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The Rise Of The Rural Super Telco
Frontier, Centurytel, Fairpoint: the future of rural America?
by Karl Bode 10:15AM Friday May 15 2009
While many people lament the fact that Ma Bell is essentially reassembling herself to the glassy-eyed stares of well-lobbied regulators, one thing's standing in her quest to re-coagulate: rural America. Both telcos and cable operators are starting to shed more rural markets, unwilling to invest the time and resources into markets that deliver a lower return on investments. This of course creates opportunities for smaller carriers.

Fairpoint now owns Verizon's New England networks, Frontier will soon own Verizon's rural networks most everywhere else, and Cenurytel and Embarq are fusing to create a new operator. Our friend Bernie Arnason at Telecompetitor explores the rise of the "rural super carrier," and wonders about AT&T and Qwest's next move:
That leaves AT&T and Qwest to reveal their rural plans. Will AT&T shed their rural assets as well? They have a lot to shed. The wildcard among the RBOCs may be Qwest, because they have an opportunity to become the rural 'super' carrier themselves. There has been speculation that Qwest would divest itself of its long distance and enterprise units and basically morph back into its US West heritage.
Our question as a consumer-focused website remains squarely on what happens to these customers when they're offloaded. As Fairpoint's struggles highlight, there's a real risk of these carriers biting off too much too soon, something that usually results in horrible customer service (see Fairpoint or even Comcast). Smaller, debt-loaded carriers dealing with the lower ROI of rural markets during a recession also raise a lot of questions about when exactly rural Americans will see next-generation broadband upgrades.

There's also the question of how exactly these carriers hope to compete with cable. Cable operators serve many of these rural markets due to the since-gutted local franchise reform laws, and although such reports may be overly optimistic, many analysts peg DOCSIS 3.0 penetration at close to 100% in just a few years. There are competitive reasons Verizon is offloading many of these markets, and smaller operators (with less cash and fewer lobbyists) may not find the row any easier to hoe.

All of this of course leads into exactly what Uncle Sam has planned when it comes to shoring up the nation's coverage gaps. It's pretty clear that rural America is going to need some help.

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Jamaica, NY

2 recommendations

reply to iansltx

Re: "Tying two bricks together doesn't make them float"

said by iansltx:

In Texas there are a lot of co-ops. THe largest one is rolling out 20/3 FTTH for $60-$70 per month depending on whether ou sign a contract and take a bundle.

Hill Country Telephone Co-op on the other hand is just now rolling out 3/768 DSL for $70/month. Then again their offering is aimed at very rural folks.

The problem is that even if you don't have a profit motive wiring rural areas is expensive. When you have a profit motive things get even worse. C'mon guys, 1024/128 DSL? I can get better upload speeds with Po-Dunk Wireless, utilizing Linksys-in-Tupperware technology!
1024/128? thats fast. 384/128 for $40/mo sounds better. Want 1.5/768? $180 per mo for the "telecommuter" plan, and you must have a business account. Our DSLAM 1996 vintage DSLAM was bought used in 2001, and it was financed on our sub-prime corporate credit card, plus we run our whole CO's DSL service off a couple bonded AMI T1s for a couple hundred miles to the nearest POP. Our T1 loops use equipment older than you with 200 amplifiers in the loop to the POP.

Tavistock NJ

2 recommendations

Question arises on WHY the rural last mile is being spun off

The question this topic brings up is why are the major telcos selling off the rural last mile business. And that answer is fairly straight forward.

Local phone business is still regulated and rates are set by state PUCs. Regulators took advantage of the fact that the national carriers like Verizon & AT&T could bury loses from areas where costs were higher than revenues amongst their more profitable business lines.

Verizon, and I guess eventually AT&T, can spin off these losing segments by selling them to smaller telcos. And the regulators will have to let these smaller rural telcos raise rates or see them go out of business.

End result - the rural areas can no longer be subsidized by more profitable urban areas and will have to pay the real costs of supplying that last mile access.