June 2009 Archives

I'm not the brightest guy in the world. Yet over and over I see politicians and regulators make decisions that the other 99% of the US knows will be bad news. One such decision: approving the sale of Verizon's New England region to Fairpoint.

For one thing, agents can no longer sell in that region because Fairpoint thinks they can sell better than a telecom agent can. Ha! I'd put any agent I know up against any W-2 from a telco.

Two, even VZ knew that it would become too expensive to maintain the copper plant in New England; nevermind deliver broadband to most of it. But for some reason the regulators in 3 states and the folks at Martin's FCC approved the deal. Buying into the story that while a giant like VZ can't, an elfin telco like Fairpoint could, while saddled with the debt from the $2.3B deal. 

The customers in New England are not happy either. As much as 12% of its customers have bailed out. (To cellular and cable probably). But it could get worse as Fairpoint hinted back in March that it could file bankruptcy because of its debt. Verizon still owns about 60% of Fairpoint (I think).

The only happy camper was VZ who took a huge one time credit, released $1.7B in debt, and dumped a rural liability. And smiled the whole time.

In a similar deal, Hawaii Telecom went BK - that was a former VZ area. I know when Alltel (now Windstream) took over Eastern KY, it was like buying a termite infested house. VZ doesn't leave its assets in a state that anyone can work with apparently. Hence, the WSJ suggesting that Frontier learn its lesson from the Fairpoint deal.

While speaking at the FISPA meeting this week, I kind of focused on sales and marketing. Why? Mainly the E-Myth. Most of the ISP owners are technical but are very uncomfortable talking about business, marketing and especially sales. One point that is important is that ISP's are NOT selling Internet Access. ISP's are selling reliable, dependable high-speed access to Facebook, YouTube and the rest of the websites and Web Apps that people desire to use. SAAS and VoIP means that ISP's need to be cognizant of the fact that if you keep selling Internet Access you will relegated to a dumb pipe. Instead, you should be offering not just the access but also some of those Apps. (That's what the RBOC's want to do).

ITSP's are NOT selling replacement phone service. They are selling business productivity and efficiency through a new, reliable and redundant platform for voice service. It's NOT about saving someone 10% -- it is about understanding how the business uses the phone (and other communications services) to interact with prospects, customers, and employees.

Google Voice is now going public. Luckily, for some providers Google announced that it will charge for enterprise and premium users. At the FISPA meeting, IKANO (Disclaimer: I rep IKANO's Google Apps for ISP's) presented the concept of ISP's moving their email service to Google. This was at the tail end of a CLEC session where the discussion centered around becoming a CLEC is about controlling your destiny and your services. Well, outsourcing your email - still the killer app for users - for an ISP is tantamount to losing control. And the fact that Google - IKANO's partner for email - is launching Google Voice is just one more reason that the ISP's will say No to Google Apps. They see Google as the new AT&T.

In the book Marketing Outrageously by Jon Spoelstra, in Chapter 13, Jon writes about radio and TV advertising. Basically, you need to dominate a show or a channel to gain market share. Spoelstra doesn't talk about market share. He thinks it's about your brand being considered socially acceptable. PR firms want you to do Frequency and Reach. In other words, branding - get your name in front as many people as possible. Spoelstra's strategy is that you should dominate the show that targets your demographic. When you dominate a show, you create the impression that you are socially acceptable and ingrain yourself on the audience (your demographic).

I believe he is right. When you look at TMC portals, one company owns each category. Seth Godin in The Dip talks about being Best in the World. But it's up to you to define that world. That's what the Chris Anderson's Long Tail and Niche Marketing is all about. The way to be Best of Breed is to dominate a Niche that you create. That is what Whole Foods and Starbucks did -- established a Blue Ocean Strategy; that is, these companies stake out a new, uncontested category to dominate.

Most companies do not need millions to be successful. They need thousands. And they can narrow their focus to the best 1000 prospects to get that number. But like Vonage they want to hit everyone. It's expensive and doesn't pay off. Because it's expensive. Do you want to be Toyota or Lexus or Porsche? I want to be Porsche. 

What is your demographic? Don't know? Okay. What target market are you attracting and how can you dominate it in some way? If you are a Telecom Company and you are dominating your space, maybe you should talk to TMC or me about what slice of the market you want to own and we can devise a plan where you work to own that niche. That's the way to go. Be a sharpshooter not a scatter shot.

