WisBusiness: New President Aims To Turn TDS Into A Broadband Company
By Brian E. Clark
Dave Wittwer, a long-time employee of TDS Telecommunication Corp., took over as president and CEO of the Madison-based company on Jan. 1. He replaced James Barr, who retired in December.
TDS provides service in 29 states, has 1.2 million customers and nearly $1 billion in revenues. Its holdings include TDS Telecom, TDS Metrocom and U.S. Cellular.
Wittwer, 45, has served as the companys chief financial officer and chief operating officer. His chief goal, he says, is to turn TDS into a broadband company.
WisBusiness.com Editor Brian E. Clark interviewed Wittwer recently in his office off the Beltline in Madison.
Brian Clark: Whats at the top of your agenda, now that you are in charge?
Dave Wittwer: Clearly this is a business in transformation. Our goal is to become a broadband company, which means taking a traditional land-line telephone company and transforming it into the broadband company of the future.
But thats not something that began on Jan. 1. I am continuing what Jim Barr and the management team put in place. I just need to take that good work and step it up.
Certainly this is a business that is impacted by enhanced competition. We have new competitors that arrive every day and we have customer needs that continue to expand and grow.
Clark: How have changes in the Internet affected TDS?
Wittwer: It has exploded what we have traditionally thought about in terms of needs for information and dependency. To be perfectly honest, that is a fantastic thing. I like selling a product that is changing peoples lives. I like having a flagship product that people relish.
So we are going to make sure we have the right technology bets, continue to manage well in this regulatory environment and make sure we provide good customer service and that we have the right people in the right jobs.
Clark: How many years have you been with the company?
Wittwer: Twenty-three years. I started when I was 12. (Chuckle.) I joined right out of college and started with internal audit. TDS was a much smaller company and one of the first things I was involved with was cellular business, which TDS was just entering.
We had a position in the Los Angeles market and we wanted to turn it up to prepare for the Summer Olympics of 1984. At the time, there was a lottery going on for cellular. Then, there were only going to be two providers in each market.
We had to determine which markets would be most valuable and which ones we wanted to try to pursue. That was my acclimation to the company. We had to figure out what this business was going to be worth and what we should be bidding on these licenses.
I was very, very lucky. I was in the right place at the right time and there were a lot of new things coming along.
Clark: Where are you from?
Wittwer: I am from Sauk City and went to UW-Whitewater. I got my undergraduate degree in accounting. After working for TDS for about seven years, I went back to get my masters from UW-Madison.
Clark: Is TDS planning to go into video as well?
Wittwer: We do have plans to go into video. We have a couple of markets in Tennessee where one is in the process and another is planned for launch. It is a very different video model. It is truly IP-based video.
It is not over the Internet from the standpoint of getting content, but using the broadband connection that the customers have to their homes to get TV video to them.
The very important distinction is that in traditional world, all channels are broadcast to the customer simultaneously. So your mindset is to select a channel from the list that is there. In an IP world, it is limitless because you are only going to select the channel that you want to have. Instead of broadcasting all the channels to you, you are choosing the channel you want to see.
What is important about that is that it is limitless. In a traditional cable model, there are limits. There is only so much that can go down a particular pipe at any point in time. Once you take that to the next level, you can imagine how you could broadcast things that are very important to smaller groups of customers.
If you have a small gated community whose customers are interested in having a channel assigned to looking at the community center, swimming pool or the front gate, that could easily be done in an IP-enabled world.
That is the path that we are going down. Having a broadband pipe will allow customers if they want to completely bypass that traditional video model to get video off the Internet.
Clark: Do you think there will be legislation to establish a state-wide video franchise model here in Wisconsin?
Wittwer: I think it is likely. We had hoped for some video legislation at the federal level, though it doesnt appear to be going forward. But there has been some talk about it in Wisconsin. If we could, I think it would be a great thing.
Clark: Why is it a good idea?
Wittwer: There are a couple of different reasons. It gives customers a choice. If you think about it, video is not difficult to provide in the current world other than the fact that there are franchising requirements that require the new entrant to walk into the shoes of the incumbent. Those rules were fine when that incumbent was put in place.
If you think about when that cable company first came to town, they were not a regulated utility and the city fathers put those franchises in place to insure that they would live up to certain expectations. They were making a commitment, saying that the streets would be torn up so customers could get access to this wonderful new world of cable TV. They put certain requirements in for that first entrant.
