Recently in economy Category

Stanford International Bank is the other Madoff. While Madoff burned people to the tune of $50B in his Ponzi Scheme, Stanford wiped out $8B in its investors money. In its wake, it has erased the credit line of Reignmaker Communications. It is reported that Reignmaker laid off 19 of 25 employees. It looks like this Broadsoft based VoIP provider will be closing.

Reignmaker is an Atlanta based ITSP that purchased a CLEC with a Broadsoft switch. It back-ended into Tampa-based CommX, a wholesale Broadsoft ITSP. A good dose of its employees came from Cbeyond, down the street.

L3 released 4Q08 numbers last week. Remember at Christmas, rumors swirled about a possible bankruptcy. Now it rings up a profit.

Level 3 Communications has recorded its first quarterly profit in six years for the fourth quarter of 2008. The operator reported a $44M profit for the three months to 31 December; although it also reported lower revenue at $1.05 billion for the quarter than it did for the same period in 2007. Level 3 had a $290M net loss for the full year but this was considerably less than the $1.1B loss incurred in 2007. Full year 2008 revenue was $4.3B [about the same as 2007][.telegeographyg]

Even when you hit some numbers, The Street kicks your ass. But when you say, "For 2009, the company said it expects continued revenue weakness over the short term but is also working to cut costs" in Forbes, your stock is taking a hit.

Full disclosure: I rep for 20+ carriers and Level3 happens to be my biggest carrier. Pricing pressures are driving rates down on everything from Transit to Transport. Not everywhere mind you, but in the top 10 Metro areas, where L3 competes with Cogent, HE, and NTT/Verio, it is pressured to lower rates.

XO competes with it in many markets because XO has IRU's on L3's cable, so about 60% of where L3 is, there's XO. Surprisedly, pricing pressure is also coming from Qwest on longhaul routes, especially on Waves. (I rep for XO and Qwest as well, but not Cogent, HE or Verio). But the real competition comes from its own Resellers, like WBS Connect. Lately, Scott's company has gone underwater to take a deal from me, I mean, from L3 directly. I don't know where all this ends but I do expect HE, Cogent, WBS and others to start seeing more bad debt and late payments. The people who fight for price the most are also usually (not always) the ones who pay late. We'll keep watching.

Nuvox says that they are all set for this economy. It looks like they have $30M in the bank, re-financed their debt, and are looking for a possible acquisition.

Nuvox is now offering Google Apps to its customers.

NuVox business customers can now access Google's popular Web applications on their own domain such as Google Docs to create, share, and collaborate on documents, presentations, and spreadsheets in real-time and can even gather a variety of business information in one place from Google Sites which brings forth videos, calendars, presentations, attachments, and text -- and easily share it for viewing or editing with teams or as a company intranet. NuVox's customers can also get access to Gmail with up to 25GB of storage per user, mail search tools, and integrated chat. Gmail also interfaces seamlessly with popular email clients. And also Google Calendar, which helps to coordinate meetings and company events with sharable calendars that work with your company's directory. Schedule meetings, manage conference rooms, and receive "large company" services for small to medium enterprises. Google videos for business and Google Message Filtering are also part of the deal which NuVox's customers can take advantage of.

It seems that when they mention Google Apps comes with the T1 service, Nuvox gets more appointments.

"The power of Google standing behind email and other essential applications gives our customers a bold edge in the marketplace. Additionally, this is a major advance in NuVox's strategy of offering innovative managed services that are not currently available through other providers." [TMCnet]

Nuvox is a Sylantro shop that is now making a push into SIP trunking, but I just don't see why. Nuvox is one of the most inexpensive CLEC's, selling T1's in many markets for sub-$400. I don't see where its customers would migrate to SIP trunking as a cost savings. As with any SIP trunk, interoperability with the PBX is essential.

"NuVox SIP Trunking is compatible with a variety of premise-based IP-PBX systems including Cisco, Avaya, Ingate, and Digium to date." [TMCnet]

I moderated a SIP trunking panel at Microcorp's event in Atlanta in Sept. of 2008. The result was that the carriers were pushing SIP Trunking as a cost savings replacement for PRI. There was no differentiation among the 4 carriers - whose names I will not print. So then I am at the IT Expo in Miami for the Reseller panel on SIP Trunking titled "The Service Provider Perspective" hoping for something different. It was different. I was bored to tears by the middle of the 3rd presenter.It was one commercial after another about the company and how they could save money.  It was a shame too, because it was a packed room with people eager for some meat. (Lots of notepads and pens poised).

