On Rad's Radar? - CLEC Archives

Growing Out an IT Business

2013-04-08T13:32:44Z

This is a slide from EarthLink's earnings presentation. Basically, telecom spending is flat and it is roughly 11% of what companies spend on IT services. So if you were looking for growth where would you turn? Oh, yeah, IT services.

These have been the 4 segments -- the 4 drums really - that EarthLink has been beating for a while now - MPLS, IP, IT and Hosted Voice.

When you look at the broader picture, MVNO is not a high margin business. It is the new UNE-P. And as I have repeatedly said - Layer 1 or Layer 7 - either own a network or own the applications.

With the onslaught of the cablecos on the SMB market with their triple-play, CLEC's have to pick up the pace on sales. Not only do they have to sell more, faster, they have to retain their customers, too.

CLEC's need to get sticky. It doesn't have to be your own services either. Partner with someone. Speed to market is more important than owning or building. And if you partner with someone, they should have the deployment formula down pat.

Deployment is where the relationship begins. On-boarding is like the first date. When that impression is bad, there is no second date. There are rumors in the schoolyard about how awkward and weird you are. Today that school yard is social media.

Not every provider has the skills in-house to offer security, desktop, RMM and other IT services. Leverage a strategic partners' skills.

The key to stickiness is to be the one throat to choke. It was a lesson I should have learned working in the VAR business, but didn't get until I was an Agent. It is far easier to sell more to your current customers than it is to continually find new customers to sell one or two services to. And if a customer has 3 or 4 services with you, no one can take them away unless you screw up.

I'm not saying become a cloud services broker, but a model similar to that will work. You just need to have a small piece of all of the services that your clients use.

Is the Channel Too Lazy to Sell Cloud?

2013-03-29T12:31:56Z

Talking with channel managers lately in the Hosted UC space, well, has been depressing to be honest. No one is having fun - or knocking it out of the park. Yes, there are pockets of success - mostly from verticals or niches (surprise!).

So one CM made the comment that channel partners are too lazy to sell cloud. "It is much easier to sell network or a box than it is to sell cloud." There is some truth to that.

VAR's and Inter-connects have a similar business model that is centered around selling a box, installation and support. So cash flow comes from selling the box. They receive a chunk of money upfront. I am not certain that any of them survive off can recurring revenue yet.

To remedy this, some master agencies and vendors are looking to pay some of the commissions upfront, but this requires risk and financing, which devalues their own companies (and makes an exit harder).

From what I have seen and heard, most channel partners - agents, VAR's, Inter-connects - sell Hosted PBX as a third option after all else fails -- and typically sell it as cheap VoIP.

To me, this means that the service providers and the CM's have done a poor job of training and communicating who the target customer is, why they should buy UC/HPBX/Cloud, and what the value proposition is. Am I surprised by this? Not in the least. Why?

For one, many cloud companies have too many executives from the CLEC world where it has always been about Arbitrage - "Let me save you money!" And, let's face it, CLECs know nothing about marketing or positioning or branding - and neither do most cloud providers.

The other big problem is that most of these companies are enamored with their technology - as if the market gives a crap about their technology. People have iPhones and tablets and a bazillion apps. You think your tech is cooler than that??

This was a problem that ISP's had too. All techies that just like to be techies. The reason that 8x8 has grown is because some where along the way they switched from being a tech company to being a sales and marketing company. Most cloud providers are not there yet.

It is also very challenging to sell cloud services, especially UC, with its myriad pieces and components. What channel partner is going to remember all the stuff about your UC product and about the other 10-12 services that he also offers???? Um, not very many.

The flip side to this is that most cloud providers don't really sell direct. They dapple in it because it is expensive. However, if you haven't sold it, you don't know how to train or coach others to sell it either. You don't have the sales process and questions in place as tools for the channel partners.

There is another challenge right now: sales sizes are too small to cash flow for the provider or for the channel partner - so that will grind things to a halt sooner rather than later.

My CM pal also mentioned that partners don't want to explain all the features of HPBX/UC, do an ROI or TCO, check the WAN and LAN, etc. It is far quicker to just sell network or a box - and move on.

