On Rad's Radar? - cableco Archives

Combatting Mobile Data

2012-05-24T02:02:06Z

How do you offer your broadband customers mobile access? There are a couple of options. One is MVNO, reselling cellular data cards to your customers. This is a very expensive option. No margin, but stickiness for your bundle.

Another way is to use hotspots. Hotspots are good advertising for your ISP and can even get you some new revenue from hourly or daily users. The cablecos have done that in-region but have now decided to having roaming wi-fi hotspot contracts with the other cablecos. TWC, Bright House, Comcast, Cablevision and Cox will be able to log in to each other's Wi-Fi hotspots - a total of 50,000 hotspots.

I guess AT&T will have to change this statement: "With AT&T Wi-Fi access included at thousands of hotspots nationwide. Cable can't provide that!"

AT&T acquired Wayport years ago and eventually supplanted T-Mobile as the wi-fi provider for Starbucks. AT&T owns more than 20,000 hotspots in the US, including McDonald's, Fedex/Kinkos, and Hilton locations. Wi-Fi access is included for iPhone users on AT&T and for certain other AT&T Mobility and AT&T High Speed Internet service. AT&T uses wi-fi to offload traffic from their overloaded cell network.

"Verizon Wi-Fi for High Speed Internet is a free service that enables qualified Verizon High Speed Internet subscribers to access the internet at thousands of public places known as Wi-Fi hotspots . This wireless service is not intended to be used from your home, but to be used while on-the-go." No idea how many or where, but the locator is here.

Two things are interesting. The top 5 or six cablecos are starting to work together, deliver the same services (usually with the same vendor) like home automation and security, and inter-connect with NNI's. Soon the cablecos will have a nationwide footprint that looks homegenous. The other is that the cablecos are starting to look more and more like the ILECs.

Cellular Mayhem

2012-05-18T17:46:16Z

Just looking at the news makes me think that the cellular industry is having a week of mayhem. Besides the mess I wrote about earlier this week, "US wholesale player LightSquared has filed for Chapter 11 bankruptcy protection amid efforts to resolve regulatory issues that have prevented it from launching its satellite service," according to Telecoms. "The carrier has been planning to build a ground-based LTE network, supported by satellites, but the US Federal Communications Commission (FCC) blocked the project, stating that the proposed mobile broadband network will impact GPS services and that there is no practical way to mitigate the potential interference." That about spells it all out. Last I read Philip Falcone wants the FCC to give Lightsquared better spectrum.

WISPA stormed DC this week to plead at the FCC and Congress for more unlicensed spectrum. Everyone wants more spectrum, but only WISPA will settle for unlicensed spectrum. WISP's make a lot out of a little. Cellcos make a mess out of an abundance, which just goes to show that when you are too big to fail, you will fumble a lot.

Speaking of fumbling, AT&T is in talks with Leap Wireless. Yeah. AT&T needs to acquire more spectrum. How about you and all the rest of you just deploy the spectrum you already have? How about you have to give it back if it isn't lit in a year?

I like this comparison by the NYT: Sprint as a downer and AT&T Mobility as techno-Pollyanna. Sprint might be right about mobile payments, since I don't trust the cellcos enough to be my wallet. I have a wallet. A leather one. I trust AMEX. I understand the rules of using VISA. I have Paypal. What more do I need? Do I really need to spend my money faster?

The Big 4 Cellco execs riffed at CTIA. Yawn.

AT&T ripped into FCC Chair again and threatened price increases: "In the case of wireless, without additional capacity, which would have been created by our transaction, prices rise," said AT&T Senior Vice President Jim Cicconi." So you mismanage your network, can't buy your competition, whine about the FCC and then raise rates. Awesome! We have names for people like you.

You know I have a problem with Sprint and its CEO, but this headline takes the cake: A Better Network is Coming! Really? Could be get a worse network?

,p>T-Mobile thinks that VZ's deal with SpectrumCo (the cable alliance) is bad for everyone. "T-Mobile USA would like to have a chance to bid on the spectrum Verizon Wireless is looking to buy." Well, make a bid then. Sheesh.

The Union is against the VZW-Cable deal, "could mean the end of a competitive telecommunications landscape, saddling consumers with higher prices and diminished choice." Well, that and the Union doesn't get a piece of the deal. I do agree that this will end all competition, since the competition is a Duopoly. Now they would be working together.

A Game of Risk

2012-05-17T15:20:37Z

Everyone blames the FCC. AT&T blames the FCC for all of its woes after the FCC (and the DOJ) said no to its merger with T-Mobile. Boo-hoo. It was a risk. It didn't work out. You probably shouldn't have given them the smoking gun memo. Not to mention that 4G is the new broadband and we need competition in that sector. You can't agree with the FCC and applaud them when they say that wireless is the future, then get mad when they want to maintain the competitive landscape.

Speaking of the competitive landscape: the FCC can not let VZW and the cablecos work together. The only competition we have is the Duopoly - cable versus telco. Letting the largest cellco joint venture with the top 3 or 4 cablecos will spell disaster for competition.

In the short term, we are talking job losses and rising prices. In the long term, we are talking bankruptcies. None of that is for the good of the consumer.

