Gustavo Stocco is the former CEO of NAXI Telecom, a Brazilian company that revolutionized the telecom industry in his home country. By being the first to offer XGS-PON and symmetrical upload and download speed NAXI changed the game. Gustavo himself was innovative in the way he ran NAXI, never settling for anything but the highest standard for his clients as well as those who worked at the company. Today we sit down with him and discuss the importance of providing unlimited high-speed internet to the masses.
Why do you think it is important for countries such as Brazil to offer unlimited high-speed internet?
I have always viewed internet connectivity as household electrical, you don’t have a “package” that limits your electrical consumption, it is more of a physical barrier in infrastructure that must support it all. In the telecommunications market, there is a transmission channel between the access point and the internet. When we at NAXI decided to launch an unlimited speed plan, we broke the market paradigm offering something above and beyond what the market was accustomed to.
Can you speak more about that paradigm?
Yeah, in Brazil (and I believe in most places), people were conditioned to consume internet bandwidth within their contracted limit. This was true regardless of whether the infrastructure on either the consumer or provider’s end could support more. This allowed customers to explore everything they wanted in their homes as long as they had high-performance and technologically advanced compatible devices. It was always interesting to me to see how these so-called “unlimited” plans worked.
How do you see the work that you did with NAXI changing the telecom industry worldwide?
We were disruptors. We broke down barriers, most of which were imposed by commercial rather than infrastructural or technological issues. NAXI demonstrated that it is possible to offer a unique connectivity experience for a product that was seen as a commodity. Beyond that, we provided customer service that valued the well-being of our clients and was transparent about the information supplied. NAXI implemented straightforward marketing without surprises in the contract, and of course, unparalleled speed, which was unrivaled at the time, especially in a country like Brazil.
What was the marketing plan and how was it different from what was implemented by most companies at the time?
First off we put value above everything else, and we did internal testing that revealed a substantial reduction in the bandwidth consumed by the customer when the speed limiter was removed. What NAXI provided was truly unlimited internet plans allowing customers to consume what they needed and wanted. Without having hidden clauses in our contracts, we were able to charge only a little bit more for something that was truly extraordinary.
Can you explain the speed limiter to a layperson like me?
Yes, so with a contracted plan content consumption gets bottlenecked by a speed limiter imposed by the provider. With NAXI we instead offered much faster speeds which in turn freed up the transmission channel earlier. For example, if you were to download a Microsoft Office package it would typically take about 30 minutes to become available. During that time your connection would be 100 percent occupied. By removing that speed limiter the same package would only take 5 minutes to complete allowing the Internet channel to be free sooner which would allow the user access to the downloaded content earlier than expected. It’s very simple logic in the end but also effective, no?
What was your initial business plan and how did you adapt and change it over time?
At first, the plan was simple: offer internet connectivity with conventional speeds, but deliver a user experience that was above average. Prioritizing stability and a high level of customer service were always our core principles from the beginning. Over time we stuck to our core principles as they remained relevant, but we needed something else to stand out in what was becoming an increasingly competitive market.
What was it that you changed to stand out?
We moved towards technological innovations, which had always been one of our strong suits. Expanding our fiber optic network in order to provide cutting-edge connectivity which spread out to rural properties on the outskirts of cities. We also had a fundamental change in the way we approached our end users. Instead of the serious nature we started off with, we became warmer, more relaxed, and became closer to our customers. We didn’t want to be seen as just a company but rather as a friendly service provider that our customers could rely on. This inherently changed our hiring process for key roles such as customer retention, customer service, and of course technical support.
How did the idea start to sell NAXI?
NAXI had always stood out in the national ISP (Internet Service Provider) market for its high quality of customer service. Our performance indicators were always very high as well, as well as our dedication to the integration of advanced technology into the whole process. Not to mention the strong internal culture of the company, something that I was very proud of. At the time I decided as CEO to validate our internal assessments of the company by conducting an external audit. The audit was conducted by JGPL6, one of Brazil’s top firms, and a manager of large investment funds. We wanted a meticulous evaluation of NAXI with a particular focus on our financial statements.
What was the process of the audit like?
It was pretty intense, to be honest. It took four months of exhaustive work including late night shifts by various managers to gather all of the required information. We were pleasantly surprised when the audit was completed as the results exceeded our expectations. NAXI was a success and a big. It was well above the market average and that drew considerable attention from the JGPL6 team. The profit margin was 50 percent higher than the average in the national telecom sector. We combined the highest absolute prices while at the same time delivering the most value to our customers.
So is it then when you decided to sell?
This is when we started to market the company. With the great results of the audit, we wanted to assess how potential buyers would evaluate the entire operation. We signed all the compliance documents and NDAs to send a comprehensive briefing to selected investors. It only took a week after sending out the documentation to receive offers from established market players. Thanks to the smooth operation of the company we were confident with its positive evaluation which allowed for concrete discussions.
How quickly did you sell NAXI?
It took several rounds of negotiation, but we successfully closed a deal approximately 15 days after putting NAXI on the market. I think it was quite remarkable the speed with which the market absorbed the operation. We had clearly built a successful company and we were highly sought after, both for the client base (which ranked top in the region) and for our excellent reputation.
What would be the starting point if you were to start a new program in a new country?
This would be no simple task. Despite the telecommunications market being similar worldwide in technical terms, each market has various nuances that need to be studied and analyzed to ensure the viability of the product in that market. I do see a lot of similarities between the Brazilian and US markets. The countries, while being geographically close, also have similar consumer profiles, with users in both markets seeking cutting-edge technology and the highest level of service. The best places to start are areas that major companies have overlooked due to economic disinterest and to some extent a reduced effort in expansion. With that said I believe that targeting areas not yet covered by fiber optic systems would be an excellent starting point. This is especially true in the U.S. considering there is less than 30 percent fiber optic coverage for its users.
