TCT: a Case Study
How a Rural Telco Transformed itself into a Competitive IP Communications Company
TABLE OF CONTENTS
1. 2. 3. 4. 5. 6. 7. 8. 9. Introduction...................................................................................................................................... 3 Brief History of TCT ......................................................................................................................... 4 The Need For Change..................................................................................................................... 5 Company Evolution ......................................................................................................................... 7 The MetaSwitch Difference ............................................................................................................. 8 The Long Distance Challenge ......................................................................................................... 9 Other Technology Partners ............................................................................................................10 Making a Difference........................................................................................................................11 Looking to the future.......................................................................................................................12
10. About MetaSwitch...........................................................................................................................13
NOTICE
“Data Connection” and “MetaSwitch” are trademarks of Data Connection Limited and Data Connection Corporation in the United States and other countries. Other brands and products referenced herein are the trademarks or registered trademarks of their respective holders. Copyright © 2006 MetaSwitch, a division of Data Connection. All rights reserved.
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 2
1.
INTRODUCTION
TCT, formerly known as Tri-County Telephone and TCT West, is not your typical rural telephone company. While many rural telephone companies base their business plans on guaranteed governmental subsidies such as the Universal Service Fund (USF) or settlements from organizations such as the National Exchange Carriers Association (NECA), TCT recognized years ago that these funding mechanisms would most likely disappear at some point, and they needed to position their company and business to be self sufficient. TCT also saw that new IP-based technology such as wireless and Voice over IP (VoIP) would spawn even more competition for subscribers, yet another threat to their future business viability. These developments required TCT to aggressively prepare for an uncertain future with no guarantees. This meant a total transformation of the entire company, requiring change and new ways of thinking in all functional areas of the organization. Accomplishing this was no small task for this independent telephone company in rural Wyoming. This case study examines the transformation of TCT, a rural, yet very forward-thinking, service provider that continues to face its challenges head on and is everevolving in order to stay competitive in today’s telecommunications market. We discuss how they have leveraged MetaSwitch’s award-winning softswitch technology as well as MetaSwitch technology partners in order to maintain their competitive edge.
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 3
2.
BRIEF HISTORY OF TCT
2.1 Humble Beginnings
Tri County Telephone Association, Inc. was formed in 1954 to provide local telephone service to rural Big Horn Basin, Wyoming customers in Burlington, Otto, Emblem, Ten Sleep, Hyattville, and Hamilton Dome. As you might expect, agriculture and ranching are the main industries in this part of the country. Telephone service became a reality in 1956 when the first dial tone was available in those areas. Tri County is a rural cooperative made up of 4 exchanges: Ten Sleep, Hyattville, Burlington, and Hamilton Dome. These local exchanges total about 950 access lines. The Tri County Telephone Association, Inc. business office is located in Basin, Wyoming. In October of 1994, Tri County Telephone purchased 7 telephone exchanges from US West causing the company to increase nearly 700% overnight. From that purchase, TCT WEST, Inc., a subsidiary of Tri County Telephone, was formed to serve the exchanges of Basin/Manderson, Frannie, Greybull/Shell, Lovell/Byron/Cowley, and Meeteetse. There are approximately 7000 access lines in the TCT service area. The company is headquartered in Basin, Wyoming with another business office in Lovell, Wyoming. While at one time TCT had a virtual monopoly in the area, this is no longer the case. TCT faces competition from many different carriers, including cellular, satellite, voice over broadband (e.g. Vonage), and even services like AOL and Skype. It is this competition that has compelled TCT to become the innovative company they are today, always searching for new ways to leverage technology and their local presence in order to increase their subscriber base as well as the revenue from those subscribers.
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 4
3.
THE NEED FOR CHANGE
3.1 Not just a telephone company
Executives and managers at TCT, including President and General Manager Chris Davidson and Engineering Manager Richard Wardell, recognized in the late 1990’s that in order to remain competitive they would need to add additional capabilities to their network to derive additional sources of revenue from their customer base, as well as stem line loss to competitive carriers and new technology such as cellular phones. In short, they needed to become more than just a phone company – they needed to become a total communications provider delivering many different forms of communications and entertainment services.
3.2 The Move to IPTV
At the time, many rural carriers were considering or implementing “Triple Play” services of voice, video, and data. TCT was one of these carriers, implementing a TV solution provided by Next Level Communications (later acquired by Motorola) in some of their exchanges. Unlike many telcos that have introduced IPTV services, however, TCT was not content with just delivering content from the usual national networks and Hollywood providers. In order to offer a truly differentiated, local service, TCT became a content producer, creating local content, such as covering high school sports events. This creates loyalty among subscribers and a sense of community ownership that the big cable companies cannot match.
