Teligent's Mandl Sizes Up a Tough Market

FRAMINGHAM (03/06/2000) - Teligent Inc., a national facilities-based competitive local exchange carrier (CLEC), launched its first offerings just 16 months ago with Chairman and CEO Alex Mandl at the helm. Mandl started Teligent in 1996 after a five-year stint with AT&T, where he served as president and chief operating officer. Today, Teligent offers service in 40 markets and has more than 10,000 customers. Mandl recently talked with Network World Senior Editor Denise Pappalardo and Editor in Chief John Dix about what it takes to be competitive in today's vibrant market.

NW: How do you view the competitive landscape? Are the CLECs starting to bump into each other?

Mandl: We can't lose sight of the fact that 95 percent-plus of all local voice services are still served by monopoly companies. Even though there are a lot of CLECs, the revenue from these companies only amounts to a tiny percentage of the overall opportunity. There is plenty of room for companies to grow and go after the regional Bell operating companies' very large slice of the local services business. I would not describe the field as overly crowded.

NW: Given the number of new players, are we ultimately looking at a shakeout?

Mandl: There is no question the industry will continue to consolidate in a fairly aggressive way. I think you'll see consolidation among the CLECs themselves, just by virtue of the need to build critical mass and to accelerate growth. And I think there will be activity between the CLECs and the major carriers. Over the next five years or so you'll see continuous partnering, merging and acquiring activity as the various companies position themselves.

NW: Cost is one of Teligent's advantages. What can users expect?

Mandl: For the most part, customers will pay 30 percent less than what they are paying today for local voice and Internet access. Long-distance has a slightly different structure, but again it's a competitive discount.

NW: Do you sell mostly based on price?

Mandl: Price gets you in the door and gets the customers' attention. But what keeps the customer and allows you to grow with the customer are things such as value-added services, high-quality customer care and providing the bandwidth capabilities that the customers are not getting today.

NW: Eighty to 85 percent of your revenue is still from voice. Are you one of those who believes someday voice will be free?

Mandl: There are very few things that are free. It might become less expensive, but it's not going to be free. As voice becomes part of the digital stream, it will be priced differently, and it will be harder to measure the future growth of voice using traditional voice metrics.

NW: Is Teligent testing or using any voice-over-IP technology?

Mandl: We're doing some testing. Our main architecture is ATM today, but we are building our own ISP network. As we continue to build that out, voice over IP will be part of the consideration.

NW: Do you think voice over IP is the future?

Mandl: If you ask will it be all voice over IP in the next three years, I don't believe that. But in seven to 10 years, the odds are that a high percentage of voice traffic will travel over IP.

NW: When do you hope to have all of your customers on Teligent's own Internet backbone?

Mandl: Roughly by mid-June, at the latest.

NW: Teligent got a cash infusion from Microsoft last year. Does the relationship go beyond that?

Mandl: It does. Microsoft has made these types of investments in a number of companies. Basically they hope their investment makes money, and so far it certainly has. But as part of the investment, Microsoft is looking for partnership opportunities that will allow us to leverage each other's capabilities. We're still defining and working through that, but basically it means we can either cross-sell or we can bundle certain Microsoft software with our services. There is an array of opportunities.

NW: Where does Teligent draw the line between being a carrier and an application service provider (ASP)?

Mandl: There is not a sharp line there. But the more value-added services you offer, such as Web-based services, the stronger the relationship with your customer. Our strategy is one of moving up the value chain.

NW: Where will you stop? Will you become a full-fledged ASP or simply offer services that are close to your core competencies?

Mandl: We'll have to see how we can best serve our customers. You want to walk before you run. Clearly, providing a core set of application services is where we would start. That will be done through partnerships, maybe some acquisitions, and through some of our own internal development.

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