Last man standing

DENVER (Telephony)--Accusing venture capitalists of being unimaginative for not giving the data CLEC model a chance, Dan Moffat--president, CEO and co-founder and CEO of New Edge Networks--tried to put a positive spin on the problem-plagued DSL market at the Spring DSLcon show.

Among other things, Moffat called the current downturn “just a bump in the road” and urged attendees to remember that broadband demand is still booming.

“When folks talk about the demise of the current crop of players, they forget that people want this service,” he told a crowd of only about 65 to 75 people at the closing day’s keynote speech. “It’s a failure of nerve and a failure of imagination on behalf of the capital markets.”

Data competitive local exchange carriers such as NorthPoint Communications and Rhythms NetConnections have failed partly because they had national business plans that overlapped in many metro markets.

“No one will know whether their plan was a good one because the capital markets shut off,” Moffat said.

Moffat likened the current DSL shakeup to the wireless industry in the mid-1980s, when coverage was poor and a duopoly of carriers dominated the market. Now the wireless industry is booming, populated by several players.

“The reason that wireless was successful was one fundamental reason: People love the service,” he said.

While few at DSLcon seem to question the demand for broadband, the big question is who will end up delivering it.

Moffat addressed encroaching competition from the RBOCs, which seem poised to inherit the DSL market from the floundering data CLECs.

The RBOCs have excelled at some things such as providing local service and wrestling with legal and regulatory issues, he said.

“They’ve done a great job of blunting the impact of the Telecom Act,” Moffat said. “They’re in a pretty good position, it would seem.”

But he likened the RBOCs to slow-moving aircraft carriers and said they will have difficulties meeting the huge demand for broadband, especially in second-, third- and fourth-tier markets targeted by New Edge.

Moffat likened it as the “Wal-Mart strategy,” whereby a company establishes a foothold by entering smaller markets where competition is scarce. Moffat said New Edge’s DSL take rate in the rural areas it serves sometimes exceeds larger metro areas.

Of course, New Edge hasn’t been immune to the effects of the market, and its initial plan to roll out service in 1200 central offices nationwide has been scaled back to 600 COs. But compared with NorthPoint, “we were fortunate enough not to be overextended and being able to bridge the funding gap,” Moffat said.

Competitive carriers that can survive the current shakeup will reap big benefits on the other side, Moffat said. Compared with the optical sector, which has a roster of more than 600 funded companies, Moffat said he’d rather be one of the one or two broadband players left standing.