The reason that UC is stuck is because it is not exactly like what people have now. So there is training and education needed to the customer and her employees (as well as to the channel partners). This could be fixed IF the channel would actually eat the dog food. Not many channel partners actually use cloud services. If you drink the kool-aid how do you sell it to someone else? (Sales is about the transfer of emotion - if the partner isn't excited about your product, why would the customer be?)

There are a number of reasons that UC isn't selling. (Another is too many providers that all look the same.) As my brother tells me, "But, bro, Lync is selling!" Sure as part of Office 365 or to Fortune 100. And mid-sized businesses with more than 250 employees are buying UC, but are they buying it from the channel or from one of the top carriers?

Another trend is that smaller, unknown cloud providers are losing deals to better known companies - like Comcast, EarthLink, etc. WHy? Trust factor. Brand is a trust factor. So it comes back to marketing.

So is the channel too lazy to sell cloud? Or have the cloud providers just done a really poor job of picking partners and/or marketing?

BTW, there are certainly channel partners selling cloud, but they are dedicated to doing so. They drink teh cloud kool-aid.

Getting Rid of Copper

2013-03-13T15:33:15Z

One way or another Verizon will get rid of the copper. After Storm Sandy, the Battery park central office was so damaged that VZ said they had to clip the copper. Too bad for anyone served by copper in the area. It affected CLEC's and customers.

In FiOS areas, DSL qualification is negative. If FiOS is available, you can't qualify (or order) the copper. ATT does something similar in U-Verse territories.

If the customer calls for support X number of times on a copper service, VZ declares the copper unfit. No one can use it after that. In some areas, like the beaches in West Florida, the copper is poor due to the elements, so no loop qualification on that copper either.

What does this do for not just DSL (which is a losing technology due to cable and FTTX), but to all the CLEC's trying to sell EoC?

Transitioning to Cloud is Hard

2013-03-07T18:24:14Z

Making the business decision to migrate to offering cloud services is hard.

It is also expensive. The capital expenditure for data center equipment, services, software, routers, SANs, backup, bandwidth, licensing, etc. is only the beginning. Then you have to float labor. You need a new set of skills so that means new talent.

After all that, you have zero revenue! (That's why companies buy rather than build - they get talent, gear, and some revenue.)

The transition is so painful - even after buying companies - that Dell is going private. The Street (Wall Street, the bankers) will destroy them while they make the transition from hardware to cloud.

CenturyLink, EarthLink, Windstream, Verizon and TWC have all made cloud or data center buys in the last 2 years. Everyone is banking on cloud services, but the payout is smaller and slower.

Am I Selling Cloud?

2013-01-07T16:34:47Z

I signed up as the first agent for Broadsoft's second customer in 2003. They were unprepared to sell via the channel, and even less prepared to market their offering in general.

In 2005, I signed up as an agent for another Broadsoft shop. It was a wholesale offering for service providers. The company had problems delivering quality service.

When I look back at all the VoIP companies I worked with, most sucked. They could not deliver on the service promises. Mainly, I think because they were in it for the Arbitrage.

I had a long discussion with a reader on Friday where he expressed concerns about most telecom and VoIP companies treat engineers poorly. He mistakenly thought that CLEC's and VoIP companies were in the engineering business. They are not. They are sales & marketing machines that happen to offer VoIP. The engineering, the service delivery, the customer care -- are all secondary concerns. Selling and billing are the primary concerns.

When I say this industry is built on Arbitrage, I mean that since the dawn of the first IXC, any competitor in this space has been about "I will save you money." It has never been about building something better and growing the total revenue -- it has always been about selling a cheaper substitute for the ILEC. This is why the debt is high and the revenues are flat or declining for most companies.

One reason the ILECs are winning is because their replacement services - voice, texting and mobile data -- actually cost more than the replacement services!! This chart shows that mobile data revenue has surpassed fixed broadband revenue. Of course it has -- mobile broadband is expensive!!!

RAD-INFO INC has signed a lot of NDA's and a lot of agent agreements to sell VoIP and other cloud services. Usually it has amounted to very little.

