Rural Telecommunications Carriers Look to Diversify Revenue Streams in 2019
CoBank Report Looks at Different Strategies for Rural Local Exchange Carriers
DENVER (December 18, 2018) — Many independent local exchange carriers (ILEC), and rural local exchange carriers (RLEC) are looking for ways to diversify their revenue streams as they continue to face secular headwinds in their core business due to declining regulated revenues and Universal Service Fund support. While large telecommunications companies can make transformational investments, RLECs must look at other strategies to diversify, according to a new report from CoBank’s Knowledge Exchange.
The report specifically examines four strategies being used by various RLECs; fiber-to-the-x, wireless tower leasing, edge-outs and mergers and acquisitions.
“Competition for data services and wireless customers will become increasingly fierce as traditional revenues continue to decline,” said Jeff Johnston, lead industry analyst with CoBank’s Knowledge Exchange. “These four strategies have been successfully employed by various RLECs.”
The strategies are a mix of leveraging existing assets and finding ways to partner with competitors where it makes sense, said Johnston. For instance, the fiber-to-the-x strategy focuses on building fiber deeper into networks to help rural operators compete with tier-one cable operators while the tower leasing strategy focuses on partnering with national wireless operators as they build out network coverage and capacity.
“Time is of the essence for RLECs who have yet to diversify their business model,” said Johnston. “The longer operators wait to employ new strategies to diversify, the harder it will be for them to make these needed investments.”
CoBank is a $128 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 70,000 farmers, ranchers and other rural borrowers in 23 states around the country.
CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.
For more information about CoBank, visit the bank's website at cobank.com.