HOT SPRINGS, Va.--Video may be the hot topic for many large telecom service providers, but it doesn't always make good business sense for smaller telcos, a couple of industry leaders warned today.

In a panel discussion exploring the changing financial landscape for members of the Organization for the Protection and Advancement of Small Telephone Companies, leaders of four rural telcos indicated wireless could well be a more strategic service to add to a bundled offering.

"The problem we have with video is that we don't have all the capabilities to play in that space," said Michael Weaver, chairman, president and CEO of Otelco, based in northern Alabama. "We are margin-driven, and there is a limited area in which video works for us."

Michael Coltrane, chairman and CEO of CT Communications of Maine, said that state's recently passed video franchise law will make it easier to get into video services, but agreed it doesn't always make sense, especially given the high cost of programming.

"You don't necessarily have to offer video--it depends on how competitive the cable company is," he said. "You could partner with a satellite provider."

The satellite option can also be more trouble than it's worth, Weaver said, since what satellite companies offer smaller telcos is "very much one-sided."

The challenge is to retain customers in a competitive broadband world, and panelists agreed that often means adding wireless capabilities, either on the voice or data side.

"There's a good reason why we are called independent telcos," said Thomas Riley, chief operating officer of Oklahoma-based Chickasaw Holding Co. "There are lots of ways for us to participate in wireless--either as resale, or as agents. I'd like to see us operate together on a consortium on a nationwide basis."

"We have to be involved in wireless," agreed Larry Sterrs, vice president of corporate operations for Maine-based UniTek. But primarily, he said, "it's all about broadband--and whatever we're assuming in terms of bandwidth is probably too small."

All four of the panelists agreed that bundling is becoming more important to customer retention, even if it sometimes means accepting what Sterrs called "skinny margins."

"It's important [customers] select us as their broadband provider, not Time Warner," Coltrane said. "We've upgraded to ADSL2+  and we are offering light, middle and heavy services up to 10 Megabits [per second]. Most customers take 1.5 Mb/s or 5 Mb/s because it's cheaper. But our growth has exceeded our expectations."

In general, the rural companies are spending more and making less profit as they focus on customer retention. For example, Otelco is reducing churn-- which frequently happens in the first 60 days--by doing more in-home installs, even though it's more expensive, Weaver said. CT Communications is advertising "like crazy," Sterrs admits. And everyone is focused on better customer service and tighter customer relationships.

"We are having to work harder and do things differently, and we are always looking for ways to cut costs," Weaver said. "We're working longer hours and harder for smaller profits."