Plumas-Sierra localnet Internet service provider.
Located in the Sierra-Nevada mountains of northeastern California, Plumas-Sierra Rural Electric Cooperative serves 6,150 customers in an area larger than the state of Connecticut (see Appendix 1). The cooperative maintains 1,067 miles of electric lines. The economy of the area is traditionally resource-based: ranching, mining, and timber. Snow blankets much of the area from late November until March. Because of the sparse population and the harsh winters, there are few large businesses.
In the first quarter of 1995, the leadership at Plumas-Sierra Rural Electric Cooperative attended a number of economic development meetings for our service area. Through these meetings it became apparent there were a number of obstacles to overcome in order to attract new companies to and encourage those already here to grow their businesses in our area.
One obvious reason was the lack of cost-effective Internet connectivity, an increasing need in today's business environment and critical to future business success. In our area, subscribers to any of the numerous Internet Service Providers (ISP) are subjected to substantial long distance charges or are paying a per-minute charge for 800 number access.
General Manager Robert W. Marshall was quoted in Ruralite magazine as seeing internet service extending the mission of electric cooperatives. "We were started because power wasn't available to rural America at a reasonable price," Marshall said. "We started our satellite program to bring TV to rural America at an affordable price. Now the Internet is the next logical step."
After weighing the benefits of having toll free Internet Access available to our communities, our cooperative decided to explore the feasibility of becoming a local Internet Service Provider (ISP). We began working with a local consultant to assist us with this project.
UNDERSTANDING THE CUSTOMER PROFILE
The next step was to gather data through community meetings and surveys. Our surveys were conducted via our member magazine, the local newspapers, and two of our service territory county fairs. We also referred to results from our 1994 member survey, which indicated approximately 30% (1,900) of our members owned computers.
The amount of positive input we received was overwhelming. Over 300 respondents stated they were ready to sign up with our service immediately, and approximately 500 respondents demonstrated interest.
RESEARCHING COMPETITORS & MARKET POSITION
Concurrent with the customer data gathering process was the effort to identify and understand our competitors and our position in this market.
We found that, although there are numerous Internet Service Providers nationwide and interest locally, the only current competitive threat for local service was Citizens Telecom. Citizens Telecom is a local phone carrier in one of the counties we serve. They weren't offering the service as yet, but were evaluating. a beta program for our area and another service area in the State of New York where they also provide local carrier phone service. We assumed the New York area would be a better decision for them.
From this data we determined we had a huge opportunity here to be the sole source for dial-up connectivity. And our research indicated the interest was increasing. We believed we would be able to obtain well over 800 customers within an 18-month period placing us in a strong position for future competition.
HARDWARE & CONNECTIVITY CHOICES
Through our research it became apparent the largest issue with providing the service was connectivity. We needed to ensure that in our rural setting the telephone company had adequate switching and competitive pricing. We were fortunate that our local provider, Pacific Bell, was able to meet our needs for this connectivity. They were reasonably priced, and able to assist us by providing additional information about our choices. They educated us on their services, and referred us to other vendors with additional resources available for this project.
We designed an infrastructure for a local digital network. This included constructing and maintaining the necessary local hardware to support dialup PPP (Point to Point Protocol) and terminal access to the Internet.
Needed for this design was a Domain Name Server (SGI Indy), Frame Relay (384K) connection to the Secondary Domain Name Server (contracted from West Coast Online) a modem pool, a terminal server (Livingston), and a CSU/DSU. The secondary server would provide us with our entrance into the Internet as well as providing our news service feed. (see attached diagram)
For each additional prefix, the installation would consist of a modem pool, a terminal server, a CSU/DSU, and a Frame Relay connection from that prefix back to our server.
All of the connectivity and hardware items would be proportionately scaled to the number of users on the service and each had their own growth algorithm.
Once we had all the customer, competitor, hardware and connectivity data gathered, we evaluated the feasibility of becoming an ISP, and initial estimates looked better than anticipated. We determined that with moderate growth projections we would have a viable business able to obtain a positive revenue stream within a 24-month period.
