In February we had Windstream Wholesale’s Buddy Bayer here to talk about the company’s plans for 2022. Now we follow up to see how things went with Joe Scattareggia, who has been instrumental in driving forward the company’s new infrastructure construction activity on multiple fronts. On the menu are multiple intercity, high-fiber-count network buildouts and many new customer relationships that you wouldn’t have associated with the Windstream of old.
TR: Your role at Windstream Wholesale changed this year, what has changed?
JS: When Buddy Bayer was promoted to the president of Wholesale and Enterprise, he named me the Chief Revenue Officer for the wholesale organization. I still have the sales and marketing, product, pricing and the network expansion. But the biggest piece that has changed in my responsibilities is really the addition of the infrastructure component. When you last talked to Buddy, we were evolving into what I would call an infrastructure/construction company, and during this year we truly have become one.
TR: What infrastructure are you building, and how does it differ from Windstream Wholesale’s earlier expansion of the network out to the west coast?
JS: Our initial West Coast expansion was primarily a lit product expansion effort where we increased our wave length services reach to better serve our customers. The build consisted of lighting both our own assets and fiber that was IRU’d from our partners. The new infrastructure projects are about building long-haul, high-count, intercity dark fiber that Windstream will own and manage. We have four fiber builds in various stages going on right now.
TR: What does each of those projects look like?
JS: We have now completed two of those routes: one is a metro build in around Hillsborough, Oregon, The other one that we are excited about is our new 432-count fiber route between Little Rock and Tulsa that we call T-Rock Express. We have a large anchor customer that we delivered that route to last month, and we are open for business to bring on more customers. The third we call the ‘Beach Route’ which runs between Raleigh NC and Jacksonville FL through Myrtle Beach. Jacksonville is an existing cable landing station that we are already providing services to/from, and Myrtle Beach is the landing station that some new subsea cables will terminate – including the Firmina system. We already have 110 of the 645 miles built on the beach and have already sold a lot of fiber capacity on that route– so we are making great progress. The fourth project is a route between New York City and Montreal through Albany, where we are overbuilding our existing CanAm-1 route, which we are calling CanAm-2. That’s scheduled to be ready and active in 2024. And yes, we have our own construction crews, trucks, trailers, and our own Windstream hard hats out in the field.
TR: Is that last one overbuilding the old route you acquired via Dominion/Telergy/Intellifiber/PAETEC?
JS: That’s right. There were some existing assets we were able to monetize for parts of it, and so we’re overpulling those portions with new, modern fiber. But there are sections up in the Nyack area north of New York City that have historically presented performance challenges because they weren’t buried. We’re fixing that to make it a better performing route and reducing the latency.
TR: What led to your decision to build out the ‘Beach Route’?
JS: We have some existing assets in place that we will be able to monetize. We have a stretch of good conduit that that we are able to overpull a 864-count cable through. That enables Raleigh to Myrtle Beach, and Myrtle Beach now has a number of international cables coming in at DC BLOX along with other planned data centers. But then we’re going to continue overbuilding through Charleston and down to Savannah. Then from Savannah down to Jacksonville will be new construction of multiple conduits and a 864-count cable. We are seeing good demand for that route right now which we will turn up in segments, with Raleigh-Savannah scheduled to be up by the fourth quarter of 2023. The construction from Savannah to Jacksonville will be ready mid-2024.
TR: What opportunities have led you to embark on such significant infrastructure buildouts, and how do you go about justifying the spending?
JS: All of our new builds start with the hyperscalers because they are the ones buying high fiber count routes. When we initially start these builds, we have strategic conversations with all of them. The objective is to try to find an anchor customer that wants to invest in or buy alongside what you’re building. From there, you do have other customers, like the traditional telecom companies and large global accounts, that will take a pair, two pairs or sometimes ten pairs of fiber.
TR: What other big construction projects might follow these buildouts?
