FierceTelecom Leaders: Dave Pistacchio, President of Optimum Lightpath
September 8, 2009 — 11:38pm ET | By Sean Buckley
Dave Pistacchio may only have been named President of Cablevision's business services subsidiary Optimum Lightpath at the end of May, but the 15-year Cablevision veteran says the new position really is just a continuation of his work in transitioning the company to become a provider of Ethernet and IP-based services. Pistacchio says Optimum Lightpath under his leadership will continue to focus on providing these services to vertical market segments including financial, government, and health care. FierceTelecom recently caught up with Pistacchio to talk about the outlook for the company and the challenges of doing business in an economic downturn.
FierceTelecom: Dave, although you have been with Cablevision and Optimum Lightpath collectively for over 15 years, you recently took the reigns as Optimum Lightpath's president. Tell us about your first few months on the job.
Pistacchio: Well, the first month on the job is much like the last four years on the job in that I am focused on continuing to drive the business and innovation. The position is much more of a title promotion. In 2005, we made the transition to Ethernet, and we've been driving Ethernet and Ethernet-based products aggressively ever since. It continues to be a challenging marketplace and we continue to be successful in driving Ethernet and helping our customers leverage the technology to power their business. It's very much more of the same.
FierceTelecom: Okay, with five years under your belt at Optimum Lightpath, what are your goals for the rest of 2009 and 2010?
Pistacchio: Well, certainly Ethernet is at the core of our strategy and we'll continue to drive that. More and more, we're working with partners and our customers to enable applications over the Ethernet platform. I think you have heard of our relationship with GetWellNetwork, which is a health care application to improve the clinical outcome for health care providers. We're looking at other applications including a managed voice hosting product and we also have a managed video transport product.
In healthcare, financial and the general enterprise space, we're looking at what are the applications that enable our customers to do more for less by leveraging the Ethernet network. The Ethernet network provides them with clear transparency from site to site unlike legacy technologies. They are able to consolidate infrastructure and run applications much more efficiently.
FierceTelecom: Staying on the Ethernet topic, Optimum Lightpath saw Ethernet revenue increase 48 percent over last year's first quarter. What drove that growth?
Pistacchio: I think there are a few things. Clearly, the benefits Ethernet can bring versus TDM are its efficiency, scalability, reliability and the usage it enables. A lot of CIOs are faced with the reduced budgets to make their data centers more efficient and Ethernet is a great solution for that. Additionally, there are a lot more sales of larger bandwidth units. When we first started in 2005, there were a handful of GigE sales, but now GigE has become the new 10 Mbps. We're selling lots and lots of GigE and selling lots of high-end optical services. I think there's a lot of high-end bandwidth requirements in Ethernet which is driving some of that growth. That again is due to customers needing to do things like consolidate infrastructure and run applications that they previously had to have multiple copies of.
FierceTelecom: Are there specific markets segments where the need for Ethernet is ripe?
Pistacchio: Health care has been consistent in terms of its use of telecom technology. Financial markets certainly are strong even in the downtown as they think about how to save money, so for them Ethernet has a compelling story. The media transport marketplace is another one. Traditionally, media transport was done over 270 circuits, and we were the first service provider to do it over Ethernet. We're not pricing our services based on mileage. Instead, we're offering flat rate pricing and very compelling price points for Ethernet to carry video.
I will tell you our number one selling product is our voice/Internet bundle where we are packaging our Internet access with bundled voice minutes. They are obviously not spending the kind of money like they would on GigE, but when you're selling 20 Mbps 50,000-unit bundles it's very popular because its flat rate and very predictable.
FierceTelecom: When you say voice minutes, do you mean IP voice or is it traditional TDM voice?
Pistacchio: Whether those voice minutes are originating on an IP platform or a PBX, what they are buying from us is a package of calling minutes. We do support both, of course, as our customers move to IP, we are helping them do so with our hosted and premise-based VoIP platforms. As our customers move to IP, we're essentially supporting their calling minutes regardless of how they originate.
FierceTelecom: With the economy not in the best shape, many service providers reported some slowdowns in the recent quarter. Has that had a major effect on Optimum Lightpath?
Pistacchio: What we have seen in the first half of the year is that some of the sales take longer, especially in the larger enterprises. There's a lot more scrutiny in some deals. That just means you need a lot more deals in your pipeline to meet your objectives. We're on track to light the same number of buildings with fiber this year. I think the answer is while it takes more work to close deals, the deals are there and they are there because of the value proposition. We're seeing good growth and hopefully that will continue because it seems like the economy is starting to stabilize a bit.
FierceTelecom: While there's a lot of focus on the large and SMB markets, I am hearing more about the mid-market opportunities. Are you seeing more of this opportunity?
Pistacchio: We think there's a huge opportunity in the mid-sized business market to provide service and value that the incumbents have struggled to get. The ILECs traditionally have done a reasonably good job with their large enterprise clients, but the mid-market companies have been neglected. When they call into a customer call center, they are getting routed to an IVR in Texas and finally get to talk to someone who can't solve their problems. They are also the ones that have pricing that's all over the map.
We've attacked that marketplace with what they want: excellent customer service and flat rate pricing. We think in all cases we have seen these companies are focused on simplifying their life. They are companies that don't have huge staffs to analyze their telecom spending. They need help so we designed our product set and our approach around helping them as well as a very aggressive approach to large businesses.
FierceTelecom: With all of the fiber that Optimum Lightpath has put in the ground over the years, I have to ask how is the wholesale business doing these days?
Pistacchio: That's an interesting business. It's not entirely our focus. Our focus for the last four years has been really on the enterprise. We consider ourselves much more of an enterprise company than a carrier's carrier company. While we have some wholesale business, it represents a fairly small percentage of our revenue stream. While we do have relationships with other wireless and wireline carriers, we're not seeing a huge amount of growth or a reduction of our business there either.
The wireless backhaul opportunity is a very interesting situation in our market because it's very expensive to build in our market. Then, there's this pressure between what the wireless backhaul guys want to pay and how much bandwidth they need versus what it costs to light all of these towers. That pressure continues. We do deals where it makes sense and walk away from deals where it does not make sense.
FierceTelecom: Along with providing traditional telecom services, we're hearing more about service providers offering more professional services to customers. Is Optimum Lightpath going down that path?
Pistacchio: There are a lot of things you can do when you talk about professional services. Some of those have been tried by lots of other companies and have not been successful. We're very interested in looking at those things and we have relationships with professional services companies to help with the deployment of our hosted and premise-based platform. We continue to think about ways in which we can improve the product portfolio and offer new capabilities.
Honestly, we're very careful about not going too far afield into places where it has not been proven to be successful, unless we have secret sauce that will make us more successful than others have been. We do think we have a different philosophy and would not rule out a play in professional services, but I don't have anything on the product roadmap for the next 12 months related to professional services.