Simply applying that same set of rules to the subsequent entrants doesnt make any sense. To simply launch the new guy into that and to be an effective provider, the administrative cost of going through multiple franchise organizations doesnt make a lot of sense.
We think streamlined administration makes a lot of sense for us. It allows the customers to get service faster. IP is different and switch digital is different. We already are a regulated utility. We already have access to the rights of way.
Clark: Has cable taken away many voice customers from your company?
Wittwer: It has taken some, certainly. You start with 100 percent market share. So when there is a new entrant, primarily the cable company, you will have some losses.
We saw this coming for a long time. We wanted customers to have a choice. We did not try to put up regulatory roadblocks to stop them (the cable companies) from being there. That would have just alienated the customer.
We wanted to create an environment where the customer wants our products, service, price and packages. So we have been trying to create those packages. But clearly, you will lose some.
Clark: Who are your biggest competitors now?
Wittwer: Charter is the largest here in Wisconsin because they are the dominant company in the areas that we serve. Wireless is also a significant choice for many customers, if they dont see the value in a traditional land-line phone.
Clark: Have you been increasing your lines at a rate youre happy with?
Wittwer: Never happy enough. Clearly, what we see is that the communities that we serve in Wisconsin have been a good area for economic growth. If you look around Dane County, there has been a tremendous amount of business formation, customer growth and new subdivisions. That is good for our business.
But it comes at the expense of losing a customer we already had facilities to. So from a net perspective, you might gain three and lose two. But you still have the infrastructure cost of adding to those three because you are not going to walk away from markets.
Wed always like to grow faster, but it is not just about growing for growths sake. It has to be profitable and you have to be able to provide good service with fiduciary responsibility to the shareholder. You cant just say my job is top-line growth and somebody else will figure the rest out. Thats not what we are about.
Clark: Last year, the Wisconsin Legislature passed a bill that would give telecom companies tax benefits to get them to expand in underserved areas. Will you be doing anything with that?
Wittwer: It certainly factors into our plan. As I recall, it exempts our equipment costs from sales tax. But it is a relatively modest approach. Wisconsin is one of our primary markets and weve built out to a lot of the state already, so it probably has less value to us.
And most of our lines are in southern Wisconsin. But it is certainly a step in the right direction that people are recognizing the fact that we need some help. It will not cause us, though, to go out and over-build the state.
Clark: Looking into your crystal ball, where do you think TDS will be five years from now?
Wittwer: We will be well on our goal to being a broadband company. We will be the company that our customers look to that provides the broadband content and access that they are interested in. I think we will underestimate how both consumers and businesses will use the Internet.
We dont have an appreciation for how things will look in five years. But it will be something that customers want. They will say they cant imaging operating their homes our businesses without this robust connection.
Businesses will use broadband for applications they now keep in-house. It wont be unusual to see companies using broadband to get at their payroll, accounting or billing systems. Today they just have a broadband connection for Internet access.
Clark: In five years, what percentage of your business will be voice?
Wittwer: Clearly it will be less than it is today. Over time, we think that voice will be another application that will ride on that broadband connection. It wont look any different than your e-mail. It will just be something else that you will use that broadband connection to do.
There will be bundles and packages, so it wont be that discernible to say how much of this revenue stream comes from voice. Though we see more and more people using email to communicate, that doesnt mean voice is diminished. The medium they may use has changed and we see more and more minutes going over wireless.
People may actually be talking more than they were before. I think voice communication between humans will always be significant and we want to be in a position to make it easier for them to do that.
Clark: What are you doing to meet the needs of younger people, who seem to be able to do five electronic things at the same time.
Wittwer: Well, the desires of each generation are different. When building a house, younger people might say that the first thing that needs to be connected is broadband because that is the most important to them.
Clark: Can you talk about any interesting new products?
Wittwer: We have been trialing a product where we have introduced some wireless cameras inside the home that connect off customers wireless network. It allows the customer to do remote monitoring so they can keep an eye on their pet or their front door or whatever.
The value of that is leveraged only if you have a network within the home. TiVo boxes can be set up to be networked and appliances and your car will be set up that way, too. There are a lot of things that can be enabled when devices start talking to devices.
Clark: Will there be anything with the changes in Congress that will affect telecommunications?
Wittwer: There is always the risk of that. But change in Congress tends to move at a relatively slow pace. Fortunately, there is a general recognition that rural areas are different and that you need to continue to provide that universal service so that rural markets can continue to grow and develop.
That is important and it doesnt a matter what party is in power. There is complexity in how it is administered. But fundamentally, both parties recognize that the market itself wont support it.