2010 Metro Connect (Part I)
February 8, 2010
I recently attended the 2010 Metro Connect annual event in Miami, Florida. As long as I can remember, I have been a speaker at this event. In my opinion, this event is better than many others at providing substance over rhetoric. The team at Capacity Media, producer of this annual event, works diligently to ensure the topics are timely and relevant and the speakers are insightful.
To my Blog readers that are from Enterprises, Education, Government, Hospitality, Financial, Healthcare, etc. – please do not think it is Telecom-only event. On the contrary–by attending this event you will learn the ins and outs of Telecom because large propaganda-spewing Telecom firms (like Ma Bell) aren’t the dominant force at this event.
For example, FiberLight (Atlanta, GA) was a leading sponsor this year. FiberLight is a service-oriented, responsive carrier that has major metropolitan fiber infrastructure in the top 10-12 markets in the United States. Sure, they might not be a household name, but you can glean invaluable knowledge from listening to a panel or speaking directly with Mike Miller, CEO of FiberLight.
Capacity Media produces various events similar to this one throughout the world. By attending one of their events, I can promise you that it is virtually impossible to attend/leave one without obtaining quite a few “gold nuggets” of insight. You can meet C-level executives who are well-versed in Telecom issues such as regulatory filings, big carrier issues, etc. and are genuinely pleased to discuss these topics candidly. These are CEOs that stay around for the event as opposed to speaking for 60 minutes and then hopping on a private jet.
But I digress—back to this year’s event. The big buzz, and it’s not limited to Metro Connect 2010, is the expectation of another round of Telecommunications consolidation–this year with the focus on metropolitan fiber optic infrastructure. Believe it or not, contrary to the Real Smart Guys (RSGs) on Wall Street back in 2000, there is a shortage of fiber optic infrastructure in metropolitan areas. I know it’s hard to believe! Bandwidth demand is growing at 50% each year which is outpacing the infrastructure supply and creating an imbalance. There is an even greater imbalance of metropolitan infrastructure supply outside the top ten cities in the United States. For those owning infrastructure that is highly unique in footprint, there is even less of a supply! With these facts in mind, the consolidation buzz was inevitable.
I am not the type of person to take everything I read or hear as Gospel, but I do observe things, and I believe the consolidation buzz has more strength than anyone may think. Why do I feel this way? I will go into a deeper discussion in subsequent posts, but I can tell you this fact based on my personal observations—in nine years, there were more investment bankers and private equity (PE) firms per square foot in attendance than I have ever witnessed at any conference. When I speak of the big PE firms, I mean the big “players” as opposed to the wannabes. For years, PE has been talking about consolidating and driving data IP fiber infrastructure platforms. 2010 just may be their year. As I chatted with a few of my PE acquaintances about the buzz around data IP platform infrastructure consolidation, I had to rib a few by joking, “Imagine if you actually did first mover advantage three years ago like we discussed–you would look really smart today.”
At the conference, I metwith Investment Bankers, PE Managing Directors, Bank Managing Directors, Wall Street Analysts and other CEOs in attendance. As you can imagine, my schedule at the conference was packed with private meetings. I only saw the light of day as a panelist examining the topic, “Does the dominance of industry giants spell the end for the small metro wholesale provider?”
Andy Lipman from Bingham McCutchen–industry notable and legal scholar in all regulatory matters–moderated the panel. I enjoy being on a panel when Andy is the moderator because he gets to throw a few barbs and I am able to share my “love” for lawyers and certain aspects of the legal profession such as the Vortex. Our panel members consisted of: me (an out-of-the-closet fiber bigot), Bjarni Thorvardarson, CEO of Hibernia Atlantic and John Scarano, COO of Zayo Bandwidth. It was quite a lively panel filled with personality and character.
We dispelled the notion of “dominant industry giants” fairly quickly. In summary, as long as there are industry leaders who are not customer-friendly, slow to respond, one size fits all and bureaucratic, there will always be a healthy competitive wholesale segment. Although the idea is impossible for Wall Street to understand, even if you look 20 years down the road, network diversity is a necessity not an option.
