The Age of the CLEC - the competitive carrier - is at end. They fill gaps now, like Birch, Bullseye and Granite for POTS and other legacy services. XO is part of Verizon. EarthLink absorbed by Windstream to become like AllWorx, USLEC and Paetec, a memory. Level3 will be a division of CenturyLink, where it will cease to be a rival to the RBOC in the Enterprise.
Net Neutrality is going away. That zero rating investigation to determine if giving some content a free rideover all other content was fair has been closed.
It is simply cable or ILEC. And both groups have to be wondering how much longer they can continue to carry their massive debt. The big dilemma is that ARPU is stagnant but subscriber counts have peaked. Cord cutting is a real issue for cable, telco, satellite and content owners. NBCU closed two channels recently and re-branded another. Apparently, twenty five cents per subscriber per channel per month isn't enough any longer. And advertising rates are a little off too. The economics of many legacy businesses are being blown up!
The cost of services increases as more small cells are deployed to blanket coverage for 4G LTE, LTE-Advanced and how much will 5G cost? If ARPU is stagnant for cellcos in this price war, yet the cost to build and maintain the network remains constant and you don't lose any subscribers, all is good.
Sprint and T-Mobile have waged a brand battle against Verizon and AT&T. It has worked to a degree. But all 4 carriers are losers. The foreign owned T-Mobile and Sprint can afford to lose money for a while, but how long?
With the subsidized phones are gone so are contracts and large ETFs. More churn. Higher cost of customer acquisition. Ma and Pa Bell already saw this small business broadband and voice. Then they lost the consumer broadband and voice market. Now the cellular market is up for grabs.
Verizon is looking at buying Charter now. Rumor has Comcast looking at buying its 4G backup partner, T-Mobile. The cablecos denied cord cutting until it was too late. Telcos denied cable competition until it was too late. There really aren't any visionary CEOs in our space.
The problem remains the same: at some point you have to be make money, not just on paper.
Debt payments, network CAPEX, stock dividends, payroll and pension liabilities are a burden to ILECs - all of them: Frontier, AT&T, Verizon, CenturyLink, even Windstream and Fairpoint (who sold out to Consolidated).
Revenue is getting crushed as the cost of bandwidth, transport and transit collapse. Voice revenue has declined. Text revenue is flat. OTT apps have taken video calls (Skype, Facetime), some voice calling (Messenger, WhatsApp), SMS/MMS. What's left? The Enterprise market and the Government market.
What happens when there are just 4 carriers? Is the channel necessary to sell monopoly services? Well, see.
Some other points:
With subsidized phones gone, how will that affect phone makers long term? Will we see the leaps in tech that we have so far? Unlikely. Google Pixel at $649. The iPhone 7 is $700. Not that many folks are going to drop that cash every 18 months to two years. (Note to self: Get in the smartphone/device insurance business!)
When will the next highly desired device come along to prompt an exclusive carrier deal (a la AT&T and the original iPhone) to drive signups?
Even Sprint is Buying into the business of streaming media with a $200M investment into Tidal, another money losing music streaming service.
As someone at lunch pointed out, many foreign LECs like Vodafone, BT, Telstra, even NTT, are sitting on tens of billions in cash. They could buy into the US market.
We sit at the nexus point of some interesting times.
Did you notice that UCaaS consolidation halted? Yeah, me too.
]]>As one CEO told me, "Luddites are still selling network. And the price compression is killing everyone." I know. Revenue and price compression are working against everyone.
I get requests for Gigabit pipes in rural areas that come with a budget of less than $3K. It is unrealistic, but you can't explain it to people. They don't want to hear it.
Providers would like to sell more managed services. They probably could if they told a better story besides we want to manage your technology. MSPs do a good job of explaining the value of outsourced services to businesses, but carriers do not (yet).
While partners hear all the chatter about cloud, colo, SD-WAN and UCaaS, they realize that network is the easier sale. And you have to sell more and more to stay even.
Some of it is a Trust issue. If the vendor has screwed up number porting on a PRI or POTS line, are you really going to sell their UCaaS?
If the carrier can't find their network maps, do you think they can do a good job with SD-WAN?
If the billing is always an issue, why would you sell complicated stuff with that vendor?
Personally, I have an issue selling managed router. It is overly automated with no human interaction at all. Automated emails and trouble tickets mean an angry customer.
Would I use that carrier for managed security? Um, no.
