Telecoms combine networks; GCI vs. KTUU; Verizon enters
The top telecom story of the year was Alaska Communication Systems Group Inc. and General Communications Inc. closing on a deal to merge their infrastructure into the Alaska Wireless Network.
Under the terms of the transaction that closed in July, Alaska Communications, or ACS, and GCI each contributed wireless assets to the new network. They will each sell separate retail products.
ACS receives certain preferential cash flow initially, as long as it maintains certain subscriber levels, with GCI receiving the remainder. GCI receives a consulting fee from the new network for its management work.
Alaska Communications received about $132 million for contributing its assets to the new network, $8.1 million in earnings on the equity it contributed, and $2.9 million in preferential distributions. The company used much of that income to pay down its debt.
Through the third quarter of 2013, the company paid down $134.2 million in debt, a 24.9 percent reduction compared to December 2012.
“Finally, with debt balances coming down we create headroom for the business going forward. We are managing from a position of strength as we reduce our debt, build cash and invest for our future,” said ACS Chief Financial Officer Wayne Graham in a November investor call.
GCI didn’t see as much of an immediate financial change, but said at the end of the third quarter that the transition was going smoothly.
The FCC approval noted that the AWN should be able to operate on fewer cell towers than when the companies have overlapping, but separately-run, networks, which will save money while maintaining current coverage. This could also enable a further build out than either company would otherwise be able to afford on its own.
ACS and GCI also made a voluntary commitment to expand service if the merger was approved.
Under the May 2013 agreement, they will extend 4G LTE in remote parts of the state, extend 3G service to 6 additional communities, construct 2G macrosites in 12 remote communities and maintain 2G service in the other communities that have it currently, by Dec. 31, 2014. Fairbanks was expected to get 4G LTE by the end of 2013.
The commitments are contingent on approval of the AWN as proposed in June 2012 and continuation of high cost support. The commitments are also contingent on not disqualifying either company from bidding on certain other funding.
2. GCI-KTUU embroiled in dispute
GCI also spent the later part of the year in a dispute with KTUU over retransmission in rural Alaska and certain Southeast communities.
By mid-December, GCI no longer carried KTUU’s news programs in several rural Alaska communities, including Nome, Kotzebue, Barrow, Bethel and Valdez. The cable company also stopped carrying the news on the two Southeast Alaska stations, in Juneau and Sitka, that it bought this year. Like KTUU, both Southeast stations are NBC affiliates.
Both companies asserted the other was at fault. Initially, KTUU asked GCI for payment for transmitting its signal that was well above prior agreements. Eventually the two parties said they resolved that issue, but could not agree on other terms of the agreement, including what would happen if KTUU acquired another station.
The last agreement on the table was meant to cover transmission in Anchorage, rural Alaska and Southeast.
GCI also purchased Anchorage CBS affiliate KTVA, launched its own newscast Dec. 2, and announced plans to purchase two more stations in 2014.
In mid-December, GCI spokesman Morris said that it was too early to say what the affects of the Southeast change will be, but the station hasn’t seen a significant drop in rural subscribers since those communities lost the programming, as far as GCI can tell.
3. Verizon launches in Alaska
Verizon turned on its 4G LTE signal in June, officially entering the Alaska market and serving all 50 states.
The company entered the market in Anchorage, Fairbanks, North Pole, Juneau and much of the Matanuska-Susitna Borough.
For now, Verizon only has data service. Voice traffic roams on other Alaska telecom networks.
The network took about $100 million and two years to build, and was the first time Verizon has a built a new network to 4G LTE speeds rather than upgrading older elements. The money went toward purchasing wireless spectrum, building a switch center in Midtown Anchorage and building and connecting cell towers across the state.
By the end of 2014, the company plans to provide high definition voice-over LTE service. That will launch statewide in all of Verizon’s markets once it’s ready.
Where the provider doesn’t offer 4G LTE service, customers “fall back” to other carriers’ 3G networks. Although Alaska Communications, GCI and AT&T offer 4G LTE service, theirs is on a different spectrum, so Verizon customers can’t roam on that network.
Verizon is partnering with Matanuska Telephone Association to expand the Mat-Su service, Copper Valley Telecom to expand into Cordova, Valdez and the Prince William Sound, and Ketchikan Public Utilities to expand to that city.
Those companies will own and operate their own networks, but sell products and services using Verizon’s spectrum.
Copper Valley turned on its 4G LTE signal in September.
Molly Dischner can be reached at firstname.lastname@example.org