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Business Observer Friday, Apr. 2, 2004 18 years ago

DayStar Dials Up Sarasota, Englewood

In the Goliath vs. Goliath multibillion struggle for telecommunication dollars, Port Charlotte's David - DayStar Communications - carves out its niche.

DayStar Dials Up Sarasota, Englewood

In the Goliath vs. Goliath multibillion struggle for telecommunication dollars, Port Charlotte's David - DayStar Communications - carves out its niche.

By Sean Roth

Real Estate Editor

Englewood and Sarasota businesses are about to see a new player in the battle over Internet, data and telephony services. This newcomer, Port Charlotte-based DayStar Communications, features the usual cast of characters - past employees of Verizon, Lucent Technologies, Nortel Networks and MCI - and more.

Behind it all is a newspaper owner who takes chances. Derek Dunn-Rankin, chairman of DayStar and president and publisher of Port Charlotte-based Sun Coast Media Group Inc., and his employees are entering a competitive market at a dangerous time, when talk of the big money cable- and satellite-providers making significant stabs into the already volatile telephony market are reaching a crescendo.

Being part of a dynamic and competitive environment is part of the fun, Dunn-Rankin says, adding, "Being on the leading edge of the changes that are coming, competing with all these big, multi-billion business. ... That is pretty exciting."

Dunn-Rankin, who has been involved in the newspaper business since he was old enough to toss a Sunday edition, joined with several private investors in 1977 to acquire a Venice weekly newspaper with nine employees. Dunn-Rankin soon expanded the Venice Gondolier Sun into North Port and Englewood.

"That was where the market was," he says. "I started driving around Englewood and North Port. What I discovered is that the market is a lot bigger than just Venice. I also saw that Charlotte (County) was going to be part of that."

Four years later, Dunn-Rankin bought a 16-page tabloid-sized shopper in Port Charlotte and reinvented it as the weekly Charlotte Sun-Herald serving Punta Gorda and Port Charlotte. Dunn-Rankin later started a third newspaper in Arcadia called the DeSoto Times.

Sun Coast Media Group has grown quickly. The company now publishes daily 'Sun newspapers' in Port Charlotte/Punta Gorda, Englewood, North Port and DeSoto County in addition to the biweekly Venice Gondolier Sun, a number of shoppers and regional magazines. Overall, the company has a total weekly circulation of about 111,350 and employs 445 people on a full- and part-time basis.

But in the early '90s, lack of competition enticed Dunn-Rankin into the high-tech world of the Internet. "It was clear that the Internet was going to be a big part of the information business," Dunn-Rankin says. "We knew our newspapers had to have Web sites ... but at the time we couldn't get an ISP (Internet Service Provider) into the Charlotte market. We had to make a long-distance call to Tampa to connect."

After a discussion with Steve Case at AOL, Dunn-Rankin ran a newspaper campaign to collect the signatures of 3,500 potential AOL Internet users in Charlotte County to entice the company to enter the market. "We got the signatures," Dunn-Rankin says, "but they still weren't going to do it. So I thought if no one else is going to do it, we will."

In 1995, Sun Coast Media Group invested $100,000 in equipment and personnel and formed Sunline, a local ISP. Sunline also served as the developer and host for the Web sites of Sun Coast Media Group's newspapers, for several Charlotte County and Venice municipalities and economic groups and for more than 150 Sun advertisers. In 1997 and 1998, Editor & Publisher, the newspaper trade journal, named Sunline the nation's best Web site for a newspaper with a circulation of less than 100,000. In 1997, the Newspaper Association of America awarded Sunline first place for the best Web site.

Within two years, even faced with hefty technology upkeep costs, the venture was profitable. By 2000, the ISP had peaked with annual revenue of $1.5 million.

"It was a very modest effort," Dunn-Rankin says, "but we were one of the pioneers."

It was around the same time that Sun Coast Media Group started Sunline that Congress opened the door for the DayStar business plan with the passage of the Telecommunications Act of 1996. One aspect of the new regulation was that phone companies had to sell access to their phone lines at a discounted rate to competitors.

"This opened up the potential for digital subscriber lines," Dunn-Rankin says. "This really led us to say, 'When will high-speed (data communication) come to Venice and Charlotte?' It's all going to go to the NFL cities like Tampa and Atlanta. It would be years before any of these communities get that type of bandwidth."

Around 1999, Dunn-Rankin and Sun Coast Media Group staff started looking for personnel and equipment to develop a high-speed data company to serve Charlotte County and the surrounding area.

When the technology bubble burst in late 2000, the recruiting pool for DayStar improved dramatically. One of those recruits is DayStar President Al Sanders.

At the time, Sanders, who had worked for GTE Telephone Operations and Progress Telecom, was a sales representative for Nortel in Tampa. "I sold a lot of the equipment to Suncoast Media Group for DayStar," Sanders says. "In early 2001, I was laid off along with 55,000 other people. Derek heard about my situation and came to talk to me."

Sanders brought with him several of his colleagues, such as Bill Dees, now director of engineering and operations and formerly a Verizon manager, and Joe Obusek, now the company's sales manager and formerly with Marconi Corp.

