Kalona Cooperative Telephone Co., Inc. (KCTC) had a good financial year with a net income of $189,954, Bart Yotty, board president, stated at the KCTC annual meeting on January 26.

Yotty cautioned that the KCTC profit margin will not be that strong in the coming years. “As we continue forward with our upgrade of the outside plant and central office and other projects,” Yotty explained, “the company’s net income will likely be less over the next several years. With our increased investment in plant and equipment, higher expenses will follow in the form of depreciation, financing/interest and consulting expenses.”

Net operating revenues for l998 were $1,617,368 as compared to $1,533,574 in l997. Net income increased from $l07,122 in l997 to $189,954 in l998.

Broken down, the income for 1998 includes $409,772 from local network services, $1,095,103 from network access services revenues (from the long distance carriers), long distance network services, $547; carrier billing and collection revenues, $48,154 plus miscellaneous revenues (including internet services) of $63,289.

Yotty gave a historical review of rate increases since 1930. “In l998, we had a $1 per month rate increase (May).” he said. “Over the past 10 years, rates have increased from $9.60 to $16.10, an increase of about 68 per cent over ten years or an average increase of $6.8 per cent per year.”

KCTC collected $26,841 and $862 in E911 surcharges for Washington and Johnson County 3911 boards respectively. Washington County’s E911 fee goes to $1.25 (up 25 cents) starting in March 1999 while Johnson County remains at $0.45 per month.

Yotty noted that in l998, KCTC refunded $17,038 in patronage capital. There was $1,526,697 in patronage capital at the beginning of 1998 compared to $1,279,527 in l997. Transfers to patronage capital totaled $98,024 for total end of year patronage capital of $1,607,683.

In June of 1991, KCTC adopted a business plan for the upgrade to fiber optic network and cable TV. As the time passes, fiber optic technology is becoming more affordable and reliable, Yotty noted. Some of the expected advantages of the fiber optics are:

A) higher quality and clarity of telephone service.

B) high speed data capabilities.

C) digital cable television (MPEG-2 real-time signal) to customers, both rural and in town.

D) interactive video, video on demand, home shopping and home banking.

E) interactive video telephone service with two-way picture and voice transmission.

In the first quarter of 1997, KCTC installed a new, technologically advanced Siemens Stromberg Carlson EWSD central office switch. With this equipment, KCTC is able to provide advanced digital services, including caller ID, voice mail, and ISDN. The new switch has made KCTC a full SS7 Class 5 end office.

KCTC internet

In July of 1996, KCTC installed equipment to become an Internet service provider (ISP). KCTC provides both local dial-up and ISDN access to the Internet as well as dedicated connection to the Internet.

“We feel this provides our customers with high quality, much needed service, and helps to position KCTC as a full service telecommunications provider,” Yotty stated.

“Since the implementation of our Internet service, response has been growing for Internet dial-up account, as well as the added benefits of the addition of second access lines. We have designed marketing packages to promote the features of our internet services, emphasizing how the service can be utilized by both the business community and residential user.

“We continue our free Internet classes at the local library, with record attendance.”

KCTC donated a computer to the Kalona Public Library in l993 and in the 4th quarter of l997 donated 1.5 new PC’s. “We plan to continue the Internet classes and are working with the Library to educate and inform the local residents on how to use Internet Services,” Yotty reported. “Currently, approximately 15 per cent of customers in the Kalona exchange subscribe to our Internet service.

Highlights of KCTC Internet include:

A) KCTC builds and hosts sites for Kalona Area Chamber of Commerce to provide extra revenue for the chamber and to promote the Kalona area.

B) Design, build and host web sites for area businesses with special needs and promotional ideas.

C) KCTC has installed high speed ISDN circuits and are providing Internet services to the Mid-Prairie Elementary and Middle schools.

“Growth in the Internet business has been steadily increasing, even more than we had anticipated,” Yotty said. “Demand for services has been overwhelming. Thus so has the need for support in customer service, billing and administration. We are using the Internet as a marketing tool to promote our Internet services and some of the advanced calling features, voice mail, ISDN and other services available in our Siemens EWSD Class 5 central office switch. These efforts have been well received.”

Toll routes

In l995 and l996, KCTC completed a new toll route and continued work on route relief to the Joetown and Richmond areas and central office switch. This is Phase One of the project.

Phase Two is the upgrade of the rural area within the Kalona exchange to fiber optics and a fiber optic network backbone. Phase Three is the upgrade of the fiber optic cable within the City of Kalona.

“Our business plan design is to bring fiber to the curb and copper the last 2,000 feet into homes and businesses,” Yotty stated. “On an ongoing basics, we will continue the development of our business plan for a comprehensive upgrade to fiber optic cable TV an/or a direct broadcast satellite TV relationship, We have been pursuing this relationship for the last several years.

In 1997, KCTC deployed seven Optical Network units (ONU’S). By the third quarter of 1999, KCTC plans to deploy six BRX units, which are full digital loop carriers capable of delivering broadband, voice and TV signals. The equipment KCTC has chosen will be integrated into the outside plant to the curb and to the home, when set top boxes become available and all the details are worked out.

“We will then have the most advanced fiber optic and broadband capabilities delivered to the home,” Yotty pointed out. “As time passes, fiber optic technology is becoming more affordable and reliable. The cost of the entire project is estimated at $6.1 million and as of the end of 1998, the amount invested is approximately $3.5 million.

He noted the completion of the new long distance route establishes a new meet point with USWest and GTE. This route is a Sonet fiber ring which will give KCTC redundancy and an added protection in the case of a major cable cut. The cable route has eased cable pair pressures to the area, allowed for future expansion, provides more flexibility and protection and allows for backup facilities.

Y2K prepared

KCTC is attempting to research and resolve potential Y2K problems. “We are holding regular staff meetings, contacting programmers, vendors and suppliers, and contingency planning in the event that Y2K problems are widespread,” Yotty added. “We plan to do Y2K testing in mid-1999 on our equipment. We have been closely following the Iowa Utilities Board and FCC guidelines and checklists in effort to become Y2K compliant. Our goal is to provide the high quality, uninterrupted telecommunications services through the year 2000 and beyond.

Board

The terms of three directors expired this year and were re-elected. They are Ron Harland, Raymond Yotty and James Strabala. Yotty was reelected board president.