Some of it is a Clarity problem. By that I mean, the vendor catalog is so larg - and it is usually delivered to the channel in a fashion similar to confetti: thrown at you. There needs to be more context. What is the core product? How do the rest of those services align or add value to that core? Who buys it? Why do they buy it?
Additionally, there needs to be more proof that clients are buying it.
Meanwhile, another provider enters the network fray: Google Fiber is looking to partners to reach the small business market. "Aaron Withrow, channel partner manager for Google Fiber, acknowledged the challenges in selling to businesses and offering them value beyond a boatload of bandwidth." [CP]
An ASIDE: the reason folks sell SIP Trunks in place of UCaaS is a similar argument. It is a faster sale - straight up replacement transaction.
]]>We went from TDM to VoIP to Hosted PBX to UCaaS to UC&C.
We went from T1 to cable broadband to Gigabit.
The consolidation of cable will tighten the market in 15 to 18 months. (It takes that long for integrations to take hold.) Now if the integrations are not a big fail, then cable - New Charter/Spectrum, Comcast, Altice - will ratchet up the competition in the small business market for triple play.
"Cable/MSOs are the fastest growing providers in the business services market, with much of their recent success in the mid-size business space," reported MarketResearch. Think about that: the mid-sized space - not just the small business segment of the market.
Of the $104 Billion total businesses spent on telecom services in the US in 2014, AT&T had the largest share (33%), followed by Verizon (22%) and the rest of the LEC band of brothers (Level3, CenturyLink, Sprint, Windstream). MSOs have more than $12 Billion of that pie, with the lion share - $5B - going to Comcast coffers alone.
SIP anyone? 54% of business cable subscribers also use cable for voice, the report states. That means less than half the businesses using cable are buying voice from another provider. That is a shrinking opportunity for the 2000 Hosted VoIP players in the US.
"Last year the Cable/MSO share of businesses with 100+ employees rose to 17%, reports TNS. "The main driver behind this growth was a heavier reliance on internet service and the need for greater bandwidth; two areas where larger cable providers excel."
Telco broadband has not kept pace with cable in speed and price. Egged on by Google Fiber - and a declining market share of businesses - ILECs have started tentatively rolling out faster fiber based broadband - 100MB to 1Gigabit depending on the ILEC (Windstream versus CenturyLink or AT&T).
UPDATE: Google just rolled out Gigabit Fiber to small business starting in Charlotte in July of 2016.
The ILECs have made a tremendous CAPEX investment in TV - just as OTT TV is hitting its stride. They spent big to supply triple-play, when they could have spent the money on FTTx projects for faster bandwidth. That was just uncreative thinking. [More of that Me-too mentality ingrained in telco.]
All of this will stress ILECs, some CLECs and even some OTT VoIP players. When cable takes about 35% of the SMB market, there won't be much room left for anyone else.
In March of 2016, "During the fourth quarter, Verizon reported that total broadband connections dropped to 2.1 million as it lost more DSL subscribers after losing 94,000 DSL customers," according to Fierce media.
Verizon is transitioning. Verizon is now betting on mobile ads (AOL acquisition and Yahoo bid); 5G fixed wireless broadband replacement for wireline services; and IoT (including connected cars) to add to its coffers.
A point I make often is that the debt that the ILECs carry is crippling with flat revenues.
Think about this: Vonage has taken $800M worth of voice revenue. Twilio gets $240 million in voice revenue. This is revenue that typically would go to Level3, Verizon and AT&T (and it probably does terminate to them eventually for a smaller percentage of that money).
WebRTC is being used in so many apps to allow for video and voice calls - bypassing the traditional voice network. [And bypassing the cellco text system and dollars.]
Then, we have Cable beating Telco in broadband bandwidth. Always has in fact. Gigabit fiber will be the real winner if the telcos decide to pursue that route for real (versus in just press releases).
We have telco getting in the data center - and now we have telcos looking to get out of that business without embarrassment.
There is a Talent problem, too. There are too many musical chairs. Not only can't you set a strategy when you shift personnel that much, you can't execute on a strategy either if the cogs are constantly being replaced. (And I don't mean cogs in a bad way. It takes a lot of talent to keep the wheels spinning.) The talent drain has also resulted in a domain knowledge drain as well. Quite frankly that means they don't where things are and how things have been done to keep things working. It isn't all documented, especially fiber maps!
Let's face it, for many companies that started with an A Team, they are now running with a B or C team. Why? As Steve Jobs said, "A Players hire A Players, B players hire C players. Get it?"
