“We’re still maniacally focused on small business customers,” says Terry Trout, one of Cbeyond’s founding employees, who serves as vice president of customer experience. When talking with new employees, Trout says she always mentions that Cbeyond has the same mission today that it had 10 years ago: to bring big business communications tools to smaller businesses at prices they can afford.
Cbeyond does that for more than 52,000 small business customers in 14 markets, with Boston one of the latest additions to the list. That’s a far cry from the 1,000 customers the company had garnered after a year in service. At that point, the company was offering services in just three markets – Dallas, Denver, and its initial market of Atlanta.
The company has made a business out of delivering an array of services via T1 connections. Today the company has 30 applications it integrates and delivers to its customers. Its solutions include voice, data, Hosted Microsoft (News - Alert) Exchange, data backup and mobile services, all of which customers can manage via Cbeyond’s customer portal, CbeyondOnline.
“With CbeyondOnline, our customers have the ability to make instantaneous updates and changes to their account, such as modifying e-mail accounts, setting up online bill payment or scheduling when to forward calls or backup important files,” says Trout. “Our small business customers told us they wanted features and functionality that they could manage, at their convenience, and without picking up the phone. We delivered.”
SIP trunking, a service for which Cbeyond considers itself a pioneer, is a central component to the company’s value proposition. And it added mobile services to its portfolio in 2006, and has been expanding on that ever since. (The HTC (News - Alert) Hero is among the latest addition to Cbeyond’s BeyondMobile service, which features a selection of smartphones, mobile devices, broadband access and cloud-based applications that run on a nationwide 3G network, and integrate with Cbeyond’s core IT and communications services.) Today, 37 percent of Cbeyond customers use its mobile services.
Rather than blanketing the country with services, Cbeyond has continued its effort to bring services to select markets and then doing all it can to capture and retain customers in those markets. The company calls this the “inch wide and a mile deep” strategy. Trout says this practice, and Cbeyond’s services, customer care and community outreach, have enabled the company to maintain its “super high” retention rate. (In reporting its second quarter 2010 financial details, Cbeyond said its monthly customer churn in the second quarter was 1.4 percent, the same as it was during the first quarter of 2010.)
“We’re good to each other, we’re good to our customers,” says Trout, adding that Cbeyond now employs between 1,600 and 1,700 staffers, all of which are encouraged to volunteer in the communities they serve.
“We thought it would be good for our employees, and we thought it would be good for the company,” she says, adding that the Cbeyond staff logged 13,000 outreach hours last year alone.
But while its mission, core services and culture have remained consistent over the past 10 years, a few things at Cbeyond have changed.
For example, Trout notes, this year Cbeyond altered its packages, each of which initially was based on the number of T1s a customer needed. Now, however, it offers regular and mobile editions of its packages – and those packages introduce some personalization. Cbeyond has designed packages to allow customers to add bandwidth or mobile or applications as they need them, instead of force-fitting them into a certain package, Trout explains.
Also new this year is Smart Start, an initiative through which Cbeyond does on-boarding of new customers by spending three hours to get the newbies comfortable with the service provider’s solutions.
And later this year Cbeyond expects to open a second call center, this one in Denver. That’s in addition to the call center in its home base of Atlanta. Trout says Cbeyond is proud to keep its call center operations on U.S. soil.
Cbeyond also fairly recently took steps to increase its customer responsiveness by arranging for “solutions advisors” to visit customers every six months or so. The idea here is for Cbeyond to keep abreast of the needs of customers, to understand what they’re using and not using, and how their needs have changed. Of course, this allows the company to be more active in addressing the requirements of customers with new or different services, for example.
These are the kinds of things that have enabled Cbeyond to add new customers despite what Cbeyond Chairman, President and CEO Jim Geiger (News - Alert) calls “the still-sluggish small business sector.”
During the second quarter, Cbeyond reported net customer additions of 1,787, an increase of 15.3 percent in total customers year-over-year. However, ARPU went down; it was $708 in the second quarter vs. $723 in the first quarter and $748 during the same quarter last year. The company says the decline in ARPU from the first quarter of 2010 was primarily due to the lower prices of the new packages introduced in 2010, the decline in customers’ demand for mobile hardware and services, decreased charges for usage above levels of voice minutes included in the company’s packages, and from customers reducing the number of additional lines and services with incremental charges. Cbeyond, which says these declines are related to the effects of the economic recession on customers and increased competitive pressures, has moved to offset some of that by selling additional applications.
“We are pleased to report continued strong results in adjusted EBITDA and free cash flow during the second quarter of 2010,” says Geiger, who also has been with Cbeyond from the start. “Our adjusted EBITDA of $18.4 million represents an increase of approximately 33 percent over the second quarter of 2009. We are also pleased to note that Cbeyond posted ‘free cash flow’ of $3.2 million in the second quarter, with free cash flow totaling $8.6 million in the first half of 2010. Free cash flow is a non-GAAP measure that we define as adjusted EBITDA less capital expenditures. While adjusted EBITDA and free cash flow results have developed largely as planned, revenue and ARPU have continued to be challenging in this tough economic and increasingly price-sensitive environment. Our efforts are focused on trying to optimize profitability in our target markets while continuing to grow and maintain our customer base.” NGN
The Cbeyond Network
Cbeyond uses a private IP network and softswitch technology to deliver communications services. It is a peer to the local phone company and supports the primary line telephone services including E911, operator services, line features such as call waiting, caller ID with name, three-way calling, call forward and more.
At customer locations Cbeyond installs and manages a Cisco (News - Alert) integrated access device, which connects to both a customer’s existing phone system and LAN. IP traffic runs across Cbeyond’s private Cisco-based backbone network, while handing off Internet data to Internet service provider partners and phone calls to the PSTN. No voice traffic ever goes over the Internet.
And since voice and data travel over the same path, when voice lines aren’t in use, the full T1 connection is used for data transfer.