Technology

A Little Telco With a Big TV Agenda

2/20/2005 7:00 PM Eastern

PrairieWave Communications chairman and CEO Craig Anderson calls his organization a 100-year-old startup company.

It’s a play on words that makes sense for a telecommunications firm that uses whatever technology it needs to serve 70,000 homes and businesses in 38 communities inside a triangle with endpoints at Watertown/Yankton, S.D.; Lake Wilson, Minn., and Storm Lake, Iowa.

As the traditional cable and telephone companies enter each other’s territory, perhaps they could take a cue from PrairieWave. The company began offering telephone service in 1902, a business that remained largely unchanged for 80 years.

In 1982, it started to build traditional cable networks to serve its customers. A few years later, after the federal government broke up AT&T Corp., it added long distance telephone service.

In the mid- to late 1990s, PrairieWave began offering cable-modem service to those on its cable plant. But in areas where a cable build was not economical, it offered digital subscriber line service.

In the past year, PrairieWave has started to offer its cable subscribers HDTV and VOD. It’s also about to offer voice-over-Internet protocol, primarily in new housing developments. But it has no plans to rip out its circuit-switched plant for VoIP.

COMPETITION EVERYWHERE

As a multifaceted services and technology company, it competes against everyone. It goes mano a mano with MSOs Charter Communications Inc., Midcontinent Communications, Cable One Inc. and Mediacom Communications Corp. In some areas, it’s PrairieWave against DirecTV Inc. and EchoStar Communications Corp.’s Dish Network.

But it also competes against Qwest Communications International Inc. and Frontier Telephone on the voice side. It’s truly the Wild West.

Anderson doesn’t disclose exactly how PrarieWave’s multiproduct strategy has paid off, in terms of subscribers for each individual service or penetration. As a private company, it’s not obliged to release such figures.

But according to Anderson, the company has been able to thrive by sticking close to its roots.

“We are a small community cooperative,” Anderson says. “The hinge for our entire competitive strategy is we see everything from the subscriber’s perspective and what provides the best value.

“When cable first came in vogue, we overbuilt all the phone exchanges with cable service,” Anderson says. “When the Internet became the thing to do, we became the first and largest [Internet-service provider] in South Dakota. When long distance became a separate product with the AT&T break-up, we became the first independent long-distance company in South Dakota.”

Because PraireWave has such an agnostic approach to technology, it’s a true pioneer.

“We found ourselves at the leading edge of convergence,” Anderson says. “We’ve adopted a physical network platform that is based on backbone fiber rings over which we run numerous protocols.”

PrairieWave’s architecture mix includes fiber to the node, fiber to the premises and coaxial cable or copper to the premises, he says. The company built an entire Gigabit Ethernet ring on its 107,000 miles of plant, paving the way for video-on-demand, HDTV and other advanced services over the past year.

“The key is to take what exists today to that endpoint, maintaining quality-of-service and a competitive position,” he says.

“Adding HD to an already digital network is very low cost from the headend standpoint,” he adds, and set-top costs can be covered through lease fees. Anderson says that PrairieWave wanted to get ahead of satellite and launch HD, even if the initial payoff may not be that big.

“It’s not going to have a high penetration, but we are double where we thought we’d be, and we wanted to get out ahead of TV [set] sales,” he says. “People won’t buy an HD set unless there is available programming. We wanted to make sure we had the programming and would be in a position to add more channels as demand increases. We also wanted to head off the DBS providers.”

In September, the company launched VOD, using servers from Kasenna Inc. and N2 Broadband software. The lineup includes hit movies, premium subscription VOD and free content, including programming from Home & Garden Television, Food Network, Fine Living and Do It Yourself Network “We’ve been very happy with it,” he says.

In June, PrairieWave will launch VoIP, an offshoot of its cable plant. “New line extensions will be coax-only, using VoIP technology,” he says.

“We have no plans to substitute out VoIP for our existing wireline service,” he says. But Anderson plans to buy a soft switch that will handle both VoIP and, eventually, circuit-switched calls. VoIP will be deployed for line extensions.

Anderson estimates that PrarieWave’s market grows by more than 1,000 homes each year, and he plans to provide service to every one of them.

In the end, he says, subscribers don’t know — or care — which technology brings phone calls to their homes — they just want it to work.

The company began offering dialup data services in 1983. It launched data in the late 1990s, and offers upstream service at 7 Mbps downstream and 1 Mbps upstream. Although the vast majority of its data subscribers are on the cable plant, there are pockets and rural farms where PrairieWave offers three megabit downstream DSL service.

BELIEF IN BUNDLING

It’s no surprise that Anderson is a big believer in the bundle. “We’ve been big advocates of the single bill since 1997. It’s a huge success,” he says. Those who predicted that bundling would cause sticker shock were proved “completely wrong,” Anderson says. “People love the convenience of a single bill and a single call, and we take maximum advantage of that in our sales campaigns.”

Anderson has a three-pronged competitive strategy. First, “we have a technology lead, and it’s a different lead depending on what competitor you’re talking about,” he says. “It might not be the same lead in every market.”

Second, he says, “underpromise and overdeliver.”

Third, “Keep your price point in the range where the people in our community perceive our value equation to be superior to adopting several other vendors. I can count on one hand how many subscribers I’ve lost to DBS in the past few years,” Anderson says. PrarieWave prices its 60 channels of basic at $29 a month, and has cut video prices in some areas to remain competitive against other cable operators.

Another tactic PrairieWave possesses is a strong local knowledge base. “We have an inhouse, door-to-door sales force. When you’re moving in, we should be at your house.”

The company keeps tabs on household moves through various information sources. “We have reps assigned to territories. They’re supposed to know when homes are vacant and when people move in. We have a database of every home.”

And finally, nothing substitutes for the local touch. Because the communities are so small, PrairieWave employees are neighbors of customers.

“We do tailgate parties at high-school football games,” he says.

Anderson recounted the story of an elderly cable subscriber who called, saying she had lost her remote control. A technician was dispatched and found the remote in the sofa, but PrairieWave didn’t charge the customer one penny for the truck roll.

“It’s an example of how we treat the customer,” Anderson says.

March