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FORT LEE, NJ-Recently, consultants Cap Gemini Ernst & Young surveyed 128 CEOs, two-thirds of whom cited broadband connectivity as the “most significant immediate factor influencing the way customers will utilize technology over the next few years.” One conclusion was that broadband access to the Internet (any connection using means other than traditional dial-up) might be a savior for the downtrodden e-commerce.

The broadband business has taken some knocks of its own, currently carrying its own stigma. What’s happened to this promising industry?

“Some of the early entrants, known as BLECs, found that funding was readily available, and Wall Street and the capital markets had very different criteria for rewarding these companies,” says Joseph Varello, EVP of marketing and corporate development for Everest Broadband Networks, based here. “The criteria ultimately turned out to be wrong.

“Some business models that were flawed wound up getting funded,” Varello tells GlobeSt.com in an exclusive interview. “Signing up and wiring as many buildings as possible–a phenomenon known as the ‘land grab’–was the measuring stick. Where some made a mistake was in not paying more attention to how much they were spending on capital and operating expenses and whether they had a sustainable business model. Paying more attention to an expense-to-revenue model per building would’ve shown that this kind of business model just wasn’t workable.

“But access to additional capital seemed limitless,” he says. “Revenue and profitability were secondary to the land-grab mentality of the moment.”

What happened next was that the capital and IPO markets pretty much shut down, and things are still tight. “Wall Street now wanted to see revenue growth and a path to profitability rather than square footage signed up,” Varello points out. “You needn’t look farther than the current stock prices of Allied Riser and Cypress Communications to see the effect. Both have traded consistently under a dollar [per share] recently after being well over $30 a year ago. Both currently have a market cap that’s actually lower than the cash on their balance sheets.”

What about building owners skeptical about some of the industry’s players? “It’s important for them to understand that these problems are due either to the shift in money markets, or some providers’ flawed business plans,” Varello says. “The future of broadband and growth in tenant demand is as bright as ever.

“The simple answer to how we deal with this is execution and focus,” Varello says. “Ultimately, we will be judged on our ability to deliver. Competing successfully requires you to focus on defining a market niche or company differentiation, and on your return on investment.”

What about Everest’s metro New York/New Jersey home base? “The future is especially bright in this market, where Gigabyte Ethernet technology holds tremendous potential and fiber and bandwidth are becoming more available at decreasing prices,” he concludes. “Those burdened with the high cost and inflexibility of older technology and legacy networks won’t be able to capitalize. Those who can will be successful.”

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