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Paul Griswold leads Ontario & Trumansburg Telephone, which as a trio of telecom firms

Victor, N.Y., February 8, 2008 - Hovey Griswold's purchases of the Ontario Telephone Co. Inc. in 1920 and of the Trumansburg Home Telephone Co. some six years later were deals considerably more modest in scope than the multibillion-dollar mergers more recently seen as the fragments of Bell system rejoined to create giants such as Verizon Communications Inc.

Like other rural telephone firms of the early 20th century, the Ontario and Trumansburg phone companies, when Griswold bought them, were startups being put together in an industry then as new and open as the Internet was at the century's end.

Hovey Griswold's great, great grandson, Paul Griswold, describes the phone company's early days as "not a lot more than a few farmers hooking up to each other with barbed wire."

The fourth generation of his family to head the rural phone companies, Paul Griswold, 45, is president and CEO of the telephone companies, now branded as the Ontario & Trumansburg Telephone Cos. He also heads an associated unregulated business started in 1995, Finger Lakes Technologies Group Inc.

Griswold runs the three firms in concert, sharing some of the total staff count of 73 among them and selling services back and forth between the telephone firms and FLTG.

The three companies are legally separate. The phone companies are regulated by the state Public Service Commission. Trumansburg Telephone's service territory stretches south from its namesake village to Ithaca and north from Trumansburg along the Route 96 corridor to Interlaken, Ovid and Romulus. Ontario Telephone's territory covers Phelps in Wayne County and the nearby village of Clifton Springs in Ontario County.

The three-company combination—collectively a $19 million a- year-and-growing operation—makes up a micro-version of larger competitive local exchange carriers such as the more than $1 billion in revenues Paetec Holding Corp. or Time Warner Telecom Inc.

The pint-sized CLEC that Griswold has fashioned from the three firms is an ingenious and possibly unique amalgam, says Brighton-based telecom consultant William Hughes, CEO of HPA Consulting Inc.

"I'm very familiar with the telecom picture in New York and reasonably familiar with it in other areas, and I've never seen anything like it," Hughes says.

Elsewhere, Hughes says, independent, rural phone companies such as Ontario & Trumansburg are withering on the vine, seeing their revenues shrink as their best customers desert traditional dial-tone service for wireless and digital-phone deals.

In the formerly regulated U.S. telecom market, Hughes says, the rural companies were in good shape, collecting fees without competition as regulated monopolies that would in exchange for their exclusive franchises serve as providers of last resort.

"Now," says Hughes, "being provider of last resort works against them. The wireless companies and everybody else can skim off the best business, leaving the worst customers behind. They're all looking for ways to get around it, but most of them haven't figured anything out. Paul Griswold has."

The FLTG-Ontario & Trumansburg combination works in several ways. The rural phone companies' 11,000 customers are still the three-company operation's base, providing slightly more than half of its revenues. But the group's growth—combined revenues stood at $13 million in 2005 and grew to $15 million in 2006 before reaching $19 million last year— virtually all has come from FLTG operations. Ontario & Trumansburg revenues are holding steady or growing slightly, while FLTG showed 40 percent growth last year, Griswold says. And the phone companies' 11,000 access lines—the most of any rural phone company in the state—have been somewhat shored up by FLTG's purchase of lines.

"If it weren't for FLTG, we'd probably be in the same boat as other rural phone companies: losing access lines," Griswold concedes.

A new venture

Griswold and his brother William started FLTG as an Internet service provider in 1995. William Griswold headed the phone companies until 2005, when he retired to South Carolina where he now works as a business coach. Until 2005 Paul Griswold was an Ontario & Trumansburg vice president and president of FLTG. Up to that time, the telephone companies and FLTG were on separate tracks. In 2005, Paul Griswold embarked on a plan to knit the three firms into one unified whole.

Fiber-optic cable was the thread that would stitch the three firms together. Starting in 2005, Griswold strung a fiber network that initially connected the Ontario & Trumansburg companies' territories. Then, stringing cable to points where at least one significant customer had signed up for service, he started to extend it.

