Billion Dollar Baby, Part 1
September 29, 2009
I want a billion dollars.
Seriously.
Last week I had an opportunity to get together with a few friends from my past–over 450 of them.
This Rochester get-together reunited past employees of Rochester Telephone and Frontier Communications. It was organized by Bill Hammond who was my CFO during my Presidential stint at Frontier Communications. (Shameless plug for Bill’s business: http://www.baseisloadedmarketing.com).
It was great to reminisce about a great period of growth and expansion. Those were great days and great people. Plenty of mutual respect and deep talent in that room. Many firsts in our industry that were accomplished came from the people in attendance.
To give you an idea on that talent, since the Communications Act of 1996, you can track many telecom firms of different shapes and sizes that not only survived the telecom meltdown, but also thrived and remain viable growth engines today. Many of these companies have a spattering of CEO’s, CFO’s and senior management whose roots came from Rochester Telephone/Frontier Communications. In some circles, we are referred to as the “Rochester Telecom Mafia”. Even Wall Street analysts/pundits–and well before Jack Grubman et al and the Real Smart Guys (RSGs) crashed the telecom market–referred to Rochester, New York as “Telecom Alley.” There is plenty of optical and telecom talent dripping around Rochester – VC’s should take a greater interest in the Rochester area.
With the exception of two (2) bankruptcies, of the 1200+ firms that melted down back-in-the day; many firms with Rochester Telephone/Frontier Communications leaders or management are still standing and operating … some survivors have been acquired as a happy event, not a fire sale event.
Why such success? I contribute it to three things.
First: The water here tastes great.
Second: Upstate is conservative when it comes to business so we do not have a tendency to piss away investor or debt dollars.
Third: Rochester Telephone/Frontier Communications was a Telecom University – it taught employees focus, patience, execution, what to measure, teamwork and managing risk. In addition, employees learned about accountability to results and were rewarded for results. The fastest way to find your ass out the door was ethics or cultural integrity violations.
Performance was another.
Stick around for more of this post coming up…
Tele-Orgasm
September 24, 2009
I have a new word and sensation for Telecom – it’s the Tele-orgasm.
A Tele-orgasm is the tingling sensation that Chris Matthews gets when he encounters a fiber bigot, such as myself, discussing copper loop removal from a building or residence. Yes, the Tele-orgasm is the equivalent of Chris Matthews in awe of anything President Obama utters – that same identical tingling.
At the Goldman Sachs investor conference this week, Ivan “The Terrible FIOS” Seidenberg, CEO of Verizon pretty much stated that copper is just about dead as far as Verizon is concerned. These comments were aimed at the shrinking loss of lines that analysts like to measure. Joined by Randall “FTTP” Stephenson, CEO of AT&T and Ed “Wireless-less” Mueller, CEO of Qwest, all concurred that someday the landline loss would stop shrinking.
As aptly reported by conference attendee Saul Hansell of the New York Times, “In other words, that snipping sound you hear around copper phone lines is just going to get louder.”
Oh, that tingling sensation I get just thinking about it!
In the same article, Seidenberg declared, “Video is going to be the core product in the fixed-line business and the focus will move from selling bundles of video and landline to video and cell phones.” He added: “Once I shed myself of the burden of chasing the inflection point in access lines and say ‘I don’t care about that anymore,’ I am actually liberated.” Let’s here it for liberty and freedom – I am having a vision, perhaps Ivan can be caste in a remake of “Braveheart” as William Wallace – the Telecom version!
Since I have written about this before, let me translate this for Wall Street: Measuring legacy copper lines is of declining value, possibly of no value at all. It is not an indicator of anything anymore. Ivan, Randy and Ed won’t say it, but I have before and will again — you need to measure ports installed and bandwidth deployed. Mr. Wall Street – any idea how many simultaneous VOIP calls you can run over one port of Gigabit Ethernet? You count that “port” today as a line… Think about it. You really don’t know how much net line loss is going on with VOIP as a substitute for copper TDM lines, do you?
And I do know for a fact that many of you on Wall Street do read this blog but never comment. That’s called voyeurism.
