Profitability vs. Manifest Destiny
August 29, 2008
Consider this post an epilogue to the series on forbearance. AFS is a privately held company, and someone coming up with “AFS only hits about 1% of businesses in any market” reflects a limitation in research, not fiber service. It is an incorrect statement in and of itself. Here are some facts…
We did not get trapped in the Wall Street measure of national manifest destiny that so many did, and we did not perish in bankruptcy. CA96 promoted a pro-competition framework … no we don’t look like others and our market segments are different from most others. Actually, only a handful of us as a percentage of all competitors chose to build and own fiber infrastructure methodically and rationally as a sustainable strategic advantage. I believe the count today is less than 30 metro network fiber providers remain; of the 30, only a handful are financially healthy.
Our fiber placement is unique in our markets with primarily one competitor to route compete against with, Ma Bell. We only address the business segment; consumer residential is a two wire game between the cable company and the ILEC. We only connect bandwidth into buildings where the lead-in customer requires a minimum of 50 megabits. We purposely don’t want to be in the low end, copper retail, high churn, no loyalty, thin margin, low price-only, usage sensitive T1, IAD, DSL retail segment. However, we do backhaul for these folks in this segment over our unique network footprint as a viable, diverse, reliable alternative to Ma Bell. And, by the way, once we drop fiber into a building, it does not take long for us to garner 100% building share.
We place our fiber in our markets to address 95% teledensity of high bandwidth, high margin buildings. We maintain a database of physical audits of these buildings inclusive of prospects, digital photos of the telco closet, racks, terminations, GPS coordinates and building entry points for the fiber. We pretty much know what’s going on when our sales person shows up and more importantly, how to price based on the route and competition. 50 megabits, by the way, blows out most copper clad CLECs in a building.
We have been taking one building at a time since inception in 2000 and have a CAGR of 40% for revenue…our margins are to die for. We are not a big top-line revenue testosterone driven company; we only want to address the 20% of the high margin, high bandwidth segments in our markets where we do have a greater market share than 1%. We are a different cat, and given the fiber shortage, we can keep doing what we are doing because like the GAO, lots of buildings still lack another real competitor, let alone fiber access. We prefer profitability to manifest destiny. After all, our customers actually like us, and they recognize we need to stay in business to provide the service they have come to appreciate and trust.
Written by Dave Rusin - Telecom Executive
Posted by admin | Filed Under American telecom, Forbearance, Telecommunications bloggers, Telecommunications industry, Telecommunications news, Trends + telecommunications, Trends in telecommunications
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