In this month’s issue of Business Alabama, “Companies on the Verge of Making It Big” (page 44), we introduce you to some very promising new companies, most of which emerged from Alabama business incubators.
Southern Light has been around a little longer than those companies, but it’s still a youngster and also got its start in an incubator—the Mobile Business Innovation Center.
Southern Light is already making it big. It has been listed as one of “America’s Fastest Growing Private Companies” by Inc. magazine during each of the last four years.
The success was not a smooth arch. It intersected with the 2001 recession, requiring an overhaul of the business plan—changing from designing telecom networks for operators to the more ambitious business of owning and maintaining a network. Founded in Mobile in 1998, the company employs around 90 people. Its 2, 400-mile fiber optic network runs from Lafayette, La. to Tallahassee, Fla.
We spoke to president and CEO Andy Newton, who has been in that position with the company from the start. Newton, a graduate in economics from Birmingham Southern, turned 40 last month.
The company got started with two arms—construction, and engineering and maintenance, and the latter was more successful in the beginning, because there were so many communication companies in Mobile that were thriving and building networks. When we started the company, we brought in some Canadian fiber optic engineers with over 20 years’ experience each, and they operated the company for us.
When the dotcom bubble burst, the engineering and maintenance company started to falter, because the customer base dried up. In 2001, we became mainly a construction company. We were funded by local investors, who had an interest in seeing our area thrive. Our investors saw larger cities—larger than Mobile—and the success those cities were having. Tier two and three cities were underserved, so they saw the need for a communications network to be built in our area.
We had to keep a constant eye on and adjust our business plan to match that demand as it changed. First, we were focused on communications companies, but when the communications market became unstable, we focused on government—universities, city networks and Department of Defense contracts, the groups spending money at the time. At that point, we were from Mississippi to Pensacola. Now we go from Lafayette, La. to Tallahassee, Fla. We will keep growing east from Tallahassee and west towards Texas.
As the communications market started to stabilize and correct, then we focused again on communications companies, cellular providers and local enterprise customers. That business grew fairly rapidly, especially more recently, as smart phones have driven a rapid investment in bandwidth, drawing on video applications and all the smart phone apps out there. There is a huge demand; we started to build out directly to the cell phone towers. That has been a huge driver.
There were multiple fiber companies in the area that built small networks to serve their own purposes, but, when they lost their Wall Street funding, a lot of them went bankrupt and left the bandwidth users in the area without adequate providers, and they really fled back to AT&T Bellsouth at the time. We just provided a more compelling, competitive bid. We were building our network when the cost of construction and materials was falling and there were not many companies building. And we had a new product set, dark fiber. That’s where we run the end of the fiber to the customer and they hook their own equipment to it and control the amount of bandwidth. Often it’s for the government, where they have an IT staff and understand and can manipulate it themselves effectively.
Now our fastest growing segment is the wireless and cellular companies. Government has continued to increase, but not at the pace that wireless providers have increased their needs. 3-G and 4-G rollout, the push for fiber to the tower, has accelerated rapidly. AT&T is still an alternative for cable companies and smaller companies similar to Southern Light, which we compete against and also work with. Most often we share right of way, though we have separate cables and conduits.
The demand for fiber to tower will increase. A higher and higher percentage of homes will have more application needs for bandwidth. Entertainment streaming is a big bandwidth hog. So far, I don’t see any evidence that it’s just a fad. I see it continuing, and exponentially.
We have our growth predominantly to the east and west. When I first started, we felt it might go north into Alabama, but people travel east and west, the largest transmission lines run east and west, and our growth will be east and west. And we have a lot of growth in density in the areas where we already have a presence. Any company that has a fairly significant bandwidth need, as prices come down, is a candidate. We will have been building down their street. The more we build out, the greater our reach into more and more companies. We’ve been building for over 10 years, so our reach is pretty wide. Cost is going down because technology is improving and so is the availability of fiber. The price per meg of bandwidth has gone down dramatically.
We have seen a few cases of companies, because of the recession, cutting back on bandwidth, but, by and large, they are reliant on network connectivity even more so in tough times. And we have tried to adjust prices, to bring these services to the Gulf Coast area at affordable rates. We haven’t seen a noticeable drop in bandwidth expenditures.
As with any technology or infrastructure, the bigger cities get the capabilities first, and, as the smaller cities are made aware of the capability, that trickles down to the smaller cities. Mobile has the capability in our footprint of any large city in the U.S. But, as we expand into more rural areas, where they are starving for capabilities that fiber optics brings, they are excited about the possibilities. Once they have fiber capability, they can operate their businesses like any company in the U.S.
We still have the original owners. It’s an extremely capital-intensive business, but we haven’t required any additional capital in the last five or six years. We have operated completely on the success of the company, and we haven’t looked to them for investment in quite a while. Our next step for growth would be to acquire a company that would allow us to leverage our product in a new network.
Chris McFadyen is the editorial director of Business Alabama.
Interview by Chris McFadyen