Harry Brown is wearing a dress shirt with an open collar. No big surprise, really. Casual attire is no longer a novelty in the business world, even on a weekday. Lots of executives aren’t even bothering to wear neckties, save for the most formal business meetings and events.
Brown, however, seems like he has spent most of his 43 years on the job with his sleeves rolled up.
A self-described “good mechanic,” the president of North Pittsburgh Systems Inc. appears as though he would be more content connecting or repairing lines and switches than poring over financial statements, making presentations to stock analysts or talking with journalists.
“I learned it from the ground up,” Brown says of his on-the-job education in the business his grandfather founded.
Brown may not be the typical telecom company executive, and North Pittsburgh Systems isn’t a run-of-the-mill telecommunications company. The company, which serves as the holding company for Nauticom, an Internet service provider and consultant; Penn Telecom, a competitive local exchange carrier; and North Pittsburgh Telephone Co., an incumbent local exchange carrier, has managed to transform itself from a traditional telephone company into a diversified telecommunications operation, earn strong recommendations from analysts and the business press, and make substantial capital equipment improvements without taking on excessive debt, all while remaining financially solid.
The straight-talking Brown — once a welder, a race car mechanic and later a special services engineer at North Pittsburgh Telephone, an affiliate of North Pittsburgh Systems — must be at least as good at the nuts and bolts of corporate management as he is with coaxial and fiber optic cables.
Business 2.0 magazine this year ranked the 400-employee public company among the nation’s 100 fastest-growing technology companies, no easy feat for a mature company in a struggling industry. It’s even more remarkable when you consider that one of its three divisions — and its largest — is a local telephone company, a segment that is compelled by regulatory requirements to provide service even where there may be no demand for it and that faces competition from wireless carriers.
Particularly in the residential market, traditional phone companies are finding customers opting for cell phones instead of landlines. Nonetheless, an incumbent local exchange carrier like North Pittsburgh Telephone is required to build infrastructure to accommodate all new development within its franchise area, no mean feat for a company that services one of the fastest-growing areas in the region.
The company’s growth has been bolstered by adding two divisions — Nauticom, an Internet service provider founded in 1989, and Penn Telecom, a competitive local exchange carrier and inter-exchange carrier launched in 1979 that offers services including long distance, custom calling cards, broadband connections and telecommunications equipment.
Simple formula
North Pittsburgh’s success may be due to the fact that the 97-year-old company and Brown stuck to a simple formula for doing business during the telecom boom: Most of the time the brass, at the urging of Brown, decided to make money instead of splashes.
“We don’t want to buy market share, we want to make money,” Brown says.
The company has survived and thrived at a time when a lot of telecom ventures fizzled and even as the big companies continue to struggle in the wake of the speculation and overbuilding that began in the 1990s. The Telecommunications Industry Association contends that the industry has not recovered from the loss of 600,000 manufacturing jobs in the sector over the past three years.
For much of its existence, North Pittsburgh has been an incumbent local exchange carrier, serving residences and businesses with telephone services within a 285-square-mile area in northern Allegheny County, southern Butler County and western Armstrong and Westmoreland counties. But the emergence of the Internet and the Telecommunications Act of 1996, designed to increase competition among telecommunications providers, changed the face of the industry.
Those changes opened the door for Penn Telecom, launched as a business telephone services provider, to operate as a competitive local exchange carrier and expand long-distance and other services beyond North Pittsburgh Telephone’s prescribed service area. All three companies under North Pittsburgh Systems benefited from the decision to invest heavily in the system’s fiber optic transmission lines, part of an ambitious five-year, $50 million capital improvements program completed in 2002.
Learning from mistakes
Not that North Pittsburgh hasn’t made some wrong turns. Brown acknowledges that the company has made its share of errant moves.
“We’ve wasted some money, but we learned a lot through that, and we have never made the same mistake twice,” Brown says.
With the support of the company’s board, North Pittsburgh ventured into a highly speculative business in 1999 with the Nauticom Sports Network, a service that provided online broadcasts of high school and small college sporting events as well as other sports programming.
“It was a disaster,” Brown says.
With the growing interest in the Internet and lots of dot-coms looking like they were poised to reap millions, offering radio-type broadcasts of scholastic sports over the Internet supported by advertising seemed like a winning idea. But the conceivers of the idea didn’t anticipate that users of the network wouldn’t necessarily be at the computer screen to be influenced by the ads.
North Pittsburgh shut the network down at the end of 2000, selling the broadcast equipment to Management Science Associates Inc.
And it hasn’t been without other pains. Charges associated with the WorldCom and Global Crossings bankruptcies cost the company $501,000. Slowing demand for services within the North Pittsburgh Telephone Co.’s franchise area made it necessary to reduce the division’s work force by 15 percent, accomplished during the second quarter of 2003 through retirement incentives and layoffs.
“That was the first time we had to do that,” says Brown. “That was very hard to do.”
The key to growth for the company across the board, says Brown, is to replace lost revenue and customers on the North Pittsburgh Telephone side with new business acquired by Nauticom and Penn Telecom.
Despite personnel cuts at North Pittsburgh Telephone, the introduction of technology and the growth of broadband bode well for the company. The U.S. Telecom Association predicts that overall demand for broadband services will grow by 30 percent over the next two years. The International Telecommunication Union estimates that about one out of 10 Internet subscribers globally paid for high-speed service in 2002. DSL broadband service is available to 99 percent of North Pittsburgh System’s residential customers, the segment that is driving the growth of broadband.
And while North Pittsburgh Systems isn’t big enough to enter the wireless business directly, a segment that Brown says is taking a bite out of incumbent local exchange carriers like North Pittsburgh Telephone, it has partnered with YYireless1.net to offer wireless Internet access where access had not been previously available or was severely limited. The two companies launched a project this year that provides wireless service in parts of Hampton, O’Hara and Shaler townships.
Finally, the factor that’s likely high on the list of the reasons for North Pittsburgh Systems’ success may not be technological at all. Brown’s plainspoken demeanor and candor are things that he not only reserves for himself but qualities he expects from those around him as well.
“You’ve got to surround yourself with good people,” Brown says. “If you surround yourself with people who are going to tell you things you want to hear, you’re in trouble.” How to reach: North Pittsburgh Systems Inc., www.northpittsburgh.com, Nauticom, www.nauticom.com, Penn Telecom, www.penntele.com
