Interview - E.J. Butler, PAETEC Communications
Written for the 2003 Annual Report for PAETEC Communications
A few minutes with E.J. Butler, President of Wholesale Services, is all that’s required to develop an overwhelming sense of his essential preparedness. Mr. Butler is man who, in the parlance of our times, has his ducks in a row. Disarming in countenance, Mr. Butler exudes the confidence of success. It’s difficult to assess which of these might have come first for Butler – confidence or success - but it hardly seems to matter; he serves them both in generous proportions. “OK, I’m ready. Let’s get started.” No surprises there.
Back Office Growth
Butler begins on home turf for the wholesale business – the back office. For some time now, he has been planning the back office investments that would be necessary to advance PAETEC wholesale offerings. Under his guidance, those investments took shape in 2003. Engineering, operations, and network planning functions were all fortified during the year as a precursor to ramping up wholesale business traffic. “Our rule of thumb is that infrastructure needs to be installed, tested, and turned up 9-12 months prior to sales.” Suggesting that few other providers are willing to go to these lengths, Butler repeats himself. “9-12 months. Lead times like this allow us to exercise the network, to verify robustness. We look for problems -- we even try to cause problems. We’re incredibly careful about this. When we go live, we know that the network is ready to handle whatever our customers can throw at it.” The watchword, again, is preparedness.
The sheer technical prowess necessary to manage planned growth like this has always been a PAETEC trademark. Butler’s challenge was to do it efficiently. He speaks with near reverence about the wholesale staff in this regard. “It is extremely important to remain cost competitive in the wholesale business. We need to ensure that new orders can be placed at competitive rates, even as we invest in new infrastructure. My staff was able to find new ways to streamline our processes and maximize our productivity.” Butler isn’t surprised, of course; he’s just delighted. “The result is that we’re handing the new flow of orders with existing staff. It’s been a tremendous effort.”
Clearly, Butler’s passion for preparedness is paying off. During 2003, PAETEC emerged as a truly full-service, national wholesale provider. In many respects, this has been the Holy Grail for PAETEC’s wholesale business – to move beyond a service-enabled business to a service-intensive business. PAETEC’s extraordinary service is the essential competitive differentiator. “PAETEC’s early years in wholesale were spent as an intermediary of sorts,” says Butler. “Our customers bought big pipes, and we connected them to the PSTN. Today, we are connecting our customers to their customers directly. It’s a much more comprehensive service offering.”
PAETEC is, in fact, serving more customers with more products, and with more options for integrated bundling than ever before. In 2003, PAETEC achieved the critical mass of wholesale customers necessary to drive costs down to exceptionally competitive levels, and the market has responded. “Increasingly, customers are choosing us because of our national footprint,” says Butler. “PAETEC now covers more than 50% of the access lines in the United States. We can negotiate contracts nationwide. And we are extremely price-competitive with respect to other national wholesale providers.”
Wholesale in Context
The numbers for 2003 tell much of the story: $72 million in revenue, a 67% gross margin, and $34.7 million in EBIDA, and 34.6% in net income. But they do not tell the whole story. That requires an understanding of context. “Wholesale is an excellent complement to PAETEC’s mainstream business. It’s an enabler of sorts,” says Butler. “We use wholesale to leverage the underlying costs of our retail business. It allows our sales force to negotiate excellent rates for our retail business customers.”
Butler is not sanguine about the year, nor should he be. “In 2003, our execution was superb. It was our best year ever, but it’s important to understand that we managed it with an eye toward the next five years.” Once again, Butler is emphasizing preparedness. “We’re trying to stay one step ahead of our customers in order to continue to provide outstanding service.” To that end, Butler continues to plan ahead, preparing for the second phase of PAETEC’s data build out, for PAETECs forthcoming data products, for softswitch technology – for the unexpected. In wholesale, that’s what is necessary, and it’s what E.J. Butler does best.
No surprises there. None at all.
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