It's really a 2 horse race in cellular. Sprint sucks. T-Mobile is cutting another 900 jobs. They already have morale issues over there. This will just be another coffin nail.

T-Mobile does have options though. Merger with an ILEC like CenturyLink or Frontier. Merger with US Cellular, which TDS mainly owns and appears to manage well. Leap, Cricket and MetroPCS are all in play. Will it be Sprint or T-Mobile that go there first?

Lightsquared has filed for bankruptcy. It was another risky gamble to buy spectrum and try to use it for purposes other than what it was designated for. You went all in LSQD and you lost. Live with it. Business is a gamble. It's just the first time that the house (the FCC) wasn't totally ~~bought and paid for~~ on your side.

I guess without a stacked deck of cards, the telcos kind of suck at poker.

The Incumbent Mindset

2012-05-10T18:02:28Z

I'm heading to NYC next week to attend Seth Godin's seminar. It is always worth the trip to me. From his Domino Project newsletter today, a little insight:

"It happens to just about every industry, from hard drives to furniture--the insurgents, coming up from the bottom of the market, had an incentive to refine their techniques, engage with their customers and innovate. The incumbents, saddled with much higher costs and less innovation, watched themselves go bankrupt, one by one."

Can you say China? HUAWEI? Vonage? 8x8?

Every market gets disrupted. The Internet has been the greatest tool of disruption. Think about Netflix and Google Apps.

"Instead of working hard to keep their share of a shrinking pie, or working even harder to make sure the industry stays as is, I think the most essential thing legacy ~~book industry~~ players can do is set up independent ventures with great people and little interference and work really hard to put themselves out of business by starting at the bottom, not by reinforcing the top."

Some ILEC's like Windstream, TDS and CenturyLink have used acquisitions as a way to counter-balance disruption that broadband and cellular have done to the market. M&A will only get you so far.

We are already seeing where Live365/Office suites have become a commodity. VoIP is certainly sold as a commodity. Hosted PBX is probably next. Any time you can automate it, someone will come along, with less costs, and undercut your price. The Incumbents will have to take the hit just to stay in the game. Look at CLEC's and the T1 market. The cablecos are disrupting the T1 market. Next it will be MPLS.

It will be skill set, human talent, integration, customer care, and WOM that will set your product offering apart from the rest of the crowd.

That Seth Godin always gets my mind going.

What Competition?

2012-05-01T20:19:21Z

In this article about independent ISP's fading away, CenturyLink talks about competition of ILEC DSL - from cellular 3G/4G, muni Wi-Fi, and cable. There's also fixed wireless in some ares from independent ISP's, but that is mainly in areas without competition.

But competition is a myth today. VZ is co-marketing with cable now. The Duopoly isn't even competing any more!!!

According to Akamai's State of the Internet report, "The U.S.'s average connection speed is 5.8 Mbps -- a 14 percent increase from the previous year." That's thanks to FTTX and DOCSIS 3.0 mainly.

BTW, Customers prefer flat-rate pricing in study after study.

"In other words, the broadband cap may have less to do with managing congestion on Comcast's data network than with making over-the-top video services like Netflix and Hulu unattractive for heavy television users who are the most lucrative customers for Comcast's paid video services."

Would we even have a cap if we had true competition? Probably not.

With consolidation in the telecom industry, there aren't many players left. In many markets, it's ILEC versus cableco, except where they are co-marketing! Lots of OTT (over-the-top) but I'm not sure how much longer they are allowed to survive.

In the B2B space, lots of consolidation, but cablecos are buying up market share with cheap pricing. It's interesting, because I'm not sure how much longer the nationwide CLEC will be relevant. Everyone is competing for the same dollars: federal and state government, Fortune 5000 and Enterprise, and the multi-location customers. These are a limited supply - maybe 110,000 customers??? But in the small business space there are 5.2 million businesses with under 20 employees! Who services those accounts? That's where all the growth and opportunity is. Unfortunately, broadband and VoIP have cannibalized the pricing structure in this market. It will have to be a bundle of more than data and voice that wins here.

It's also expensive to market and sell to this space - and to support this space. That means it has to be more than voice and Internet, so that the monthly recurring is high enough to rate the work required. We'll see who steps up there.

WOW! to acquire Knology

2012-04-27T19:04:02Z

More cable consolidation. Southeastern Knology is being acquired by WOW!, WideOpenWest LLC for about $1.5B with debt.

"The acquisition increases WideOpenWest's customer base and will help give the operator more leverage in programming contract discussions with content providers." This statement makes sense - scale and scale.

"WOW is paying about $1,875 per customer relationship," according to Bloomberg.

"The combined entity will have over 800,000 customers, and its products and services will be available to more than 2.8 million households in 13 states," according to the press release.

Knology offers Hosted PBX and Knology Matrix, our fully-managed direct-to-the-desktop solution (which looks just like Hosted PBX.)

What's With Wireline?

2012-04-27T18:32:20Z

Wireless replacement - now over 30% of households - is leading to the demise of landlines, but it is also hastening the regulation of ILEC's. Quite a few states have deregulated ILEC's and landline service.

