After all the consolidation we’ve seen, you’d think that the tightly focused local and regional approach has been forgotten. But there are many such companies still out there that continue to thrive. One such operators is Michigan’s 123Net. Starting out as a dialup ISP, they have navigated the industry’s storms for over 20 years and now operate some of the state’s key fiber, wireless, and data center infrastructure. With us today to talk about 123Net’s approach to the Michigan market is Founder and CEO Dan Irvin.
TR: You founded 123Net back in the mid 1990s, how did you get started?
DI: I started this business literally above my garage as a dial-up ISP, directly serving individual retail customers. We only had about 40 customers when we started to realize that this was not exactly what we wanted to do. There were two important realizations that melded. One was that we wanted to get out of the retail business and provide wholesale services. We also quickly figured out that we wanted to have some control over our destiny and become facilities-based. That meant investing in fiber and getting our own switch, and that's how we got going.
TR: Did the telecom nuclear winter set you back any?
DI: We didn't really notice it, because there was such a high demand for dial-up and T-1s and all the other services we sold back then. We have had 20 years of continuous growth, even during the big hit that the big three took in Detroit. There are customers that use dialup, surprisingly, and we can still support them.
TR: So what does your infrastructure look like today?
DI: We have three main pieces to our infrastructure. First off, we have four data centers in Michigan; three, including our primary one, in Southfield and another in Grand Rapids. We have added more fiber lines, carriers, and businesses connecting to our primary data center. Then we have our fiber footprint, which has gone from having inter-office fiber, to now leasing, owning, and most recently constructing a lot of fiber in the local last mile. We're building fiber strategically around Michigan: in Detroit, in Grand Rapids, and in Ann Arbor. About eight years ago, we entered the fixed wireless business as another way to get directly to our customers. I think that makes us unique. Lastly, we have voice. There haven’t been big advances in the CLEC voice business but we continue to hone in on that. We've done VoIP for about ten years, with millions and millions of minutes a month on our VoIP switch. We are continuing to focus on the whole delivery system including delivering VoIP trunking as well.
TR: What expansion projects are you working on today?
DI: We have many fiber projects that we're working on, both strategic builds and filling in the last mile. That's a big focus for us right now and it's a great business. We are also expanding our primary data center here in the Detroit metro area, where we have over 100,000 square feet of data center space and are upgrading with a 20 MVA substation. We're also going to build a new data center out in the Grand Rapids area where our existing facility is getting close to capacity. In fixed wireless, unlike a lot of other areas in the telecom industry, the radios are improving for both speed and price points on a continuous basis. So it's pretty important that we stay on that curve. As we continue to expand our fiber footprint, our fixed wireless sites are being fiber fed and have become an additional backup source for our networks.
TR: How do you view all the M&A in the infrastructure space we’ve seen over the last few years?
DI: Our growth has been primarily organic, and I think that has served us very well. We're fortunate to be in a market that is growing rapidly. I think acquisitions often look good on paper or might make a lot of sense, yet when you start to meld together a couple of companies, it's difficult – whether it’s the culture or the technology or a different factor. So for us, 99% of our growth has been organic and that's the way we see it going forward.
TR: We’ve seen Everstream buy GLC and Lynx over the last couple of years, has that consolidation simplified the market in Michigan and cleared the air a bit for you?
DI: GLC and Lynx were somewhat stressed companies, and we're happy that Everstream has given them some stability. Although we sometimes compete against Everstream, we often partner with them and we are confident that this acquisition could end up benefiting us in that way. As far as reducing competition, I think that it's the larger corporations that are always our biggest competitors, not the little guy across the street.
TR: How do you compete with the national and larger regional operators?
DI: If you look at where we win our business it’s the fact that we're local. The larger corporations do not like that we're focused on Michigan. We think that we can grow locally the way we've been growing for a long time. There are a lot of companies that like that we have local support and that we’re very responsive, and can come out to address any issues immediately. They're in our backyard.
TR: You also operate the DET-IX exchange, how does that fit into your business model?
DI: DET-IX was formed because before you had to go to Chicago to interconnect. There were some large technology providers here, but no one was ever able to fire up any exchange points. So, we were excited to do it and it's benefited us tremendously. There are times of the day where 60% of our traffic goes through the exchange and it's close to free. We're happy to be able to offer that to other players around town and some of our wholesale customers. We feel that investing in the DET-IX will not only help 123Net, but help businesses all throughout southeastern Michigan grow.
TR: Do you have any interest in expanding beyond Michigan at some point?
DI: No. That's something that people have asked us, but I think that we're still a small player compared with the other companies in Michigan. We still can easily double, triple, or quadruple our business in Michigan without having to go anyplace else. 123Net has always seen room for growth in the state of Michigan, even in years past where others did not. That is why we continued to expand our infrastructure in the state during the down years. Now that we are seeing a resurgence in Southeastern Michigan, especially in Detroit, we are only planning on taking our investment within the state to the next level.
TR: Where do you see the most opportunity coming from in Michigan today?
DI: Over the last 5 years we've started to do business with a lot of manufacturing and OEMs, and I feel like we've just scratched the surface with automated driving and the amount of connectivity that's in vehicles. The amount of traffic that comes off of one new Ford F-150 is amazing. The amount of CPUs, the amount of connectivity in a car is amazing, and it's only going to keep growing. There's a tremendous need for bandwidth and data centers here in Detroit. I think it's no secret that two of the big three are building massive data centers here, and I think that mobility and automated driving are a big part of that. Metro Detroit and Michigan as a whole has become very attractive to global technology companies, we’re excited to be providing the network that’s driving this growth.
TR: How have you funded your growth over the years?
DI: We don't have any outside funding mechanisms or investors, it’s all organic. That’s probably the big difference between a company like ours and one with private equity behind them. Being privately owned and managed provides us with unique opportunities, agility, customer focus and other intangibles. I think we can have a longer term view of things. We’re really excited that we're able to reinvest most of what we make back into our growth and into our infrastructure. More importantly, 123Net continues the investment in Michigan.
TR: Thank you for talking with Telecom Ramblings!