Alaska Communications Systems Group, Inc. operates as a fiber broadband and managed information technology (IT) services provider that offers technology and service enabled customer solutions to business and wholesale customers in and out of Alaska.
The company also provides telecommunication services to consumers in the most populated communities throughout the state. The company’s facilities-based communications network extends through the economically significant portions of Alaska and conne...
Alaska Communications Systems Group, Inc. operates as a fiber broadband and managed information technology (IT) services provider that offers technology and service enabled customer solutions to business and wholesale customers in and out of Alaska.
The company also provides telecommunication services to consumers in the most populated communities throughout the state. The company’s facilities-based communications network extends through the economically significant portions of Alaska and connects to the contiguous states via its two diverse undersea fiber optic cable systems. The company’s network is among the most expansive in Alaska; and forms the foundation of service to its customers.
Markets, Services and Products
The company operates its business under a single reportable segment. It manages its revenues based on the sale of services and products to the three customer categories, such as business and wholesale (broadband, voice and managed IT services); consumer (broadband and voice services); and regulatory (access services, support and carrier termination).
The brand pillars supporting the company’s products and services are reliability, customer service, trustworthiness and local presence.
Business and Wholesale
Providing services to Business and Wholesale customers generates the majority of the company’s revenues and is expected to continue being the primary driver of its growth in the near term. The company’s business customers include large enterprises in the oil and gas industry, health care, education, Alaska Native Corporations, financial industries, Federal, state and local governments, and small and medium business. The company is the first Alaska-based carrier to be Carrier Ethernet 2.0 Certified; and is the Alaska-based carrier certified for multipoint-to-multipoint services.
The company offers Internet Protocol (IP) based voice including the largest SIP implementations in the state of Alaska and are the first Microsoft Express Route provider in the state. The company provides services, such as voice and broadband, managed IT services, including remote network monitoring and support, managed IT security and IT professional services; and long-distance services primarily over its own terrestrial network.
The company’s wholesale customers are primarily in-state, national and international telecommunications carriers who rely on it to provide connectivity for broadband and other needs to access their customers over its Alaskan network.
Consumer
The company also provides broadband and voice services to residential customers, including residential homes and multi-dwelling units. Given that the company’s primary competitor has extensive quad play capabilities (video, voice, wireless, and broadband) it targets how and where it offers products and services to this customer group in order to maintain its returns. The company continues to expand product and service offerings to this customer group; and has implemented fiber fed Wi-Fi and certain fixed wireless technology solutions for providing broadband, all of which provided a basis for continued growth in this market in 2020.
Regulatory
Regulatory revenue is generated from three primary sources, such as access charges, which include interstate and intrastate switched access and special access charges, and cellular access; surcharges billed to the end user (pass-through and non-pass-through); and federal and state support. The company provides voice and broadband origination and termination services to interstate and intrastate carriers.
Access Charges: Interstate and intrastate switched access are services based primarily on originating and terminating access minutes from other carriers. Special access is primarily access to dedicated circuits sold to wholesale customers, substantially all of which is generated from interstate services. Cellular access is the transport of local network services between switches for cellular companies based on individually negotiated contracts.
Pass-Through: The company assesses its customers for surcharges, typically on a monthly basis, as required by various state and federal regulatory agencies, and remit these surcharges to these agencies.
Other: Other non-pass-through surcharges are collected from the company’s customers as authorized by the regulatory body. The amount charged is based on the type of line, such as single line business, multi-line business, consumer or lifeline.
Connect America Fund (CAF) II: In 2016, the FCC released the CAF Phase II order specific to Alaska Communications, which transitioned from CAF Phase I frozen support to CAF Phase II.
Essential Network Support (ENS): The company is required by the state of Alaska to provide and maintain local services for retail and carrier-to-carrier telecommunication throughout certain local exchange facilities.
Network and Technology
The company provides communications and IT solutions that connect Alaskans, as well as customers in the continental United States to the world. This is based on an extensive facilities-based wireline telecommunications network in Alaska that the company operates. The company provides high-capacity data networking, internet connectivity, voice communications, and IT Services. Networking services include Ethernet and IP routed services, as well as switched and dedicated voice services. In addition, the company offers other value-added services, such as network hosting, managed IT services and long-distance services. The company continuously upgrades its network to provide higher levels of performance, higher bandwidth speeds, increased levels of security and additional value-added services to its customers. It operates 181,000 terrestrial and submarine fiber miles, which serve as the backbone of its network; as well as serving over 900 buildings with fiber. The company’s networks are monitored for performance around the clock in redundant monitoring centers to provide a high level of reliability and performance. The company’s network is extensive within Alaska’s urban areas and connects its largest markets, including Anchorage, Fairbanks and Juneau with each other and the contiguous states, as well as many rural areas.
The company continues to utilize Fixed Wireless technology to reach even more customers, bringing total homes and businesses passed to more than 16,000 at the end of 2020. In 2020, the company secured additional spectrum through the Federal Communications Commission (FCC) auction for licenses in the shared Citizens Broadband Radio Service (CBRS). The company also continues to expand its Multi-Dwelling Unit (MDU) offering utilizing fiber or fixed wireless backhaul, with more than 7,000 MDUs served.