When I look at the fall of Nortel (and Alcatel-Lucent) as well as banking giants, Circuit City, GM, and more, I have to ask, "What happened?"  In his new book, How the Mighty Fall, Jim Collins writes about how once great companies have declined. Collins goes over the summary in Business Week where he identifies five stages of decline. Nortel came to mind as I was reading it but so did Lucent.

The whole situation is best exemplified by the music industry and newspapers. They didn't want to change - couldn't see the writing on the wall. Each was stuck in a revenue model that was supposed to work forever - and never bothered to examine a Plan B. Are you certain that you are not doing that?

In his book, Marketing Outrageously, Jon Spoelstra asks, "What business are you in?" Specifically, he talks about both railroads and Smith Corona. Railroads didn't realize they were in the people transport business, so missed out on becoming the airlines. Smith Corona thought they were in the typewriter business, when actually they were in the word publishing business. They missed the PC age.  NCR and the cash register business was another one that came to mind.

Do you think you are in the VOIP, UC, or SAAS business? Think again. You are in the Reliable Application Delivery game or the Reliable Communications Platform moreso. And you better not forget it or fail.

Xerox is the example that Collins cites in the Business Week article of a company that was in a death spiral, but the CEO pulled them out. Kodak is another.  Don't you see comparisons to Qwest, Level3, Global Crossing and XO in these stories? I do. It's not about pipe size or bytes or telecom. It's about the ability for a business to reliably get information, database access, and connect and interact with partners, employees, customers and prospects. It's like a car: no one cares how it works, just that it does when the ignition is turned on.

Expanding network into Charlotte and Raleigh was just the start of expansion for  XO in 2009.  

XO's been adding even more services to its too-big catalog lately. (I say too big because even XO sales folks don't remember half of what they sell or can brief prospects on more than a handful). The catalog is RBOC sized including Hosting, wireless, IP, VoIP, PBX, SIP trunks, transport, collocation, TDM, Ethernet, and Managed Services.

Oh, I forgot wavelength services too.  And in a deal with Pacific Crossing, XO extends its reach to the Asia.

XO is back to pushing Fixed Wireless that it relegated to the old Nextlink brand.  It was mentioned recently when XO announced that it was adding new speeds to its Hatteras based mid-band Ethernet service.

XO is also pushing Concentric, its hosting brand, with the announcement of a Managed Backup Service.  According to Phone+ magazine, the service will be sold via a new VAR Channel Program (as well as current XO Business Partners).

Beyond transport, XO added Hosted IVR, labeled as an Inbound Teleservice, and XO Connect, which is a mass notification service. I guess, they are taking lessons from Ifbyphone to use SIP to do more than make cheap calls.

And finally XO has an agreement to extend VoIP to 2800 LSO's in the US. That deal apparently also includes transport and transit to 2800 rate centers.

That's a lot of expansion once the heavy debt was lifted.

I'm attending a two day meeting next week that is basically a client event for me. I was foolish enough to tell a couple vendors about it. Now they are sending two people to go sell direct.  Isn't that great?  One is even going to convert my clients to agents, which makes me selling their services even less likely. 

Way to support your current partners people!

BellSouth and Cox fought Lafayette (LA) over the municipal fiber project (LUS) to the  tune of $500,000 in legal fees. Who do you think paid those fees? Taxpayers and consumers.

Then there's the Embarq, TimeWarner Cable fight over the Wilson (NC) municipal fiber project called Greenlight. It was a $28M project. Not for nothing, but couldn't TWC or Embarq have ponied up that cash and delivered FTTH instead of battling it in the legal system?
 
So when the Duopoly doesn't deliver broadband and the government takes matters into its own hands, they get sued. Why? The duopoly can't compete with a government-owned ISP. Instead, they lobby heavy, get the lawyers involved, and start spreading the cash to have laws made that prevent Americans from getting reasonably priced super-fast Internet Access.

Now, the Duopoly spends millions - literally, hundreds of millions - lobbying and contributing to politicians each year. Why not take that money and build FTTH instead? 