I know I run negative, but wouldn't they have been better served to engage the audience? How about starting with a question: "Has anyone heard of BandTel? Can you tell me what you have heard?  Really. Well, that is somewhat roight but here's the rest of that story. ....  " Then one minute later: "Do you know where our sweet spot is to our resellers?"

There were four carriers up there. Not one talked about productivity, benefits, sweet spot, differentiation, or interoperability.

Productivity: If you are a Broadsoft based ITSP, your SIP trunk allows you to provide Broadsoft Anywhere and API-based software to your customer as a SIP overlay on the trunk. That is a huge deal.  It adds much value to a what a PRI can do for the customer PLUS it extends the life of the PBX while adding missing features as an overlay.

Benefits: the advantage of SIP and SIP endpoints like a softphone. A SIP trunk can extend the PBX to remote sites.

Differentiation: I'm not sure anyone in telecom with a VP of Marketing title understands that term or knows who Jack Trout is. (Trout and Al Reis wrote the book on Positioning in 1981).

Interoperability: PRI is a time tested standard and SIPconnect (SIP Trunk) is just a SIP Forum recommendation for a specification that contains numerous RFC's. This allows for various interpretations of the configuration. The IP-PBX interface must be checked for interoperability with the carrier's switch. Not every IP-PBX card can work with every SIP trunk unfortunately. There is also the necessity for high-quality Internet access for the SIP trunk to work reliably.

One other issue I have is that it is sold on price. The costs are much lower than PRI. There is still a port needed. there is still an access line needed unless it is all over going to be carried over the Internet, in which case, the quality will likely be sketchy. Even the long distance rates are cheaper, even though the costs to th ecarrier aren't much different from TDM LD rates.  Go figure.

The revenue side is mentioned because PRI is TDM and can fetch higher revenue than anything with IP in its name. IP means cheap, which means less revenue. Less top revenue for the service providers books, less ARPU, and less commissions for agent or sales guy selling SIP Trunking. All with the extra headaches of inter-op.

"Nearly one-third of VARs (value added resellers like Cisco certified IT shops) are planning to grow their businesses in excess of 15 percent in 2009", according to CRN.

The most interesting quote was not about the importance of Managing Cash Flow or How Goal # 1 is Finding new busines, it was this quote:

"When we asked them to rank what is most critical, they said "finding new business." Note the word "finding" because these are not organizations waiting around for Microsoft or HP to send them sales leads. Growth-oriented VARs in a down economy go out and find new customers."

Good agencies have a Lead Generation system in place. But one thing Agents ask for from their vendors (carriers) is Lead Gen.

The other point was keeping "up with changing technologies. With growth VARs, this doesn't mean perusing a vendor's latest offering -- it means they are in front of customers with Oracle's new $750 express database application before the local rep checks in to see if the marketing materials have arrived."

Johnny Hustle, like never before

More Broadband Stimulus Bill (and here at TMC) info from Stephen Ronan on the CyberTelecom listserv.  (probably in response to the volume of comments from Tom Keatings blog!)

Can anyone provide a pointer to the bill at issue?

• text of bill
• House Draft Report

The summary of the principal broadband provisions below:

1) $2.825 billion for loans, loan guarantees and grants to be administered by the USDA's Rural Utilities Service Distance Learning, Tele-medicine and Broadband Program. .... Those funds are for "open access broadband infrastructure in any area of the United States." However at least 75 percent of the area to be served by each funded project must be in "a rural area without sufficient access to high speed broadband service to facilitate rural economic development, as determined by the Secretary of Agriculture." ... Priority is given to projects "that provide service to the most rural residents that do not have access to broadband service" and to project applications from (or including) borrowers or former borrowers under Title II of the Rural Electrification Act. .... 50% percent of the funds are to be awarded not later than 9/30/2009 .... "No area of a project funded" by these funds may also "receive funding to provide broadband service under the Broadband Deployment Grant Program" (see below).

