In The News

And the ranks get thin: WorldSpice is among a few local ISPs left standing

By Kate Miller
Memphis Business Journal
November 30, 2001

(This article can also be found online at the Memphis Business Journal's web site.)

In the wake of an industrywide implosion that is weeding out many locally owned Internet service providers in Memphis, WorldSpice Technologies president Paul Tomes is defiant.

"You can make money in this business," he says.

Just how much money WorldSpice is making is unknown, since the private company will not release revenue figures. But the company's complete or partial purchase of three smaller ISPs this year is certainly indicative of good health.

In five years, the company's customer base has grown from 300 to 3,900, mostly businesses. But Tomes says it was WorldSpice's decision not to focus on growth that led to its success.

Tomes began using the Internet in 1993, through a dial-up connection to Atlanta. Using his mathematics and software engineering background, he soon configured a Unix server to allow family and friends to portal through to his dial-up connection using his other two phone lines.

Paul and brother Keith (now an investor only ) founded WorldSpice in 1994 out of a room in Paul's Midtown home. The BellSouth technician thought he was crazy when he had 100 phone lines installed under his house, where the business remained for over a year.

Office space wasn't the only thing the business couldn't afford -- Paul and Keith continued to work other jobs for more than two years until the company could afford to pay two salaries.

Profits were razor thin in the beginning with dial-up the only technology and residential users the majority of its customers. When businesses became interested in the medium, WorldSpice was able to capitalize on Tomes' engineering background and break away from the cookie-cutter mode by engineering more complex solutions to problems like network security and legacy systems integration.

In 1997 Tomes met Blake Weber, co-founder of ISP Webnet Memphis, on an radio talk show devoted to the Internet, and the two companies began sharing bandwidth. That became even more important in 1998 when the two pooled their resources to move from T-1 to DS3 lines -- 30 times faster.

The bandwidth sharing arrangement soon expanded to the company's White Station Tower office space, but the companies didn't officially merge until 2000.

The company grew by 1,400 customers from 2000 to 2001 with no outside investment.

"We grew it through cash flow, by being diligent with expenses," Tomes says.

WorldSpice's cash-based growth plan allowed it maintain its customer service values and custom-engineering niche in the face of high-profile competition with national, Wall Street-backed companies now largely out of the market.

Backed by millions in venture capital, national companies blew through Memphis acquiring as many customers, or circuits, as they could to meet Wall Street's definition of success. With no outside investment or investors to answer to, WorldSpice had its own definition of success -- customer retention.

Weber admits they panicked when Blue Star entered the market in 1999, but the company's shoddy post-sale customer service record soon eased their minds. In the end, they say WorldSpice benefited from Blue Star and like companies because their large sales forces and advertising budgets raised awareness about Internet services.

WorldSpice didn't hire its first sales rep until April 2000 and now has four.

The company has experienced some growth this year from its multiple acquisitions of smaller ISPs Tnet, Vantek (dial-up customers only) and Synapse, but the moves were largely defensive. Leaving their infrastructures in place to languish would only make it easier for out-of-town competitors to establish a foot- print in the local market.

The buyers' market WorldSpice finds itself in has also played a role. Never used first-rate equipment from companies like Cisco can be bought for ten cents on the dollar from defunct competitors.

As for evolution, the company is moving into two new markets -- fixed broadband wireless and multi tenant unit high-speed connectivity.

The company signed a contract with TrizecHahn Office Properties to become one of several ISPs to offer service to the 100 businesses in Clark Tower.

Lisa Ritenour, TrizecHahn's general manager for the Clark Tower location, says WorldSpice's unique multi-tenant high speed connectivity product played a role in getting it in the door, but the fact that it was locally owned was probably the biggest factor.

"We have had experience with other companies that weren't, and when their company wasn't doing so well or the economy started to go down they pulled out of the Memphis market because they would rather be in markets like Atlanta, New York, Chicago. They would rather be in the bigger cites," she says.

Weber says that two years ago the company looked different than it does today, and it will look different two years from now.

"You've got to constantly grow and evolve in this business," he says. "If you're not on that track it will eventually catch up with you."

WorldSpice Technologies - 901.843.9300