Best of the ISP-Lists

Successful CLECs

Members of the ISP-CLEC list talk about current market conditions and unearth cautious optimism in a few corners—some companies are still stealing market share from the Bells.

[August 9, 2001]

On the ISP-CLEC list in July, PN asked hopefully,

"Does anyone know of any existing CLECs currently involved in an expansion or buildout? Is everybody going through financial issues, or are there success stories out there?"

A number of respondents suggested that things really do look bad:

[MC warned] "Don't hold your breath. I haven't heard of any sales/marketing jobs in the last three months, and I used to get six to eight calls a week from headhunters—and I know of at least 20 guys that are looking for work. The only plans I've heard of recently are companies looking to turn sites off, not build new sites. Even the used/refurbished equipment dealers are having a hard time finding buyers!"

[SM agreed] "The market is really tough. Why would anyone want to build out when all they have to do is wait a few more months and pick up a bunch of good equipment at cheap prices? Also, where is anyone going to get investor capital for a build out? Finally, why would you want to build out, when there is also a huge surplus of fiber and backbone transport facilities in place? Frankly, this whole scenario is hurting the economy in general."

[JR added] "All the potential customers in the dot-com world just folded up their tents and went away. We have a long way to go before everyone who needs service gets service, but we just lost a whole segment of the economy that we considered big users."

Others posted some positive stories:

[DH noted] "I am not having any problem keeping busy, but I'm in one of the luckier sectors of telecom: the metro environment."

[AD observed] "We are building out, but on a fairly small scale. We currently have about 20 COs in various phases of completion, with another going into the pipe roughly once a week. We have a fairly large base of resold DSL and higher speed lines in a tight geographic area, and can be immediately cash flow positive in about 50 central offices. By the time we finish those, there will be another bunch we can go into. We are not looking to make money with our CLEC subsidiary; the goal is to give us more control over provisioning and repair, so we can give our DSL and dedicated line customers better service."

[RB added] "There will be lots of survivors. Today is just like early 2000 in reverse: excessive optimism then, excessive pessimism now. There is no glut in the last mile, and there is plenty of market share to be taken from the ILECs."

Still others contended it's mostly a matter of shifting perspective:

[MC offered] "The term 'building out' is quite misleading. I believe the correct question might have been, is there any company still planning expansions into new markets? I just got back from a tour of nearby CLECs and telcos, and the story seems to be the same everywhere:

Nobody has time to even answer the phone, because those employees that still have a paycheck are doing two or three jobs for the same compensation that they were doing one job for last year. Most or all of these companies are still growing their service penetration levels in their existing markets as fast as their techs can turn up service. They still have growth targets to hit, and still plan on getting close to those targets in the markets where they have already started service—but they are looking to pull out of markets where they have little or no existing service.

These companies have finally learned that it makes more sense to sell service to more customers in the buildings where they already have a presence than to go after new customers in new markets. The bigger companies are still testing new stuff in their labs, but most new technology market trials have slowed down. At some point they will be forced to roll out all the neat stuff they have tested in the labs, but there is no reason to rush out there this year.

My take is that whenever the dust clears, the few companies that survive are going to be those run by conservative types that squeeze every penny, not the ones with the slickest marketing brochures and neat service offerings. We had a great run for a couple of years, and now things bite—but at some point this fall, those of us that still have jobs will benefit from the turnaround."

[FG agreed] "Businesses nowadays have to think about ideas like cost control, profit margins, and other fundamentals. It reminds me of the Doonesbury comic from a few weeks back, where Sid told Mike he had a new business plan: selling boring old stuff that people really need. It was the formula for success for many years, and should work again. It's like a big 'welcome to the real world' for a lot of players."

— End