Everstream CEO: The One With the Most Fiber Wins

Spun off from non-profit OneCommunity in 2014, Everstream is densifying and expanding its fiber to enterprises, wholesalers and data centers across parts of Ohio and Michigan.

The 115-employee fiber provider credits a laser-like focus on its core market and region, as well as its customer-centric culture, for continued double-digit growth. Some new customers came as the result of two acquisitions: Everstream finalized its purchase of Lynx Network Group in February and acquired the assets of Great Lakes Comnet and Comlink in 2016.

UBB2020 Editor Alison Diana spoke recently with Brett Lindsey, president and CEO of Everstream, who oversaw the company's transition from OneCommunity and Everstream's $100 million expansion of its network. Lindsey discussed Everstream's strategy, the fiber market, the challenges of acquisition in a hot market and his strategy for hiring the best people. Here are his edited remarks:

UBB2020: Everstream's grown, in part, has been through acquisition. What was the over-arching strategy for these purchases?
BL: The main reason for the acquisition was Michigan. We wanted dense fiber routes to replicate what we had done in Ohio and significantly invest in the network and build as much fiber as possible off of the network into unlit buildings.

UBB2020: What are the challenges post-acquisition?
BL: After we did the GLC transaction, it was all about integration last summer and getting everyone on the same billing platform and everything you'd expect. Our Michigan team is now performing at the same level as our Ohio team, so we're seeing a significant investment in capital where we're building, just in Michigan alone, 25-plus new laterals a month, combined between Ohio and Michigan somewhere between 50 and 75 a month on average. Our core belief is the guy with the most fiber wins. We want to be building as much as possible and that's why we're also not a cloud company and a data center company and a voice company and everything else; our bread and butter is build fiber, turn up Ethernet and Internet services for business customers.

We doubled down in Michigan last year. Between the two deals, it's been $55 million, $60 million of investment last year in Michigan, acquiring those two companies.

UBB2020: How many miles of fiber does Everstream own?
BL: Today, total, we're about 9,500 miles across the entire network. With the second acquisition we didn't pick up any additional route miles, we just further densified the existing routes. We have nice fiber counts across the existing networks.

UBB2020: Who are your core customers?
BL: We don't do any residential. It's strictly for-profit customers and large healthcare systems: If you looked at a pie chart of how much of our services were based upon government, healthcare education versus today, that number is dramatically down, just because we have added so many new customers on the business side, as well as wholesale side. We do a lot of business with other carriers where we are their preferred last-mile builder and we're tying up their new customers on our network and back into their network interfaces. It's definitely been a shift. For us today, we're about 70% enterprise and in that enterprise bucket, that would include healthcare, government and education, and then we're about 30% wholesale, which is fiber to an enterprise customer for the likes of Level 3 or Spectrum, those kinds of folks, but also fiber to the tower for the wireless providers.

UBB2020: Do you see that wholesale versus enterprise split shifting?
BL: I think we will see a shift, between 2018 and 2019, where that wholesale number will ratchet up and then I think it will go down after 2019, and the reason is there is an enormous amount of fiber to the tower opportunities currently in our region. We will be seeing an increasing investment in capital to build out to a number of both macro cell towers and small cells and we believe the next 18 months is the time of the tower for us, and it certainly -- depending on where you are in the US, everything cycles through based upon how the carriers are coming and doing replacements or when contracts are expiring -- and we have a lot of that happening in our footprint, so that's why I think it will pick up above 30 and then go back down 18 months or so from now.

UBB2020: Why do communication service providers partner with Everstream instead of building their own fiber networks? BL: First off, sometimes when you're in a big company, just trying to get the approval internally and the cost at a reasonable level without a lot of the overhead that gets baked in to a lot of those projects, it's just easier frankly to do business with us than within their own organizations. Second, their metro assets are not as dense, and so their build cost ends up being significantly higher, which is another reason they would come to us. Then it's all about timing. We, in Ohio, are building laterals in about 90 days and in Michigan about 123 days.

UBB2020: Why do you say the residential market is much more complex than serving fiber to enterprises?
BL: If somebody wants to come into a market and become a new fiber to the home provider, that's great. And if they wanted a head start then working with someone like an Everstream to buy the core network, get an IRU for fiber to connect them to a bunch of suburbs and then go deep and wide on their own, up and down the streets, but that's an expensive proposition from what I see. That's an extraordinarily expensive proposition and the expectation from investors -- at least those I've spoken with -- they're looking at it's going to take three years, four years to get penetration rates in their specific areas and help those builds' cash flow, effectively. You have to have a great partner who's patient with a lot of available cash flow to be able to go do those residential builds.

Maybe with the recent change with Altice and their IPO and the amount of money they're going to put in to their specific properties that they bought from Cablevision, they have a unique "I want to be fiber-only" mindset, but beyond that I think you've seen Verizon and Google and a lot of other people scale-back their fiber to the home deployments just because they're involved in so many things and they're all trying to figure out what do they want to be when they grow up between all the acquisitions for content and everything else. I think it's a really unique time to be in that fiber to the home space. I don't feel like it's going to accelerate at the pace people would like it to, just because of all the stuff that's going on around the fringes of that space for those businesses.

UBB2020: How has cloud affected your work with data centers?
BL: Every customer that's moving into that data center is going to have to have high-speed connectivity. For us, that could be as simple as a 1-gig transport between that customer's headquarters and a data center location or it could be as complex as a privately managed, dedicated DWDM system for a Fortune 500 company with two data centers, a corporate location and our own private data center. We run the gamut of that, but the data center side of our business is probably generating about 30% of our growth, and is coming from the connectivity that's required.

The death of the data center is a little over-stated. A lot of people think the cloud is the best thing. Well, the cloud is a data center. It's somebody's data center. What we're seeing with large enterprise customers especially, and even midsize, is they're not going to put everything in Amazon or Google or Azure or whatever. What we see in most cases is a hybrid solution, where folks have local data center partners -- they may even have more of a DR partner that's further away -- and they're doing cloud. I don't see that changing anytime soon. The conversations we're having with our enterprise partners are the pain and the fear they have about not having a lot of their production-type services close by far outweighs the cost-savings they might get from moving to an Amazon.

UBB2020: You say getting the right people is one of your biggest challenges, something many executives say. How do you address this?
BL: I don't know that I'd say any one specific discipline is more difficult to find. What we spend a ton of time on is trying to find people who have the right attitude and who are a cultural fit for us. That goes for somebody who's sitting at the front desk to someone in the NOC to an outside plant construction guy: We have a process whereby I interview every outside person, no matter what the role is. They don't get an offer until I've had a chance to visit with them. My conversation is not about what their job experience has been or what they'll be doing for us. It's to find out about them, as a person, and whether or not I think they're going to be a fit -- not only in the dynamic we have as a broader culture, but then also in the smaller group they're going to participate in.

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— Alison Diana, Editor, UBB2020. Follow us on Twitter @UBB2020 or @alisoncdiana.