November 2008 Archives

One thing that the VoIP Providers seem to want is Distribution. How does a VoIP Provider get his device into the hands of the consumer?

Vonage spends millions on advertising and has deals with retail outlets like Amazon and Circuit City. Skype has devices on Amazon and other outlets. (It seems like Amazon has an affinity for VoIP providers, including Magic Jack and Ooma.)

Now Ooma is a strange deal. There has been a lot written about Ooma (here and here and here)  Sharing a PSTN line seems like no way to save money. If you still have to pay for the landline, why buy Ooma? To save on some long distance? Most people don't spend more than $20 per month on LD. Someone must believe in the deal because even after staff was cut and execs fled Ooma, the company was able to raise $16M.

The key for any of the VoIP players is scale. Distribution is one way to attempt to achieve scale. Some use an Indirect Sales Channel; others try to get inside the distribution network of Tech Data, Amazon, or a bog box outlet. (That's an expensive proposition.) But how else do you reach the masses except through a multi-million dollar advertising campaign? Or running hundreds of infomercials?

I wrote about a typical telecom sales situation about a week ago. Khali Henderson, editor of Phone+ magazine, has an editorial that talks about this type of scenario in the Channel. The conclusion of the story happened yesterday when the client called me to ask me to meet the direct AE's rate and send him a contract. My best Indirect rate is $1500 per month higher than the direct rate. Same company. Go figure. This AE just gave away $18,000, which doesn't seem like a lot, but how many deals like that can a company take? There should be a Pricing Floor.

Some carriers have Rules of Engagement between Direct and Indirect. It's just paper. What's the punishment?

A Cisco VAR just sued Cisco over breach of contract. Cisco took a tagged deal that the VAR brought in and handed it to its other partner, AT&T. It cost Cisco $6.3M and a change to the VAR contract. These lawsuits take years and mucho money so they will be rare, but it goes back to my question: What's a Partner Worth to the carrier or vendor?

AT&T spends millions advertising its partner program, but can't bother to show up at Channel events. Mixed message much?  Verizon has thrown many agents out of its program over the years. Qwest just revamped theirs again.

I started out working with a BellSouth agency (I have never had a direct relationship with BellSouth or AT&T , which is something they can't get through their heads). BellSouth would change the compensation plan regularly. But agencies cannot change their own business plans so easily or so quickly. It sometimes feels like folly.

This is a business where you have to trust your vendor even when you know your vendor is going to trample you at some point.

UPDATE: While the Direct AE did quote way lower than me. However, after speaking with the client, they actually went with a reseller.

It's the last full day of work for many of you. Here are some tips to get through Thanksgiving:

1. Stop watching / reading the news. It's going to be more of the same news for a while and listening to it and reading it are not going to help you. It will only increase your anxiety. The Law of Attraction actually works. You get what you think about. If you think negative, you get negative. Think Positive, you gain positive. That's The Secret.
2. Remind yourself of the things to be thankful for. It may seem tough with all the doom and gloom that the TV throws at us, but there are still many things going right.
3. Business is still being done. It's just taking longer. 
4. Now is a good time to do more networking and marketing.
5. Give a little to charity. (You get it back).

Happy Thanksgiving. (The cartoon came from here)

 

Interesting report from Strategy Analytics: More folks would switch their triple play provider if they didn't have to waste a day or two waiting for the install.  With that kind of stat, will any of the duopoly companies fix their install process?

People often claim to be satisfied with what they already have. 76% of broadband subscribers in the US suggest they are very or somewhat satisfied with their broadband service. But when they are asked if they would be willing to switch, three in every four say they would do so, depending on the price and performance of an alternative service.

Can't be too satisfied if you would switch.

And really the perception varies greatly. In Tampa Bay, I have used Bright House for broadband for 10 years at home and at the office. Rock solid. Someone on Twitter was complaining today about the Verizon install. In the course of the conversation, she mentioned that she hates BH. Me? I don't want to give Verizon a dime, but I want that one POTS line for my business - which they keep charging me more and more for - almost as if they were forcing me to switch. (If they would stop mailing me something every single day, they could lower my rates!)

I think the surveys are flawed. Or people don't understand what satisfied means.

