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NC Indie Goes on the Offensive

A new breed of local telephone company emerged in North America over the last decade, as smaller telcos expanded their reach using IP technology to challenge larger incumbents outside their local footprint.

Companies such as Ntelos Inc. (Nasdaq: NTLO) in Virginia, HickoryTech Corp. (Nasdaq: HTCO) in Minnesota and GVTC (now known as GVTC) in Texas grew well beyond their rural roots.

In North Carolina, family-owned North State Communications is arguably joining this group, competing aggressively with Time Warner Cable Inc. (NYSE: TWC) on video by deploying fiber-to-the-home to three-fourths of its 600-square-mile local service footprint of High Point, N.C., and surrounding communities, and challenging AT&T Inc. (NYSE: T) with business service offerings in Greensboro and Winston-Salem, two larger North Carolina cities.

"This is indicative of a trend we've seen over the past 10 years of IOCs [independent operating companies] who decide not to just hunker down and defend the castle," says Craig Clausen, EVP of New Paradigm Resources Group Inc. , longtime consultants in the competitive carrier space. "They've seen the light and they know they have to get with the times."

For North State and many companies like it, such expansion efforts are a matter of survival, says Bernie Arnason, managing partner, Pivot Group and consultant to Tier 2 and smaller telcos.

"They know that they have to diversity beyond [traditional voice] with other lines of business and other markets," he says. "Those investments aren't without risk, but these companies are in a position to leverage their perceived better customer service, the fact that they are closer to the customer, and they are smaller, more nimble companies."

North State began its FTTH buildout in 2009 using Zhone Technologies Inc. (Nasdaq: ZHNE) access gear, adding to its core network, which is built on Cisco Systems Inc. (Nasdaq: CSCO) gear. The firm offers broadband packages that provide up to 80 Mbit/s downstream, and resells AT&T Wireless along with its own video service to complete a quad-play offer.

"Our flex packages allow consumers to pick the services they want for their bundle," says Royster Tucker, COO of North State. The firm doesn't release its penetration rates, but Tucker says they are "on target" and that video services are contributing to profits.

The wireless play allows North State to advance what it calls a "digital lifestyle strategy," using eight retail stores throughout the region to help consumers sort through a more complex set of smartphone and tablet choices than they've faced in the past.

"We've stayed true to our roots, and that is good customer service," Tucker says. "People can walk into our stores anywhere in the Triad area and get help with wireless options, which are much more difficult today, and with all the different parts of their digital life."

That customer service approach works as well on the business side, where North State advertises a local presence that dates back 110 years even as it is selling a full range of broadband services, including Ethernet, managed services, backup and disaster recovery, hosting Exchange, and Web hosting offers.

Rather than develop its own hosted IT and cloud offers, North State partnered with IT firm Dynamic Quest , which delivers and bills for such services separately.

"We are doing the upfront selling and addressing the customer needs and if we see that customers are heading down a path to a solution that Dynamic Qwest can provide, we'll bring them in," Tucker says.

Companies such as North State can continue to grow in their local community space or may become acquisition targets for larger operations, such as Windstream Communications Inc. (Nasdaq: WIN), says consultant Clausen.

"These types of strategies -- diversifying their base, deploying assets, modernizing their plant -- make them more attractive for acquisition," Clausen. "We've certainly seen a lot of that in the past, and we'll continue to see it going forward."

— Carol Wilson, Chief Editor, Events, Light Reading

DCITDave 12/5/2012 | 4:56:18 PM
re: NC Indie Goes on the Offensive

No better way to show AT&T who is boss in a market than to resell its wireless services. :)

cnwedit 12/5/2012 | 4:56:17 PM
re: NC Indie Goes on the Offensive

In fairness, they are reselling AT&T Wireless to consumers within their local footprint, and competing with AT&T on business services outside that footprint.

comtech3 12/5/2012 | 4:56:01 PM
re: NC Indie Goes on the Offensive

It's a crazy mix,but that's just the world we live in today.In Lower Merion Township, Pennsylvania, Comcast once installed and service Directv in an area outside of its cable franchise,but had acquired a LMDS provider who had contracts with a few aparments in the city of Philadelphia.Directv was used to supplement the sometimes poor microwave feed from some of the roof antennae.And so, while Comcast was doing its dish buyback thing, the company was quietly supporting Directv at the other end.

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