This formula has worked especially well in rural America, where the heads of companies meet their customers on the street, at PTA meetings or in the pews on a regular basis and must be able to hold their heads high. However, forces are at work to render this formula insufficient, if not obsolete. These forces may be social-, economic- or technology-based and would all be part of a healthy competitive environment if it were not for the regulatory entanglements preventing rural operators from responding.

For example: A new dynamic has replaced the three elements in this formula for success. Some might call it vanity, some simply the desire for the latest functionality, but the demand for next-generation devices has replaced network and service quality as the number one criteria for choosing a wireless provider. In a perfect world, rural wireless operators could respond to this demand. But not only is the world no longer simple, it is imperfect. Rural and regional wireless operators cannot get their hands on these devices.

This is one example of how regulation is making it difficult for these operators to respond to new market demands and to compete. It also is an example of what brought the Rural Cellular Association out of its home in Texas in 2008 and into the hotbed of policy and lobbying in Washington, D.C. It also led the organization to hire what Johnie Johnson, CEO of Nex-Tech Wireless and past president of the RCA, called a thoroughbred leader to head the organization.

That thoroughbred is Steven K. Berry, CEO and executive director of the RCA.

Berry has argued for fairness in the wireless communications market for years. Today he is arguing on behalf of rural and competitive providers. But several years ago he argued from the other side as head of legislative and advocacy operations at CTIA, an organization known primarily for supporting larger operators. He did the same for the cable industry at the NCTA. And prior to that, Berry rubbed shoulders with the Washington elite working behind the scenes in the House, Senate and State Department.

Berry said this experience has galvanized his thinking over the years. Now, “I feel I can bring all those experiences together and find solutions for RCA members. I think the cumulative experience gives me an insight into what is doable and where we can make headway,” he said.

Although some regulation has obviously been helpful to his constituency, Berry said the RCA must ramp up its efforts for advocacy on policy issues that affect the bottom line of its members. “The board has asked me not so much to change the direction of the organization, but the intensity of the focus.”

There are three pressing issues that can either devastate the rural and regional wireless operators or allow them to keep suiting up for the game, Berry said. They are handset exclusivity, mobile data roaming and interoperability in the 700 MHz band.

That Darn Exclusivity

Roger Entner, senior vice president of Research and Insights, Telecom Practice, at The Nielsen Company, said last year that before the iPhone came along, few people cared much about handset exclusivity. In fact, it ranked seventh on the list of factors in choosing a wireless operator back in 2006 and still ranked that low as late at the beginning of 2009, according to Nielsen’s Mobile Insights report. So Entner doesn’t see this as a burning issue, at least for the four major wireless operators. The view is much different from the perspective of the small operator.

“This is a huge issue for our members,” Berry said. “We know from our statistics that consumers really do want the functionality of these devices. But deploying smartphones and high-end handsets in rural America is a huge problem for our guys,” he said, saying that, iPhone aside, 46 of the top 50 handsets are subject to exclusivity deals with large operators. Rural operators, often the only carrier in a given region, cannot then bring those gadgets to their end-users.

“This administration talks a lot about bringing broadband to rural America, but if you believe, as we do, that high-end handsets drive adoption, you have to believe that if some can’t get them, then you’re not pushing a policy that drives broadband adoption in rRural America,” Berry said.

Rural operators individually do not have the purchasing power of scope and scale to get the ears of manufacturers. “Many of the large carriers — and I don’t know that they do this on purpose — buy up two years of a production cycle on a particular phone, and when that cycle is finished they’re on to the next revision, which becomes a whole new exclusivity agreement. We might get what comes off the tail end of that initial production line, if we get anything.”

The fallout from the lack of next-gen handsets stretches beyond the inability to meet customer demand. It affects the business case for network buildout itself. “We are trying to roll out new broadband in rural America, which is the most costly and difficult area to roll out to. If you don’t have the handset for 4G, the case for building out the network becomes more difficult,” Berry said.

This disparity puts rural consumers on what Nex-Tech’s Johnson called the bottom side of the digital divide. Nex-Tech was a greenfield builder when it launched in October of 2005 to serve western Kansas. It has approximately 190 cell sites across 33 counties, which stretch into Colorado. It has a CDMA EV-DO Rev-A 3G network and is a strategic roaming alliance partner with Sprint. And operators like Nex-Tech resent the lack of access. “As technology advances, our customers expect us to provide the types of handsets they see advertised on TV and in magazines every day. I have to tell them I don’t have access to those devices, and it brings into question my credibility as a company,” Johnson said.

Still, he said that the three key issues identified by Berry are issues that his company and other small operators struggle with on a daily basis. “Hopefully the RCA can educate Congress on issues affecting our industry and rural consumers,” said Johnson. “We don’t want to get into a situation where metropolitan customers have better technology than rural customers, just because of the economies of scale and the cost to deploy in a rural area.”