"Nemertes Research continued to throw cold water on the future of the Internet last week, releasing a study projecting that demand for bandwidth on the Web would exceed its capacity by 2012." [PCWorld.com]

I just don't see how that can be. With 40G pipes starting to emerge. With Content Delivery Networks (CDN's) popping up every where.  The CDN's make most traffic local.  The CDN's are getting closer to the edge. Does that report mean that the backhaul traffic will overflow? Or the CDN network will exceed capacity?

Nemertes analyst Mike Jude says, "More and more applications are coming online that will drive expectations for service quality even higher," he said. "I'm not saying that the Internet is going to crash in 2011, but that people's expectations are going to be throttled. People will stop going to the Internet for those services." [PCWorld.com]

Jude goes on to say that people expect more reliability and real-time traffic from the Internet (which it was not designed for). And to get thta ISP's will have tiers of packages to deliver it. That's where the Net neutrality debate unhinges.

My skepticism tells me that it is just the Duopoly wanting to make as large a buck as possible from consumers to continue to get their 40% margins, despite the fact that their actions stall innovation and the economy. And the capacity can be made available, it is just more expedient to create a supply issue.

QWEST REFERRAL DESK - Effective January 1, 2009 there will be significant changes to the Referral Desk Program.  Qwest will no longer be paying up fronts for any sales. Also Agents can sign up new customers to Qwest and only re-term their own existing customers.  Lastly there has been a slight modification to commissions when teaming with Direct Reps.  We know these changes can dramatically effect how you sell Qwest.  Qwest is making these changes so that they can remain fiscally responsible.

Back in September, American Internet Services announced a CEO change at the Grand Opening of their Tier 4 data center in San Diego. Alessandra Carrasco was promoting from EVP and COO will assume the role of Chief Executive Officer. I interviewed her in October.

ME: What verticals are you chasing?

AC: AIS specializes in any business that requires high availability solutions for their technology platforms. These include companies in vertical markets such as medical, financial and pharmaceutical, among others.

ME: Why choose AIS over Switch and Data?

AC: Switch and Data, while operating as a data center facility, runs on a completely different model than AIS. I'll highlight two of the key differences between our models. Switch and Data offers carrier neutral bandwidth only, which means that they don't personally offer bandwidth - connectivity is left up to the customer. AIS offers two different versions of our own premium blended bandwidth to our customers, along with the option to select their own from one of the 260 carriers we work with.
Secondly, most of Switch and Data's space currently resides in what we call 'carrier hotels.' These are large, usually multi-level facilities where Switch and Data has a presence, but do not control the premises and systems. Because AIS owns and operates its own data center facilities and mechanical systems, AIS is able to specialize in custom configurations such as high power requirements and 24/7, on-site 'remote hands' support. This means that instead of competing head-to-head with us under the Seaport Capitol umbrella, our companies can work side by side.

ME: Where is the growth coming from?

AC: The rapid expansion into new facilities by our company is driven by a few factors, i.e. our abundance of power and multiple bandwidth carriers. Due to our proven track record, up-time and flexibility to provide custom-crafted solutions for our clients, our customer growth and retention rate has increased with each year in business. The organic growth by our customers, coupled with their own customers' growth, has catapulted AIS past our competition in the San Diego market. With the addition of our 80,000 square foot Lightwave Data Center, AIS has established our dominance as a data center provider and, based on consumer demand, is expanding into other regions.

ME: Will AIS' growth be affected by the economic situation on Wall St.?

AC: Colocation is no longer a commodity, but a necessity. Because of this, AIS doesn't rely on temporary fluctuations taking place inside the economic market, negative or positive, to affect overall company growth. Bottom line: our customers, from small to Fortune 5 businesses, require the most reliable and best performing colocation and connectivity business solutions, regardless of market conditions.

AIS announced it has acquired Complex Drive, a well-established San Diego data center provider known for its advanced technology, expertise, and excellent support for the past 10 years.

If you can't get a position at the FCC, perhaps you can put your talents to use at the other governmental telecom agency, which is looking for a few intelligient people like Sue Crawford help shape the broadband policy of the US:

The National Telecommunications and Information Administration (NTIA) is seeking nominations of individuals to represent the business community, public interest groups, and other appropriate groups interested in serving on the NTIA Online Safety and Technology Working Group (OSTWG) for a single fifteen (15) month term to commence in January 2009. At the conclusion of the working group's term, the OSTWG will provide a report to the Assistant Secretary for Communications and Information and NTIA Administrator and to Congress on ways to promote and to preserve a safe environment for children using the Internet.

