Blackfoot Telephone and 3 Rivers Communications decided in tandem last year that owning and operating a wireless network in their vast and open land was becoming a liability. Years earlier, they were being congratulated for bringing the first digital wireless service to their customers. But times change, even in Montana. And in August 2005, Chinook Wireless was born and stepped in to turn that liability into viability — for itself.

Chinook bought the wireless assets of Blackfoot and 3 Rivers and secured employees from each. Not quite a year later, its head count has gone from 43 to 115 and its network has gone, or is going, from a CDMA-based infrastructure to Nokia-provided GSM.

The company, backed by Boston-based private equity firm Alta Communications, is making a $40 million investment that will turn it into one of the few GSM operators in North America. It's an eyebrow-raising plan, but one that makes perfect sense to Ronald Belin, executive vice president and chief customer operations officer of Chinook.

“We feel GSM is equal to or better in its ability to offer robust services and features,” Belin said. “The technology advances from an infrastructure and handset standpoint are ahead of the other technologies.”

It obviously also makes sense to founder and CEO Jonathan Foxman, who has been there and done that. He also deployed a GSM network with Nokia at SOL Communications in Phoenix.

Belin said that in addition to converting its acquired infrastructure, the company is expanding beyond the previous service areas. Chinook will be taking its technology across the state with initial pushes to the east and north. Based in Great Falls, Chinook currently serves that area and goes north to Havre, Fort Benton and Lewistown. To the south, it serves Billings and the land between Kalispell and Hamilton.

One might say the expansion provides Nokia with a greenfield opportunity to deploy what will be one of the first 3GPP Release 4 network architectures in North America, but given Montana's landscape, it's more of a golden-field opportunity.

Converting to GSM provides Chinook with a chance to be different, Belin said. “Being different is just as important as being better because you have to have something that people will recognize about you that is not the same,” he said. “The market is fiercely competitive, and as it becomes more saturated, you need to clearly identify yourself as having an alternative.”

The difference that GSM provides is in the services it can support, Belin said. “We are prepared to offer a full-service package of voice and data and everything else that can be put across an EDGE GSM network.”

Although the $40 million investment may appear, as Ovum analyst Roger Entner said, to be a little excessive in relation to the performance difference between the technologies, there are service and operational advantages for Chinook.

Because GSM is the largest wireless technology being used around the world, Belin said, Chinook will have access to more innovation and have it earlier than operators using other network technologies, especially in handsets.

Belin is a little concerned about the ability of large equipment manufacturers in general to keep up the current pace of innovation given the environment of consolidation and in light of the proposed melding of his suppliers Nokia's and Siemens' service provider businesses — but not imminently.

“We already have our commits from them, so initially, it won't matter much. It will take some time for them to develop their plans,” Belin said.

Overall, he said there is a downside to vendor consolidation. “What it limits more than anything is the innovation,” he said. “If you have fewer players that have no incentive to spend the money to look for better ways to compete in the market, you inevitably have less innovation.”

He added that it would be better to have more vendors reaching for that ultimate pie-in-the-sky cell site that transmits across 100 miles versus 30 miles, looking for the next big breakthrough. “However, if consolidation results in reduced cost because of combined operations, which means we can get the equipment at lower prices, that's a positive for us,” Belin said.

Entner said Chinook will definitely have access to a bigger handset universe and that base stations will be cheaper, but he still said, “Forty million dollars is a lot of money.”

Chinook will know soon enough how well the investment pays off. The company expects to complete the transition to GSM by the end of the third quarter. So far, Belin said, the overall response has been overwhelmingly positive. Chinook has been communicating its transition plans and the benefits customers will see through a systematic program using bill stuffers, text messaging, mailers, outbound calling from customer service and talking customers through the changes while they're shopping in their stores.

“With any technology change, history has shown that the customer service aspect is most in need of attention,” Belin said.

The trend Chinook is bucking by going with a GSM-based network is just one of the trends that it and other providers in rural areas seem to be bucking — and not just small providers. By spinning off their wireless assets, Blackfoot and 3 Rivers followed suit from Alltel, which separated its wireline and wireless businesses in the creation of Windstream. In doing so, these companies appear to be bucking the quadruple play, the bundling trend that so many experts say a provider needs.

“I don't see that you have to have that as long as you have outstanding, reliable service with something unique to offer that customers consider a value,” Belin said.

As for providers deciding to focus on their core networks rather than trying to be the sole provider of services in an area, Belin said this: “It's about identifying your core strengths, making sure you can compete effectively and knowing the amount of investment you're willing to tolerate. Companies are deciding they have finite resources and determining where to invest to get the most for their shareholders.”

Of Blackfoot and 3 Rivers in particular, he said, “Like ILECs across the country that had participated in wireless auctions and dealt with the rapid pace of advancement and the capital required to keep up with that advancement, they decided their resources were better spent elsewhere.”

Darren Moser, general manager of 3 Rivers, agreed. “It got to be a very difficult market to play in. We decided our resources were better used for our wireline network,” he said.

It won't be easy for Chinook either, but Belin is confident that the company's plan is solid. Chinook is pleased with its choice as well as the advances made in GSM over the last five years. Chinook has a fully funded business plan that looks out over the next five.

“Everyone is comfortable with the projections,” Belin said. He added that there are a lot of variables that affect progress, such as how quickly they can bring on customers, how well they are able to control costs and how precipitous is the drop in handset prices.

One option for controlling costs could come from the Nokia. In addition to supplying Chinook with a radio and core network and switching infrastructure, Nokia is providing several services, including network planning, installation, integration and testing.

But another option would be to outsource its operations to Nokia, which has been gaining ground in that area on market leaders Ericsson and Lucent Technologies. Not that it's much of a market yet, but it's an option. And it's an option Belin doesn't sound ready to take.

“We have looked at that and continue to evaluate. We don't have a firm opinion one way or another,” he said. “It really comes down to the value proposition versus what it takes to do it ourselves.”

For now, Belin said that the 4% unemployment rate in Montana can make it hard to find and retain skilled workers, “We have been lucky to find good people. We could always use more.”

Chinook may be bucking a few trends, but if it's successful, it has just as much of a chance of starting a few of its own.