Calix ConneXions 2022 event review and more - ETI
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October 24, 2022

Calix ConneXions 2022 event review and more

The following transcript has been edited for length and readability. Listen to the entire discussion here on The Broadband Bunch. The Broadband Bunch is sponsored by ETI Software.

Pete Pizzutillo:

Hello and welcome to another episode of the Broadband Bunch. My name is Pete Pizzutillo and I have the pleasure of speaking with Michael Weening. He’s the CEO and president of Calix.

Michael Weening:

I am.

Pete Pizzutillo:

Welcome.

Michael Weening:

Thank you.

Pete Pizzutillo:

First off, congratulations to you and your team. What an amazing few days we’ve spent here in Las Vegas.

Michael Weening:

We appreciate it. Did you enjoy yourself?

Pete Pizzutillo:

Not as much outside of the hotel as I would like, but maybe next year.

Michael Weening:

Maybe next year.

Pete Pizzutillo:

No, it was amazing. I mean, I was here last year. The scale is just continuing to grow, so it’s amazing that you guys have the ability to bring this community together and really zero in on it. That’s one of the themes that I’m taking back with you all, are you guys seem to really care about your customers. That’s not a throwaway line. There’s a real ethos in your company about helping these people win.

Michael Weening:

Yeah. I think that really comes from… Look, we’ve been in business for 23 years. Our founder and now chairman started with that focus, which is he wanted to focus on rural broadband providers and build the company that way. He actually made a conscious decision to not go after big companies because what he didn’t want to do has just become a development shop for them. He said, “No, I’d rather go after a really broad set of customers, understand what’s important to them, and then build for markets.”

Then that just became, to your point, the ethos of the company is all about focusing on customers. I’ve been very fortunate that in my previous role before joining Calix, I actually ran customer success at Salesforce for all the small-medium, which at the time was about half the business, about 4 billion, 200,000 customers. That ethos was something that I was always really impressed about with Salesforce, which is there was this recognition that if Salesforce was going to be successful, they had to invest in customers and make them successful.

That same philosophy when I joined Calix is one that I tested before I joined and it was the same one that we were all really focused on, how do we make the small and medium service providers wildly successful in their markets? Because it was just the right thing to do. We knew if we did that, we’d be successful. The CEO and founder believed it at the time, and all the staff believe it. It is real.

The last part of that is that if you look at what we’ve built from a platform point of view, we succeed only when they succeed. It’s also built into the economics of the company and everything that you do and that’s why we invest in the way we do.

Pete Pizzutillo:

Yeah. You said something earlier this week about never putting another brand in front of your subscriber. You’re speaking to the ISPs, right?

Michael Weening:

Absolutely.

Pete Pizzutillo:

Including Calix’s. Now you have this… As a leader of the company trying to build value. I mean, it’s very counterintuitive to what a corporate American vision of building value and brand is. Can you speak a little bit about what you believe there?

Michael Weening:

Sure. Yeah. No end subscriber should ever know the name, Calix. Ever. Never. The reason why is that if you look at how companies have perceived broadband providers, they’ve perceived them as having no value. They’re like, “I want to get to the end subscriber. I want to have a consumer product where I have a direct relationship and all that the broadband provider does is provide a pipe.” That’s it.

That’s what we’re changing from a dynamic point of view because these broadband providers really care about their communities. They’re making massive investments from an infrastructure point of view. Then with what we’ve done with our platforms, we also now allow them for the very first time to add value to these over-the-top services because they’re taking what was a DIY solution, so let’s take a web camera from Arlo.

Yeah. I can go buy that from Best Buy, and I can install it and go through the nightmare of trying to install it and probably doing it wrong and then trying to fix it, and my wife is mad at me and all those different things, which I don’t want to. Actually, probably 90% of people don’t want to do it, or if I trust my broadband provider, who I’m working with every single day, they can convert that into a managed service, and install it for me.

If I’ve got some problems, they can resolve them and I have this great experience. I think they can really be part of that value chain and really build their brand as a direct relationship. My broader point too though, is there are companies who are trying to, for example, put their Wi-Fi in front of a broadband provider, or that infrastructure, and all that they’re doing is trying to get to the end subscriber and turn the broadband provider into a dumb pipe.

Pete Pizzutillo:

Dumb pipe. Yeah.

Michael Weening:

That’s unacceptable. They add a lot of value.