People move from company to company in teams. The same routine and team may work once, but it is not often a repeatable experience. There's a reason the Cavaliers recruited LeBron back to Cleveland - and didn't hire the whole Miami Heat starting line up.
The telco organizations harbor stifling factors: monopoly mindset, legacy systems, federal accounting and regulations, departmental silos and competing internal interests. These factors do not lend themselves to attracting more A Players.
There is also a surprising lack of talent for the new services and skills needed for omni-channel marketing; omni-channel customer service; cloud, managed services, migration and integration. This lack of skill will choke growth and brands.
We see outages and hacks every day. The worry is only about getting a customer. There is little concern for retaining that customer; data security; or a resilient network (4 Nines is good enough).
Many people are choosing smaller organizations to work for. The reasons are numerous but I would think that impact and voice play a major part. In smaller businesses, any one person can have a voice and can see the impact that they are having on customers, culture, and the company. That isn't the case in larger organizations.
Flat organizations (and smaller companies) have less meetings, fewer silos, maybe more transparent governance.
Most financial experts are predicting an economic slump in 2017. It won't matter which candidate wins the Presidential election, a slump is coming. We have under-employment; increasing number of freelancers; and a stagnant wage. None of these components inspire an economic engine that is fueled by consumer spending.
ARPU for cellular, cable and VoIP segments have been fairly constant over the last 4 years worth of data I could find. Bandwidth and voice revenues are actually shrinking. Total telecom spending from 2013 to 2014 shrunk $6 Billion dollars according to MarketResearch.
Growth will be hard to find. We are seeing a price war in cellular accompanied by escalating customer acquisition costs.
Hosted VoIP is experiencing a similar battle for customers that is increasing the cost of customer acquisition. Rising SPIFFs and other compensation are being used to grab both market share and channel partner attention.
PBX vendors are NOT crashing and burning as many had predicted. Premise PBXs are still being sold and installed by a robust band of vendors - Mitel, Shortel, Avaya, 3CX, Fonality, Zultys, Panasonic, NEC, Siemens and more.
We are half way through 2016. No big winners. The Twilio IPO was a surprise. Vonage spending all of its acquisition money for the year on Nexmo, Twilio's competitor, seemed strange, since there were Broadsoft clients they could have picked off instead to take a big step forward in the race. Slack and all the Skype4B hype are little surprises.
2016 is half over - and so many companies have either done M&A or played musical chairs that I expect nothing magical to happen in the rest of 2016. And I look at all of this and wonder what 2017 holds.
ASIDE: telco versus cable consumer data.
]]>At a master agency, Microcorp One-on-One, the Cable 3 Sisters gave a presentation together. They have been sharing booth space for a couple of years - and presenting together for a while. This was my first view of it.
The push is on to fiber. "Screw MPLS! If you need Class of Service, just get a bigger pipe from us." The Dave Schaeffer (CEO of Cogent) answer to networks. Buy a bigger pipe and you won't need COS. Class of Service is only needed on a congested network.
Cable is all about Ethernet and Fiber now. No mention of SDN or other fancy network buzz words. Maybe in 3-5 years.
On SLA (service level agreement), I agree with the presenter from TWCBS, customers would love an end to end SLA that pays out credits. [Not available.] However, when Spectrum Business states that 1GB pipes can be as low as $1200 per month, the daily credit would be just $40!!! Who is going to fight for $40?
As one agent mentioned, AT&T is just as aggressive price-wise in region. And using ACC Business is easier than any cable process. (Who wants to wait weeks for an inquiry for pricing?!) However, the aggressive pricing - from my standpoint as an Agent - is crazy! How do you make money on $1200 Gigabit loops???
Comcast threw up a slide about 10GB will be passing 25 homes. No idea went they meant by that but all 3 of the collusion mention Fiber to the Home. FTTH is coming. Coax is retiring. We'll see.
Windstream is getting out of the $300 T1 business according to their channel people. They have set the bar to chase multi-location deals and to aim for $1200 in average deal size.
When you have cable biting off your market share, you move up market. However, then you are running into the rest of the LECs - ILEC and CLEC - AT&T, VZ, C-Link, XO, Level3. And soon Comcast Enterprise.
The one thing that many CLECs have not figured out: You need an exclusive offering - much like the Integrated T1 of yesteryear. A bundle that you can call your own, like Cbeyond tried to put together - or the Managed Office bundle that CenturyLink has. Without that, what is your Value Proposition?