This same decline is also affecting DSL. Naked DSL was supposed to help shore up broadband revenues by releasing the customers from having to purchase a POTS line, too. VZ is reversing course on that, just a year after offering Naked DSL for $25. Some of that offer had to do with the FCC asking the ILECs for a cheap broadband offer to bridge the Digital Divide. Now VZ is saying no DSL where FiOS is available. They need to make folks take FiOS service (to make the metrics look good for Wall Street).

The teclos have basically lost the broadband battle. They stopped rolling out FTTx - at least FiOS and U-Verse. 75% of broadband additions in 2011 went to cablecos.

What I can't explain is the 8.9% decline in wholesale landline revenue for VZ. Maybe CLEC's have been impacted by VZ's anti-competitive nature. Does that mean that resale CLEC's are seeing a decline too? Probably. Cablecos will own customers under $500, so that means a lot of T1 customers have become cable customers.

Two Other Things to Ponder

Cloud and Managed Services as the Next Big Thing and TV Cord Cutting

TV Cord Cutting is rising. Early adopters really like the TV anywhere anytime. They also dislike the huge cable TV bill, which is expected to rise to $200 by 2020. Cord cutting will speed up the price increase in TV because less subscribers means higher price. Content creators like Disney/ESPN pay more and more for sports and that is passed down. In this cycle, the higher the price, the more cord cutting - and around we go.

LEC's losing wireline revenue are looking to Cloud and Managed Services to make up for it. There are a few problems with that. One is that the sales process is so different for CMS. Two, the ILECs have tried e-Commerce and similar services before. (Didn't take.) Three, if the provider cannot deliver telecom services without problems, what makes them think that customers will trust them with more complicated and mission-critical services?

There was a period of time when CTO's would not consider Sprint or Qwest for MPLS because Sprint has an uncertain future and Qwest was for sale. The point is that if the CTO's don't trust your company, they won't buy from you.

It's a quandary.

As CLEC's once competed heavily on teh commodity Dynamic T1, they will now compete on MPLS services, which will (again) drive down revenue and margin. I don't see how this works out for most CLEC's - billion dollar companies or not. Paetec and Intermedia (ICI) were billion dollar CLEC's that had to be sold. It's about having a brand, differentiators, unique services, WOM and executing on a strategy flawlessly to counter the wireline revenue decline.

US Government Suing AT&T for Fraud

2012-04-26T14:49:58Z

Is Fraud rampant at Ma Bell?

ARS wrote an article titled, AT&T collected millions from taxpayers in fraudulent charges, US says. "AT&T improperly received millions of dollars from a government reimbursement fund by ignoring fraudulent use of the IP Relay call system provided free of charge to hearing- and speech-impaired US residents, the US government alleged this week."

Another item ripped from the headlines:

DOJ Sues AT&T For Not Keeping Scammers Off Deaf Phone Service

CRN reports, "The Justice Department this week filed a lawsuit against AT&T on the grounds that the carrier did not do enough to keep international swindlers from abusing a government-mandated service that allows deaf people to make free calls to hearing people via text message over the Web, Reuters reported this week.... The FCC reimburses carriers for the service, to the tune of $1.30 per minute. However, the Justice Department claims that the vast majority of callers using the service were fraudsters in other countries, and that AT&T did not take measures to stop this from happening."

"This claim was initially made in a whistle-blower lawsuit against AT&T brought by a former call center employee, according to Reuters".

Too big to fail also means too big to know what is going on.

This is but a symptom of how poorly managed these big companies are. It's all about the stock price. When you have $64 Billion in debt, you need to watch the stock price or your debt starts costing more. One percent is $640 million extra. But you can be a slave to it or everything else falls apart.

AT&T is facing competition from VZW and the cablecos. If the SpectrumCo deal gets approval from the FCC, VZW will be co-marketing (read colluding with) three MSO's to take revenue from AT&T. All the mass markets are flat: voice, TV, cellular and broadband. It's a game of take-away now. That's expensive. So customer acquisition costs increase. Subsidies on cell phones go up. Everything goes up except ARPU! Do you see the problem?

If any other cellco - T-Mobile, Sprint, MetroPCS or even Tracfone - could get its act together, it would add pressure. The MSo's have their act together and are winning the battle for the SMB space under $500. The CLEC's used to own this business, which meant wholesale revenue for the ILEC's (Qwest, VZ, ATT), but even that revenue will start to decline as less T1's are sold by the CLEC's.

Wireline revenues, especially DSL, are in decline. Where does the new revenue come from?

Windstream and CenturyLink made big moves to counter their wireline shortfalls. What have the RBOC's done? Mainly gone cellular including spectrum acquisitions. Comcast bought content (NBCU). It's a race.

Short note for CLEC's: if wireline is declining and the sub-$500 customer is going to cable, what are you going to do?

One last note: VZ already had a union strike and had to settle. ATT is in the midst of negotiating a CWA union contract. How does that help or hinder future growth? For VZ, VZW and FiOS are non-union shops.

Get Off the Agents' Back

2012-04-12T21:48:50Z

These were my thoughts on the 2011 CPZ that I was a panelist on. These are my thoughts as a reaction to the latest CPZ.

Surprisingly, not everyone read my post about how the whole telecom eco-system is shifting. Agents, Masters, Carriers and Cloud Providers are all going to experience a Shift.

Did you ever see Shift Happens?

Considering all these factors - Quota, Debt, declining revenue, pricing pressure, and flat markets - the future does not look bright.