The company owns and operates two undersea fiber optic cable systems that diversely connect its Alaskan network to its facilities in Oregon and Washington. These facilities provide the most survivable service to and from Alaska, with key monitoring and disaster recovery capabilities for its customers. The company also has usage rights on a third undersea fiber network connected to the lower-48.
The company’s network in Oregon and Washington includes terrestrial transport components linking its landing stations to a Network Operations Control Center in Hillsboro, Oregon and collocation facilities in Portland, Oregon and Seattle, Washington. In addition, AKORN, one of the company’s undersea fiber optic cable systems, connects its Alaska network from Homer, Alaska to its facilities in Florence, Oregon along a diverse path within Alaska, the Pacific Northwest and undersea in the Pacific Ocean. Northstar, the company’s other undersea fiber optic system, has cable landing facilities in Whittier, Juneau, and Valdez, Alaska, and Nedonna Beach, Oregon. In 2020, the company completed major network upgrades to the Northstar fiber line, increasing capacity by more than five times. The company’s subsea capacity, including the AKORN and Northstar systems provides a total of 7,800 route miles, or about 26,000 fiber miles, of submarine fiber. Together, these fiber optic cables provide extensive bandwidth, as well as survivability protection designed to serve its own, as well as its most demanding customers’ critical communications requirements. In 2017, the company upgraded the AKORN system to be able to support 100GB circuits for customers. Further upgrades to the AKORN system were completed in 2019. Through the company’s landing stations in Oregon, it also provides an at-the-ready landing point for other large fiber optic cables; and their operators, connecting the U.S. to networks in Asia and other parts of the world.
The company’s terrestrial fiber network on the North Slope of Alaska allows it to provide broadband solutions to the oil and gas sector in a market that previously had no competition; and continue to advance its sales of managed IT services.
The company has developed a satellite earth station network and acquired C-band transponder space on Eutelsat’s E115WB satellite. It provides Internet backhaul connectivity in 2017; and continues to expand the satellite service, adding customers and upgrading equipment throughout 2018, 2019 and 2020. Another Alaska carrier, Quintillion, has invested in a submarine network with landing stations in several northwest Alaska communities, including a terrestrial route from the North Slope to Fairbanks. The company has acquired capacity on this system and deliver service to customers in this area, including a buildout of terrestrial fiber optic cable, in Utqiagvik to serve this new market. The company is serving customers in Utqiagvik, Nome, Kotzebue and Deadhorse.
Competition
For traditional voice and broadband services, the company competes with GCI Wireless Holdings, LLC and AT&T on a statewide basis; and smaller providers, such as Matanuska Telephone Association, Inc. on a more localized basis. The company competes with GCI Wireless Holdings, LLC (broadband and voice).
Marketing
The company tailors its products and services based on understanding its customers’ needs, location, and type of service they desire. For business customers, the company bundles its products; and provides value added managed IT services using its local service delivery model and highly reliable network. For consumer customers, the company focuses on brand awareness, the product experience, providing improved service through new technology and price.
Sales and Distribution Channels
The company’s sales strategy combines primarily direct distribution channels to retain customers and drive sales growth. In 2021, the company will continue leveraging its direct sales channels’ focus on serving Business and Wholesale customers, its web and contact center channels for consumer customers; and expand its penetration of the military housing market for continued sustained performance. The company is also continuing its efforts to improve customer service and move more consumer transactions to the web.
Customer Base
The company generates its revenue through a diverse statewide customer base. Business and wholesale customers are the company’s primary focus and they consisted 68% of its total revenue in 2020.
Seasonality
The company’s revenue is impacted by seasonal factors. This is due to Alaska’s northern latitude and the resulting wide swing in available daylight and weather conditions between summer and winter months. These conditions, unique to Alaska, affect business, tourism and telecom use patterns in the state. The company’s spending patterns are also impacted by seasonality as it incurs more capital spending and operating spending during the summer and early fall periods of the year (year ended December 31, 2020) , reflecting the heightened economic activity from the summer months; and its own construction activities during this time period.
Regulation
Federal Regulation
The company must comply with the Communications Act of 1934, as amended (the Communications Act) and regulations promulgated thereunder, which together require, among other things that it offers regulated interstate telecommunications common carrier services at just, reasonable and non-discriminatory rates and terms. The Communications Act also requires the company to offer competing carriers interconnection and non-discriminatory access to certain facilities and services designated as essential for local competition.
All of the company’s local exchange carrier (LEC) subsidiaries are considered incumbent LECs (ILECs) and has additional obligations under the Communications Act, including obligations to unbundle certain elements of their networks for purchase by competitive LECs.
The company also received a Letter of Inquiry on March 18, 2018, from the FCC Enforcement Bureau requesting historical information regarding the company’s participation in the FCC’s Rural Health Care program.
The company’s LEC subsidiaries are regulated common carriers offering local voice and telecommunications data services. In providing regulated telecommunications services, these subsidiaries are subject to competitive market forces, as well as rate-of-return regulations for intrastate services that originate and terminate in Alaska and price-cap rate regulation for interstate services regulated by the FCC. A broader range of data and information services are offered by the company’s unregulated affiliates or as unregulated services by its regulated companies.
History
Alaska Communications Systems Group, Inc. was founded in 1998. The company was incorporated in 1998 under the laws of the state of Delaware.
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