The other secret I’ll let out of the bag, though my buddy Ivan insinuated it, is this: They are not the telephone company anymore. Wall Street-–you need to accept this and figure out what to measure accordingly. The big “service push” that is evolving is data. And I don’t mean data in the sense of point A to point B.
What I am talking about is the effort by my three new friends trying to figure out how to sell one data plan to customers that covers all their needs — fixed and mobile. People don’t want to pay for separate, multiple data plans – a single “portable” data plan is of significant value to the customer. Data – anytime, anyplace, on-demand regardless of access device is powerful. The single point IP addressable data plan is the new Holy Grail in telecom. A personal data plan or a shared corporate data plan —- but one data plan period – wire line (fiber) or wireless (LTE/4G/Wimax) is coming our way. So stop it with the copper line loss shenanigans.
However, before we get to data utopia, that copper needs to get snipped … and there goes that tingling sensation – another Tele-orgasm.
Copper Rain
September 22, 2009
If you read this blog regularly, you know how I feel about copper loops.
Well, the network alarms across the southeast and middle Atlantic are buzzing today.
Receiving days of rain, lots of Type 2 (copper circuits) in these areas have grounded out. You see, water and metal do not mix. The metal seeks a ground when current runs through it. So, if any copper pairs in theses rain driven areas have the tiniest of sheath nicks or open copper that gets wet … well, there you have it – no dial tone. No DSL. The same goes for the cable company running copper coax.
Reports to our folks in our NOC from AT&T – it will be 48-hours before they can get to some circuits.
This is why I don’t like fiber-to-the-pedestal fantasies either. The area in the pedestal that connects the tube fiber to the customer copper is in open air. Too much rain, one drop of water – and the copper gives you a crackling static noise or goes dead. Or, the copper between the pedestal and premise has one nick in it or loose connection, the water grounds it out.
Fiber all the way in to the premise? Fiber is dielectric – it could care less about water or lightning.
Did I mention what lightning does to copper in seeking a ground as well … it’s not pretty! Fiber is dielectric.
I can remember looking at print outs back when while President of Frontier. Based on the call volume pattern to our customer service centers, I could always tell you by looking at the data when we had rain … the calls would jump!
Yet another reason and real life examples to become a fiber bigot.
Welcome to Deregulation and “Choice”
September 22, 2009
I wish to apologize for not having written in awhile. This has more to do with mindset – to write something worthwhile, you have to have the focus, frame of mind and decent subject matter.
Certainly, I could write about my trenching project in the backyard yesterday–replacing a 4-inch OD sprinkler pipe that had cracked. What a bitch! I hand dug it out, replaced a pipe section – turned on the water and the sprinkler heads start steaming water.
Success!!! I go to check the hole before back filling – what do I see – water appearing deeper
down the pipeline…Bottom line, I’ll save my next attempt for Columbus Day weekend and this
time I’ll bring in my back hoe. Yes, I own a back hoe! My sprinkler delivery system needs more work.
Or, I could write about playing Candy Land with my nieces and nephews. I believe Candy Land does have certain parallels to the Telecom meltdown (circa 2001-2003) and certain CEO’s.
Maybe the next time I speak at a conference I’ll give away some Candy land games. By the way, when I speak at an event or moderate a panel – I give out prizes!
I have a stack of material on my desk waiting for you, my loyal readers. I just need to be in the proper state-of-mind to make it interesting, insightful and entertaining. Otherwise, why bother?
As an aside, I live in upstate New York (the part of New York State with honest, ethical, moral people – not to be confused with the down state Wall Street Real Smart guys et al). In upstate, we try to grow businesses the old fashioned way: by actually growing them. We have less interest in growing businesses on PowerPoint’s and spreadsheets. Call us backwards, but we are what we are — people who deliver results that prefer clarity of truth to rhetoric, deal making frenzy or word parsing. We like sustainable businesses.
