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One communications is gunning for big time

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One Communications is not an ILEC. Nor is it an independent operating company. Until recently, it was nothing more than a dream, perhaps, of Board Chairman Ken Peterson's. Prior to this summer, the three primary components that now make up One Communications were busy trying to survive in their own niches as CLECs. And before that, their individual family trees branched out in all directions.

But on July 3, Choice One Communications and CTC Communications, at long last, finalized their merger announced back in February. The companies also simultaneously announced the acquisition of Conversent Communications. Three weeks later, the new company was christened One Communications and instantly became the largest privately held CLEC in the U.S.

The company ballooned from 550,000 access lines to 1.3 million. It nearly doubled its employees — some of whom sadly, but necessarily and not unexpectedly, were let go. It doubled the number of business customers to more than 150,000 and quadrupled the number of fiber route miles to 10,000.

One Communications is now a regional facilities-based player with service in 16 states in the Northeast, Mid-Atlantic and upper Midwest.

“Scale does matter in this business,” said Ray Allieri, president of business services. “Acquisitions give us density in the marketplace and density is important. Any time you can shorten the distance between you and the customer, that's important.”

The combination took some time to achieve as the Conversent deal was tossed into the middle of the Choice One and CTC merger. “Because of that, we had a couple of extra months to plan and figure things out, so the integration has gone very smooth,” said Russ Oliver, chief technology officer for One Communications.

Allieri said at the time of the acquisition that adding Conversent to the combination of Choice One and CTC creates an even stronger competitor to ILECs like Verizon and AT&T. However, as the company spreads out across the region, the big LECs aren't the only ones they'll be running into. Although the company downplays the potential for competition with rural telcos, that potential does exist.

“We partner with rural providers,” Oliver said. “As we pass their territory with fiber, we can be their transport facility. We cooperate more than compete.”

This may be true, but it can't be too long before the company starts eyeing all those small businesses they're passing with their fiber and decides to steal a few.

Even the company's switch vendor said it is inevitable. “That's something [One Communications] will have to face as they break into new markets and continue to expand quickly,” said John Lazar, CEO for MetaSwitch. “They will run into other CLECs in Illinois and independent companies in places like Indiana and Michigan.”

That doesn't mean they will bowl over the homegrown competition. “They will run into local companies that know their customer bases very well. That's just something they are going to have to take on.”

For now, the company is taking on the challenge of growing its coverage area while simultaneously integrating and transforming its businesses. By creating a super-regional company with financial depth and resources, Allieri said his company could remove one of the roadblocks CLECs have faced when acquiring customers.

“A number of potential customers have not moved to a CLEC provider because of concerns about sustainability. We answered that,” Allieri said. “We got a B rating from the markets, which is something no CLEC ever got.”

Now, he said the company is trying to crystallize its product set, blend the various cultures — which Allieri said was something that passed the sniff test when CTC first met with Choice One — and build out their fiber and softswitch network with extra levels of redundancy through routing as well as mirrored call control capabilities.

As to how the company will get this done, Oliver said, “Talent is our secret weapon.” For proof, he pointed to the commemorative display on the wall of his conference room that celebrates the company's involvement in the first Class 5 softswitch call for 911.

Pointing to the future, Oliver said One Communications will be working with MetaSwitch to build out its network. But first, a little more about its past and the sprig-like branches of its family tree.

Prior to the merger, CTC began deploying MetaSwitch's softswitch platform in October of 2005, then for the Northeast and Mid-Atlantic regions. CTC had recently become the largest CLEC in New England, thanks in part to its acquisitions of Lightship Telecom and Connecticut Broadband.

CTC deployed a redundant pair of MetaSwitch Call Agents in Worcester and Springfield, Mass., to serve Boston and New York — not too many independents there. At that time, CTC has already been providing telephone services to business customers in the region for more than 20 years. But the independent market first came into play through Connecticut Broadband, which had been providing Internet, data and voice services in the state since 2004, but which got its start from the merger of Connecticut Telephone — established in 1980 — and Partner Communications, founded in 1996.

Choice One was also growing. It picked up about 40,000 business lines when it acquired certain assets from FairPoint Communications in early 2002 and another 3500 small and medium-sized business customers in Portsmouth and Worcester when it acquired Atlantic Connections in 1999.

And Conversent itself was formed in April 2005 through the merger of its subsidiaries, Conversent Holdings Inc. and FiberNet. CHI was co-founded by cable entrepreneur Robert Fanch and Robert Shanahan in 1998. FiberNet was founded in 1997 in West Virginia.

It is apparent that if you work for One Communications, you are likely a journeyman of company and network integration. The secret to coping, Allieri said, is a matter of focus, a focus on the business and on the quality of service.

“Customers aren't enamored by technology,” he said. “So you have to focus on service quality.”

You also have to keep it simple, he said. “Can we out-tech the phone company? Probably not,” Allieri said. But you have to offer new technology. The trick is, providers at the low end of the market need to be simple. More important, they have to be consistent across markets.”

MetaSwitch can help in that regard. “They get some interesting [network] rationalization using our equipment,” Lazar said. “They can have centralized call control using our softswitches and call agents and exploit the promise of a distributed IMS architecture by having media gateways in a number of different markets.”

Lazar said there is no doubt they can get tremendous savings just by clarifying the networks. “It's a classic case of a company building a very high-end, carrier-class IP backbone to rationalize the way they run their business.”

A good example of that, Oliver said, is how the company was able to eliminate some leasing agreements. “[CTC] had a lot of fiber where Choice One was leasing, so we just illuminated that and are moving them over,” he said.

While One Communications tries to keep it simple by offering basic, but quality, communications services to mostly business customers — such as local and long-distance, high-speed Internet, T-1 service and managed services that include voice-over-IP, Web hosting and Web development services — more complex services are on the way.

Oliver said the company is exploring Wi-Fi and WiMAX technology. And he admits that within 24 months, One Communications will need a video service. Then the company can start calling out the cable companies.

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© 2008 Penton Media Inc.

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