Q & A with New Edge Networks: DSL at the Crossroads

There's no doubt the price of a fast, first-to-market approach has impacted many high-speed Internet providers.

A growing number of yesterday's competitive local exchange carriers and Internet service providers are today's headlines, many forced to file for Chapter 11 bankruptcy protection or go out of business entirely.

I had the chance to sit down and talk with New Edge Networks president, chief executive officer and co-founder, Dan Moffat, and discuss some of the issues facing DSL providers like broadband deployment, staff cuts, and competing with the regional Bell operating centers or Baby Bells. Moffat also expresses his hopes for the new Federal Communications Commission under the conservative Republican administration after eight years in the hands of liberal Democrats.

Q: Like NorthPoint Communications, Rhythms NetConnections and Covad Communications, you have had to do some cost-cutting yourself. Are more staff cuts planned down the road?

Moffat: No, we don't plan on any more staff cuts. Now, with that said, you never want to make a blanket statement that you're not going to make business adjustments, so what we did when we got our financing in October, we could've taken two views: one is 'great, we got our financing, full speed ahead;' the second view is 'great, we got our financing, lets trim our sails and make sure that we'll be able to weather the storm we think is coming.'

We took the latter view and we made the cuts shortly after our financing and that's put us in a very nice position in terms of getting through the year and getting additional financing.

Q: What is the impact of all the bad news and what contributed to this turn of events? Last year at this time, it seemed CLECs and ISPs were in the midst of a broadband "Golden Age."

Moffat: It impacts the sector in that it makes investors more nervous. Whenever you're doing an infrastructure rollout, (for example) if you go back and look at wireless and cable TV, there's a natural shakeout that occurs, a shakeout and consolidation. We're entering that shakeout and consolidation phase now. NorthPoint mentioned they were coming out in a restructured manner and it will be very interesting to see who comes out with them and at what valuation and how that works out.

But, you know, there are going to be winners and losers. You got a whole bunch of people that jumped in (to DSL), kinda like a gold rush thing. A whole bunch of people come in and stake their claim and some of the folks don't operate well or they're unable to create the value or they get squeezed like in the situation with NorthPoint where they make a big deal and it doesn't come to pass, through no fault of their own.

It doesn't mitigate that there isn't gold "in them thar hills," you know there is broadband gold and that there are going to be some solid winners that come out of this. We're seeing a lot of folks in our markets wither or go away, you know, a lot of the folks that jumped in after us, and perhaps had funding or operating problems, and that just diminishes our competition and makes it easier for us.

Q: Many analysts predict that resellers, CLECs and ISPs can't hope to beat out the Bells when it comes to DSL. Is that true?

Moffat: I think that's a silly argument. There are many players who resell and lease from the RBOC facility, but have their own value-added services. For example, frame relay. It's on RBOC facilities but you put frame products on it. We're doing the same thing, we're just leasing RBOC facilities and its lines and putting a nifty technology called DSL on it.

The RBOCs are very focused on (Plain Old Telephone Service) and consumer DSL is just as an extension of POTS. You know, you're using the same telephone line as POTS, using the same technicians, and the same central offices, so it should be very straightforward for them, but they're having troubles