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ACSI moves quietly


An article yesterday about American Communications Services Inc. incorrectly reported the company's stock price. ACSI shares closed at $7 Monday.

The Sun regrets the error.

For a company with aspirations of making a splash in the telecommunications business, American Communications Services Inc. didn't make much noise when it moved to Maryland this spring from suburban Chicago.

There were no parades or press conferences with the governor, no million-dollar incentive packages or tax breaks. The publicly traded company just quietly buckled down to the job of raiding some of the nation's most entrenched monopolies -- the regional Bell companies.

Richard A. Kozak, ACSI's president and chief operating officer, said the company considered Atlanta, Charleston, S.C., and other metropolitan areas before it decided to locate its headquarters in Annapolis Junction, near Fort Meade.

Mr. Kozak said the company's choice of Maryland was influenced by many factors: the lure of the Chesapeake Bay, easy access to Wall Street and Washington, a well-educated work force, a favorable real estate deal, a state Public Service Commission that favors competition in telecommunications, the proximity of Baltimore-Washington International Airport with its low fares on Southwest Airlines.

What Maryland did not offer, Mr. Kozak said, was any financial incentive to move to the state. He said the company contacted Maryland economic development officials last winter to inquire about assistance in moving several dozen employees to Maryland but was told there was nothing the state could do to help.

Despite what Mr. Kozak considers an anemic economic development effort, ACSI chose Maryland.

"We recognized that Chicago was not a place to base a company that would be serving the South," Mr. Kozak said. "Maryland offered us a gateway to the South."

The South is very much on the mind of the people at ACSI these days. The company is what's known as a competitive access provider, or CAP, which means it provides business customers with a way of bypassing local telephone companies and their expensive access charges when making long distance calls. And it sees the South and Southwest as areas that are ripe for competition.

ACSI's Southern strategy is apparent at its high-tech network management center in its office suite in a new business park close to the epicenter of the Baltimore-Washington corridor.

On one wall is a pair of large, high-resolution screens, with a map of the Southern states projected on one of them. Blue dots on the map represent the five networks ACSI has brought into service since its founding two years ago: Louisville, Ky.; Little Rock, Ark.; Greenville and Columbia, S.C.; and Fort Worth, Texas.

Mr. Kozak said ACSI is avoiding the nation's largest markets because of heavy competition from cable companies, long distance carriers and larger CAPS such as Teleport Communications Group and MFS Communications Corp.

"Everyone wants to be in the Tier 1 markets because they are perceived as being the most profitable," said Mr. Kozak, a telecommunications industry veteran who served as a communications specialist in the Nixon White House. "In our case, we found a crying need in these Tier 2 and Tier 3 markets."

Mr. Kozak said the company is now in a race to identify such markets and get there ahead of other potential competitors to the local phone monopolies. Networks are already being built in Lexington, Ky.; Montgomery and Mobile, Ala.; Charleston, S.C.; Tucson, Ariz.; El Paso, Texas; and Albuquerque, N.M. The company's goal is to have 20 city networks under construction or up and running by March 1996. Mr. Kozak said the company is now formulating a goalfor its next "milestone."

Brian Boyer, a telecommunications analyst with First Analysis in Chicago, said ACSI's ambitious plans make a lot of sense.

"You want to plant your flag as quickly as possible," Mr. Boyer said.


ACSI can trace its origins to a split in the management ranks at MFS, one of the largest CAPS and the first to bring competition to the Baltimore area.

Mr. Kozak said Tony Pompliano, one of MFS' co-founders, left that company in 1991 because he disagreed with the decision by majority owners to emphasize entering new lines of business and reaching the break-even point quickly over geographic expansion.

Mr. Pompliano's no-compete agreement expired in 1993, about the same time Mr. Kozak left MFS, where he had been president of the network expansion division.

Mr. Kozak said he and Mr. Pompliano met in 1993 and hit it off. He said Mr. Pompliano supplied the ability to raise capital, while he brought a knowledge of the Southern market from his days as MFS' regional vice president.

The two men took over a shell corporation with an inactive NASDAQ listing later that year and changed the name to American Communications Services Inc. With Mr. Pompliano serving as chairman and chief executive, ACSI has raised more than $80 million in the debt and equity markets to bankroll the expansion to 20 networks.

No long distance

Mr. Kozak said that unlike MFS and some other firms, ACSI will not seek to enter the long distance market. He said the long distance companies will feel much more inclined to do business with ACSI if they know it won't try to poach their customers.

ACSI isn't as hesitant about going into competition with the regional Bells and other local telephone companies. Mr. Kozak said ACSI will seek to become a "co-carrier" -- providing local dial tone service to businesses on an equal basis with the incumbent phone company -- wherever the law allows it to do so.

Mr. Boyer said going head-to-head with entrenched local carriers makes sense for ACSI. "I don't think the special access business alone is going to do it," he said. "You have to have other services."

Scant revenues

So far, ACSI's story has been one of money raised and money spent, with scant revenues and the negative earnings expected of a start-up telecommunications company. But that hasn't prevented ACSI's lightly traded stock from doubling in price after trading as low as $3.75 in early July. It closed yesterday at $19.25.

Mr. Kozak said ACSI will be playing an increasingly active role in Maryland business circles, even though it has no plans to build a network here.

The company now employs 90 people, about half of them in Maryland, and plans to add three to five new workers every time it adds a new city.

But even though Mr. Kozak can see enticing opportunities in all directions, he said ACSI will keep its Southern accent after it reaches its goal of 20 networks.

"Having a focused, disciplined strategy is important at this point rather than chasing every girl in town," he said.

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