We understand that many young families today do not want a landline phone. 99% of our customers already have multiple mobile phones in their homes, and that is all they use for voice services. We get it, and we have understood what our customers really want for many years.
Unfortunately, like all businesses, we work within certain constraints. Federal regulation is our #1 constraint. However, it is also the very thing that makes a fantastic state-of-the-art Fiber Optic Network in the sparsely populated, beautiful, but remote valleys like Bear Lake, Rockland and Arbon viable. Currently, the law of the land requires all regulated telecommunications providers like us, who receive certain funding, to only offer broadband services with an accompanying landline service.
In order to lower the cost of the required landline, we began offering measured telephone service to customers who do not want to pay for regular home phone service. Measured service is our solution to bring you reliable wired broadband at the absolute lowest possible total cost, and allows you to receive a significant discount on your landline phone service at home.
As a federally regulated company, the FCC requires that all broadband services be bundled with a qualifying landline phone. (We agree this seems outdated, but we all live by the rule of law in order to enjoy fiber optic cable in remote places like rural Idaho.) If you choose standalone DSL or Fiber broadband service, the minimum monthly charge for standalone is going to be about $199 according to the laws we must abide by. So, it is far more cost-effective to bundle your broadband with the measured phone, than order broadband without phone service. And yes, believe it or not, we do even have the majority of households still subscribing to regular old fashioned unlimited home phone service too. (Some even paying for long distance service.)
An important piece of this regulation and funding puzzle is to understand that end consumers in Bear Lake could never afford the real cost of bringing fiber to their homes under pure market value in a community this size. Clear evidence to demonstrate this claim is that there are no other wireline providers in Bear Lake. So here is a little explanation of how the rural internet business works.
Direct Communications makes their investment in fiber construction back over several decades. We borrow to build the network, and then during those decades of cost recovery, an FCC program pays a specified rate of return, which provides the incentive to invest in remote areas, and allows us to pay back the debt. Without this program, Bear Lake, Rockland and Arbon would not have a fiber network at all, and we would not have a viable business model. (Also worth noting is that there is a several year gap between when we put fiber into the ground and when it is allowed to start being recovered on under the FCC program.) Of course, along with this federal cost recovery program, comes federal regulation—a lot of it. In spite of the very real and genuine challenges resulting from cash constraints, burdensome government regulations, and ever increasing network demands, we are excited about the accelerated deployment of fiber to the homes that we’re pursuing in order to continue providing premier internet experiences for our customers now, and to prepare for the way people will use the internet in the future. It is often trendy to trash government regulation and by no means are we fans of a great deal of it, but in rural communities where there is no viable business model for the deployment of fiber networks the model of a regulated monopoly makes the most economic and social sense. It ensures a provider of a business model that incents investment and then a statewide regulatory authority regulates the monopoly to protect the consumers who have no other choice on where to go for wireline services.
Each year, we have invested about several million dollars into network assets like Fiber optic lines, and upgrading switches, electronics and equipment, to power the fiber in your town. (This is public information that can be can be sought from the State Tax Commission.) The cost of building a modern fiber network is huge. Where does all that money come from? Not from your internet bill, but keep reading, and we will answer that later.
Direct Communications is your local, independent broadband provider. We are a small, family-owned business. The only way Direct Communications is able to afford to roll out fiber optic cable to everyone in Bear Lake, Rockland and Arbon is through our classification as a Rural Independent Local Exchange Carrier. Our network in Bear Lake, Rockland and Arbon is financed through federal cost recovery programs—primarily money collected by the Universal Service Fund. The residents of Bear Lake, Rockland and Arbon could never pay for the cost to build or maintain a state-of-the-art fiber optic network by simply subscribing to broadband service. Firstly, because not everyone is on our network. We only have a partial market share. Try a simple calculation- let’s say there are 2000 homes in Bear Lake, Rockland and Arbon , and for illustration assume that half subscribe to our internet service, paying $30 a month, which is by far the most popular price point in Bear Lake, Rockland and Arbon . (The real market share we will not divulge for competitive business reasons, but as we have already stated, we are not a monopoly.) That would result in monthly gross revenues from internet sales of $30,000. If anybody has ever tried to run any kind of business, you would know that you could barely run a lemonade stand on those revenues, let alone a modern communications network that requires a whole lot of employees, heavy construction equipment, plowing up roads and laying utilities, not to mention the latest fiber electronics that must be upgraded every year. We in rural Idaho are historically adverse to any kind of federal involvement in our affairs, but at least in this case, we are grateful that we have some deeper pockets to draw on to keep us in fiber optic cable.