So there I was, driving along in Upstate New York, thinking about all the useless blogs out there, and listening to the radio. The host talked about a Spanish Company that bought out all the electric and gas companies in New York State a few years back (with the exception of down state utilities) and this company just announced a 16% price increase for electric and gas services (ubiquitous commodities). Even though the ubiquitous commodity prices for the electric and gas have stayed relatively flat for the past 6 years, the increase is due to the ongoing costs to maintain the INFRASTRUCTURE and associated labor to do so.
So, what is my point? Bandwidth is not ubiquitous–or at least bandwidth that provides speeds
greater than our Federal standards of 768 kilobits.
Some call bandwidth a commodity. I do not.
I can’t store bandwidth like corn or pork bellies, yet somehow bandwidth is a commodity.
Remember Enron? They actually had this bandwidth trading scam going on back then where actual idiots bought future contracts in something that is only consumed in real time and can’t be warehoused. It was not the first time I have witnessed stupid money in Telecom! (Trust me – it’s still out there … just had a meeting last week with a …)
Anyhow, today’s game is about INFRASTRUCTURE … bandwidth will never be a plentiful, a
ubiquitous commodity of low price desire until such a time that the appropriate INFRASTRUCTURE is in place. The greatest challenge to buyers of bandwidth, similar to the healthcare debate, is not about the service itself. It’s about clearly understanding the delivery system. Typically, a delivery system is what drives costs up or inefficiencies. So whether its bandwidth or healthcare, it is all about the delivery system first – in Telecom the delivery system is what the ignorant refer to as dumb pipes.
I wrote a white paper on this subject a few year back – something about Clouds — you can get
a copy by clicking here.
No gas lines – no gas. No electric distribution lines – no electricity. Get my drift? Our nation
has not made telecom INFRASTRUCTURE a priority. Many times, our friends in the beltway
have the cart before the horse…which only results in a waste of private and/or public capital.
So here is the deal: existing tower and fiber optic infrastructure is more valuable as the delivery system than the applications today and in the foreseeable future. The commodity to be bought is not bandwidth–it should be network reliability, which delivers scalable optical bandwidth. The last time I checked, network reliability is not a commodity. Low prices are great until your carrier’s network fails and interrupts your life or business. As I have often said, in Telecom, you get what you pay for. Welcome to deregulation and “choice” under the Communications Act of 1996.
We (America) are early in the cycle of bandwidth manifest destiny; we are also behind many
parts of the world. Keeping in mind our friends at the Electric & Gas Company – we are not
only lacking the INFRASTRUCTURE but also what is already in place never becomes cheaper to build, maintain, relocate or install. Materials, labor and government regulations go up every year as an ongoing operating and capital cost. This is the reality of dumb pipes that some think should be free to access or bought for pennies on the dollar.
So that’s my ramble for today, because they are raising my electric and gas rates. It is incumbent upon the buyer of communications services to clearly investigate, understand and scrutinize the underlying delivery system. If you do this in Telecom and healthcare, we can solve two problems at once.
Don’t make price your only point of any decision – you will get what you pay for. You will not
get what you thought you paid for on price alone. In the case of evolving telecoms in America, the network reliability delivery system is everything and we still need to build it before we do anything else.
Digital Britain
September 2, 2009
In my former life, I used to travel the globe mercilessly on business. You name the place–I pretty much have been there. One might say I am a mystery man of international intrigue.
One of my haunting places on many, many occasions was the United Kingdom. So, I keep a watchful eye on the comings and goings within UK telecoms and Europe in general, plus South America, plus Asia, plus Australia/New Zealand . I affectionately refer to the UK, when it comes to things like healthcare, horticulture, cuisine and telecoms, as the land of “That’s Good Enough.”
I just came across a report called Digital Britain published under Lord Stephen Carter, the first Minister for Communications, Technology and Broadcasting. Just Google or BING “Digital Britain” and “Lord Carter” and you to can download this 245 page report as well. (I put BING in here just in case Google reads this…).
There were two things that caught my eye, though I have not read the report cover to cover, that I would like to share with my loyal fiber bigot readers…and of course the few copper loop loving Oafs. Don’t worry–I love my loyalists and copper Oafs equally. It’s all about the love at American Fiber Systems.
