Fierce Telecom Leaders: Pat Bennett, Covad and Dan Foster, MegaPath - Part II

FierceTelecom: Do you see your merger as a potential sign of new consolidation in the CLEC industry?

Bennett:
I certainly do. There will be continued consolidation for multiple reasons for different players. Dan and I agree that some companies have to get together in a merger of necessity, but I think this is a merger of opportunity where two successful companies see an opportunity to be more competitive and serve the customers better by combining their assets. I think there will be more of these in both categories in 2010.

Foster:
There's definitely opportunity out there. As we have seen over the last couple of years or so out there, I think there's been some businesses that have over expanded and due to some of the limited financial resources they've had or the lack of success in bringing revenue to the table have underfunded their business. There will be a new sense of consolidation in the industry. You have two things: a platform and a management team that is skilled at bringing those businesses together.

FierceTelecom: Speaking of CLEC consolidation, we have seen cable taking a more active role in the competitive telecom industry with Comcast's acquisition of Cimco. Do you see cable as a potential new competitive force in the CLEC industry?

Foster:
I train my sales folks that everyone is a competitor. I could name a few that are cable companies and even some PTTs that are wholesale partners of ours are competitors of ours on the retail side. We live in a world of coopetition where we have rules of engagement that are durable so you can go to market and feel good about the effort you do at the direct level or your partnered effort in the marketplace. That being said, the cable companies are making moves in the commercial space. Fortunately, they have got some real challenges with partners. We are one of the largest on the commercial side of users of cable service, but it's a very limited footprint. We're in a pretty good position as it relates to serving some of the major MSAs in America.

FierceTelecom:
Obviously, the merger agreement has been announced and now the real work of integration comes. Do you see any major challenges there and what will we see in terms of new services?

Bennett:
I think from a time frame perspective, we're not expecting the deal to close before the July timeframe because of regulatory approvals. Once the deal closes, we'll immediately try to take advantage of each other's capabilities, but integration will be critical to the long-term success of the business. In the first six months after the close, we'll be focused on the integration process and leveraging as many of the assets that already exist. After we get the heart of that integration behind us we'll look at how we expand and leverage these things to bring new products to market that we're not offering today. That probably begins to happen in Q1 of next year. Part of the excitement of bringing the two companies together is that we're going to market looking for more growth, particularly on the sales side.

Foster:
It's always a challenge in an evolving technology world to stay current. Fortunately, in a classic integration you've got two healthy standalone companies so you can go to market right away. Today, I know how to buy from Pat and he knows how to provide me with some really good service. I look at the continued convergence and say we need a mobility play in there and an IP convergence bundle in there--that really has a productivity impact on my customers. To that end I think we have a good platform with our existing products, but those have to evolve. The mandate will be to build a compelling roadmap for the customers and show them how I either save them money or improve their productivity. 

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