Competitors: Can video cash replace USF cow?

Qwest executive vice president Dan Yost, Comcast senior vice president Gary Traver and Janco Partners director of research Donna Jaegers gave the outsiders' look to rural telcos recently at CoBank's Communications Industry Executive Forum.

Among the concerns for rural telcos, they said, was the future of Universal Service Funding.

“It's going away,” Jaegers said. “USF is a political hot button, but Wall Street thinks rural carriers will get smacked when USF changes. The game you have all gotten so good at playing is going to change.”

She said a reverse auction is the most likely solution, and that that may not bode well for rural providers.

Traver said Comcast and the cable industry in general support USF but would like to see it applied more evenly across the board. He urged rural providers to look to WiMAX as an alternative. “It may cannibalize your existing lines, but it provides another pipe to those lines that are going away,” he said.

Another option for replacing revenue lost by likely changes in the USF fund, they said, is video services — particularly in advertising. As it is delivered today, video is already losing advertising dollars. However, advertisers are willing to pay for targeted advertising, and rural providers are in the best position to target their advertising.

There's just one problem, Traver said. “To get targeted advertising, infrastructure has to be built in the local markets where the ad insertion for personalized ads would occur,” he said. “While there has been a huge drop in generalized advertising, new forms are showing relevance to consumers, and therein lies the opportunity.”

Yost gave a nod to video-on-demand, saying service à la carte was best. He compared it to the Internet, where no one would pay $49 per month for 400 Web sites when millions are available.