* Q&A with WilTel CEO Jeff Storey
A leading wholesale provider of telecom services, WilTel Communications has been pursuing the enterprise market directly as a next-generation ISP for the last two years. Network World Senior Editor Carolyn Duffy Marsan spoke recently with WilTel CEO Jeff Storey about the company’s enterprise strategy and its critical but changing relationship with SBC. Here are excerpts from their conversation:
NW: What success has WilTel had in its push into the enterprise market?
Storey: We target the type of customers that need a wide-area networking specialist that will engineer a solution specifically to meet their needs. They need capabilities that other carriers can’t bring. They need access to people and resources that other carriers won’t bring. … We have Lava Trading, a firm that handles 20% to 25% of all the trades on Nasdaq. That’s certainly a company where the network is a key, critical component of the business that they operate. Another recent win is ING, a large insurance company where data is absolutely critical to their success.
We have all the capabilities to support enterprise customers very successfully. We’re good on the data side, with MPLS, private-line and IP services.
We had a great voice business on the wholesale side, supporting 5 billion minutes per month. Now we’re offering voice services to both our government and enterprise customers. Vonage is one of our largest voice customers… We don’t release numbers about our growth in enterprise sales, but our revenues are continually going up. And with only 2,000 employees, we have a cost structure that’s remarkable.
NW: This year, WilTel announced Ethernet and storage services for the enterprise market, as well as new voice services. Can you explain the significance of these in terms of building WilTel’s share of the enterprise market?
Storey: Storage-area networking is very important. Our Vyvx subsidiary is the leader in the transmission of broadcast-quality video over fiber for the media and entertainment business. We want to be the Vyvx of storage-area networking. Ethernet – both managed and unmanaged – is just the way the world is going. Voice services are part of the portfolio that an enterprise wants to buy. These services fill out our portfolio so enterprises can do one-stop shopping.
NW: What other enterprise services does WilTel have planned for 2005?
Storey: We’re going to continue to grow our IP VPN services. We’re going to continue to expand on storage-area networking and Ethernet products. And we’re going to focus very specifically on professional services and managed services for our customers. I think there’s an opportunity to help clear up the networking confusion for our customers. We’re also going to expand our voice products and our integrated access.
NW: How much of WilTel’s enterprise revenue is direct vs. through subcontracting deals with foreign carriers such as KDDI?
Storey: It’s a mix. Historically, we’ve only been in the enterprise market through our wholesale arrangements. There are some wholesale customers that buy great big pipes and do finished services on top. There are other customers that work with us. We provide the enterprise services under their banner and their name. KDDI and SBC are two of these. We’ve been winning enterprise customers in both ways.
NW: SBC is WilTel’s largest customer, representing 70% of its revenues, according to analysts. Can you explain the significance of the new master services agreement WilTel recently signed with SBC?
Storey: The agreement means several things. It is a testimony to the quality of the service that we provide that it was important to SBC to sign up for a new master services agreement. With their intention to buy AT&T, certainly they’re going to move traffic they have on our network to AT&T. This agreement is intended to make sure that they provide the same quality of service to their customers [during the transition].
From a stability standpoint, we’ve been making this transition into the enterprise and government markets for the last 18 months to two years, but it takes a long time. The primary revenue we get from SBC is long-distance voice. We’ve known for a long time that was going to go away, whether it was going VoIP or to AT&T. Our strategy has been to launch into these other markets with other products so that as the SBC business goes away, we can continue to grow and be healthy. Before the timeline was always vague. This [agreement] puts clarity around the timeline because this is a five-year deal.
Having this [agreement] gives us a leg up on enterprise deals. We can very clearly sit down with customers and talk about the health of our financials. When you compare our cash growth to any of our competitors, you will see that WilTel has outperformed everybody else.
NW: What’s WilTel’s strategy for surviving and thriving in the midst of all the telecom mergers?
Storey: One of the things we have learned that has become part of our culture in the last three years is a disciplined financial approach. There are a lot of companies out there trying to grow revenue without regard to whether it’s good revenue or bad revenue. We pass on bad business. We focus very closely on winning good quality customers. We’re going to be very aggressive at looking at consolidation opportunities. We want to participate in the consolidation without doing something stupid. We think we’ll have the opportunity to roll up a lot of good providers or good offerings. I’m not predicting anything. We’re going to be very disciplined about it.