My clients have been selling cloud services - like virtual desktop, Hosted PBX, Hosted Exchange, XaaS, and VPS - for a long while. I only sell to an end user through a client service provider. I am selling cloud, but I am selling it to the service providers and through them to the end-users.

From what I have seen, the hype of 2012 has certainly helped the marketing for cloud services, so 2013 should be the year that the needle actually moves on the revenue side.

Of course that depends on whether the service providers can actually sell their services and provision them to the customers' satisfaction. (Both of which are up in the air presently.)

Will 2013 Be the Year of the Broker?

2012-12-27T19:59:56Z

As carriers add cloud services, we find that a majority offer the same stuff. DUH! That happens with everything in telecom - Integrated T1, Metro E, EoC, Hosted Exchange, SIP Trunking, yadda yadda.

As we enter an era of cloud and social media, I find that most of the service providers are still not branding. Call it anything you want - value proposition, positioning, differentiation, marketing. Most service providers do not Brand.

Now in sales, there is always more than one sale occurring. The customer has to buy the salesperson, the service and the company - especially for cloud services. That's 3 sales. It has to do with Trust. Brands can deliver trust. No brand, then the sale has to be made over and over - and it really comes down to the sales partner sitting in front of the customer.

Without branding, the sales partner has the real control. It is after all his reputation on the line.

Agents have been brokering telecom services for many years. Long distance, POTS, PRI, T1, DS3 and so much more for a while. Certainly, customers ask for the ILEC quote sometimes, but that doesn't mean that the broker isn't influencing the decision. (I don't say that in a bad way - the ILEC isn't always the best solution nor is it always the worst solution.)

As we push to SIP Trunks, Hosted PBX, SAAS, VPS and other cloud services, the differentiation and branding is even worse than in the CLEC world. Think about it. In the world of backup, consumers know and use Dropbox - more than Sharepoint, Box, or any other company.

I think the world of music is a good example. Consumers know iTunes, Pandora, Spotify, Grooveshark and last.fm - a couple are household names to the point that they have been included on auto software and in commercials for cars. That is Branding. That never happened with record labels - and barely happens any more with radio stations.

That lack of branding means that the channel becomes a big source of word of mouth (as well as sales). It also means that the Agent could become a cloud broker as well. (Round about way of getting here huh?)

In the same way that an Agent represents many CLEC's, ILEC's and other service providers, an Agent can certainly start brokering for cloud services. Being a CSB will be different because there are many more pieces to consider with a cloud sale than with a telecom sale. Someone is going to have to do more project management per sale - the agent, the master agent or the service provider.

It isn't just backup that can be brokered either. VPS (virtual private servers) are just another hosting play - and there are numerous players in that space.

CRM - not everyone wants Salesforce, but you might as well as broker the ILEC and its competitors, right?

Hosted PBX is like a commodity. If 400+ companies utilize Broadsoft, what's the difference which one the customer uses? Billing, customer care, reliability, and most important on-boarding. The same as it has ever been.

I see some master agents already lining up to become master CSB's. We will see if 2013 is the year that Agents jump on board too.

Last Merger of 2012 - Maybe

2012-12-27T19:15:02Z

Sidera is merging with Lightower - to compete more effectively with the RBOCs, according to IBT.

The merger is being done by Berkshire Partners, a VC firm with no connection to Bershire Hathaway. It is a $2.2B deal. Both Lightower and Sidera are owned by VC's.

Lightower CEO Rob Shanahan will run the combined company, which will have network throughout the Northeast, Mid-Atlantic and Midwest, and provide access to more than 6,000 on-net locations, according to the BizJournal.

"ABRY Partners, which has owned Sidera for several years now, and Pamlico Capital, which is one of Lightower's major owners, will remain as investors in the combined company alongside Berkshire," reports Rob Powell. Powell reminds me that ARBY and Berkshire own TELx together.

This is a roll-up of roll-ups as Lightower consists of KeySpan, DataNet, Lexent, Veroxity, Open Access and NStar; while Sidera is mainly RCN coupled with ConEd, Neon, and Long Island Fiber Exchange.

