Twin Valley Telephone Eyes Growth in the Cloud

Independent Telco Sees Growth Potential in Managed Services

On November 1st, Miltonvale, Kansas-based Twin Valley Telephone Company (TVT) announced that it had acquired a majority stake in cloud services provider, Salina, Kansas-based ISG Technologies. While financial terms of the deal have not been disclosed, the combined company will generate around $90m per year. The purchase signals a pivot for TVT to target more small to medium-sized business customers—a shift that many telcos and communications providers of all types are making. With the increased competition in managed services, the question remains: Who is best positioned for success?  

An independent, family-owned telephone company, Twin Valley has provided telecommunications services to customers since 1947, with its company’s roots dating back to 1900. It currently serves 6.6k subscribers and 7.4k access lines over a footprint of 2.4k square miles in north-central Kansas. The telco completed a fiber build over its entire footprint in 2009, and offers IPTV, and broadband Internet in addition to its phone services.

As a competitive telco for over 60 years, Twin Valley has gone through many transformations in its day. It got into the cable television business in 1983, and amid increasing access line losses in the 1990’s and early 2000’s it turned to IPTV as a revenue replacement growth strategy in 2003. In March 2006, it nearly tripled its size, purchasing 5,200 access lines in 13 Kansas exchanges from Sprint.

In acquiring ISG Technologies, TVT adds a portfolio of managed services and data center solutions along with an established based of 2,500 SMB clients. While the term “cloud services company” can conjure up the image of a crew of 5 to 10 people operating out of a basement somewhere, ISG is an experienced IT company with 28 years in the business and 140 employees. Like many IT companies, ISG has found a niche in “cloud services”—which it admits is essentially a metaphor for utilizing the Internet for your computing and communications needs.

Twin Valley had its own experiences in “the cloud” which led to its interest in ISG. According to ceo Ben Foster, TVT realized the potential of selling cloud services after the company itself moved over to a virtualized server infrastructure.

“Our realization that a business-focused cloud strategy was going to be our growth opportunity outside of our footprint occurred just after we went to a virtualized server infrastructure.  We began to save significant amounts of money by reducing the number of servers that vendors were selling us and charging us to maintain. It became evident that what we really had was a mini-data center that could be leveraged to sell hosted services and disaster recovery.”

TVT experienced first hand the economic benefit that cloud services could provide to small businesses, and saw a potential revenue stream for its own business. It decided to offer services such as web hosting and disaster recovery, which it offers along with its hosted VoIP services. With the ASG acquisition, TVT is doubling down on the cloud. 

TVT however is not alone. In addition to regional telcos like Warwick Valley Telephone (Alteva) and TVT moving into managed services, massive corporations like Amazon and Google are getting into the same space. Best Buy just acquired IT services firm mindSHIFT for $167m, commenting that the combined companies are looking to capture a greater share of the $40b small and mid-sized business MSP market.  While bigger doesn’t necessarily mean better, a company like Best Buy, armed with its strong distribution channels and Geek Squad service expertise appears to be well positioned for success as an MSP. 

Despite the growing competition, Foster believes there is plenty of room on the cloud for the giant companies and smaller providers alike. Specifically, he feels Twin Valley and ISG are better suited to provide quality service that meets the business needs of small to mid-sized companies.

“In our market research, we identified a gap in the type of support these corporations provide business customers versus what they expect for the investment they are making.  If you are a fellow Fortune 500 company, Amazon and Google would be happy and probably better-equipped to support you.  If your company is smaller than that, you aren’t really hitting their radar screen.  Companies of all sizes can’t operate without an efficient, capable IT partner and infrastructure. We are far better equipped to handle that next tier of companies’ needs and will do so aggressively.”  

That LECs are competing in similar areas to an Internet search giant like Google, and retail companies like Best Buy lends more credence to what we already know: the telecommunications landscape is changing rapidly, and media providers of all shapes and sizes are a part of this giant shake up. 

As this convergence in telecommunications is taking place, some providers are content to maintain a strategy that has worked for them for years--focusing on their core businesses: telephone, cable television, and Internet. Others are taking a more proactive approach to their future. With its acquisition of ISG Technologies and its move to the cloud, Twin Valley is proving that it is the latter.