By Elizabeth Cloutman
Covad Communications was the first to provide consumers and small businesses high-speed access at affordable prices
The first independent broadband service provider began Oct. 7, 1996, when three former Intel employees brainstormed at the kitchen table of a Los Altos Hills home.
The Telecommunications Act of 1996 had opened competition among telecommunications businesses by requiring the local telephone companies to rent their lines and switching facilities to competitors. Los Altos Hills resident Chuck McMinn, Dhruv Khanna and Chuck Haas saw the huge potential for providing affordable broadband access to homes and small businesses.
“The technology to do DSL (Direct Service Lines) had existed since 1989,” Haas said. “But until 1996, the telephone company had never offered this technology to the consumer … The price of broadband was $1,000 a month, so that only very large businesses could afford it. We applied this technology to the small business and the consumer market, dropping the price to $50 (for basic services), which iswhat it should be … It’s the economics of scale. By lowering cost and creating new models, you create new markets.”
By December 1997, the Santa Clara-based company had become the first independent broadband service to offer a commercial DSL network to Bay Area homes and businesses. Today Covad has grown to be the largest nationwide DSL network in the United States, covering 40 million homes in 50 cities in 40 states. There are 2.6 million customers in the Bay Area alone.
McMinn, Haas and Khanna brought a variety of business experiences that helped Covad succeed.
McMinn, who is now Covad’s chairman of the board, was a former executive at Intel and IBM and the CEO of Visioneer, a company which made scanning products for personal computers. He was also a venture capitalist and consultant to various Silicon Valley start-ups. He now serves as Covad’s chairman of the board.
McMinn, who was at Intel from 1978 to 1982, met Haas in the mid-1990s, when one of the companies for which McMinn was then a consultant was assisting Intel in seeking broadband alternatives.
Haas had come to Intel after “a lot of years” working in telecommunications sales for AT&T. Haas is now Covad’s executive vice president and general manager of Covad Wholesale.
Haas introduced McMinn to Khanna, an attorney who specialized in telecommunications law and also worked at Intel. When the Telecommunications Act became law, the three men brought their expertise together to form Covad. Khanna serves as the company’s other executive vice president and its general counsel.
“We’re a little atypical of a Silicon Valley startup because we didn’t have the ‘engineering guy,’” Haas said, laughing. Instead they used and expanded on existing technology. “Now, we’ve got hundreds of engineers.” These engineers are among Covad’s 1,450 employees nationwide.
Covad has continued to focus on providing DSL services to consumers and small companies of “two to 500 people,” Haas said.
Khanna emphasized Covad’s focus. “One of our key values is we’re a small company, and this is all we do,” he noted. “We’re not a broadband unit of a phone company. We’re not a cable company whose core business is telephones or television. That’s allowed us to be much more successful with a smaller group of employees and a lot less cash.”
Covad’s founders also believe its small size makes it more accessible to its customers. “You’ll always be able to find a live person at the other end of the phone,” McMinn said.
The company offers high-speed Internet access to residences, home businesses and business with multiple locations, including e-mail and fixed IP (Internet Provider) addresses.
The service is either self- or professionally installed, depending on the services provided.
Businesses can opt for additional service including multiple static IP addresses, custom Web-hosting, and guaranteed service levels.
Covad also offers businesses its TeleDefend security solutions. The TeleDefend Firewall prevents unauthorized users from hacking into a company’s local area network (LAN). The TeleDefend acts as a virtual private network to ensure secure connections between a business’ main and remote offices. These security solutions can be integrated into either Covad or broadband services from other providers. Included in the cost of the security services is routine hardware and software maintenance.
In the future, Covad plans to offer smaller businesses affordable digital voice services, which will allow six to 10 lines to be carried over one set of copper wires.
“This is especially important to small businesses that can’t afford T-1 lines,” Haas said. Covad is now testing the system on its own employees.
Covad’s founders look back with pride at their pioneering efforts to make broadband Internet services widely accessible and affordable.
“We were the rabbit that goaded the telephone companies to roll out these services,” McMinn said. “We were the first people to offer broadband in every one of the 50 major markets.”
For more information or to order service from Covad, call (800) 636-3500 or logon to www.covad.com.
