November 2009 Archives

Ken Camp's Year in Review prompted me to write this. It's been an interesting year. SIP, UC, Cloud, Merger. That's really how I see the blur that was 2009. I attended so many conferences this year. The highlight was speaking at so many. So to the organizers, like TMC, thank you so much for letting me have a podium. 

Ken points out Voxeo. I point out Ifbyphone.

Many regional CLEC's and VoIP Providers had positive moves this year. A round of applause  to Hunt Telecom, Socket, PBX-Change, FreedomIQ, Sonic.Net, Kinex, Smoothstone and Telesphere.  (Full disclosure: I worked with many of these companies so I saw the growth first hand).

I saw so much M&A activity this year despite the economy. We also saw XO clean up its balance sheet. 

We saw Agents get cut and get mad - even as the Channel seats at the carriers became musical chairs in 2009. So many Channel folks moving around, I got dizzy with all the business card exchanges at the shows. (Reminder: keep your LinkedIn profile up to date and with a non-work email so you can stay in touch). I don't know if it is growth in the Channel, but lots of carriers and master agents were hiring channel managers this year. 

TCA had a good year, seeing agent numbers increase. The TCA is currently working on a Code of Ethics and a Best Practices Guide for Agents for 2010. (Join in! It's a work in progress that can use your input.) Is a Certified Agent coming?

We never saw the BTOP and BIP money. Well, ConnectedNation saw the mapping money. This probably hurt gear makers more than carriers.

The FCC got bogged down in Net Neutrality and Broadband Policy without revamping a single thing. I was hoping the "new" FCC would actually do something. Guess not.

SIP Trunking seemed to be all anyone was selling in the VoIP space. Dis-a-ppointing in a Big Way! Why? PRI replacement is like Toll-Replacement -- it's cost savings not productivity improvement.  We have all this technology -- and we just can't message it or sell it. (And believe me I have been writing and talking about it all year!)

Amidst all the M&A, we saw Charter, Nortel and Fairpoint file BK (bankruptcy) in 2009.

UC - more people tried to define than use it this year. Just so you know, Telepresence is NOT UC. It's shares components though. Again lots of buzz about this - like there was buzz about HD Voice - neither one likely to hit the big time soon due to the fact that the networks aren't ready yet. 

One valuable lesson this year: cheaper bandwidth does NOT mean a good thing. I had many clients get cheap bandwidth - and they got what they paid for. 

Lots of outages at data centers too. After Katrina and other disasters, you would think that reliability and redundancy would be the key questions.

Also, so many big data breaches this year, that when you combine it with outages and lack of redundancy, spell a problem for Cloud, Virtualization, or whatever else you want to call hosted server architecture. The highlight would be SalesForce.com reaching a billion in revenue. It sort of proves out the SAAS (hosted app) model.

It was the year of the apps too. Aside from SAAS, iPhone, Blackberry, Google, Broadsoft - everyone got an app store. I don't know if that resulted in revenue, but it probably helped many folks waste a few hours per week. I'm wondering when the IP Phone will become more than just a desktop phone and more like the mini-computer it is today. If you have all these apps on your mobile, why not on your phone on your desk?

This was the year that Twitter took off. I mean, once Oprah got on, that was it. It being the peak. Social media is a time suck without discipline and goals. (Something most people don't have in real life let alone online). Two quick things on social media: it's about conversation and it's just a bunch of software programs that let you publish your message, so engage and be interesting. 

WiMax, 4G, LTE - yawn!

Nothing really rocked this year.  Did I miss something? 

Happy Thanksgiving

Windstream follows up its acquisition of CLEC NUVOX with the purchase of an ILEC. Windstream Announces Acquisition of Iowa Telecommunications Services for $261M in cash, $269M in shares and $598M in debt (see Reuters).

