Rural consolidation a cautionary tale

I must assume that amid all of the recent controversy and troubles surrounding FairPoint Communications readers have forgotten that I once supported [1] the North Carolina company's acquisition of the former Verizon Communications landline assets in northern New England. Either that, or no one cares what I think, and if so, I want to keep the illusion that this is not the case alive for just a little bit longer.

Now, as FairPoint teeters after a problematic operational integration, service disruptions and customer complaints, with the possibility that a bankruptcy protection filing might be in its future, I must admit that while things haven't turned out very well, I still think it was the best idea available at the time. I still think that in the future, the affected customers will be better off for the deal having been done, though it may take longer to convince them that is the case. And, I still think rural telcos in general must be given the chance to grow through sometimes risky consolidation moves. In some ways, it is the best and only option that rural customers have of enjoying the same service options as customers in major metropolitan markets.

More recent rural telco consolidation moves, such as CenturyTel's acquisition of Embarq, and Frontier Communications' bid to acquire other rural landlines owned by Verizon, may carry risks similar to those taken on by FairPoint. However, the deals also give rural operators greater buying and lobbying leverage at a time when they certainly need it. Broadband stimulus funds also are set to position these companies for greater success, while giving their customers a much better array of services than they have thus far enjoyed.

As much larger telcos look to get out of the rural business and traditionally tiny operators look for options to deliver their customers into the 21st Century, mergers and acquisitions will increase, and for the most part, these deals should be allowed to play out. They may result at times in problems both foreseen and unforeseen, as well as some seemingly unforgivable lapses in customer service.

For those reasons, the companies involved need to be extra-responsive and transparent in their operations. They can never take for granted that getting bigger is a job that ends when they have the funding in place and have made promises to regulators. They must build into their deals extra precautions (like remaining tied to another firm's support systems if that are not ready to transition customers to their own) and other extreme measures that they hopefully won't need to take, but will be available to them all the same. And, in the event of problems, they must not delay in delivering service credits, discounts and other benefits to make up for what went wrong.

Consolidation may be the only future path available to rural operators and their customers. It may be a tough one, and rural telcos need to show their customers that the destination is worth the trip.

-Dan [2]

For more:
- The Barre Montpelier Times Argus has this story [3] on FairPoint
- The Concord Monitor imagines [4] a bankrupt phone company