FLTG provides both lit and dark fiber. In dark-fiber deals, businesses lease space on a network but install and maintain their own optical routers. In lit-fiber arrangements, the fiber company owns and maintains connections to the network and collects a fee for the service.

John Purcell, president of the Brighton based Fibertech Networks LLC, says that for his firm and most other companies in the fiber network business, and even for the big phone and cable companies, customers in the heart of FLTG's territory are too few and far between to justify investing in the kind of network Griswold has installed. But Griswold's family-owned rural phone companies were positioned to reap a payoff where other larger firms could not.

Both phone companies' business is roughly 85 percent residential. And other than a smattering of larger business and institutional customers such as G.W. Lisk Co. Inc. and Clifton Springs Hospital in Clifton Springs their business customers range from small to tiny. To establish the FLTG fiber network, Griswold signed Cornell University, which was pleased to connect its Ithaca campus to facilities in Geneva, as the network's first tenant and main anchor. The Ithaca based Tompkins County Trust Co. would be another major tenant on the FLTG network.

Inking Cornell was a coup. But any triumph Griswold feels in inking the Cornell deal is tempered in that virtually no one else was in a position to do so. "It's Verizon's territory," he says. "But I don't know how interested they were in going there."

Over the past two years, Griswold has extended the fiber network to some 200 route miles with connections going through Canandaigua and Victor, where FLTG has its headquarters, to Rochester.

It also is extended to Seneca County, where FLTG last year made one of its boldest moves, inking an agreement to lease a 7,500-acre section of the Seneca Army Depot, the 10,000 acre ultra secure base formerly used as one of the main

U.S. nuclear weapons storage sites. It is owned by the Seneca County Industrial Development Agency.

Griswold's idea was to convert more than 60 underground cavern-like bunkers into electronic-record storage sites. His initial plan was to spend some $7.5 million to prepare the bunkers and market the storage facility himself. But after running fiber-optic to the site and doing some cleanup of the bunkers, he started negotiations with a firm that would set up and run the records storage business as a subtenant. FLTG would provide fiber connections and security.

If the deal to sublet some two-thirds of the bunkers to the firm concludes, Griswold plans to subcontract the security. As it is now developing, Griswold says, the project looks better than he initially thought. Under the deal, FLTG would be spared the capital expense of buying and maintaining servers and spared the trouble marketing the service. It would collect rent as a landlord and fees for providing fiber access and security.

Equipment business

FLTG also sells telephone equipment, a business it took over from an earlier Ontario & Trumansburg subsidiary. Equipment it handles includes voice over Internet protocol phone systems. And it provides voice and data systems to businesses.

The rural phone companies, meanwhile, also sell fiber connections using the FLTG networks. An advantage that, Griswold says, helped him piece together the three company whole was being able to trade services between the fi rms.

When FLTG buys access to the Ontario & Trumansburg system or vice versa, the companies pay for the privilege. For practical purposes, Griswold says, he is taking money from one pocket and putting it into another.

Two years into piecing together the fiber network, Griswold has edged out from the rural phone companies' footprint to snag customers in the Finger Lakes, Rochester and Western New York regions. FLTG customers include Birds Eye Foods Inc., SUNY at Buffalo, Summit Federal Credit Union, Infotonics Technology Center Inc., Preferred Care and Wegmans Food Markets Inc.

Griswold takes an undisguised pleasure in contemplating the interlocking, three-company complex he is assembling. Words tumble out as, eager to show off his handiwork, he explains how the pieces fit together.

Griswold's success in melding the firms is in a way fruit of the tree Griswold's great-grandfather planted nearly a century ago, Purcell says.

Purcell is a 32-year veteran of Frontier Telephone of New York Inc.'s predecessor, Rochester Telephone Corp. Rochester Tel made periodic stabs at acquiring the Ontario & Trumansburg companies, some in which he as a Rochester Tel vice president was involved.

"I've known Paul a long time and I've known the family a long time," Purcell says. "I dealt with Paul's father and uncle and I remember dealing with his grandfather when Rochester Tel was trying to buy the company. We wanted it because it was very high quality. That company's a great story. It's a great American story. They were never interested in selling."