In its latest SEC 10Q filing, it states:

"On November 2, 2009, Windstream entered into a definitive agreement to acquire all of the issued and outstanding shares of common stock of NuVox. As discussed under "Pending Transactions" above, Windstream expects to pay approximately $280.0 million in cash and assume $180.0 million in net debt in the first half of 2010 as part of the transaction, which will be financed with existing cash on hand and borrowings available under the Company's revolving line of credit. ... As discussed above under "Liquidity and Capital Resources", on October 8, 2009, Windstream completed the private placement of approximately $400.0 million aggregate principal amount of senior unsecured notes due 2017. The net proceeds will be used to finance the cash portion of the purchase price of the D&E and Lexcom acquisitions, estimated to be approximately $75.0 million and approximately $141.0 million, respectively, to refinance certain indebtedness of D&E, approximating $180.8 million, in connection with the merger, to pay related transaction fees and expenses and for general corporate purposes."

"Additionally, during October, Windstream received consent from its lenders to an amendment and restatement of its $2.2 billion senior secured credit facility. Windstream amended and restated its senior secured credit facility to, among other things, extend the maturities of the facility and amend certain covenants, resulting in increased interest rates on the extended maturities. See "Liquidity and Capital Resources" above for the extended maturities and related interest rate increases. Scheduled principal payments under the amended debt structure will approximate $23.8 million, $142.8 million, $42.3 million, $1,248.0 million and $20.8 million for each of the twelve month periods ended September 30, 2010, 2011, 2012, 2013 and 2014, respectively. The scheduled principal payments remaining after 2014 approximate $4,170.1 million." That's 4.2B! It's long term debt as of 9/30/09 was $5.2B.

Revenue is $735M per quarter or $2.9B per year. And they picked up $600M more in debt today - to reach $5.8B. Will it have enough free cash to pay that back? Revenue for ILECs is dropping as the landline business gets competitive - people leave for cellular or cable or VoIP. These rural ILEC's can't afford to provide fiber-to-the-Hood (FTTH)because it's too rural. (That's one reason that VZT has been selling off its rural assets. The other reason I think is to enhance its balance sheet before Wall Street figures out that VZ's balance sheet is as pretty as BoA.) Still the triple-play offering requires DirecTV or DISH. No cellular property. (Windstream is th eresult of a spin-off; Alltel merged its landline biz with Valor in 2005 to create Windstream. It was similar to Sprint spinning out Embarq.) It's time to get creative because massive long term debt is not your friend.

I was talking with Geoff Shepstone of TBI yesterday about the 2013-2015 time frame for telcos as much debt comes due at that time. Between now and then, there will likely be much consolidation, because there's too many players pushing the revenues down as they compete on price. 

What do you do when you used to be a monopoly with no competition and a fixed rate of return of high margin? Now you are one-half of a duopoly fighting for half the pie and half the margin? Scramble. Merge. Acquire. 

How about Innovate? No true innovation or differentiation has happened in telecom in a while. (Hosted PBX, SIP Trunking, G.SHDSL, EoC, FTTH, GPNO and Metro Ethernet not withstanding).
 

On the ChannelVision LinkedIn Group, there is a discussion about the ad wars between VZW and AT&T Mobility. Ho hum. Who cares? One Bell battling another like two children.  Every time I see the AT&T ads, I think, "Weak!"

Doesn't AT&T listen to its customer base? At the Broadsoft Connections event, where iPhones were about half the phones in use, many found them unusable because the network was too busy. (Busy signals?)

The problem for AT&T is that when they lose the iPhone exclusivity they will learn quickly how much their network is lacking. AT&T can sqawk about 2.5G versus 3G all day, but if the user experience is poor, that's the story. Period.

I find it funny that VZ only has commercials where they poke fun at the competition - whether its AT&T or cable. Here's an idea: spend more time talking to your customers. That's your best investment. Your FiOS TV service is horrible. It makes so many weird sounds, it almost makes TV unwatchable. (I have Bright House at my condo, but I miss DISH.)

Final thought to both Bells: spend your ad dollars and your lobbying millions on Customer Service and Upgrading your network. That will work more than any amount of crap ads and direct mail. 

Currently on the LinkedIN Group for Technology Channel Association members, we are having a dialogue about two important topics: a Code of Ethics for Agents and Best Practices.

The Technology Channel Association (TCA) wants to examine the best ways to elevate the professionalism of this industry overall.

In July, the TCA held an interactive conference call titled Best Practices for Channel Managers. Agents shared their points of view on what can be done on a daily basis to ensure the best possible customer experience.

