FAST FORWARD: LARRY WILLIAMS, ITC^DELTACOM

Last month ITC^DeltaCom--which acquired its competitor, BTI Telecom, last year--announced its plans to merge with two more Southeastern competitive local exchange carriers (CLECs): FDN Communications and Network Telephone. ITC^DeltaCom CEO Larry Williams told Telephony since that the company plans to join with at least two more Southeastern CLECs before looking for opportunities in other geographies. He also discussed some of the details guiding the company’s strategies.

On growing market share: It’s always been a feeling that to be a long-term scalable player you need to be 20%, 30% if you’re going to be in a market. We need to be that across our footprint probably to be a long-term sustainable player. How do you get there? You can continue to grow [organically], which is getting tougher and tougher because of price compression and churn, or you can consolidate. We’re just trying to get enough scale to be able to play long-term…In some markets, even before the merger, we have as much as 15+% of the business market. That doesn’t include residential; it’s primarily T1-type customers. There are a lot of markets in Alabama where we were close to 15% market share before. After the merger, we’ll probably be 15% to 20% in some markets in Florida. We’ll pick up more in Alabama and North Carolina, where we may be in the 15% range. The largest person in Florida is probably FDN from a CLEC standpoint. We’re probably the second largest. Putting us together, we’d probably approach 15+% in the small to medium business (SMB) market for sure--maybe not in large businesses, because FDN is heavy in SMBs.

On competition in the Southeast:

In any one market, we can have anywhere from 4 to 10 competitors in the 40 markets we serve. It may go back to the old history of SouthernNet and telecom use. SouthernNet started in BellSouth territory and focused there. The model went well. A lot of the CLECs we see today were spin-offs of SouthernNet—NuVox, New South. We at ITC all came from there. USLEC was a competitor out of New England who saw the model and moved to Charlotte, N.C. There are communities of interest [in the Southeast]. Calling patterns stayed in the Southeast, not all over the U.S. There were a lot of startups in various towns and states. FDN started in and focused on Florida. BTI started in Raleigh.

On churn: It varies by product. T-1s, which is what USLEC sells primarily, runs very close to them: 1% or lower. If you go into SMBs, it probably approaches 2% to 2.5%. Go into residential, and it can be 5% to 10%, depending on how you manage it. That’s indicative of BellSouth’s win-back strategy. They can aggressively go after residential people. They know everybody who’s left them because everybody was one day their customer. They’ve got 18 months of being able to use telemarketing where no one else can use it. With small businesses, they do the same: go after them with telemarketing and special promotions. With large businesses, you’ve got to go out there and face the customer. It’s harder to do on a mass market basis.