DATES: Nominations must be postmarked or electronically transmitted on or before December 12, 2008.

SUPPLEMENTARY INFORMATION: On October 10, 2008, the President signed into law the ''Broadband Data Improvement Act'' (the Act), Pub. L. No. 110-385. Section 214 of that Act directs NTIA to establish the OSTWG to review and evaluate:  READ here...

Who is Sue Crawford? Read her bio here. Besides being a law professor, she is on the board of ICANN. Her writings are very articulate and logical - until the ramblings you read from me. I understand that she is part of the Obama transition team, but I can't confirm that.

Most people that know me know I am a Follower of Seth Godin. No one else that I read regularly makes me re-think how I view business and the world more often as Godin. IN his post, How to make money from the Internet, he writes:

Connect organizations spending money with ways to save money.
During the last recession, plenty of entrepreneurs scored by selling businesses on doing a phone bill audit. They took 30% of the first year's savings and did the work for free. Today, there are countless ways businesses can save money using technology and outsourcing, but few take full advantage. You can train them to do this and keep a share of the savings.

If you are in telecom and do not work with an auditing firm, you might be missing out on some opportunity. Telecom expense management and telecom asset management and cellular tracking (both asset and expense) will be big ways to make revenue while saving folks revenue. (They are also expensive Google key words to buy!

So on Linkedin, Neal Lachman, asked if the $100 Triple Play was Viable in today's economic molasses. Neal writes:

Bundling voice, video, data services for a higher ARPU was an obvious, great move when broadband services and advanced digital services were first introducded......  However, the market is moving more towards a lower ARPU for the triple play services. This is especially going to play a big role in future operations. The time of high ARPUs is going, and soon it will be history.

I believe operators have to lower their ARPU estimates from 2010 onward, simply because the customer won't be willing to pay as much. Today operators generate $100+ revenue per month on their triple play services. In 2010 and later, they should be happy if they can reach ARPU of $50. One example is the FTTH service in Holland, where people do not even want to pay more than €50 for their triple play bundle.

My thoughts on it are here:

Telcos like AT&T and Verizon are actually losing money on triple-play. Think about the fact that they were getting $35 for a phone line and $35 for DSL (averages for consumers 2 years ago). Now they have to upgrade the network to offer TV, which is the least profitable service. And do that for $30.

Install and maintain the network that they will be capping. Install home equipment like ONT and STB. To give it away for $100. Now usually the telcos will add taxes and fees on that to increase their profit.  But its the MSO's who are making out. They went from the least profitable service (TV) to the more profitable services of phone and Internet.

With all of the CAPEX for DOCSIS upgrades as well as FTTx and WiMax build-outs, these companies won't be able to lower ARPU for triple play.

The cost of TV content is increasing. Must carry TV channels are now asking for a bite of the pie. You have seen the battle that NFL Network and the other sports networks are having to get carried by the systems -- and to be carried in the most popular packages.

I can see how the MSO's and telcos would have to lower ARPU averages in the face of the economic tsunami we are experiencing, but they won't be offering triple play for $50.

Remember that for the Bells, RGU's include security, cellular, and now tech support. Cablevision rolled out a $350M wi-fi network in NY. The duopoly knows that to keep churn down, they have to get sticky with ubiquitous Internet Access and to get close to a quad-play. Surprisingly, while Verizon has the quad play in my town (Tampa) - FiOS TV, Internet, phone and Cell - that is not the package that they advertise to my house Every Single Day.

 The cost of customer acquisition, retention, advertising, tech support, customer care, bad debt, security, upgrades, and maintenance are too high for the triple play ARPU to drop below $99.

So DISH Network keeps upgrading my DVR software without my asking. Tonight, I go to record a pay-per-view movie and the dialog box says, "You only have 24 hours to watch this movie before we remove it from your DVR."  Well, that stinks. We used to buy them and watch them at our leisure - usually within a week.

