CLECs Worry More about Regulation Than Recession
NASHVILLE -- CLECs must stay active on regulatory issues, executives told a CompTel panel late Monday. “Nothing could be more damaging to the Wall Street perspective of this industry” than a negative regulatory action, said Deltacom CEO Randy Curran. CIMCO CEO Bill Capraro agreed: “I love the saying, ‘Only the paranoid survive.'”
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CLECs won in 2007 when the FCC denied Verizon forbearance requests, Capraro said. This year, CLECs will fight Qwest and others, he said. But the CIMCO executive fears that “cable companies have diverted attention from most of the ILECs significantly,” he said. “I don’t think we should let up.” It’s “critical” that CompTel members send more money to its political action committee (PAC) so it can battle the Bells, he said. Last year, AT&T’s PAC raised $1.2 million, while CompTel’s raised $32,000, he said: “It’s almost insulting for us as an industry.”
CLECs can gird against regulatory forces, Capraro said. For example, by signing agreements with out-of-region ILECs, CLECs can shelter themselves from detrimental regulation, he said. CLECs also should look to wireless access to bypass incumbents’ facilities, he said.
The economic slowdown isn’t a major issue, executives said. “We've seen a little bit of softness in the PBX business in the last six months,” said Curran. But on the network side, Deltacom has seen “no change in the state of the economy,” he said. Through Capraro’s two decades-plus in the industry, “we've had all kind of ebbs and flows in the economy, and it’s had little or no effect on our ability to acquire customers,” he said. But the slowdown has limited access to capital needed for expansion, he said: “The real crux of the matter is we want to continue growing at a fast pace.”
Near term, a “bone-dry” capital market will limit CLEC merger and acquisition activity, Curran said. “But as an overall trend [M&A] absolutely will continue in a big way.” The debt market will slow consolidation “for a little while,” agreed Zayo Group CEO Dan Caruso. But Zayo will keep making acquisitions, he said. CIMCO historically has focused on organic company growth, not acquisitions, Capraro said. But “that is a model that probably will not survive.” M&A “just makes more sense,” he said.
Sharply rising bandwidth demands will keep telecom a “dynamic industry for years and years to come,” Caruso said. “What video is doing to networks right now is just unbelievable,” he said. The added network strain is good for the industry, encouraging innovation and technological change and increasing market opportunity, he said. IP is the “most exciting” new technology because it makes expansion “much more affordable from a capital perspective,” Capraro said. With IP, “you don’t necessarily have to have a physical presence in multiple markets.”