Warwick Valley Telephone Company Business Information, Profile, and History

Company Perspectives:

The company's mission is to be the choice provider of quality communication services and products by offering superior customer care and value for traditional and new markets in the Tri-State Region and beyond.

History of Warwick Valley Telephone Company

Doing business as WVT Communications, Warwick Valley Telephone Company is an independent telecom company serving a mostly rural area of southeastern New York and nearby portions of New Jersey. The Town of Warwick, located 55 miles north of New York City, is comprised of three villages (Warwick, Florida, and Greenwood Lake) and five hamlets (Amity, Bellvale, Edenville, New Milford, and Pine Island). Despite its small size WVT has been in the vanguard of telecoms in adopting new technologies and rolling out new products. WVT converted to all-digital technology and offered cellular service in the late 1980s, then provided internet dialup access in the mid-1990s as well as high-speed ISDN and DSL service later in the decade. With the advent of a new century the company introduced VDSL (very high-speed digital subscriber line), which permits WVT to offer digital TV service to its customers. Internet service is provided by wholly owned subsidiary Hometown Online, Inc., not only operating in Warwick Valley's service area but also in neighboring parts of New York, New Jersey, and Pennsylvania. Another wholly owned subsidiary, Warwick Valley Long Distance Company, resells domestic and international long distance to WVT subscribers. In addition, WVT is involved in a number of joint ventures. It holds a 7.5 percent stake in Ball Atlantic Orange-Poughkeepsie Limited Partnership, a wholesaler of minutes to cellular operators, and a 17 percent interest in Zefcom, L.L.C., a reseller of wireless services. WVT also owns an 8.9 percent stake in Hudson Valley DataNet, a company offering high-speed bandwidth in the region.

Founding of Warwick Valley Telephone: 1902

Before the birth of Warwick Valley Telephone in 1902, the entire Town of Warwick was serviced by a single public telephone located in a drugstore on Main Street in the Village of Warwick. Frustrated that the New York Telephone Company was not prepared to offer anything beyond this modest convenience, 25 Warwick residents met in the Village Building on December 1, 1901, to organize their own telephone company. At this preliminary meeting it was agreed that Warwick Valley Telephone Co. would be incorporated with capital stock of $10,000, to be raised by selling 1,000 shares at $10 each. A dozen people subscribed for 120 shares on that first night, providing the new enterprise with $1,200 in immediate funding. In January 1902 nine directors were nominated and the articles of incorporation were filed. By April 1902 the new company initiated telephone service in the Village of Warwick, with a single operator, paid $10 a month, manning a plug-in switchboard. The technology of the day required that a customer turn a crank on the phone to alert the operator, who then placed the call by manually patching callers to the people they wished to reach. Because there was a limited number of lines in the system, customers shared "party lines," with each user assigned a distinctive ring pattern that would indicate an incoming call. Employing technology crude by today's standards, the new telephone company nevertheless played a crucial role in bonding the disparate villages and hamlets that made up the Town of Warwick. By January 1903 WVT had 200 telephones in service, with 134 village customers and another 66 in the country. In order to obtain service, subscribers outside of the village were required to provide their own poles, set apart at prescribed distances. In addition, WVT initiated service in neighboring Vernon Township in New Jersey.

Warwick Valley's next major expansion occurred in 1927 when it paid J.K. Roe $12,500 for the Florida Telephone Co. To this point it had been allowed to use the poles of Orange and Rockland, the local electric company, at no charge, but to insure further growth Warwick Valley signed a pole rental agreement in 1929. The company then expanded its territory in response to a 1939 petition from Pine Island subscribers of Farmers Union Telephone who requested service, and a year later WVT opened a central office to service that community. By 1943 the company had 1,400 telephones in service. With the country involved in World War II, however, growth slowed somewhat, but picked up significantly following the end of the conflict. In 1949 Warwick Valley moved into a new building, the company's current location, and bought new equipment to become a full-dial operation. By 1950 the company had 3,640 telephones in service, using five exchanges. It was also making further inroads in New Jersey, opening central offices in Highland Lake in 1951 and Upper Greenwood Lake in 1954.

Less Reliance on Operators During 1960s

WVT was still very much dependent on large party-lines but took steps to ease congestion in the 1950s. In 1957 ten-party lines were eliminated in favor of five-party lines, which now became the largest in the system. Technical upgrades continued in the ensuing decade. In 1961 WVT installed North 1+ equipment, which allowed the company to provide Direct Distance Dialing and WATS over the entire system. Operators, who previously had been necessary to place every call, would soon be involved in just 35 percent of all phone traffic. In 1969 0+ dialing was introduced, further reducing the need for operator assistance. Touch-tone dialing was added in 1972, and in 1975 WVT took a major step toward digital switching when it became the first eastern telephone company to install a Stromberg Carlson digital mechanical switch in the Warwick central office. The company also continued in its efforts to eliminate party lines. By 1976 WVT had 15,000 telephones in service (an addition of 10,000 since 1959), of which 82.7 percent were now private lines. The company then launched a promotional effort to market private lines, so that a year later the number of private lines grew to 85 percent and in 1978 totaled 86.8 percent. By 1980 over 90 percent of its customers were on private lines, the same year that WVT switched over from hard-wired telephones to modular instruments.

