editorialCarriers' carriers carry onThis month's cover story treats the high financial tide currently washing the shores of the bandwidth marketplace. In the course of asking various venture capitalists and other financiers how companies could turn their optical networks into gold, I naturally inquired about what they felt was hot-and what was not. I earlier had run into some financial analysts who were down on the carrier's carrier space-carriers must "own the customer" to get Wall Street's attention, they said-so I expected to hear more of the same this time around.I was pleasantly surprised by the upbeat viewpoints I received. "It's a very profitable business if you know what you're doing," says Roland Van der Meer, co-founder of the venture-capital group ComVentures. "The idea of customer control is great, it's wonderful. But guess what? It costs a fortune. So who is actually going to win in that game? Are you going to actually go in and out-sell existing companies? Not necessarily. So I think there's benefits to both ["owning the customer" and selling bandwidth], and I think that a carriers' carrier is still a viable model, provided that your solution or what you're offering is unique and differentiated." A company that planned to provide a combination of services and bandwidth for the Internet-protocol (IP) market would get Van der Meer's attention in a hurry. "I would tell you that there's still a wholesale IP voice carrier to be formed-absolutely," he says. "I would tell you that there's going to be a [virtual private network] wholesale-type service to be offered. Why? Because it's hard to do, and you need some kind of dedicated network capable of doing it." Robert Stuart, managing director, Global Telecom Investment Banking Group at CIBC World Markets, sees the carrier's carrier space as a viable market as well. His group has invested heavily in undersea networks-it was one of the first investors in Global Crossing, for example-so he's put his money where his mouth is as far as backing bandwidth provision business models. He understands why carrier's carriers might scare some investors, however: There's a large up-front cost, and bandwidth sales have high peaks and valleys (depending on when new capacity comes on line)-two traits that lead some bankers to reach for the antacid. Getting that first dollar, therefore, might still prove difficult for undersea network providers but certainly should not be impossible if they have a sound business plan and the right management talent. In short, new companies should not shy away from the carrier's carrier space as an entrance strategy for fear of turning off the money tap. As in other aspects of the white-hot optical-communications market, there's plenty of money available for smart people with a good plan. Stephen Hardy Editorial Director & Associate Publisher |