More Video, Voice Peering Forum, Part 2
January 2, 2009
This is the second half of the interview with TMC’s Rich Tehrani.
Voice Peering Forum Interview 1 of 2
December 30, 2008
Over the summer, I participated in an interview with Rich Tehrani, president of TMC, at the Voice Peering Forum. Here is part one of the interview.
Happy holidays from all of us at AFS. We welcome your comments and questions. Post a message below or email the Straight Shooter. If you’d like, you can see more telecom videos here.
Looking Ahead to ‘09, Part II
December 26, 2008
Here’s the continuation of my recent post on xchange magazine’s blog. You can see part one of this post, Looking Ahead to 2009, here.
Given the credit crisis (and my theory that the current situation will weigh on telecom well into 2010), I believe we will start to see a realization by Wall Street and those that have the capacity to lend, that top-line growth by itself is meaningless without margin/profit growth. If you look at recent M&A, it was driven and debt funded around that testosterone-driven top-line growth. We are now watching many companies struggle with integration, and some may end up in Chapter 11 as a result. The other problem all CLECs face in the United States — none of us are “too big to fail” in terms of our federal government. So as much as the “big” CLECs like to beat their chest in superiority over smaller CLECs — we are all basically a gnat on a rhinoceros’ ass in the scheme of a $3 trillion global telecom economy.
If I were an agent of any sort, I would focus on carriers that have competitive sustainability.  You can first start by looking at who survived the 2001-2003 telecom implosion without going Chapter 11 or Chapter 22. These firms obviously have something going for them, and more than likely it is discipline, cost control and focus. Now, my bias under full disclosure is that I am a fiber bigot. Worse yet, I am a metro fiber bigot. From analyst reports, PE firms with lots of cash and lenders — there is a high interest in enabling established, healthy companies with a track record of organic growth that own local fiber optic infrastructure well beyond the headlines of the global credit crisis. PE firms looking 5-10 years down the road now realize that real broadband is over fiber and that any and all known and unknown applications will initiate or terminate over a local fiber optic network. Some analysts are readily reporting wireless having a place, but it will not come close to the fiber optic infrastructure which is close to the customer.
I believe agents need to reassess their models to serve and transition from a volume driving activity to delivering growth margins to those companies which have great control over their network costs. I have spoken with agents for the type of business we have – all data/IP, 20 megabit or higher enterprise customers with a minimum of $5000 MRR — and I have yet to have an agent show us a model which beats a direct sales force. Below 20 megabits is the traditional low-end game of lowest price, drive-by selling and a costly back office/customer touch where margins are quickly eroding as basic bandwidth demand increases as copper becomes an insufficient medium. There is an abundance of price discounting channels available within this lower segment.
My opinion is that the sales agent of the future is not an agent but a partner — an integral part of the organization. This type of partner is loyal and not waiting for the next best commission deal to come along. This partner understands how to sell into an existing price point to hold it or grow it… not lower it.
Happy holidays from the Straight Shooter. If you’d like to email Dave, click here, or post a message below. You can also subscribe to this blog’s RSS feed.
Looking Ahead to 2009
December 23, 2008
Happy Holidays to you and yours. While we all take time to be with with friends and family, I thought you would enjoy a look into what is in store for CLECs in ‘09. This is an excerpt of my regular series on xchange magazine’s blog.
There’s a question that keeps coming across my email lately, especially from agents. It’s asked in various forms, but the long and short of what people are wanting to know is this: “how long do you expect the regional and national CLECs to keep their heads above water?”
I have no doubts that additional consolidation will occur. Sadly, the next round of consolidation will occur around marginal CLECs. Who are marginal CLECs?
Marginal CLECs will be those CLECs that are faced with pricing pressures as the result of not having an ability to differentiate services or hold a margin due to reliance on ILEC infrastructure. In addition, those ILEC-dependent CLECs carrying debt greater than 3x EBITDA, in my opinion, may be forced into the situation as credit markets remain elusive and expensive. For example, in the State of Missouri, the ILEC has been relieved to raise prices to CLECs. In general, Special Access costs across the United States will increase as the ILECs are no longer obligated to provide volume or terms. The ability for ILECs to raise prices of wholesale pieces and parts via forbearance is not an issue of “if” just when – that’s reality. Most CLECs relying on Type 2 ILEC will not see costs decrease as prices decrease.