Generally speaking, agents feel that a good channel manager has the following traits:

• manages relationships
• responsive
• delegates responsibility to the appropriate internal contacts
• knowledgeable about the business overall.

It takes time to develop a business relationship, so shuffling channel managers is probably not the best idea, unless channel success is at issue.

One factor was that while the channel manager needs to be responsive, the way in which he communicates with agents may have to depend upon the agent and how he likes to communicate. All agreed that face-to-face is still the best way to cultivate a relationship.

It's also about engagement. Carriers want the agents more involved and having their company top of mind. Agents need to be engaged by channel management to learn about new offerings or promotions. One way is to know what the agent's business is and to point him to the most relevant stuff. Maybe suggest that he could upsell his base with Product X -- but with a qualifying statement of why his base would be interested or what the pitch would loook like.

That covers much of what agents want from channel managers. Now it's time to find out what agents need for best practices. Input is welcome.

There are a bunch of debates raging over the telecommunications infrastructure. 

Congress has looked at Open Access bills for cellular networks. By this we mean that a consumer can use any available handset or device on any cell network. This is kind of the Carterphone concept for cellular.

The 700 MHz auction had open access provisions built right in, so VZW's 4G/LTE network will need to incorporate Open Access.

Spectrum is a finite resource. TV, radio, public safety and the cell companies all share access to various licensed spectrums. Other companies, like oil companies to communicate with rigs and ships, have purchased spectrum licenses. There is also the unlicensed bands like 900 MHz, 2.4 GHz, and 3650 MHz that are shared by any and all. We are seeing in the 2.4 GHz band that too much usage causes crowding and in some cases makes the spectrum useless. (Your little blue Linksys wireless AP's use 2.4 GHz, as does quite a few cordless phones and other consumer products). As more and more products and consumers go cordless and wireless, this resource will be used up. It must be allocated better. 

(An aside: Open Access has one advantage: less handsets in the landfill.)

Net Neutrality is based on network management. Both cable and DSL have bottleneck issues in your community. To manage those issues, the service provider uses tools, hardware and software, to prioritize traffic. This same set of tools can be used to degrade Vonage while prioritizing the ISP's VoIP service offering. These same tools can be used for DPI (deep packet inspection) to read every unencrypted packet that passes through the box. This same tool can be used to police the network (or Internet) of child porn, illegal downloads, and the like. Do we really want that kind of Big Brother action? 

At the heart of the NN debate is the fact that a few ISP's have degraded VoIP packets and legitimate P2P (peer-to-peer file-sharing) traffic. As networks go all IP, there needs to be a set of guidelines for peering traffic and network management. I don't think the FCC or Congress should be the ones making these rules. Any rules they come up with will be a compromise that will ultimately solve nothing, but create new problems.

The final debate in DC is about Fair Competitive Access to the telco infrastructure. After court rulings and Forbearance petitions in 2004-06, CLEC's and ISP's have been losing ground in the ability to get access to telco network elements to provide service to customers at a fair and competitive price. In so many cases, the CLEC "wholesale" rate is higher than retail. Make sense? Docket 05-25 at the FCC is the Notice of Proposed Rulemaking on Special Access Rates. 

While they may seem similar in that they are all about access to the network, they all are about different aspects of the network access. In the end, Open Access Rules and Net Neutrality guideleines will define how we use the networks for innovation, collaboration and communication.

American Tower is buying 196 Towers from Cincinnati Bell (CellNews)-- Outsourcing of Network Infrastructure continues.

Mobile Backhaul Equipment Market to Jump 60% in 2009 to $5.9 Billion (CellNews) Qwest and cable companies are all over fiber backhaul from cell towers. More smartphones means more bandwidth needed from each cell site - and NxT1 won't cut it. Using wireless backhaul won't either as the big boys don't want to use Unlicensed nor use up their precious paid-for spectrum on backhaul.