Like Nex-Tech, Bluegrass Cellular of central Kentucky has traditionally relied on its customer service and position as the hometown provider. It also has a more aggressive build-out strategy to differentiate it from the competition. “And like any carrier our size, the ability to provide a competitive handset has become the number one issue,” said Ron Smith, president of Bluegrass and, as of April 28, the new chair of the RCA.

There is no squabbling over the priorities of the RCA. All members seem to agree on the issues. And they have tried to address them internally even as the FCC and Congress contemplate new rules. The group reacted with what Smith calls a “normal economic response” by forming the Associate Carrier Group within the RCA to grow their scale.

“If you can’t purchase handsets, and the reason given by the manufacturers is you don’t have enough volume to warrant their attention or establish a production run, it is a natural to pool your purchasing power,” Smith said. “The ACG has been able to improve the number of CDMA devices we have access to, but it doesn’t solve the overall problem.”

Solving the overall problem will require help from Washington. And getting the attention of Washington requires three things: scale, tenacity and know-how.

Smith said the RCA has moved to address the scale issue by raising the maximum number of subscribers an operator can have for membership, in order to attract larger companies. And it has, with the likes of U.S. Cellular. To address the rest, he said, they have Steven Berry. “We have changed the organization significantly, and Steve is a big part of that. He brings a lot of credibility and experience dealing with these issues with the FCC and Congress. He is an incredible asset to us.”

For his part, Berry also has opened the organization’s arms to competitive providers. “I really believe there is a role and home for a competitive carrier advocacy that focuses specifically on those issues that are important to the small and regional carriers,” he noted.

He said that growing the organization would add to its efficiency and clout. “If you have 100 or 150 members when you go to Washington to fight for your issues, rather than four, that’s a good thing. Also good is that we have a number of those operators already in our fold. The board of directors has been forward-thinking on this.”

That Darn Roaming

With that clout, the RCA hopes to better influence upcoming decisions on mobile data roaming, USF reform and interoperability. Berry calls mobile data roaming the tall pole in the tent.

“Without roaming ... all you have is a localized ability to interface with friends and neighbors in a certain area. You need roaming to ensure that you have connectivity with other carriers throughout the U.S.,” Berry said. “So the federal government must mandate that roaming agreements are available for any carrier that requests one.”

The FCC had committed to adopting an order in the second quarter implementing rules to ensure the availability of reasonable, automatic roaming arrangements for voice service. And in fact, the RCA feels it scored its first victory on the matter by influencing the decision that came down on April 21 which eliminates in-market roaming exclusions and moves to adopt a Second Further Notice of Proposed Rulemaking regarding the extension of automatic roaming obligations to data services.

“This is a huge step forward for small rural and regional carriers. RCA has worked diligently on this issue, and we are pleased the FCC has taken action to eliminate the in-market exception,” Berry said.

RCA however is not throwing its new weight and influence behind the mobile data extension. Rather, the organization has been kicking around the idea of forming a roaming coalition among it members. Berry said that if a coalition were put together in a cooperative fashion, roaming costs would be no more than they are in one’s own network and can be another source of revenue. He also sees it as a way that small operators can help large operators — by making it easier for them to access the rural markets.

The roaming issue is not as consistently critical across the RCA membership as the device exclusivity issue, but it is still a top priority for everyone. Some members, such as Nex-Tech, can make the claim of nationwide coverage. thanks to its nationwide roaming agreement with Sprint. However, “Sprint doesn’t have the most expansive network, so it would be nice to have some of our eggs in other baskets,” Johnson said.

He added that Nex-Tech has had difficulty negotiating roaming agreements with other large CDMA operators. While negotiating in good faith is good, it is easy for another carrier to make it cost-prohibitive to enter an agreement. “In no way am I advocating we need to be regulated by the FCC, but I think more parameters need to be given, so that situation does not occur,” he said.

Smith said Bluegrass Cellular, on the other hand, has enough scale to have successfully negotiated agreements with Tier 1 operators, but stresses that this is not the case for all rural operators. “If you are really looking at ubiquitous broadband in America, you have to make sure that happens in rural America, too,” he said. “There has to be a presumption of roaming. Our customers expect when they buy data services that they work outside our network.”

The bottom line, Berry said, is that while consumers have long benefitted from the competitive wireless environment, that all could change if the right rules are not put in place to maintain competition. “There used to be nine carriers bidding for spectrum in every market. Now we are down to four and in most markets you have a duopoly. AT&T, Verizon, Sprint and T-Mobile are fighting for that duopoly position and when they get it, there will be a significant change in the whole competitive marketplace,” Berry said.