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The main office of Citizens is located on Webbs Mill Road, just outside the town limits. The company also has a retail store in the new Village Green.

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Citizens facing challenges

by Wanda Combs
Editor

The telephone cooperative that exists today is different from the one that existed 20 or 40 years ago, and as a result its leaders are having to rethink in the face of challenges from declining revenue resources and an ailing economy.
Citizens, which began as a mutual company in the early 1900s and evolved to a cooperative formed by local residents about 40 years later, enjoyed somewhat of a monopoly for much of its history. That environment has changed, said general manager Greg Sapp.
Last week, news of company announcements to employees made its way to Doug Thompson’s blueridgemuse.com blog site.
Sapp, who has been with Citizens 15 years and became its general manager in January, would not respond to comments made on that web site, but he did explain some of the things that have been affecting the company’s revenue. “For the past 20 years, the number of telephone customers routinely grew from 5 to 7 percent a year. Over the past two years, we started losing over 1 percent of telephone customers. This year at this point in time we’re’ averaging a 2 percent (loss). That’s a 7 to 9 percent swing in the negative. That really totally throws our traditional business model, stands it on its head.”
Sapp said the company’s long distance revenue peaked in 2001, dial-up revenue peaked in 2002, and basic local telephone service revenue peaked in 2003. “The difference of where we were then and now is a difference of $1.6 million dollars.”
As a result of shrinking revenue, Sapp said, the cooperative has had to find replacement revenue. Citizens launched its video service, high-speed service, and cellular service, and those three services combined have brought back $1.4 million.
The company must, however, continue to grow revenue, and it must do so in a competitive market. “Any service we offer today there is competition….We’ve had to evolve and be a more competitive company. We have to continue to identify new revenue sources.”
Citizens must also continue to monitor and manage costs, he explained. “We have employee meetings, and we do share with employees. We are very open with employees. The realities of today’s market are very different from what we’ve historically enjoyed.”
Sapp said that “in no way does Citizens or its management conceal or hide anything” and remarked that the previous manager, Gerald Gallimore, was “open about financial challenges” at the last annual membership meeting in October, 2007.
“Citizens has challenges it must face in today’s environment….We must continue to look to enhance efficiency and productivity…to retain the right size workforce to match the size and scope of our business,” Sapp commented.
“There’s a certain amount of fear and anxiety that change brings,” he continued. “That’s why we have to be open.”
Sapp said the company aims to be “more results oriented” now. “We’re not in a monopoly environment anymore. We have to set revenue targets, customer targets.” Sapp commented that the “days of batting a 1000 are over. The only thing that’s a sure thing in our industry is that it will change.”
He said Citizens has made changes to step up their customer appeal, including customer-friendly hours in the evening and on Saturday, special services, such as the PC Protection Service, and the opening of a retail store in the new Village Green in Floyd. Sapp said the company needed a retail space, and it was more cost effective to open that space than to redesign a portion of the main building on Webbs Mill Road. Plus the new location, part of the downtown revitalization, will get more foot traffic.
He said the company has put together a five-year strategic plan that is updated every year. In 2004 there was a major update in the plan as a result of declining revenue sources. The Board of Directors approved several goals: to diversify revenue sources; to diversify geographically; and to seek alliances and business to business relationships in the industry and related industries.
Danny Board, who has served on the Board of Directors and been associated with the company for over 30 years, said that through the years, “it has been a challenge with competition and new technology always coming up. Before you can get one revenue source, you’ve got competition in it.” Change, however, is the word in telecommunications, he noted, and he believes Citizens is the best equipped telecommunications company in the area. “I’m proud of the cooperative, and I think all the subscribers should be, too. They have a lot to offer.”
“I have always been proud of the cooperative and the leadership,” agreed one Citizens’ employee. “It has come a long ways. We’re pretty much on top of the new technology….I’m happy to be there.”
Asked about the company’s expansion in other areas and how that has affected Citizens, Sapp responded, “We’ve worked with a large geographic footprint.” In 1996 the company started the dial-up network in a nine-county area. “That was very successful so we branched out at that point. We haven’t branched out more; we’ve just added services.”
Sapp said the company had not reached their target for residential subscribers, but it is “having better than anticipated success in reaching business customers in the region.”
The condition of the economy now has a two-fold effect, he commented, as it affects customers’ pocketbook and company finances. Sapp said as customers face fuel price increases and rising food costs, they look for ways to trim their budgets. It is expected that entertainment and communications expenses are often cut first.  Sapp said that “customers’ budgets” were behind the bundled packs it introduced about two years ago. The packs offer customers an opportunity to combine Citizens’ various services. “That’s the area where we want to pass on discounts and lower the total cost.”
Sapp commented that Citizens takes its mission of being a cooperative, as well as providing services to customers, very seriously. “In Floyd County there are 18 houses per square mile. In Roanoke County there are 144 houses per square mile, and in Richmond there are 1500 houses per square mile. That’s from the Weldon Cooper Center at UVa.” Sapp said density of an area is an important element of competitive pricing, and that is another challenge. “That makes a big difference in the number of customers you have to make a return on your investment.”
The economy is also affecting Citizens directly, Sapp said. “Our fleet of vehicles is on the road providing services. Fuel costs have doubled. We have over $10,000 a month in gasoline (costs).”
Asked about morale at the company, Sapp replied, “In general there’s a change, and change brings about uncertainty and a certain amount of anxiety. I don’t believe it’s low or as high as it has been.”
One former employee of the company told the Press she still cares about the people at her former workplace, and a couple of people had called her upset about the current situation and “nervous. They’re afraid they’ll lose their jobs.”
Sapp was asked about the possibility of lay-offs. “We have to continue to look at the workforce, the size it is versus what we need to operate at that time,” he said.
He added, “Historically the company goes out of their way to protect the interest of employees and the employees.”
But that doesn’t change the reality of the environment, he continued. “That’s why we have to be proactive and do things today and not wait until next year to react.”
Sapp said “the Cooperative is changing to reflect the changing market and economy so we can continue to provide the level of services customers demand at competitive prices and so that we can do that for a long time in the future.” But he added, “On any road to the future, there’s always going to be a few bumps in the road.”