Windstream CEO Leaves the Door Open for Consolidation

Implications: Consolidation among the RLECs has been happening at a steady pace over the last couple of years.  Mergers or acquisitions for a company such as Windstream could either help or cause problems, depending on the activity they choose.

Analysis: The RLECs (Windstream, Embarq, Century Tel, FairPoint Communications and some 1300 other independent telcos) have the same problems the larger RBOCs have with losing access lines to wireless replacements, CATV MSO incursions into their telcom space, and just plain general economy issues, not good right now for any of us.
The article mentions that Windstream posted a revenue slippage from the quarter just reported of 3% year over year, and net income dropped from $115.9 M to $102 M, for a 12% drop in net income.  "Windstream lost 37,100 landlines" in the quarter to quote the article, and that is slightly less than the number lost in the previous period.  So, what does an RLEC do to take care of business with these kinds of numbers? 
FairPoint Communications touts that 60% of their revenue comes from business, so a good place for any RLEC of any size is to start with boosting the business product list with attractive features and services.  FairPoint has a list on their website in one of the papers that lists a page of hot business sales products, many Ethernet-driven, that small and medium businesses are looking for to reduce their costs so they can stay in business during this so-called non-recession period.  With a strong list of salable business services, the next focus should be on boosting the DSLAM capabilities in the residence zones so that there are no roadblocks to selling DSL high speed data.  Of course, the higher the speeds, the more attractive DSL is to customers.  Some gamers that have cable modems love to challenge their DSL buddies, because the modems are much faster and the CATV gamers have a real edge on their friends, who "can't see the bad guys to shoot" because the data speeds are slower than cable.  Perhaps, the next item on the boosting services list is to insure that FTTP is being built in greenfields.  Continuing to build copper in new subdivisions is just not cost effective when competing with CATV MSOs with more bandwidth in their coaxes.  Of course, the normal response of an RLEC to competition, is to say there is no competiton, unless they are up against Comcast, Time Warner, Cox, Charter or that level of MSO.  Smaller CATV MSOs are having the same difficult time keeping an attracting customers and trying to upgrade their systems to triple play all at the same time.  Finally, the last item on the boosting list is for the RLEC to consider how to best secure the video customer the quickest.  Most opt for the DBS (direct broadcast satellite ) route, and partner with DirecTV or Dish Network to get the video to their customers.  Some of the independents actually own CATV cable plant and provide video on an RF basis, sort of playing both the telco and MSO sides at the same time.  Many small independents are looking at buying their competing MSO to both gain the video edge and to stifle their competition.  Comcast is close to their limit on the number of subscribers it can have as limited by the FCC.  Charter is trying to handle its debt issue, and selling small CATV properties helps fund triple play in the major venues for Charter.  Cox is looking at the fiber play and how they can increase fiber and bandwidth, causing them to look more and more like an RLEC or RBOC.  So, to get back to the issue in the article, it appears likely that RLEC consolidation will happen over time, and that investor groups or other telcom companies may be the dealmakers.  Losing access lines on a recurring basis, and not improving the broadband play to increase ARPU is a recipe for disaster.  Or is it a recipe for an acquisition?