Beware of the unseen competitor

It has become conventional wisdom that video is a key element to ensure the long-term survivability of independent telephone companies. Video is great, but by itself, it is not going to be enough for telcos to be effective competitors in the years ahead. It also is important to look at who the competition will be. Today, cable companies are clearly telcos' largest threat, as most have — or soon will have — the ability to offer virtually the same services.

A long-term concern, though, should be competition arising from unexpected sources that can result in product substitution, which often has huge impacts on entire categories. For instance, the widespread adoption of cellular phones is a major cause in the decline of basic service lines.

Independent telcos' unforeseen competition might come from the big box retailers that have devastated mom-and-pop businesses across rural America. Those retailers already provide independents some competition by selling phone cards. At the International Consumer Electronics Show last month, there were scads of voice-over-IP customer premises equipment from name-brand electronics manufacturers, and it will not be long before they're available on retailers' shelves.

Eric Mantion, senior analyst of In-Stat, suggested at the National Telecommunications Cooperative Association's IOC Wireless Symposium that, using only McDonald's and Wal-Mart facilities, a WiMAX network could be built to serve 83 million homes for only $4.5 billion in capital expenses.

The possible threats from retail are almost endless. But instead of speculating on what might be, it is important to begin to strategize for competing. So what can be done to meet the retail competition, real or impending?

• Work within your community: Identify ways to work with local retailers to create bundles that are unique to the community and cannot be easily matched by out-of-town competitors. Don't be afraid to compete with yourself — if you do not, someone else will eventually.

• Make yourself heard at the FCC: The FCC takes seriously its mandate to ensure ubiquitous broadband. Remind the FCC of the costs of serving remote customers and that some new competitors don't have a plan for serving everyone.

• Work together as an industry: The deployment of IPTV services is still too much magic and not enough science. There must be significant improvements in standardization and interoperability testing before independents can roll out new products as quickly as the cable industry.

The good news is, at a strategic level, what is required to meet and beat retailers and cable operators is the same. Having a variety of products that meet the various needs of your customer base while providing a better value will ultimately win against the competition — whoever that competition might be.