There were a number of big CLECs (over $500M in revenue) just 6 years ago - PAETEC, Windstream, Qwest, Cbeyond, XO, Level3, Global Crossing, TW Telecom, EarthLink, AboveNet, Zayo, and TelePacific.
By 2012, half were gone, swallowed up by acquisitions. [CBEY-Birch, Qwest-CLink, Paetec-WIND, L3-GX, L3-twt, Zayo-ABoveNet]. Today, with XO going to Verizon next year, there are really only a handful left. And they don't look like what a CLEC looked like 6 years ago.
Wireline Copper is in decline in large part to fiber, Google and cable, but to no small extent by the ILECs not wanting to be in that business anymore. They don't have to share fiber assets like a UNE. They do wholesale it, but since the ILECs are getting beat by the cablecos, the wholesale ILEC fiber isn't an awesome deal.
Buying wholesale from cable is resembles punching yourself in the face. They don't want to sell wholesale. I have heard this from them repeatedly. They make Verizon look like a generous wholesale partner. They will snake your customer out from under your contract. )I have heard these stories repeatedly as well.)
After you have done this for a while, you want a change. Who wouldn't? Telco is to gastroenterology what candy is to dentistry.
TelePacific has made a shift. With its acquisition of DSCI, TelePacific is taking managed services, UCaaS and SD-WAN nationwide. I have been known to say, Layer 1 or Layer 7 - either own the network or own the app. With managed services, UCaaS and SD-WAN, TPAC is betting on being a business technology partner at Layer 7 (of the OSI Model). Congrats, to one of my favorite clients (for full disclosure to my readers).
The other final pivot occurred in Atlanta, where EarthLink "acquired Boston Retail Partners, LLC ("BRP"), a highly regarded management consulting firm focused on the retail vertical. BRP's experienced consultants work with leading retailers to deliver strategic solutions that address the business and technology challenges unique to the industry." This might be the final note of the retail song that ELNK has been playing. Retail is a vertical they decided to attack and own and this might be the final piece needed.
It reminds me of CapGemini a little in that CapGemini is a consulting firm that partnered with VMWare and their AirWatch division to offer mobile desktop mixed with MDM. A consulting firm being a service provider like an MSP.
This ELNK acquisition makes me wonder if they will spin-off their network assets - Deltacom/IFN fiber, ONE Comm fiber in the northeast and New Edge Networks - to a REIT or other entity. It would make sense IF the revenue of the CLEC could stand up to scrutiny by itself. We'll see, but it is definitely a different looking CLEC. I'm not even certain that term applies to them any more.
After 28 acquisitions, Birch has a new CEO and mission for organic growth predicated on a fiber lit building strategy and Cbeyond's cloud portfolio. They still look and act like a CLEC.
Zayo is all fiber all day. Pipe, pipe, pipe. Oh, yeah we have some data center stuff from a Latisys acquisition but fiber, fiber, fiber.
And Level3 is still plugging away at its own triple play: the voice network that more than 70% of the VoIP providers rely on; a very well connected network with a top looking glass that is connected to content engines as well as enterprises, government and carriers; and fiber. The next step for Level3 is to connect their young security services department into their well-connected market. This would get them up the stack a little too.
Rumor today is that Comcast wants to buy Level3 to compete eye to eye with AT&T and VZ.
Network is the main play but no one can survive forever on just selling network - unless you have many unique routes, you run your network flawlessly and you know where the assets are. There has to be a layer beyond just pipe. That's what everyone is working on.