Pete Pizzutillo:

How do you do that? You’ve been here about six years now. How do you go from kind of… Calix has always been a network, an innovator on the manufacturing side to… I didn’t hear us talk about one piece of equipment. No GPON or any other… There’s nothing set up in the hallways. People are talking about marketing and services and customer engagement. How the heck do you do that? How do you make that turn?

Michael Weening:

Well, that was the founder, so Carl. I’m now the CEO, if I tried to do what he did over the last 12 years, I would’ve probably been fired six times over, right?

Pete Pizzutillo:

Right.

Michael Weening:

If you take the innovator’s dilemma and build a company within a company, that’s what he did. He set a vision saying, “We’re going to become a software and cloud company. We’re going to virtualize all these functions and we’re going to change how we go to market.” The only way he could do that is it’s like changing the engines on a plane while trying to fly it. Anyone else who tries to do that, if you’re a public CEO, you can’t.

He’s the largest shareholder. He was able to say, “No, we’re going to make these massive investments. We’re going to hold the track. We’re going to pursue this vision.” Thanks to him, we’re well over a billion dollars into it, and we’ve built all the platforms. It took 12 years, massive employee change, and a completely different culture than where we were 12 years ago. Now we’re here. We have this platform that allows us to completely change our market.

Honestly, the only way it can happen is if you have a founder who can really do it. We are a case study for the innovator’s dilemma, for sure.

Pete Pizzutillo:

Can you speak about the partner and ecosystem? That’s something we talked a lot about here, and a unique approach to really partnering. I mean, that’s kind of a throwaway word in a lot of places here, but there are a lot of folks that are unique partnerships both on the implementation side and on the innovation side. How did you unlock that?

Michael Weening:

The challenge in telco has always been that if I wanted to take a partner go-to-market solution, so something sold to an end consumer, and I want to provide it to my subscribers, I have to integrate it into my back office and into my entire business. For every telco, it takes 18 to 24 months. It’s a huge investment and then you have to hope and pray at the end that you sell some, right?

Pete Pizzutillo:

Yeah.

Michael Weening:

The best example I could give was the CEO of Paul Bunyan was on the stage, Gary Johnson, and he said, “We glommed together all this technology. It cost us hundreds of thousands of dollars to create a go-to market for home security. It was pretty bad and we sold 62. Two years of work, not very good and my members aren’t happy, and I sold 62 of them.” Now, if you have someone like Calix… And by the way, think of that. Now every single person has to do this.

Every single broadband provider has to do the same thing. It just doesn’t scale and so now what we’ve done is we’ve gone to these partners and said, “Go through that integration once with us as a platform, integrate into our marketing cloud, which gives you behavioral analytics to understand the subscriber’s needs so that you can focus who to sell to. Integrate it into our call center application support cloud so that it can be supported.

Integrate it into our operations cloud and into our OneCloud which goes into the billing engine, do that once and now you have access to 2000 plus broadband providers on the path of tens of millions of subscribers. Now we become a channel for both ones.” The broadband service provider is an easy way to test the technology and that partner has access to a massive marketplace. It’s a win-win for both groups because the broadband service provider doesn’t have the ability to do this.

Pete Pizzutillo:

Yeah. I think you also unlocked the innovation engine, right?

Michael Weening:

Absolutely.

Pete Pizzutillo:

You introduced a bunch of managed services now and you got a couple more. Can you speak a little bit about what you’re excited about seeing there?

Michael Weening:

Yeah. We released or announced eight, nine, and 10 and 11, right?

Pete Pizzutillo:

Right.

Michael Weening:

Which is also the thing. Most people are stopping at, “Well, I did manage Wi-Fi, so I give you a managed Wi-Fi.” That’s where they’re stopping. They throw a little virus protections, and parental controls, that’s it. That’s where the industry stops because they haven’t built a platform. We’re doing the eighth, ninth, 10th, and 11th. All of those came from customers that’s what the most amazing thing is. We’re now in this stage where we have this great platform, tell us where your problems are, and tell us where your opportunities are.

Then we find the partner and go and integrate their technology. The first one that we announced is something called HomeOffice IQ and it is basically if I have a router and I’m working from home, and let’s say the broadband network has an outage, what’s very common is fiber cuts. An excavator digs up the fiber. Now all of a sudden my broadband’s down and oh my gosh, I can’t do my Zoom calls and I can’t work.

Let’s be honest, this whole work-from-home thing is a big thing. I would need resilience in the home. Well, now the router will automatically switch over. If you have a wireless hotspot or your iPhone, it’ll quickly switch over but more importantly, it’ll kick your kids who are playing Xbox off the network and prioritize your traffic to make sure your Zoom call goes. That actually comes from the second managed service, which is Smart Business.

