Industry Spotlight: Clearwave CEO Matt Dement

April 24th, 2018 by · 1 Comment

Fiber builders and operators in and around the big NFL cities get most of the attention, but in today’s market substantial amounts of fiber are being built out in less traveled geographies.  With 5G and the pressure to move content to the edge, we are only going to see that trend grow.  One company taking on the challenge in southern Illinois is Clearwave Communications.  With us today to give his perspective on it all is Clearwave President and CEO Matt Dement.

TR: How did Clearwave get started and how did you get involved?

MD: Clearwave was started in 1996 and over time developed into a traditional non-facilities based CLEC.  In 2011, Clearwave was a recipient of a BTOP grant to build a middle mile fiber network in southern Illinois. Clearwave completed the initial phase of the middle mile build in 2014 and has since been solely focused on adding wholesale and commercial fiber customers to our network. The introduction of a robust fiber network has been well received in our markets, as over 95% of our revenue is completely on our own fiber now.

As for me, in 2011 I was working for the telecommunications investment banking practice at Stephens Inc.  Stephens has a private equity arm that invested in Clearwave in 2011 and provided the matching funds capital for the BTOP grant and became the majority equity holder. I joined Clearwave’s board of directors for a period of time and became CEO of Clearwave a little over a year ago.

TR: What does Clearwave’s footprint look like today?

MD: If you draw a line from St. Louis across the state of Illinois, our network essentially covers everything in the state south of that. We have fiber in 27 counties with approximately 2,400 route miles and 165,000 strand miles. We serve about 1,200 commercial fiber customers and have 450 cell towers under contract.  Our network is 100% underground and in conduit. It is also 100% owned as we do not currently have any offnet last mile circuits or any material IRUs.

TR: How much of the wireless backhaul market does that represent in your region?

MD: I would say we serve or are currently building to the majority of the macro cell towers in our footprint today.  However, this is a region that continues to see a meaningful amount of new macros get built every year.  There is also disparity among the 4 wireless carriers in their network coverage and density in our markets.  So, we expect and are starting to see the deployment of macros accelerate in our market as several of the wireless carriers continue network deployments in rural areas across the country.

TR:  Are 5G plans starting to drive deployments in southern Illinois yet?

MD: Being in rural markets we will certainly be behind 5G deployments in urban areas, so we haven’t seen anything meaningful in our markets as of yet, but we are obviously following it closely.  In our recent tower builds the equipment being deployed could be used for 4G or 5G.  Also, while the vast majority of the towers we serve are macro sites, we have also deployed and are in the middle of deploying small cells as well.  Some of our small cell deployments have been in very rural communities, with one use case being residential broadband replacement.  It is still early but the preliminary results have been promising.

TR: Are you looking to expand into adjacent geographies in neighboring states?

MD: Our preference is to continuously edge out into new markets. E-Rate season just wrapped up, and we were successful in winning several new school districts where we will be expanding into new adjacent communities with a school as the anchor customer.  We are excited about these types of projects since they help fund expansion capital and give our sales team more network and markets to sell into.

We also regularly review & analyze more holistic / speculative market expansions, as there are logical cities to expand into north, east, south, and west of us. Because we build everything ourselves, that gives us the flexibility to prioritize our projects into a mix of expansion and of course building to new customers.

TR: How do you approach the entry into a new market?

MD: As I mentioned earlier, we try to find a large anchor customer in a new community.  We are comfortable building to those locations and not making our money back the first term if we have conviction that there is enough business around to make the build profitable.  That has been the primary way we have expanded our network over the last seven years and hope to continue to do so.

TR: Do you foresee adding to your product portfolio organically in the near future?

MD: Our product set is pretty simple now, which we like.  We offer dedicated internet access and private networking, and we do also offer a hosted voice product.  But our voice product rides the same fiber as our data and we treat it as an application over our fiber network. We are also implementing a new UCaaS product later this year that will add a softphone component, video chat capabilities, messaging, etc. to our current hosted voice product.  While voice is a small percentage of our revenue, certain customers find it convenient to have the same data and voice vendor, so we’ve found it to be an enabler of data sales in certain circumstances.  I’d say we like being the infrastructure provider first, though, and do not have any aspirations at this time to be a managed IT provider, so I would expect our product set to not change or expand materially over the near to medium term.

TR: How do you view M&A in the sector. 

MD: We are certainly open to expanding our network through M&A, and we actively look at everything that’s out there. A lot of the assets available have other asset mixes other than owned fiber in their business, which isn’t necessarily bad, it’s just been a bit harder to get our arms around as a pure play fiber provider. So I think we would certainly look at businesses that look like us, but we’re also excited about our organic growth and expansion path as well.

TR: How does running a fiber business in a rural region differ from in a higher profile suburban or urban region?

MD: The fundamental goals of the business are largely the same:  You build infrastructure and try to get a payback / return on the infrastructure you build through long-term customer contracts, and then try to further leverage that infrastructure for new customers, and that repeats itself over and over. The actual building of the infrastructure in urban areas is far more complex and expensive.  It certainly varies significantly but it can be up to 50x more expensive to build in urban cities than in rural areas;  but there are obviously more opportunities in urban areas, which counter balances it some.

Secondly, rural markets are in most cases far less competitive than urban markets.  Typically in rural areas there is usually just one fiber provider, and the ILEC and cable companies typically don’t have as upgraded network plant as they do in urban areas.  So there is a better opportunity to get more market share, and to retain your customer relationships for longer periods of time.  Our revenue churn rates are very low compared to the industry, and while we certainly do offer a fantastic product our customers value, the attractive competitive dynamics is obviously a contributing factor as well.

So, It’s definitely different than running a fiber business in an NFL city, but I think the economics are equally if not more attractive.

TR: Thank you for talking with Telecom Ramblings!

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Categories: Fiber Networks · Industry Spotlight · Metro fiber

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1 Comment, Add Yours!

  • mhammett says:

    Matt, what do you think about improving the quality of your service while decreasing costs?

    We have an Internet Exchange in St Louis where we connect to many content networks and ISPs. We would love to get you guys connected.

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