For about 14 of its 20-year history, DQE Communications focused solely on providing dark fiber to enterprise and wholesale customers. Like the broadband market itself, DQE's services have expanded since then, and the Pittsburgh-based service provider now offers a growing range of lit and managed services across southwestern Pennsylvania.
The privately held company is now considering its next technological investment steps as well as expansion into West Virginia, moves propelled in part by customer demand, said Jim Morozzi, president and CEO of the 70-employee firm. UBB2020 editor Alison Diana spoke recently with Morozzi to discuss DQE's strategy, network upgrade plans and evolving service offerings.
Following is an edited excerpt from the interview:
UBB2020: Tell us a little about DQE.
Jim Morozzi: We provide data fiber communications. We've been at it for about 20 years now and we have a very nice network in southwestern Pennyslvania, a very dense downtown business triangle area in Pittsburgh. We focus on a couple of things: dark fiber, metro Ethernet and Internet services. Co-location services is a bit of a value-added product for us, and we're providing it to more add-on types of things like DDoS mitigation service and some of those more managed service types of things. But at our heart, it's dark fiber, metro Ethernet and Internet services to large enterprises, to governmental entities, to universities, schools and those kinds of customer base.
UBB2020: How are sales divided between dark and lit fiber?
Breaking New Boundaries
DQE President and CEO Jim Morozzi wants to expand the fiber service provider into Virginia and deeper into small and midsize businesses.
JM: Not too long ago we were just a dark fiber company, so 100% of our sales were dark fiber. Within the last couple of years since we got into the lit services business, it's grown dramatically. Roughly speaking, our revenue is split 50/50 between dark fiber and lit services, and under that lit services category that's where I capture metro Ethernet service and Internet service.
UBB2020: Tell us a little about DQE.
JM: If you go back to the beginning of our company, it was all dark fiber and it was to the largest enterprises. Those large enterprises [were] financial service institutions that had their own IT professionals, had their own people who would take that dark fiber and light it themselves. As we got to the point where we reached all those kind of customers, then we started reaching toward the small to medium customers who did not have the requisite skillsets or professionals who could buy the routers and servers and the optics to make these things work themselves, and that's when we got into lit.
UBB2020: What challenges do you face?
JM: To the extent I need to go and build more network to reach a new location or reach a new customer, I'm beholden to the time it takes to get pole attachment rates, to go get make-pretty work today, to make physical space available to me to build the fiber. So that's a challenge, just the timeframe to do that. The cost to build fiber is very expensive and what doesn't always translate to that end-customer is, 'It should be cheaper.' It's technology that should be cheap and should be getting cheaper over time. But there are real costs and real dollars to extend that last mile of fiber to the customer location.
I talk to other folks in the industry and my counterparts in other parts of the country and they struggle too. Everybody's saying that's the issue here. That's what's going on.
UBB2020: What are your goals for growth today, now that you've expanded to SMBs?
JM: Our growth plan is around two things. The first is an edge-out strategy: You know we really do have a great network in southwestern Pennsylvania so we have decided to go into the Morgantown, West Virginia area. We see some great economic opportunity down there. We see there's an opportunity to bring some of those customer needs back towards Pittsburgh to connect with some of those large data centers.
The second thing is we grow with our customers. We've been very successful going after a corporate headquarters or a corporate data center and then been able to pick up additional locations as that customer or company grows and we grow along with it. A good example of that might be the financial services industry, where we may be doing business with a bank and win their data center business and then we pick up branch locations going forward. I'd like to continue to grow with my customers.
UBB2020: You have a wholesale business, so you're also competing with some customers?
JM: Lisa Williams is responsible for all sales to our carrier customers. I have another person who's responsible for sales to our enterprise customers. In a lot of regards, the telecom-data world are a co-opetition world, where I've got people selling directly to those end-user enterprise customers and Lisa selling to the other carriers who are then selling to the enterprise customers. We have a nice balance of business between wholesale carrier customers and end-user enterprise customers. We do compete but we also cooperate with those folks and partner up with them.
UBB2020: Is wholesale growing faster than enterprise or vice versa?
JM: I can't say we're emphasizing one more than the other. I like good, solid competition even among my own folks in this company here. I like to see my folks go after enterprise business and portray to our customers that we're the best solution; I also like telling the wholesale customer that we're the right option for that last-mile access. We do call the backhaul business part of our wholesale or carrier piece, and we've seen that grow pretty dramatically over the last couple of years. We connect to several hundred macro cell sites, so that's been growing pretty dramatically, and we're seeing bandwidth upgrades in those cell towers so from that perspective, that part of the wholesale business is growing and we expect it to continue to grow.
UBB2020: Have any particular technologies boosted your business?
JM: We have launched a DWDM platform so we're able to now deliver 100-gig WAV services to certain customers. Again, these are large customers who have those kinds of bandwidth requirements. We saw that as a need that would be growing in the marketplace and we put that in the marketplace a couple of years ago. That allows us to not only better groom our own traffic and recapture fiber by putting more and more services on WAV, but it also allows us to sell those WAV services directly to our customers. That was important. That was a necessary thing to do.
UBB2020: Are you using other technologies, like passive optical network (PON), to get more out of existing fiber?
JM: The answer to that question is how does GPON play into this? How do we take advantage of GPON? At this point we do not have a GPON platform. We're strictly a Layer 2 solution provider with full, expensive switches out there. But that's something we will be looking at. We will be looking at GPON as a possible delivery solution, particularly in those areas that we're going to turn up as a green field.
UBB2020: Any interest in NG-PON2?
JM: That would be part of it: Understanding what's the right way to do this. A passive network architecture is different for DQE Communications. We've always [had] this active, $2,000, $3,000, $4,000 switch at the end. We would look at NG-PON2 as well as GPON, absolutely.
UBB2020: What does the future look like?
JM: I think we're going to have a bigger fiber footprint. It wasn't that long ago that a lot of customers bought 50- and 100-meg pipes. Now the requests are 1-gig going to 10-gig, and some are even at 100-gig. A year from now, we're going to see many, many more of our customers buying 10- and 100-gig services. We're going to see more opportunities for wireless backhaul and small cell connectivity. And I think we're going to have significant presence in Morgantown, West Virginia, and that economic center there.
UBB2020: What role does cloud play in this demand for ultra-broadband?
JM: A lot of our customers need to connect to the large cloud providers and that drives bandwidth need as well. That also drives the need for the 10-gig and 100-gig going forward also. Our part of that is the transport piece. How do we get you to the cloud? That's where we see our part of the value-chain.
— Alison Diana, Editor, UBB2020. Follow us on Twitter @UBB2020 or @alisoncdiana.