Feature: Gordon Martin

Posted: 03/2002


Gordon Martin
On Blocking & Tackling at Qwest

By Khali Henderson

Gordon Martin

Last fall, Gordon
Martin left his post as the first CEO of the utility-network wholesaler AFN
Communications Inc. (
to become executive vice president of global wholesale markets for Qwest
Communications International Inc. (

His new position
is a bit of dij` vu since the telecom veteran has been in the wholesale
business since the mid-80s working for WilTel, Worldcom and Williams
Communications in similar capacities.

At Qwest, Martin
replaces Greg Casey, who retired in January after showing his successor the
ropes. PHONE+ caught up with Martin just three weeks after he began to fly solo
to find out why he left AFN, why he joined Qwest, his views on UNE-P and
post-271 competition and what his plans are for the division in 2002.

Q: Why did you
leave your post at AFN and why did you go to Qwest?

A: First of
all, this opportunity for me personally and professionally is just outstanding.
I have always viewed Qwest as having a leadership position in wholesale. My
business unit at Qwest is roughly 25 percent of the revenue and is a key part of
the business. So, why leave as CEO of AFN and join Qwest? Its just a great
opportunity to be in a leadership position at an important business unit at a
thriving company.

Secondly, part of
the personal career growth and really the unique opportunity is to come in and
have the responsibility for the 14-state network so having local
responsibility is something that is career growth for me, and very sincerely an
intellectual challenge, all those types of things.

But, I think
something very relevant for you [and] something very relevant for your readers,
so to speak, is that I have a personal passion for the wholesale business. I
fundamentally believe that at Qwest I can bring significant value to the entire
industry. What does that mean? What that means is that I already have been very
proactive in making contact with a number of CLECs and a number of other
companies and started to further the process of Qwest working very aggressively
to help them succeed with their business plans. So, its a long way of saying,
here at Qwest I am now part of an operation that has the scope and scale to
really have a significant impact on the industry, as we are local to global. The
depth and breadth of what we can do can have a real impact on the industry.
Thats another part of the attraction for me.

Q: How does
your previous experience translate to what you are doing at Qwest? On the
surface there seems to be a match between the roles, but looking at Qwest as a
Bell company, there seems to be some contrast there as well.<$>

A: Two
thoughts. First of all, I am being blunt with you. Qwest is not an RBOC. Qwest
is full service provider local to global. In our wholesale services, yes, we
do provide access in a 14-state region and regulated private line services. But
to the same companies, we provide out-of region private line facilities,
international capacity, minutes of use, IP transit services, etc. So the picture
that I need to paint is that Qwest is a full-service provider in particular in
the wholesale arena. So, my previous experience — Ive been in the wholesale
business since 1986 is as I like to articulate it has all been additive to
now reaching this point where not only am I supporting my customers and a lot of
activity in long-haul services, but get to add to that bucket, the local
relationship. So, its really exciting in that regard.

Now, at this point
in time for Qwest you might reverse it why would they be interested in
me? Quite frankly, Qwest is a full service provider. Yes, it is the combined
organizations of Qwest and USWest, but here at Qwest we have a wide range of
experience and a lot of that experience is in the environments where I have
spent time and that is in growth segments. The wholesale industry being part of
the growth segment at Qwest means that weve got to grow our business at a
point in time when we have regulated price pressure on access and local
facilities, but have a great opportunity in the market to bring our national and
global assets to bear on the industry.

I view this as one
of those moves that is additive on the experiences of WilTel, WorldCom, Williams
Communications and AFN. The depth and breadth of responsibility given the size
and magnitude of this business is quite frankly a step up for me in terms of the
things that I am doing.

You have talked a few times about the addition of the local responsibility. How
do you reconcile the two tasks dealing with the local regulated product as
opposed to what you have been doing all these years in long haul?

A: The only
difference in a private line facility local is regulation on your pricing. We
are a company that serves the needs of our customers locally and globally. The
only difference in the 14-state region is that you have regulation that mandates
the price of the service and some of the quality attributes.

think I am getting to your question. Is it difficult? No [it is not],
particularly within the context of what we are doing at Qwest, which is being a
full-service provider. When I sit down with 
— lets take a hypothetical example WorldCom, we are providing
significant access services to them in our 14-state region, they are buying
local facilities from us local private line, entrance and other facilities,
but we are also presenting to them our full breadth of services nationally and

Q: Are you also
in charge of UNE-P?

