By Leo Staurulakis
(Reprinted from the May/June 2008 issue of NTCA's Rural Telecommunications magazine)
NTCA members have spent the last several years absorbed in transition and uncertainty. Now, however, our "Waiting for Godot" period, as far as policy and regulation are concerned, is drawing to a close. Congress and the FCC are chipping away at the foundation of universal service and federal support for service in high-cost, rural areas. The dynamics of advancing technology and onrushing competition are causing many companies to contemplate what kind of service provider they will become. The reality is that technological and market forces will affect our businesses far sooner than regulatory changes.
Naturally, the possibility of this big a change is generating much reflection about what the future holds for the companies serving rural America. At the risk of alienating some allies and friends, let me contend that we've had it pretty good over the past 25 years or so, certainly since divestiture. Thanks to USF and federal support, the connection to the national network among NTCA members, the communities they serve, and rural America has prospered.
Looking to where we're going, instead of where we've been, forces us to recognize that this time, all the talk about the consequences of change is not mere rhetoric. Many companies already are experiencing disruptive effects on their revenue streams. Despite the current fascination with all things technological, the transformation of the financial environment promises to be even more eventful. Why? Let's start with what we can count on:
- USF, or some support mechanism, will be there, but in a form and amount we may not recognize.
- Access revenues will decrease significantly, or morph to a support mechanism.
- Retail revenues will become critical. What this means is that going forward, we must be cost conscious in our business operations, staffing decisions, employee benefits, new lines of business - i.e., in everything we do. We must operate from the philosophy that the services we sell must ultimately pay a larger portion of the costs; we can no longer count on significant "support" to make up the difference.
We need to consider a number of things that reflect our "new and improved" way of doing business. Some won't be easy; for example, we have to reconsider our pricing strategies. We must be more flexible in pricing our services, in particular. Keeping local rates artificially low because of USF is no longer defensible.
We'll also need to broaden the mix of services we offer and, in step, expand our markets and customer base, while controlling costs in the process. When deploying new services and technologies, we'll need to be cautious of significant capital expenditures, realizing we may not be able to provide the same level of service to every subscriber. Logic would dictate that with reduced support, we must deploy first in areas financially able to sustain our investments, and then extend deployment as economic circumstances allow. This will create have-nots in our systems unfortunately, so we'll need to search for more cost-effective ways to serve this group.
Finally, given the tough economic times confronting our industry, we must understand that not everyone can, or will, succeed. While it may be difficult at first, we must gradually accept that innovative partnerships and consolidations, whether financial or operational in nature, are realistic options.
Can NTCA members survive the competitive, regulatory, and technological changes before us? Absolutely. Will our businesses look different than they do today? Definitely. While change is scary and imposing, it does afford us many opportunities - as long as we are willing to recognize what we must do to capitalize on them.