If the telecom meltdown of 2001-2003 is any indicator of how the current market conditions may force behavior, the squeeze could be on. It is important to note that the current downturn is not network-centric as in 2001-2003, but it is deeper, wider, sinister and global.
Some unsophisticated CLECs will make an attempt to survive by lowering prices believing that lower prices will stimulate growth and cash flows. I agree with this somewhat but only to the extent you have 100% control over your network operating costs and by increasing volume you get economies of scale for better margins. However, the more a CLEC relies on the ILEC for pieces and parts, the more likely the CLEC in a price lowering market cannot achieve margin sustainability. The ILECs are not benevolent and will not lower their wholesale pieces and parts unless the law says to do so. We saw many companies go bankrupt 2001-2003 by lowering prices as a single, unsophisticated strategy.
Season’s greetings from the Straight Shooter and the entire AFS team. If you’d like to receive Dave’s posts direct to your inbox, click here. We always welcome your questions and comments. Email Dave or post a message below.
Gomer Pyle: Part Deux
December 15, 2008
Page A18 of the December 11th issue of the Wall Street Journal, The headline read: “Political Favors at the FCC.” Sub heading: “Kevin Martin orders up another rigged spectrum auction.”
Surprise, surprise, surprise … yet another game of Beltway insiders and money-people playing do as I say, not as I do. We have a two tier society in America. The top tier is for the greedy Real Smart Guys (RSGs) and politicians with perceived power and money and the second tier, for us common folk. It is rare a top tier villain goes to prison, but us second tier folks, don’t jaywalk or you will end up in jail.
The Readers Digest version of the story is that FCC Chairman Martin (R) and the venture capital RSG John Doerr of Silicon Valley fame Kleiner Perkins, worked back channels to place terms on the spectrum auction whereby the spectrum in an auction would not be attractive to dominant carriers. The article mentions under the “conditions” placed on the spectrum at auction it would sell for $50 million. However, economists estimate the value to the federal government coffers of $3 billion without said conditions.
Kleiner started a company to pursue this spectrum auction called M2Z. As the articles states:
“M2Z and Mr. Doerr are essentially asking taxpayers to subsidize their attempt to start a new telephone company. Mr. Doerr will have profited from what amounts to a government subsidy via a rigged auction. And if the start-up fails, don’t be surprised if M2Z attempts to sell licenses that it has acquired for a song and reap a windfall.”
For those that want to point political fingers, I suggest you read the article. Both parties are just as guilty as they are in our credit crisis. And, by the way, a company called Frontline also funded by Kleiner Perkins and headed up by former FCC Chairman Reed Hundt(D) failed in a similar scheme this past January.
Now for my soapbox. There will be no outrage over this. There will be no criminal charges. Why? This is top tier money play of influence and power at the expense of the second tier of our society. This is about greed. It’s not about fairness, transparency and equal opportunity. It’s a classic “non-nod, wink-wink inside the corrupt beltway” event.
My advice to CLECs: stop lobbying Congress and the FCC — they don’t give a rat’s ass about what is best for America. Sure they will meet with you and your highly paid lawyers to act interested, but unless you are driving party politics by stature and cash, you are nothing. By the way, what may be good for America may also not be good for CLECs, for the record. But in my naĂŻvetĂ©, I actually fantasize that our elected officials and their appointees like Chairman Martin can be objective and not deal in dishonest dealings or dollars.
My fellow CLECs, spend your beltway dollars on infrastructure to gain your independence from ILEC infrastructure (UNE’s, Special Access) and the FCC.
What do you have to say about it? Let Dave know. Email the Straight Shooter or add your comments below.
For the record
December 12, 2008
If you haven’t read or at least skimmed the House report, DECEPTION AND DISTRACTION: THE FEDERAL COMMUNICATIONS COMMISSION UNDER CHAIRMAN KEVIN J. MARTIN, I encourage you to do so. On Wednesday I wrote in the blog post “Hate to say ‘I told you so’” that non-ILECs should stick to focusing time and money on infrastructure.
For the record, a few years back, I had a meeting with the president of Comptel at our offices. We discussed openly and candidly the lack of success non-ILEC lobbying efforts has had inside the beltway. I will keep the majority of the conversation private. However, I did provide a bold strategy for Comptel to consider. I suggested that Comptel issue a press release stating that the non-ILECs represented by Comptel have given up and that the ILECs and cable companies have the FCC and Congress in their back pockets. Comptel members are no longer going to fund lobbying efforts to effectuate competition. Comptel would no longer encourage membership to lobby independently as well. Comptel, the last remaining non-ILEC membership group, surrenders to the FCC and Congress. I suggested that doing this will get Comptel and its members all sorts of Congressional hearings. But alas, my suggestion was ignored.
