For John Beck, president and CEO of Actel Integrated Communications Inc. (www.actel.net), this is the second time around the telecom start-up track. But this time around track has changed, and, he thinks, for the better.
The money people at Sandler Capital (www.sandlercap.com) and DB Partners, the venture capital arm of Deutsche Bank AG (www.deutsche-bank.de), seem to agree. They've just invested $75 million in Actel, which gives them a 52 percent stake in the Mobile, Ala.-based carrier. Actel will use the money to roll out services in 20 markets, including the seven it already serves. Actel currently provides service in Birmingham, Mobile, Huntsville, and Montgomery, Ala.; New Orleans and Baton Rouge, La.; and Pensacola, Fla. It's new roll-out will include Austin, Texas; Little Rock; Lafayette and Shreveport, La.; Chattanooga, Tenn.; Macon and Albany, Ga.; and Tallahassee and Gainesville, Fla.
Beck, who until 1998 was regional operations director for the southeast at e.spire Communications Inc. (www.espire.com), says Actel is focused on small and medium-sized business customers, as e.spire was. "What has changed has been the technology," he says. "When we (early CLECs) first entered CLEC arena, we pretty much emulated the ILEC. We built a network pretty much like they did. We had a direct sales force, but we used the same equipment they used, so we had no advantages. The new technology means we can bring truly convergent solutions to the last mile."
Actel has three class 5 switches - in New Orleans, Birmingham and Mobile - but is building the rest of its network with Lucent Technologies Inc.'s (www.lucent.com) Pathstar and Stinger platforms and will use Cisco Systems Inc.'s (www.cisco.com) IP routing equipment. The company follows a smart-build strategy in that it leases fiber. However, it has built its own metropolitan fiber rings in Mobile, New Orleans and Birmingham, and Beck says the company may buy indefeasible rights of use (IRUs) to fiber in other markets when market conditions justify such a move.
It's this technology, unavailable just a few years ago, that has made life much more promising for Actel, as Beck sees it. A CLEC building out its network in a tier two city a few years ago might have spent between $5 million and $7 million in the effort, Beck says. He claims that Actel, because it isn't replicating the ILEC network and because it doesn't usually tear up the streets and lay out its own fiber, can do the job for $1.5 million.
Actel aims to serve businesses with between nine and 48 lines that, excluding data services, spend about $1,100 per month on telecommunications. Actel is focused exclusively on the southeastern United States. Beck says he and his colleagues aim at second and third-tier markets where their target customers haven't been well served by the incumbents or other CLECs. "Most of these competitors don't have a focus on the southeast, even though they may say they do on their web pages," Beck says.
And this lack of focus, according to Beck, means they may not give the customers the tender, loving care Actel plans to give them. However, Actel's main marketing attack will be against the incumbent provider.
"The initial pitch is, we're selling you on the company," Beck says. "We're going to provide a direct sales force, someone who will work with you, do a complete analysis of your needs, voice and data."
The technological change that has made life more promising for Actel has also presented the new carrier with some challenges. For example, Beck says, when he and his colleagues were laying out their initial strategy in 1996 and 1997, they planned an integrated voice and data network aimed at small business. But the boom in Internet and Web-related applications caused them to adjust their plan to include web hosting, which they offer for between $39.95 and $59.95 per month.
"In our effort to provide a complete bundled service, this was not in our original plan," he says. "Demand drove this. What we need from you, customers told us, mail, web hosting and content services."
The light bulb that lit up in Beck's head also lit up in the heads of many other competitors, of course. But Beck says he's sure that Actel will have the superior claim when they make their pitch to small businesses in places like Chattanooga. Most such businesses are still on dial-up connections, and haven't been able to afford anything better, he insists. And most of the competitors will focus on higher-end customers. In any case, Actel has brought on a new CTO, Joe Zuccari, whose job will be to develop that side of the business.
