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DSL breaks the rural barrier

An independent telephone company, Vermont Telephone, pours on a thick layer of DSL over its region

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High-speed access is not something Vermont residents only read or hear about. It is just as real as the travel brochures that lure tourists there.

An independent telephone company, Vermont Telephone Company, or VTel, is working to drive high bandwidth to customers previously left out of high-speed access solutions. Ironically, while many in Tier 1 cities still can't get high-speed access, some in rural Vermont can.

Surprisingly, VTel claims to serve one out of seven homes with DSL in its service area. Why are its penetration rates so high? Could it be that the demand for connectivity is greater in more remote locations? Are smaller telephone companies bound to be more successful because they take a more hands-on approach?

It may seem especially surprising given how frequently we hear of what hasn't worked with DSL. DSL has been taking repeated blows from the very public demise of some data CLECs and low availability.

Although these events may make it seem as if DSL providers might as well surrender to competitive technologies such as high-speed cable access, some companies beg to differ. Vermont Telephone is one of those companies.

Building on demand

Although Vermont is one of the most sparsely populated states with roughly 680,000 residents, the potential market is still huge for high-speed access. While residents in metropolitan areas may have multiple choices, the options in rural Vermont are slim to none. As a result, Vermont Telephone is trying to satisfy that hunger.

In 1994, VTel, bought the bulk of its access lines from GTE. They sold off [the assets] early in the disposition process, says Michel Guitt, president and CEO of VTel. From that point, the company started out with a normal amount of debt and then began adding more lines slowly, he says.

It was like we bought a Chevy with 15,000 miles on it. We spent $5 million shutting down the network, says Guitt, adding that the young company then started redesigning the network and upgrading switches. We spent $5 million more than the usual capital expenditures, he says.

Now the company has around 21,000 access lines in 14 rural towns and has DSL available in all of its central offices. 85% of the 21,000 lines are within several thousand feet, Guitt says.

Of that number, 2350 are using DSL, which is about 11% of the total. Guitt says the one out of seven statistic was based on the 85% of its 21,000 lines that are DSL-capable (Figure 1).

You can drive around the back roads of Vermont tucked away and they have DSL, says Guitt. People just can't believe that we actually have something in rural Vermont that the folks in New York can't get.

If they are really hitting those numbers of [one in seven households], that's remarkable, says Clifford Holliday, president of B&C Consulting Services.

The secret syrup

The reasons for VTel's success in the region are multifaceted. Simply put, demand appears to be high, and competitive options are currently not available (Figure 2). And considering winter weather conditions and the remote nature of Vermont, residents may be more receptive to signing up for high-speed access.

There might be a lot more interest in getting onto the Net to get things they can't get locally, says Janette Noyse, an independent industry analyst. There's definitely interest in high-speed Internet access. Pent-up demand is only going to grow. Additionally, Vermont residents typically have a high education level, making them more likely to be interested in high-speed access.

VTel has been pushing to get DSL to customers before other competition does, Guitt says.

Those factors compounded by the fact that Vermont users must pay a metered rate for basic phone service may make DSL even more attractive.

Most customers in Verizon territory typically spend $10 to $15 per month in local phone charges. If you pay $20 per month for Internet access and $14 access over a local phone line, you are up to $34 for a 28.8 kb/s connection, Guitt says. Why not migrate to DSL for a small increase in cost and a lot more speed?

But luckily for VTel, Verizon doesn't seem to have much interest in rural Vermont. Instead, the incumbent is targeting larger cities with a more concentrated base of customers than those in VTel's service area.

Verizon seems to be a good neighbor, says Guitt. They haven't really made Vermont much of a priority. They have been scrupulous not to come into our territory, he says.

And now, much to the delight of the company, VTel decided to stay out of the CLEC business. We looked at it, but thank heaven we didn't, Guitt says, adding that the only way to succeed with the DSL business model is to own facilities rather than lease them from another company and then try to resell them for a profit.

The company is also gaining speed because of the technology it is deploying, says Norman Koch, vice president of network operations at VTel.

When a customer signs up of DSL service, the company sends out a self-install kit with Nortel's 1-Meg Modem. By using the 1-Meg Modem, installation is easy for the end user, as is provisioning and troubleshooting for VTel, Koch says.

Once a line has been qualified and conditioned for DSL, VTel removes the basic POTS line card in the Nortel DMS-100 voice switch and move the line onto a DSL-enabled card within the switch. When the company redesigned its network, it deployed the DMS-100 voice switch and Nortel DSL access multiplexers (DSLAMs). For the backbone, however, the company is using Cisco Systems' routers (Figure 3).

[The 1-Meg Modem] is the most cost-effective solution we saw, says Koch. And from a technology perspective, it is a very basic system and it doesn't have many problems with [implementation].

Instead of having an ATM base as most other DSL modems do, the 1-Meg Modem is Ethernet-based, which enables users to connect easily, says Justin Robinson, senior datacom network engineer at VTel.

Using the 1-Meg Modem customer premises equipment (CPE), VTel offers asymmetrical DSL to its customers, although they have a maximum transmission rate of 1.28 Mb/s. The CPE apparently works for the Vermont application because it reaches 18,000 feet and beyond. We started out cutting things off at 18,000 feet, but some customers at 19,000 feet, for example, said they wanted to try it and it works, says Koch.