I didn't mention EarthLink because in my book they are out of the nationwide CLEC game - and just doing the Retail vertical. And Birch, we'll see.
NOTE:
A cable channel manager asked me to clarify my post. I wrongly contributed the pricing toTWC. Well, the 3 cable sisters act like one entity. You present together. You booth together. Same products. So I paint you with the same brush. And I still don't know how this is NOT collusion.
]]>Network upgrades and maintenance costs have not dropped the same percentage as the bandwidth costs. So maintaining the network to provide cheaper pipes has remained the same (more or less). As a percentage of costs, it probably tweaked up a little. Upgrades to DOCSIS 3.0, 100GB, G.fast, Gigabit2 and the associated backhaul and middle miles have been steady or increasing (depending on geography and provider).
The one thing that is being discussed about the cable mergers is that customer service is at an all time low. So much of residential service is self-service -- from ordering to billing to paying to install. Even tech support for the modem is automated as the call in to support will initiate a modem reset. Simply put, the cablecos are not going to put money into customer service. There are profits to be made, big chunks of debt to be paid back and network to be built. Honestly, I don't know where the cablecos get all that capital to do countless build outs for triple play to a business at $310 per month.
I do know that installation is suffering. Well, the whole provisioning process is awful - from porting to install. Much of that is due to massive staff layoffs that resulted in domain knowledge disappearing. Less staff to do increased work. In some areas there is a single T1 technician for 5 CO's. That is a large area to cover single-handed. (But then unions have been getting squeezed out too.)
Even in the VoIP world where prices have compressed due to hyper-competition. When you have 2000+ providers trying to sell VoIP to everyone, 3 things are going to happen. (1) A lot of amateurs will be in the mix leading to lousy VoIP, horrible experience and clumsy install. (2) Telcos will try to deliver VoIP like they do TDM, which is a mistake since the delivery platform for VoIP is more complicated. (3) Not enough experienced technicians to go around, so installations will be a mess time and time again. I hear horror stories every week. One large VAR thought that if their techs could install wi-fi at a coffee chain, then VoIP would be a piece of cake. What? Hello!! Not even close to the same skill set or complexity. And they even get the wi-fi install wrong occasionally. Dead zones.
As we get more megabits for the same dollar, service will continue to deteriorate. It isn't like the debt that the Duopoly has is going to handled by broadband sales. Or that executives don't want bigger bonuses. Or that shareholders don't want a dividend.
It has an affect on the channel as well. Partners are spending more and more cycles on managing the provisioning for services that pay so little. Kind of unprofitable to spend hours on paperwork for site survey, ordering, porting and then chase the whole project to completion for $31 per month. This system will crack open soon. Yet this was all inevitable. It is the Wal-Mart effect on the Duopoly.
]]>Today, 4% less think connectivity is tactical and 3% less think it is strategic, but 7% MORE think it is Essential. (Taking out statistical relevance of a 5 point error either way, which would mean that they think of it about the same way now.)
For the most part, business owners do not buy based on these service results. They buy largely on price.
Some business decision makers know the difference between broadband best effort service and dedicated internet access. (Some others couldn't be bothered to listen to the difference.) These folks understand dedicated bandwidth, service level agreements and how vital reliable bandwidth is to their daily business functions. Others have bought into the heavy marketing that 100Mb x 10Mb is better than a T1 and cheaper too. I don't think that they know how to quantify "better".
Sure, in some cases, a fat broadband pipe is going to work for a business, especially a business not utilizing real-time communications (on that pipe). If, however, that business wants to run real-time communications - like video conferencing or VoIP - or that business is heavily reliant on cloud services - like insurance companies and doctor's offices - then perhaps broadband is not the way to go. And the channel partner will need to be willing to explain the difference.
Statistically, I'm not certain that a 7 point change in one trait (Essential) in a year is a big deal, especially when the other traits - Tactical, Strategic and Transformational - all dropped 2 to 4 points. None of the above increased 2 points.
Maybe we have to do a better job of educating the prospect, but we have to do it against a tide of marketing that misinforms the customer about "best effort" and SLA.
]]>Your business probably relies on some research online, right? We don't go to a library or have too many reference books or get the daily newspaper or monthly trade journal, so the news and info come from the web.
Payroll, QuickBooks, FreshBooks, and other online accounting and bookkeeping services are probably a daily occurrence for someone in your business.
Email is still the killer app. How about IM/chat? Companies are using a variety of services for this: Google Apps, Gmail, Office 365, Zoho, Hosted Exchange, Sharepoint, and Lync.
