History of Northern Arkansas Telephone Company

Steven G. Sanders (far left) started working in the telephone business in northern Arkansas as a teenager when his father (second from right) bought the Flippin Telephone Company. It then had only 42 stations.

"Tomorrow's Technology Today" became the motto at Northern Arkansas Telephone Co. when it rebuilt all of its facilities with fiber optic cable and digital switching between 1988 and 1993. That $21 million changeover gave NATCO's customers in rural Arkansas telephone services equal to or better than those offered in many American metro areas. The changeover also prepared NATCO to be one of the first Internet Service Providers in the dawning Information Age.

NATCO's President and General Manager Steven G. Sanders, who holds a doctorate in physics, returned to Arkansas to run his family's company in 1977 because he saw a chance to "implement beneficial technology rather than develop it." Even in the early 1980s, he sprinkled the technical terminology of the Internet in his conversations as he tried to explain to the public what was on the horizon: Internet-based communications with e-mail, home banking, online shopping, games, graphics, radio, and video.

Always owned by the Sanders family, NATCO was established in 1951. Initially serving only the 42 customers from the old Flippin Telephone Company, NATCO quickly expanded into nearby communities. Ray E. Sanders, an Illinois Bell Telephone man from Chicago, bought the company with a telephone industry friend - Art Chamberlain - as an investor and moved his family to Arkansas. When the deal was signed, Sanders went to work the very next day cleaning and replacing worn parts on the switchboard; luckily, he found the outside plant in good condition, needing little work.

Ray Sanders had returned from military service in Europe during World War II with a desire to start his own business, his son Steve recalls. When Sanders decided to break away from city life and buy a business in Arkansas, where they had vacationed, Sanders sought out a telephone property where he could apply his telecommunication experience.

When telephone industry deregulation occurred, a committee of the Arkansas Telephone Association concentrated on legislation which included the preservation of affordable basic phone service in rural areas. In early 1997, Dr. Steven Sanders (far right) saw Governor Mike Huckabee sign the Arkansas Telecommunications Regulatory Act of 1997.

The telephone company name needed to be changed from "Flippin" because the first item of business was to upgrade to serve the new town of Bull Shoals. A hydroelectric dam was being built on the White River and would create Bull Shoals Lake. Sanders leased a telephone line from the Mountain Home Telephone Company and installed two phones at businesses in Bull Shoals. He soon found a way to provide better temporary service. Buying a used PBX switchboard from Chicago's Midway Airport, fulfilling his wife Mildred's description of him as "always resourceful."

Sanders, a hands-on owner/manager, initially was busy with everything from repairing outside lines to selling new customers. A year after its founding, the customer base had already doubled, and soon thereafter another 100 customers in Bull Shoals, nine miles away, would be added. To do so, NATCO utilized a new Southwestern Bell toll line and 8,000 feet of cable laid by NATCO within the city of Bull Shoals.

One of several "firsts" for NATCO occurred in 1954. Needing capital to expand, NATCO was the first commercial Arkansas company to apply for a Rural Electrification Administration (REA) telephone loan. The funds were available at 2 percent interest - irresistible to entrepreneur Ray Sanders. The financing would allow NATCO to bring its customers into the "dial telephone" era.

Steven Sanders Jr. and his father, Dr. Steven Sanders, stand by a portrait of his grandfather, Ray Sanders (deceased), at the NATCO boardroom. Ray Sanders led the firm from 1951 to 1976; Dr. Sanders took over from his father in 1977 as president and general manager; Steven Sanders Jr. is vice president and plant manager.

At the midnight switch-over to dial telephones on Oct.2, 1957, the years of the community switchboard operator ended in Flippin. "Operator" had been a job that Ray, wife Millie, and son Steven had all mastered during the company's first years at Flippin. Millie would continue as a relief operator a few more years at Lead Hill. The '60s proved to be a decade of growth and expansion. NATCO acquired new territory stretching around the south shore of Bull Shoals Lake to serve new residents, businesses, and another new town, Diamond City.

NATCO was one of the 5,000 independent telephone companies developing during an era of mutual cooperation with the then-dominant Bell System and AT&T toll network under the watchful eye of the Federal Communications Commission. NATCO had grown and was ready to expand to serve another 1,000 customers, and did so with $1.5 million financing in 1967. With this improvement all rural eight-party lines would become four-party lines, and those living in towns would have one-party service. Sixty-one miles of lines would be added to reach Diamond City.