I have another suggestion:  Eminent domain. Eminent domain seems to work for cities that want to take over waterfront property for developers. How is having a network that you won't upgrade and deliver your promises on any different? When the Duopoly sues a city over a Muni Broadband project, why can't the city just counter-sue under eminent domain and take the network assets over?

Tech Data's Senior Product Sales Champion for UC was at the event last night. I spent a few minutes chatting with him about his position, but couldn't really get a definition of UC out of him. Polycom and tele-presence are what he pushes - to me that's not really UC. HD Voice? No we leave that up to Polycom and the vendors. Seems even a tech company has a problem wrapping the head around Unified Communications. (UC doesn't mean the latest gadgets).

XO has some components to build a UC bundle - overlay IVR, Broadsoft SIP Trunking, some straight forward Hosted PBX (with a limited feature set), and Hosted Exchange for the email integration piece.

If the UC Champion thinks UC is tele-presence and video conferencing, what does that say about well defined the term is in the Industry?

I received an invite yesterday from XO to come down to the Tech Data Expo at the Don Cesar Hotel in St. Petersburg FL. ADTRAN shared the booth with XO at this event. Surprisedly, the other two carriers that distribute through Tech Data had assigned booth space, but were absent. 

XO is a good fit for Tech Data. While I think the XO catalog is too large to know well - wireless, hosting, IP, VOIP, transport, collocation and more - the VAR's at Tech Data vary so much in what they do and what would complement their business that the wide selection helps - IF you can get in front of them and remind them throughout the year how they can take advantage of the additional revenue stream. 

For many VAR's the advantage of XO through Tech Data is that there's no contract (especially for those VAR's already under contract with Ma or Pa Bell) and with Tech Data as the "master agency", it isn't likely you need to worry about your residual check.  (And now that XO has converted their debt, it is in a good position going forward, which other debt laden CLEC's can't say).

Many VAR's are already in the PBX space and were asking about SIP. I wasn't sure if they actually grasp the concept of SIP or that they just know enough to be dangerous. The biggest difference between a PRI and a SIP Trunk is Inter-Operability. PRI is a standard with two available configurations that work with almost all the PBX's on the market. SIP Trunk is a spec - a collection of a lot of RFC's that have to work together just right to provide dial-tone. Broadsoft, the softswitch that XO is using, has tested inter-operability on many IP-PBX systems. Not so for other SIP Trunk vendors. So before you sell that SIP Trunk make certain that the IP-PBX model will inter-op with your SIP trunking vendor. It's a mess if it won't work.

Occam Networks has a pretty good blog. Today's topic is usage based pricing. I disagree with the usage based pricing.

As I see it, we have had (mainly telco) rate hikes since 1999 on the promise of Broadband. In fact, in Penn. Verizon promised DS3 to the home. Where is that?

ISP's have had 10 years to figure this out. Ten years to upgrade the networks. Ten years of rate hikes and regulatory wins.

Telco ISP's don't want to figure it out, because they are minutes-munching Bell-Heads and thinking like a Net-Head is too much of a change. Switched versus packet.

MSO's don't want to cannibalize their video revenues. Unlimited gets in the way of VOD, PPV, and premium channels. Cable really wants usage based pricing. The Network DVR is supposed to keep some video revenue from sliding to the Internet, especially for less Net-savvy consumers.

How is it these same ILEC's that desire usage based pricing are now looking to deliver video and multi-media to a cellular handset? Their cell networks are more expensive, bandwidth limited, and not up to this challenge. But they don't want to deliver this same service terrestrially? Bell-heads! Go figure.

When they live up to their rate hike promises and merger conditions, they can re-examine the usage based pricing. Till then shut up and give me my broadband.

To quote John Stewart: You are hurting America. Other countries have faster, cheaper broadband - and are taking our jobs.

I'm going to be speaking at a CLEC and ISP event next week in Nashville. Some interesting topics really. CLEC Strategy, How to Sell VoIP, and Marketing in a Nutshell.

Here is the slide deck for How to SELLECOM Digital Voice

Everyone has some plan to spend money for broadband now that the BTOP is out there.  Much of the broadband problem revolves around lack of fiber. There's no conduit and no fiber, so what do you do?

This one blog post explains the conduit and fiber access dilemma and how if it is not addresses will create problems down the road. 

Then you have a couple of Congresspeople pushing a bill to build conduit into any highway expenditures. Except the Highway Trust Fund is broke.

