One of the ways in which regional fiber networks have been born in the US has been through the efforts of smaller independent telcos with common needs to reach outside their territories. Such networks are important part of the infrastructure of most states, but tend to get very little attention relative to their more vocal relatives. One such network operator is Indiana Fiber Network, or IFN, which operates a statewide network in, yes, Indiana. With us today to tell us about IFN and its plans is President and CEO Kelly Dyer.
TR: How did Indiana Fiber Network get started?
KD: An opportunity to acquire a large amount of fiber assets within the state availed itself to a group of us ILECs. These assets were priced to us very economically from a company that was in the middle of a major fiber build-out in Indiana based on contracts from multiple CLECS that didn’t survive the downturn in Telecom in the early 2000’s. I actually came from one of a group of 12 independent telephone companies that got together and formed IFN when we found these assets were available. The idea was to form a statewide network connecting the participating ILEC companies to bring state of the art technology services and economies of scale to themselves and to provide similar services to non-member companies once established. We ended up with 20 independent telephone companies that exclusively own IFN.
TR: How much fiber did you start with? And how much do you have now?
KD: Basically, there were about 740 route miles of fiber purchased. We constructed another 740 miles of new fiber initially, and the members provided some additional fiber to get through their territories. Today we are at 4,100 route miles of fiber in the state of Indiana and counting. We also lease capacity to 350 E. Cermak in Chicago where we interconnect with other carriers and also with INDATEL, our national consortium of state wide networks.
TR: How much of your business still comes from serving the needs of your independent telco owners?
KD: Through 2005 it was almost entirely member services, and then in 2006 we started selling to other carriers and enterprise customers. Now only about 12% of our revenues come from our original members. , As we continue to grow outside sales the percentage of non-member revenue is rapidly increasing. As a result, the member service percentage will continue to decrease.
TR: What kind of growth have you been seeing lately?
KD: Actually we have seen rapid grown not only lately but since our conception. The demand for increased broadband capacity over Ethernet technologies is ever increasing. Our biggest growth areas have been the healthcare vertical and wireless wholesale. .
TR: What is driving the wholesale wireless growth right now?
KD: Obviously wireless customer’s insatiable appetite for data has been and will continue to be a major driver in our wholesale wireless growth. It traditionally has been circuit-based, but some of the carriers are now looking at dark fiber. Dark fiber has not historically been one of our products but as our major wireless carrier customer’s request dark fiber, we have also brought that into our portfolio in certain areas.
TR: Have you seen much interest in small cells?
KD: We are starting to see that in Indiana in regards to RFP’s for dark fiber.
TR: Where do you see the most opportunities coming from overall?
KD: Our sweet spot has always been being the provider who could get the more rural, underserved communities back to the more metropolitan areas of the state and also the nation through our ownership in INDATEL. We see that continuing as we expand throughout Indiana. We also see continued increases in cellular backhaul and the healthcare and educational verticals, along with increases in wholesale sales to other carriers who need to reach the once underserved areas of the state that we now serve with Ethernet connectivity.
TR: How big is your enterprise and retail business, relative to wholesale? Who are your typical customers?
KD: We got into retail a couple years after the wholesale market, but our current growth is as much on the retail side as the wholesale, with retail sales and wholesale being almost equal. Our services are mainly data transport and internet, as we do not do any retail voice services. On the retail side we are talking about the larger businesses such as healthcare, schools, etc. We do have some smaller businesses, especially in rural areas that have no other opportunities, e.g. they can only get DSL if that. For the most part, it usually takes at least a 50Mbps circuit for the business case to justify a fiber build into a location. That’s not always true, as we do have 10Mbps customers also. It depends on where they are located and whether they have Ethernet opportunities from other carriers or not.
TR: Are there more parts of Indiana that you would like to extend your network to?
KD: There are. Like everywhere else we have the haves and the have-nots within the state in regards to Broadband. Some areas are extremely competitive with lots of opportunities, and some areas are almost void of bandwidth. We are continually looking at expanding into these underserved areas. This usually requires an anchor institution that has high bandwidth needs to justify the expansion.
TR: Do you have any interest in expanding beyond the state of Indiana?
KD: We would consider expanding beyond the state of Indiana. However the cost associated with opening up another state would require a full commitment to expand into that state, not just an edge out strategy so more than likely, if we were to expand to another state it would be through an acquisition. We’re not against that, and would certainly entertain the possibility of acquiring an established regional or smaller provider.
TR: Do you foresee M&A of that sort being an important part of your future?
KD: It is a distinct possibility. We are keeping our ears and eyes open for such an opportunity. There’s been one provider that has been buying everything that comes to the plate and that obviously has an effect on pricing. We have not actively bid, although we looked at one and found it wasn’t really a fit. But if the right opportunity came along, we’d definitely take a look at it.
TR: IFN hasn’t really pursued outside capital to speed its expansion, why is that?
KD: Though our growth has been substantial, not seeking outside capital did limit our speed of expansion. However we didn’t and still don’t want outside investors. Outside ownership tends to change an organization. Often outside investors have a shorter, more profit driven focus. While we are also desire and strive for increasing profitability, and have been profitable each year since year two of operation, we believe the best long term strategy to obtain ever increasing profitability is to provide a higher level of service. The mindset of our 20 owners is oriented toward providing excellent quality, high-end communications services for themselves through IFN, and thus to our other customers They like the idea of cash distributions too, just like a normal investor would, but they won’t risk quality of service for short term profitability.
TR: It seems to me that regional networks owned by independent telco operators have rarely participated in consolidation relative to the rest of the industry. Why do you think that is?
KD: In our case, IFN was set up to make it purposely hard to sell, and I think it’s very similar for other state networks. We are in essence providing our members 90-95% of the services they resell to their end-users. If they sell IFN, they would be at the mercy of whoever they sell to. The other thing is that they built this to operate for the long term, and it was structured with rights of first refusal and other organizational restrictions to make it very hard to sell. They wanted to stay independent, and by forming IFN and other state networks it allows them to look much larger than they are, offer advanced services, and keep some control over their costs. They really saw this as needed for long term survivability and that is still the mindset.
TR: How does your membership in the INDATEL fit into your business?
KD: INDATEL started as a place for individual state networks to brainstorm what is working in each member’s state in regards to services. A few years back we decided to start providing peering and interstate transport services, and now we have multiple statewide networks interconnected in Chicago and other locations in the US. INDATEL also allows us to join the collective footprint of 27 states for responding to national RFPs. INDATEL ends up being the head that can be contacted for a multi-state deal, being able to then turn around and package together the different state networks to get a bid out for opportunities we wouldn’t have bid on ourselves.
TR: How do you differentiate yourself from larger, national providers in the marketplace?
KD: Even though we’ve grown rapidly, we’ve never quit listening to the customer. Every customer is almost a one-on-one design scenario. We listen to what they want and if it is technically feasible and reliable, we will incorporate it. That’s something a lot of larger companies don’t do. You have to take whatever their flavor of the month is. We try to be reactive to the needs of our customers. Also, if they have to, they can still talk to the CEO directly. The fact that they are not talking to someone from out of state, that we are locally owned and operated, and that the money stays in Indiana is a big selling point. Granted, we have increased in size immensely since we were created, but we are not huge. We have never lost the small company personal touch.
TR: Thank you for talking with Telecom Ramblings!
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