When I analyze the four CLEC components of the new EarthLink Business, I wonder what Atlanta will do with it.
Deltacom had a huge fiber network (IFN) that essentially went under-utilized. In my experience, many employees did not know about IFN. Assets like lit buildings, collocations, colo gear, and the fiber maps are crucial to revenue generation from those hard cost assets.
Essentially, Deltacom was competing on price in the T1 space. It's two core products - Metro-E off IFN and the MVNO - were not marketed well. It's Channel strategy was bipolar - first terminating agents, then out courting them.
Admittedly, I did not have much experience with ONE Communications. Based in the Northeast, it was a regional CLEC that did not have a strong brand; a market differentiator (like Deltacom's MVNO); or a powerful sales force. After the integration of CTC, Choice One, and Conversant, it was touting almost a billion in revenue, 700 collocations, etc. The purchase price of $370M including paying off the $285M of debt means that $800M in revenue sold for $85M. 160,000 business customers went for $85M, which is an acquisition cost of about $531 each.
When ONE talks about 10,000 miles of IOF fiber, it is talking about inter-office fiber between collocations ordered via a favorable inter-connect agreement with the ILEC. Although this IOF does mean that there is a solid network connecting the 700 colos.
STS Telecom was once a large UNE-P shop. Now it is a Broadsoft based VoIP Provider. This purchase by EarthLink was the quietest. STS is supposed to provide $15M in revenue to ELNK this year. It makes me wonder what the New Edge AX partners like Simple Signal do. STS telecom does provide ELNK with an experienced Hosted PBX team. That is certainly something that can be leveraged across the merged entity.
New Edge Networks does an adequate job of sticking to its knitting of DSL. It was shadowed in the last year by the Megapath deal. In fact, it has been all Megapath news that I have seen in this CLEC sector. NEN seems to be missing the boat on G.SHDSL. For a company that relies on its copper plant access, it seems to be missing the boat on Mid-Band Ethernet as a means to jump the T1 chasm and compete in the business bandwidth war.
New Edge has a good channel strategy with no channel conflict.
Launching the AX platform was a great positioning move. Following the idea of the smartphone apps stores, the AX was a chance for cloud partners to offer services on the New Edge Network in a "private cloud". Much different than the public cloud approach of so many today. It needs to add a number of partners in the data backup/storage space, merchant credit card processing, POS and business applications. I don't mean a connection to Salesforce, but more like practice management software, point-of-sale software, and other applications that are business process requirements for companies.
New Edge has a strong retail presence, showcasing itself as a PCI Compliance expert. It could take this a step further. Taking Skype's idea of partnering with Citrix for conferencing, NEN should partner with Citrix for POS software. Then when the bundle includes POS, merchant card processing, a SIP trunk and video surveillance over the MPLS network, agents can offer a turn-key solution for the retail sector that New Edge Networks already chases.
This integration of 4 CLEC's will be about how well the final entity, EarthLink Business, can leverage its assets: current customers; fiber network; collocation footprint; and channel partners. The back office system integration is another story and will certainly make the rest of this year uncomfortable in many areas: ordering, billing, provisioning, and commissions - while all of it moves to one system.
The future of EarthLink Business depends on whether they come to market with the same old products that ONE and Deltacom struggled to sell or if it develops new product offerings and bundles that will stand out from the CLEC competition. Brand Relevance is the key to the future. PAETEC attempts this with energy and MSP plays. With PAETEC, XO, Megapath, AireSpring, Windstream Business, Broadvox, Level3 and more all clamoring for business, EarthLink needs some unique ideas.
Deltacom hasn't marketed its MVNO play. Moreover, it is a move that Cbeyond was first to market with; now Tele-Pacific is also selling. Yet, it is a start in the business bundle program. The question becomes What next?
Like Cloud, Unified Communications, and Convergence, the CLEC space is filled with me-too offerings. Not just the resellers either. Even the facilities based CLEC's offer the same boring products that they have for years. Calling it a Dynamic T1 or IP-Flex doesn't make it sparkle. At the end of the day it is a T1. And we are near the death of the T1. To the business owner cable broadband speeds are faster and cheaper than T1. Is a T1 even adequate for a business that is moving deeper into cloud apps? And how significant is Internet Access to a business today?
Thousands of collocations when you count Deltacom, New Edge and ONE. That's a large copper footprint for Mid-Band Ethernet to reach a large footprint of businesses (prospects). But what is the Value Proposition?
After spending two days at Enterprise Connect where everyone was shouting UC, Cloud and Collaboration without being able to define it, clarify it or make it concrete in any way, I feel that too often in our industry we forget that we need to stand out - like a Kindle or a Prius - and have a tangible benefit and value to our intended target market. Another example, if your press release is titled Enterprise offering, then you should not be talking about businesses with less than 250 employees. It's confusing.
This is a perfect opportunity for EarthLink as most of the big boys are also integrating acquisition (Windstream, Qwest-CenturyLink, Paetec). It's a chance to be loud and stand out. (By the way, I would love to help you figure it out. I have plenty of ideas how to go-to-market; on bundles; on channel; and on sales strategy. Call my office at 813-963-5884).