An early start

Paul Griswold started working in his family's telephone business as a teenager. As a high school student, Griswold says, he planned to go into psychiatric social work. His mother and a great-aunt worked in that field, and his older sister also went into it.

Griswold says his attraction to psychiatric social work partly was rooted in his interest in a profession that involved working with people. But it also might have had something to do with the fact that as the youngest of three siblings he did not fall in the family's traditional line of succession to take the helm. For the previous three generations, leadership had gone from father to the eldest male heir. Griswold knew the presidency was marked for his brother, William, four years his senior.

But part-time work at the rural phone companies as a junior high and high school student changed Griswold's mind.

"I dug holes, I set poles and when I was 17 and got my drivers' license I drove a truck," he says. "I guess I got the bug."

After he graduated from Midlakes High School in Clifton Springs, where he grew up, Griswold attended Alfred University and then transferred to Rochester Institute of Technology, where he majored in marketing. In his junior year, Griswold got a job working for Rochester Tel's RCI Long Distance subsidiary. When the job wrapped up, he decided not to go back to school but to go to work for the family business instead.

"I guess I was bored with school, and I was impatient," Griswold says.

He in some ways regrets his decision to curtail his college career. Gesturing around his office walls at FLTG's Victor headquarters, Griswold speaks wistfully of his disappointment at not being able "to put a degree on my wall." Still, he gained invaluable practical experience he would have been hard-pressed to match at any school.

Off the net

Griswold is not all work. He plays golf, keeps a boat on Canandaigua Lake where his parents have a house and enjoys keeping up with his teenage children's sporting events. He has a 19-year-old son and a 16- year-old daughter.

"I'm big on spending time with my family," Griswold says.

Still, he seems to take no less delight in his job than a round of golf, and as it has been since Hovey Griswold's day, the family and the business are inextricably bound. Griswold's wife, Julie, greets visitors at FLTG's reception desk.

For much of his time at Ontario & Trumansburg, Griswold worked in operations. There were, he says, few chances to apply any lessons he might have learned from his marketing studies. There was not much marketing to be done for the regulated companies.

That began to change in 1995 when he and his brother decided to start FLTG. But Griswold did not come into full flower for another 10 years. In the meantime, he had the benefit of a decade-long, bottom-up course in the telecom business and in the rural phone companies' operations and business sides.

By 2005, the eventual plight of rural phone companies such as Ontario & Trumansburg was fairly clear: Without some plan to bridge the gap between their shrinking regulated business and a vastly more competitive deregulated U.S. telecom market, tiny rural phone firms would wither or be swallowed.

Ontario & Trumansburg hired a consultant to help chart the companies' future. The consultant asked for ideas. Griswold submitted a strategic plan calling for the integration of the regulated companies with FLTG.

"It was essentially everything we're doing now," Griswold says.

The consultant recommended Griswold's plan be adopted. The family decided to take the consultant's advice and determined that the plan's execution should fall to the one who devised it.

By continuing to move FLTG's CLEC business and fiber network out to newer customers, Griswold figures the enterprise can double its present size before reaching the natural limits of its geography and starts bumping into territories where it would have to go head-to-head against bigger competitive and incumbent carriers.

Purcell concurs. Griswold would not be well-advised to try expanding much beyond the firms' present Rochester, Western New York and Southern Tier axis, he says. But the FLTG and rural phone company combined might be expected to increasingly venture into the region's larger metropolitan areas. In the Rochester area they are bumping against his own firm's territory, a development Purcell says he does not mind.

"It's a funny business," Purcell says."Sometimes we're competitors; sometimes we're customers. It depends on who needs access from whom. But I'm happy to compete anytime against anybody as honest as Paul."

Much as Rochester Tel once sought to take over Ontario & Trumansburg, the FLTG/Ontario & Trumansburg package's increasing attractiveness could tempt larger competitors into making a takeover bid. Griswold says he would not be any more interested in selling than were his father and uncle, grandfather or great-grandfather. A later generation of his family, maybe even his own children, might be forced to sell or want to cash in, but he cannot imagine that he will ever be so tempted, Griswold says. He is having too much fun.

By Will Astor
Rochester Business Journal

wastor@rbj.net
585-546-8308