The 1980s brought developments on a number of fronts, due in large part to the deregulation and the divestiture of AT&T. In 1981 the company began offering calling cards through AT&T. A year later customers were given the option of purchasing their own telephones, rather than renting them "in place," as well as taking responsibility for the wiring and outlets in their homes and offices. By 1985 WVT was the 74th largest independent telephone company operating in the United States, with more than 1,440 access lines in service and just 306 party lines left in operation. In 1988 the entire system became 100 percent digital. The company took an important step in entering the cellular mobile communication business when in 1986 it became a 15 percent owner of a joint venture, The Orange County MSA Limited Partnership, joining forces with NYNEX Mobile, Highland Telephone, and Continental Telephone. A year later WVT formed a subsidiary, Warwick Valley Mobile Telephone Company, in order to become one of the first in the country to offer retail cellular telephone service and installations. In April 1989 cellular operations commenced when a mobile telephone was installed in the Corvette owned by Warwick resident Frank Seeber. By September 1990 the company had 99 cellular subscribers and lowered prices to attract even greater business.

WVT continued to stay in the forefront of telecom advances in the 1990s. In May 1990 the company began to offer a voice-mail messenger service from Octel Communication. Warwick Valley became an "equal access" company in 1991, allowing customers to choose their long distance company from a group of nine competitors. In 1994 it formed subsidiary Warwick Valley Long Distance Company to offer domestic, international, and operator-assisted long distance. In that same year, WVT also began to offer customers prepaid phone cards and advanced calling features such as repeat call, return call, and call trace. The company reached a major turning point in 1995 when for the first time it moved beyond traditional telephone service by establishing Hometown Online to offer toll free, 28.8K Internet service, thereby becoming one of the first telephone companies in the country to offer access to the World Wide Web. WVT had tried to get major online providers AOL and Prodigy to service the community, but when those companies declined, it opted to enter the business itself. At first, service ranged from $12.95 for six hours per month to $74.95 for 24 hours of unlimited usage per month, but soon reduced the cost of unlimited monthly usage to $29.95 and by April 1996 was offering an unlimited monthly access plan for just $19.95. In addition to operating within the service area of Warwick Valley, WVT also did business in outlying areas of New Jersey and Pennsylvania. In December 1995 WVT took the first step in high-speed access when it introduced ISDN (Integrated System Digital Network), a move that was very much in the vanguard of the telecommunications industry. After a year in operation Warwick Online had 1,000 subscribers. WVT launched yet another product when it began offering a pager service in October 1996. Warwick Online then in 1998 became one of the first companies to offer the next generation in high-speed Internet access, DSL (digital subscriber line). Within three years the entire Warwick Valley service area was DSL-capable. Also in 1998 customers received combined billing for their WVT local telephone service and Warwick Online Internet access. A year earlier the company had combined billing for local service with Warwick Valley Mobile.

WVT Listing on NASDAQ: 1998

WVT became a publicly traded company in April 1998 when it listed on the NASDAQ. By now the company had more than 27,000 customers, and subsidiary Warwick Online had more than 15,000 subscribers. Warwick Valley Long Distance was also prospering, surpassing AT&T in the number of local subscribers. WVT assumed control of its directory in 1998, taking over production, sales, and distribution, then in 2001 the production of the directory was taken entirely in-house when a graphic artist was hired. The company also sought new ventures and took steps to ensure continued growth in its core telephone business. In 1998 the company received approval to provide telephone service anywhere in New York State and a year later gained similar approval to provide telephone service throughout New Jersey. WVT also strengthened its commitment to high-speed Internet access, a service which was becoming increasingly more important because of the company's proximity to New York City and northern New Jersey and the rising number of its customers who were becoming telecommuters. In 2000 WVT invested in broadband provider Hudson Valley DataNet, L.L.C. On the wireless side of its business, WVT also invested in Zefcom, Inc., which did business as Tellspire, reselling Sprint PCS wireless services in several urban markets as well as to independent telecoms for resale under their own brands.

In January 2001 Warwick Valley Telephone Company began to do business as WVT Communications, better reflecting the range of its business interests. It remained a small, albeit cutting edge, telephone company, very much trading on its local roots and responsiveness to the community. When technology made the maintenance of an in-house operator service inefficient it was with some reluctance that management ended a 100-year tradition of relying on local operators and opted to outsource the operation to a third-party company, becoming one of the last independents to do so. By the fall of 2001 WVT's entire service area was DSL-ready, but already the company was looking to the next step: VDSL (very high bit rate digital subscriber line). This technology held the potential of allowing WVT to use a fiber-optic network and the existing copper wires in the homes of customers to offer a package of telephone use, high-speed Internet access, and 145 channels of digital television. In February 2002 WVT began testing this package of VDSL services in a resort community of Sussex County, New Jersey. As WVT extended its VDSL capability throughout its coverage area, it began to gain cable TV franchises from the different communities. Although by February 2003 the company still had not received a town-wide franchise, management remained confident that it would succeed, and envisioned that in the near future WVT would be able to offer such products as video-on-demand to its customers. As exciting as the future might be for WVT, however, it faced potential stiff competition from larger digital TV providers such as Cablevision. For a century WVT found a way to prosper while maintaining its hometown image, and there was every reason to believe that it would continue to do so in the foreseeable future.

Principal Subsidiaries: Warwick Valley Long Distance Company; Hometown Online, Inc.

Principal Competitors: AT&T Corp.; Verizon Communications; MCI Communications Corporation.

Chronology

• Key Dates:
• 1902: Warwick Valley Telephone Co. is incorporated.
• 1927: Florida Telephone Co. is acquired.
• 1949: System becomes full dial operation.
• 1972: Touch-tone service is introduced.
• 1989: First mobile telephone is installed.
• 1994: Warwick Valley Long Distance Company is formed.
• 1995: Hometown Online is established.
• 2001: Company begins doing business as WVT Communications.