As you will find in the Martin allegations, the game is rigged. It’s a house of mirrors. As we are slowly learning in America, justice, opportunity and fairness is a function of how much you can afford to spend whenever our government or politicians are involved. Just look at the picking the winners and losers on Wall Street by Congress in our financial crisis. The responsible companies are getting punished while “the too big to fail” real smart guys (RSGs) get bailed out. There is a bit of poetic irony with the banking firms selectively being bailed out – all those years banks picked winners or losers for investment not on the basis of merit, accomplishment or experience, but by whom you knew or were referred by.
Has America lost its direction? I would like to hear your opinion.
Sound off now by posting a comment below or by shooting Dave an email.
Hate to say “I told you so”
December 10, 2008
As Gomer Pyle would say: “Surprise, surprise, surprise …”
For years at telecom conferences and most recently on this blog, I have heralded the waste of time, money and effort spent on lobbying the FCC or anyone else inside the beltway. I have referred to such expenditures on lawyers and/or lobbyists as money entering a large vortex. The only winners in the vortex are the lawyers who create arguments amongst themselves in an endless circle only to bill you with no results. Non-ILECs have no voice inside the beltway. I say spend your money on infrastructure rather than legal fees and lobbyist bills – because infrastructure gives you ILEC independence.
I can sum up things relative to non-ILECs receiving a fair hearing inside the beltway as appalling at best and at worst bordering on corrupt. Yesterday, a report was released entitled: DECEPTION AND DISTRACTION: THE FEDERAL COMMUNICATIONS COMMISSION UNDER CHAIRMAN KEVIN J. MARTIN. A few excerpts for my loyal readers:
“Transparency was plainly not a priority.”
“Chairman Martin withheld important and relevant data from the other Commissioners … “
“The Chairman’s office appears to have ignored evidence that rate payers have been over charged, while the companies providing Telecommunications Relay service has been over compensated, potentially by as much as $100 million per year.”“Chairman Martin manipulated report findings and policy direction … when he ordered that a report to Congress previously issued by the Commission be rewritten with a completely different outcome ….”
“There is a climate of fear and intimidation at the FCC.”
See for yourself. The full 110-page report is available online.
Now, to be fair to FCC Chairman Martin, he has yet to respond. In addition, given the change of administration, there is certainly an air of cowardice in issuing this report in December 2008. That said, and I will say it again, non-ILECs have no voice inside the beltway; spend your money on infrastructure which gives you ILEC independence.
What do you think? Post a comment below or email Dave your opinions and ideas.
Don’t Get Mad, Get Fiber
December 8, 2008
In the last post, Broadband for Regular Folk, I admonished our friend who wants broadband to his home to check with county authorities and arm himself with information about who actually has fiber in his area. His final question was, “Do you know of any user groups or vendors who can help a very small cooperative run a few dozen strands from their neighborhood towards civilization?”
If you have an entrepreneurial bent in all this, your timing could be good. The FCC is changing the rules on rural funding programs. Starting I believe in December, the government will no longer fund (subsidize) traditional voice TDM services to RLECs in a phase-out program. After a few audits, the FCC has determined some RLECs have used government subsidies to pay shareowner dividends. In short, the traditional “cash machine” model as subsidized by the government for the RLECs is being phased out along with intrastate and interstate access charges much to their displeasure. Reality bites.
Where the FCC is aiming future funding is for the deployment of broadband infrastructure to rural areas and has fiber optic infrastructure at the top of the list. The place to inquire about these funds is not the FCC. Contact the Department of Agriculture. They issue the funds and can provide you the rules of engagement to receive funding. There is a capital (cash) component you would need to bring to the party if you choose the entrepreneurial route. If you choose to go entrepreneurial and if you are not personally wealthy, try contacting local businesses (large enterprises), municipalities, school districts or an RLEC or two for funding or a consortium business model.
Keep giving me questions as you progress. I am happy to give you information as you go along, but like I said I could respond with a book on the ins and outs of deploying fiber optic networks.