3.3 Network Evolution
In parallel with the introduction of TV services, TCT continued to build out more than 400 miles of fiber capacity that would allow TCT to expand its network footprint and capabilities. This allowed TCT to collapse its legacy Lucent Class 5 switch from 9 switching centers to one centralized switch with distributed remotes. While this was a significant upgrade to the voice network, it did not yet change the existing time division multiplexed (TDM) access network. In a later section we look at how MetaSwitch’s IP-based softswitch played a key role in migrating TCT to a true next generation network. In those remote cabinets that were not upgraded for triple-play services, TCT deployed high speed internet access services using Digital Subscriber Line (DSL) technology from Net to Net Technologies (now Zhone). The Ten Sleep exchange even received new fiber-to-the-home technology, provided by Optical Solutions (later acquired by Calix). Fiber optics continue to play a big role in TCT's network evolution
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 5
As evidenced by these network upgrades, IP services really began to take hold within the TCT network at this time, and TCT realized that not only will their network have to embrace this new technology, but their people would need to adapt as well. TCT understood (maybe better than most rural carriers) that eventually all future telecommunications services will be delivered over a converged IP infrastructure, and began the transition of both the network and the company to support this future vision.
Internet
IPTV Headend
UNASAT Backbone
PSTN
IP Router
MetaSwitch VP3510 Class 5 Softswitch
IP Backbone
TDM Backbone
GR-303
IP DSLAM
DLC
Residential Triple-Play Services
TCT uses the MetaSwitch solution to take advantage of the significant cost savings of IP-based long distance connectivity provided by UNASAT .
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 6
4.
COMPANY EVOLUTION
The technology explosion of the 90’s into today has had a major effect on the telecommunications industry. New technology is constantly coming to market, often rendering previous technology obsolete along the way. However, it’s not just technology that has to make the transition in order to survive, it’s also the people that implement, market, sell, and support the technology that have to be able to adapt. TCT has definitely felt the effects of this. While some of the telecom veterans at TCT were able to evolve with the changing times, other long time employees found it harder, and TCT began hiring new talent that had the necessary skills to work in the new environment. “Fortunately or unfortunately, some of our long-time employees that had been with us for years and years simply weren’t able to make the transition from the long established way of thinking,” states Chris Davidson, GM of TCT. In addition to hiring new people, TCT has also adopted new ways of selling and marketing their services in today’s more competitive market. The primary differentiator for TCT is that they are local. They are local people that live in the community, they provide local presence, local service, and are able to deliver the personal care or “high touch” to their subscribers that other competitive carriers simply cannot. In short, they are the face behind the name. TCT participates in local trade shows, places newspaper ads, sends out envelope stuffers, advertises on highway billboards, and even produces local radio and TV spots as part of their on-going marketing efforts. They have also invested in branding the company, with a redesigned logo and new website that emphasizes the company’s breadth of services and forward-looking vision. These efforts are paying off. “We are perceived as the local service provider that actually resolves our customers’ issues. We even get calls from [our competitor’s] subscribers to help them resolve their problems because they can’t get a resolution from their own service provider,” states Marla Leithead, Public Relations Manager for TCT. TCT also provides incentives for all employees to sell the company’s services, regardless of their position in the company or where they happen to be. Installers, support technicians, accounting, and salespeople are all encouraged (and rewarded) if they are able to sell a new service to new or existing subscribers. With so much competition in today’s environment, every little bit helps. – Chris Davidson President & General Manager, TCT “Fortunately or unfortunately, some of our long-time employees that had been with us for years and years simply weren’t able to make the transition from the long established way of thinking.”
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 7
5.
THE METASWITCH DIFFERENCE
5.1 Overview
A key part of TCT’s network transformation from legacy TDM-based technology to next generation IP-based technology was their selection of MetaSwitch’s VP3510 softswitch solution. When the lease on their legacy Lucent 5ESS TDM switch was coming to an end in 2004, TCT realized that the timing was right to look at implementing a softswitch-based switching solution, and MetaSwitch was chosen to make this transition.