Maybe we need to stop looking at the federal government for broadband deployment and start looking at the business plan for after you sink all those assets in the ground. Need we forget that there is plenty of fiber in the ground from companies that have long been forgotten that lies unused (because no one knows where it is, where it goes or who owns it). 

At the end of the day, there needs to be a business plan that allows for sustainable broadband. Paying for the network usage and maintanence.

The USF contribution is now 12.9%!! WTH?  That is too much. And that doesn't include the companies that will take loans or grants under BTOP and go under (never to pay it back or deliver service). What will USF look like in 2 years?

Meanwhile, you have the NTCA saying that Google and content providers should pay into USF. Excuse me? They do pay into USF on transport billing. 

What do they think people want the broadband for? Email? Bell-heads need to figure out what happens when the system they love crashes. What happens when the Universal Service Fund collapses upon itself? Most ILEC's, including VZ and ATT, get millions from the fund.  Millions of my fee dollars go back to prop up an unsustainable system.

This will be a strange post but Alex Balashov and I had a Twitter exchange today about the telecom industry and its relentless pursuit of arbitrage plays. From long distance to calling card to SIP trunking, it's all about changing the bucket of minutes for something cheaper so someone can make some short change coin. Kind of ridiculous.

I asked where the Purple Cows are. Where's the HD Voice in my Hosted PBX? Where's the mobile component that is stupid easy? 

Alex doesn't like Hosted PBX. "As for Broadsoft, it's an overpriced waste of time. Not because it sucks- it is a very feature complete multitenant engine...its cost simply doesn't scale to what people are willing to pay for hosted PBX and dial tone. Shot up by commoditization." 

I think that there are two camps: one that thinks Voice should be free - and I hear that more from folks IN telecom than from buyers. And these folks simply do not grasp the stranglehold that the ILEC's have on the PSTN, which for years to come will still be the network of the final mile to end user. Yes, cellular is large and cable voice is growing, but most of that traffic still resides on the ILEC operated PSTN. ENUM and Voice Peering domestically in the US has not  reached a level that will cripple the PSTN yet, luckily. (What will we do when that happens?)

The other camp will gladly pay to reliably and clearly communicate with family, friends and customers. 

Maybe I am in the minority but I can't hear folks well on Skype, Magic Jack or cell phones. I for one would like less computer features on my "smartphone" and better clarity, volume controls, and speaker. But that's just me.

Alex does make a good point that all ITSP's need to pay attention to: "No process, no standardisation, no infrastructure = no chance of making money, on something that is a red sea to begin with."  What's a Red Sea? A bloody marketplace built on price, not value. "Develop business processes that can be replicated at decreasing marginal cost, standardize." That at least helps when you live in a Red Ocean.

The Starbucks of Telecom. Who is it? Alex suggests that it is "Ifbyphone, Callfire, and various niche call center and dialer vendors (far from all)." And certainly these companies offer a value add on in a niche way. However, who is providing the dial-tone while delivering a communications experience? (I don't know). I have a laundry list of stuff I want from my Hosted PBX vendor:

• HD Voice
• Easy access on smartphone
• Easy transfer to/from mobile/desktop
• Presence
• Video capability
• IM/Chat
• Email-Voicemail Integrated mailbox
• Voicemail text 
• UM (unified messaging)
• User portal
• Click to call

Alex thinks that the Duopoly is getting better at delivering smaller transactions. I think that they still suck at it and it is costing them a fortune in acquisition cost. Then a fortune more in brand deterioration when people get frustrated with the experience. (Part of is it the B.S. marketing that they have been doing for years that raises the level of expectations to beyond the network to deliver. Can you say More Bars or No Dropped Calls or Best Network?)

Very few Purple Cows in our Industry. And if you think you are one, I suggest you talk to your customers. Why? Because while you may think you deliver a great service, your competitors are taking your customers.

Alex and I did agree that the way SIP Trunking is sold is yet another arbitrage play. "So, I think we agree - trunking in itself is a very mathematically exacting but mostly pointless waste of time.  As far as who captures the value in the non-enterprise VoIP space, you're absolutely right - the very few value-add vendors." 

It's food for thought from twitter.

Alex talks further about TDM - that it is still the winner in reliability, inter-operability, and call quality. 

