Ford, Stanton say rural carriers need to rethink strategies

LAS VEGAS--Rural carriers must change their business models or risk extinction in an IP-based environment, Alltel President and CEO Scott Ford said during yesterday’s keynote at Telecom ’04 sponsored by the United States Telecom Association.

"IP is not going away, and it will not [support] most of the business models we grew up with," he said. As evidenced in the long-distance, switching and routing markets, adoption of IP technology leads to drastic decreases in pricing, Ford said. In addition, he said, "IP technology disintermediates everything it touches, like rust or water," meaning the next generation of communications will follow one of two business models: being an access provider or a content manufacturer.

"We’re no longer going to be in the service business; we’re going to be access providers," Ford said. "Some call that a dumb pipe. I call it a fat pipe."

Voice-over-IP substitution of circuit-switched telephony is inevitable, and rural carriers need to "modernize and update" their infrastructure, business plans and their regulatory positions, Ford said. In particular, rural carriers need to devise strategies that are not so dependent on universal-service funding--a support mechanism that accounts for 30% to 70% percent of some rural carriers’ revenue base.

But recent trends in the troubled fund probably are not sustainable long term, including the fact that wireless carriers provide 27% of the contributions into the fund but only receive 3% of the disbursements, Ford said.

"If all we do is sit back and resist change, the system will snap," he said.

Fellow keynote speaker John Stanton, chairman and CEO of Western Wireless, echoed this sentiment. The current universal-service support system needs to be revamped, because dependence on the revenue source discourages investment in the most efficient technologies in rural areas, he said.

"If the system is not fixed, we will revolt," Stanton said.

Stanton, who said he supports the abolition of all economic regulation where competition exists, noted that Western Wireless serves many developing countries but "the most regressive regulation we face is in the United States."

That needs to change, because the current environment of uneven regulations is causing investment to deteriorate, Ford said, calling on rural carriers to "actively participate" in getting new rules adopted.

Stanton agreed that this approach would be the best long-term strategy for rural carriers.

"If you don’t embrace competition, you’ll be swept away by it," Stanton said.