Airband CEO Sees Big Telco Channel Opportunity Following Merger

Specifically, said Ruley in a interview, Airband would like to see its indirect channel sales account for at least 50 percent of its overall business, up from the 20-or-so percent it is now. All of the channel partners Airband works with, from more traditional master agents to VoIP VARs that expanded their wireless service offerings into the hosted and managed services arena, are part of that growth, he said.

"Twenty percent of the company's orders are coming from channel partners today, but that's growing quickly. We clearly would like more from our channel partners," Ruley said. "They've got the feet on the street and we'd never replace the kind of relationships they have."

Ruley sees incumbent local exchange carriers (ILECs) and cable companies competing for enterprise and business customers -- customers looking to cut costs in what they pay for connectivity but also be flexible in how they access it. Where Airband's fixed wireless Internet portfolio succeeds, he explained, is in providing customers connectivity in a more flexible, less expensive model without having to tether themselves to T1 or DS3 increments -- Airband's wholly-owned, fixed-wireless, last-mile network bypasses local phone and cable infrastructure.

"Ours is scaleable, we can deploy it quickly, and we have a pretty broad portfolio of VoIP offerings from our traditional hosted services to a fully bundled portfolio," he said. "It's agile, it's reliable, and because we're not a wire in the ground, we're not going to get cut by a back-hoe, either."

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Airband is among the telecom service provider leaders who see expanding opportunities for solution providers and agents alike. It's also a prime example of a consolidation trend among telecom service providers that's gradually remaking the space.

Ruley, formerly the CEO of Sparkplug, is now CEO of the combined company, while former Airband CEO Tim Kinnear has become CFO. The company is headquartered in Dallas and now boasts a presence in 17 U.S. markets for its combined suite of voice and data services, offering anywhere from 1 Mbps to GigE speeds, and providing everything from hosted VoIP to VoIP/SIP trunking.

What's driving growth is not only that the compound annual growth rate (CAGR) on Internet access continues to grow, Ruley noted, but also that customers no longer think of Airband's services as merely a backup play.

"It used to be from customers, 'My primary will be Verizon or AT&T and maybe we'll use you as a back-up in case it goes down.' But now we're a replacement technology," he said. "Now we're seen as a forethought, and not an afterthought, and we're eliminating and totally replacing older accounts with newer technology."

The financial terms of the merger were not disclosed, but the merged company receives $20 million in financing, a combination of $11 million in equity investment from Ignition Partners, Key Venture Partners, M/C Venture Partners and Trilogy Equity Partners, and $9 million in debt financing from Silicon Valley Bank and MMV Financial that will be used for growth and acquisitions, according to Airband.

Ruley described it as "natural consolidation" and said Airband would look to make additional acquisitions going forward.

"The investors of Sparplug and Airband came together and decided that their investment pieces were much stronger together than separate," he said. "Related to other roll-ups that have occurred, this is the largest of its kind, at least in our space, and we think natural consolidation is the way to move forward rather than raising more capital and building organically in markets. It takes a long time to build a new market, so strategic growth is the way."

As the channel for voice and data services grows, so too is the level of competition. The biggest difference he's seen lately, Ruley said, is that cable companies are now focused on business-class services and are starting to create pricing pressure at the lower end the business segments Airband serves.

"But our services are differentiated because they're guaranteed. They're not 'best effort,'" he said. "Some people will aspire to that maybe cheaper, 'best effort' solution, but we're clearly moving upmarket. As speeds go up, we become even more competitive. The demand is insatiable for access."