Enabling the underdogs

Driven by competition from cable operators in the voice arena and the desire to provide the latest services to their customers, a host of rural telephone carriers nationwide are adding video and high-speed data services to their offerings.

Pairing Next Level Communications' very high bit-rate DSL (VDSL) network with its M2-Series video edge device, VideoTele.com is helping 13 local telcos expand their capabilities. Last week, the company inked a deal with Washington County Rural Telephone Cooperative of Pekin, Ind. VT.c previously paired with Chibardun Telephone Cooperative of Dallas, Wis.; Horizon Chillicothe Telephone in Chillicothe, Ohio; and PBT, formerly Pond Branch Telephone, in Gilbert, S.C.

Washington County RTC will use VT.c's MPEG-2 digital encoding, demultiplexing and grooming solutions to offer video services to 3200 potential subscribers in portions of Clark, Floyd, Scott and Washington counties.

VT.c supplies the headend that sits next to a telco's central office and transforms content from a variety of sources - including satellite feeds, local broadcasts and music stations - into packages for delivery over Next Level's VDSL network, said Lee Rainey, vice president of marketing for VT.c (see figure).

A typical headend provides about 100 video channels and between 45 and 50 audio channels, or commercial-free music, he added. Operators also will be able to offer DSL Internet access via Next Level's network.

As cable operators creep into the voice market, telcos are turning to video to remain competitive and generate new revenue streams, Rainey said. Companies can potentially triple the revenue potential from each subscriber household.

"It's not only a rural phenomenon," Rainey said. "In areas where there is not a lot of population growth, it's very attractive to phone companies."

Competition and revenue are the reasons Washington County RTC decided to enter the video realm, said Charles Coon, the service provider's general manager.

"It's another source of revenue for what I see as an eroding revenue stream in the telephone business... through decreases in access charges and competition," Coon said. "The video allows you to go head-to-head with the cable companies, and it also allows you to maintain or increase your revenue streams."

Washington County RTC, which is equipped to roll out 80 video channels, plans to introduce its initial product featuring about 75 channels on Aug. 1, Coon said.

The telco will compete against cable provider Insight Communications in parts of its region. It intends to differentiate itself with a video product that features true digital pictures and broadband Internet access that is not shared, he said.

Washington County RTC also is counting on its strong local presence to make a difference.

"We actually have an office here where people can come and talk to us and ask questions," Coon said.

Face-to-face interaction is a big draw in small towns and the same strategy is being used by PBT, which plans to offer high-speed Internet and a combination of 200-plus video and audio channels to its potential subscriber base of nearly 17,000 customers by October.

"The personalized aspect of the business - that's something that you're not able to find anymore," said Ben Spearman, chief regulatory officer for PBT. "If you have a problem, you can walk in the front door and meet with the president of the company or the chief regulatory officer. You can get personalized, one-on-one attention here."

PBT's venture into the video space also is an attempt to bridge the digital divide. "Just because you decide to live in a small town or a rural area, you should have the availability of any type of service that you may want," Spearman said. "We want to be able to offer our customers a full array of services."

Any distinction that the company can muster will help it compete against Time Warner, which is building its fiber optic cable network in portions of PBT's region, Spearman added. The companies likely will face off in the cable and high-speed Internet arenas, with PBT's broadband product competing against Time Warner's Road Runner.

As video becomes increasingly popular among small telcos, more technology is available to cater to their needs. mPhase Technologies last week paired with more than a dozen networks to test the delivery of TV signals over copper wire through its Traverser Digital Video and Data Delivery System. A trial will be conducted with Hart Telephone in Hartwell, Ga. Service will be expanded to customers across the country via various local telephone companies as affiliate agreements are finalized.