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The Competitor

Who is Brad Evans, and why is he attacking the phone company?

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"Two hours? That's asking a lot," Cavalier's public-relations liaison, Elizabeth Pierce, had said when scheduling an interview for CEO Brad Evans. Lunch? "That would be hard. He doesn't really eat lunch."

One gets the impression Pierce would rather not even broach the idea with Evans. A reporter is in no position to muscle. As a privately held company, Cavalier doesn't have to reveal anything related to ownership or finances. And there's no leverage. Subscribers report the prices are better and the service as good as competitor Verizon's.

The low-key image is typical. Evans is so press-shy that he's seldom if ever interviewed. After agreeing to, and participating in, a series of interviews with Style, Evans declined to be photographed for this article.

"Brad is one of the most intensely shy people I know," says Terry Vanderveen of Vanderveen & Associates, the Lansing-based lobbying firm Evans used to help him redirect the course of telecom law in Michigan. "Brad would come to meetings and keep to himself — no guffaw, no funny-funny. But he knew the business better than anyone I'd ever met."

True to form, Cavalier Telephone crept into town three years ago virtually unnoticed. Other than a quick advertising blitz, there was no glad-handing with the established anointers of the realm, no lavish donations to popular causes, no clamoring to get on influential boards. In a town where eager entrepreneurs traditionally gain acceptance through support of carefully selected causes, arts or charities, Evans and Cavalier Telephone didn't seem to get it. They just concentrated on their own dead-on, no BS brand of business strategy: Come in well-capitalized, and offer a good product. And don't let the big guys kick you around.

In Richmond and in Tidewater, Cavalier quickly got traction, claiming a 12-percent market share in each. "We're much smaller in Northern Virginia," Evans notes. "We're just gaining momentum up there now."

In an industry where the average time from startup to profitability is eight years, it is no less than remarkable for a company to cite figures like Cavalier's some three years into the venture. In May, Cavalier posted monthly earnings of $829,000, before interest, taxes, depreciation and amortization, on revenue of $16 million.

Evans is, by his own admission, "driven." He's done everything he can to shake Verizon's hold on the market.

Investment in infrastructure and aggressive acquisition are only half Evans' strategy. Standing up to the Baby Bell that ate America is the other. In a full-frontal attack last November, Cavalier filed a $635 million federal lawsuit charging that Verizon's "conduct toward consumers and competitors is illegal and predatory."

He's taken the fight to the streets, charging that Verizon is purposefully thwarting competition by serving its own orders first and best, thereby giving its business-to-business, or wholesale customers like Cavalier, short shrift.

As legal bills pile up, Evans is arguing to anyone who will listen that Verizon continues to squelch competition in flagrant disregard of the terms laid out in the 1996 Telecom Act. (In June, he tried to raise a ruckus in evidentiary hearings before the State Corporation Commission, to little avail.)

Evans has sized up his opponent, but so far he's only dished out what amounts to a good shin-kicking. After hearings that included testimony from Cavalier and other Verizon competitors, the State Corporation Commission declared that Verizon has fulfilled its mandate to foster competition. And last spring, a Federal District Court judge ruled that Cavalier's multimillion-dollar lawsuit did not meet the criteria for antitrust action. Still, as he waits for the appellate court to rule, Evans believes he is fighting the good fight.

Nearly 70 local phone companies currently compete with Verizon in Virginia, claiming 17 percent of Verizon's phone lines.

"What sets Brad Evans apart is his willingness to fight Goliath," says telecommunications-industry analyst Daniel Berninger, editor of the Telecom Antitrust Intelligence Report and a columnist for Pulver.com, an analyst and consulting firm.

Evans' lifelong friend and right-hand man Jeff Snyder agrees: "Brad doesn't see anything as an obstacle. That's his strength and his weakness."

Starting a telephone company is usually a road to failure. Industry analysts estimate that the aggregate losses of companies like Cavalier are in the trillions. In an industry where nearly half the startups do a fast belly-flop, deep pockets are not easy to come by. "The first financial hurdle is, can you cover your operating costs," says Evans. "A lot of our competitors have closed down. High-tech is bankrupt."

Yet Evans was able to secure a $175 million investment package to start Cavalier, largely because he knew what he was doing. (Cavalier's total initial investment is $225 million, according to Evans.) That's because he'd done it before. In fact, in his initial foray into telephony, he was among the first wave of competitors to chest-butt the monopolies after deregulation.