After thoroughly writing off the dominant player theory, we moved on to the Google threat—and we dispelled it as well. Then Andy moved on to another hot topic—backhaul to wireless towers. This discussion was fairly interactive because we all did not agree on certain things, but because this is my Blog, I’ll share my perspectives just as I shared them during the discussion.
Join me later this week as I provide a quick Telecom history lesson and then dive headlong into the topic of tower backhaul.
Happy New Year
December 29, 2009
As the year draws to a close, I would like to wish many of you a happy, healthy and prosperous New Year!
To the carriers who simply compete on the lowest price, I hope you finally hit rock-bottom in 2010 to protect the health of our industry and the strategic broadband interests of our country. Try an economic concept to sell by: comparable differences. It’s a little more sophisticated than, “I have the lowest price” or “Just tell me what price you want.”
To enterprises, institutions, healthcare, government, hospitality, education systems, etc, I propose that you do your homework in 2010. The lowest price does not translate to network reliability, network diversity, on-time delivery, service availability or customer service. I submit that anyone with the lowest prices is cutting corners – caveat emptor.
I will and shall remain a bigot in 2010 – that is, a fiber bigot.
To a few of my favorite CEOs, may you find the following in 2010:
For Carl Grivner, CEO of XO Communications – some definition and clarity from Carl Icahn.
For Jim Crowe, CEO of Level 3 – a scratch-off lottery winning ticket that helps you pare down your debt so Wall Street can focus on your assets and potential.
For Dave Schaefer, CEO of Cogent Communications – a price increase to enhance your margins and increase shareowner value.
For John LeGere, CEO of Global Crossing – reparation payments and psycho therapy reimbursement for pre-LeGere Global Crossing./Frontier employees that were financially screwed by Gary Winnick and Co.
For Larissa Herda, CEO of TW Telecom – a new calculator that goes past two digits in the display and a better valuation by analysts.
For Bill LaPerch, CEO of AboveNet – more on-net buildings, you have the perfect business model (just like AFS).
For Randall Curran, CEO of ITC DeltaCom – the Civil War is over, head north.
For Jim Geiger, CEO of CBeyond – another year of growth. You have an algorithm, but be mindful, copper has its limits
For Arunas Chesonis, CEO of PaeTec – some more fiber in your diet.
For Danny Bottoms, CEO of Cavalier Telephone – a vacation trip to Dubai, I hear real estate prices have dropped substantially recently.
For Ivan Seidenberg, CEO of Verizon – another great year with FIOS…outstanding strategy – kudos to my Zen Master that made FIOS a reality.
For Randall Stephenson, CEO of AT&T – copy Verizon with a look-a-like FIOS, the regulators just might make you share your FTTC with others. See what they did in Britain as a clue.
For Glen Post, CEO of CenturyLink – a successful integration of Embarq…at AFS, we’ll miss you Embarq.
For Carmen Perez, CEO of FPL FiberNet – getting out of Florida for some network diversity and adding more women CEOs in 2010.
For Dan Caruso, CEO of Zayo – more pieces for that puzzle you are putting together.
For Howard Janzen, CEO of One Communications – more reliance on the knowledge and experience center in Rochester, NY. Most successful CLECs have CEOs, CFOs and senior execs from Rochester (Frontier Corporation).
For Peter Aquino, CEO of RCN – less cable TV and more enterprise.
For Ed Mueller, CEO of Qwest – a target of sorts … that’s what the Wall Street experts say.
For John Scanlon, CEO of Reliance GlobalCom (Yipes) – getting a 3x return on the $300 million for which Reliance bought Yipes a few years back, I know you can do it!
For John Purcell, CEO of FiberTech – just like AFS, another boring year of double digit growth in all categories.
For Mike Miller, CEO of FiberLight – larger pipe enterprise sales and a drink at MetroConnect in January.
