Thomas: Windstream holds advantage in second, third tier markets

with Tony Thomas, CEO of Windstream

Thomas

with Tony Thomas, CEO of Windstream

Tony Thomas may be relatively new to the Windstream CEO role, having only taken on the position in December when Jeff Gardner announced he was resigning from the company, but he's a seasoned company executive. Prior to his new role, he was president of its real estate investment (REIT) company and earlier served as CFO. Now that he's firmly in place as Windstream's CEO, Thomas has set a primary goal to expand the availability of its fiber network for business customers, while using a mix of VDSL2 and fiber-to-the-premises (FTTP) technologies to enhance the speeds and services for residential customers. Sean Buckley, senior editor of FierceTelecom, recently caught up with Thomas to talk about his vision for the company in 2015 and beyond.

FierceTelecom: Can you talk about your first days on the job? What have you learned so far after taking over from Jeff Gardner? 

Thomas: Of course, I had been CFO prior to my appointment and worked at the REIT so I have a pretty clear understanding of what Windstream's capabilities, strengths and weaknesses are. I have some core beliefs around organizational structure. We adopted a business unit structure immediately following my appointment where we are organized into three business units--consumer and SMB, carrier and enterprise. We pushed a lot of responsibility down into those business units. I think we can get better alignment to the customer and better alignment to the financial results. We brought on a lot of seasoned telecom leaders. We brought on a new CIO, the new enterprise chief marketing officer Joe Harding, and we have a new head of process development. Frankly, in the area of process, we added a lot of additional talent as well over the last two months.

The other thing I realized in taking over the role is that we have the fifth largest fiber network in the country and I saw a lot of opportunity to leverage that fiber network more. What I have been doing is screening for opportunities where we have made fiber investments that had not been fully optimized and where we had the potential to get more out of our assets by adding equipment to that. A good example of that is in the carrier network, where we are expanding our capabilities by adding Infinera equipment that enables us to provide high bandwidth capabilities across more of our fiber network.

FT: You mentioned the long-haul network. Where are you in the buildout process, and are you seeing constant demand for low-latency services?

Thomas: We're seeing a lot of demand from our partners and they are both carriers, content providers, financial services companies and I think the folks you would expect that are looking for high capacity criss-crossing the country. Importantly, they are sometimes not located in the largest metro areas. There are a lot of second and third tier markets where Windstream does business and has the ability to deploy this gear that they are located in as well. We think we have the ability to leverage our assets in our fiber network where we go to some pretty unique areas.

FT: Do you think your ability to serve these second and third tier markets gives Windstream an advantage over other long-haul carriers?

Thomas: We do think it's an advantage and in many instances we're prepared to provide 100G services. Many of our carrier and content providers have still not upgraded their infrastructure to support 100G, but we'll be ready for them. Think of the change in our approach at Windstream. One of the things I am trying to do is I am pushing a real network and product vision within the company. I want to make sure we have a best in class network. That's how I think we can provide the best possible service to our customers.

FT: Windstream appears to be moving on a path to increase its on-net fiber footprint so you can reduce interconnection costs and provide a better customer experience. Where are you in that process?

Thomas: This piece of the strategy is different. In this case we don't have the facilities so we're going to be laying fiber in the ground to provide these services to customers. Those will be instances where as a result of the REIT transaction we had the opportunity to invest more capital to improve our competitiveness and that's where we plan to put our capital to work to better position us.

FT: Will the on-net strategy be based on a success-based model?

Thomas: It will be a mix. One of the ways we're looking at this is displacing third-party costs where we lease that network from someone else. We'll be going off-network to on-network so we'll be looking for success-based prospects, but part of this is displacing existing interconnection costs. We'll improve the customer experience and drive higher margins in the enterprise business.

FT: Windstream has been making progress in serving medium businesses, but it was mentioned during your Q4 call that you're moving up market to larger businesses. What are the challenges of going up market for Windstream?

Thomas: I would tell you our strategy has not changed on the enterprise side. The reference to large businesses is that we're selling to large multi-colocation, mid-sized businesses. These are customers with multiple locations, potentially over 250 employees, but we're really emphasizing bringing all of our solutions to them, including telecom data, cloud and equipment. I would say that our emphasis is in the mid-market. We're not going after the Fortune 500 companies. We can be partners to those customers as well, but our sweet spot is in the mid-market.

FT: Let's switch to residential services. Windstream has set an ambitious plan to roll out IPTV and implementing VDSL2 in various markets. Where are you at in that process and how will you drive that into other markets?

Thomas: We do believe the VDSL2/bonding technology allows us to provide very competitive speeds in the marketplace. We're in the midst of launching VDSL2/bonding across a number of our markets. We'll be doing that in the second quarter and we'll move to enable all of our markets to eventually be VDSL2/bonding-capable. It will be the Windstream default platform for the future. VDSL2 will give the consumer team a much better tool. Because of the upgrades we made in our high speed Internet infrastructure, that enables us to launch services like Kinetic, the Windstream TV service.

FT: Besides Lincoln, Neb., which will be the first market to get the IPTV service, are you looking to bring Kinetic to other markets?

Thomas: We're looking at Lincoln to be the first of many markets to launch the Kinetic TV service. Right now, we're doing a friendly trial within Lincoln, but we're positioning this product to be one we can launch in several of our larger markets in the next few years. It's an opportunity to leverage investments we have already made in our fiber network by adding another service on top of it.

FT: VDSL2 leverages FTTN, but have you considered doing fiber-to-the-premises (FTTP) maybe in Greenfield areas?

Thomas: Fiber-to-the-prem is a good opportunity for many LECs. Windstream has been deploying fiber in subdivisions for over a decade. We obviously stopped putting in copper in the ground a long time ago for new subdivision builds. We're looking across our footprint where we have made fiber investments in the past and how we might leverage those fiber investments to provide 1 Gbps service to our consumers. We will launch a market in 2015--at least on a friendly basis if not on a full launch--with 1 Gbps service.

FT: Continuing on the broadband front, the FCC increased the requirements for the second phase of the Connect America Fund (CAF-II) to support 10 Mbps. Is it feasible to support those speeds in rural areas and what challenges does it create for Windstream?

Thomas: The CAF II change to make the mandate 10 Mbps was coupled with the extension of funding. Windstream's position all along was that we do think 10 Mbps was the appropriate standard to build to but we should have received CAF-II funding for an extended period of time. The FCC did extend the program modestly. Once we get our final funding amounts, we think we'll be able to make the elections for CAF II monies.

FT: Fiber to the tower is another transitional product for Windstream, but where are you in that buildout process?

Thomas: I'd say we completed the vast majority of the fiber-to-the-tower builds for our wireless carrier partners. There are still a few more sites we're adding as they fill in their footprint to provide a better wireless customer service experience. The emphasis now is on increasing footprint capability. They typically started with 50 Mbps and are now upgrading those sites to 100 Mbps or 150 Mbps and will continue to increase it as demand mandates it. Small cell is another interesting element. Ultimately, small cells will be most relevant in the urban communities so we'll work with our partners on small cells as well.

FT: Speaking of fiber-to-the-tower, there's a lot of talk about dark fiber. Is that something that Windstream is looking at?

Thomas: We have seen interest in dark fiber. Windstream prefers to provide lit services, but we'll work with our partners to provide dark fiber when it's part of a suite of solutions for our customers that includes both lit and dark fiber.

Thomas: Windstream holds advantage in second, third tier markets
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