Most of the people who were talking on the CPZ 2012 video about transactional agents are not actually agents and to my knowledge never have been.

Does a subset of Agents shop masters? Probably. On the other hand, I know masters who shop to sub-agents with "I'll give you another point or two to go with me." Part of this is due to the weight of quota on the Master Agency business. Master Agents are under a tremendous pressure to hit quota to keep the support level and sustain the commission revenue at its current level. So don't get mad at the Sub-Agent when Masters are doing it too.

Value and Telecom

The whole Industry talks about VALUE, but can they describe it? No. Our Industry has been a series of me-too, arbitrage bandits selling the same thing: UNE-P, Integrated T1, SIP Trunking, and today it is MPLS. It's all just similar looking and sounding services. How does an Agent or a Prospect tell the difference?

Branding is non-existent in our space, except for the Duopoly of ILEC and MSO. You create value with branding. Other value comes from benefits and differentiation. We are lacking the Differentiation.

Without value, it becomes a commodity. Commodities are price shopped. Tell me the difference between any two Internet T1's or any two SIP Trunks.

Carriers are Unhappy with Agents

Just because Agents don't act like you want them to doesn't mean they are all in the wrong. You built this current eco-system. Now you want the ship to turn on your say so. Easier said than done, pal.

Truthfully, have you done all you can to give Agents the tools they need to sell your product? Not to be repetitive, but have you established your value statement? Do you know who the target market is? Do you know what triggers the sale? Who is the actual buyer? Answer those questions first.

The Industry wants the Channel to go upstream, except they don't. By that I mean, the carriers want revenue. Period. It's all about quota. While they might want an Agent to sell MPLS, they aren't turning away T1 business either. However, they want the Agent to turn away from that business to go upstream. Yeah.

Keep in mind that it might be that the marketplace doesn't want to go upstream either.

Right now, Cable is doing an excellent job of disrupting the market and stealing business with cheap loops.

At a CLEC training, it was stated that cable would own the sub-$500 business. It sounded like they were conceding it. The cablecos will become the de facto ILEC's. I have no idea what the ILECs are going to do. Only the 2 RBOC's have a cellular business. And CLEC's will probably run into too many problems to continue to sell network access.

In that same training, the CLEC stated they wanted Multi-site, multi-access business. Unfortunately, everyone wants that business. Masergy, Smoothstone, EarthLinke, Megapath, Netwolves, Wind, CenturyLink - just to name a few. To hear carriers talk, I guess, MPLS is the new Integrated T1 (in every way). They say there is more margin in it. No there is not. There is more revenue per customer, but they will have to give away margin to (A) hit every site and (B) win the business in a hyper-competitive marketplace.

No one buys the way most service providers sell either. That's why the carriers are always searching for Consultative Sales Professionals. The whole industry sells what they want - and it is followed up by a series of me-too. Just because one CLEC is selling Managed Security does not mean that the marketplace wants it or will buy it or that it will want it delivered that exact way. It also doesn't mean that the next eight CLEC's or service providers need to market that same offering. Do we know what the marketplace is expecting?

How Things Can Shift

One thing that could cause a big shift is if Tech Data becomes a Master Agent. With TDMobility, they already have the platform and are selling cellular in a Master Agent model. Plus by offering mobile device management, TEM and all that hardware, they have caught up to the big Masters. CDW could become a Master Agent if they wanted to - and they might have to in order to sell more hardware.

Dell could become a Cloud Provider. As it stands now, they are an MSP Enabler. And Dell is selling CDN now! It will be interesting to see what Ingram and SYNNEX - both betting on cloud services for their future - do to not have to compete with Dell head-to-head, while also competing with Tech Data.

I don't think that most telcos will make the shift to managed services and cloud successfully. It's labor intensive. It doesn't scale like telecom. They think they can automate everything, but that only works for cookie cutter stuff. Plus they can barely deliver telco services without a headache. I think MSP's will win this war. Any company that can integrate apps (like CRM and invoicing with Exchange and Sharepoint) will be successful. If they partner with VAR's who can handle the on-going maintenance and support that all this technology will require, they win big.

Can the Channel change to become Trusted Advisors? Probably not all of them. Selling Cloud is different than selling telecom. Period.

The Channel basically sells replacement services. Here are some examples: VoIP for POTS: SIP Trunk for PRI; Ethernet for T1. Each transaction is replacing like for like. Even MPLS is just a replacement for Frame Relay, ATM and IP-VPN.

That is why selling Hosted PBX and other cloud services are so challenging: It is not a simple replacement. It's not like for like.

The sales process for selling replacement services is pretty easy. When the sale becomes about business process change or fork-lift upgrades (like Hosted UC or Virtual Desktop), the sales skills are different. The sales cycle is different - and longer. Provisioning takes longer. Ultimately, commission payments are much later.

This is really important to remember.

Selling Cloud and Managed Services will not just be more of a challenge, but it may be less satisfying. Why? Transactional sales types are motivated and driven by quick hits and a lot of ink in a month. Extended sales cycles are less motivating to this type of sales person.

Moreover, as commissions decline with the price decreases, agents have to sell more and more to maintain their revenue goals. Shifting to new products, new sales skills, and a different sales approach will be a huge leap, especially without training, a financial cushion, a deep desire for change, and vendor support.