Pay As You Go Mobile Broadband Overtakes Contract Deals, according to CellNews. Boost Mobile all-you-can-eat-text-web-talk-for-$50 is not good for T-Mobile or VZW. Ma Bell still leaning heavily on iPhone. When exclusivity ends, they will be in big trouble if they don't fix things now - and suing VZW over ads isn't going to help fix what ails you, especially when you lose the first court battle. No injunction granted, because "ATT doesn't argue that the maps are incorrect in terms of showing its 3G coverage. But it says that Verizon is misleading customers by implying that they cannot use their phones or access the mobile Web when they aren't in 3G coverage areas. The reality is that customers can make phone calls and access the Internet from their phones using the company's slower EDGE or GPR networks."

Key investor is opposed to Sprint purchasing the thorn in the side affiliate, iPCS.

Unions push to organize T-Mobile USA employees, according to FierceWireless. That's funny because the old SNET company union workers can't get Ma Bell execs to talk to them. And this isn't a time in American economic history to be a worker looking to unionize. You should be helping your company stay afloat so you still have a job -- and your pensions aren't wiped out when your former company files Bankruptcy. Foolish greed.

"Niche groups are emerging as cultural creators" - Frank Cooper of PepsiCo at AMEX Innovation Summit.

Tom Peters has been talking about businesses aiming at the explosively growing Hispanic market as well as targeting female shoppers for years. I guess Pepsi finally listened.

At Broadsoft Connections I made the comment that a Bundle will need to be created to target a specific vertical (or niche). Not everyone agreed with me. But according to Seth Godin, Coca-Cola Japan comes out with a new product every 3 weeks because they have no idea what will work.

Are you experimenting with your marketing? Your bundles? 

Are you targeting Everybody? I hope not because Everybody does not know you. Qualified prospects will react more positively to a specified offer. 

Seth Godin wrote Permission Marketing in 1999. Ten years later, most media companies don't understand the concept still. As Seth explains in the book and in his blog numerous times, when I give you my email address, it is a trust issue. I trust that you will not spam me; inundate me with off-topic email; and most importantly not sell my email address to third parties -- even if they are your partners. 

All too often, when I sign up for an event, I get inundated with email from the vendors of the event. This irks me for a number of reasons, but mostly because I did not give my email address to them.

This is a failure on so many levels. The media company has a database of email addresses that are mostly "junk". By that I mean. yahoo, hotmail, and the like. That means they are likely not sending email that will not be read.

An advertiser is paying to send an email that will be likely read. It does no good to pay for 5000 emails if 4500 of them are worthless, unopened, bounced or sitting in an email box that gets opened infrequently.

By the way, the CAN-SPAM Act is one thing, but your media company brand gets destroyed by these kind of hijinks. Act accordingly.

Listened to XO to introduce Enterprise SIP (ESIP) to the Channel today. This offering is very targeted. Enterprise SIP is designed for multi-location customers such as Retail and Restaurant chains that are looking to get rid of PRI's.  

ESIP will be for high capacity connections with the minimum connection of 10MB at the hub (or HQ) for aggregated voice traffic. 

Essentially it is a SIP trunk (at 10MB) that will take all of the local and long distance traffic - inbound and outbound - from the branch offices across an MPLS (or other private network) through one or two hub circuits. 

Here's how it works.

You connect all of the offices together via a private network or MPLS architecture. Then you port all of the numbers to the SIP Trunking of XO's Enterprise SIP Service. The trunk will plug into an IP-PBX or an SBC and handle all of the voice traffic on the company network. All inbound and outbound voice traffic will utilize the ESIP Trunk.

A 10MB pipe will handle about 100 G.711 call streams (more or less). That means about 500 to 1000 extensions depending on the phone usage of the employees.

XO will even give Virtual-NXX numbers off this trunk. Although toll bypass is not allowed. 

The thing that surprised me the most was how specific the offering is. It's isn't for everyone. It was designed with a very particular market segment in mind - namely retail and restaurant chains.

The ESIP offering is designed to terminate on a Session Border Controller, IP-PBX or a Fax Server. 

Need to UPDATE that this is my take-away from the call. XO has many VoIP products and they want to match up the best solution for each customer. The ESIP is specifically for Multi-Location, MPLS-enabled customers. Not many companies need or can afford a Session Border Controller, so to me that is an indicator of the type of Enterprise that this offering i sdesigned for.

