In the world of telecommunications and internet infrastructure, we spend much of our time looking at Tier 1 markets, and most of the rest not too far away. But there are also service providers doing the same work out where the biggest corporations are not to be found. Blackfoot Communications is one such regional provider, serving markets across western Montana and eastern Idaho and reaching into the surrounding states. With us today to talk about its unique position in the industry is Todd Twete, Blackfoot Carrier Services’ Director of Carrier Services.
TR: What are the origins of Blackfoot, and how did it become what it is today?
TT: We have operated as an ILEC in Montana since 1954. Our roots are in being a cooperative, which is a little different than a Fortune 500 company that has general shareholders. Every member in a cooperative has equal rights and voting power and they are paid a capital credit which is a cooperative's version of a dividend. About 20 years ago we started operating as a CLEC as well and in 2012 Blackfoot did a couple of strategic acquisitions. We bought a fixed wireless outfit in Bozeman, Montana called Cutthroat Communications, and within a few months we also bought a Fremont property down in southeast Idaho. So today we have ILEC and CLEC operations in both western Montana and in southeastern Idaho.
TR: Your network map stretches beyond that territory into Washington, Nebraska, and Wyoming, what infrastructure do you leverage in those geographies?
TT: Blackfoot has customers in 16 western states, but obviously we don't have network assets in all those states. We often find ourselves having to provide connectivity in places we don't have assets. As such, we leverage partners for offnet connectivity. In Wyoming, for example, our partner is Range, which recently rebranded and was previously known as ACT. Blackfoot, Range, and a handful of other organizations have recently formed a consortium of rural network operators. The go-to-market strategy of these partners entails the joint marketing of their combined network assets.
TR: What is your balance between residential, business, and wholesale services?
TT: We have a direct/retail sales team, a channel sales team, and a wholesale sales team, along with a customer service team that is dedicated to our residential customers. We have internal controls and processes between each one of those sales channels, keeping each channel independent for competitive, anti-collusion reasons. Most of our revenue comes from the wholesale channel, followed by retail and the channel. Our wholesale revenues come from other carriers and network operators that need to leverage either our regional transport or our last mile to get to a specific enterprise customer or cell tower. Our biggest customer is one of the big four mobile carriers, whom we started doing business with in 2016.
TR: Are you seeing demand related to 5G yet in your territories?
TT: There is certainly a carrot being dangled about 5G in the market, but when places like Montana and Idaho and other western rural markets will actually see it is a big question. Those type of services tend to always get rolled out first in the major cities. But in my opinion, one of the challenges in the rural West is the ability for various networks to actually support the requirements of 5G. One issue is latency, as the routes need to be much shorter to the major switching centers. But more simply, the bandwidth requirements of 5G are startling and I'm skeptical that there's enough fiber in the ground in rural America in general to support it. Even if you have fiber to the tower (often it is copper or microwave), is there enough capacity on a given last mile provider’s core network? Even within the last few years it was common for backhaul to a cell site to have 100Mbps or 250Mbps or 500Mbps connectivity. Now 1Gbps is becoming the standard and 10Gbps is rumored to be the requirement very soon. It's conceivable that once we get to a full rollout of 5G, each site is going to require 100Gbps. I can tell you without hesitation that there are many rural ILECs whose core networks don’t support 100Gbps. So I think it could be years from now before 5G actually reaches much of small-town America.
TR: Where do you think the resources for those needed upgrades of rural network infrastructure will come from?
TT: I don’t know, it’s a quandary. The federal government perhaps?
TR: What projects are you investing your current resources into?
TT: Managed services is a big focus, and that is really a case of evolving customer needs and industry trends. We all know the phrase, the “race to zero” when it comes to broadband. If your business is primarily dependent upon revenue from traditional broadband circuits, you're probably going to be disappointed with your revenue projections in the upcoming years. It's highly competitive, and rates are getting lower and lower every year. Given that, is a spend on an MPLS network justified? It's very secure, very stable, but it's very expensive. Instead, we can invest in several commodity-type circuits and then leverage managed services software to decide which circuit to use when and for what traffic. We actually launched those retail managed services at the beginning of the year, and we are launching wholesale managed services this fall. Our offerings are based on technology from VeloCloud (VMware) and Meraki (Cisco).
TR: How do the wholesale managed services differ from the retail you have already launched, and who are you targeting?
TT: The value proposition is different. If you look at Blackfoot’s regional partners, the size and capabilities definitely vary. Some are similar in size, some are considerably smaller. When an operator decides to roll out a new product offering, there can be months or years of R&D and business case building and vetting of vendors. Blackfoot has invested that time and those resources. The value proposition is really about allowing a partner to leverage all the R&D that Blackfoot's done and the knowledge that it has developed via a white-label offering. It allows them to be opportunistic, capitalize on their existing end user relationships and get to market quite a bit faster.
TR: Looking beyond those service launches, what is next on the horizon for Blackfoot?
TT: We're in the same stage with a unified communications platform that we were approximately a year ago with managed services. So that is a possibility, however it’s too early in the due diligence process to say whether that will have a wholesale offering as well. But most of the focus of our network engineering team is on the Blackfoot network. It circles back to what we talked about with 5G and whether, with the fiber in the ground, we will be in a position to support it. Of course, the work associated with building a network is never done. There’s network maintenance, upgrades, evaluating additional assets and dark fiber opportunities. Existing wholesale customers that we're servicing today with 10Gbps are staring to ask for 100Gps. When you're in the businesses that we're in, the size and capacity of your network two years ago just isn't going to get you where you need to be two years from now.
TR: How do you view M&A as a path to future growth? What types of assets might make sense?
TT: It’s an ongoing concern. There’s always some due diligence that's being done somewhere, but we just haven't found the right fit. Something completely outside of telecom might catch our interest. We have a technology incubator/accelerator known as C2M Beta. Through C2M Beta we have partnered with some small startup technology companies, but they are not traditional telecom.
TR: How has the COVID-19 pandemic affected Blackfoot’s operations, both in the short and long term?
TT: At one point in time, I think it was early April, all 200 or so employees at Blackfoot were working remotely. I think we were surprised at how easily we were able to implement that and how well it works, and I'm sure this is not unique to Blackfoot at all. The experience has really given us some clues about what business is going to look like in 2021 or 2025 and beyond. Case in point, a little while ago, I was talking about the campus, the buildings we have in Missoula right now. We've talked about a new campus, consolidating some of the buildings we have right now and possibly building a facility for C2M Beta. We still might go down that path but based on our experiences with COVID the notion that we've got to have a facility that houses 200 people all in Missoula has really changed. And I know that's not specific to Blackfoot at all. I'm sure there's hundreds of organizations across the United States thinking about the same thing. Do we really all have to go into an office anymore?
TR: What unique features are there about the telecommunications and internet infrastructure business in places like Montana and Idaho?
TT: If you're exclusively living in an urban jungle, you may not understand some of the challenges and nuisances associated with turning up mobile service in rural America. We can't do construction in the winter. The ground is frozen and there's six, seven, eight feet of snow sometimes at some of these tower sites. And because of the remote nature of some of these sites, it's not feasible to plow fiber, so you fall back on microwave. However, line-of-sight is not always a foregone conclusion. In a market like Dallas, you’ve probably got three, four, or five fiber providers to pick from and there are probably easements already in place. There are probably already leases in place on the tower. You don't have to deal with private landowners. The job really is much different than in a warmer metropolitan climate.
TR: Thank you for talking with Telecom Ramblings!
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