If you have VoIP, three-way calling, conference calls, and voicemail retrieval all put a load on that broadband connection. Webex, GoToMeeting, Join.me, and other collaboration and conferencing services also put a load on the broadband pipe.
Do you blog? Do you update your website with new copy or new products?
How do you do credit card processing - over a POTS line or online? Also, for supermarkets, real-time inventory management software and the point-of-sale platform are constantly connected to the server at the data center.
Are you using VPS or testing apps in the cloud?
Do you have a sales team that are using CRM? Where is your customer database stored? Without access to Salesforce (or other CRM) how would you view your customer database without Internet?
Customer support is sometimes done via Zendesk or some other trouble ticket system.
Social selling and marketing means being connected to LinkedIn, facebook, twitter, Hootesuite, Hubspot or similar sites. And if you are running a pay-per-click campaign, don't you want to monitor that spend in real-time?
How much of your business depends on the Internet?
How much would an hour of outage cost your company?
It isn't a bad idea to have a dedicated connection versus broadband, especially for real-time apps like VoIP, Video or Collaboration. At the very least, have a backup like DSL or 4G or fixed wirless.
]]>Users buy bigger pipes and FiOS just to get faster (they think better) Internet access to enjoy Netflix or Hulu without buffering. Surprise! That isn't the case at all.
The peering pipe between Netflix and most ISPs (VZ, ATT, Comcast, TWC, even Bright House) is saturated often. The reps in customer support try to make you think it is a last mile issue, when it is really an upstream issue - namely, the peering pipe to the content.
When you pay $58 for broadband each month, you don't want buffering
That's not the user experience I am paying for.
Then I see that VZ is accused of throttling other traffic - see here - and now I know it is a game for VZ. This game opened up after the US Appeals Court ruling against Net Neutrality.
"The ruling is a major win for US telecoms, which are pegging their future growth on alternative revenue growth streams. The wireless market is extremely saturated and growth can only come from an increase in data usage by consumers. Since the industry is extremely competitive and margins are thin, companies will benefit from additional revenues from their "enterprise solutions" segment in partnerships with major content developers." [source] Just one more way to get people to pay for transit or pay for using CDNs owned by the likes of Comcast.
Gary Kim wrote that Netflix agreed to buy transit from Comcast (since peering wasn't working out). Transit means that you pay the ISP for bandwidth. Peering is a settlement-free arrangement for the transfer of traffic.
"Verizon has a policy of requiring payments from networks that dump more data into its pipes than they carry in return. 'When one party's getting all the benefit and the other's carrying all the cost, issues will arise,' said Craig Silliman, Verizon's head of public policy and government affairs." [ARS]
I don't think it helps Netflix that they use a lot of Cogent, who has constant peering issues.
"Lines are being drawn in a battle that may ultimately be decided on Capitol Hill. In the meantime, things are getting uglier as both sides are blaming each other. Content developers are claiming that carriers are limiting bandwidth to cloud providers such as Amazon, while the carrier industry is complaining about the capacity constraint being caused by data intensive usage by subscribers to services such as Netflix." [source]
On the one hand, VZ complains about video traffic, yet it pitches watching live NFL games on its wireless network in commercials!!! DUH!!! VZW's LTE network --- which VZW claims will require up to 500 MHz of spectrum to provide adequate broadband -- can stream video but its wireline FiOS can't???????
Basically, F U to the users and hold the content providers hostage until they pay for transit to the users. As ARS is reporting, VZ and other ISPs begrudge the traffic from Netflix. Some of that is that it takes away from their own services like Pay-per-View or video-on-demand, but especially broadcast TV, which is a sunk cost for all of these providers.
If we had (A) a strong and smarter FCC and/or (B) broadband competition in the US, this wouldn't be an issue. But we have neither.
]]>The blog post shows a chat session where a VZ tech confirms the limiting bandwidth for home users to cloud providers like AWS and Netflix. (Netflix utilizes AWS.)
I don't have FiOS. I have cable. I experience buffering when watching Netflix often. It's annoying, especially the tech support replies. Do a speed test. All is fine. Reboot this or that. Ummm, I can surf the web; just not get my packets in real time from Netflix. (It happens with my VoIP business line sometimes too.)
The advertised speed is bullsh!t because you get that for last mile and maybe a little longer, but most servers can't deliver a 1GB experience. And the bottleneck is the Peering points.