JS: There are at least four other projects that we’re looking at currently, but it is premature to get into too many details. At some point, we would like to extend from Raleigh up into Ashburn, which would give us a clean run between Ashburn and Jacksonville. That’s probably the one that we’re closely looking to develop at the moment. And there are other ones, that we e are discussing with some partners that you’ll have to wait to get those details in the next interview.
TR: It wasn’t so many years ago that nobody would even consider building out intercity dark fiber. What changed?
JS: I think the biggest thing is just the sheer demand. When some of these routes were built across the country over 20 years ago, they never thought about fiber counts like this. I think the original Sprint route from Seattle to Chicago had 24 fibers. Now you have companies who are buying 24 or 48fibers on a route and even some who are buying 144 or 288 fibers. I think the technology has changed to allow that cable size. But the big thing is just the demand — there’s just a sheer need for fiber. Bandwidth consumption, particularly for companies that are driving video, is driving an endless amount of demand.
TR: Beyond those big infrastructure projects, what has Windstream Wholesale been up to lately on the lit side?
JS: We have two wholesale groups, the CLEC side and the Kinetic side (ILEC). The kinetic side really focuses on driving fiber-to-the-tower and ethernet in our ILEC area, while on the nationwide CLEC side the main product is wavelengths, IP, dark fiber and towers. It’s a simple product set, and we like to keep it simple. We like to be good at what we do. This year, we’ll sell almost 48Tbps of capacity. Our original core transport, “winterstate network” was about 8-9Tbps when it was first built out, so there is now a lot of network being sold. We have a great team, along with great partnerships with our customers.
TR: What trends are you seeing in that customer demand?
JS: I think the big thing right now in the marketplace is the 400G evolution. We have seen a large uptick in quoting activity for 400G, and we have taken some orders this year. I think next year we will see a larger percentage, and by the 2024 maybe 25 or even 50 percent of our sales will be 400G versus 100G.
TR: The last time I talked with Windstream, you were starting a global accounts group. How has that gone in 2022?
JS: We started our global accounts group, about eight months ago and the team is led by Phil Cusumano. We have a small, very experienced team that has a lot of relationships, and we are seeing a tremendous amount of activity and movement right now. We’re focusing on the financial sector right now, but it’s not exclusive. We’re more broadly targeting any large multinational corporation that has US core network needs that fit within our footprint. Those large enterprises buy like carriers in many cases, and so we’re designing solutions for them that way. One thing about them that is a bit new to us is that we’re having to build into single tenant data centers rather than carrier hotels and such. But I think the big thing is that many of these companies are looking for a new partner who is fast and flexible. There’s been some consolidation in the marketplace that has led to some companies that support that business taking their eye off the ball a little bit. And we’re trying to show what we can do.
TR: The other initiative from the start of the year was Windstream’s Fast & Flexible campaign which you just referenced. How has that gone?
JS: “Fast & Flexible” began as a social media campaign, but now it has become part of our culture. Everyone has bought into being fast and flexible, whether it’s in the office and getting things accomplished or whether it’s responding to a company that needs us. It’s part of our DNA.
TR: 5-10 years ago private money was mostly funding M&A and consolidation, but there seems to have been a shift toward new construction. Has that changed the M&A market?
JS: It’s a combination of both. Private equity firms and infrastructure funds operate a little bit differently. A PE firm looks at assets and revenue models and usually hold investments 3-5 years. An infrastructure firm looks at long-term asset appreciation and is not as aggressive in terms of short -term return. There has to be a little bit more consolidation, so I think you’ll see some of that. But I also think that the investments coming in are definitely on the new builds. There’s a lot of new projects that are out there right now, some of them you don’t even hear about except behind the scenes. For us, building is one part of our strategy, but another is to partner with the smaller companies that have some assets and have some unique capabilities and bring our machine to the table whether it’s capital, the sales and marketing engine, the ability to build, or the ability to manage on the back end. We sit in a very unique spot and are excited about the future
TR: Thank you for talking with Telecom Ramblings!
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