This gives them a big footprint - and 6000 lit buildings is nothing to sneeze at - but $2B and you think you will compete with the RBOC's????

One problem with these mergers -- no one knows where the assets (fiber runs) are - which makes it very challenging to make this a profitable transaction. Plus when have these mergers ever worked out -- for anyone but the bankers? Bigger isn't better. Better is better.

Predictions for 2013

2012-12-19T19:15:00Z

CenturyLink Biz has an ebook out with predictions for 2013 and beyond. M2M, mobility, cloud - all just mind blowing stuff . It's prediction time obviously. Let me say that 2013 can go a couple of ways - DC gets its collective act together to improve the financial situation or it doesn't. The economy will swing with either path - good or bad. We have already seen layoffs and threats of more. The only positive I see is bankers actually being penalize for fraud. That said what is in store for 2013?

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:

RIM and Alcatel because they are re-inventing;
Avaya because of its crushing debt;
Bright House due to its Telovations acquisition and to see if it is the first cableco to chase business outside of its region;
8x8 and similar OTT Hosted PBX players like FreedomIQ;
the Cloud Communications Alliance, especially the members who have not been acquired yet. If Hosted PBX doesn't explode in 2013, it never will;
Sprint because Clearwire+DISH+Softbank = a big ugly mess with Hesse;
Verizon but specifically its OTT hosted PBX service, VCE;
Dell as it continues its shift to cloud services from hardware;
Tech Data - between TDmobility and the Microcorp deal - 2013 will be telling;
AirWatch since MDM is huge and they are being sued;
Master Agencies that have to figure out relevancy 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.

Cloudy Math

2012-12-11T03:10:14Z

There is a lot of talk about the big money that Agents and VAR's can make if they just switch over to sell Managed Services and Cloud Services. Here are some facts about cloud.

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.

You will have to sell upmarket. There are 83K businesses in the US with 100-499 employees, according to the 2009 US Census (the last year data is available). With 1000 cloud service providers in the US that will be a fun Red Ocean to swim in.

There are only 17,500 business with more than 500 employees. That 's the spot you would like to sell in but you would need to be connected or a white elephant hunter.

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 ;)

RBOCs Declare War on CLECs

2012-12-06T17:58:29Z

This is a letter from telecom lawyer Kris Twomey to the members of FISPA, an association for ISP's and CLEC's. I know that Politics and Regulatory talk puts you to sleep or bores you or you don't have time for it - but these proposed changes to the Telecom Act WILL affect you!

"One of the questions I am often asked by ISPs considering starting CLEC operations is whether access to unbundled network elements ("UNEs" or "the copper in the ground") will continue in the future. My response has always been something like, "Of course, the Telecom Act guarantees it. Congress would have to revise the Act for any changes to impact UNE availability." Those of you that know me know that I don't get involved in hyperbole, and I'm basically too optimistic to accept any sky is falling-type theories. Now though, there's something brewing in D.C. that genuinely worries me. Turns out AT&T has a plan to wipe out the Telecom Act of 1996, or at least, the parts regulating interconnection.

"I think the next great telecom policy battle is at hand-- nothing less than an attempt by AT&T and others to dismantle the Telecom Act, destroy CLECs, and essentially codify the ILEC/Cableco wireline duopoly. Smaller CLECs need to get organized and respond.

"Debate has begun on all fronts about the future of telecom regulation and I believe we are at the precipice of major change. Over the last couple years, AT&T and Verizon have been quietly lobbying for the FCC to consider rules to transition to an all-IP network, or in ILEC-speak "facilitate a sunset of the POTS network." Verizon is even using a natural disaster to justify removing copper (and therefore interconnection rights) from its network: Other ILECs have been murmuring that the Telecom Act is now 15 years old and needs to be updated.

"On November 8th, AT&T filed the first real proposal with the FCC to "modernize telecom regulation for an IP world." The petition is here [pdf].