Agents are not FARMERS! They are Hunters! They do not do Account Management, cross-sell or upsell to the base. Smart agencies will higher a couple of farmers to work the customer base and perform account management.

All of this makes me wonder who will be the Agent of tomorrow, who will be grooming accounts and performing consultative selling of complex solutions to their customers?

USTelecom Wants Forbearance for all ILECs

2012-04-09T18:36:04Z

We once fancifully debated if the ILEC's would LET the cablecos get ahead just so they could get out from under regulations. This was 2006. Apparently, that was the plan.

USTelecom is an organization made up of ILEC's. The org has filed for forbearance at the FCC on behalf of its members. Not certain THAT is legal.

The petition [pdf] comes from the ILEC executives "essentially telling the FCC that it's time to wake up and smell the coffee--"many rules were adopted in a different era, long before the advent of broadband networks or the creation of the public Internet."," as JSI describes it. JSI continues with, "it might be time for a new regulatory regime as even the 96 Act is becoming less and less relevant with each new cord cutter and cross-platform conglomerate. The petition is also in line with the White House and Congress' push to get the FCC to clean house, and "the Commission's commitment to eliminate unnecessary regulatory requirements.""

The petition states, "Forbearance is warranted because the rules have been rendered obsolete by technological and market changes. From a technological standpoint, the Commission's legacy telecommunications regulations are ill-suited to facilitating, and in fact hamper, broadband deployment." I'm not sure that's true. It hasn't hampered DSL; the LEC's have by not deploying, switching to fiber and, quite frankly, arrogantly thinking that they were still a Monopoly. In every respect, the trouble with ILEC's is NOT the federal (or dwindling state) regulations. The trouble with the ILEC's is a Monopoly Mindset.

They don't choose the best technology nor do the deploy technology well. Mismanaged spectrum just being a symptom.

FiOS failed because the numbers forecast was wrong. Basing it on 50% penetration was a mistake. Not considering that it would take 2 techs all day (or longer) to install triple-play FiOS. Thinking that the CPE - all 4 pieces of equipment - would be cheap to install.

Let's also look at three bigger problems for ILEC's Pensions, Unions, and USF. By shifting to a cellular and entertainment companies, the RBOCs - AT&T and Verizon - are moving toward a non-union shop. AT&T is dealing with CWA union contracts right now - and VZ had to deal with them last year (along with a strike). They want to eliminate the union. Cellular, entertainment, cloud and outsourced services mean less Union liability - and less pension liability. The ILEC's - Embarq, VZ, ATT, Qwest - are sitting on a chunk of pension payments. It's just another example of bad planning by the executives running these corporations. I know in my life time I will see one of these companies file BK papers. With all the debt they have - $109B just for the Big 2 - mixed with declining revenues, pension payments, probably healthcare costs, union troubles and hyper-competition, the C-Suites at the ILEC's - all of them - are as ill-suited to run them as Hesse is to turn Sprint around.

A Forbearance petition is nice, but it won't solve any of their problems.

With USF Reform, the RLEC's - and even some ILEC's (FFW+C) - will be in even more trouble. Not just competition and dwindling access lines, but decreasing government subsidies for those access lines PLUS a requirement to build out broadband, which means CAPEX! It is not a pretty horizon.

As I read this paragraph all I can think is: Monopoly MIndset is the problem, not FCC regulations. And claiming that it is regs that have created the current quagmire is sticking your head in the sand.

"Indeed, the most recent survey by the Center for Disease Control (which has been relied upon previously by the Commission) has found that more than 32 percent of households have completely "cut the cord" and have abandoned their wireline phone altogether. .... At the same time, incumbent carriers compete against a host of providers, including cable companies that offer service to at least 93 percent of American households, already serve approximately 20 percent of the residential voice market, and are the primary provider of residential broadband. Under these competitive circumstances, the current outdated regulatory regime imposes unnecessary costs on a limited subset of competitors to the detriment of these competitors and consumers alike." Plus it's a Duopoly. There isn't much competition in the Broadband space. It's DSL, cable or 3G.

Comments or Oppositions Due: April 9, 2012 TODAY>

And of course COMPTEL has filed opposition.

Category 10 (Service Discontinuance Approval Requirements); Category 9 (Rules Governing Notices of Network Changes); and Category 2: (Open Network Architecture and Comparably Efficient Interconnection Requirements, All-Carrier Computer Inquiry Rules and the Structural Separation Rule) would really make CLEC life miserable.

Think about this when thinking about regulations being the issue: "According to the Telecommunications Industry Association, wireless has become the preferred voice-services option. Wireless revenue in 2012 is forecast at $335 billion, while all other forms of fixed network voice revenue will only total $176 billion ($132 billion for wireline, $38 billion for broadband access and $6 billion in cable/television revenue)." Is it regulations doing this or our mobile culture? De-regulating ILECs will mostly hurt SMB who are the profit center of ITSP and CLEC businesses.

One last point: voice is being replaced by Skype, G+, Facebook, IM, chat, SMS, and other types of communications. These innovations were NOT brought to you by the telcos NOR will any innovation because they have a Monopoly Mindset. And that mindset screams: "We want to make more money off our old plumbing without having to morph, change or innovate!"

