Verizon Invites the Channel Once More

Peter : On Rad's Radar?
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| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Verizon Invites the Channel Once More

Jon Arnold wrote up a good review of Verizon's Broad Cloud offering (VCE). One glaring problem is that it targets in the SMB market.

Arnold says that it is presented as a TDM replacement service. Why then is VCE promoted online in VZ Enterprise? Mixed messaging from a company with so much segmentation and so many divisions no one can find anything or talk to anyone. [This from experience. Note I am a telecom agent who has tried to sell VZB; I am a Tampa resident where VZ used to be the ILEC; I have VZ wholesale clients.]

Back in the day, every CLEC offered Integrated T1s which were used for converged POTS replacement. Today, every single CLEC now offers Hosted PBX. Every ILEC and RLEC offers HPBX, too. In the case of RLECs, they are targeting small business like they have never done before.

There are almost 28 million small businesses in the US and over 22 million are self employed with no additional payroll or employees, according to the SBA. (That's about 5.8 million businesses with less than 500 employees = the target market. BTW, that works out to 2900 businesses per provider offering HPBX. Simple Signal had just 1600, so 2900 could be a healthy business.)

One Problem: Cable

Comcast Business Services revenue increased 21.9% to $4.0Bn (that is 60% of growth driven by small businesses and ~40% driven by mid-size businesses). "Low penetration with a large $20-$30Bn addressable market!" In other words, Comcast isn't finished vacuuming up the SMB market with its voice and Internet offerings yet. (Which is good news for VARs, the preferred partner of the cable sisters).

Comcast sells more Broadsoft licenses than any other company in the US every month. Polycom doesn't even have a class to put them in, since Platinum Partner doesn't cut it. (TelePacific is a Platinum Partner.) My guess is Comcast probably sell as much as the next 4 combined in the Top 10 Hosted VoIP space.

"Speaking to investors during the Sanford C. Bernstein Thirtieth Annual Strategic Decisions Conference, Jeff Gardner, CEO of Windstream, told investors that cable will continue to focus most of its attention on the small to medium (SMB) business space....The customers that cable is chasing typically spend less than $750 a month," according Fierce.

The RBOCs gave up the SMB race to cable. They were purely focused on wireless -- but it came at a price. The RBOCs talk about the copper plant problem, but it is what is keeping revenue flowing. Their wholesale UNE and T1 business, their own U-Verse service, and even EoC are all riding that copper plant, providing them with revenue -- and customers who are not giving all of their money to cable.

If VZ IS indeed targeting SMB, it is a little late. You can't sell off 1.5 million of the 5.5 million FiOS customers and all that wireline territory (and fight to replace copper with fixed LTE), and still say you have an answer for small biz. Sure in tiny pockets (and in cellular). Yes, VCE can ride OTT -- putting it in competition with the vast majority of companies that have been providing Hosted VoIP for a long time like 8x8, RC, FV, Nextiva.

VZ just made a noise at the Channel Expo. Well, an exec from VZ Enterprise was a keynote speaker, so I guess you call that buzz. The only buzz I heard was over the agent agreement, which contains as many gotchas as it has in previous renditions - you know, all the other times that Verizon opened or re-vamped its channel program.

If VZ wants help selling VCE, it is going to have to actually become channel friendly. A video with two partners reading cue cards isn't going to cut it. The cable sisters have been wooing the channel for 4 years without any blunders. They have put a lot of feet on the street. Not certain that VZ can mount that same type of push without seriously embracing the channel (starting with the agreement and providing a road map to SME and contacts inside VZ that won't be useless before the ink dries. And by useless I mean, many employees are going to Frontier with the sale in 2016; others are always being let go; the remaining folks are so burnt out or overworked that their voicemail is always full and their email inbox is close to maximum capacity.

VZ exhibited at the show, but I can't remember their booth. I remember Jive because of the green Jeep. AT&T because of the espresso bar (thanks btw!). Windstream, Simple Signal, Vonage, Equinix, AireSpring - because of size and placement. Tata and Rackspace because like why are they here?! VAR Dynamics because Tony, duh! TelePacific because of the folks trying to ride the stationary bikes to light up the board. The VoIP folks tend to blend together because take away the logo and it could be anyone's booth. I noticed master agencies like TBI, Colotraq and Telarus. But can't recall the VZ booth.

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It is very hard to change culture under the big top that is Verizon. Verizon has so many fiefdoms - wireless, enterprise, residential, telecom, VZB, et al. The product catalog is so vast - except that the channel can only sell a portion of it and to only a portion of the businesses. That makes it a challenge - channel conflict, deal registration, commission debates.

I look at VCE and think: is VZ serious about this offering? They have so many voice products. This one isn't even bundled with cell phones or tablets - even Sprint can make a cellphone an extension off Broadsoft. AT&T has an integrated bundle of mobile and Hosted VoIP with its RingCentral offering. VCE has to up its game a little. At least VCE will still be a viable offering post sale to Frontier for agents. It isn't tied to wireline or territory.

I wonder if the Enterprise focus isn't because now that cable owns so much of the SMB market that most CLECs have moved up market. Where it just used to be the RBOCs and maybe Sprint or Qwest fighting for GEM accounts, today it is Windstream, Level3, CenturyLink, AT&T, Verizon, Frontier, Cable and a number of smaller but specialized players like Masergy or Mettel. That is a lot of competition and pricing pressure - in the last bastion of high margin service offerings, in an arena that they used to own (like they owned SMB).

To me, it is the Big Dog who has been lauding over his kingdom for a long time, who took a look and realized that someone was eating not just his lunch but his garden too. And now they have to figure out how to, not just stave it off, but turn it around, because that $116 Bn in debt isn't going away. The other players are all seeing declining revenue in wholesale and other areas due to price compression and competition. VZ probably is too. Continuing market share erosion and slipping revenue coupled with the pending sale of 3 states means that VZ better make some big moves fast. And by big moves I don't mean more acquisitions. I mean, start smartly marketing your services while embracing the channel.



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