For inspiration, I was on a board of a company before the telecom meltdown of 2001-2003. This company provided fixed wireless connectivity. We sold the company months before the telecom crash to the advantage of shareholders. This business was solely founded as the result of the founder/entrepreneur getting pissed off over the local phone company turning away his requests for high-speed bandwidth. He said enough is enough and tapped some friends and family for cash. He started with two nodes and over a period of three years served cities from Boston to Albany to Buffalo… all because he was pissed off and those that funded him were sick of the phone company as well.
Don’t think big. Think about incremental entry and selling service reliability.
Have a comment or want to know more? Type away below or shoot Dave an email.
Broadband for Regular Folk
December 3, 2008
This question on “do-it-yourself” broadband, came in on the blog recently, and it’s right up my alley.
Call me crazy if you want, but I want fiber so bad I can taste it. I’m just a middle class guy living on a road with a bunch of other middle class guys in rural upstate New York. I know that it will be a cold day here before Verizon or Time-Warner run fiber down my road. Thus … my desire to run my own fiber. I haven’t asked the first person yet, but I’m pretty darned sure that I can beg a right-of-way through the woods and wetlands at the back of people’s property. In exchange for which, of course, they get to buy a strand (or two, depending on termination equipment). By myself, I would be crazy to afford it, but as a group, it’s reasonable, and it’s the only way we’re going to get broadband.
Why the end of my road? Because it’s a New York State highway (56), because Time-Warner has hardline cable there, because we’re within shooting distance of Verizon’s CO, because both of the above plus DANC have fiber runs down 56, because SLIC (Nicholville Telephone’s ISP) is slowly fibering 56.
I have a gazillion questions about pedestals, fiber (singlemode to go 2.75 miles, obviously, but direct burial, aerial, or conduit?), termination, patch panels, splicing, permitting, trenching or cable plowing (if buried), etc. I’m leaning towards trenching because there’s practically nothing in the ground except rocks. Nobody to worry about amateurs with a ditch witch.
But they all fold down to one question:
Do you know of any user groups or vendors who can help a very small cooperative run a few dozen strands from their neighborhood towards civilization?Haven’t found any users groups, and vendors all seem to be selling to the same ten companies. Don’t even need a website to do that — just send a salesman around to take them out to dinner.
Thank you for the questions, my fellow fiber bigot. I could write a book in response.
Because it sounds like you are rural, I would check with your county permitting authorities to determine if there have been any other fiber builds that have occurred in your area outside of the usual suspects. Sometimes municipalities, private companies or Rural Local Exchange Carriers (RLEC) consortiums have built networks. With RLECs, I would not give you much hope. If they have a consortium, they would sell capacity long before fiber. Bottom line: you need to figure out where actual fiber is today before you go begging private landowners for anything.
More on this very soon — and keep these great ideas coming my way.
Do you have feedback or a question for Dave? Shoot him an email or post a comment below.
More on Backhaul
December 1, 2008
Thank goodness it’s Monday… as we all come out of our food-induced comas of last week’s feasts. Here’s a question to volley to start the week off right:
Dave,
What sort of backhaul deals do you see nowadays. Market-wide, or one tower at a time, or mostly in between?   Are they supplementing your fiber to some towers with copper from other providers to other towers where it is not justified, or are they using wireless backhaul to the towers you bring on-net?
We have seen and built market wide fiber-based solutions to cell towers. RFI/RFPs indicate this trend will continue as well. Typically, the densest of towers are addressed while leaving the less dense towers to ILEC legacy T1 copper facilities. We have yet to experience piecemeal one at a time tower requests. Starting bandwidth serving towers we have built to have ranged between 100 Meg and 300 Meg … sure says T1 is dead.
No, we do not supplement our tower builds utilizing legacy copper or bonding legacy copper. Why? We have been there and done that for land based opportunities, and we have found the copper facilities to be extremely unreliable, assuming the ILEC even has extra copper pairs to begin with. In addition, starting bandwidth levels of 100 Meg renders copper inefficient and so passé.
We are seeing a few “wireless backhaul” businesses out there trying to compete with fiber. Of those companies that are public, a quick check of their financial information indicates a stressed business model. Customers need to factor risk of bankruptcy in conducting business with these companies and of course the service reliability factors.
As I have said before and will state it again: you get what you pay for in this age of digital convergence. No such thing as a low priced, high quality lunch.
Have a comment for the Straight Shooter? Leave your thoughts below or email Dave now.
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