With the Rate of Broadband Adoption Continuing to Increase

Issue: May 20, 2013

CEOCFO Magazine - The Most Powerful Name In Corporate News and Information

With the Rate of Broadband Adoption continuing to Increase Exponentially, Alpheus Communications is in the Right Industry at the Right Time as One of the Largest Fiber Optic Networks and Data Center Managers in the State of Texas

Technology solutions to enterprise and wholesale CEOCFO: Mr. Widham, would you Telecommunications/ customers. Broadwing was acquired tell us about Alpheus Communica- Network Services by Level 3 in 2008 for $1.6B. Prior to tions? joining Broadwing, Widham was the Mr. Widham: We are a twelve year Alpheus Communications founder and CEO of Capital Cable, a old, Texas-based telecom company 1301 Fannin, 20th Floor multi-system operator that owned ca- that has a very large fiber optic foot- Houston, Texas 77002 ble systems across the U.S. and in print in the state of Texas. We have 877-ALPHEUS Latin America. Capital Cable was ac- dense metropolitan fiber assets in the www.alpheus.net quired by Charter Communications. large Texas cities including: Dallas, Widham also served as EVP of Core- Austin, San Antonio, and Houston. comm and was a Director at MTV Our network also extends to South Networks. Widham earned a BBA Texas including Corpus Christi, Lare- from The University of Texas at Aus- do, Harlingen and McAllen. We have tin. six data centers that we operate where we sell colocation services to About Alpheus Communications companies that want to put their serv- (http://www.alpheus.net): ers in a secure environment. We are Alpheus Communications is a leading primarily a wholesale company where provider of Texas metro-regional fiber we sell to large telecom operators and and networking solutions with owned resellers that want to terminate ser- facilities in Dallas-Fort Worth, Hous- vice in the state of Texas. We also ton, San Antonio, Austin, Corpus have an enterprise division that we Christi and the Rio Grande Valley, launched last year where we focus on Alpheus is flexible, content-neutral offering services to medium and large and responsive to customer needs size businesses. Our enterprise chan- when low-latency and uptime are es- nel targets businesses in Texas and sential. As the preferred fiber back- we provide customized solutions for bone for Metro Texas, Alpheus is in a them, including running fiber to their unique position to support mission- operations. We offer a suite of net- critical information technology func- work services including MPLS, Scott Widham tions and cloud computing solutions Ethernet and voice services like SIP CEO through resilient SSAE 16-compliant trunking. data center platforms for colocation BIO: and disaster recovery. CEOCFO: Why was this the time to Scott Widham leads an experienced start that outreach, that new phase? Executive Team at Alpheus Commu- Alpheus Communications was a joint Mr. Widham: It is really a model that nications. Most recently he served as venture between Genesis Park, LP, a is duplicated in our industry -- compa- CEO of Cobridge Communications, regional Houston-based private equity nies that started as wholesale provid- an owner and operator of cable tele- firm and El Paso Corporation. The ers, then over time, morphed into vision systems in the Central portion company was acquired by Gores AC providing enterprise services. It is of the United States. Prior to Co- Holdings, LLC in December 2011. actually a model that I did success- bridge, Widham was CEO of Broad- fully at a previous company, Broad- wing Communications, a billion dollar Interview conducted by: wing Communications. The wholesale telecommunications services com- Lynn Fosse, Senior Editor market is only so large. You can get pany offering voice, data and video CEOCFO Magazine to the point where you are not growing