In both articles, Verizon points out that its peering needs to be equal. If not, someone has to pay. Netflix uses Cogent to get to VZ apparently. That will never work out. Cogent always has peering fights - always.
Since the Net Neutrality court battle, many have pointed to the lousy service as a Net Neutrality fight. VZ hurting Netflix to help Redbox Instant (its partner). They fail to notice that VZ has a big dog in the IAAS arena, which is where Amazon and its AWS are winners. VZ could be throttling to help its own IAAS and VPS business.
Or it really could be a peering battle.
Either way, it people are working at home more and more and more. As layoffs - like the Dell's 3000 and the other 2000 telecom jobs in the past month - more people will be working at home. Freelancing will be king. Cloud services will grow and bandwidth usage will increase. The bandwidth has to work. The throughput has to be valid. I already ask why anyone would pay for 25MB or more. You aren't going to use it. The bottleneck is not your last mile pipe.
]]>Personally, I think these CEOs - Crowe, Hesse, and others - have to take more responsibility for revenue, integration, value and culture. The role of CEO is more than just setting some ambiguous vision that your reports then have to crystallize and execute on.
Best quote from Mobile World Congress:
"Openness is not something to be afraid of. There are lots of business models available. But openness is also about being open to innovate." - Jolla CEO Marc Dillion (launched Sailfish at MWC)
FCC and FTC gave the green light for T-Mobile to merge with MetroPCS. To VZW and ATT, this is a yawner. To the consumer, it will just eliminate one of the all-you-can-eat players.
This news comes as Gary Kim writes about the spectrum crunch that never came. Please note that all of the Top 5 cellcos still have a bunch of spectrum that they have not deployed yet. It bears repeating: there is plenty of spectrum that they have not deployed yet! (Despite what Hesse spouts to the press. He likes being in the spotlight, which is fine, if someone else was running Sprint.)
Susan Crawford wrote an article about the lack of wireless competition. Every flavor of broadband - terrestrial or wireless - has clear winners and losers, but mostly losers, who we call customers.
I have beat this drum before but all the value in the US economy is in knowledge and innovation -- it is the Internet Economy. Stifling that due to profits for a few companies is not going to make the US competitive in a global race.
Nice blog about small business, Obamacare and the opportunity for channel partners.
In SAAS, the secret sauce is data integration - which fails almost 20% of the time!
One last one: at CPExpo, a channel AVP at ATT was given my book and read it and took the time to come over to say that he enjoyed it. Kind of a highlight at the show.
]]>CenturyLink Biz has an ebook out with predictions for 2013 and beyond. M2M, mobility, cloud - all just mind blowing stuff
Well, the FCC's pace for any case is slow and slower, so they will likely not get to the copper clipping and IP transition until 3Q2013 at the earliest. meanwhile, CLEC's have to be vigilante to document cases of copper clipping, because all the money that they - Integra, Megapath, TelePacific, XO, Windstream - have invested in EoC doesn't work without said copper. I think they will be fine until 2014 on this.
That said, CLEC's have to accelerate their plans for OTT services like cloud and Managed IT. When the copper plant disappears, wholesale (from fiber providers and cablecos) will get expensive. The money will be in Layer 7. I have often said that it was going to be Layer 1 or Layer 7. Without a network that you own, it will be a fight for apps and services. Everything will look like Office 365 - where 42,000 Microsoft partners are selling it for very little margin.
Here's the thing: more businesses are moving to the cloud for so many reasons - mobility just being one of them. Some CLEC's, VARs and even Agents will migrate to a cloud services brokerage model. That will work for slinging Hosted Exchange, SharePoint, CRM, simple backup, even VPS. Network will become a separate sale and negotiation.
I'm still shocked that no one has rolled out vertically based integrated bundles yet.
So mobility will still be huge in 2013, but with the new shared data plans, the monthly bill will be increasing, so businesses (and consumers) will be looking for alternatives. Wi-fi will be significant. When you add in mobile data caps and consumer cable caps - and metering - there will be a net effect on cloud services and OTT services.
When you examine the backlash yesterday on the Instagram privacy gaff (right after Facebook finished acquiring them for $715M), you have to wonder how much longer the online phenomenon continues. Privacy is non-existent. You have to be off-the-grid and paying with cash to be beyond corporate and government spying. I think we will see a little more backlash in 2013 - enough that FB and other companies see a dip in usage and corresponding advertising sales. Have FB and twitter peaked?
