David Rowe: European Easy Rider

David Rowe's telecoms and internet business Easynet is blazing a trail across Europe – but can its ambitious plans succeed in the fiercely competitive internet market?

There may be doom and gloom engulfing the internet, but David Rowe is refreshingly chirpy. Dot.coms may be melting faster than an ice cream in August, but 41-year-old Rowe is more than upbeat about his Easynet company. And evidence suggests he has every right to be. Critical decisions taken at strategic times in the evolution of the six-year-old company have successfully guided it through the virtual rapids of internet business life to a dominant position in its sector.

There may be doom and gloom engulfing the internet, but David Rowe is refreshingly chirpy. Dot.coms may be melting faster than an ice cream in August, but 41-year-old Rowe is more than upbeat about his Easynet company. And evidence suggests he has every right to be. Critical decisions taken at strategic times in the evolution of the six-year-old company have successfully guided it through the virtual rapids of internet business life to a dominant position in its sector.

It now employs more than 500, has a predicted turnover of £43m this year - up from £27m last year - and is Europe's biggest non-US provider of internet services for businesses with more than 10,000 customers. It has also been voted Europe's best internet service provider by the people who count - the industry's association.

Mr Rowe, who, unlike many entrepreneurs in this high-profile sector, doesn't much like talking about himself, started Easynet in 1994 with £50,000 of his savings. For himself and co-founder Keith Teare - who now runs the internet company, Real Names, on the American west coast - the first corporate home was a small base in London with a couple of office staff.

"I did a business studies degree, worked for Kodak for a while in management, then spent five years mostly in Japan teaching English," says the man whose brevity underlines his reputed dislike of the personality cult that surrounds many internet entrepreneurs. "At the end of my time in Japan I started an import-export business.'' Back in the UK, he completed a master's in computer science and got a job with a systems integrator, becoming sales manager, then business manager.

"In 1990 I went over to Poland to run a business that was started as a spin-off by the company I was working for. When the Berlin Wall fell at about that time, the first businesses to privatise were the banks and they had lots of hard currency so we developed a very strong business around that. It was an exciting time and we were expanding very rapidly over a period of just two to three years.''

The business was providing integration software to banks and his time in Poland lasted for four years until the company was sold. "After the business was sold in 1994 I came to the conclusion that having helped someone else to build up a reasonable business, it was probably time to do it myself. It was good to learn on someone else's money, but I felt it was now time to do something on my own, so I started Easynet the same year.''

Easynet is now a pan-European internet service provider (ISP) and telecommunications company, but in the first few months it provided, with about 300 assorted competitors, the internet connections for consumers. "We had a connection to Pipex and we had our own servers and we were taking subscriptions over the phone for dial-up services," says Mr Rowe. "We had technical support people dealing with customers with strange modems, and all that kind of thing." He says companies need a high volume of customers to succeed in a market where the only thing that distinguishes one competitor from another is the price they charge.

Just nine months after the launch the company had a share of the market, but at the same time was crucially diversifying into the corporate sector. Selling IT solutions into the corporate market was where Mr Rowe wanted to take the company and he did that as soon as the technology became available.

The internet and telecom sectors are among the most competitive, and Easynet straddles both. "In the start-up phase of a company in this kind of industry every day is a challenge," he says. "There is huge pressure on you to grow, and there is a huge pressure in managing that growth. Doing both, and at the same time building a firm platform for the future, is very challenging. Since we started we have pretty much had organic growth. In 1996, 1997, 1998, 1999 and 2000, we have doubled our market capitalisation each year."

In 1995 the company went on to AIM with a capitalisation of £14m compared with the present capitalisation of £320m. In April last year it moved from AIM to the official list of the London Stock Exchange. Today, the company owns one of Europe's most advanced internet networks, with bases in the UK, France, Germany, Belgium, Spain, Holland and Switzerland.

"Because we own our own European network infrastructure, we deliver flexible internet solutions for business." One of the keys to survival in this cut-throat sector is having the ability to evolve with the constant stream of new technology and adapt to changing circumstances and demands.

Mr Rowe, who owns around 14 per cent of the company, sees Easynet, with its dual role of being an ISP and a telecom company, as being ideally placed to exploit the future of a fast growing and rapidly changing industry. "We like to think we are the future of telecoms,'' he says, and enthusiastically points to next year and what the industry calls "unbundling the local loop".

In non-telecom speak, that means so-called alternative telecom companies like Easynet will be able to provide their own link from BT exchanges to their own customers, instead of hitching a ride on BT's wiring. "For the first time in the history of telecoms, there is an opportunity for alternative telecom companies to put their own physical equipment into the local exchanges of the incumbent provider - BT in the UK - and physically own the last mile from the exchange to the customers. We will have ownership of the customer.

"From July next year, but possibly January, we will be able to put equipment into BT exchanges that will govern the speed, quality and margins of the products." National calls may still hitch a ride on BT trunk mains, at least for the time being, but in concentrated urban areas, alternative telecom companies will be able to serve their own customers directly by laying down their own wires to BT exchanges. "That's why everyone is digging to the local exchange. Our aim is to provide an end-to-end data telecom and internet access service that is cheaper, faster and better, and for a flat fee."

Top of the immediate list of sites are London, the M25, the M4 corridor and Manchester. And once the UK is on line, it will be the turn of France where Easynet already employs more than 100 people. Easynet is also getting the keys to Hamburg exchanges after being awarded a telecom licence in Germany earlier this year.

Mr Rowe says that unlike major telecom companies, Easynet is not burdened by what he calls the legacy of voices. "If the majority of your revenue is per-minute voice calls, you have a problem. Some day there is going to be a flat fee for these calls - all the voice you can eat - and the per-minute voice will become a legacy. If 90 per cent of your income is from voices, and next year you are expected to grow but the cost of calls is falling, you are in trouble.

"Our business model is in an area every telecom dreams of, providing service and access data to the internet. It is the area with highest growth margins and it is where the battle will be."

So where does he see Easynet at the end of the next decade? "In 10 years we will be the number one internet access provider to businesses in Europe. Our main competitors now are American, like UUNet, but we are very much flying the European flag,'' he says. And then? "After we have become unassailable in Europe, and they've torn themselves to pieces in America, perhaps we'll go over there and pick up the pieces.''

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