1 at double digits, and in order to grow efficient in terms of how we encode VARs, resellers, and agents. Our quicker, you need to add additional and compress our traffic. There are marketing department promotes our verticals. Right now we have new compression algorithms that al- services via direct mail, advertising launched an enterprise vertical, and low us to transmit many more bits and PR. We are growing our online we are looking at the government and than ever before. The network capac- presence from our website and social educational sectors. ity is also increasing. Dense wave media to get our name out to the busi- division multiplexing that allows us to nesses. CEOCFO: What is the competitive split light into eighty different colors landscape in your geography? Are on a single fiber. Now we can push CEOCFO: What is the ‘aha’ moment there many as robust fiber networks in much more capacity down each fiber. when you talk with a company? When the area? The routing protocols have gotten do they understand they really should Mr. Widham: Yes, we have some much more efficient, so now we can be changing over to Alpheus? very large companies that we com- use our routers to always find the Mr. Widham: If we have the opportu- pete with, and we have some very quickest and the most efficient path to nity to tell our story and they talk to small companies; it really runs the get to the end user. Then, I think the some of the customers we have rela- gambit. The good news for us is our resiliency of the networks, the harden- tionships with, then they really under- largest competitor is the local phone ing of the networks, has led to a more stand our unique selling proposition. company. We do an exceptional job robust, more reliable network than we They will realize that they can get when compared to the large service have ever seen in the past. more technology packaged in at a providers because we are smaller and lower cost, and at the end of the day, more nimble—we are a hundred and CEOCFO: I know you did an acquisi- twenty person company, and because tion in December. Are acquisitions “We do an exceptional job of that we can be very responsive. part of your growth strategy or is it when compared to the large opportunistic? We can give tremendous attention to service providers because we the customers that they do not get Mr. Widham: Organic growth clearly with larger carriers. To give you an is our main driver, but we will look are smaller and more nim- example, when you call the large lo- opportunistically at deals of all sizes. ble—we are a hundred and cal exchange or cable companies, There are different types of busi- twenty person company, and chances are you are going to get an nesses that fit our model, so we are because of that we can be automated attendant with many lay- looking at potentially buying fiber very responsive. We can give ers. You are going to have to wait companies, data centers and other tremendous attention to the through various prompts to get to a networking companies in Texas. We person, and if you do not have your cast a fairly wide net in terms of get- customers that they do not circuit ID number, you are going to ting to know people, and that is just get with larger carriers.”- have to go back in the cue and start what you have to do in the acquisition Scott Widham all over again. With us, we provide business because you have to look at 24/7 support, and when you call us a lot of deals to find the one that is they can get better service. I think our you will get a live person very right for you. In the case of Net Star, stumbling block is a couple of things: quickly—chances are, you will know which we purchased in December, it one is the old saying, “Nobody ever that person, and we will run your prob- was a really nice fit because it was six got fired from buying from IBM.” The lem down until there is clear resolu- miles away from our corporate office, same thing with the phone company; tion to it. It is just a different customer it had a group of household name they are the safe choice, they have service experience. When customers customers that we were able to pick been around forever, they will be here trust us with their network and their up, and we were able to go to those forever. So to go with a smaller ser- data needs, they know they can sleep customers with a much broader prod- vice provider, the network manager at night because they have us looking uct set and up sell services. So it has to be willing to take a small after their network. wound up being the very synergistic chance, and some people are unwill- deal that allowed us to grow. ing to do that. When customers real- CEOCFO: Do you have concerns ize that they can save money, they about newer technologies, things that CEOCFO: How do you reach pro- can get as resilient of a network as might come along and supplant what spective customers, particularly in the they currently have, and they can get you have created? newer areas? I am assuming that a technology improvement—that is Mr. Widham: We are in an ever everyone knows you are in the whole- when they say, “Aha! It’s time to evolving industry, because innovation sale arena, so how do you reach new make a switch.” A part of our strategy is happening at the fastest rate that I customers for the enterprise offering? is the edge of the wedge. If we can can ever remember seeing things Mr. Widham: We have a direct sales get in and just get one circuit with a happen. One of the consequences of force, so we have feet on the street customer, and they can experience rapid innovation is that the industry is that go out there and create relation- the personalized customer service becoming much more efficient on ships with prospects. We have an with us, then we tend to win them many levels. We are becoming more agent channel where we work with over. The other challenge for us to 2 overcome is the service contracts vices today like virtual private net- vious deals over. One of the more terms; just like you have with your cell working (MPLS-VPN) and managed gratifying things for me is that I am phone. You may have a two year or a Ethernet LAN. We are looking to add seeing people that have worked for five year contract. Those have to run to our product portfolio with additional me in various deals beginning to build their course. Usually when they are managed solutions that leverage our their wealth. I have a management expiring, we are in a position then to network and data centers for cloud- style that rewards for performance, so compete for their business. based applications. For example, in- the achievers and the over achievers frastructure-as-service offerings like do really well in this environment. I try CEOCFO: How is business these virtual data center and private-cloud. to create a culture where we push days in general? So businesses, without having to decision making as close to the cus- Mr. Widham: We are growing our manage and own their servers, can tomer as possible. And we try to have business in double digits. The good dial up or dial down computing power fun as a company. We have a lot of news is that the rate of broadband by buying CPU, RAM, or storage that social events, company meetings, adoption is increasing at an exponen- is on their virtual private network. Fur- contests, and various communica- tial rate; particularly as video is be- ther out in time, we will look at plat- tions with our people so they really coming the larger percentage of what form- and software-as-a-service offer- enjoy where they come to work. Once people consume. As we are in the ings as an extension of our network you create that, then the model broadband distribution business, we and data centers in terms of our seems to work in deal after deal. I are in a very good place, in a growing longer-term road map. We are not have been CEO of six different com- industry. There is a lot of consolida- there yet, we are still figuring out the panies over the years, and every one tion going on so we are beginning to exact business model, because those of them, thankfully, has been a suc- see a scarcity of assets in terms of businesses are moving very quickly cess. the number of fiber providers out and we are trying to figure out where there, which bodes well in terms of our sweet spot is. CEOCFO: Why should investors and our enterprise value. I am happy to be people in the business community be in this space. CEOCFO: You mentioned previous paying attention to Alpheus Commu- ventures. What do you bring from the nications? What makes this an excep- CEOCFO: Are there services you previous ventures that has been most tional company? would like to add or are planning to helpful for you as the company has Mr. Widham: We have one of the add? grown and is changing? largest fiber optic networks in the Mr. Widham: Yes. We are moving up Mr. Widham: Thirty-five years ex- state of Texas. We are one of the the “telecom stack”. It starts off with perience as an entrepreneur, and largest managers of data centers in just putting raw fiber assets in the specifically as a CEO has taught me terms of number of data centers in ground, and you sell dark fiber ser- how to find deals; how to create rela- Texas. If a company is looking to as- vices to customers. Then over time, tionships in the industry that allow me sociate themselves with a Texas com- you light the fiber and start selling to purchase companies that are not in pany that provides exceptional ser- wave lengths. Then we put in routers an auction process, but unique oppor- vice, where they know they can lower and switches to deliver various net- tunities to buy companies. It has their cost over time and benefit from work services. The next step is really taught me how to put together a man- technology improvement, we are a managed services and applications. agement team, and I have been suc- great candidate for that. We are selling managed network ser- cessful in bringing individuals in pre-

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