Telecom.

• Position: Industry Outlook - Company overview

The ability to be connected wirelessly with speed and reliability is revolutionizing the way we do business, and the way we live. At this year's telecom roundtable, Utah Business brought together a varied group of industry players to discuss the most pertinent issues facing the industry, including government regulation, technology convergence, Internet Service Provider trends and VoIP issues. The group also discussed the overall health of the telecom industry and up-and-coming products.

PARTICIPANTS:

Back Row:

Steve Proper, Comcast

Eric Isom, Qwest

Gary Nieboer, Integra Telecom

Rex Knowles, XO Communications

David Kennard, Utah Business

Layne Sisk, ServerPlus

Spencer Cox, Western FiberNet

Front Row:

Ted Smith, Stoel Rives, LLP

Travis Starkel, Qwest

Nate DiPalma, Leave Me On Hold

Steven McGhie, Utah Broadband

Myron Perschon, Cache Valley Electric

Matt Reed, Telesphere

Matt Horlacher, Holland & Hart

We'd like to give a special thank you to Ted Smith, partner at Stoel Rives LLP, for moderating the discussion and Holland & Hart for hosting the event.

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How is Utah's telecom industry handling today's rough economy?

KNOWLES: I know that it's a difficult time for a lot of customers. They're having a hard time coming up with money to invest in things they want to do and that they need to invest in. And their decision time frames have been expanded quite a bit--they're taking longer to make decisions. They want to make sure they spend their money prudently. But with that said, my company, XO Communications, is actually seeing growth. Our revenue is still growing and we're still investing in capital. So though times are tough, the biggest change we're seeing is our customers are looking to spend their money more wisely. And we think that the products we're offering facilitate that.

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We're seeing a lot of people moving toward Ethernet, IP, VPN type, MPLS type networks. And they're spending a lot of money to try and get those up and running. We have customers who have enough demand that we're investing and getting them on our own network whenever possible. We're spending money on actually making the connections, adding fibers, to our highest demand customers. So, we're spending money that way.

We're also expanding our national IP network and expanding that capacity quite a bit as well. We've spent $450 million in the last couple of years on a variety of those types of capital expenditures.

ISOM: Obviously the telecommunications industry has been a very competitive industry. And I think the downturn in the economy has made it even more competitive. At Qwest there are basically three focuses we'd like to point out. With the downturn in the economy, we've tried to focus on retaining customers and making sure that we work on perfecting the customer experience, making sure that we listen and are providing what customers expect and the services and the products they need. And then, obviously, we're also focusing on our anchor service of high speed Internet, working on our fiber-to-the-node deployment to increase bandwidth and provide the types of speeds that customers are wanting. We then are looking at reducing expenses and streamlining operations and creating efficiencies. So those are three focuses that we've looked at in the downturn of the economy.

SISK: My company, Serverplus, provides services to the providers. What we're seeing is a significant increase in interest in outsourcing in order to lower costs. We had our best first half of the year we've ever had since we've been in business. It's because we're seeing people saying we've got to figure out how to cut costs, we've got to figure out where those efficiencies are. So for us, it's been actually a great boon--we've had our best year.

McGHIE: I think telecom is a good industry to be in during this kind of an economy because communications don't go away. People still have to communicate. My company, Utah Broadband, is in the Internet business. If you take just the Internet business and you look at it either on the residential or the business side, communication is always important. For residential consumers, even if they lose their job, the last thing to go is the Internet because they need it to find a job. To businesses, on the other hand, communication and the Internet are critical. So really, as Eric [Isom] pointed out, it's really more about the competitive environment, not about attrition in the market.

COX: And adding on to what Rex [Knowles] said, what we're seeing with consumers being more careful with their dollars is that they're actually focusing those dollars internally. They're spending on entertainment, the Internet, videos--those types of things. People aren't going out as much and they aren't travelling as much, but they still want those escapes. Overall, we're definitely seeing a growth there because they're willing to spend more on broadband and video.

PROPER: I agree with that statement. There's been much publicized cord-cutting that was spoken of early on going into the economic downturn, but we just haven't seen it on the video side. It's not to say we haven't had to make adjustments. From a company perspective, Comcast finished pretty well in 2008. Our operating folks saw the downturn coming and made the operating adjustments necessary. But we find that on the video side, in particular, people are making value assessments and judgments in terms of where they spend their entertainment dollars. Studies have shown that consumers are watching more video than they ever have--it's where they're watching videos that has changed. They're not necessarily just watching their TV anymore. They're watching on the Internet and even on their mobile devices. What this means is that there is opportunity out there.

SMITH: It would really be interesting to see if more people are going to theaters or watching movies at home. It is obviously more economical to watch at home, but people enjoy going to the movies. With the economy being down and the convenience of being able to bring movies into the home via cable or wireless--there are many ways to get entertainment--and I'm sure it's having an impact.

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PROPER: I agree. In fact, one of the products that we're looking at is the Internet. Some folks have said, "Well, isn't the Internet going to be a bit of a competitive challenge to the cable operators of the world?" We see the free video right now as a product in development. If you'll recall the Napster days, when the audio business was free--we see similarities with today's Internet videos. We're developing a product called On Demand Online. This product authorizes Comcast customers' computers to be able to download On Demand services from their computer. So, if you receive HBO, for example, you would be able to download all...