The limits of luxury

However, the current VTel scheme is not flawless. The maximum downstream rate of 1.28 Mb/s may not be enough for some customers, for instance. There are a couple of applications where [the] speed on the 1-Meg Modem is not sufficient, says Robinson.

However, Samuel Coleman, data sales manager for VTel, says that rarely happens. Some might think [1.28 Mb/s] isn't enough for what they are doing, but it really is. Most customers typically want Internet access, e-mail and, occasionally, VPNs and remote access to other areas. Everyone talks about voice over IP, but the need isn't really there, Coleman adds.

Koch also notes that despite its success with the 1-Meg Modem, VTel will migrate to another product.

The 1-Meg Modem has a fairly low market share, according to Noyse, although Bell Canada and Prism are both using the equipment.

Alcatel and Efficient Networks really have a bulk of the market share, says Dan Hanson, director of access network systems for RHK.

In situations in which the customer needs more bandwidth, VTel must develop solutions to meet the higher bandwidth needs. One school needed more bandwidth to get applications back. We used an Elastic Networks EtherLoop modem and put two modems back-to-back, Robinson says. Then the data transfers like an Ethernet connection.

Problems also surface when T-spurs come near copper. And the DSL products don't necessarily get along well with T-carrier, Koch says.

In addition to the other problems, the 1-Meg Modem has difficulties with other applications such as VDSL and voice over DSL, Robinson says.

One thing we are looking at is voice over DSL, and with the Ethernet base, there is no way we can [provide] the necessary quality of service, Robinson says.

In contrast, the ATM based solutions let the provider set up different channels for voice and data, which is a more reliable option.

VTel is looking at products from several different companies such as Cisco Systems and Next Level but has yet to make a decision, Robinson says. We have been looking for over a year now, he says. There is a lot of pressure to use one company.

Choosing the right product is the big challenge. Once you go there, you can't go back.
Norman Koch, vice president of network operations

Although picking equipment to roll out may not seem daunting and products may sound good in theory and on paper, reality is quite often very different. Choosing the right product is the big challenge, Koch says. Once you go there, you can't go back. Vendors say to put [equipment] in a trial and if it doesn't work then take it away; that's not easy to do.

The redcoats are coming

Just as VTel is working to bring on more DSL customers and make new equipment and network choices, it also has competition. That competition is coming in the shape of provider Adelphia Communications, which is deploying voice, data and entertainment services to the region.

With Verizon turning its nose up at the area, VTel's Guitt says Adelphia's impending entry into the region is one of the primary reasons that VTel has been working so quickly to secure customers. He hopes to grasp the first mover advantage.

Our understanding is that [Adelphia] picked Vermont as the first place to [make] telephony work over coaxial cable, Guitt says. And because it is far enough away and a low enough priority that if it doesn't work, Wall Street won't care.

They are making a huge investment in fiber; there's nowhere we don't see Adelphia's fiber, he adds.

Adelphia is spending $50 million in Vermont for its network buildout, says Robert Frost, general manager for Adelphia's New Hampshire and Vermont operations.

A lot of that money has gone into fiber backbone and switches for the region, he said.

Adelphia is splitting its operations in the region into two groups: Adelphia Business Solutions, which will operate as a CLEC offering voice and data services targeted at medium to large businesses, and Adelphia Cable, which is using fiber and coax to provide cable television and broadband Internet access over cable.

So why the interest in Vermont? For one, the state is unique because it is a single LATA. In addition, it has one of the highest quality-of-life ratings and was underserved, Frost says.

This is a very successful operation for us. We are offering services customers haven't been able to get before, such as protected Sonet, says Frost. It is a small market, but we have done well in it.

Our goal is to make sure all our customers who want high-speed access get it.
Michel Guitt, president and CEO

But the infrastructure buildout is part of a company-wide plan, says Bob Snowdon, Adelphia Cable's manager for the Vermont region. Vermont just happens to be on the front end of the curve, Snowdon says. Approximately $35 million of the $50 million Adelphia is spending in the area is going to the cable portion, Snowdon says.

Ironically, VTel leases some T-3 facilities from Adelphia, according to Guitt. VTel is matching Adelphia's pricing plans for the region at $34.95, $10 cheaper than Verizon.

Tapping the maple lines

The myriad of reasons VTel seems to be having success in Vermont simply may reflect what needs to happen for the entire DSL market to take off ease of use and installation as well as a blanket of service rather than spotty coverage. Couple that with demand and self-owned facilities, and DSL looks strong again.

Although Vermont has the stigma of being rural, VTel and Adelphia must be onto something. Our goal is to make sure all our customers who want high-speed access get it, Guitt says.

Vermont Telephone at a glance

Headquarters:
Springfield, VT

Top officers:
Michel Guitt, president and CEO
Julie Ladieu-Walton, director of services
Norman Koch, vice president of network operations

Number of employees:
60-70

Date founded:
1994

Focus:
voice and high-speed data services

URL:
http://telephone.vermontel.net

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© 2014 Penton Media Inc.

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