DISH has increased prices across the board. They will lose AT&T as a distribution arm in February of 2009. Will AT&T take its 1M subs to DirecTV? DISH has been  losing subscribers. (Are they the Sprint of TV?) And Echostar lost the patent suit against TIVO. They also have the DTV conversion coming. All this and they add DRM? Do they *want* to chase away subscribers?

Sure, adding MPEG-4 and 1080p content is great. (I just got an HDTV), but I don't want them messing with my DVR. I paid for the movie, what do they care about my time shifting it?  It's time to look at Bright House digital TV packages and save some money.

Typical Sales Situation: So I meet a prospective buyer. We exchange cards. A couple weeks later, he has a circuit need to be quoted. We have a conversation. It gets complicated. Next thing you know I am competing against the inside sales team and the Reseller.

So why is an Agent in a price war with the direct account exec? No idea, but it happens more and more. Who loses? The carrier usually. Why? Because they are losing margin with each pitch and counter pitch. At some point - like in the beginning - Siebel should flag that client and a floor should be established. That way the carrier makes a profit; the sales cycle doesn't spin out of control; and the conversation with the buyer can move beyond price to solutions and value.

Who else loses? The agent. Why? Usually direct can get lower than indirect. Also, the agent is spending a lot of time on a deal that may not close, but one that certainly has diminishing return.

I can understand it from a Buyer's perspective: get in a bidding war and I win. Short term, certainly. You win lower prices. Long term you get poorer service. Less profit equals less service. Period. The next time you want a deal, word is out. It's going to be the low price RFP bidding war again. Not everyone wants to get into that. As an agent it is a waste of my time and effort, because people only interested in price, are a PITA.

As an agent for 9 years, I provide value to my clients. One way is as their advocate to the carrier - if they have billing, provisioning, or other issues that need resolution. In provisioning, I interface with carrier and coordinate the installation times with all parties - hardware vendor, buyer, tech guy, carrier and installer. Another way is in the information I provide - beyond who the carriers are that I can quote. Maybe I need to do a better job with messaging this to avoid the Price War later.

In case you feel bad about things not going well, here's a video of other failures to give you hope.  (It can't be embedded sorry). Then there's my short list of telecom failures that I am certain will be updated in 2009. And then one last hopeful video: Did You Know? / Shift Happens by high school teacher Karl Fisch.

Bandwidth caps have more to do with preserving TV revenues than network management business. Yes, there are issues of last mile and node congestion for both telco and cableco networks. It is also a function of the band-aid approach that these companies take. instead of one huge upgrade (like say Verizon with FiOS), there have been baby step fixes.

It's also about preserving revenue. If you switch from watching Broadcast TV to just downloading Netflix and Amazon, how do the TV Providers make money from VOD (video-on-demand)? If you are watching shows via Joost and Hulu (and the coming network to replace Showtime), how does the big upgrade get paid for? The duopoly is preserving its content revenue - plain and simple.

Personally, the FTC should be investigating false advertising by the carriers - both on cellular data and broadband. In many cases, it is sold as Unlimited, but isn't. That's false advertising.

This will present an interesting challenge as people will switch. The duopoly is doing everything it can to compete on price and not value. Neither company is trying to court customer loyalty.

The ripple effect on this may be to stymie Internet business growth. Software and Application companies (SAAS, ASP), Web 2.0, and entertainment companies will find it hard to maintain customers and grow revenyue under a bandwidth cap.

I wonder how AT&T's partner, Apple, who makes the Apple TV and owns iTunes, feels about a cap, which will eventually flatten its revenues.

Not for nothing but these companies can't bill correctly anyway. There are certain to be many folks billed for overages where there are none. An even bigger erosion of customer satisfaction is coming.I guess we forget about Customer Acquisition costs and the lifetime value of a customer.

As prices of IP bandwidth sink to new lows, resellers - like Bandcon, AlphaRed, and the rest - are facing pressure. In fact, AlphaRed has apparently closed its doors, which could create problems for other resellers that it buys from and sells to, like BandCon who is the CDN for AlphaRed.  For every reseller that closes, a new one opens up.

(Please note: the other reason that AlphaRed may have closed was that the Washington Attorney General is suing AlphaRed CEO for scareware.)