Huawei Aggressively Courts Rural US Telcos
Rumors of Huawei's departure from the US service provider market have been greatly exaggerated, and Bill Gerski is perhaps the greatest proof of that.
Gerski, a former VP with the National Rural Telecommunications Cooperative (NRTC) who also represented Dish Network LLC (Nasdaq: DISH) in sales to rural telcos, is a veteran of the rural telco market and is now aggressively taking Huawei Technologies Co. Ltd. 's story there, believing the time is right for rural resurgence. Named VP of sales for Huawei USA earlier this year, he sees a good fit for his company's broadband access products among the Tier 3 telcos that are trying to find a way forward in the post-Universal Service Fund era.
"What I am seeing is renewed interest out there," Gerski says. "Many companies have held off spending for a couple of years trying to figure out what was going to happen after the USF funding cuts, and some of those companies have held their cash pretty close to the vest. Now they are in a position to make a decision."
Gerski is not alone in thinking that rural telcos, after a period of hand-wringing, are trying to fight their way back. Other people including Shirley Bloomfield, CEO of the NTCA - The Rural Broadband Association , and a number of rural telco execs are not only urging action on the part of rural telcos but noting where it's happening. (See Rural Telcos Admit Major Changes Are Needed and NTCA CEO: US Needs 1 Rural Network Entity).
One of the more intriguing trends Gerski and others have observed is the move of rural telcos to consolidate in regional or even statewide groups -- at least to the extent of sharing management resources and buying equipment and services as a single entity -- to improve economies of scale.
"Going forward, they know they need to cut costs and add services," Gerski says. Through consolidation, they can share general management and administration costs to save up to 40% of operating costs, while buying in volume to improve purchasing power. Huawei is prepared to work with these new consolidated entities, which are just now in the making, he says.
Survival of the fiber fittest
Those rural operators that will survive must push fiber closer to the customer and be able to deliver bandwidth that not only supports the newer services they want to offer but also keeps them competitive with new companies moving onto their turf. That will include satellite broadband and LTE offers and lets them cherry-pick customers on the edge of their current footprint who might be unhappy with their cable or telco providers.
That's not to say every rural telco is on board: Gerski admits 5-10% of the companies are likely to either just close up shop or sell their way out of the business. But many Tier 3 telcos are co-ops: They are owned by the community and have a stake in its economic development, and those companies that have more aggressive managers are the ones now pushing to expand their service offerings.
The hardest thing for all of these companies will be developing more of a sales and marketing mindset, Gerski says, starting with the management and going down through the entire organization.
"These are companies whose employees are used to just answering the phone," he says. Once they invest in newer fiber networks, they need to drive take rates through sales and marketing efforts that are still largely foreign to them.
"It's a mindset -- these guys have to compete. And they've never had to do that before," Gerski adds.
The more successful rural telco providers -- veteran companies such as Calix Networks Inc. (NYSE: CALX), Adtran Inc. (Nasdaq: ADTN), and Metaswitch Networks -- have been working for years to provide more marketing and sales support to their customers. Gerski says Huawei will step up to the task, and in addition to his travels, he is bringing a number of rural telco CEOs into his company headquarters in early February both to show off the company's engineering expertise and to see what kinds of marketing and sales support they need.
Huawei is also prepared to compete with Calix and Adtran on price, beating them by up to 30%, Gerski claims, and expects to continue its US push for some time to come.
"We are here, and we are not going anywhere, and we want your business," he says. "We are asking folks to take a look at a third vendor and give us an opportunity to show them what we can do. We expect to be a major presence in the rural market."
— Carol Wilson, Editor-at-Large, Light Reading