"The AT&T petition is a direct shot across the bow of the FCC and CLECs, essentially daring the FCC to act. The petition is breathtaking in its audacity. Here are its main points and suggestions":

Eliminate the availability of copper loops (all UNEs, really) in certain central offices as an experiment and see what happens;
Limit the time that CLECs can object to ILEC notices of network changes;
Reduce state utility commission regulatory authority;
Allow ILECs to remove all copper facilities when the feeder (such as a remote terminal) is upgraded to fiber;
Eliminate legacy ILEC regulations such as carrier of last resort obligations, long distance parity, etc.

"Various stakeholders have responded. The National Regulatory Research Institute, a group representing state public utility commissions, issued a paper on the TDM to IP network transition (here).

"The trade associations have begun to weigh in on AT&T's proposal. CompTel and individual CLECs have lobbied for pro-competitive policies and filed proposals concerning the IP network transition, preserving access to copper loops in fiber-fed ILEC networks, and requiring direct IP to IP network interconnection.

"The cable trade association, NCTA, filed a response to the AT&T petition arguing that the FCC should take its time developing a record. After all, they've actually got a pretty good deal under the current rules. The NTCA, which represents smaller ILECs, filed its own petition on November 19th seeking regulatory relief.

"I am concerned that there is no organized coalition of smaller facilities-based CLECs to defend its interests and propose alternative ideas. I fear COMPTEL will push the interests of its large CLEC members over those of smaller CLECs. I do not think that necessarily the interests of Level 3, Windstream, etc., that do not purchase many copper loops, will adequately align with those of truly local competitors in suburban or rural markets reliant on central office connectivity at regulated rates. I'm especially worried because, well, those "local competitors" describes virtually my entire client base and the businesses of many people that I consider friends." [RAD's note: Mine too, btw]

"As a preliminary matter on strategy, I believe that it is fruitless to solely fight against a policy without offering clear alternative proposals. I also think that by refusing to acknowledge the legitimacy of some opponents' suggestions detracts from the power of our unique ideas. I have several alternative, pro-competitive policy suggestions that would truly represent a modernization of the current system; seek to even the current playing field; and give the ILECs relief from some of the legacy regulatory requirements that are arguably outdated. For now though, it is better that these ideas remain off-list until consensus positions can be developed by a group.

"I have spoken to several of my facilities-based CLEC clients that are interested in forming an organized opposition to these attempts to gut the Telecom Act both at the FCC and to lobby Congress for a true modernization of the Act. I will be hosting a conference call for interested companies on Wednesday, December 12th at 2pm EST. The call is restricted to optimists--those that do not subscribe to the defeatist notion that the ILECs must always get their way. I have some very specific ideas and policy proposals, but am not pre-disposed to any particular strategy. I think it's time for like-minded companies to join forces to protect their interests and I'd be honored to represent them. Please contact me off-list at kris at lokt.net for call-in details."

[RAD Commentary] The RBOCs lost a court battle each recently.

VZW lost in Appeals court its fight to forbear cellular data roaming. It challenged the FCC's authority on this matter and lost.

Meanwhile, ATT lost a data throttling case in small claims court.

Copper clipping will affect Agents because EoC is a big deal - but requires copper plant!!!

XO, TelePacific, MegaPath and other CLECs would lose territories that they could offer EoC and flavors of DSL. ADTRAN, Zhone and Overture Networks make the geat gear that goes in the CO for CLEC's to provide EoC. These companies would be affected as well. Can you see the ripple effect?

How about affordable mid-band Internet Access for the SMB space? That is what EoC is - and it will go away.

Promises Broken and Unenforced

2012-11-19T02:21:06Z

When SBC went to buy BellSouth in 2006, then CEO Whiteacre assured Congress that the merger would be good for consumers and broadband. [HuffPro has a good story about it]

This has been the trouble with the FCC: the FCC has a poor record of merger conditions enforcement.

If this was the EPA, we would have pollution. If this was the FDA, we would have drugs killing people. Oh, wait.

Anyway...

We have a failed policy of competition that comes straight from the FCC. Granted that is a political organization with a change in thought every election. But when you consider the billions in Universal Service, RUS loans and grants, and the BIP and BTOP spent on telecom, especially rural telecom, why isn't creating a competitive environment Job 1?