Speaking with Peter Davis, Partner Channel Manager in the Southeast for XO, about MPLS and HIPAA. XO recently held a webinar describing how their MPLS Solution can enable healthcare organizations to be HIPAA compliant.

The wording here is important. Transport is neither compliant or not. It is the end devices and users that must be HIPAA compliant. In other words, how the data is handled end-to-end has to be compliant, not the pieces and parts. 

When speaking with Hospital HIPAA Administrators it is important to remember that part of compliance is security and part is procedure. The procedure part has to do with how all medical records (physical and virtual) are handled and secured, whether on-premise, in transit, at a data center, ona  server or in a file cabinet.

With off-site data storage, the best solution for access is a private line, a Layer 2 VPN, or an MPLS network. Why? Segmentation of traffic. Security of data flow. Less chance for a lapse in security. 

The data needs to be securely stored and backed up. EMR firms have to sell a fairly expensive proposition due to all the safeguards and redundancy that goes with accessing medical records from a remote server. 

In many ways, the telecom agent can sell numerous pieces of the puzzle through XO (or other carriers or VAR's). 

• The transport - private line, metro Ethernet, Layer 2 VPN, or MPLS.
• The data center - collocation for servers and networking gear
• Data storage and backup

HIPAA is more involved with procedures in place (and to be followed) on the storage, access and security of medical records  than on the technology used to secure, store or transport those same medical records.

If you are looking for more info on MPLS, XO has an MPLS video series on YouTube and TCA has a stored webinar for its members on its website.

AT&T cancelled their CallVantage service. It will go dark on Nov. 20th. The porting process is probably the most painful part of changing service. If you are a licensed CLEC, it is a little easier. If you are a VoIP Provider relying on another carrier to LNP for you, you have to set expectations for the porting. And by that I don't mean blow smoke up my tush by telling me it could take 45-60 days. Sure that can happen, but I haven't seen that time frame in a while.

One of my clients who took over my VZ number ported it in 3 days. Bang! Done! And that's against VZ, one of the worst possible feet dragging, no-one-home LEC's. 

Do you know what On-boarding is? Personnel departments use the term to mean when you bring on a new employee. The process involves getting them email addresses, ID's, parking, a desk, badge, orientation, training, benefits, etc. Most larger corporations have a written procedure in place for on-boarding. Why is it important? Because the first impression the new hire gets is day 1. All to often Day 1 is a mess for the new hire. No desk. No computer. No contact or introductions. Welcome aboard!

Is that what you do to your customers? Because the on-boarding of a new customer is very important too. It's their first impression of your company's ability to provide service. Imagine how that feels when the customer gets no status update for a month. The porting happens suddenly and without warning. Or worse doesn't happen for a long time. (Long is relative). 

Did you map out the PBX extensions? Did you check inside wiring and the LAN design? Are the phones programmed? When will staff training occur on how to use the new system, voicemail and handsets? Is there a manual or a wiki?

These are the basics of the on-boarding process. LNP is just a part of it.

I received an email yesterday through my website contact form. From Dennis  asking me if I was a direct agent for Paetec. (I'm not; I sub through Microcorp). I reply that I am a sub-agent and ask why. His reply: "Because I'm an agent for PaeTec and I'd like to talk to you about our sub-agent program."

I explain I already am a sub-agent. His response: "I understand that and am interested in your commission structure. I'll cal anyway if you don't mind."

The fact is I did mind. I hate this crap in our industry. I email him that I think poaching agents is not very nice and that as a founding member of an agent association, TCA, I feel that integrity and ethics are an important foundation of The Channel. His reply: "For the record, I was not poaching other people's agents, I happen to see you web site and noticed the PaeTec representation so i thought I'd introduce myself. Besides that, I didn't know it was unethical to solicit other peoples agents; I thought that was what most would consider the free market system. Thanks your your input anyway; I was going to give you a lead for fiber but under the circumstances, I suspect you are well set in that area as well."

He teaches Technology Management at a local college and has been in the business many years.  It irks me. 

What's was going to be his pitch? I'll give you two more points if you move your business over? Does he think that I have no integrity? Does he think that my relationship with my Master Agent is based solely on commission points? 

