Mass High Tech
by Efrain Viscarolasaga
(January 29, 2007) Verizon Communications Inc.'s announcement last week that it would sell substantially all of its wireline interests in Maine, New Hampshire and Vermont to FairPoint Communications Inc. of North Carolina has shone a new light on the issue of broadband access in rural regions.
The transfer, which would remove Northern New England residents from access to Verizon's touted fiber-to-the-home product FiOS, has generated some concern that the region could fall behind in the availability of triple-play services (bundled voice, data and video services) or even in basic high-speed access.
But while the transaction still needs to be approved by various regulatory entities in the three states, as well as by FairPoint shareholders, many industry insiders say the deal will eventually be a good thing for the region -- including for residents and smaller communications providers.
The fact is, FairPoint is a company more suited to deal with rural communities than Verizon is. Rolling out FiOS is a costly proposition for Verizon, and the least-dense regions of its footprint provide a challenge to making that investment profitable.
On the other hand, as a rural local exchange carrier (RLEC), FairPoint has made its reputation serving smaller communities. It currently has an average of 13 lines per square mile, and the Verizon deal is expected to increase that number to about 36 lines per square mile, according to company documents. A jump, to be sure, but still a fraction compared with the larger service providers that tread in regions with more than 100 lines per square mile.
Assuming the company keeps its promises, its announced $200 million investment in infrastructure in the region could go much further than a comparable investment by Verizon in FiOS.
"(With this deal) they'll have a company dedicated to the less-populated areas that will operate like a smaller company, which is what consumers in the area are used to," said Rory Altman, a co-founder at Boston-based telecom consulting firm Altman Vilandrie & Co.
Without the merger, FairPoint's footprint in the region is minor, with about 55,000 subscribers in the three states, mostly in Maine. Of those customers, 80 percent have high-speed broadband access -- compared with Verizon's more than 1 million customers in the region, of whom only 64 percent have high-speed access, according to documents from Maine's Public Utilities Commission.
While the process is expected to take a year or longer for final approval, you can be sure large and small providers will be watching the process closely. If successful, other large carriers could follow Verizon's lead. That could mean opportunities for smaller communications companies such as Dedham's RNK, Inc., which originally expressed interest in the Verizon sale, but decided not to move forward according to president Rich Koch, or Marlborough's One Communications Inc. (formed last year through the merger of CTC Communications Inc., Conversent Communications Inc. and New York's Choice One Communications Inc.). Cash call
Speaking of RNK, the company's voice over Internet protocol (VoIP) division, RNKVoIP, is quietly turning profits from its international connection numbers.
The company recently cut a deal with 7-Eleven Inc. convenience stores to offer unlimited international calling cards for $19.99 per month at 5,700 stores in the United States. The service enables customers to make an international connection from a cell phone, eliminating the need to enter a new account code or personal-identification number (PIN) for every call. One-time registration connects any domestic phone with an international number in any of 42 countries.
7-Eleven officials have jumped at the opportunity, and 500,000 cards have already been printed and are in the process of being delivered to stores, according to Koch.
A quick consultation of my abacus shows nearly $10 million in potential revenue in the first run. Koch wouldn't reveal how much RNK would get out of the potential pot, but said "most of that comes our way."
Stores are advertising the program as "coming soon." Koch said it will be fully operational some time in February.
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