The companies to watch in 2013:
For Agents and VARs, 2013 is the year they have to put a plan together. No more waiting. Too many VAR's are already jumping on the telecom/network bandwagon and not nearly enough Agents are jumping into the Managed Services and Cloud space. For Agents, 2 resolutions for 2013 would be (1) partner with a VAR or two; and (2) cross-sell services to grab more of the total wallet share of your customers. Look to revenue per customer and lifetime value of each customer as the most important metrics. (Mainly because they are.)
For VAR's, they have seen some big changes from Microsoft - Small Business Server's end of life as well as the way Office 365 was sold. VAR's also witnessed CLEC's - like Cbeyond and EarthLink - make a big splash in launching managed services and cloud offerings. In 2013, VARs will need network/telecom to make up for the revenue dips. Locally in Tampa, we have seen some Microsoft partners go to programming and integration services in place of the old model of SBS and Exchange. For all of cloud adoption, Integration is the key to any business process outcomes. There aren't nearly enough programmers to do all the necessary integration.
In the Google world, there are companies making money supporting and integrating Google Apps. Backupify, Batchbook, Insightly are just 3 companies that integrate with Google Apps for CRM and backup. As this ecosystem becomes more complete, Microcorp's deal with NeoNova could prove brilliant.
It is this type of package or bundle that most businesses want. Do they want stand-alone Hosted Exchange? Notsomuch. They want a complete package of inter-working software - the Hosted PBX integrated with Outlook and the browser - like they have on their smartphone!! It confuses me that the smartphone is more integrated than a laptop, Mac or desktop.
They want their CRM to integrate with all of it too. If Xobni can pull in all that social data, why can't a plug-in for CRM?
It's this complete solution that is needed. No idea what company will roll it out first or if it will be in 2013.
]]>M5 had the highest ARPU (average invoice per customer) when ShoreTel bought them - at $2000. Most other cloud communications providers hint at lower ARPU - maybe around $1000 per customer. However, 8x8 and Cbeyond are public and their cloud ARPU sits at between $200 and $250.
When you examine the "cloud services" of many carriers, it is just Hosted Exchange, Sharepoint and maybe some backup. That's $9 + $10 + $20 = $39 per user per month. Add in a Hosted PBX seat at $30 and you are now at $69 per month. For 20 employees, that's not a bad billing invoice for Agents, but it is also an unlikely sale. What small business will pay $1380 per month for phone and email? A PRI at $550 plus maybe $100 for the PBX lease and $50 per YEAR for Google has you covered. Add in some Dropbox and Bingo!
This isn't to discourage you. It's to put a pin in the hype balloon, which is starting to annoy me.
That leaves Agents chasing 20-99 employees - since that is a majority of the businesses in the US. Let's call the average 40. If you sell that business the full boat: Internet, Hosted voice, email and backup - the ARPU is worth it. The sales cycle will be longer. The deployment will require more input and project management than Agents are used to. (In fact, it is more than most carriers have ever had to do!!!) Post-sales support will also be required. So overall, it is a lot more work for a stickier client with more ARPU than you are used to. Are you up for that challenge?
Let's go back to the 8x8 example at $256 of ARPU. That's about a 9 employee shop. So you sell them 8x8 voice, cable modem AND another broadband service (like DSL or 4G or fixed wireless). You offer them Google Apps for SMB via NeoNova for some small change. Add in some Mozy Pro back-up (or Carbonite or other backup service that pays you). Next you try to get the cell phones - there has to be a couple that are corporate owned -- for a few more dollars. Don't forget the 4G data plan.
So you wrapped up the Internet Access, mobility, voice, some DR (disaster recovery), backup, email and office suite. After that, what software do they use? How about Conferencing? Do you see? You have to grab the whole wallet (or you can't make much money).
It has to become a lot like McD's. What do they do? A call center hits you first in the drive-thru with, "Would you like to try our ______ special today?" No. "okay. Order when you are ready." But don't forget "Do you want fries with that? or can we Super Size that for you?" It sounds cheesy but you are going to have to do it.
CenturyLink, XO, MegaPath and quite a few other carriers offer transit, Hosted voice and cloud services. It will all be on one bill, with one carrier to blame, with one throat to choke. It makes it easier to sell --- check boxes on an order form or site survey.
You better hurry because the MSP's like MindShift and others are already out there doing this.