Every year, Direct Communications spends millions of dollars in rural areas, upgrading the network plant and assets, replacing old copper lines with new fiber optic lines, upgrading switches, electronics and equipment. Bear Lake, Rockland and Arbon are remote places with a unique needs. Keeping up with the demand for bandwidth for all the families in areas is our full time job. Internet technology is changing and improving constantly. People are using more and more bandwidth, and we are upgrading the network constantly, sometimes defying the very laws of physics. We are constantly upgrading the electronics and equipment, which of course takes a lot of money and time, but our number one priority is improving our network and keeping it absolutely the premier fiber optic network in rural Idaho.
The only way the rural telephone business actually works is through federal government cost recovery programs to a certain classification of independent telephone company. Direct Communications is classified as such a rural, independent, federally-regulated company. Every person in the USA who has phone service is helping pay for your internet service in Bear Lake, Rockland and Arbon . On your phone bill, you will see a federal tax called USF, which stands for Universal Service Fund. The government established this early in the last century to provide a way to subsidize rural utilities. Everybody pays towards this fund, people in large cities served by AT&T or Centurylink for example, where phone service is a viable business, are paying $6 or $7 in taxes a month, and the federal government, through their agencies such as USAC (Universal Service Administrative Company) and NECA, (National Exchange Carrier Association) redistribute these revenues to rural phone companies to help pay for the cost of building and maintaining networks in remote areas, where the customer base cannot support the cost of the network.
So, this is a good thing if you live in a remote or rural area.
Anyway, along with government aid, of course, comes government regulation.
Various government agencies, like NECA, The FCC, and the Rural Idaho Public Service Commission, tell us what we must charge for phone service, what we must charge for DSL or Fiber service, what the installation fees must be, what we can and can’t charge for—the list is endless, the state and federal audits are frequent and never-ending. We do know what people are paying in most larger cities in Rural Idaho, and we know what people here in Bear Lake, Rockland and Arbon would like to pay, which is probably to get free Internet from Google like their relatives in Provo Utah. But, we feel our prices are pretty competitive, and our value unbeatable for the high quality product we offer. We would love to be able to offer Internet service without the hassle of the landline phone rules–this would make life easier for us and you, but until the FCC changes the model for rural customers, this is the nature of the rural phone business.
Remember, when you support a local company, you are investing your money back into your hometown—your revenue goes directly back into building up the local communications network here in Bear Lake and improving the infrastructure here. If you are sending your money out of town to the mega-corporations with headquarters on the East Coast, nothing improves in Bear Lake, Rockland or Arbon . They will spend your hard-earned money elsewhere. (Perhaps even give it to sponsor political causes you definitely oppose.)
We provide employment to folks in your local community and help improve the local economy. Would you like your home value to go up? Have more thriving local businesses in the area? Have our youth find gainful local employment? Part of our mission as a company is to ensure the future of small towns, but we need the support of the folks if our investments are going to be fruitful.
We hope you will choose to support your local phone company. Most urban areas in the USA don’t even have fiber yet—all they have is old cable or phone lines. But thanks to Direct Communications, if you are in a new development, you now have fiber-optic cable to your home, which even most of the biggest, hippest and hottest cities in America don’t yet have.
We are builders, with a vision to improve the communications infrastructure by connecting rural Idaho to the world via our state-of -the-art fiber optic network. We were the first telephone company in Idaho to offer a fiber-to-the-home connection, and it happened right here in Rockland. We are constantly working to bring better long-term value to the folks in Idaho. Thank you for your loyalty. We ask for your support in our continued efforts to improve the communications future in our town.