Friends and associates paid tribute to Ray Sanders in 1975 when they gathered to mark his 50th year in the telephone business. A sociable person, Sanders had many friends from business-related and civic activities. He had helped start a new bank in Flippin, the Citizens Bank, was active in Rotary Club, and served on the board of the community mental health facility.

A new telephone exchange building at Bull Shoals was completed in 1975. A big remodeling project was also underway at the Flippin headquarters. With that project's completion came another celebration as 1975 turned into 1976, the year that would be Ray Sanders' final one working at his beloved telephone company. On September 13, 1976, Ray Sanders suffered a stroke and could never return to work.

Modernizing telephone service in northern Arkansas was a lengthy process for the Sanders family, owners of NATCO. At first, it included working as a lineman in the winter of 1952 after an ice storm.

Son Steve, then 40, who had worked at his family's company during his high school and some college summers, was a professor of physics at Southern Illinois University outside St. Louis. He obtained a year's leave of absence in 1977 to come to Flippin to help the board of directors determine what needed to be done at the telco. The business evaluation took three years and changed Steve Sanders' future.

In June 1954 Steve finished high school in Springfield, Missouri and received a scholarship to attend Massachusetts Institute of Technology. After graduation from MIT, took a research job at the Plasma Physics Laboratory operated by Princeton University. A National Defense Education Act fellowship allowed Steve to obtain his doctorate in physics at the University of South Carolina and to continue government-sponsored, weapons-related research. But, as an NDEA fellow, he also instructed college students and found that he preferred teaching to research. He excelled at teaching for more than 10 years and became chairman of his department and president of the university senate.

Then came his return to Arkansas to help the NATCO board. Dr. Steve Sanders decided that there would be a lot more action in the telephone business than at the university. He became a telephone man. He explains: "The dam seemed to be open in the communications business for massive technology implementation and this appealed to me. I considered NATCO as a beachhead in this process."

In the late 1970s it was clear to Dr. Sanders that telephone networks would have to become digital. Telephone equipment-maker Nortel accomplished digital switching breakthroughs. Motorola was experimenting with wireless technology in the Chicago area. Economically, the United States Justice Department was considering major anti-trust action against AT&T, and finally, FCC regulators were attempting to determine what products and services would become competitive rather than monopoly offerings.

Flippin, Arkansas, is the home of NATCO. Located about five miles from Bull Shoals Lake and the White River, the independent, family-owned telephone company brings advanced digital phone services to six rural communities. Its subsidiary, NATCO Technologies, is a successful Internet Service Provider to adjoining areas, including Harrison and Mountain Home.

At NATCO, the company needed a rate increase for new services provided, and it adopted a cost separations model for revenue recovery. Dr. Sanders reorganized and computerized routine procedures to efficiently handle the company's continuing growth. In the early 1980s, the sales of telephone equipment outside the service area were successful. A subsidiary, then called NOVA Systems, sold mainly digital phone systems for corporate and government clients. Its 10-year run (1982-92) gave NATCO the technical expertise to build the modern network the company has today and gave NATCO experience negotiating with equipment vendors, Dr. Sanders said.

In 1982, Ray Sanders died, shortly after his former partner in NATCO, Art Chamberlain, had died. The NATCO pioneers were gone.

The court-ordered breakup of the Bell telephone system in 1983 had thrown the telephone industry into turmoil, and by 1990, the number of independent phone companies was down to around 1,000. However, at NATCO, business practices set up in 1979 served the company well in separating regulated and non-regulated services, which would soon be required of all telcos.

By 1987, it appeared that the industry had settled down; NATCO owners could see a continuing future for their small independent telephone company. In 1988, NATCO began to plan for a landmark $16 million wideband, digital network upgrade that could provide digital services to the home and small business. The digital network would become a reality within five years (and additional funding of $5 million), resulting in ultra-modern telephone and telephone-based Internet services, a full fiber optic network connecting all offices and remotes, and all one-party lines.

Another of NATCO's firsts came along in 1994 when the Arkansas Public Service Commission authorized NATCO to test a new technology "National ISDN." It offered Internet service without tying up the telephone line, and the capacity to send graphic images and data 26 times faster than analog modem Internet.

Dr. Sanders used NATCO's digital network to help area schools. He donated a server to the U of A so area schools could have access to the ArkNet Internet in 1994, when Internet was not widely known. He worked with the Ozarks Unlimited Resources project to bring interactive video (for teaching advanced classes) to small rural schools which couldn't expand course offerings on their own.

Media recognized NATCO as an "aggressive rural independent" (Roundtable Magazine, Fall 1994), as a small company tackling a large project (Arkansas Democrat-Gazette, August 8, 1994) and the company with the lowest monthly rate for ISDN in the nation (New York Times, March 25, 1996).