In the land of “That’s Good Enough” it’s nice to see not much has changed. Though Telecom is a £52 billion a year economic driver, the British government has in its sights a goal. That goal is this: by 2012, for all of Britain have broadband speeds of 2 megabits. This is classical British authority – the government establishing what’s good enough for the British commoners.
In fairness, they do recognize the value of fiber optics to the home and businesses per the Digital Britain report.
So, beyond 2012, they want fiber and they want it everywhere. Per the report, they pretty much figured out that 2/3 of the country can be served by just letting private Enterprise compete in an open market with limited government involvement but regulatory oversight of British Telecom by Ofcom (aka their FCC) to succeed with last mile fiber deployment.
Lord Carter, through Digital Britain, has concluded that there needs to be the ambition “to accelerate the rate of growth, and cement the UK’s position as a world leader in the knowledge and learning economy.” Note to Lord Carter and the Queen of England: You are not going to cement anything at 2 megabits per second – I can swim the English Channel faster – I told you I am a mystery man of International intrigue.
So our friend the Lord, has proposed an idea to address the remaining 1/3 of the country that can’t be addressed by the private sector due to rural economics. He has proposed a tax of 50 pence per month or £6 per year on each and every copper loop as long as they are in existence.
The collected tax will be centrally collected, controlled and disbursed by Ofcom to subsidize the private sector to service and build out rural UK with fiber optics. Lord Carter believes this scheme will in 4-5 years time provide fiber access across 90 percent of the UK. Estimated tax proceeds from the copper facilities of £175 million per year will be the source of public funds to achieve rural fiber access by matching it with private funds. I am sure eventually that reality will settle in and that wireless 4G, LTE or WiMax will also play a subsidized role in the hinterland. I have been to Scotland – I don’t see running fiber cables from glen to glen.
What I like about this approach, is the British government trying to stay out of the mix as much as possible (translated – no government authority or entity trying to be in the communications business.) Maybe by watching America, they wish not to repeat our mistakes of municipal or public utility participation on a tax subsidized basis, not being required to make a profit, let alone have the appropriate core competencies or burning desire of an entrepreneur.
Now, for a few of my readers that may be from the UK, or conduct business there or just follow things like this as I do, you may be thinking: “But Dave, isn’t the push on for Fiber-to-the-Curb (FTTC) in the United Kingdom leaving the access to copper?” And my answer to that is yes!
That’s the beauty of the tax.
Today, British Telecom is the national wholesale backbone provider and for this privilege is regulated by Ofcom. BT is required to place at various intervals along the backbone cross-connect huts with power and get this – non-discriminatory, equal access to the copper from the hut to the residence or building. If a hut runs out of space, BT is required to build another hut adjacent. Most of these “huts” are underground. No volume discounts or any of those last mile “special access” games – competitors pay the same for the last mile copper as BT uses it for itself. (I am trying to keep things simple). BT is the wholesaler – the technology push is last mile for all.
The incentive over time is for competitors and BT to build fiber from the hut to the premise to displace the copper and the tax that goes along with it. Nothing prohibits a competitor to build their own backbone in and around the huts. This makes for an interesting mix of diverse last mile options that could range from a neighborhood to multiple kilometer area coverage. The key is the equal access, non-discriminatory and same cost interconnection in the huts. To a certain extent, it can rationalize the deployment of capital expense whereby a last mile fiber owner has a sharing incentive for access (i.e. waves) or take the risk of getting built over for trying to be a last mile monopolist. If a competitor has an equal access backbone from BT, it becomes a more level playing field for rational access deployments.
There is a very nice Layer 2 access model in all of this as an option for private investment.
BT as a wholesaler will get regulatory relief as networks and options evolve, but as things evolve they have every incentive to deliver reliable, diverse and equitable bandwidth to those huts. If they don’t, besides Ofcom, competition with open access to the huts can usurp their wholesale position.
It will be interesting to see if the tax gets approved. I am not one for taxes; however, copper loops are like kryptonite to me, it makes a nation weak.
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