5.2 Flexibility
TCT selected MetaSwitch for many different reasons, ranging from MetaSwitch’s industry leading multi-protocol support, the ability to reduce and optimize long distance costs by leveraging IP peering partners, and other enhanced services such as subscriber web-self care and Caller-ID capability for their IPTV service offering. Perhaps more than any other reason MetaSwitch was chosen as the next generation switching platform upon which TCT would build their network is the flexibility of the platform and the ability to offer new, revenue-generating services from the MetaSwitch. The MetaSwitch was able to coexist with the legacy Class 5 switch while subscribers and services were carefully migrated to the MetaSwitch on a schedule with which TCT was comfortable. In May 2006, the legacy Class 5 switch was fully decommissioned and the entire TCT subscriber base is now serviced by the MetaSwitch VP3510. As an example of why flexibility is important, consider what happened when TCT recently had the opportunity to acquire Big Horn Wireless, a regional broadband wireless provider. Although it was not part of the original softswitch deployment plan, MetaSwitch’s strong VoIP support allowed TCT to rapidly introduce a voice over broadband service, known as VONTel, to these wireless customers. TCT sees VONTel as very strategic to its future growth – but more importantly knows that their MetaSwitch will allow them to take advantage of other new opportunities as they arise in the future. MetaSwitch's VP3510 provides voice services to all of TCT's 7,000+ subscriber lines
5.3 Support
In addition to MetaSwitch’s superior technical solution, TCT has also been impressed with the support they have received. “The MetaSwitch support team has been terrific in supporting our on-going transition off of our legacy switch to the MetaSwitch platform,” states Richard Wardell, Engineering Manager at TCT. “We knew we’d be implementing cutting-edge technology, and MetaSwitch has been with us every step of the way.” – Richard Wardell Engineering Manager, TCT “MetaSwitch has been with us every step of the way.”
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 8
6.
THE LONG DISTANCE CHALLENGE
6.1 UNASAT, A MetaSwitch Partner
One of the drivers for TCT selecting MetaSwitch was the ability to leverage IP technology to drive down their long distance costs, which in turn would allow TCT to offer better long distance pricing to their subscribers. After trying service from a few different long distance IP providers, TCT finally found UNASAT, who was able to implement the solution for which they had been searching.
6.2 Significant Cost Reduction
UNASAT provides TCT with their UNAPEER product, which is a long distance IP peering network. TCT’s MetaSwitch connects to the UNASAT network over SIP trunks. UNASAT interfaces directly to the Level 3 nation-wide network, which currently covers about 72% of the U.S. TCT is using the UNAPEER service to dramatically lower their long distance costs. Compared to what they were paying, TCT is saving over 66% on their monthly long distance costs. This dramatic cost savings has allowed TCT to implement unlimited long distance packages for their customers, which has resulted in two things: • More revenue. TCT is actually making more money on long distance now than they were before. Subscribers now opt to take the long distance packages TCT offers rather than pay perminute charges which resulted in very little use and therefore very little revenue. Previously, subscribers were using their cell phones for long distance instead. • Reduced line loss. The unlimited long distance bundle packages provide an added incentive for subscribers to keep their home phone, rather than disconnecting service altogether and solely using a cell phone.
6.3 Quality
Beyond the cost savings, TCT found the quality of the UNASAT network to be superior to other IP long distance providers they had been using. UNASAT prides itself in working with high quality organizations such as Cisco and MetaSwitch. The combination of significant cost reduction and superior quality has had a dramatic effect on TCT’s business, both from a revenue perspective as well as from an operational viewpoint. In TCT’s words, “if a customer was having any quality issues, we just routed them to the UNASAT network and the issue disappeared.” UNASAT CEO Michael McLaughlin (left) listens as TCT GM Chris Davidson describes TCT’s network plans
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 9
7.
OTHER TECHNOLOGY PARTNERS
7.1 Overview
In order to coexist in the TCT network, the MetaSwitch VP3510 needed to support both legacy and IP-based protocols, a significant strength of the MetaSwitch solution. MetaSwitch’s industry leading interoperability program, which has tested literally hundreds of TDM and VoIP devices since its inception in 2001, ensures that implementations go smoothly. MetaSwitch’s Interoperability labs are located in Alameda, CA where hundreds of devices have been certified for interoperability
7.2 Access
TCT still has 63 SLC2000 Digital Loop Carriers (DLCs) in
service that have now been cut over to the MetaSwitch and utilize the GR-303 protocol. The Next Level triple play equipment is also connected to the MetaSwitch via GR-303. TCT is currently evaluating next generation Broadband Loop Carrier (BLC) equipment that will ultimately replace these legacy DLCs and replace the GR-303 links with an IP-based protocol such as MGCP, H.248, or SIP. MetaSwitch’s support for all of these key protocols and industry-leading partner program ensures that whichever BLC vendor is chosen, the solution will have already been tested and verified in the MetaSwitch interoperability labs. The Calix equipment (formerly Optical Solutions) that provides the fiberto-the-home services to the Ten Sleep community has also been fully tested by both MetaSwitch and Calix, and is widely deployed by other service providers, providing TCT with the peace-of-mind that the two solutions work well together.
7.3 IPTV Integration
The lines between communications devices are becoming increasingly blurred, and nowhere is this more evident than with the telephone and television. In the TCT network, MetaSwitch and Myrio Corporation, the IPTV middleware supplier to TCT, combine to provide subscribers with screen pop-ups on their television that show the name and number of callers when the phone rings. This has proven to be extremely popular with subscribers and provides TCT with yet another competitive differentiator against satellite companies vying for the same subscribers.