Meanwhile, TheVerge is reporting that due to Storm Sandy, Verizon is taking the opportunity to cut whole copper lines. That's right, CLEC's out of that Central Office are now effectively screwed -- and so are their customers. Verizon's Executive Director of Operations, Christopher D. "Levendos says it's "far too tedious, time consuming, and not effective of a process to try and put this infrastructure back together," so Verizon's taking the opportunity to rewire with fiber optics instead."

Failed Policy.

CLEC's like TelePacific, MegaPath, integra and XO have spent tens of millions on EoC equipment from ADTRAN and Overture to provide mid-band Ethernet to the SMB marketplace nationwide. That investment is in jeopardy. The ripple effect of consolidation, lack of competition, and copper clipping will lead to many more layoffs, lost market and investment value, even less competition and the loss of hardware vendors as well.

Despite the RBOCs saying they are spending billions to build out fiber to replace copper, are they really doing it? Not really. With a contract in place, they will take 90-180 days to build out fiber to a customer. But overbuilding of copper stopped with the FiOS project.

This hurts the economy and competition. And it actually hurts the RBOCs. More CLEC's means more revenue (in wholesale dollars) and more feet selling against cable, who until recently were the enemy. Now, however, VZW and the MSO's are co-marketing!!! The FCC has basically punted on their responsibility. Nice job Julius, Kevin, and Michael.

AT&T's Big Investment

2012-11-14T15:03:17Z

AT&T announced that it would spend $14 Billion dollars on wireless and wireline networks over the next three years. What a bunch of hoopla over not much. AT&T already spends between $7B and $9B annually on its wireless network. The rest will be used to hit 1 million businesses with fiber. This will happen because both RBOCs want to shut down their copper network. They don't want to run two networks -- and they don't want to sell plant to competitors at wholesale. Those competitors are CLEC's, a bunch of whom rolled out EoC (Ethernet-over-Copper) in many central offices. MegaPath, Integra, XO and TelePacific are betting on the copper plant to provide as much as 100 MB to a business over copper. ADTRAN is the supplier, who is also hoping that the copper plant stays. Can you imagine the unemployment if the copper is clipped?

There is talk about AT&T using this big announcement to force state utility commissions to allow for the clipping of copper. If you want LTE and fiber in your community, then AT&T gets what it wants. Never has there been a better time for CLEC's to SELL DEEP and invest in their own fiber.

Being Choosy is Being Profitable

2012-11-12T18:43:19Z

There was a lot of talk about Insurance in this political season. Insurance companies decide who they will cover. For example, in Florida, insurance companies decide who they will offer a home owners' policy. In Healthcare, the insurance company decides, not only who they will cover, but what they will cover. This maximizes profits for the insurance companies. Maybe this is a model that CLECs and ITSPs should look at.

In a small way, fiber companies and MSOs have a similar strategy, but it revolves around fiber build-out and three year payback models. If the customer can be profitable to the carrier in three years, then the company will construct a fiber route to his premise. If not, either pay for the construction or find someone else.

Being choosy and able to say No is significant. Right now, cablecos wants a signed LOA before quoting out a prospect's site. If the prospect doesn't like the letter of agreement (that closely resembles a servcie order), no quote from Cox. The prospect is flummoxed. There is a reason that companies have policies and one of them is to be profitable.

Recently, I spoke with a Hosted PBX company exec about the difference between a CLEC sales approach and the HPBX company approach. The CLEC was working on lower margin while grabbing market share. The CLEC has access to the capital to win deals on lower margin. The HPBX company wants to maintain margin, but doesn't like losing deals. Either you chase market share or you chase profitability.

In some ways it is a public versus private debate. Public companies don't have the same objectives or metrics that a private company does. Public companies have more access to capital, but are slaves to the transparency and need to maintain a share price. This mindset is anathema to many private companies struggling for growth amid cash flow and capital issues.

