The Iowa Innovator

From his office at the North Liberty, Iowa, headquarters of South Slope Cooperative, J.R. Brumley can see the population wave coming. Off to the south, toward Iowa City and the University of Iowa campus about 10 miles away, the homes are multiplying like weeds in an untended lawn. And they keep sprouting up everywhere he looks.

Brumley and South Slope, which operates 19,000 access lines, are witnesses to an Iowa-style population boom. According to the 2000 census, North Liberty had 5387 residents; by July 2002, that number had jumped 13.3% to 6081. By September 2004, builders had added 500 residential units — mostly multifamily dwellings that people around town refer to as twelve-plexes in reference to the number of units per building they house. This year, the pace is even quicker, as growth continues coming from Iowa City and Cedar Rapids.

“There's just a lot of activity here, and we have a very aggressive economic development group,” Brumley said. “We think it's a very desirable part of the country.”

All that building is not just changing the population characteristics of South Slope's territory, it's also giving the telco an opportunity to get on the cutting edge of new technology deployments. Since March of last year, the company has been providing a triple-play bundle of voice, high-speed data and video to customers through a unique arrangement with Iowa Network Services, the statewide fiber network.

This isn't a story of a small telco made good, however, as much as it is the story of a small telco getting a jump on the future.

Brumley, not unlike his counterparts across the independent telco landscape, is driven to some extent by events in Washington, where decisions are being made that easily could bankrupt the traditional rural telco model.

“Right now, our big concern is access charge reform,” he said. “If they don't get it right … there are 150 telcos in Iowa, and just about all of them will go broke.”

The impact of declining access charge revenue has been dramatic. Five years ago, revenue from IXCs and wireless carriers represented 79% of South Slope's income. Today it comprises 45%. At the same time, the company has been able to increase its cash flow from other areas, dramatically reducing its reliance on access charges.

Take fiber to the home, for instance. Like many independents, the company has jumped whole hog into that market.

“We have 494 square miles in territory,” Brumley said. “If there's a new subdivision, it will be fiber to the home. And if it's not, you better talk to me and explain why it shouldn't be.”

The company also has provided most of its copper-connected homes with a DSL option (3000-plus customers at last count) and acts the part of good citizen by contributing to the communities. What makes South Slope slightly different is the level of its aggressiveness.

South Slope has started an “edge out” strategy whereby it extends service into neighboring towns. But instead of creating a CLEC arm and targeting businesses in the new area, the telco simply widened its borders and treated the new territory like its existing ILEC turf, bumping into other independents and Qwest along the way. It's done it twice in the Tiffen/Coralville area and once into Cedar Rapids. It's contemplating others, too.

“We did things the old-fashioned way, by extending our boundaries and putting a drop to every home,” said Natalie Stallman, manager of application technology for South Slope. “It's not about cherry-picking. It's about expanding our boundaries.”

“People look at me all confused when I tell them about that,” Brumley said. “There's nothing confusing about it. We're just expanding our boundaries. It's a natural thing to do.”

Residential users in South Slope's newly claimed territory are given access to all of the company's services, including video. That includes one of the first deployments of video-on-demand (VOD), which is a result of South Slope's contract with INS. INS, which is owned by 135 Iowa telcos, signed an agreement last year to use Kasenna video servers and software and act as the master headend for any carrier wanting to offer VOD. Under that deal, South Slope is able to pull content from a video library that currently contains 150 movie titles but ultimately will expand to 700.

That video library, which collects content from TVN Entertainment, initially was supposed to have around 300 titles, but getting the rights to send content over an IP stream has proved time consuming, Brumley said. Content owners traditionally have been hesitant to sign off on such technologies unless they're certain premium content like newly released movies are securely encrypted. INS is working with Widevine and Myrio to ensure that lock down and gain the rights to expand its library, but it's taking some time.

“We have a really good service, but until this encryption issue gets taken care of, we just don't have enough content,” Brumley said.

On the broadcast side, the company is using SkyStream MediaPlex 20 units to encode local content and take encoded national channels from INS. South Slope, which was one of the first telco wins for SkyStream, also turned into a learning experience for that vendor. During a software upgrade earlier this year, the telco intermittently lost channels running through its MediaPlex.

According to Andy Lovit, vice president of field operations for SkyStream, the issue was resolved after the vendor sent one of its more experienced engineers out to South Slope. The lesson for SkyStream, Lovit said, was not to take on any project “unless I have the proper resources.”

Once into the South Slope network, video is sent through a series of fiber rings. In fact, in a world where bandwidth is a relatively cheap commodity, South Slope appears to be swimming in it with a series of rings that transmit bits at anywhere from OC-3 to OC-192 speeds.

The company also was an early adopter of Movaz DWDM equipment, which Brumley heaped praise upon, when given the opportunity: “It was almost plug-and-play,” he said. “They were wonderful to work with.”

At the end users' (or members, in co-op speak) homes, the company currently is using Amino's AmiNET 110 set-top boxes — but South Slope is itching to get the vendor's 500 series into the field because it offers personal video recorder (PVR) capabilities.

“We have a waiting list for them as soon as we can get them,” Stallman said.

Regardless of the box sitting in the home, video is multicast though either one of several Calix C7 Broadband Loop Carriers for copper-connected customers or via Optical Solutions' FiberPath platform for those with direct fiber connections. In either case, channel changes are handled upstream on one of the C7, using Calix's IP resource card, or IRC.

“That manages the flow of the content and acts as the intelligence of the content,” said Geoff Burke, video solutions marketing director for Calix. “The IRC actually manages the distribution through the other shelves in the network. The other interesting thing about that is one IRC card can handle 8000 or so customers.”

Assuming — and it's a relatively big assumption — that all of the pieces of the puzzle fall into place over the next few months, South Slope stands to be among the most advanced telco video providers in the country. From an outsider's perspective, it might seem a natural place, given the company's growing territory and past aggressiveness. But for Brumley, video has been among the most difficult transitions.

This also isn't the first time the company has ventured into video. About five years ago, when other independent telcos were experimenting with VDSL-based platforms, South Slope acquired two small analog systems. Those have since been shuttered. “We wanted to get in the business, but we didn't have any experience,” Brumley said.

That false start, though, taught the company that succeeding with a video service can't be done without a little outside help. For a company that Brumley proclaims, “doesn't work well with others,” it's a hard lesson.

“The hardest thing for South Slope to embrace about video is the outsourcing involved,” Stallman said. “You're at the mercy of so many other people. We also have to be a lot more tactful with the information we're providing.”

Video, however, isn't just a fancy option any more, given the competitive pressures the company is facing. Throughout its entire six-exchange territory, South Slope faces off with Mediacom, which has aggressively deployed high-speed Internet access and is in position for a significant telephony launch this year.

“We need the triple play,” Brumley said, “because we need to keep what we have.”