"From a cost perspective that is a hard OPEX formula to meet. TDM is still the only reliable means of PSTN access. Stuff just doesn't work well. Eventually the smart ones widen up and get cheap TDM circuits, and ISDN gateway boxes. ... 90% of their technical overhead drops off, churn slows, but the margins take a dive unless they got a really good deal. "good deal" usually means meeting an IXC in a hotel and not paying loop on the circuit, just blended usage."

This leads me to wonder what ever happened to Voice Peering and ENUM? Well, one thing is that everyone wanted to start one. There wasn't just one. The rules and connection costs get in the way. Why didn't COMPTEL force its membership into a Voice Peering arrangement in 2005? Add in the Cable Industry, VoIP players, and Sprint's network of cellular minutes and you take a lot of the minutes out of the ILEC's PSTN. Costs drop. Or would they? Seems that the CLEC's would still want Inter-Carrier Compensation since some have this built into their financial model (as it were). Because Bell-heads (traditional telecom execs) don't think the same way that Net-Heads (IP execs) think. The settlement model would have to be forced on them. Even the FCC has balked at that for 10 years. 

Alex doesn't get my Peering point so let me spell it out further. Take Sprint as the manager of the Voice Peering Points in Dallas, NYC, LAX, CHI and maybe VA. CLEC's, cablecos, ITSP's could drop traffic either as TDM or IP on the switch and not pay for termination. A flat rate if you will. But Alex is correct that the settlement issues just won't float. Too many Bell-heads left in charge. 

To mean VoIP was able to take off for 3 reasons: broadband deployment, expensive TDM, and cellular acceptance of crappy call quality. We haven't come much further than that.

CNN's Money's Customer Service Hall of Shame includes mainly banks and surprise telecommunications companies. These are the top 10: AOL, Comcast, TWC, Sprint, Cap1, HSBC, Abercrombie, Qwest, BOA, Citigroup.

Former SBC chief Ed Whitacre is going to be the next Chairman of GM. Huh? According to Bloomberg, Whitacre is doing his patriotic duty and loves the challenge. Rich Tehrani thinks that Whitacre was a strategist. He dismantled the regulatory landscape, fought off (and then ate) is competitors, and turned a local Bell back into Ma Bell after numerous acquisitions that have never been integrated. (AT&T still acts like 7 different companies to anyone that has to work with them).

So how successful will an insider monopolist from SBC be at a dying auto maker? Well, less debt to deal with. Inside political track, which is the only way he plays the game. He didn't really understand the Internet and probably doesn't understand the auto industry either. 

His "partners" at SBC (authorized sales agents) are much like dealerships, who should expect the worse, since every company SBC bought tightened the screws to the agents. 

Rich writes, "For too many years GM had lousy management and created cars that for lack of a better word sucked. Americans ran away from Detroit automobiles like AT&T ran away from VoIP in the nineties." Rich, SBC (now called the new AT&T) isn't exactly known for being innovative either. No VoIP. Compete on price. Long installation intervals. Bad billing. What exactly is Whitacre going to bring to the new GM? From what I can see having dealt with all the Bell companies over the last 10 years, he was a lousy cheif exec except that he could put deals together. So what? GM is selling parts and Whitacre knew as much about internal organization and integration as Level3 execs. 

This is also the guy whose company allegedly helped the NSA wiretap the nation. I guess this is his thanks, since Crazy Ivan at VZ is still busy.

Who is my choice? How Elon Musk? How about someone from P&G or Unilever? 

Success is measured a number of different ways, but make a big, hulking, inflexible, non-innovative tech company isn't what I would consider a success. GM needs fast, flexible thinking; innovation; reach out to dealers and workers; and a huge re-branding campaign (which might be the only thing Whitacre is capable of: re-branding GM as the new GM with the same crap as before).

SUMMARY:

GM needs a creative thinker that is flexible and industry knowledgeable. Someone who can bring new partners and ideas to execution quickly, because mergers and acquisitions are not going to be the solution for GM.

GM has two prime missions: convincing people to buy its cars; making cars people want to buy despite the state of GM.

Unfortunately, the government once again shows that change has not come to Washington as they pick a crony instead of the right person - something we have seen too much of during these times of re-invention and government intervention.