We have an extension of residential, which takes all of our wireless hardware and any configuration you want for different sizes of small businesses and then puts a whole bunch of services in place there. Multiple networks that are fully managed, cybersecurity, content management, advertising, all the basics. Then we added that wireless capability. We did it for this small business solution, and then we turned it into a product for the consumer too.

That also shows you the power of software. You grabbed a function that… The home doesn’t need all the other functions, but they need that one, so we offer it to the home business. That’s where I went with small biz. Small business is fascinating because managed Wi-Fi and that connectivity and cybersecurity is the start. Now what we are doing is sitting down with customers and saying, “Okay. What are all the other applications you want to do? Foot traffic management, data insights, all those kinds of things.” Think of it as the start.

The third one that we did was SmartTown. That’s basically taking every single router that’s wireless router that’s in your network and converting them into what is in essence a wireless hotspot, or in my view, more of a small cell. Turning a broadband service provider into a wireless carrier. That one has all kinds of examples. My favorite one, which is really the inception of it, was that if I’m an underprivileged child, we certified for something called EDGE or roam, which is standard for partnering with schools.

If I’m an underprivileged child and I have this ubiquitous Wi-Fi network across the town, as we saw with COVID, a lot of these kids, and parents didn’t have broadband. They took their free Chromebook and they’re sitting at McDonald’s and they’re trying to do Wi-Fi. It’s really sad. Now that you have this ubiquitous network, they actually securely connect.

It goes back to the school, it authenticates, it provides them virus control, parental controls so that you’re blocking out the bad websites, but all these kids can now do homework. There are all kinds of use cases to do that, which we’re really excited about. Then the last one, the 11th managed service we started last year with Arlo web cameras because web cameras are really security, right?

Pete Pizzutillo:

Yeah.

Michael Weening:

To manage, very light integration, which is just some basic integration into the supported cloud. This next step is Arlo actually wants CES for their home security solution. Home security is… Look, I have a home security solution from my service provider. It’s like 10 years old. They charge me 70 bucks. They haven’t innovated on it ever. It’s awful.

I keep calling them every six months and saying, “Could you please upgrade my four-inch Android tablet that’s eight years old and gathering dust?” They just say, “No. Pay your $70.” Right?

Pete Pizzutillo:

Yeah.

Michael Weening:

Arlo created this whole DIY solution, which is super cool. It’s got a keyboard, it’s got a universal sensor for windows and water and all those things. Obviously, it integrates with all their cameras. It’s a great go-to-market solution and so we partnered with them to turn that into a managed service because again, I don’t want to go to Best Buy to install this by myself. Arlo will fully manage it. If I press that button, they’ll call the police.

The broadband service provider doesn’t add value there and they don’t get involved but for everything else, they’ll go in and install it. They’ll put it on the bill. More importantly, if you call in and say, “Hey, the sensor’s not working. There’s a problem with my web camera.” They’ll have the analytics in their call center and then they can say, “Oh, well you forgot to change the battery, or there’s a failure of the hardware. We’re going to send you a new one.”

What it does is that they become a fully managed security solution with some really cool tech. That’s a great example of their taking an over-the-top technology, DIY, and turning it into a managed service and adding real value because you and I trust them. That was the 11th one. Then 12, 13, 14, all that stuff, we got a platform, we can do it and want to… We have this speaker and what he said to the CEOs and GMs in this breakout is, “Close your eyes and visualize something. Look at the future, what do you want?”

That’s really the stage that we’re in is that we’re really turning to our BSPs and saying, “Okay. Close your eyes. What do you want? Let’s go work this together.” It’s a super exciting time in this next phase.

Pete Pizzutillo:

Yeah. I think the SmartTown is really interesting because you just don’t know what’s coming, right?

Michael Weening:

Right.

Pete Pizzutillo:

One of the examples, Midsouth Fiber came up, they were talking about they upgraded during COVID and they had this auction house that was selling cattle. Because of COVID, they couldn’t get people in the auction house. Now they could stream and now instead of selling to the local town, they’re streaming to the entire state of Texas.

Michael Weening:

Which is amazing.

Pete Pizzutillo:

Their business went from a mom-and-pop shop to a regional supplier, right?

Michael Weening:

Right.

