Will Rural Telcos Once Again Feel the Love?

Getting RUS approval for equipment, I am told, is a long and involved process. So maybe the recent news from both Occam Networks (OCNW) and Zhone Technologies Inc. (ZHNE) are just two RUS efforts leading to their logical conclusions.

But for me they serve as a reminder that rural telcos got a lot of love from vendors the last time our industry faced an economic meltdown. And that leads me to question whether that will be the case once again during this recession.

Back at the turn of the century, during the telecom nuclear winter as it is so lovingly known, many suppliers – hit hard by the fall of the CLECs – turned their attentions to the good old reliable rural ILEC crowd.

Independent operating companies (IOCs) were attractive potential customers, vendors and pundits told us, because they tended to have cash on hand (or could get it through RUS), were small enough to make buying decisions relatively quickly and tended to be kind and loyal customers. Sure, rurals were slow in the uptake of new technology vs. the CLECs, and were small fry compared to the RBOCs, sources said, but, hey, beggars can’t be choosers.

Fast forward about eight years and rurals have made some significant strides in embracing new technologies. And they could be winners if this national broadband initiative gets off the ground. But when it comes to the interests of key vendors, rural telcos seem once again to have fallen to the bottom of the pecking order.

Analyst and xchange blogger Chris Nicoll told me today he was just asking the largest of his clients about this exact topic earlier this week, “and it seems those programs [targeting rural carriers] have gone by the wayside.”

Nicoll called that “short-sighted” and noted the value of rurals in helping vendors get technology proven in the field.

“...also, the rural telcos I think are a bit more aggressive in wanting to bring new services to their customers,” he added, saying “SOMEONE is going to focus on the rural guys and will win out, but I don’t think it will be the incumbents unless they wake up quickly.”

Teresa Mastrangelo, our analyst friend with broadbandtrends, who also blogs for xchange, doesn’t anticipate a renewed interest in rural telcos by vendors this time around because of lessons learned in the last downturn.

During the telecom nuclear winter, she said, “vendors realized how difficult it was to sell into this market and how little the opportunity really is.

“At this stage, particularly with the broadband stimulus focused on rural – only those vendors that are already participating (meaning RUS certified) will have a shot at this near term opportunity,” said Mastrangelo. “Otherwise, I think the economic slowdown is affecting everyone, small and big alike.”

What do you think? Will rural telcos get more love during the recession? Let us know your thoughts.

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