Natco’s 3G Still Called To Connect In Flippin

Ray Sanders, right, of Natco.

(Editor’s Note: This is the latest in a series of business history feature stories. Suggestions for future “Fifth Monday” articles are welcome. Please contact Gwen Moritz at (501) 372-1443 or by email at GMoritz@ABPG.com.)

In 2011, Natco Communications Inc. of Flippin entered its 60th year. Two years before that, Steven Sanders Jr. became president and general manager, ushering the company into its third generation of family ownership.

The company was founded in 1951 when World War II veteran Ray Sanders and his business partner, Artel Chamberlain, bought Flippin Telephone Co. Flippin was a favorite vacation spot for Sanders, a Chicagoan.

Sanders rechristened the company Northern Arkansas Telephone Co. At the time, it served a grand total of 42 customers. Sanders began the task of growing the company while his wife, Millie, operated the switchboards.

He started by extending a line to Bull Shoals, and from there the company continued expanding, building phone lines in many underserved, rural communities between Mountain Home and Harrison.

With the help of government loans, the telephone company expanded rapidly through the 1960s. But because the rural telephone business wasn’t proving profitable, the next-in-line in the Sanders family was looking for employment elsewhere.

“Before [Natco] ever paid a dividend it was 20 years,” said Steven Sanders Sr., Ray Sanders’ son, who was a teenager when the company was founded. “It didn’t even look like it was going to be much of a viable business, so I had to go and do my own thing.”

Steven Sr. took his family north, back to Illinois, where he became a professor of physics at Southern Illinois University in Edwardsville, Ill.

Second Generation

But in the late 1970s, Ray Sanders suffered a stroke. Steven Sr. returned to Flippin with his family, and in 1982, took over the company when his father died. Steven Sr. continued to expand and improve the company’s infrastructure.

“The company didn’t get profitable until I started to manage it,” he said.

When his son, Steven Jr., was 12, he would walk two blocks from school to Natco headquarters, where he would help his father and other employees with odd jobs.

“I would work after hours copying, putting together binders for people and little miscellaneous stuff,” he said. “Then I would go home at night with my dad.”

Steven Jr.’s sister, Meghan Ward, remembers spending time in a garage with the company trucks and in the switchboard room.

But both siblings had different futures in mind.

“When I was younger, like a lot of younger people, I would say, well, that’s the last place I want to work,” Steven Jr. said.

Steven Jr. attended Hendrix College in Conway, then later Arkansas State University in Jonesboro.

Ward moved across the country, most recently living in Utah.

Third Generation

Eventually, however, both siblings returned to their roots at Natco.

“After living other places, and doing other things, you realize that it’s a great place to work, and our area is a beautiful place to live in and a great place to raise a family,” Steven Jr. said.

He returned to the company in the 1990s and succeeded his father as president of Natco in 2009. Steven Sr. retained the title of CEO and moved to Fort Lauderdale, Fla. After telecom companies were deregulated in the late 1990s, Natco became a holding company, and Steven Sr. now manages the cash assets for each company, which includes Natco’s various segments as well as a few restaurants.

Steven Jr.’s wife, Danielle, also works for the company, and Ward returned in 2009 to become marketing coordinator.

Having the family continue its involvement at the company represented “one more level of dedication,” Steven Jr. said.

“We have a lot invested in the community,” he said. “We have a lot invested in the company. Really the success of it is [our] well-being: We’re not a publicly traded company trying to manipulate a stock price for a certain period. It’s us. It’s our family, our well-being. In that sense I think it’s extremely important to have as [much family] involved as we can.”

Now, the company has a service area of 658 square miles running along the south shore of Bull Shoals Lake. According to the report Natco submitted to the Arkansas Public Services Commission, its assessable in-state revenue for 2012 was $5.51 million divided between its technology and voice services divisions, down from $5.74 million in 2011. It peaked above $8 million in 2006.

Changing Market

One of Steven Jr.’s challenges is adapting Natco to the rapidly changing telecom market. Voice service was once the company’s backbone, but it’s now focused more on high-speed Internet.

“It’s only now starting to migrate where people are disconnecting landline services,” Steven Jr. said.

According to the 2012 report, the company had a total of 5,439 access lines, down from 7,022 in 2009, when Steven Jr. became president.

Foreseeing these issues, Natco began adding services in the mid-1990s.

“We started offering dial-up Internet service in 1996,” Steven Jr. said. “That was the beginning of our migration over to an Internet company, and really now, we consider ourselves more of a broadband company than we do a telephone company. Voice is now just an app that runs over the Internet.”

In early 2012, the company started offering Ethernet service directly to businesses. Also last year, it started offering both regular cable and streaming Internet television services.

It’s right at about the “tipping point,” Steven Jr. said, where Natco’s broadband customers outnumber its voice customers.

“A lot of people still do value the voice just for security reasons,” he said. “I guess that’s another place where the area we live in plays a role, where people are wanting to have that emergency land line.”

Now, just as Ray Sanders expanded phone lines, his grandson is expanding Internet lines.

“You really have to understand what could potentially happen in the future,” he said. “To build a network in our service area is extremely expensive. It’s rural; the terrain is bad. So what we’ve had to do is really understand what services could come down the line. When we do a project, we implement a facility that is able to last a long time.”

The company’s major competition comes from larger cellphone carriers like AT&T and Verizon, Steven Jr. said, and Natco remains relevant in the field by delivering services that those carriers can’t.

“We don’t question that mobility has its purpose in somebody’s life, whether you’re a business or a residential customer, but when you have to do some of the heavy lifting over the Internet — whether you need applications for work, and the schools obviously have more of their curriculum running over the Internet — when it comes to things like that, the fiber cable that we’re deploying has much greater capacity than what cellular can do,” Steven Jr. said.

Expanding fiber lines is more complex than voice lines, Steven Jr. said. He said when Ray Sanders founded the company, he was “really just trying to build connections.” Now, Natco must take those connections and link them to many different providers and offer different services on top of the connection, and that’s how it will continue to grow.

“A lot of what we do, I think, is going to be based on getting that connectivity out to the customer,” he said. “It’s not a matter of throwing a bunch of money at something and being able to build it. It kind of goes back to planning, trying to plan the network and build the infrastructure the right way. Going forward, what we want to do is get that fiber connectivity and give people the opportunity to do over the fiber what they need to do.”