Vermont Telephone Co and Cedar Falls Utility

On the surface, this CableFAX honor appears to be driven by the story of two small, proud companies—one rural, the other surrounded by rural communities—bringing big-time data speeds to customers, aping Google’s much-discussed but only partially-deployed fiber venture in Kansas City and Austin, TX.

Go deeper and you realize it’s much more than that. Yes, Vermont Telephone Co and Cedar Falls Utility of Iowa provide tremendous data speeds to their customers. But it’s also possible they are handing these communities a lifeline for the future. Although company representatives won’t acknowledge it, 1-Gig service could turn out to be a vital economic driver, retaining and attracting businesses, academics and citizens to areas that too often are overlooked, particularly when it comes to infrastructure.

Vermont Telephone Co

Serving roughly 17,000 households in rural Vermont, the family-owned company’s visionary CEO, Michel Guite, pledged several years ago to bring VTel’s service into the modern age. Fiber to the home was one of the ways he pledged to do so. “I want Vermonters to be happy with the service they will be getting,” Guite said.

When Guite made his announcement, it was thought that a hybrid fiber coaxial plant would be the solution. Then Guite and VTel had a revelation. For the same cost as upgrading to HFC, VTel could go directly to fiber.

Here’s where it gets tricky. When CableFAX decided on this honor, VTel was not yet offering video. That was taken care of in July 2013, when VTel launched a 500-channel product. Another tricky bit: Guite found the resources to upgrade to fiber via federal subsidies, including a $129mln package in 2010. Government subsidies are like Kryptonite to cable operators. They pay lobbyists to shout down subsidies in Washington, D.C. But VTel gets a pass here since it is using the federal money as intended, building in remote rural areas of Vermont.

Speaking of money, VTel offers its speedy service to subscribers for $35 per month, half the price Google is charging in Kansas City. An article and blog in The Wall Street Journal in late April touting the price difference between Google in Kansas City and VTel that began “Look Out, Google Fiber” attracted worldwide attention.

When we spoke in June with VTel’s marketing manager, the affable John Caceres, he said about 1500 customers were using the 1-Gig service. “Take rates have been pretty high… we’ve been going whole hog getting customers cut over,” Caceres added. About 60% of its customers take Internet. “We expect the take rate [for Internet] to improve when video is introduced,” he said. The goal is to have VTel’s entire footprint converted to fiber by 2014. Vermonters have been “blown away” by the 1-Gig service, Caceres said.

Most Vermonters have little need for 1-Gig service today; still, a conversation we had with a VTel customer, who spoke anonymously, was instructive for today and what might be tomorrow. The customer works from his rural Vermont home for a major tech company. “My boss is jealous that I have more bandwidth [to do work] than he does in Manhattan,” he said. And all this is in a small rural state, the nation’s second oldest—a place where more people leave than move in. It’s conceivable that VTel’s 1-Gig service will do far more than amass good reviews. It could be saving Vermont.

Cedar Falls Utility

CFU’s story is similar to but a bit different from VTel’s. Like VTel, it’s a small company, but it’s a city-owned cooperative, whose broadband/cable utility was organized in the early 90s, after a vote of Cedar Falls’ citizens.

Earlier this year, after completing a 3-year network upgrade that brought fiber optics to every home and business in Cedar Falls, it’s offering 1-Gig data service. Unlike Google, which continues to build out in Kansas City, “if you call us today, we can turn on [our 1-Gig] service today,” says CFU’s Communications Manager Betty Zeman. She makes a point to emphasize that CFU didn’t announce 1-Gig service until the upgrade was completed. And unlike Google, whose deep pockets can finance a fiber experiment, CFU is self-sustaining; its upgrade was funded with cash reserves and revenue bonds. Another difference between behemoth Google and CFU: by Iowa law, cooperatives like CFU can’t serve customers much beyond the city limits, “so we must protect the customers we have and provide great products and service at reasonable prices,” Zeman says. About 400 rural Cedar Falls properties can access CFU’s 1-Gig offering.

By Iowa standards, Cedar Falls is a good-sized town, population 39K, home of the University of Northern Iowa, contiguous with Waterloo. Together, the Cedar Falls-Waterloo area has a population of about 100K. Unlike VTel’s service area, it’s not rural, but Cedar Rapids is surrounded by farmland, typical for towns in Iowa. CFU’s strategy with its 1-Gig service is a bit different from VTel’s. While take rates for its $275 consumer product are moderate today, it believes demand will be there tomorrow. Several consumers are using the service as are businesses. In fact, the top-tier business customers were automatically upgraded to the 1 Gig service at the same price they were paying previously.

“We know not too many homeowners have a need for 1 Gig speed today, but needs change quickly in this business, and it’s important to be out in front of it,” Zeman says. “We want to make sure we are not a limiting factor for our customers or any businesses or consumers who might want to relocate here," she says. "If you wait for half your customers to want it, it’s too late.” – Seth Arenstein

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