What Frontier Means on a Resume
September 4, 2008
I am often asked two things: Are you ever taking AFS public, or would you be interested in a CEO opportunity at a public company?
No.
Why? Just spend some time at conferences with investment bankers and industry analysts. I have met very few, if any, who have ever had any public company experience themselves, let alone hands-on operating experience. Do I really want to get onto the 90-day gerbil running wheel-of-infinity with these folks telling the world what we are doing wrong or right based on an opinion and a spreadsheet at best? No, thank you. I may have opinions, but at least mine are informed, experienced opinions.
Why do I bring this to your attention? PAETEC.
I know Arunas; Arunas knows me. We hardly kibitz with one another on our respective enterprises, but if I come along something that may be of interest to PAETEC, I am not shy letting Arunas know. PAETEC is an interesting story. It is one of only a few CLECs that successfully built a CA96 “UNE”/Special Access model. As we know, most similar attempts went bankrupt.
There is a lot to be said for this accomplishment. However, nothing stands still in telecom, and with the exception of our recent meltdown, typically telecom service demand grows substantially annually. I have never witnessed a net decline of bandwidth demand in over 25 years. Being a fiber bigot it is my strong belief that bandwidth enriched content and high touch interactivity is a long term requirement which makes it imperative to become independent of the ILEC. As I stated above, moving up to 70% – 80% gross margins and 30% – 40% EBITDA margins is not something an ILEC is going to allow.
Here is what I do know, with the exception of less than a handful of former Frontier executives who formed CLECs that went bankrupt during the irrational telecom bubble, most CEOs and CFOs with Frontier on their resumes seemed to have managed their businesses through the telecom crash without using bankruptcy as a strategy. Rochester, New York, is where Frontier had its roots formally as Rochester Telephone has produced many CLEC success stories when most others failed or went bankrupt. I believe that perhaps 2 out of 600+ CLEC bankruptcies had former Frontier executives at the helm.
Arunas has Frontier on his resume, and like others who passed through the culture and discipline of Frontier, we have been well prepared. I would not knock PAETEC’s viability, but I would keep a watchful eye on things as optical network platforms quickly become table stakes for rapidly growing Internet and Ethernet proliferation. I just believe in owning fiber is a great mechanism of immunity from regulatory bodies as well as providing a platform to innovate from without relying on the speed, temperament or self-interests of the ILEC.
Got a question, comment or even a gripe? Email me or leave a comment below.
Written by Dave Rusin - Telecom Executive
Posted by admin | Filed Under American telecom, Telecom bubble, Telecommunications companies, Telecommunications industry, Trends + telecommunications, Trends in telecommunications
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Dave,
The viability for PAETEC will be integrating the McLeodUSA fiber into the PAETEC environment.
I have been challenging tax assessments on this industry specifically focusing on CLEC’s and IXC’s back to 2000.
Because of the NOL’s, property tax was a major part of the CLEC operating expense.
A CLEC without fiber going forward will soon see the end. I am sure if the credit markets would allow and the PAETEC stock price would rise, Arunas would be after more fiber…possibly XO.
XO is next. Question is who is the buyer.
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