I am a big proponent of selective selling for a couple of reasons. It is more profitable to be selective. The take-away close - the idea that someone can't have your service - works in more often than not. It is easier to create a value statement or USP for a target audience. It is also cheaper to market to a target audience as opposed to the general marketplace. Learn from the insurance industry - be picky about who you target and sell to.

Over the years, I have advised clients about Lit Building strategy. Still, many service providers do not have a procedure, process, strategy or plan to sell deep into a building that already contains a customer. Gone are the days of sales territories. However, as CLEC's begin to sell EoC and multi-location deals, they will learn that they will have to say no. They will say No to single location deals (if they are true to their multi-location strategy.) They will have to be picky about what customers they chase with 30, 50 and 100 megabit EoC offerings, since there are factors like distance and copper pair counts that affect the ability to deliver service. Sales departments will need to get more selective to be profitable.

It's All Just Shifting

2012-10-26T21:52:09Z

"Ovum, in a latest research report, has warned that OTT VoIP will cost the global telecoms industry $479 billion in lost cumulative revenues by 2020, which represents 6.9 percent of cumulative total voice revenues," according to reports. Notice that it says Over-the-Top VoIP, not VoIP the way cellcos, FiOS and cablecos deliver it. I think it is a wild guess.

If you believe that tablets and smartphones will replace desktops and PC's, then OTT VoIP will be a good part of that.

If the nature of the brick-and-mortar office is shrinking and more and more workers are remote and virtual, then that will have an affect.

If everything is just apps on a network - if everything is just riding on top of the Internet - then that number gets bigger.

The carriers are facing a huge problem: you can't sell as many devices now because everyone has more than enough devices.

As cable steals the small business market, the ILEC's worry but not nearly as much as the CLEC's.

As TV cord cutting picks up pace, cablecos are looking to SMB to replace that revenue. Which will happen faster - SMB sales or cord cutting?

The mounting debt, the expense for interest, the flat revenue, the rising cost of customer acquisition will factor into the future of many carriers. Some will be able to buy their way out of trouble by buying new revenue, new services, maybe new markets. Others won't be able to.

After a few bad earnings, we see that companies are laying off. They are laying off their own consumers. So where does that leave them in a few years? Companies forget that Henry Ford paid his employees a huge wage so that they could buy his cars. The bad economy is as much a function of bad business management as it is Congress.

We have this stupid assumption that everything should grow, always. How is that possible? There are so many factors that are fixed and finite - like the number of customers and how much they can spend.

At BoB, larger VAR's like Dimension Data (owned by NTT), mentioned that customer retention would become more important than customer acquisition (due to cost of acquisition), but total wallet share will also be a factor in success.

What metric are you looking at? What expectation are you setting to your stakeholders? Are you preparing for the shift?

Money, Market, Launch - News

2012-10-12T18:28:47Z

I can't always write about everything happening, so here are some tidbits:

The TCA added 17 more members at the CPExpo in Orlando as the TCA closes in on 550 members - about 200 of whom have signed up to get certified as a CTP.

The US Secretary of Defense announced that Cyber-attacks could threaten US infrastructure. The DoD is working on a response. It is a constant game of cat and mouse - and the mouse is a fixed target.

SaaS company, Workday, IPO'ed today with a 70% bump to rake in $637M. "The company has not turned a profit." And revenue last year was $134M. That cloud buzz is a hit with investors.

"Integra Telecom today announced that investment funds affiliated with Searchlight Capital Partners, L.P. have acquired a significant equity stake in the company."

Virtual Communications Express is VZ's Broadsoft based SMB Hosted PBX offering that has some integration with Google Apps and a dashboard. I know someone who is exhausted and glad it launched!

An inside look at the Sprint-Softbank negotiations. Customers? No a worry in those rooms.

Master Agency, Intelsys, blogs about the huge opportunity in sales that agents have. "Conservatively we believe the US addressable market share for the telecom services channel of which we are all part is $100 billion annually, or $8.3 billion in monthly spend. This excludes most of the Fortune 1000 on the high end, and the SOHO/consumer segment on the low end.... , Intelisys Sales Partners will own about 0.2% of the addressable net billed market share." The numbers say we need more volume to move the needle.