In 1986, Michigan- and Pennsylvania-based City Signal Inc., of which Evans was president and co-founder, became one of the first competitive local exchange companies (CLECs) in the country. But the playing field wasn't level. "Small competitors still had to use the monopolies for that last-mile service needed to connect customers," explains Vanderveen. "Essentially, under the law, the monopolies maintained their hold."

So believing CLECs to be the victims of a vast capitalist conspiracy, Evans went to the statehouse, lobbied hard and pretty much developed the template for how to square off with giants: Rely on the big boys as little as possible. And if the law doesn't keep things fair, rewrite the law.

Vanderveen and Evans convinced Michigan lawmakers that they needed to rewrite Michigan's Telecom Act — not once, but twice — to even the odds for the little guys. Vanderveen believes it was Evans who first drew this analogy: "It was like playing basketball with my 4-year-old. I'm beating him 100 to zero. He scores a basket, and I get nervous, so I make him tie one hand behind his back. Finally, we got a balanced telecom act in 2001."

It was no surprise, then, that when Cavalier came to Richmond in 1999 it thundered out of the gate. While less-well-capitalized companies targeted big business in hopes for big return, Evans went for the whole magillah. "Our strategy was to invest heavily in fiber-optic infrastructure, to be a full-service provider to business and residential," Evans says. "Most only went after large business. That proved to be their downfall."

When it started, instead of leasing fiber-network capacity from Verizon, Cavalier built its own fiber network and set about buying financially troubled competitors cheaply. But, at least as Evans tells it, Verizon seemed ready to clamp off the wires at every turn.

"They made it hard for us to install, resulting in delays of upward of eight months," says Evans with a hint of indignation. "There were billing inaccuracies by Verizon, directory inaccuracies by Verizon." The lawsuit maintains that Cavalier's reputation suffered significant harm and loss of good will as a result.

To some degree, Evans' complaints have taken root. The Justice Department recently urged the Federal Communications Commission to take a hard look at Verizon's white-pages listings process before approving Verizon's bid to offer long-distance and data services in Virginia. (Evans also charges that Verizon is price-gouging its wholesale customers.)

In the dead heat of a Richmond summer, Evans is gathering his artillery for the winter months, when the Virginia legislature is back in session. Early on a Wednesday afternoon in July, he' s back at the office, having just met with Sen. Stephen D. Newman, R-Lynchburg. Clearly, he's on a mission. "We've been meeting with a lot of legislators to talk about a new telecom bill," he says.

Companies still must rely on the largest providers to complete the basic service cycle that connects customers to customers. Cavalier, for instance, owns its lines, but Verizon still owns the last mile of circuitry necessary to place a simple phone call. Directory service, as well, is still ultimately in the hands of Verizon. And if Verizon gets it wrong, the company whose name is on the bill — not Verizon — gets the blame and the bruised reputation.

"Over the past three years, Verizon has done everything in its power to keep out lower prices and innovative services by keeping companies like Cavalier out of the markets in Virginia," Evans says. "While most competitive telephone companies are rapidly becoming extinct, Cavalier is one of the few that has persevered through Verizon's deadly gauntlet of overcharges, delays, technical snafus and illegal practices."

Evans' view is harsh, even by telecom standards. Even some of Verizon's critics point out that Verizon inherited all the problems of adapting a monopoly-based phone system for its competitors.

And Verizon, of course, sees the situation quite differently. "All I can say is that the SCC conducted an intensive two-year study of our operating support systems, the ones that provide support to companies like Cavalier," says Verizon spokesman Paul Miller. "We passed with flying colors. Again, Cavalier is blowing smoke."

To Evans' mind, there are no excuses. Unnecessary paperwork delayed Cavalier's entry into the market, he says. And Verizon was slow to provide sufficient equipment to carry telephone traffic between Cavalier and Verizon customers. "Consequently, 25 to 70 percent of the calls to Cavalier customers in Tidewater were blocked," he says. Misrouted calls, overbilling and inaccurate directory information cost Cavalier a slice of its customer base. "When Verizon misrouted calls in Tidewater, it caused a complete outage for our customers in Northern Virginia." And just making the connection is serendipitous. "We even had a hard time getting into Verizon's central office so we could connect our equipment," he says. As for the allegation of price gouging, Evans cites "artificial charges."

