Doing the Dirty Work Pays Off
The past 12 months have been a heady period for tw telecom, as the US competitive services provider has garnered awards from Light Reading, Atlantic-ACM, and others, in addition to being recognized by Vertical Systems Group as the top CLEC providing business Ethernet services in the US. (See Light Reading Announces 2013 Leading Lights Winners.)
Only two other telecom entities were named -- U.S. Cellular Corp. (NYSE: USM) and Shenandoah Telecommunications Co. (Nasdaq: SHEN) -- and tw telecom's rating of 96 out of 100 on the composite scoring put it higher up the ranking than those two.
Purely by coincidence, tw telecom's CEO, Larissa Herda, had granted Light Reading an interview on the day after the Forbes news broke, and while she was still feeling some of the euphoria of that honor, Herda was also willing to get back down into the weeds to explain her firm's recent success.
She sees the Forbes award as recognition of her company's commitment to customer experience -- "something we as an industry haven't always been good at," Herda notes -- and ties that into one of tw telecom's major technical accomplishments of 2013, its E-Access service for wholesale Ethernet, and its dynamic capacity services for enterprises. (See 2013 Leading Lights Finalists: Most Innovative Enterprise Service and 2013 Leading Lights Finalists: Most Innovative Ethernet/Optical Service.)
"What we have been trying to do is give our customers as much visibility and control of their network as we can," Herda says. "Generally speaking, in everything we do, we are thinking about how we can make it easier for our customers to do business with us."
Doing the "hard, dirty work"
That sounds a bit like typical CEO-speak, but she goes further in her explanation, tracing back the current success to some tough decisions tw telecom made eight years ago, when it was in the process of growing through a series of acquisitions.
Having survived the telecom meltdown of the late 90s and the recession of the early noughties, tw telecom had just purchased Xpedius Communications, a Missouri-based fiber optic network operator that bloomed in the wake of the Telecommunications Act of 1996. Her firm paid $531 million, more than half in stock, to Thermo Capital Partners, a private equity firm, to acquire a metro fiber network in 30 states and 75 markets, including Washington, D.C.
"They were a compilation of a bunch of companies owned by a private equity company," Herda says. "We got this magnificent network that we have been able to really capitalize on."
But tw telecom decided it wouldn't just add Xpedius to its current mix. Instead, the company decided to shut down its new product pipeline and even allow some customers (those deemed unprofitable) to disconnect, while it invested heavily in moving the data from its networks into a single network data system.
"It was hard, dirty work, because you have to do things with customer data that impacts how that data comes together into a new system, and for the first six months, while we went through this painful transition, our customer service levels were affected. But we knew we had to take a step back."
Sorting through customer records and applying exacting standards such as whether to use "street" or "st," avenue or "ave," road or "rd" to create a single clean set of records, also put tw telecom 18 months behind in new product development, forcing the company to play catchup with competitors. Some long-time customers noticed the impact on customer service, and Wall Street noticed the lack of new products and revenues.
Herda and her team then made the decision not to cut capital spending or do sweeping layoffs when the recession hit in 2007, and those decisions also frustrated investors, she says.
"We had the same management team in place from the first recession, and we saw then that when we stopped investing, it took us five years to get back to top line revenue growth," she says. "We took those learnings and applied them to our decision-making during this recession."
As a result, tw telecom was hammered in the investment community and saw its stock fall to $4 a share. Fortunately for the company, everyone's stocks were falling at the same time -- and it turned out the bets tw telecom made in clean data positioned the firm to roll out new products such as dynamic capacity.
Next page: Taking the next steps