In addition to that USDA program:

2) $2.825 billion for "Wireless and Broadband Deployment Grant Programs" to be administered by the National Telecommunications and Information Administration (in the Dep't of Commerce), of which $1 billion shall be for Wireless Deployment Grants and $1.825 billion for Broadband Deployment Grants (though NTIA would be able to transfer up to 20% of the funds from either program to the other). The grants are intended for "the non-recurring costs associated with the deployment of broadband infrastructure in rural, suburban, and urban areas..." ... Of the $1 billion for Wireless Deployment grants, NTIA is instructed "to the extent possible" to provide 25 percent for wireless VOICE service and 75 percent for "advanced wireless broadband service" (3 megabit per second down by 1 megabit up) to under-served areas. ... And of the $1.825 billion for (presumably non-wireless) broadband, 25% are to be awarded for provision of "BASIC broadband service" (5 megabits per second downstream by 1 megabit upstream) to underserved areas and 75% for ADVANCED broadband service (45 megabits per second downstream by 15 megabits up). .... Services are to be provided on an "open access basis" (that's to be defined by the FCC within 45 days of enactment) and adhere to the FCC's 8/5/05 statement on net neutrality (05-151)

"Factors in grant award decisions by the NTIA will include public safety; state reports on priorities; increases in affordability and subscribership; service enhancement for health care delivery, education, or children; enhancement of computer ownership and computer literacy; and state or local matching funds."

States are required to provide up front to NTIA a report indicating which geographic areas of the State should be considered to have the greatest priority for service (can't represent in aggregate more than 20% of the population or geographic area).

VoIP originally was sold as the answer to the next wave of cost savings for consumers and especially for small business. Business phone lines have always cost more than residential lines because, in theory, businesses use the phone line more often. (I guess, if you have 2 teenagers then that equals 1 small business).

Now that businesses are looking for ways to cut costs, analysts are predicting a rise in VoIP sales. Maybe. Define VoIP.  Hosted PBX certainly offers an attractive ROI, but to take full advantage of it, there is an upfront CAPEX (capital expenditure) that includes: IP Phones, cabling, POE switch, and some form of IAD or QOS Router like an Edgewater.   A lease could alleviate some of this, but Voxilla agrees with me on the CAPEX question.

If we are talking about the myriad apps that offer VoIP on the cell phone, I have to ask, why? These apps don't work on every handset. These apps either use up minutes (on callbacks) or data. It seems that it would be cheaper to bulk up the minutes than go through the trouble. But Gary Kim writes that the small business segment will move mainly to cellular IF the iPhone can become like the desk phone. I guess people like to ask, "Huh? What? you cut out there." Or more likely they aren't paying attention any way so don't care about call quality, dropped calls, or dead batteries.

VoIP mainly makes sense when there is a lot of inter-branch calling. Or when there is a virtual office, tele-workers, or other location varied need.

While SIP Trunking is the new buzz word, it is sold primarily as a PRI replacement, which makes no sense to me.  TDM and PRI are tried and true. You might save 10%, but so what? SIP Trunking isn't a standard so it may or may not work with your PBX IP card, depending on carrier and implementation. And how much cheaper do you think long distance will be on a SIP Trunk versus a PRI?

If the SIP Trunk is a means to extend the life of a IP-PBX as well as add SIP overlay features, that would be a better offer, but that isn't the "I'll save you 10%" deal that most folks tout. 

Overall, cellular will probably win for the mobility.

There has been a deep discussion that started on Tom Keating's blog about the Broadband Bail-out plan (known in various circles as a Bell hand-out, Stimulus package, Information Highway Infrastructure Development Funding).

Attorney Jim Baller has more on the House Stimulus Bill:

• $2.825B for USDA RUS, mostly for rural open access broadband grants, 50% to be awarded no later than Sept. 30, 2009;
• $2.825B to NTIA, including $1B for Wireless Deployment Grants and $1.825B for Broadband Deployment Grants for the deployment of basic broadband service or advanced broadband service;
• $350M to fund state broadband tracking initiatives; NTIA to develop and maintain broadband inventory map of U.S.;
• $1.85B for wireline to be split 75% for advanced broadband in underserved areas and 25% for basic broadband in unserved areas
• $1B for wireless to be split 75% for advanced broadband in underserved areas and 25% for basic wireless in unserved areas

definitions

• "Advanced broadband service"=45Mbps/15Mbps;
"advanced wireless broadband service" = 3Mbps/1Mbps;
• "basic broadband service" = 5Mbps/1Mbps
• FCC to define "unserved" and "underserved"
• Recipients must provide "open access" (except for providers of basic wireless broadband);
• bill also lists numerous preferences (text of bill)(House Report)