A: Yes. We
are working with CLECs. A personal passion of mine is to continue to drive at
Qwest successful deployment of resold services into the industry itself and most
importantly the CLECs. So, yes, I have that responsibility. We work very closely
with them and we have had great strides in our service delivery in that area.

Q: Can you be
more specific?

A: In all
areas of operational support from systems to process we have improvement
in terms of our ability to deliver in a timely manner for our CLEC customers the
facilities they have ordered. That is out in the public record in terms of 271

I approach UNE-P
from a product and service perspective. The fact that we have that product,
its in place to support the business plans of our customers. I actually have
found and I dont mean to overstate this my views are very refreshing
for our customers as someone who has been on the outside of the regulated
business and who is now on the inside.

Q: That
brings up an interesting point. I recently heard Qwest CEO Joe Nacchio say UNE-P
was a flawed way of achieving local competition. Given that view and the fact
that you have to do it anyway, do you find this a difficult task?

A: The
reason it is flawed is that it is purely regulated approach. Market forces
sale and resale should be in place in order to build the economic models
around the way we do business. UNE-P and some other approaches are sometimes
flawed because they are built around regulation. Sometimes a regulated product
isnt what the end user needs. We aggressively work with our CLEC partners to
make sure they are getting in their product toolkit the depth and breadth of
services that they need to be successful.

Listen, Qwest, I
can tell you when I interviewed for this job, when I came to this company, I
would not be here if we were not serious about the wholesale business. We are
going to present the assets of this company for purchase and resale into their
business plans local to global.

Q: You made
some progress in getting 271 approvals on the state level. Once those approvals
are gained and this whole you have in the 14 states is filled, will there still
be an emphasis on wholesale?

A: Once
again, you have to look at the metrics of the company. I keep emphasizing that
you are a quarter of the business. You represent 25 percent of the business.
Anything that Joe Nacchio messages and directs is consistent with how we apply
it in the wholesale business. We have a wonderful set of assets. Those assets
will be presented to the market for their use. So the good news about 271 for my
business unit and the industry is that post-271, we will be providing a full
range of services, including long-haul services.

If you want to go
to the highest order for your readership and the industry, the key message is
that Qwest is serious about wholesaling. We have a great set of assets and we
will be presenting those assets to customers and prospects that want to utilize

Q: Nacchio
has projected 4 percent to 5 percent growth in wholesale revenues this year.
What is your plan to achieve that?

A: There
are two challenges. The first challenge is that we have regulated pricing
pressure. We have mandated access pricing so we have price decreases built into
our plan. On an unregulated basis, we have to some degree not as bad as in
years past continued price pressure in the market.

What is our plan?
The exciting and really good news is that we have relationships with virtually
every player in the industry from large to small. A lot of our growth comes in
the consistent message I have been giving you today, which is if you have an
access relationship with that party, then leverage that access relationship by
introducing the depth and breadth of services that we have here at Qwest.
Broadening our services to what is an existing and growing customer base is key
strategy No. 1. Key strategy No. 2 is
somewhat similar with the full-service provider, but what we are seeing with the
financial pressure in the industry is what I like to refer to as CAPEX and
financial constraint. Fortunately we have a strong set of assets that can be
utilized by those that have limited capital. A term that you will see us
introduce is doing the network outsourcing for people because we have scope and
scale and we still have CAPEX thats being deployed, so we are going to be
here and we are financially strong. What we can do is outsource the needs of
customers and prospects literally on a full-service basis. Soup to nuts, I can
sit down with a company and provide local, long distance and a full suite of
data services on a turnkey basis.

Really, the third
plan is to target growth segments — wireless is growing significantly,
broadband access, some of the cable activities and other activities supporting
what ewe like to refer to as the post-271 ILEC and RBOC. So [we will be]
providing services to the post-271Verizon, SBC and supporting the CenturyTels
and AllTels. Then, we are really making some great inroads internationally. What
we are finding is that PTTs and other international companies are very
interested in Qwest given our scope, scale and stability, and the fact that we
now have connectivity on a global basis to reach them. So voice and IP services,
private lines on the international front are growth areas.