Pete Pizzutillo:

I mean, nobody predicted that. I mean, that’s the power that these folks can bring and it just unlocked for their communities.

Michael Weening:

Right. If we turn ourselves into an innovation engine for them… I asked the CEOs, I have this leadership advisory that I run. We have 32 CEOs, GMs and COOs, and I meet with them once a quarter and we ask about what’s important. I said, “What is the most important thing we need to keep doing?” They’re overachievers so they gave me two. The first one was they said customer success. I talked about that.

Our whole strategy is around having people who work for our company and all that they do is what’s important to you and how to make you more successful. That’s our customer success army that’s doubling in size. We just approved that. It’s already a big team now. It’s going to be by far the biggest team in the industry.

Then the second thing they said was, “You’ve invested in this platform. We’ve been waiting for a long time, be my innovation engine.” Because I know that this concept of going to market with just speed, I may have a speed advantage in my market today, but what keeps me up at night is I know that at some point there’s either going to be another broadband provider at the same speed, and I know that my customers don’t understand speed.

I need to innovate so I can differentiate my brand and really continue to add value on top of this amazing infrastructure that I built.

Pete Pizzutillo:

Yeah, we talked a lot about the co-ops versus the private money that’s flowing in this. I mean, the private folks have the benefit of a different economic engine and so coming in and competing in the race to the bottom, right?

Michael Weening:

Right.

Pete Pizzutillo:

So giving these tools to folks that don’t have the ability to experiment and innovate, it’s just been… I mean, there are a lot of folks talking about the-

Michael Weening:

Yeah. But we see private equities basically loving the innovation engine because they were thinking about it as I’m buying a fiber network. Now they’re realizing that we’re going to optimize their margins through really low OpEx, through virtualization of functions. Then there’s all this upside now that they never built into their models, which is, how do I get two bucks, five bucks, $10, $20 of incremental ARPU?

All of a sudden we’ve opened that up and that’s never been something that the industry’s been good at. Then on the cooperative side, actually the cooperatives are competing quite a bit with private enterprises. They’re definitely not holding back because their view is we actually go and drive these profits and we can take those and reinvest them in the community.

So we see a lot of very assertive cooperatives going out and bluntly they’ll do the places and the builds that no one else will. Chariton Valley’s a great example where they’re up against a big legacy company, a big legacy cable company, and they’re driving all these profits, but they’re taking those profits and now they’re doing three kilometer runs, single fiber runs out to farms, and they’re setting these farms up with amazing Wi-Fi and all kind of that stuff and what are they doing? Enabling smart ag and all these other capabilities.

I was speaking to Kirby who runs it, and he said, “Look, this one run I just did, it’s a 32-year payback.” He goes, “I care about my community. We’re cooperative. It’s all about our mission is make their lives better.”

Pete Pizzutillo:

Right. No one would ever touch that.

Michael Weening:

No one would ever touch it. There’s a place for both.

Pete Pizzutillo:

Yeah. That’s interesting. This year’s theme was the giant. You laid out some of the things that you’re offering there. Folks that are trying to figure out how they can do it, what’s your recommendation to them?

Michael Weening:

Well, the theme is really just saying that this industry has been dominated by the giants because they’ve had all the capital. They’re the only ones who could build cool stuff. Comcast is building Xfinity, Lord knows how many billions of dollars and how many tens of years it took to build it. So that’s why they’ve been able to be the giants. Then on top of that, you got these big consumer guys who are trying to turn our customers into dumb pipes.

Our whole theme here is you can now be the giant because our platforms make you vastly more innovative than they are. You can move at a fast pace. It’s just you have to make the cultural choice. Back to that whole what’s my go-to-market? I can use that speed advantage if I have it, but I really need to be thinking about how I become really innovative.

How do I use data to focus on and understand my subscribers? Then how do I position the right things so that you as a subscriber are just like wildly happy with everything that we’re doing?

Pete Pizzutillo:

That’s what I really enjoyed about this event you don’t have to take my word or your word for it. I mean, you have people that have done it that are leading in their communities and there’s a great sharing that’s happening here. I think that’s one of the keys that you guys have hopefully continued to push on. What about next year? What’s the theme for next year?

Michael Weening:

Can’t tell you yet. You have to come back.

Pete Pizzutillo:

Well, it has been great talking to you. I’m sure you’ve had an exhausting week, but again, great event. Thanks for having us and we look forward to being back.

Michael Weening:

Thanks for coming. It’s been great.

Pete Pizzutillo:

Thanks, Michael.