Bandwidth Brothers

Posted on Jun 1, 2010 :: Cover Story
Posted by , Insight on Business Staff Writer

Pat and Rob Riordan

Pat calls Rob the futurist. Rob calls Pat the rock.

Nsight CEO Pat Riordan credits his younger brother for ushering the family’s small regional phone company into the high-tech communications world in the 1980s. Back then, a lot of supposedly smart people thought his idea was a pipe dream.
Rob Riordan, executive vice president, credits Pat for keeping the 100-year-old family enterprise thriving through dizzying change – the sort of change that has befuddled much larger companies.

It’s the unique blend of the brothers’ personalities and talent that has kept Nsight and its subsidiaries, including Cellcom and Nsight Telservices on the global communications map, says one expert with a finger on the pulse of the industry.

“It’s obviously worked very well for Cellcom. They’re not risk averse, but they keep their feet very firmly planted on the ground in terms of measuring opportunity versus risk,” says Elliott Drucker, a nationally renowned communications guru and president of Kirkland, Wash.-based Drucker Associates.

Drucker (yes, he’s related to the late business management guru Peter Drucker – a nephew, to be exact), worked as a consultant for the Riordans in the 1990s, when the company was emerging as a technological leader in wireless telecommunications. He was impressed with the brothers’ willingness to invest in the technology and infrastructure necessary to promote future growth.

“They recognized that this business of mobile telecommunications is very technology centric and they sought out the best support they could find in a variety of areas,” says Drucker. “Being on top of the technology is what really put them in a strong position right from the start.”

That’s no small feat for a regional company competing against national and international giants like Verizon, T-Mobile, Sprint and U.S. Cellular. That the Riordans have been able to do so is a testament to the foresight and commitment they brought to bear.

“They’ve certainly done a good job of customer service, they know their customers and they know how to market,” says Drucker. “But where they excel is they have developed their technology and their network layout. It’s optimized for their unique locale. And they’ve not skimped on resources. Their network was designed for growth, as opposed to doing it in the lowest cost manner, as some carriers have done. When those carriers had to grow to meet unexpected demand, their networks became a liability. Cellcom took a different approach, which was to spend a little bit more money up front in terms of network layout and develop one that was much more amenable to capacity growth.”

The Riordans also embraced innovation to a remarkable degree, Drucker adds.
“They have not been driven by their vendors. They have in fact driven their vendors and been very innovative at trying new things,” he says. “Because of their commitment to service and quality, they’ve engendered a great deal of customer loyalty. They haven’t had a lot of leakage to other carriers”

Cellcom’s “churn rate” – a measure of how many customers drop a company’s service – is just 0.8 percent, says Pat Riordan. Most mobile carriers have churn rates of 2 percent or higher, according to industry sources.

For anyone who thinks the analog “bag phones” of the 1990s are ancient history, consider what mobile telecommunications looked like a decade earlier. That’s when the Riordans’ company – then known as Northeast Communications – launched a wireless communications subsidiary, called it Cellcom and began providing cellular phone service.

“Where mobile telecommunications technology would go was probably not obvious to most people at the time in terms of market penetration,” says Drucker, who was then director of research for US West/New Vector Group and one of a relative handful of people who had some notion of the communications future. “Mobile communications had not become an integral part of everyone’s life the way it is today. No one, including myself, would have seen the extent it would reach, but a few people saw the potential.”

Somehow, Rob Riordan was one of them. Pat Riordan was certain enough of his brother’s intuition that he was ready to take the plunge into then-uncharted waters. For the Riordan brothers, it was a defining moment for their family-run enterprise, which dates back to 1910.
The company got its start when a group of Pulaski business people formed the Pulaski Merchants and Farmers Telephone Co. to provide telephone service to the rural community. The first Riordan came on board in 1923, when Daniel E. Riordan – Pat and Rob’s grandfather – was elected to the board of directors. Pat and Rob’s uncle, Robert E. Riordan, joined the company in 1927.

By the 1950s, when Robert E. Riordan became president, the company was providing dial telephone service for Krakow, Mill Center and Pulaski, and installed its 1,000th telephone. During that period, Pat and Rob’s father, Ray, a Madison-based accountant, served as secretary-treasurer of the company. In 1968, three years after Pulaski Merchants and Farmers Telephone acquired the Oneida Telephone Company, the company changed its name to Northeast Telephone Co. In 1999, the company became known as Nsight.

The Riordan brothers cut their teeth on telecommunications in the 1950s, when they would spend part of their summers in Pulaski at “the old house” that served as company headquarters. The house featured a living area, kitchen and four bedrooms on the second floor, as well as the company’s switchboard.

“When our aunt and uncle would leave they would always say, ‘Now don’t bother the operators,’ so as soon as they left it was our clue to make a beeline for the operators,” says Pat. “We would listen to them and watch them work. That was our introduction to the industry.”
Pat joined the firm in 1972 and became general manager in 1975. After graduating from UW-Platteville with a degree in radio and television engineering, Rob followed in 1977 to work in the engineering department. Pat credits Rob for seeing into the future to recognize the potential that led the company out of the mainstream of telephone service to venture into cable television, mobile telephone service and Internet services. Rob maintains that Pat already had futuristic ideas of his own.

“When I came along, Pat had already been thinking about getting us ahead of this basic telephone idea,” says Rob. “One of the first things Pat came to me with was this screwy idea that since I had an engineering degree and had been involved with cable television at the UW-Platteville, why don’t we look at running cable in Pulaski?”

