Rural Telcos: A Last Stand?

There were a number of interesting conversations at TIA 2011 this year in Dallas, but one of the ongoing themes involved market changes that are impacting the business of smaller operators. And they’re not necessarily positive changes. In fact, for Tier 3 and rural telcos, their very viability is being threatened on a number of different fronts, regulatory, technological and competitive. And they’re all requiring changes in back office strategies. Call it a last stand for Rural America.

BTW, for a deep-dive into the market, watch for our free special report on rural America coming next week. Click here to pre-register.

Rural independent operating companies, which B/OSS editor-in-chief Tim McElligott calls “those small but important fixtures in far-flung communities of every state," number in the hundreds. In fact, there are 1,342 Tier 3 and rural  telcos in America, and they represent  important jobs in regions where industry is scarce. Not to mention, they provide the all-too-infrequent competitor alternative to national and international conglomerates. Companies that Tim said “can’t pretend to know or care about customers they way subscribers’ own neighbors do. They are committed to preserving a way of life, while simultaneously enhancing it with the self-sufficient access to real-time information that the rest of the country enjoys."

But their days may be numbered. And ironically, it is our liberal-leaning FCC at whose hand the end might come. When it comes to policy and regulation there is on one hand a national mandate to bring broadband—real broadband—to the un-served and the underserved—a noble cause. On the other hand, while it would seem that rural IOCs are in a perfect position to do so, the funding structure underlying the plan is in flux, with the FCC mulling the restructuring of the Universal Service Fund and the elimination of intercarrier compensation rules. The regulatory environment increasingly favors large nationwide carriers, RLECs maintain.

Those same changes would also eliminate subsidies upon which Tier 3s have relied for decades, casting their future financial being into doubt.

Meanwhile, technology is swiftly changing, with wireless, 4G in particular, poised to blanket the rural areas if a business case can be made. Small operators have an opportunity to participate in the revolution via a few different options—at the very east, it will bring new competition where perhaps there was none before.

And when it comes to competition and service parity in general, smaller operators have the same requirements as large operators to deliver state-of-the-art services, but have fewer resources to get things done.

All of these changes mean that these IOCs must streamline their operations and get into position to find new revenue streams. One way to accomplish the former is to scrutinize the software, services and infrastructure in place, and consider how to either drive automation or outsource operations and back-office functions to a managed services provider. Cloud computing, Software-as-a-Service and professional services to help strategize, plan, engineer, implement, manage and operate as a communications service provider in these markets will likely become critical tools, whether they operate over fiber, copper, coax or wireless.

The level of challenge in this segment of the domestic market is unprecedented: most of these companies have been around for 80+ years, and have never faced such shifting sands.

We’ve put together a special report that takes an in-depth look into the dynamics at work on a macro level in today’s rural market, along with some of the B/OSS-centric strategies these carriers are employing to make sure they stay in business. That includes managed services and outsourcing, turning towards wireless and changing up the services mix to offer managed services themselves. It’s a free download that will be available next week; to pre-register, just click here.