A BROADER INTEREST: MebTel Deal Connects Small Towns to Information Highway

By Isaac Groves, Times-News, Burlington, N.C.

May 6–MebTel’s parent company, Madison River Communications, serves places like Mebane and Milton in four states, and was worth $830 million to CenturyTel Communications of Monroe, La.

Madison River had about 170,000 access lines, so that comes out to about $4,500 for each potential customer Madison River could serve.

It could take a lot of long-distance calls to make that money back, but Tony Davis, CenturyTel’s vice president of investor relations, says that’s not the right way to look at it.

Possibly Madison River’s biggest selling point is its broadband service, which allows the company to offer high-speed Internet service to nearly all of its customers.

This is a bigger deal than just selling high-speed Internet service to its customers, Davis said, because Internet video and other media services require broadband. Those will become more important and profitable in the next 10 or 20 years.

By comparison, about 79 percent of CenturyTel’s customers could get broadband through their phone company.

In the short term, Davis said, customers with good broadband Internet service don’t change services as much. This is what Davis and his colleagues call “customer stickiness.” Madison River also has 2,400 miles of fiber optic lines. These lines are more efficient than electrical cable. This technology has been around for decades, but it is still very important to carrying information long distances, so telephone and Internet companies make a lot of use out of it.

CenturyTel has a lot of these lines too, about 14,600 miles worth, and can connect to Madison River’s lines in Alabama and Illinois.

Madison River is also well run, Davis said, which makes it a lot easier to take it over and start making money on.

MebTel has been keeping the phones ringing in Mebane since 1922 and was independent until 1998. MebTel and four other rural telephone companies belonged to Madison River Communications.

Madison River also moved its headquarters from Illinois to Mebane in 1998. Over the following nine years, Madison River put a lot of time and money into its fiber optic network and broadband Internet access for its customers.

All of those customers are in rural areas or small cities like Mebane. CenturyTel operates in the same kinds of markets in 25 states.

There are advantages to working in the small ponds. For one thing, there is less competition because big companies chase big markets.

A map of CenturyTel’s network shows it operates in every region except the Northeast, where the big cities are.

It has been working for CenturyTel. The company had $601 million in revenues in the first quarter of this year and is listed on the S&P 500.

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Copyright (c) 2007, Times-News, Burlington, N.C.

Distributed by McClatchy-Tribune Information Services.

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