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 10
8.
MAKING A DIFFERENCE
TCT has undergone a significant amount of change over the last several years, all in the hopes of becoming a stronger, more competitive company. Are the changes working? A quick glance at some of the services that we’ve discussed in this case study indicates they are.
8.1 VONTel
TCT’s voice-over-broadband service, VONTel, is offered primarily to customers served over their wireless infrastructure, which are all serviced by the MetaSwitch over IP. All of the same features that are available to wireline customers are also delivered to the VONTel subscribers. Since TCT began offering VONTel, the number of subscribers for the service has increased dramatically. “Our MetaSwitch has made it really easy to implement our VONTel service,” states Davidson. “We expect this service to continue to help us increase our subscriber base and revenues.”
8.2 Unlimited Long Distance
The cost reductions enabled by the UNASAT IP peering network have had significant effects on TCT’s bottom line. TCT has seen a substantial increase in the number of subscribers selecting the unlimited long distance option for their home telephone service. Since TCT connected Wireless broadband will continue to be a strategic area of investment and growth for TCT
its MetaSwitch to the UNASAT network and implemented the unlimited long distance option for subscribers, rather than losing subscribers to competitors, TCT has seen an increase in subscribers choosing this option, which has resulted in a significant increase in long distance revenue.
8.3 High-speed Internet Access
TCT continues to upgrade its access network to take advantage of the newest DSL technologies. As might be expected, dial-up customers continue to decrease while DSL customers continue to increase. All of these high-speed DSL customers are able to take advantage of bundled packages offered by TCT, which increases the Average Revenue per User that TCT receives from each household, and helps reduce customer churn by increasingly customer loyalty.
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 11
9.
LOOKING TO THE FUTURE
TCT has embraced the future, and they no longer consider themselves just a “telephone” company. Recognizing long ago that a converged IP network would be required to survive in today’s competitive environment, TCT has been extremely proactive in positioning itself to maintain a thriving business as a full-service communications provider relevant to the needs of its subscribers in rural Wyoming. In deploying a truly next-generation softswitch solution from MetaSwitch, TCT is prepared to deliver the latest exciting, revenue generating services, regardless of the access method they choose to reach their subscribers. TCT is already leveraging multiple access technologies, including copper, fiber, and wireless. Beyond these access technologies, MetaSwitch’s IMSbased solution positions TCT to take advantage of the many SIP-based applications that are or will be coming to market in the very near future. This will allow TCT and its subscribers to benefit from the newest IP-based telephony applications without having to develop them in-house or endure a long implementation cycle. Additionally, TCT is well-positioned to take advantage of the fixed/mobile convergence benefits of IMS, should they choose to pursue wireless (cellular) technology, either directly or through partnerships, such as an MVNO (mobile virtual network operator), as part of their core business. No one, service providers and vendors alike, can safely predict what services will be successful and which services will not, but most agree that a flexible, standardsbased, rock-solid platform is absolutely essential for success in today’s market. The MetaSwitch solution is the foundation upon which TCT has chosen to build their next generation infrastructure, and they are now better prepared for the challenges on the road ahead.
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 12
10.
ABOUT METASWITCH
A division of Data Connection, MetaSwitch leverages 25 years’ experience supplying communications technology and support to the leading service providers including Verizon, SBC and BT, and major equipment vendors. Our unparalleled expertise is derived from success developing world-leading products including the core protocols (SIP, MGCP, Megaco/H.248, MPLS, IP Routing, …), applications (unified messaging, conferencing, …) and next generation switching technology. The MetaSwitch Class 4/5 softswitch is easy to deploy and enables carriers to deliver reliable, toll-quality packet and TDM services in the access and backbone networks. Together with the MetaSwitch UC9000 Unified Communications system, it delivers a full range of enhanced subscriber services, Class 4/5 capabilities, and wide interoperability in IMS networks. Data Connection is a relentlessly profitable and stable private company, creating the basis for long-term investment and growth that ensures our ability to fund ongoing product investment and deliver first-class customer support. MetaSwitch operates from more than a dozen locations across the U.S. including its primary sales, marketing and customer support offices in Alameda (California) and Reston (Virginia), with worldwide headquarters in London, UK. For further information on how MetaSwitch can help service providers successfully migrate to VoIP and IMS-based networks, visit www.metaswitch.com.
$M
70 60 50 40 30 20 10 0
82 84 86 88 90 92 94 96 98 00 02 04
REVENUE EARNINGS
Data Connection Group Results, 1982-2005
TCT: A Case Study – How a Rural Telco Transformed itself into a Competitive IP Communications Company | 13
MetaSwitch, a division of Data Connection 1001 Marina Village Parkway, Suite 100 Alameda California 94501 Tel. (510) 748 8230 Fax (510) 748 8236 www.metaswitch.com