We are moving a
big number. Four to 5 percent growth on a $5 billion base is significant. But we
see the opportunities in the market to get there, and the team is excited about
what products and services we have in our toolkit to help meet the needs of our
customers and reach those revenue objectives.

Q: On the
other side of Qwests indirect channel house, there are a lot of changes going
on with the partner program in terms of personnel and policy. Are you doing
something similar?

A: Thats
a great question. Our strategy is back to basics. Youve heard me consistently
say we have assets in place, we have products and services. Back to basics means
very focused on account management, understanding the needs of our customer,
mapping our assets, products and services into that need to build a successful
relationship. So, not a lot of changes really a focus on solid recurring
business with solid companies is the approach. IT doesnt sound very sexy.
Its basic blocking and tackling but its building on the relationships that
exist, its helping new relationships emerge and its enabling them with
capacity, with minutes of use, with IP packets, with frame PVCs, with ATM PVCs,
with local access, with entrance facilities. I think you can see the depth and
breadth of what we can offer. So no major changes, its 
really managing the quality relationships we have in place and building
and growing new relationships and particular emphasis on full service provider
to those companies because we all know that this industry has had financial and
CAPEX constraints and despite some of the messaging some of the doom and
gloom that is out there, there is growth in this market and with the CAPEX
constraints, there are not a lot of full-service providers that can meet their
needs. So, its a good news scenario for us.

Q: To make a
clarification, there are no organizational changes that have occurred or are

A: No.
Really, realigned to support new revenue growth is all that I have done.

Q: What does
that mean? Have there been personnel or structural changes?

A: Minimal
personnel changes, some structural changes in order to streamline the support of
our frontline sales team. So more classic — lets just make certain the sales
person is freed up to sell and that we have all the support behind the
salesperson that they need to be very successful.

Q: Do you
have any plans to add people or eliminate people in 2002?

A: Similar
to the entire industry, we have had to streamline the team, meaning we have had
some workforce reductions. You have to think through the logic: We actually have
fewer customers given the state of the industry. 
So you have fewer customers but larger customers. There are areas where
we have eliminated some positions. My view is that 2002 will be the flattening
out of the curve in the industry and we will see position growth in 2003
timeframe. We are very focused on managing our business and managing our
expenses. We wont have headcount additions in 2002. We have eliminated a
number of positions [as announced publicly in December 2001] in streamlining our
operation. I see growth as we continue to grow the business in 2003.

Q: When I spoke
to you while you were at AFN, you mentioned plans to get into bandwidth trading.
Now that it has been stalled, what is its future?

A: You
really have two things going on. First of all, the financial and CAPEX
constraints have caused a relook at the investment you would have to make to
have your systems in place. I have always and will continue to be on that
prognosticates that some of the trading attributes will be applied. I have
always been a predictor of the 2005-plus timeframe. B, but at the end of the
day, what has been recognized is the complexity of what we do
interconnecting services on and end-to-end basis, including local facilities,
long-haul facilities of what isnt a fungible product. Remember I am an old
energy person. A fungible product means in the pipe business you can put a
gallon of gas in in Houston and in the same hour take out a gallon of gas in
Chicago and it is of similar quality. That is much different than an IP Packet.
An IP packet has to go in in Houston and it has to be transported to Chicago.
So, a lot of the hype around bandwidth trading never materialized. We do all use
risk-management techniques to understand our portfolio of services and how we
present them to the market. Quite frankly, in my Williams days, we would tell
the trading group that we were doing bandwidth trading, we just didnt call it

Q: What did you
call it?

A: Well, we
do complex deal structures, right? We buy and sell services in between and
amongst a number of carriers. We just dont do it at a trading desk and we
dont do it on a common agreement that all parties in the industry are privy
to. We do it in a very relational manner.

Q: So its
more bilateral instead of multilateral?

Absolutely. Thats correct. The industry didnt take on multilateral so to
speak and thats a long discussion as to why. Sincerely, the industry didnt
take and you had a number of forces in play also. At the same time the industry
didnt take, our entire industry got put under the financial microscope and
the capital constraint that exists, and that I believe caused any of the trading
thought to be put to bed probably quicker than a lot of us would have thought.