For Jeff Gardner, CEO of Windstream – continued consolidation of the Tier 2 markets that translates to a high margin, low churn business with a national facilities-based footprint presence.
For my friends, Wall Street Bankers – more and better creativity on valuing companies … someone needs to look and act differently. You all look the same…why pay a fee without differentiation?
For my Venture Capital friends – avoiding ordinary income gains from the Obama Administration.
For my Private Equity friends – could one of you step up and buy a platform company to drive consolidation? You are all talking about the same thing yet no one is taking first mover advantage. (Please see Wall Street Bankers above)
For FCC Chairman Julius Genachowski – a Ouija Board to figure things out. Start spending time with the backbone of telecom…small companies. Simplify, simplify, simplify.
For Joe Nacchio, former Qwest CEO – a Hawaiian shirt to go with those khaki pants and a pre-paid calling card to call home.
For Bernie Ebbers, former CEO WorldCom – continued memories of better days gone by when things were simple and honest running a motel.
For John and Timothy Rigas, former CEO and CFO of Adelphia Communications – a basic channel package from Direct TV in your cells.
Finally, I’d like to wish a dose of reality for all the non-ILEC public communication companies and privately-held communications company for 2010…learn to partner. Our answers are not found by relying upon the government and FCC or by renting pieces and parts from our largest competitor – the ILEC – regardless of price or copper ubiquity.
The combined market cap of AT&T, Verizon and Qwest is over $262+ billion. Some brilliant, superstar Wall Street banking firm could orchestrate a super-mega-merger of the three and the rest of us won’t come close in market cap. What’s the lesson here? There is not any room for arrogance or condescension. The better focus is tackling ILEC market share instead of each other. The ILECs enjoy when the termites fight each other instead of eating the foundation out of their house.
Happy New Year! And cheers to a great start to the new decade!
A Week of Responses 3
April 23, 2009
A third installment of responses to readers’ comments–
In response to “Fresh Squeezed in Florida”:
Dave,
It is interesting you bring up the differential treatment between Cable MSO and Telecom. We are working with the same issue regarding property taxation in relation to the Communications Industry. Telecommunication companies in most states are taxed Centrally at the State level and Cable MSO’s are taxed at the local level. Rather than create a 21st Century tax scheme for a 21st Century technology, some states are trying to pull the Cableco’s into Central Assessment. I don’t believe that is the answer.
–Brian
Dear Brian,
In relation to this, there are different cost rates for pole attachments if you are a utility, cable company, ILEC or CLEC … one would think a cable is a cable … how does the pole know any different …
–Dave
Response to “Skype Makes an Interesting Move”:
Dave,
I am very excited that this codec was released. However, I am really wondering how long until hardware devices start taking advantage of this? Will we start seeing a flood of firmware updates with SILK support?
–TJ
TJ,
To be honest, I have been around the software business a long time, it makes me think about bad things, really bad things. I don’t miss the software business.
–Dave
Fresh Squeezed in Florida
March 30, 2009
The House & Energy & Utility Policy committee in the State of Florida has passed a bill removing most state regulations over telecommunications competition. The bill also limits the Public Service Commission from most Telecom matters for all but basic landline services.
Here’s the logic:
- The rates for telephone service will go up–by an estimated 6% to 20%. This will attract more competition.
- Cable Companies are not regulated for phone service, which creates a disadvantage for the incumbent. (Talk about a good lobbyist). Cable companies can bundle, price, and promote without seeking PSC approvals.
Rusin Translation: The duopoly structure in Florida is not working and one party in the duopoly can’t compete because of regulations, resulting in lost market share. By allowing prices to rise (as I have said over the years, the free market) and as growing profits are realized, then and only then will new competitors enter. That’s when the business model just might make economic sense…
Will other states follow? What a concept–let the market decide prices, the winners, and the losers.
Now, if we could get the FCC to focus only on basic land line services only….
Feeds
