COVAD GEARS UP CONSUMER, DIRECT SALES BUSINESSES

Covad Communications aims to become a household name before the year is out, launching a $15 million marketing campaign and tiered pricing plan last week designed to boost Covad's direct sales across the country.

Already the country's largest wholesaler, Covad sells lines to Sprint, AOL and EarthLink. Last week the company also landed an exclusive contract with AT&T Consumer and AT&T Business for national DSL coverage.

The formerly bankrupt CLEC is prepared to become a significant threat in the retail market without necessarily infringing on its existing wholesale base, said Covad CEO Charles Hoffman. Covad's direct sales already have jumped from 4% of its revenue earlier this year to 15%, and the carrier has targeted goals of direct sales generating 20% of its revenue by the end of the year and 30% by the end of 2003.

“We think 20% to 30% is just about right,” Hoffman said. “That's where we're not competing directly with our wholesale customers, but we still have a direct line to end consumers.”

This month the commercial advertising spots began targeting consumers who use dial-up services and enterprises using other ISPs' broadband services. Covad also significantly restructured its tiered pricing plans for business and residential DSL, the most dramatic change being a consumer teaser offer for $21.95 per month for the first three months of service — a price that undercuts most dial-up service prices.

Analysts lauded the new marketing strategy, saying Covad has done a remarkable job recovering from its Chapter 11 bankruptcy to become a national competitor once again. Covad not only has a chance to capture market share, but it could be bracing itself for the changing regulatory climate as Congress pushes more incumbent-friendly legislation. If Covad establishes a hefty direct customer base, it could insulate itself from some of the more drastic repercussions of the new laws, said Cynthia Brumfield, president of Broadband Intelligence.

“Covad is like Rasputin,” Brumfield said. “It should have been dead several times, but it keeps coming back. And every time they do, they offer some pretty innovative plans.”

Covad has an ulterior motive for suddenly creating hoopla, though. The Santa Clara, Calif.-based company still has some image rebuilding to do since its bankruptcy, from which Covad emerged practically unscathed compared to its competitors, Hoffman admitted.

Hoffman said he hopes the new marketing push will not only put Covad firmly in the minds the mass market, but also restore its reputation among business and wholesale clients, some of whom which may be reluctant to deal with a company with Covad's history.

“Part of the problem of going through pre-negotiated bankruptcy is people tend to focus only on the bankruptcy,” Hoffman said. “We have that stigma to overcome. We want Covad to be known for something other than a company with clever financial restructuring techniques.”