Covad CEO sees brighter days ahead

By Denise Pappalardo, Network World
October 07, 2002 12:10 AM ET

While the stigma of bankruptcy - whatever remains of it these days - still hangs over Covad Communications, the competitive local exchange carrier is moving forward, debt-free. The company is in the midst of a $15 million ad campaign and has slashed prices on its DSL service to drive demand. Network World Senior Editor Denise Pappalardo recently spoke with Covad CEO Charles Hoffman about the company's progress.

You mentioned at a press conference recently that Covad is fighting a "perception" issue after coming out of bankruptcy. How are you trying to rebuild Covad in the eyes of its customers?

We have to keep proving that we are viable. Eighty-five percent of our business comes from the wholesale side of the market. About 10 of those carrier customers really matter. We explain our financials to those customers to prove we'll be around. We were just at AT&T talking to them about where we stand financially.

Because we were largely a wholesaler, we didn't have to rely on brand, with only about 15% of our business coming directly from consumers. We did a lot of studies and found that brand recognition is pretty low. So that's why we're getting out there with advertising. But it's tough because DSL in general wasn't that well perceived, and there are those that question how could we possibly compete with the incumbent local exchange carriers (ILEC).

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How do you prove that you can compete with these guys after suffering a financial failure?

We have been able to win some big-name partners. Our biggest partners are Sprint, AOL, AT&T, SBC Communications - who is also a competitor - and EarthLink, which is by far our largest customer. That's how we do it. If an ILEC executive says Covad doesn't matter, we say we matter to Sprint, AOL and AT&T.

The ILECs aren't good at working with the small mom-and-pop companies. If you look at businesses like Outback Steakhouse and Blockbuster Video, these are big businesses, but to the franchise owner it's a small business. We are really good at addressing the small-business users' needs, and we can offer that around the country.

Covad was classified as a competitive local exchange carrier (CLEC). How do you view that label, and how would you classify the company today?

I like the competitive part of the CLEC label. We are competitive and are going to be providing voice services by year-end. We will be rolling out voice service in the Bay Area in the fourth quarter and gradually roll it out to small businesses next year.

I like the name DLEC [DSL local exchange carrier] better, but the label doesn't really matter. I'll tell you what matters. A couple of weeks ago phone company CEOs had a chance to go to Washington D.C. to plead their case. We now have our chance to go and talk about the millions of customers that went with CLECs and why the government should not take that choice away from customers. The government needs to support competition in local markets. For that reason it is sometimes good to be lumped in with the CLECs.

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