Sacramento Business Journal | February 20, 2004 print edition | By Mark Larson
More than four years ago Elk Grove resident Dan Kramer, fed up with the antiquated phone system in the booming residential area, organized a committee and told the manager of local phone company Citizens Communications that something had to be done.
Citizens, which has since become Frontier Communications, stepped up. It has spent $85 million over the last five years to upgrade Elk Grove’s phone network. Now the new city is on the cusp of becoming the most competitive telecommunications market in the country.
While Comcast provides cable and Internet connections in Elk Grove, this year the city will get two more competitors touting the “triple play” of phone, Internet and cable all on one line: Roseville-based SureWest Broadband and Frontier itself. While Comcast doesn’t offer phone service yet, it is expected to.
And sometime this year, Comcast is promising video-on-demand services, which SureWest already provides in some local markets, and which Frontier also promises.
Add satellite broadband options, and Elk Grove — which became a city in 1999 — has quickly progressed from worst to first in telecom service options, a competitive model that the Telecommunications Act of 1996 was envisioned to generate through deregulation. It’s a big change from the not-too-distant days of one cable company and one phone company.
“It’s wonderful for people who live in Elk Grove,” says Kramer, newly seated on his city’s planning commission. “It’s nice to be loved.”
Not everyone will win: National broadband consultant Tom Reiman says the competition shaping up in Elk Grove among companies promising fiber-to-the-home is “absolutely the first in the country that I’ve ever experienced.”
It’s unlikely, however, that this level of competition will last.
While Reiman hopes all players succeed, he predicts the market will likely be dominated by the two strongest vendors, and that they’ll have to show strong customer service plus compelling broadband features to do well in a competitive field. He predicts performance, more than price, will drive customers’ vendor choices.
Rich Esposto is executive director of the Sacramento Metropolitan Cable Television Commission, which oversees cable service applications for Sacramento County. Like Reiman, he hasn’t seen anything like the rivalry shaping up in Elk Grove.
“I’m not aware of any other community that would have that kind of choice,” he says. “It’s unique in the country if it (all) gets built.” But he also expects the market will ultimately be able to support only two carriers.
If he were ever to put together a presentation on the hotbed of telecom competition brewing just south of Sacramento, Esposto has a ready title.
Says Esposto, “I’d call it the brave new world of Elk Grove.”
Stepping up: Mitch Drake is Frontier’s regional manager. Kramer and others credit him with spearheading Elk Grove’s telecom renaissance.
He listened to the complaints of a citizens advisory committee formed by Kramer and community activists. Drake than went to Frontier Communications and told company brass of the problems, and of the stupendous growth going on in what for years had been essentially a rural town.
The brass listened, and over the past five years have been sending on average $17 million each year to upgrade its Elk Grove phone network. Complaints, including one that emergency calls to the fire department weren’t getting through, were handled. Now complaints are rare.
“Mitch is a testament to how one person can make a great big difference on how a company is perceived,” Kramer said. “He did a really good job in a tough situation.”
Drake remembers the service crisis hit Elk Grove when Internet use really started to take off everywhere. After listening to complaints from Kramer’s advisory board in April 2000, Drake smoothed out the technical issues causing call problems, taking $4 million and two months to do so.
What he found was that the old phone network was designed to handle phones that were busy only on average of about three minutes an hour. But with new residents using phone lines for Internet activity like stock trading, the network clogged up.
With fiber-optic upgrades increasing data and call traffic capacity, Drake then brought DSL (digital subscriber line) service to customers. Now he’s got about 13.5 percent of his callers taking the high-speed Internet service delivered over phone lines.
Going for a triple play: While the advisory committee originally met monthly to air complaints to Drake, it now meets quarterly, and the tables have turned.
Drake now tells the committee of the latest telecom network advancements he’s bringing in sometime this year (he won’t specify when): a “triple-play” service of high-speed Internet, phone service and cable TV.
That broadband service will be delivered in a hybrid combination of fiber-optic cable run along the curbs of homes, and connecting with ADSL, or asymmetric digital subscriber line. That’s a souped-up version of DSL, and allows high-bandwidth video transmissions over limited distances of copper phone lines.
New subdivisions, however, are expected to get a fiber connection straight into their homes.
That fiber-to-the-home technology will also be sold by SureWest Broadband beginning this year. Both companies will deploy the technology neighborhood by neighborhood.
Frontier serves 100,000 customers in Elk Grove, about one-fourth of whom have cable modem services, with the rest able to get DSL if they want it.
But population growth is raging on. Drake is expecting to include into his phone network another 6,000 or 7,000 homes annually for the next five years.
And Frontier will battle Comcast and SureWest for that growing market.
“It’s going to be a dog-eat-dog world for a while,” says Drake. “We’re seeing it now in the wireless sector and we’ll eventually see it in the telecom sector with the advent of triple play.”
Echoing Reiman’s call of what this feisty broadband service competition means, Drake adds, “It’s becoming a marketing and service game.”
Players will have to distinguish themselves with service quality and features like community contributions. Drake’s local crew totals 240; he’ll add 15 to handle the growing workload this year.
Seeing the changes: Al Livingston, who just stepped down as president of the Laguna West Community Association, worked closely with Dan Kramer in pushing for improved phone service in Elk Grove four years ago. He and Kramer were also instrumental in the grassroots movement leading to Elk Grove’s cityhood.
When he moved to Laguna West in 1992, his was one of the first 15 houses built there. Last year his neighborhood was built out with 2,200 homes.
For now, Livingston gets his DSL and phone service from Frontier and his cable service from Comcast.
But that could change. Or not. He’ll have a choice.
“Unless Frontier comes up with a real good video package, I’ll have no reason to leave Comcast. But their prices have gotten higher and higher.” And a switch to Frontier would let him get everything on one bill, he notes.
Meanwhile, neighbors who use satellite broadcast services, he says, complain “about lousy installs and paying for more than I ever wanted.”
As for having SureWest in the mix, Livingston adds, “the more the merrier. It can’t hurt. But they’re going to have to put up a tremendous investment to catch up to where Frontier is. And Frontier is not going to be asleep at the switch. They’re a very lean machine now that is responding rapidly to problems and growth.”
© 2004 American City Business Journals Inc.