Coverage and reactions:

• Wall Street Journal: "So much for the broad- band tax breaks" 
• Declan McCullough: "Democrats sneak net neutrality rules into 'stimulus' bill" 
• BroadbandCensus
• Telephony Online
• Broadband Reports
• Ars Technica
• Exchange

NATIONAL BROADBAND STRATEGY "President-elect Barack Obama may want broadband for all, but it's not going to happen just with the $800 billion economic stimulus plan being debated in Congress right now...the economic stimulus package is meant to address very short-term goals, and should not be read as including provisions for addressing the long-term goal of universal broadband." [exchange mag]

BTW, a Draft UK government plan "will guarantee broadband coverage with minimum download speeds of 2 MB per second to every household that wants it." [Inquirer]

Yesterday Nortel filed bankruptcy. I'm guessing it was a pre-packaged deal because of the way it went down. Seeking Alpha implies that the BK was due to a lack of urgency to turn the company around. Three CEO's that just didn't catch up to Cisco.

Then this morning DSL Reports is discussing how Charter is preparing to file for BK as well.

At Christmas, we saw Level3 escape the BK plunge, when the stock hit a low of $0.57 before jumping back up to $1.60 after the S&P release. Now hoovering at $1.

Many pundits and pols are pushing the National Broadband Strategy to stimulate the economy. Let's look at the effects of Broadband on the Economy:

First, there is the Lake County Florida case: "Our econometric model shows that Lake County has experienced approximately 100% greater growth in economic activity - a doubling - relative to comparable Florida counties since making its municipal broadband network generally available to businesses and municipal institutions in the county. ... The Bureau of Economic Advisors estimates that for each $1 invested in broadband, the economy benefits nearly $3."

In another report, Measuring Broadbandʼs Economic Impact - Final Report Prepared for the U.S. Department of Commerce, Economic Development Administration, "The results support the view that broadband access does enhance economic growth and performance, and that the assumed economic impacts of broadband are real and measurable. We find that between 1998 and 2002, communities in which mass-market broadband was available by December 1999 experienced more rapid growth in employment, the number of businesses overall, and businesses in IT-intensive sectors, relative to comparable communities without broadband at that time."

The latest study I could find was published in 2007: The Effects of Broadband Deployment on Output and Employment: A Cross-sectional Analysis of U.S. Data by Brookings Institute. The results include the following: "for every one percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2 to 0.3 percent per year. For the entire U.S. private non-farm economy, this suggests an increase of about 300,000 jobs, assuming the economy is not already at "full employment" ... Because broadband is an important basic infrastructure that is expected to produce spillover ... they estimated that Internet business solutions will add 0.43 percentage points to future productivity growth through 2011 ... We find that non-farm private employment and employment in several industries is positively associated with broadband use." That says a lot: You want to Stimulate productivity and job growth? Deploy More Broadband!

The problem that Brookings sees is that "States have few policy levers that affect the overall demand for broadband. However, given that the demand for broadband is price elastic, the most effective policies are likely to be those that contribute to lower prices. The surest route to lower prices is provided by increasing competition in the delivery of broadband services." This is the exact opposite of the recent FCC decisions - whether it was in TRRO, Forbearance actions, or radio spectrum, the FCC has continually coddled the Duopoly at the expense of competition, innovation, and the Digital Divide. What has this cost us in terms of Productivity, Jobs, and Economic Growth?

There was a study just in the state of California: A rising tide: Measuring the economic effects of broadband use across California. "This research estimates the economic effects of broadband use across 39 California counties between 2001 and 2006. The surveys were conducted in California counties twice each year from 2001 to 2006. Estimates from panel regression analysis demonstrate that increased broadband use within California has had a positive and significant effect on growth in employment and total payroll. [The report is priced at $31.50 and can be purchased at Science Direct]. The conclusion was: "The
results show that the broadband share and the migration from dial-up to broadband each have a positive and statistically significant effect on growth in employment and total payroll, inclusive of county fixed effects."