Our next step was to provide information to our Board and enable them to make a decision whether or not to make this investment. We did so through discussions, online training and literature. We received our Board's approval in September 1995.
The implementation process began with the purchasing of hardware, software, and connectivity. The role of our consultant expanded to include the installation and administration of the system.
As part of our initial research we looked at what our clients would need to connect to our service. The number of software choices is enormous; there is a wide range of pricing and performance, as well as numerous configuration choices. Most local/non-proprietary ISPs only furnish their customers with an account of their equipment and expect the customer to provide his/her own software. We believed since the Internet is fairly new to the area most of our customers would not have configurable software, and there isn't retail access to it locally. Another option would be "free-ware" located all over the Internet, but this option is not viable for a first-time user, nor is it appropriate to distribute as an ISP.
We then worked out a solution for our customers, by establishing a contract with Intercon Systems to distribute their software product Net Shark. This was a complete solution for our Mac customers, and we worked to complete it for our IBM customers. In the interim we provided an incentive to our IBM customers by offering them a retail product in exchange for a one-year subscription.
It was important to work closely with our lawyers during the implementation process to establish the appropriate disclosures with both the software (Intercon) companies and our own customers. The Internet contains sensitive material that may offend people or need parental supervision for persons under 18 years of age. For these and other reasons, we clearly saw the need to protect ourselves from any liability.
By late October we had our equipment installed and running. Disclosures and registration packages were printed and awaiting distribution. We began the beta testing process with our pilot group, made up of six volunteers who had prior experience with a non-propriety Internet service. We found that working the bugs out of the system was not as challenging a process as learning the endless capabilities of the system.
We choose to go on-line the second week of November. This was a calculated decision between two choices: we could either spend a few months documenting procedures and preparing the system to take advantage of all of its capabilities, or go on-line now as a dial-up service with limited capabilities but allowing our customers local access as quickly as possible. We chose the latter and developed the system capabilities along the way. This decision has presented a few stumbling points, but we've found our customers to be supportive and patient.
INITIAL RESULTS AND FUTURE EXPECTATIONS
Although initial estimates predicted a gradual growth rate with about 30 customers in November and 50 additional each month of operation, the Cooperative's Internet program has far exceeded those expectations. Currently, April 1, 1996, there are 318 customers, with several geographic areas yet to be brought into the service. Plans had called for one management representative and one consultant to staff the operations; now, the Cooperative's Internet Office has two full-time employees plus the management representative.
This has been both exciting and overwhelming for us. We are having to ramp up our staff and buy additional equipment much quicker than anticipated. We have had to request additional funds to meet customer hardware and connectivity demands and add headcount.
The Cooperative's Internet customers are discovering that they can turn their computers into telephones and eliminate long-distance bills. They can talk to family in Florida or Canada and it's a local call, the only drawback being that only one person at a time can speak, like CB radio. On the lighter side, there are on-line games, software to download, and virtual tourism. In a serious vein, college degrees can be earned.
Our expansion plans are moving quickly to keep up with customer demand. In the month of February we brought on two additional prefixes, with more soon to follow. We hope our growth and success continues to exceed our original plans. At this early stage it appears we have made a good choice to diversify into this area and is seems to be a success with the community as well.
As manager of Information Systems for the Cooperative, I believe that any rural electric cooperative can offer the internet services. Realize that each situation is different, but that if you will assess your needs carefully and do the leg work, you can bring affordable Internet service to customers who otherwise are shut out because of the high cost of phone service.
Brenda Compton is the Manager of Information Systems and Division Manager of the Internet Subsidiary at Plumas-Sierra Rural Electric Cooperative based out of Portola, California. Brenda has been with Plumas-Sierra for the past 18 months. Brenda joined the cooperative after a brief intermission in her career to relocate from the San Francisco Bay Area. Prior to joining Plumas-Sierra Brenda was an information technology professional at Intel Corporation, During her 10 years at Intel she held management positions both in the Information Services and Telecommunications divisions. Brenda is a 1996 graduate of the NRECA Management Internship Program.