Rural Telcos Admit Major Changes Are Needed

LAS VEGAS -- TelcoVision 2013 -- Rural telcos need to make significant changes in the way they do just about everything to survive in today's competitive market, a keynote panel here advised on Thursday.

Hiring and compensation packages, corporate culture, technology deployments, better benchmarking, and even management structure all need to come under the microscope and be adjusted. Kevin McGuire, formerly with the NTCA - The Rural Broadband Association , which is co-sponsoring TelcoVision with UBM TechWeb , and currently CTO with Enhanced Telecommunications Inc. , outlined potentially painful decisions that rural telcos face, including the need to examine their employment rolls to bring in new skills and gently nudge non-productive employees out. That's all part of a corporate culture change that is needed to become more sales- and marketing-oriented and able to meet customer needs.

"You have to be willing to make major changes," McGuire said. "We have always focused on the network. But now we need to look at that differently."

Instead of being order-takers, telcos need to develop sales organizations that can build relationships with key customers and then develop solutions for those customers. As part of that process, a small telco also has to create new incentives for its employees and reward innovation and hard work. McGuire said one thing his company did was to institute FlexTime for its field workers, to incentivize them to stay on a job for as long as it required, knowing they wouldn't be expected to show up as early the next day.

McGuire admitted, however, that hiring the right people with a new skill set is hard -- his company has had jobs open for weeks trying to find the people they need. And even harder for many will be the process of developing metrics to measure the performance of existing employees. The key is to decide who lacks the right skills or the right work ethic and either retrain them or "help them out the door," McGuire said.

Building greater scale and efficiency into their networks is also a key requirement for rural telcos, said Vince Tyson, COO of Plateau Communications, a New Mexico telco, and that may mean sacrificing independence to work more closely with others, including other service providers and companies that previously might have been seen as competitors.

"It may be time to take the capital 'I' out of Independent," Tyson said. The key thing is to drive more scale and greater efficiency in new networks and even in programs such as marketing, he said.

Rural telcos have worked together in state-wide groups and other associations in the past, but Tyson said the loss of federal funds for rural telcos, who have traditionally had higher costs to serve less-dense areas, will require new efficiencies based on greater scale to lower those costs. Cloud-based services, shared among multiple companies, could be one answer.

Tyson and Fraser Pajak, CEO of the QuEST Forum, also challenged the rural telco execs in the crowd to start establishing benchmarks and measuring their performance against industry-wide standards.

The service mix that rural telcos deliver also must change, said Tyson and Dee Herman, principal at Herman and Whiteaker LLC. Tyson believes telcos need to drive more IT solutions for their customers, and Herman suggested looking for niche services in markets that today are unserved.

— Carol Wilson, Editor-at-Large, Light Reading

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vishal87 10/28/2013 | 6:32:16 PM
Re: Metrics Hi Seven,

Great thanks! Appreciate the insight.

BTW, I would be glad to send you a direct invite to the CE Group, but I don't have an email for you.

So, if you'd just send a request to join here http://www.linkedin.com/groups?home=&gid=77819, I'll be glad to approve it. (Of course, if you don't find the Group valuable, you can just leave the Group at anytime at the click of a button, but I feel you might find some of the discussions quite interesting :-)).

Hope to see you on the Group.

Best wishes,

brookseven 10/28/2013 | 5:45:38 PM
Re: Metrics About 875 of 900 I would guess maybe more...

Remember there are a handful of very large telcos - AT&T, Verizon, and Century call them Tier 1.

Tier 2s - Surewest, TDS, ACS, Frontier, Windstream, Fairpoint...probably a few I missed.

The rest are small.


PS - would share with the CE group but am not a member

vishal87 10/28/2013 | 5:12:56 PM
Re: Metrics Hi Seven,

Thank you for the great input! Much appreciate your thoughts.

By this measure, how many of the 900 members of the NTCA (combined NTCA and OPASTCO) do you think fit this bill?

Also, I'd like to share your comment on the Carrier Ethernet group, where the original question was asked, and would request you to weigh in there (the discussion there is building upon what is in this article).



brookseven 10/28/2013 | 5:01:56 PM
Re: Metrics  


My take is very simple on this...a Rural Telco is:

1 - An ILEC that has CoLR obligations

2 - Has approximately 100K lines or less (I do not put companies like Century, Frontier or even Fairpoint in this category - Surewest and TDS maybe).

3 - Has no Central Office that directly serves more than 10K lines (I might relent and say 20K if that is a single property - so the former Cincinnati Bell need not apply here either).

Example companies:  Valley Telephone, Blue Valley Tephone, East Otter Tail Telephone

That is why I think this notion of getting more take rate is probably hard for many of them (especially the Opastco members).  Many of them have very high DSL penetration and some of them also have cable plant.  The bigger companies have more choices, but I don't see how that works in this environment.

What they might be able to do is band together at the state level and do more.  My experience with these very small telcos is that they have very limited technical resources and expecting things out of them is not very fruitful.  One of my old customers was the ISP arm of TDS.  I can tell you that they were extremely limited as an IT group, but they were a lot better than many of the small telcos.  Those guys could only make changes/do anything when the "Firewall Guy" showed up for his 1x/month visit.  