The TCA spent some of 2009 composing a Code of Ethics for Agents which included the following:

• Honesty and Integrity are the foundation of an Agent.
• Agents should educated on the solutions that they propose to customers.
• Agents should always have the best interest of the customers at heart.
• Agents shouldn't churn Master Agencies.
• Every dealing of an agent - whether with a customer, prospect, carrier, master agent, vendor or other agent - should be performed with the utmost of respect and integrity.

Gary Kim has an excellent blog view about How Not to Sell Hosted PBX. First, you need to sell that is Reliable, Dependable.  Even before the usual pitch of: Show me your phone bill and I will save you some money. (Blah!)  Give Gary's story a read.

Yesterday was a big day for The Channel. Two separate acquisitions occurred with both takeover companies expressing interest in the Channel of the company being bought.

First, we have GTT buying WBS Connect. WBSC is just a reseller of Transit and Transport with about $28M in revenue. It was bought for about $1.8M in cash and notes plus $600K in stock. A spreadout payment over 18 months. WBS Connect had 900 customers  (ARPU calculated at $2600 per month). Lots of hype about POP's and lit buildings touched but at the end of the day WBS Connect was just a reseller pushing IP pricing lower (i.e., in my experience, they sold on price. Get your best deal and I will beat it by $1/MB). If that's the sales approach, what value is that? I won't rant here. I'll let it speak for itself.

Second, ILEC Windstream (formerly Alltel combined with Valor) bought Nuvox. Nuvox was a combo of FDN, NewSouth and Nuvox. Apparently, Nuvox had $180M in debt with 90,000 customers bringing in $500M in revenue (ARPU of about $500 per month). Windstream will issue stock valued at $183M and pay $280 million in cash for $500M in revenue and access to business cutomers outside its footprint. With cellular assets an ILEC like Windstream would be swimming in the EarthLink pool: declining revenue from a declining customer base. The only way to attract new customers is to go outside its own region - or buy a cellular company or a cable outfit (both of which cost way more than $500M).

Nuvox pays out between 12 and 18 points to its Channel agents. Many people call me wondering how they do that when they sell PRI's in many markets for $400. I have no idea. One thing that stands out is that the $95M loan in 2006 grew to $180M in 2009, some it from its FDN acquisition in 2007, but how much because they sell underwater? Nuvox burned through nearly $500M in VC funding as well. 

It sounds funny but on the same day the two companies famous for driving the price of telecom down are acquired - and the Channel is given as a reason. Is this just a bunch of order-takers or is the state of the economy the reason that price is the main object (instead of value and reliability)?

In a discussion on twitter with @DougonIPcomm (that Doug blogged here), Doug is promoting the idea that HD Voice is here so buy the cheap HD Voice handsets from Polycom and Cisco now.  I think he missed my point.

Doug points to Xconnect, Simple Signal, Apteva and Sprint as examples of HD inter-connected ITSP. Big deal. There are 1100 VoIP Providers in the US alone. many not inter-connected with anyone but the PSTN.

To enjoy true HD Voice calling both sides of the call have to be SIP (supporting G.722). Most calls today still land either on a PSTN connected phone or (more likely) on a cell phone. That will break the HD Voice.

Doug dislikes this analogy but Fax over IP still doesn't work 99% today. Years after Brooktrout fixed this issue. Why? There are T.38 compliant fax machines and certainly Edgewater devices work, but the problem is in the WAN. Any conversions of the packet and you break the fax packet. So IP to PSTN, bye bye. The same issue with HD Voice. We do not have too many all IP networks.

Then let's look at the SIP Upstream providers. You mention Sprint. Most ITSP's buy from Level3, then Global Crossing, Bandwidth.com and Verizon. How many of those networks are G.722 end-to-end?

The best way to sell Hosted PBX service is to use the HD Voice demo. However, you need to set proper consumer expectations that it only works On-Net. That when Joe Sales calls in from the field on his cell phone, it will sound tinny, not HD.  

When Grandma calls in from her kitchen wall phone, it likely won't be HD either. 

Doug thinks you should buy the HD hadnset anyway. Go ahead. But if they are sub-$200 now, think what version 2 will be like price and feature wise?