Grappling with a Telecom Bust

Despite the downturn in the market and little financing, Michael P. Miller found innovative ways to drive extra cash to his new business

The year was 2005, and Michael P. Miller was working for St. Louis-based Xspedius Communications, LLC, when he had a moment of clarity: The subsidiary he was running, Xspedius Fiber Group, would be better as a standalone entity. Within a year, Miller had found an investor, purchased the subsidiary, and begun operating it as FiberLight, LLC. Today, the Georgia-based company transports high-speed, mission-critical data throughout the Southwest, South, and mid-Atlantic regions via a 3,200-mile largely underground fiber-optic network—with 48 of the top 50 carriers in the nation using the company’s fiber.

It just made sense to me to make the subsidiary [a] standalone. The business models of the parent company and the subsidiary didn’t work well together. The parent had recurring monthly revenues based on low-end data sales; the subsidiary had irregular but large revenues. When you threw lumpy numbers on top of the regular numbers it was hard to manage the finances.

There are a lot of potholes when operating a start-up. We faced one in particular: Thermo Capital and I bought the company during the worst telecommunications bust in its history. The downturn in the market was horrible. Little financing was available.

We found a way to grow the business without borrowing. We have always been very frugal. We became self-funded by putting together products that allowed us to build networks for specific customers, but maintain control of the underlying assets. When finished, we had networks from which we could then sell data to other customers at a low cost. That drove extra cash to our business. Our debt-to-EBITDA [earnings before interest, taxes, depreciation, and amortization] ratio is 1:1. The industry today runs on an average of four to six times debt to EBITDA.

We also adopted a carrier-neutral strategy. That was a major change. Other companies in the industry had decided to prevent other companies from accessing their networks so they could reduce competition. We discovered a huge demand for someone to provide access on a carrier-neutral basis. That opened up a huge window for us. It drove our expansion.

It’s OK to mess up. When you operate a start-up, if you’re not willing to make a mistake, you will fail. The ability to recover from mistakes separates good management from poor management. That’s why, in our culture, we communicate that it’s OK to be a risk taker and make a mistake. We empower people to do their job and expect them to make decisions rather than waiting for permission.

There’s always one moment when you know you’ve succeeded. In 2007, we rolled out Ethernet after selling dark fiber for many years. I remember thinking, “We’re no longer a dark-fiber company; we’re a network-services company. Everything is going to change.”

Looking back, I would have changed a number of things. I would have tried to grow the business more slowly. I would have concentrated more on strategic acquisitions, because they might have helped us with our back office and systems. I would have rolled out our Ethernet product faster, in 2006 instead of 2007. I would have hired a chief technology officer to set up our systems and standardize our functions seamlessly. But you make decisions with the resources you have at the time. No matter how smart we are in the end, hindsight makes us all look stupid.

At my level, leadership is more important than managing. In any company, people should be more important than the things we manage. This is why people will follow a manager but will run through walls for a good leader. And it’s probably why we have such long-tenured employees. My senior-management team averages 11 years with me, and many employees have worked with me for 15-plus years. I am so proud of the people who have made FiberLight what it is today.