There's no fixing that.

The Telecom Ecosystem is Shifting Rapidly

2012-04-02T21:02:47Z

The telecom ecosystem consists of a number of pieces: RBOC, ILEC, RLEC, CLEC, ISP, MSO, IXC, ITSP, MSP, data centers, Master Agents, Agents, VAR's. It is shifting.

As carriers migrate from a commodity access business, so too must the master agents, who - more and more - are tying their business models to the preferred carriers.

Master Agents have morphed into a supermarket of services: CLEC, ILEC, MSO, VoIP, MSP and even hardware (like Shoretel). In some respects, the master agents become the fabric for a quote machine. Basically, the machine churns out quotes from a number of carriers. This approach makes busy work for agents, masters, channel managers. It's only necessary because of a lack of value proposition. There is no clear delineation of specialties for the service providers. Not even from their preferred partners.

More and more masters look like Tech Data.

The Masters are going to have figure out their value proposition to the Channel soon too.

So are the CLEC's. All the mergers are just about complete, so before we start another round of M&A (or worse a round of Bankruptcy filings), could we just hear you clearly tell the Channel what your sweet spot is going to be?

Clearly and concisely - not in 71 slides over 2+ hours - but in one sentence (or a tweet), tell the Channel what we should go to you for?

Tech Data offers 3 of the 4 cellcos services and XO services, through TDMobility. It is a small step to become a Master Agent and add 50 carriers. The difference is that TD offers hardware. It's a one stop shop. And the commission reconciliation is done by TD, not me! YEAH!

SYNNEX and Ingram are in Cloud. (No idea the details because the PR reads like someone swallowed a buzz word infographic.) But if these two VAD's start brokering SAAS services, it makes for an interesting day. In fact, if they acquired or partnered with VAR Dynamics, they would hit a SAAS home run.

Next up is Dell. Dell bought SonicWall and WYSE. It clearly has a strategy. My guess is that Dell will want to be the whole distribution system for VAR's in an MSP world. In other words, hardware, devices, cloud services and managed services will all be sold by the VAR channel with Dell providing the back office and the engine. Dell will become a Managed Services provider Enabler.

Transactional Agents will just ride it out. I hear it in their voice. Some will sell Hosted VoIP and some other services, but the comfort zone is on replacement services. It is very difficult to go from selling replacement services to basically selling insurance (or the invisible).

VAR's are the goal of everyone right now: Carriers, Agents, Cisco, etc. Are they the holy grail? Unlikely. VAR's deal with hardware and delivering their own services. Autotask and Connectwise are a platform to allow them to bill, schedule, monitor, etc. That competes with the carriers.

VAR's, like CLEC's, like control (or more accurately the illusion of control). Telco services with fluid port dates, demarc issues, and other unstable moving pieces are not what they are looking to add.

To be honest, I don't think that the telcos will win the managed services game. They can barely deliver on telco services these days, so how are they going to deliver on software, apps, security and other managed, hands-on, skilled services? Not to mention, the CAPEX of delivering on these services. What CLEC is flush with cash? Most are flush with debt and price pressures are resulting in flat or declining revenue.

Moreover, with the way Agents have been treated as of late (in quite a few noteworthy instances), I'm not certain VAR's will not be enticed to come join that party of MRR.

There are many reasons why I think that cablecos will become the new ILECs and LECs will flounder outside of telco.

IDC SVP & Chief Analyst Frank Gens said, "Volume is going way, way up and price is going way, way down. If [technology companies are] going to drive large-enough volumes to support the revenue levels they're used to, they're going to have to drive the number of customers way up. You'll need millions of customers in order to compete." Gens was talking about software, but it is the same for ISP services, cellular, TV, and voice.

Take conferencing as an example. Why don't the IXC's own that market? It's just a bridge and minutes. Instead Skype, Vidyp and other start-ups have picked that market apart. Even Webex owned by Cisco didn't innovate and own that market. Conferencing is an example of Cloud Communications and SAAS, right? But telcos don't own it. Software companies do. Layer 7 companies. Not Layer 1 companies.

Hosted PBX is another example. ILEC's owned Centrex. Many of them had installed Broadsoft boxes (but were only using it for SIP Trunking). So that market is about 1000+ strong of tiny players picking off low hanging fruit - disrupting the whole sector. Again, telcos did not dominate this segment. Sure there are a lot of reasons for this, but excuses are just excuses. Comcast will probably be the largest player in the Hosted PBX space.

How about data center? ILEC's had space and were colo landlords early, but just didn't want that game. Until now.

And Master Agents just follow the carriers. It's not like they are straying far from the center either. A couple of Masters have TEM platforms. It's a start. But none (that I know of) jumped on the SAAS game early. It's just an example of an ecosystem that follows each other and navel gazes. The main reason is due to the compensation system. Quota is a stern parent.

When I look at what Parallels is pulling together - 350+ apps to API through their portal layer - I see them leapfrogging ahead of the game - or more precisely, creating their own game.