That became Northeast Telephone’s first outside-the-box venture in 1982 when it established Net Cable Inc. to provide cable television service to Pulaski.

The giant leap forward came in 1986, when the Riordans formed a subsidiary called Cellcom to provide wireless communications services.

“When I joined the company in 1972, we had revenue of less than $1million. Last year’s revenue totaled $166 million,” says Pat. “Most of that growth has occurred because of wireless services, which we started providing in 1987. That’s made a huge difference, because about 86 percent of our revenue comes through wireless.”

Though it might seem obvious in hindsight, it was hardly a no-brainer at the time.
“People said we were crazy at the time for getting into that,” says Pat. “People told us in no uncertain terms that we were just throwing our money away. When we went in to talk to the first banker to get some money to do this, he said, ‘Pat, I know you’re Irish and you’re lucky, but there’s no way we’re going to give you any money for this wireless thing.’ There were many more naysayers than positive support and there was a lot of reason for that. It was something new and the price of a phone when it first came out was $3,000.”

“When we started the cellular business one of our salesmen came to us and said, ‘After I sell my 500th cell phone and there’s no one left to buy one, am I still going to have a job?’ We told him we expected to sell a lot more than 500 cell phones,” says Rob.
In 2001, Cellcom sold its 200,000th cell phone.

A large part of the Riordans’ strategy was to lower the cost of cellular service while improving on the quality and reliability.

“We looked at it and said the concept is not so much about cell phones as it is about personal communication,” says Rob. “People wanted to communicate where they were. The reason they weren’t using mobile communication at that time is that it was very expensive and it didn’t work very well. We saw that if we installed more towers and built more bandwidth, we could provide a better and lower cost service. If we could get it down to, say, 39 cents a minute instead of several dollars per minute, then it could be something that people would use.”
Drucker says that has been the key to Cellcom’s success.

“That actually does point to a particular strategy that Cellcom used and that a lot of carriers dismissed,” says Drucker. “That ability to retain the quality and performance of their network as they grew is probably the reason they were able to retain market share, even as the number of carriers grew and even as a number of large carriers moved into their area.”

By the early 1990s, with their mobile telecommunications business well underway, the Riordans ventured into the next communications frontier – a little invention just then becoming known as the Internet. Not surprisingly, they started in Pulaski. In 1994, the Riordans launched NetNet to provide Internet service to the school district.

In the late 1990s, concerned about protecting the integrity and reliability of their cellular tower network, the Riordans began constructing a redundant fiber-optic cable ring in Brown County.
“Although it was primarily designed to cover our own towers, the fiber ring passed by about 80 percent of the major businesses in the county, so that gave us the opportunity to provide competitive fiber-optic services to those businesses,” says Pat.

Thus was born Nsight Telservices, a subsidiary designed to provide high-speed communication services to homes and businesses. In 1999, Northeast Telephone changed its name to Nsight, with Cellcom and Nsight Telservices as subsidiaries.

Since then Nsight has developed a corporate client list that includes Boldt Corp., Schenck Business Solutions, Georgia Pacific, Robinson Metal and Thrivent Financial for Lutherans.
Tom Reinhold, director of network services at Thrivent Financial for Lutherans, says his company chose to work with Nsight in 2004 after thorough analysis of the options.
“Our first joint project was to create an alternative path for our network connectivity for our voice and data circuit and we’ve spent some time over the past six years continuing to enhance our network capability through Nsight. We now have a network that connects all five of our locations here in the Appleton area,” says Reinhold. “For any smaller company like Nsight, it’s always a challenge to compete with the larger carriers. However, we’re very selective when it comes to who we work with. We look at flexibility, we look at adaptability and the ability to execute. Those were the qualities we saw in Nsight.”

Pat and Rob Riordan say they want to continue to be at the forefront of communication technology. Pat was recently elected secretary of the Cellular Telecommunications and Internet Association (CTIA) board of directors. Rob has been a national leader in the commercial development of femtocell technology – wireless access points designed to improve coverage and capacity for homes and small businesses. He was one of three speakers at a recent Femto Forum sponsored by the CTIA.

Like others carriers, Cellcom has promoted smart-phone technology and all the attendant applications that have captured the public imagination. However, the Riordans insist, while technologies can be copied, a commitment to infrastructure and service will set companies like theirs apart.

“You have to pay attention to the backbone,” says Rob, who adds that as communication technology grows, the demand for bandwidth will expand exponentially.

“We have a five-year plan to continue to grow and get to the stage we need to be in order to continue to meet the bandwidth demands of our customers,” says Pat.
That will continue to be Nsight’s strength, says Drucker.

“The core of this industry is the network itself – more important than the bells and whistles on a cell phone,” he says. “You still have to give customers choices in terms of the devices and services you offer, but in the years to come, with more demand for bandwidth, the importance of the network will be even more evident. It will be about the quality of the engineering and how you allocate spectrum, and that is very demanding from an expertise standpoint. It’s not a cookie-cutter solution and it’s not the kind of thing you can fix easily if you get it wrong. There will always be changes and choices in the device environment, but features are largely going to flatten out and it’s possible this app mania will diminish at some point. In the long run it’s going to be the quality of the wireless network that’s going to differentiate – not on whether this feature or that phone is better.”