When you consider that Parallels AS platform allows hosting companies - like Intermedia.Net - to sell, bill and deploy these services (Hosted PBX, email, storage, office) with a click on an online order page, spend this month - the last month of 2012 - deciding what your plan is going to be for 2013. While I hate the hype, many of your competitors are already targeting your customers. Selling them a T1 will be easy after they sell them VDI or backup or Hosted PBX. Then what do you do?
Again, you have to do it but I wanted you to have a realistic view of what it was going to be like. You have vacuum up the services - all of them - heck, sell them office supplies if someone will pay you for it! Managed Print anyone ;)
]]>It is behind that hype - and in the blog - that the Duopoly justifies metering, throttling and caps. It's kind of a load of bull to hide their flat ARPU. When you consider that VZ DSL costs about $30 and Road Runner cable service is $60 in Tampa Bay, I think that there is plenty of profit on the cable side. Caps, metering and throttling are for finite resources like satellite and cellular. Cellular reminds me of the auto industry: zero to 60 in WOW! But actually do that and you get a ticket. Why talk about 10MB up and down if you don't want people to use it?
Cisco talks about how bottled water pricing can be a model for broadband pricing. Two reasons that doesn't work: Branding and competition. In broadband, there is no competition. None. And What brand? FiOS? Lightning?
Short marketing lesson: if you keep changing the rules (pricing plans) for your customers, you deflower your brand. Change rates while diluting support - or having low support scores - makes your customers mad. Luckily, though, in many areas, you are the only choice. Ah, the monopoly.
So often the messaging is mixed. Watch video on your phone. Watch TV from anywhere in your house on your iPad. So video is front and center in ads but then punish the user for using it???
And has data really gone up? With video, probably. Shouldn't the Duopoly have expected that and planned accordingly? "Poor planning on your part does not constitute an emergency on mine."
Some stats:
Telogical Systems on slide 24 shows broadband standard rates increased by almost $1 in 2010. From 2010 to 2012 pricing stayed about the same, which is the problem for consumers who would like to see shrinking pricing and for ISP's who want to see more money.
"5 out of the 7 top ISPs already have, or will soon have, data usage caps," Telogical.
Lot of hype over data usage but I have been streaming the Olympics all week without too many buffering delays. So it isn't really a capacity issue. It's a Wall Street/stock price/debt issue.
What does caps, throttling, and metering do to cloud usage?
]]>Yesterday there was an announcemnet that telecom CAPEX (capital expenditures) have shrunk. Credit Suisse says the two remaining RBOC's account for nearly 60% of U.S. telecom gear spending. Both companies have diminished spending, especially on the copper plant and DSL. VZ isn't rolling out any more DSL or FiOS - instead they are co-marketing cable!
Ripples in the pond or butterfly wings - no matter how you want to look at it. What will happen to the gear vendors? Tellabs, Ditech Networks, Sonus Networks, Ciena, Adtran, Alcatel-Lucent, Westell Technologies, and Acme Packet are all exposed to the CAPEX plans of the RBOCs.
I see four factors exacerbating this situation:
Telecom is looking gloomy not cloudy.
]]>The VZW-SpectrumCo deal in for "tough remedy", Reuters is reporting. Yeah, conditions that will never be enforced. Public Knowledge is pounding on the FCC about Comcast caps, declaring that the caps violate the merger agreement with NBCU. Will any action occur? Probably not. The issue with the spectrum deal is the joint venture. "Anti-trust regulators have sought strict limits on controversial side deals." We'll see how that goes. I hear that VZW stores are already marketing cable deals.
VZW is also in the news because the FCC forced them to allow tethering apps on Android phones. VZW says that they never blocked apps or functions on any smartphones. CNET has a long FAQ about what the tethering settlement means to the end user.
Fake AT&T Bills Direct Users to Blackhole, Zeus.
How "Toggle" Worked Its Way Through AT&T's Innovation Pipeline And Into Cell Phones.
AT&T plunked down $650M for Nextwave Wireless - well, really for the spectrum, hoping that the FCC will allow its use for LTE despite its proximity to satellite spectrum. Didn't Lightsquared just go down this path?
Nashville is lucky enough to be the trail market for Comcast's metering plan. "Comcast Starts Billing Bandwidth Hogs, But Exempts Its Own VOD Apps". In other words, Netflix goes towards usage but not anything from Comcast servers. The pipe for on-demand is probably a separate channel. The meter is on the Internet pipe. Also, VOD is part of the TV service and is On-Net. Netflix is off-net. Why meter? Increase ARPU and save your TV franchise.
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