Study: Independent telcos still heavily dependent on access revenues

Despite significant declines, many small independent telcos are still heavily dependent on access revenues, which they collect from other carriers for connecting calls to and from their customers. This was one of several key findings of a recent study of independent telcos conducted by the Telergee Alliance, a network of seven certified public accounting firms with telecom specialties.

For calendar year 2008, the median percentage of total operating revenues comprised of interstate access revenues was 36.6% for the 196 respondents, while intrastate access comprised a median 11.1% of total operating revenues. These high values were particularly surprising, considering that interstate access revenues declined a median of 1.3% between 2007 and 2008, and that intrastate revenues declined a median of 7% during that period.

The 2009 Telergee Benchmark Study, made available exclusively to clients of Telergee firms and to TelephonyOnline, surveyed small US telcos with total access lines ranging from fewer than 500 to more than 18,000. Respondents comprise a representative cross-section of the 800-plus independent telcos in the US today, researchers said.

The decline in access revenues was partially a result of fewer access minutes. Interstate access minutes declined a median of 7.7%, while intrastate access minutes declined a median of 10.8%, the study found.

“The decline in access minutes reflects the fact that access lines are down,” explained Rod Ballard, a principal with Jackson Thornton, a Telergee member firm. “They’ve been decreasing over the last 10 years as population is moving out of rural areas. There are also some losses to VoIP. On top of that, the younger generation is more email-driven. They say, ‘Why call when I can Facebook somebody?’”

A decline in per-minute revenues also contributed to lower access revenues overall. “That’s going down as clients negotiate new intercarrier compensation agreements,” Ballard said. “Access charges that used to be three to nine cents per minute now may be down to a penny.”

The accounting term for such heavy reliance on a particular revenue source, Ballard said, is “a high concentration of credit risk.” The best move for small telcos, he said, is to diversify their revenue mix.

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See TelephonyOnline for additional coverage of the 2009 Telergee Benchmark Study. Read Part 2. Independent telcos interested in participating in next year’s study should visit Telergee.com.