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Blazing a Trail on the Software Telco Frontier, ILEC Saddles Up for What's Next in Communications

By Paula Bernier January 01, 2014

There’s a lot of talk about business and network transformation these days in the telecom world, but often there’s a lot more talk than action. That’s not the case at Saddleback Communications.

The independent telephone company has replaced all its DMS legacy phone switches with Metaswitch softswitches, has a profitable new wholesale business and is building a Calix-powered fiber-to-the-home network.

Saddleback, which is owned by the Salt River Pima-Maricopa Indian Community, offers both business and residential services. Its 55-square-mile coverage area includes a mix of tribal residences in a very rural area, and some very valuable commercial real estate with Scottsdale, Ariz., addresses, notes Saddleback President Bill Bryant.

“We are literally a division of a local government,” says Bryant. “Some of the values of the community are really quite progressive, and it enables us to promote and build a culture here which is different than your typical corporate culture.”

Res on the Res

The company has 1,800 residential customers, 150 of which are now served by the FTTH network. Today FTTH options from the company include 15mbps and 25mbps packages. Saddleback’s plans are to deliver FTTH-enabled 100mbps at some point in the future. It will continue building out its FTTH network neighborhood-by-neighborhood and on demand. Those broadband customers not reached by FTTH today are served via DSL. Saddleback notes that its average residential broadband, at about 8mbps, is higher than the industry average.

“Our goal is to provide the best value per megabit in the valley,” Bryant says.

Saddleback provides residential phone service as well.

The Business End of the Territory

There are 375 businesses in Saddleback’s coverage area, which is underpinned by 238 fiber miles. Among the businesses Saddleback caters to in this area are Casino Arizona and Talking Stick Resort, First American Title, medical transportation outfit Rural/Metro Corp., local security company Safeguard, and the corporate headquarters of Kahala (the parent company of such food brands as Cold Stone Creamery).

Saddleback’s business services portfolio includes telephone services, including hosted IP PBX; a variety of broadband and carrier access offerings, including dedicated lines, DSL, and Ethernet and IP-based services; conferencing; and secure collocation, business continuity, and disaster recovery options. It also works with cellular service providers in the area, offering backhaul, space on its towers, and professional services.

It’s these business services, and the wholesale services offered by Saddleback subsidiary Re-invent Telecom, that have enabled the organization to rely less on rural telco government subsidies and more on its own revenues. In May 2005, more than half of Saddleback’s revenues were subsidy-related, says Bryant, and today that’s down to just 25 percent.

Re-invention

Re-invent Telecom, which offers wholesale services to resellers across the country, opened for business in October of 2010. The Saddleback subsidiary is a wholesale VoIP provider that sells white-label hosted VoIP PBX, SIP trunking, IP addressing, and, in some cases, private-label billing.

Traditional interconnects represent the bulk of Re-invent’s customers. Now serving about 10,000 seats, Re-invent became profitable in fiscal year 2012 and remains profitable today.

There are several companies out there today trying to do hosted VoIP, and it’s a pretty fragmented market, which is an opportunity for Re-invent, says Steve Obee, director of sales and service. That’s because the company has both IT and telecom expertise, he said, noting that dealing with LIDB, number porting, and 911 is no easy task.

“We’re finding our expertise in that has been a significant differentiator on the hosted side for our customers,” he says.

Before Saddleback created Re-invent it was dabbling in wholesale, explained Obee, but then Saddleback management sat down and decided to get more strategic about developing new sources of revenue. Bryant says they made that decision before the September 2008 economic meltdown, as there were some signs at the time that the general economy might be heading into trouble, and Saddleback knew it didn’t want to rely so heavily on subsidies.

Getting on a path to rely less on subsidies was important, says Bryant, given FCC reforms to communications will mean a reduction in rural telco subsidies. That’s not to mention that cablecos are now in the phone business, so are a relatively new competitor for rural local exchange carriers, and that wireless is also taking a chunk of revenues in light of wireline abandonment, he adds.

The Next-Gen Network

The fact that Saddleback could leverage its existing assets, including the Metaswitch softswitches, at its two central offices on the reservation to serve these new customers was a big added bonus.

Before Bryant joined Saddleback, the company had outsourced the management of its switches to a third-party company. But when Bryant came aboard, he decided to bring the switch management back in house, and to decommission Saddleback’s outdated Nortel TDM switches and move to softswitching.

Jose Crespo, the CO and OSP manager at Re-invent and Saddleback, explains that moving to the softswitches has freed up a lot of space in the company’s central office and, more importantly, has cut the company’s equipment power demands in half.

But Saddleback’s strategy to adopt new technology is not just about immediate cost savings, it’s part of a larger, long-term strategy.

Moving completely off the old iron and developing core competencies around softswitching represents the first several steps toward becoming a software telco, Bryant says. Ultimately, where everything is going, is to an environment that relies completely on cloud-based switching and open source software for the development of new products and features, he says.

The next step for Saddleback and Re-invent, he says, is probably going to be housing its softswitches somewhere in the cloud. He adds that means Saddleback technicians need to get trained on how to spin up a service on AWS, and learn how to maintain and manage services up in the cloud.



Executive Editor, TMC

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