VAR Dynamics does something similar by white-labeling SAAS for anyone to sell. This is the next piece of the puzzle. Network Access, then Apps. Agents already sell some network access. The key is to sell all kinds of network access and a ton of value-adds (like storage, backup, security, compliance). Think like Apple or Google: it's all about the Apps store! Whether that store is run by VAR Dynamics, Parallels, SYNNEX or Ingram, Agents have to find a way to get a piece of that. Why? Because transactional sales is producing less and less revenue and commissions. Last year a GigE port in 56 Marietta in Atlanta was going for $1500 on the low end. Now it's $500. The high end last year was $20K for a GigE; today it is $8K. Revenue is declining; thus, commissions are declining. Agents have to chase more and more deals to make a living.

I propose that Agents have to learn to vacuum. By that I mean, voice, broadband, mobility, security, apps, and other add-ons. Get the whole pie!

The Ecosystem of Telecom is shifting - for everyone. Either shift with it or not.

Comcast Versus Netflix

2012-03-20T18:01:27Z

IN a Fast Company article, titled "Why Comcast Will Crush Netflix". Comcast will be launching a Netflix killer soon. Why? "The battle to own the "digital home" has been waging for years." The Duopoly does not want to be relegated to being just dumb pipes. The money is in Layer 7. The Duopoly is tired of a static ARPU, while Google, Apple, Amazon, Netflix and others make money over-the-top.

The Duopoly has spent big money on TV distribution - AT&T on U-Verse, VZ on FiOS - and do not want to lose revenue due to cord cutting.

Content providers are already offering shows on their own websites plus online TV sites like Hulu, Amazon, Apple iTunes, Netflix or Epix. This competes with cable TV and DVR.

Hollywood doesn't know what to do. It sided with Blockbuster over Redbox and Netflix on access to titles. "Netflix will lose its rights to carry Starz video content." It's all about the content. Period.

"Cable companies have historically played the tortoise to high-tech innovator hares. They adopt a predictable pattern--they let someone introduce a new service, watch the market grow, and much later step in and take away the opportunity. This is how cable companies beat out TiVo (which introduced the world to the DVR) and Vonage (which convinced Americans to embrace VoIP)."

This is an important lesson for service providers.

It's a good read.

BTW, cablecos are really pushing into Business TV, even allowing the Channel to sell it. That's one way to increase TV revenue. I would guess that DBS (DirecTV and DISH) are losing accounts here. MSO's are even chasing hotel/motel TV business.

What About Selling Cloud?

2012-02-21T15:55:02Z

At The CPZ, the rest of the panel were cloud guys (VAR's and Hosted UC). This is a snippet of the conversation where the panel is talking about how transactional telecom sales are dead, long live the Cloud!

People deemed LD dead years ago (like when MCI went BK), too, but there are still a large number of agents and resellers making money on LD and pre-paid calling cards.

Until TDM is retired, agents will still be selling POTS, DSL and T1 - and making a living doing so.

Here's the problem with selling Cloud (other than the fact that cloud providers keep screwing commissions to agents):

The sales process is different! Selling replacement telecom services is not the same as selling managed services (like cloud and IT). How different? The conversation, script, questions and prospecting for IT is distinct. The buyers may not be the same. Sales triggers are dissimilar. It requires sales and product training.

I worked for a Novell VAR from 1996-1999. The sales trigger was when something broke. In telecom, the sales trigger is usually the end of the contract, because the penalties for leaving early are huge. Other sales triggers for telecom: expansion, moving, or a shift in IT (i.e., more bandwidth needed because of VoIP, Citrix or backup).

Dave makes a point about "do you want to be in that cheap stuff or do you want to do good by your customer". Do agents want to be in "the cheap stuff"? No. Our commissions are based on MRR. We would like it to be as high as possible. However, we don't make the prices, the carriers do, so why blame the sales force?

In some cases - like government agencies -- the prospect is looking to reduce the telecom spend due to budget constraints. If I don't do it, someone will.

Back to being mad about the prices falling:

Agents didn't commoditize telecom, CLEC's did. It started with the LD penny wars and has continued every since. In 1999, when Covad, Rhythms and Northpoint all IPO'ed, all 3 selling DSL nationwide against each other without any differentiation was another hit. DSL (broadband) created pricing pressure on the T1 business, which continues to erode to this day. Moreover, the Integrated T1 became a commodity long ago, again due to a lack of CLEC differentiation (branding, innovation, product design and marketing). SIP trunking came along as a "cheaper" alternative to a PRI. See how that goes?

Today, we have $200 Covad T1's and $2 per MB Cogent bandwidth adding to the price compression. So who's fault is it? (I won't even get into the companies that went through BK and really screwed up telecom with that arbitrage mindset or the fact that even as revenue diminishes debt is increasing.)

When you look at the Hosted VoIP space, there isn't a whole lot of differentiation either. There are so many players, it is confusing to the buyers and sellers. It doesn't help that so many of the providers don't know what they want to be or who they want to target. "Wholesale, white-label, retail - whatever! Just sell something!"

In the video, I make a point that no sales person is going to walk away from revenue. Well, most carriers don't walk away from revenue either - even bad revenue (no margin revenue).

Let me give you an example: there is a Hosted UC shop that really only wants UC customers, but doesn't really say that to its Channel. When an Agent brings them "small" hosted PBX deals, it is frowned upon -- but they don't say No (to the revenue).

