Two rural telephone cooperatives will vote again on merger

CHOKIO -- Two rural telephone cooperatives are asking their patrons for a second time to approve their merger.

Patrons with the Farmers Mutual Telephone Company of Bellingham and Federated Telephone of Chokio will cast ballots Thursday on whether or not to create a merged cooperative known as Advanced Communications in Rural America.

The two cooperatives primarily serve farm customers in an area of western Minnesota that covers 1,100 square miles, including portions of Lac qui Parle, Chippewa, Swift and Stevens counties.

Federated offers service in Morris, where Qwest is the incumbent provider. It also serves Danvers, Holloway, Correll, Odessa, Chokio, Milan and Big Bend.

Farmers Mutual is headquartered in Bellingham, with a population under 200.

The two cooperatives considered a merger in November, but it failed to obtain the supermajority support required. Patrons of Federated Telephone were able to vote by ballot and gave the proposed merger a 90 percent vote of support.

The bylaws for Farmers Mutual required patrons to vote in person, and about 30 percent did so. They gave the merger a 59 percent approval, which fell short of the needed supermajority.

This time around, patrons of both cooperatives will be able to cast ballots by mail.

The issues remain the same, according to Kevin Beyer, who serves as general manager for both cooperatives.

An independent study found that by merging, the two organizations can save $200,000 a year in expenses through efficiencies and avoiding overhead and duplicated expenses for marketing, auditing and permitting.

Both cooperatives are currently cash flow positive. By merging, they will be in a stronger position to take on the challenges ahead, he said.

The biggest challenge is the anticipated cuts to federal subsidies for rural telephone service. Discussions in Washington, D.C., focus on reductions of anywhere from 30 to 60 percent. That translates to a 15 to 40 percent loss in revenues to the two cooperatives, according to Beyer.

The two rural cooperatives also face growing competitive challenges from large cellular telephone service providers. Cell phone usage represents lost billing minutes for the cooperatives. Beyer said some of the large cellular providers refuse to pay an interconnection fee to the rural cooperatives; those that do only allocate one-fourth of what an interconnection fee on a land line would be.

The merger would also mean that the new cooperative can offer cable television service to patrons now served by Farmers Mutual. Currently, Farmers Mutual has been unable to find a legal avenue to allow it to provide this service. Federated has the right and offers the service to its patrons.

Both cooperatives have recently invested in fiber-optic networks that reach all of their patrons. Both offer broadband Internet, technical support and other services along with land-line phone service.

Farmers Mutual serves an estimated 1,000 patrons, and Federated an estimated 5,000.

Some opposition to the merger has emerged. The opponents have placed radio advertisements on the air but have refused to identify themselves other than listing a Bellingham post office box.

Beyer said the two cooperatives' boards of directors are working to debunk inaccuracies resulting from questions posed by the anonymous opponents. No employees would be laid off as a result of the merger. The cooperatives saw a number of employees leave prior to a union decertification vote, said Beyer, and there is a clear need at this point to hire new people, he said.

Neither of the current offices in Bellingham and Chokio will close as a result of the merger, said Beyer.

Also, Beyer said the merger will not have any effect on how capital credits are allocated to individual patrons. The credits are already assigned and state law prohibits any changes.

If patrons approve a merger, it will likely be completed by year's end.

If they do not support it, Beyer doubts that another vote would be considered anytime soon. "Each cooperative will have to survive on its own,'' he said.

He warns that the telecommunications landscape will continue to change rapidly in the future as federal support is reduced and telecommunications technology continues to evolve.