Editor’s note: Executive Q&A is a regular feature on Mondays.The demand for broadband services continues to grow, and that’s good news for Bandwidth.com, the Cary-based firm that helps businesses and consumers find the most services for their money.
Henry Kaestner, chief executive officer of the 3 Â½-year old company, tells Local Tech Wire that a surge in growth has pushed it into positive cash-flow territory. As a result, Bandwidth.com is doubling the size of its headquarters and preparing to offering new services, such as Voice over Internet Protocol and Wi-Fi.
The privately held company co-founded by Kaestner and David Morken doesn’t disclose financial details. But Bandwidth.com did say growth in its most recent quarter was up 177 percent over one year ago.
Working with major providers of broadband services and through partnerships with giants such as IBM and HP, Bandwidth.com provides database information on types of service, prices, installation times and trouble tickets for problems. It reaps commissions off sales to providers that now generate some $2.5 million a month.
Bandwidth.com works with enough major carriers to provide connection information across almost the entire United States, Kaestner says.
Corporations alone were expected to spend well over $100 billion in Internet related services this year, and more than 20 million households now have broadband. The continuing increase in desire for high-speed voice, video and data services is certainly being seen at Bandwidth.com, Kaestner says.
In a Q&A with LTW, Kaestner talks about growth in their own business and the trends he sees in the telecom industry:
What are the key factors in your growth?
The key growth factors for Bandwidth.com are:
How are you marketing and getting the word out about your services?
Lead referral partners
Joint branding with large partners (such as HP Business Internet powered by Bandwidth.com)
A new public relations campaign with SRK Communications.
Is the FCC decision forcing Competitive Local Exchange Carriers (CLECs) to possibly pay more for access to the regional Bell operating companies’ networks have any impact on carriers and affecting any costs?
Clearly yes. As a result of the U.S. Court of Appeals overturning key portions of the Federal Communications Commission Triennial Review Order, CLECs such as Covad have had to negotiate commercial terms for line sharing with RBOCs for the first time in lieu of the phasing out of mandated rates.
AT&T has decided its not worth their time to negotiate rates for consumer lines and has withdrawn from that market altogether as a direct result of the FCC decision. Changes to UNE-P (fees for use of networks) will have a material near-term affect on local loop prices, but alternative access technology will continue to put downward pricing pressure on RBOCs.
CLECs will begin to focus on superior technologies such as voice over the Internet protocol (VoIP) to compete for customers. The telecom companies that will survive and thrive are going to provide complete bundled solutions for local, long distance, and Internet service, addressing the broadest customer set with the most favorable cost structures.
Are telecom prices starting to increase, stay the same or decrease? Why is there a trend?
We are seeing prices continuing to decrease, stemming from:
However, the total amount that businesses spend on bandwidth is staying flat or moving up. Our average business buys a 3 meg circuit today at $1,100, where they bought a 1.5 meg circuit 12 months ago at $1,000. Increased applications are driving more bandwidth demand. Technology gains are pushing the unit price down.
Technology, new applications and an increased reliance on the internet are pushing unit consumption up.
Are you getting more carriers/providers to sign on for you to include their services and prices?
New carriers are constantly approaching us about distributing their services or accessing their network. We are remarkably picky and haven’t brought on many carriers over the past 6 months as we believe that we already have great selection among both Tier 1 and Tier 2 carriers. The expenses incurred to bring on a new carrier and link them into our systems aren’t particularly onerous, but enough of an issue that we don’t feel the need to go from 20 carriers to 40, particularly since the 20 cover 99.99 percent of all businesses locations in the US
How does your relationship with HP and IBM work?
We power their Internet Sales Initiatives. When you buy a T1 from HP or IBM Business Internet, you buy it from us. Their customers and sales reps have access to our pricing and customer service systems
Are you seeking any venture capital?
We have always maintained communication with VCs over the 3.5 years since David and I teamed up. Having recently gone cash flow positive, the pressure is off quite a bit to find a financial partner to help sustain our business. We are always open, though, to finding the right type of partner to help us to accelerate our growth
Any new products, services and other offerings on the way to further enhance the business?
Yes, stay tuned. Trying not to be overly secretive, but we have some projects that we are very excited about. One thing that you can count on from us is a great VOIP service offering–..there is more in store as well.
How much demand are you seeing for VOIP products and services? Is there a trend moving in that direction?
The buzz has really started and customers are asking in larger numbers than ever before. Yes, there is definitely a positive trend for VOIP interest and demand.
What about Wi-Fi and wireless access? Are people asking for options on wireless now that Nextel and others are offering wireless broadband?
Yes. We look forward to participating in this side of the market as well.
Foresee any fallout from FCC decision requiring wireless instant talk like Nextel to be “tapped”? Same question about VOIP?
Businesses just don’t care about the wiretapping issue at all.