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2012 MARKS THE INTERNATIONAL YEAR OF COOPERATIVES [Rural Telecommunications](Rural Telecommunications Via Acquire Media NewsEdge) The year 2012 is shaping up to be hisboric. It represents the 100th anniversary of the Titanic sinking, Fenway Park opening in Boston, New Mexico and Arizona joining the Union, the founding of the Girl Scouts and the invention of the Dixie cup. Looking back 1 00 years in terms of telephony, 1912 was robust for rural telephone systems, with more than 3,200 in the United States, many of which were formed as "farmer line" cooperatives. In addition to all of these 100-year landmarks, the U.N. has designated 2012 as the International Year of Cooperatives. The U.N. defines "cooperative" as "an autonomous voluntary association of people who unite to meet common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise." According to the UN., the cooperative sector has about 800 million members worldwide in more than 100 countries and accounts for more than 100 million jobs. In the United States alone, the National Cooperative Business Association (NCBA) estimates that 29,000 co-ops with 350 million members generate 2 million jobs. According to NCBA, co-ops substantially contribute to the national economy, with $652 billion in annual sales and $3 trillion in holding assets. Looking again to rural telephony, the University of Wisconsin's Center for Cooperatives counts 260 telephone cooperatives serving 1.2 million rural Americans in 31 states. Although this represents only 5% of the nation's subscribers, the service area covers 40% of the country's land mass. The average telephone co-op has 5,000 subscribers, 31 employees and an annual revenue base between $1 million and $5 million. Sbarb Spreading the Word The theme of the U.N.'s International Year of Cooperatives is "Cooperative Enterprise Builds a Better World," with the goal to raise awareness of cooperatives, seek ways to leverage their contribution to socio-economic development and foster regulatory frameworks. "This year brings real focus to co-ops," explained Paul Hazen, president and chief executive officer of NCBA. "The International Year of Cooperatives is an opportunity to rebrand co-ops and point out that this is another way to do business." Hazen noted that the cooperative model is thriving and that new co-ops are popping up all over the country. "We see this in the food industry, renewable energy and worker coops," he said. "The co-op model not only delivers goods and services cheaper to a group than to individuals, but it's also a business model that can survive the recession and create jobs and bring wealth to local communities." Henry Hansmann - professor of law at Yale Law School and author of the book, "The Ownership of Enterprise" -agreed that the International Year of Cooperatives will shed some light on the good that co-ops bring to their members and local economies. "It's also good for the coops themselves because it forces them to think about their role now and in the future." Hansmann said he believes that co-ops have a solid future. "They will be survivable even in the current economy," he said, noting that co-ops are more prevalent in developed economies. "Co-ops play a larger role in the United States' economy than any other developed country because they solve market problems." That problem- solving ability is especially useful when it comes to telecommunications, Hansmann said. "That's an area that's typically run by a monopolist, so a co-op is a natural fit in that scenario even in a heavily capitalistic country," he said, adding that rural areas are good places for co-ops. "Co-ops work best in areas where the members are homogenous," he said. "In rural areas, you have farmers, and their interests and needs are pretty much the same. In urban areas, you've got a mix of residential, agricultural, shops and merchants, manufacturers - they all have different interests and want different pricing structures." Rural co-ops will always be with us, said Barbara Blaszak, a professor of history at Le Moyne College. "Small dairy farmers must club together, or they'll be crushed by the agricultural conglomerates," she said. "Little grocery stores in small towns and rural areas must join together with other little stores in nearby towns to have more purchasing power." But Blaszak did not have a rosy outlook for technology-based co-ops. "They are more at risk because technology always has something amazing coming up the pipeline," she said. "Ten years ago, we did not have the communications systems we do now. The Internet was a startup. I can't see the technology co-ops lasting." NCBA's Hazen disagreed with that assessment. "This is a business model that can adapt to whatever the technology is/' he said. "Rural telcos will be able to adapt to new technology." Talking bo bhe Centenarians Glenn R. Grubb, manager of Huron Telecommunications Co-operative Ltd. (Ripley, Ontario, Canada), which celebrated its 100 year-anniversary last year, conceded that as a technology company, it's never a good idea to take anything for granted. "But as a rural coop, there's a lot of value in our infrastructure, and no one seems interested in serving rural Ontario unless they want to do it on the cheap with wireless technology," he said. "We've invested in fiber to the home, so that puts us in good shape for a long time to come." Grubb said the U.N.'s designation of International Year of Cooperatives is a positive move. "Some of our customers are thinking along the lines of: 'How can I support my co-op?'" he said. "But a lot of people take coops for granted." Mike Boley - chief executive officer of Wabash Mutual Telephone Co. (Celina, Ohio), which also marked its 100th year in 201 1 - agreed with Grubb about the need to stay current. "Being a co-op doesn't make you any less competitive," he said. "If you refuse to change and adapt your services, you'll suffer no matter what type of business model you have." Boley also said he liked the U.N.'s International Year of Cooperatives effort. "We'll work the 2012 angle into our advertising somehow," he said. "We always promote our local presence and our local involvement." Wabash Mutual makes it an ongoing effort to instill in the members the benefits of being part of a cooperative, Boley said. "We try to retire some capital credits every year, and people like getting money," he said, explaining that, in a good year, the average residential customer might get as much as $250; in a leaner year, the customer might be around $25-$30, which is essentially a free month of service. "We tell our members: 'If you do business with us, you'll probably get money back from us. Frontier won't be cutting you a check/ That lets everyone look upon doing business with us as an investment." Mitchell A. Moore, president and general manager of Clear Creek Mutual Telephone Co. (Oregon City, Ore.), which celebrated its 100-year birthday in 2006, cautioned that co-ops might want to be careful about promoting their business model too much. "The ability to pay out dividends has become more difficult as the economy has shrunk, so trotting out your co-op status is a balance," he explained. "If you do it too much, you might get members saying, 'Hey, where's my payout?'" Moore, who has been at the co-op for nearly a third of its life, said the co-op model is under fire these days. "It's the most challenging time in my 30 years," he said. "As a co-op, our only two places to get capital are from our patronage and from banks. A privately held company can sell stock or bring in new partners. Co-ops can't do that." Because technology changes so much, co-ops must constantly invest in their facilities to keep them current, Moore said, citing the shift to broadband. "So the challenge still comes back to access to capital," he said. "Banks don't want to invest in phones because that's a shrinking interest. We have to make the shift to broadband because that's the growth side of the industry." Moore said he's hopeful that as the broadband plans come into focus, the banks will feel more comfortable making loans. "Who better to lend to than the local company who's been working for years to improve life and services in the area? Historically, it was the co-op who brought phone service to the area. You can rely on the coop to bring broadband. We are a great model for that. We just need the money to pay for it." Moore said Oregon became a state in 1859, and his telco became a co-op in 1906. "It's hard to believe there were even phones back then," he said. "But it's no mistake that we're still around. We've worked on it. If we continue to work hard, we'll be around for the next 100 years." MARKETING AND MERGERS There are numerous ways for rural telephone co-ops to highlight the U.N.'s International Year of Cooperatives, said Melinda Crawley, president oí M2S2 Marketing and Sales Communication (Ringgold, Ga.). "Many rural coops have their own LPTV systems, so they could run ads about the year on their local channels," she said. "They could have write-ups about it in their bill stuffers and in letters to members. They could have an article to click on about it on their Internet home page." The message to relay is that the co-op is a leader and an employer in the community, Crawley said. "When you support the co-op, the money is flowing through the community versus leaving it," she said, adding that the "international" part of the U.N.'s designation should also be featured. "Co-ops are not just provincial providers- they are part of a worldwide community. And co-ops connect their customers to the world through voice, video and the Internet." Paul Hazen, president and chief executive officer of the National Cooperative Business Association (NCBA), said his association would like to see American co-ops reach out to other co-ops in their areas. "This is about corning together to work on branding and educating the general public about the value that co-ops bring to their members and communities," he said. While joint branding and communal marketing efforts of co-ops are one avenue to take in 2012, some economists have speculated that the long-term future of co-ops very well may come in the form of merging operations - particularly among rural telephone co-ops and rural electric co-ops. (One such merger took place recently between an electric co-op and rural telephone co-op, Hancock Telecom in Greenfield, Md., with the new company dubbed Nine Star Connect.) NCBAs Hazen said co-op mergers are not an unlikely scenario. "It's all about economic and operations efficiencies," he said. Mike Boley, general manager of Wabash Mutual Telephone Co. (Celina, Ohio), agreed. "We have several rural electric co-ops in our area, and they enjoy the same type of relationship that we do with the members," he said, adding that the commonalities also spill over to equipment vendors, trucks and utility poles. "It would make sense for the two [electric utilities and telcosl to become stronger." "Being a co-op doesn'h make you any less compehihive. If you ~ef use ho change and adopli your services, you'll suffer no mahher Llihati hype of business model you have." Rachel Brown is a freelance writer. She can be reached at [email protected]. (c) 2012 National Telephone Cooperative |