Dunn-Rankin says the technology slowdown cut years off the development time of DayStar. "If it had not been for the semi-collapse, we would not have been able to select the quality of people we recruited," he says.

After a $10 million investment by Sun Coast Media Group, the DayStar subsidiary officially debuted in early 2002. Through an alphabet soup of technologies, microwave towers and fiber-optic cable, DayStar provides a variety of data transport and telephony services to its business clients. Using five unmanned Points of Presence (POP) centers, DayStar provides traditional telephone services, wireless high-speed Internet, virtual private networks and more while maintaining only one manned office, an 8,000-square-foot building on the northern edge of Charlotte County. The company employs 43 people.

While Dunn-Rankin wouldn't disclose the company's sales volume, he would say the company is still considered a startup and is not yet profitable.

"We are probably not covering 10% of the market," Dunn-Rankin says. "We have about 500 customers (which includes hospitals, local municipalities and the Sun newspapers). In the long-term, I see us as more of a 20% player in the market. It is just going to be a very competitive market. There aren't going to be any 80% players anymore. This industry looks a lot like what we have seen in the long-distance (phone) industry."

Dunn-Rankin's goal: Make Daystar profitable by 2007. "We are used to taking the long view," he says.

DayStar will expand into the Englewood and Sarasota markets in the next two to three weeks. The company needs to establish one new POP center within each coverage area that ether beams a signal to headquarters or otherwise connects into the local traditional telephone system.

"Our equipment is in place," Dunn-Rankin says. "Now we are just waiting on Verizon to make the connections."

DayStar has contracted with a separate company to provide installation and repair services for its Englewood and Sarasota customers.

Both Sanders and Dunn-Rankin concede Sarasota will be the most competitive market for telecommunications services that DayStar has yet faced. The company will face competition from a wide range of national and local companies already ensconced in the marketplace, including AOL, NewSouth Telecommunications, KMC Telecom, Sprint, Verizon and Comcast.

So how does a local startup compete with the big money Northeastern companies? By using its small size and local market knowledge to make quick strategic moves, says Dunn-Rankin.

"We are small enough to say to our customers, 'We have 12 different packages, but if you don't see what you want tell us what you need,' " Dunn-Rankin says. "We really have 48 or more different pricing packages. Our edge is on service rather than price. We are typically a little less expensive on average than Verizon, but not always. We always deliver a better variety of service and faster response times."

Like many of the newer entrants to telephony services, DayStar also focuses on providing its services for a fixed fee. "Some customers were annoyed that they had to pay an extra 25 cents to call from Port Charlotte to Punta Gorda," Dunn-Rankin says. "So we offer to make those calls for a fixed fee. That gets rid of the annoyance factor. We also offer a single bill that people can understand."

As for the residential market, DayStar officials say the equipment necessary to provide telephony and data services to the general public is still too expensive. "It is just not economical to service the residential market right now," Dunn-Rankin says. One of the company's main methods of wireless communications involves the placement of sophisticated antenna receivers on a customer's building. The average cost is about $600 per receiver.

"Probably our best advantage is that we are light on our feet," Dunn-Rankin says. "We can be very opportunistic. If one of our salespeople has a problem, we can have everyone we would need to fix the problem together in about 45 minutes. We can also make changes to the technology very quickly.

"When we have a semi-annual review with the board of directors, we typically tell them this is how much we need for operations; however, we need to have this much extra for an unexpected opportunity."

In the long-term, DayStar officials are eyeing expansion into Fort Myers. "We are going to keep our focus on the smaller (areas)," Dunn-Rankin says. "I would think it would be logical to move into Fort Myers ... it is really similar to Sarasota in a lot of ways. To serve the Venice market really well we need to service Sarasota. That is not as true of Fort Myers ... at least not to the same extent. But longer-term I do expect there to be more interaction between Charlotte County and Fort Myers. We wouldn't be doing this if we felt that we couldn't do it better than anybody else. We are going to be a very serious competitor in the Sarasota telecommunications market."

In the future, DayStar might also install technology in building as they're constructed. "We have the capacity to go into a new industrial park and lay the pipes for a very sophisticated high-tech development," Dunn-Rankin says.

Second Tech Project

While the Sun Coast Media Group was developing DayStar, the company also was putting together another subsidiary called Real Estate Technologies Inc., a software company that produces a multiple listing product, called EZlist-MLS system, for the real estate industry.

"When we were creating the Web sites for the newspapers the first thing we started with was a real estate section," says Derek Dunn-Rankin, chairman of Real Estate Technologies. "When we put the listings online from Welcome Home magazine there was such interest that we decided to create a small nationwide business."

Currently, only two of the employees of Real Estate Technologies live in Florida. "Three of the four software developers live in Hendersonville, N.C.," Dunn-Rankin says. "Our head of sales lives in Fargo, N.D. Our president, Doug Kenny, lives in Charlotte."

The company has software contracts with real estate associations in California, Illinois, Texas, Georgia and two in Florida - Citrus and Dixie counties.

"That real estate software business could lead us into another information software business," Dunn-Rankin says, declining to go into greater detail.

- Sean Roth

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