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At Time Warner Telecom, CLEC is not part of the corporate vocabulary. And unlike a number of other competitive communications carriers these days, neither are the words "deficit," "layoffs" or "tanking stock."
Granted, it is a CLEC road less traveled, but the Denver-based carrier has built its own fiber optic network offering high-speed connections from a T-1 to OC-48. And that has made all the difference, according to Mike Rouleau, senior vice president of marketing.
"We don't think of ourselves as a CLEC, either," Rouleau notes. "It's really different for us because being a facilities-based provider broadband services company focused on business customers."
While other CLECs suffered through a dismal third quarter, Time Warner closed the period strongly, shrinking its net losses to $2.3 million from $9.1 million a year earlier while nearly tripling its operating cash flow to $28.4 million.
The company operates in 22 major markets and is set to debut in five more in 2001. At the company's Denver offices, empty cubicles are awaiting new employee positions soon to be filled, rather than recently vacated.
Much of the company's prosperity has to do with the company's focus on big business and fat access pipes, Rouleau says.
"One of the things we do is target medium and large business customers," he says. "The history of our business has always been at that Fortune 2,000-type customer, because of the fiber-based facilities we have and the capabilities we deliver. Most competitive local exchange carriers target that small- to medium-sized business, so they are looking at two and three and five lines going into a customer. We start at a T-1. We don't do anything less than a T-1 to a customer. And we have a pretty healthy blend of customers."
Time Warner Telecom's targets large, multi-tenant office buildings, office parks or technology campuses. Once one customer is secure and a multiplex switch is installed in the basement, the company focuses on shopping access to all of the businesses within reach.
At a time when other competitive providers eagerly gouge into their bottom line to land accounts, Time Warner Telecom is picky. "We focus on revenue, with top line growth and bottom line return," Rouleau says. "Our sales people have a laptop that has a sales analysis request. They will go in and take a look at the opportunity they have with a customer, and if it doesn't generate at least 30 percent margin, we're not interested. We walk away."
Another major difference between Time Warner Telecom and other competitors is a physical one-it owns its own fiber network with an OC-48 backbone and several regional SONET rings. With only a few exceptions, most clients hook directly into the company's network.
"If you only look at access lines for us you forget about the 55 percent of the business that is transport-based-which is as hard to bring up and provision but far more profitable because it rides our own facilities," Rouleau says. "All of our switch revenues are on our own switches. We do no total service resale. Overall, about 80 percent of our revenues run on our network."
Reach is one reason Time Warner Telecom's strategy also does not include telephony's broadband darling, digital subscriber line service. Rouleau argues that because DSL is limited by distance, so too is a CLEC in trying to offer it at a T-1 data rate of 1.544 megabits per second (Mbps).
"DSL is not important to our strategy," Rouleau says. "With DSL, trying to sell a T-1 equivalent you're going to reach maybe 10 or 15 percent of the market, whereas with a T-1 strategy we can reach 100 percent of the market."
While analysts at first questioned this non-DSL approach, Jonathan Atkin of Dain Rauscher Wessels says it has proved out with Time Warner Telecom's big business clientele. "It never made sense in the first place for them, and I think this is very much a company that is focused on making sense from a business perspective," he says.
Atkin also notes the company's focus on higher-end business customers and reliance on its own network has brought the company a quick turn into the black after market launches. "They've really cracked that code in getting into a market and getting to a profitable level fast," he says.
In the coming year, Time Warner Telecom will be expanding its footprint and business offerings. On the horizon are an IP-switched voice product, fiber line service for data storage and streaming media services including conferencing and training. But most of all, Time Warner Telecom isn't looking for any major strategy about-face.
"We're going to stick to our knitting," Rouleau says. "We are going to focus on the network business, and that is one of the things that has kept us successful. We are a very focused company. We tend not to stray from the focus."
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