Do you think it will be resurrected at anytime?

A: I really
dont. You heard me say some of the attributes of energy trading and commodity
trading will be put to work. Some of the risk-management thought. At the end of
the day, the complexity of interconnecting on an end-to-end basis really
eliminates the commoditization and liquidity that those that were trying to push
trading into the market, it makes it too difficult for it to happen. Weve
seen that a number of people that have entered to try to create that liquidity
have now exited.

Q: To wrap up,
are there any specific initiatives that we might see for the remainder of the

A: There is
some public information. I wont get specific. You heard an emphasis on
supporting the post-271 RBOC. Theres only four of them so you can dig and
understand that. We will be active there. The good news is that after Qwest has
271 relief, we will be adding services in the states at the point in time that
we have regulated relief. And, sincerely, from my perspective and as I think I
have said consistently, youre really back to basics, blocking and tackling
and presenting full services. One of the things we will be doing is making
certain that a question that you have asked consistently on this call is
answered and that is: Qwest is serious about the wholesale business. We are not
going to be like some who have had the starts and stops in wholesaling. Our
strategy is that we have a wonderful set of assets. We will present that to the
market on a wholesale basis and we will support I dont want to
exaggerate, but I will say it any and all viable companies who want to
leverage what we have in a sound business relationship. That may not hit what
you are looking for, which is some pizzazz going forward, but giving you a
signal of what you are going to start hearing us say and do in the market is: we
are serious about wholesaling, we are here, we are going to be here and there
arent going to be starts and stops with us. You build a relationship with us.
We will bolt onto your business plan and work on a win-win relationship in order
for you to be successful.

And, the reason I
am so passionate about this is just as you articulated earlier, is Qwest an RBOC.
The answer is to some degree, yes, but to a greater degree we are a full service
provider. We have a 14-state network that has regulation against it, but you
cant ignore the fact that we are a global service provider and full-service
provider voice, data, video.

Q: To follow
up on what you have said. There is a concern in the marketplace that the Bell
legacy and its goal to attain 271 approvals are really going to take precedence
over other motivations for doing things. So they are concerned that you are
going to provide as much support as you can until you get your approvals, and
then move on.

A: Its
absolutely not the case. Like I said, Ive had the opportunity to talk to a
number of people about that. At the end of the day, you have to recognize that
the wholesale part of this business is critical to creating shareholder value
for Qwest. It is a large chunk, a large percentage of the overall business. We
do contribute to earnings in a significant way and we are being asked to
continue to contribute in a significant way in the long-range plan.

Q: I can see
that especially since you talked about supporting the other Bells that have
gained in-region entry and are trying to patch together a nationwide solution.
But what I think concerns most people is what happens to what would be consider
Qwest Classic bread and butter the smaller providers?

A: We are
actually expanding our relationships with those smaller players where we might
be providing them UNE-P and we may be terminating minutes for them on a
nationwide and global basis. So, I think the answer continues to reside in the
consistent message that Qwest is going to be in the wholesale business. We have
a great set of assets that we put into the hands of the industry itself on a
wholesale basis. We do it in a rational manner. We do it in win-win
relationships where the other party can take our facilities and services and
resell them, rebrand them whatever term makes sense in a competitive
manner in the market. We have to price to a market point where those companies
can take our facilities and compete. IT is a long answer to the question, but
the strategy is to be a wholesale provider, to provide our full range of
services to those who desire them.

Q: Do you
think this message that you are trying to get out, is it a main goal? And, are
you headed up stream with this?

A: Is it a
main goal? Yes. Its to make sure that there is clarity.

Q: Are you
finding your customers worried about these issues?

A: No. They
dont ask in a concerned manner. What they really want to know: Is Qwest
serious about wholesale long term because quite frankly they might have a
wholesale relationship that is at risk today because of the financial state of
the industry. Im not trying to mix words. The fact is that Qwest has the
scope and scale and the financial wherewithal to be a survivor in this industry.
Given the fact that we are serious about becoming a wholesale provider, we
become the natural choice to build a business plan around.

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