NATCO Secretary/Treasurer Deanna Sullivan says Dr. Sanders possesses "vision" - the ability to anticipate how the industry will go. Working in NATCO's administration since 1985, she recalls that at the time NATCO installed the Nortel DMS-100 switch, other small companies would have probably purchased the much smaller DMS-10. Adds Network Services Supervisor Travis Sullivan, "Some thought we had gone overboard, but the DMS-100 proved to be more efficient in the long run."

Informational materials of NATCO and its South Shore Foundation (charitable foundation) feature the company’s comprehensive Web sites, such as the home page of the South Shore Web site. A South Shore Driving Tour brochure features tours and events of the area, and a regional telephone directory is produced with a neighboring small phone company, Yelcot.

The Information Age dawned gradually in the 1990s. "Sneaking onto the scene was the expansion of the government-based Internet network to provide data connectivity to regular citizens as well as government and educational agencies, for which it was designed," he said When Web browsers were released commercially, it became apparent that the Internet would be useable by all citizens. Through its subsidiary, NATCO Technologies, NATCO Communications became a local Internet Service Provider in1996. It offers both basic dial-up service and broadband, always "on" digital line services to customers.

During the time the system went digital, Dr. Sanders helped shape the future of the rural telco by working on national and state telecommunications policy. With the federal court's 1983 order to break up AT&T, the replacement structure was uncertain for years until Congress adopted the federal Telecommunication Act of 1996. Arkansas also passed a state Telecommunications Act in 1997. Dr. Sanders spoke on behalf of small companies at legislative committee meetings and regulatory body hearings not only within Arkansas, but also in Washington, D.C. in front of the FCC. The resulting legislation is judged by the United States Telecom Association as having been successful.

While Dr. Sanders attended to the ins and outs of telephone industry deregulation, his son, Steven Jr., earned a bachelor's degree in business administration, then a Master of Business Administration, with honors. Steven Sanders Jr. attended Hendrix College, then began work at NATCO in 1989 in construction. He finished his undergraduate degree at Arkansas State University, commuting from Flippin and working full time at NATCO. Steven Jr. joined the company full time in 1995; much of his work today as vice president and plant manager centers around NATCO Technologies as an ISP in the three northern Arkansas counties.

Today, approximately 850 telephone companies in the nation remain independents. This estimate comes from John Rose, president of OPASTCO (Organization for the Promotion and Advancement of Small Telephone Companies). Over 90 percent of those that remain provide more than basic telephone services. Their additional services usually are one or more of the following: cable TV, long distance, Internet. Rose calls NATCO a very progressive telco, now offering both Internet and long distance.

NATCO’s annual Open House and Technology Showcase attracts many who want to see and try out new Internet or digital telephone services. Steven Sanders Jr. (standing behind computers) helps answer questions from customers.

Rural telephone customers constitute less than three percent of the access lines in the U.S., so they are not usually considered in national social planning, Dr. Sanders says. "However," he adds, "there are many strident voices in the small, rural telcos and they have had some success in keeping cost shifts to rural telephone users minimal given the political pressures elsewhere."

In 1996, NATCO started a charitable organization, South Shore Foundation. The name derives from the location of the NATCO service area in communities along the south shore of Bull Shoals Lake. Travelers may have selected a South Shore Driving Tour brochure, published annually, from the racks of Arkansas Tourist Information Centers.

South Shore Foundation has awarded about $350,000 in grants over the last five years for economic development, educational and environmental improvements. Dr. Sanders believes the South Shore Foundation's role is to help the area's economic development by providing an umbrella organization through which groups can communicate, work together and control their future. Achieving those goals so far have been projects like the South Shore (youth) Soccer Association and South Shore Marion County Youth Leadership Team. The foundation continues to fund the South Shore Memory Project, an oral history of the area in digital form (www.ozarkhistory.com) designed and written by Flippin High School and Junior High School students. An annual scholarship program rewards high school academic achievement in six area schools.

A lot has changed in the 51 years of NATCO's existence: From an operator down the street to accessing the World Wide Web with your phone; from eight parties on a line to two or more lines for one party; from basic one-on-one conversation to recording messages, forwarding or holding calls, automatic dialing for emergency help, and comprehensive Web sites: www.natconet.com and www.natcotech.com.

But, not everything has changed. NATCO is still family owned and independent. NATCO is proud of its Ozarks environment and welcomes visitors. As a member of the business community and the creator of the South Shore Foundation, NATCO wants good jobs and increasing prosperity for all residents.