In one case, he says, "Verizon charged Cavalier more than $400,000 for 'space preparation' for 100 square feet of floor space that we needed to have in Verizon's central office." Even after the deal was worked out, Cavalier had to wait "more than 600 days," by Evans' count, before taking occupancy. As Evans describes Verizon's treatment of Cavalier, it sounds like sabotage at worst, and malignant neglect at best.

The State Corporation Commission doesn't agree. After evidentiary hearings this summer, an SCC hearing examiner concluded that Verizon has met its obligations to open its networks to competitors, clearing the way for Verizon to seek federal permission to sell long-distance service to Virginians.

Says Miller, the Verizon spokesman: "The fact that we have healthy competition in the marketplace is even more evidence that we should be allowed to compete in long-distance."

Yet Evans' incessant drumbeat is resonating. The SCC has agreed to initiate a penalty system that would compensate small competitors when Verizon mishandles their customers. The lawsuit isn't dead, either. Evans expects the 4th Circuit Court of Appeals to affirm it as an antitrust suit by early next year. And Evans admits that service issues with Verizon "have been ameliorated somewhat."

Industry observers believe that, eventually, Evans will prevail. "Brad doesn't give up," says Evans' confidant Snyder.

Analyst Berninger agrees. "If he keeps at it, he'll win. He's right. He has the evidence and the moral high ground."

For someone who's taking on America's largest telephone company, Evans is amazingly mild-mannered, with hazel eyes and an open, if infrequent, laugh. He's from a family of hyper-educated overachievers. His parents, a Kellogg's production worker and an executive secretary, raised three children who together have acquired six university and graduate degrees. Silver hair frames Evans' unlined 46-year-old face. He's fit and smallish, like a high school athlete before he reaches his full height. He politely waits for questions and doesn't ramble in answering.

It's the middle of the week, but Evans is casual Friday, in a knit, collared shirt with a geometric design and tan pants. "I've never seen Brad in a tie," Pierce says. Even when meeting with legislators? "Never."

The decision to locate Cavalier's headquarters in Richmond was based primarily on quality of life.

"We wanted to go where there was less snow," Evans chuckles. "Actually, we knew [the business] should be in the mid-Atlantic area, so we really looked around. Richmond is where we wanted to be." He and his wife, Susan, once a registered nurse, live with their four children — ages 10 to 18 — in a development of 1990s mansions off River Road. His youngest is thrilled there's ice hockey here. The rest are involved in outdoor ball sports, more suited to the Virginia climate than Michigan's. En famille, the Evanses enjoy boating in the Chesapeake or the Rappahannock in their fiberglass walk-around.

And since one of the Evans children has juvenile diabetes, they've taken an interest in Juvenile Diabetes Research Foundation, the only charitable organization Cavalier supports. "Our allegiance is here," Evans says. "Our corporate center is our biggest cost base. We don't plan to move again."

Though he's downshifted from the Type A who would relocate anywhere the job demanded to someone who wants to stay put, Evans hasn't eased up on the accusations he originally outlined for the SCC: "Verizon does not welcome nor do anything to foster a competitive environment, and that must change. One only needs to look at the number of Virginia competitive telephone companies that have been forced to declare bankruptcy as a direct result of financial and other frustrations they have suffered as a result of Verizon's actions."

Evans believes he is holding one last card. Until Verizon actually fosters competition, he says, it should not be allowed to expand into long-distance service. He's just got to find someone in authority to agree with him. "Verizon should not be allowed to offer long-distance in the commonwealth until the damage they are doing every day to other broadband and telephone services stops," he says.

Meanwhile, Evans' aggressive acquisition strategy has grown Cavalier to 342,000 lines. Last November, Cavalier bought Delaware-based Conectiv Communications, essentially growing the company by 50 percent. Two months later, Cavalier closed the deal to buy Net2000 Communications, adding another 100,000 customer lines.

Evans shows no sign of slowing the pace. "We are growing 10,000 to 15,000 new lines per month," he says. "Our strategy is to continue to roll out new products and services, and to gain market share throughout our footprint."

Even though Evans has won ground and shows promise of gaining more, the industry is still a long way from true competition. As Vanderveen puts it, "[The industry] is not competitive until the gross revenues of the largest CLEC in the state exceeds the salary of the CEO of the biggest monopoly provider in the state." S

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