So, I think this is a valid conversation.  I think one of the big disagreements that Carol and I have had is that I am thinking of these small companies when I think of "Rural Telcos".  I do not think about companies like Frontier or even TDS.  I think the answers for the very small companies is different than these mid-tier firms.



vishal87 10/28/2013 | 3:58:47 PM
Re: Metrics Folks,

It's great that we're talking of rural telcos and I guess we might "intuitively" know what they are. However, in a discussion currently ongoing on the Carrier Ethernet Group on Linked In on this very article, someone appropriately asked

"How does one define a "rural telco"?


Carol, Sarah, and the other commentators, any ideas?



jat5381 10/26/2013 | 7:57:06 PM
Re: Metrics I would hope that focusing on a quality process would do the opposite than hasten rural telcos demise - give customers a better product, bring in more customers, increase revenue, etc...
brookseven 10/26/2013 | 12:48:37 PM
Re: Metrics  

So jat, I guess many rural communities will just lose access to all telecom services correct?  Since there is often no other option.



jat5381 10/26/2013 | 10:11:41 AM
Metrics Mr. Mcguire says:  "...And even harder for many will be the process of developing metrics to measure the performance of existing employees."

It is my belief that the more business and industry in the US focuses on metrics first instead of a quality process, the more those same business and industries will constantly have to "reinvent" themselves and talk about having to "make major changes".

Demming's lesson's of quality have been lost (or ignored) by now two generations of business and industry leaders in the US.  And that is a shame.

Mr. Mcguire says:  "...a corporate culture change that is needed to become more sales- and marketing-oriented and able to meet customer needs."

Blaahh.  If you don't have a product or service that people want and performs as advertised, no amount of marketing will cover up this failure.

The harsh reality of today's political environment may increase the chance that rural telcos will not survive or be unable to grow.  But focusing on metrics and marketing at the expense of a quality process will most certainly hasten the demise in my opinion.
vishal87 10/25/2013 | 4:35:10 PM
Re: rural culture Tara,

Thanks for sharing these perspectives - very helpful!

The point you mention about lobbying by larger players for use of Connect America funds is worthy of note. I think it's interesting to see how these funds get disbursed, and whether the rural operators will get any significant share of them.

It is true that some expansions in rural areas by local operators will require deep capital expenses, which are initially best funded through either reasonable debt or grants of some sort, with payback being a long time horizon, which governments can afford. But, if access to such funds is difficult (for whatever reason), capital would also become a gating issue for rural operators, which is an issue they'll have to contend with.

vishal87 10/25/2013 | 4:03:13 PM
Re: rural culture Hi Carol and Sarah,

Excellent points both! A few items caught my attention, which I wanted to share thoughts on.

First, Sarah, I can assure you (from direct personl experience of tracking this industry segment for the past couple years and from directly working with some operators) that most rural telcos are not "laid-back" country folk by any means :-). They are anything but! A good many of them (as Carol observed) are ahead on the technology curve, but it's also pretty evident that technology is but one part of their puzzle.

Yes, being liked by their community is a benefit, which they rightfully use as an edge over the big guys, by being available for their community, beyond just providing them communications services. (The big guys aren't going to roll-up their sleeves and go helping neighbors out in rural Montana somewhere, when "rural carrier" staff will 'cause they live in the same communities they serve. Check out this from the South Dakota Networks (ok, they're a little more than just a rural carrier, but they do serve very large rural parts pretty exclusively) website, http://www.sdncommunications.com/about-us/history-ownership/, of how they kept communications going during a flood across the Vermillion River, back in 1993!, and of their other community initiatives http://www.sdncommunications.com/about-us/community-service/; and this is just one example of several hundred rural operators that exist in the US alone, even today!)

Carol, the question many of these rural (I call them "emerging") carriers have is that to answer "what technology is right for us?", they have to look at strategy, business, systems, network architectures, sales/marketing, customer base (current and desired) and the like in cohesion.

It is here that they typically tend to have problems (which we've helped several of our progressive carrier customer's address). In fact, we have an entire presentation that outlines some of these issues, and what it takes to address them, which is found here http://bit.ly/OkBcj0, while more info. on our initiatives is found here http://bit.ly/M5Lc94.

This is a problem of changing the mindset of executive and engineering management at these operators, and making them aware of formalized processes and systems, and of the need to look comprehensively at the information their sales, billing and engineering organizations (whether formalized or not) already have. Such, systems are a must for growth and progress, and to remain competitive.

Another issue is one of density of users. With very low user densities, running profitable operations will continue to be a challenge, and the idea will be for these operators to move into new services - broadband wireline and wireless (fixed perhaps), and to, via a process of education, show their customers the value they can derive from broadband services (a lot is possible today with a good broadband connection, siiting even in rural Wyoming or North Dakota!).

The problem of low user-density, however, will continue to be there, and one that different rural operators will contend with and address in their own ways. Perhaps by consolidation, partnerships, pooling resources and the like -- an interesting area of work for sure!

BTW, Carol, a great post and topic, which I've reflected on to the Carrier Ethernet Group on Linked In that I manage, and invite you to also have a discourse there, as this Group includes a number of members from around the world, many of whom share problems similar to those faced by rural operators in the US. http://lnkd.in/bpxAQR


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