(FORTUNE Small Business) – Yes, it's true: healthy telecom companies do exist. Behemoths like Nortel, Global Crossing, and Qwest Communications may be in trouble, but some small, independent telcos are ringing up new sales by pushing into the once impregnable turf of the Baby Bells. Analysts from UBS Warburg and CIBC have started covering some of the tiny, often family-run carriers. And the future is much brighter for these small companies--public and private--than for the fallen giants that came before them.

Take Enhanced Telecommunications, a 60-person firm based in Sunman, Ind. Since expanding into nearby Batesville in January 2000--and facing down the town's primary carrier, Verizon--Enhanced has grabbed some 800 customers from the New York-based goliath. How? Owner Robert Miles did something that has confounded telecom giants for years: He bundled local, long-distance, Internet, and cable services for consumers. (Miles happens to own a cable business.) He has also emphasized the community touch, opening an office in Batesville and employing local people--including one of his sons--to run the new operation. Miles plans to spread into Greensburg, the next town over, within a couple of years.

Family-owned Rainier Group used a similar high-touch strategy when it expanded into Graham, Wash., to compete against Qwest. Boasting faster delivery of service and real, live customer representatives--bonuses a giant regional company like Qwest can't provide--Rainier Group has snared about 1,000 new customers in four towns, says CEO Skip Haynes.

Terms like "steady revenue" and "deliberate expansion" aren't usually used to describe telcos, and that's why Wall Street has become such a fan of rural carriers. Analysts predict that some of them will be acquired by bigger rural phone companies, such as Alltel and CenturyTel. Meanwhile rural operators could get a boost from Capitol Hill: Congress is considering proposals that would give companies tax credits for deploying high-speed Internet services in rural areas. If passed, such a measure might enable rural carriers to leap ahead of the Bells in the race to hook homes up to fast online services.

For all the talk, most small telcos' expansion strategies still aren't making money.

Employees, additional equipment, and extra phone-network capacity don't come cheap, after all. Miles says Enhanced's new operations are on track to be "completely in the black" by 2005. But, he says, he never worried about his decision to enter new markets. "I have two sons in the business," he says, "and I want to hand over a company that's bigger and better, which is what my father did."