Today we are joined by Clint Heiden, who was until recently President at Intellifiber Networks and is now President of PAETEC Fiber Services. PAETEC purchased Intellifiber as part of the Cavalier transaction last autumn, and has since expanded the unit's scope. They've added in the former McLeodUSA assets, national accounts, and fixed wireless services as well, aiming at transforming the once fiber-light CLEC into a fiber power in its own right. With no further ado:
TR: Where does the former Intellifiber group now fit within the much larger PAETEC?
CH: It was very important for Arunas to keep the DNA of Intellifiber: how we work with the market, how we put the fiber to such good use so quickly, how we get exposure for the company, and the rate at which we grew the business. He did not want any of that impacted by the acquisition. So he's asked us to bring the same mindset and performance to the McLeodUSA assets.
The PAETEC Fiber Services group, which I run, is responsible for how fiber is used, how revenue is delivered against it and how it strategically enhances opportunities we can convert into customers. It's really the customer facing, customer delivery side of the fiber business. We will utilize shared resources within PAETEC to build and maintain.
TR: Intellifiber in the past focused on wholesale sites - central offices and such. How has that changed in light of PAETEC's enterprise focus?
CH: We are absolutely continuing with the organic customers we brought with us from Intellifiber. Where our approach has changed, is that we now have 900 people out there attacking the enterprise market where we used to have 5. The PAETEC sales team is not really an SMB sales team, but rather a medium to large enterprise sales team. They have already produced more quotes in the first quarter that we've responded to than we produced all last year.
Also, PAETEC is very good at working with the agent channel, which is one of the hardest things to do. We’ve spent the last 30 days educating the agent market on how to sell our services, and that’s going to be a real growth area for us.
TR: Is your Ethernet over Copper product seeing more traction with a greater enterprise focus?
CH: Our EoC product is going absolutely crazy. We have 275 central offices on-net, another 160 coming, and we've got plans to go to 100Mbps with that product set this year. In the first quarter we sold more EoC circuits than all EoC sales in 2010 at Intellifiber.
TR: How important is having a fiber footprint to PAETEC today?
CH: Huge. Absolutely huge. Not only for the economic efficiencies it drives out of the operating cost of the business, but also what it means to the types of service we are delivering or plan to deliver soon. The future of the Cloud is all about fiber.
TR: Are you aggressively expanding your fiber coverage into more buildings?
CH: The buildout to those 160 central offices is done, it's a matter of deploying equipment for those. We are absolutely going to many more customer buildings and datacenters now. With PAETEC, we're looking at where they have an aggregate number of T-1 circuits, and we're building into those locations. We won one bank customer earlier this year because they aggregated three locations into a centralized data center. So we built fiber into that data center and then did a combination of type 2 and EoC for the other thirty locations. When you build fiber into the epicenter of the network, you own that network for life and then it's just access to get to the rest of it.
TR: What type of expansion opportunities are you targeting? Are you focusing on increasing your on-net depth or on expanding your network breadth?
CH: Both. We're driving very hard on the east coast, going south. We've got fiber in Texas, in the Midwest, in Florida, and in Atlanta. We're looking at how to connect all that, perhaps through swaps or acquisitions. We're in the process of building out through Boston, and might use swaps to fill that out too. And in the Rochester metro we have longhaul coverage but aren't real strong in the metro yet. That's our backyard and we're going to own it before I get done with it.
TR: Is PAETEC interested in further M&A to expand its fiber coverage?
CH: We're actively looking for what makes sense for us. We'd like to bring on things that enhance our infrastructure and allow us to organically grow revenue and EBITDA. Fiber and data centers certainly represent some of the largest chunks of what we would like to grow in the future. We're going to be a national fiber player -- it's just a matter of when those acquisitions make sense.
TR: Are you participating in the Ethernet Exchanges? How do you see them developing from here?
CH: We are. We're in a wait and see mode with them. Great concepts, but it will probably be a year and a half before it really catches fire – there just isn’t anyone driving a lot of business through them yet. The first winning exchange will be all about systems. Which one creates a portal that allows somebody to go there, fill out their locations, do a one-click order across seven carriers, and not know it was across seven carriers. It's going to be less about the exchange and more about how you create the continuity between those within the exchange.
TR: Thank you for talking with Telecom Ramblings!