If the carrier doesn't have a target market - like AboveNet and Smoothstone do - then it is selling against everyone everywhere. That's just stupid. Service Providers need to start thinking like fiber and cablecos: ON-Net is Good. Type II is bad.

As we get into Cloud services, we are talking bloody red ocean - everyone and their brother is a player: web hosts, data centers, MSP, VAR, telcos, cablecos, CLEC, ITSP. Yeah, that will make it easy to sell. How would an agent even do a competitive analysis?

If you want an Agent to sell your stuff, answer these questions:

Who is buying your stuff right now? (Be specific: vertical, NAICS code, buyer title)
Why are they buying it?
Why are they buying it from you?
What's your special sauce? Or where's the beef?
What questions are you asking to get the conversation going?
What was the sales trigger for the buyer? (in other words, what made them want to buy?)

If you can't answer these questions (or want to give me BS answers), this is your problem! Don't blame the Channel.

FCC is Busy!

2012-02-07T20:54:35Z

The FCC is really busy!

The FCC is still working on Inter-Carrier Compensation. It ordered Rural Call Completion.

It approved TWC's $3B bid for Insight. "Time Warner Cable last August agreed to buy Insight for $3 billion in cash. The nation's No. 2 cable operator will acquire control of Insight by merging Insight into Derby Merger Sub Inc., a wholly-owned subsidiary of TWC, with Insight as the surviving entity, according to the FCC. Insight will become a wholly-owned subsidiary of TWC," according to Multi-Channel.

The FCC is looking for comments on NFL Black out. (So is the Florida Legislature, since the stadiums are publicly supported.) 16 games blacked out this year included 7 by my Bucs. That's not any way to treat fans or build up a fan base.

Engadget reports, "Back in December, the FCC approved the first white space device and database for the lucky city of Wilmington, North Carolina....Spectrum Bridge finally launched its TV White Space (TVWS) network in Carolina, as part of Wilmington's ongoing "Smart City" initiative."

The Lifeline program for low-income households has also been re-vamped by this Commission. There is a $25 million pilot program for Lifeline for broadband to see if there are cost savings. [PCworld]

Clearly, the FCC is working on a lot of business. Here are some other topics:

USF Reform
Inter-Carrier Comp rules
VZW-SpectrumCo spectrum deal
LightSquared spectrum usage and GPS interference
Reversal of Verizon's forbearance in 2006>/li>
Next Gen 911 framework.
NANPA Numbering resources (access to DID numbers)

A lot to keep track of.

Verizon Puts the Move on Video

2012-02-06T15:26:03Z

After Verizon's CFO sais that FiOS was a poor economic decision for the company, I would think video would not be on the VZ radar. The FiOS TV service is so expensive to deliver that Frontier raised rates over 70% when it took over former VZ FiOS territory -- and then decided to switch all the TV over to DBS.

Comcast buying NBCU was a little different, but cablecos have owned channels before, especially sports channels (MSG, YES, BayNews9).

Maybe the TV-cord-cutting crowd is scaring the cablecos, despite the rhetoric to The Street. Content is expensive to license and to deliver. And getting more expensive all the time. Meanwhile more video is being delivered as bits and bytes by Netflix, Amazon, the networks (USA, Comedy Central, ABC, CBS and CW - all have shows that can only be seen on-demand from thier website) and apps (HBO-on-the-Go and TWC Anywhere, for example). This means that TV revenues WILL decline.

How does the Duopoly make up the money and pay off the $250 Billion in debt it has accumulated????

Metering is one way. It increases the ARPU.

BTW, I find it interesting how the RBOC's have basically given up on DSL.

So VZ is now partnering with the Coinstar subsidiary, Redbox, to launch a video streaming service to compete with Netflix, Amazon, and Hulu.

This means that ATT will HAVE to go after DISH. Why? The wireless spectrum primarily but also DISH owns Blockbuster, satellive TV service, and Slingbox. Telco is a me-too industry. Unless ATT is going to abandon theh consumer space, relinquish it to the cablecos, it will have to make a move soon.

While Echostar owns Hughes Communications, the DISH company bought up spectrum from DBSD and Terrestar that DISH plans on utilizing to offer a hybrid satellite/terrestrial mobile broadband service. Today, DISH has a market cap of almost $13B, while Netflix is at $7B. Since spectrum is finite and like real estate, the extra $6B seems like a steal. Consider that AT&T bought spectrum from Qualcomm for $2B. That spectrum, which, according to Huffington, "Qualcomm stands to make a handsome profit on the spectrum. It paid $38 million for one slice of nationwide spectrum - the former UHF channel 55 - in 2002, then another $558 million in 2008 for UHF channel 56 over New York, Los Angeles, Boston, Philadelphia, and San Francisco." Qualcomm was using that spectrum for FLO TV, which failed. It consists of six D-block and five E-block licenses in the Lower 700 MHz band, giving AT&T post-transaction holding between 6 and 80 megahertz of spectrum below 1 GHz. Holding is key, because, like all cellcos whining about spectrum, AT&T HAS spectrum it has not deployed.

AT&T says it needs the spectrum, especially if VZW gets the SpectrumCo deal to go through whereby VZW buys all the AWS spectrum from the cablecos. So do the Rural Cellular Carriers. Makes DISH a big target for acquisition. However, Charlie Ergan still owns 51%.