On Rad's Radar? - fiber Archives

Zayo Buys AboveNet

2012-03-19T15:31:01Z

It was a big surprise this morning to hear that Zayo bought AboveNet for $2.2B. My first thought was "Where did Zayo get the money?" I mean, the Dealbook writes, "As of Dec. 31, Zayo had about $25.9 million in cash and short-term investments, along with $682.7 million in long-term debt. It currently has a credit rating of B2." Apparently, Zayo backers and bankers went into their reserves to buy AboveNet. I guess the heady days of Bain LBO is back, thanks Mitt! (LBO is leveraged buy out).

AboveNet was one of the few fiber shops that had its act together. They know where their fiber is. They can quote it fast. They can deliver on what's quoted. And they knew their sweet spot. Except for US Carrier and FiberLight, no other fiber CLEC's that I have dealt with can say that. (I'm waiting over 6 weeks for quotes and maps from IFN and L3.)

This will be Zayo's 21st acquisition. I hope the integration goes well, because in the past Zayo has had issues with their knowledge of fiber assets. It has improved. Google earth!!

Zayo doesn't sell via the Channel - direct sales only. Via email from Dan Caruso, when asked about the Channel this morning, "I am sure we will be supportive of efforts Abovenet has underway."

Rob Powell likes this deal, even at 9.2x projected 2012 EBITDA. I think scale for scales sake is the problem with telecom. Mounting debt combined with shrinking prices does not make for a healthy business. Zayo and Level3 are buying up a lot of the competition, but that hasn't really increased pricing because Cogent and resellers are still there dropping their pants to win any revenue. And the ILECs are in a price war with the cablecos.

I mainly sell transit and transport. Fiber companies are my bread and butter. It is certainly easier to just check a single fiber map, as opposed to a number of them. Here's hoping for a smooth integration.

DEBT

The debt in this industry is crazy. AT&T and VZ combined have $105 Billion in debt. The top 5 MSO's have about $100B with Comcast at $40B. Level3 is at $8.5B. WIND has $9B. CenturyLink has $22B. When you are paying 7.75% on those notes, that's big bucks! Zayo already had $682.7 million in long-term debt; now it will have about $2.9 Billion in debt on approximately $900 million in annual revenue.

I still think that taking Cogent out would be a good move for L3 or someone. You get fiber, revenue, lit buildings and take the low priced carrier out of the market. It did take almost a year for AboveNet's investors to sell, so maybe in 3Q or 4Q. Most buyers - L3, CTL, WIND - have already bought something and are still refinancing debt as well as integrating what they bought.

For the Channel, this mounting debt is scary. Why? Because the CFO looks at the line item for commissions that grows every quarter. He wonders why he has to keep paying it, The CFO thinks, "If I wipe that line item out, our books look great." That's the scary part.

EarthLink's Sweet Spot

2012-03-14T19:53:22Z

I learned a few things at the EarthLink training today in Tampa. EarthLink has 175K business customers and about 3 Million consumers, most of them dial-up customers, providing $20M in free cash flow per month. So of the $1.3B in annual revenue, about $500M is dial-up. ELNK has 4 data centers - Columbia, SC; Rochester, NY; Marlborough, MA; and 55 Marietta.)

The first (or 70+ slides) shows that Pipe is the foundation for Managed Security and other services. However, despite having 28,000 miles of fiber, they don't want to sell transport on it. Even On-Net gets the response that "This is not our sweet spot".

What is the Sweet Spot? As I wrote here, Multi-Location Multi-Access type across LEC's or cablecos.

The partner portal is in development. The customer portal, called myLink, seems cool they way that you can drill done on customer locations in Google Earth and open a trouble ticket.

Agents in the room, called T1 Slingers, asked about DSL, since EarthLink resells ADSL out of 10K end offices through 12 providers. As a resell service, a 1FB is required. And since neither RBOC is really supporting their copper plant and especially not DSL, it leaves the business DSL customer hanging for days when there is an outage. [See my post about Is DSL Done?] 3G/4G wireless backup is my answer for that. There are cool routers that even do it automatically.

The other question centered around T1. "You just are not going to make a living slinging T1's at $400 any more." PRI's are available east of the Mississippi still, which actually IS an advantage for ELNK. TDM PRI's are still the preferred reliable way to deliver voice to a PBX, especially with alarms, faxes, and elevators.

It was an hour on MPLS. I still find it amazing that almost 9 years after my first MPLS class, we are still presenting the Fundamentals of MPLS. For Agents, it will be about layering on services to the MPLS network. The sticky stuff is value added services.

Retail needs a voice line, some Internet, credit card processing, payroll and data backup. That should actually be a bundle that someone offers. ELNK has the old New Edge AX platform that connects payroll and cc processing to the MPLS Network. Add on a VoIP line and some data backup and there's a bundle. Want to make it stickier? Add network DVR to the service so that those IP surveillance cameras can be viewed from anywhere (and can't be erased locally). Bingo! (Do you have an opening in Product Management? My resume is here.)

The team mentioned POS, Inventory, HR and Loyalty programs. Do you have those on the AX platform? Those would make some excellent sticky add-ons.

"So we have an Internet T1 service that connects you securely to one of 4 data centers, Mr. Prospect. Do you currently have a payroll service? Are you looking to upgrade your POS? Are you worried about security on your credit card data (PCI compliance)?"

That's where the conversation has to go. Even though the customers just want the access - as cheap as possible - Agents will have to steer the conversation to: applications on top of that access (AOTTA).

So back to MPLS with Type II access. Ethernet is delivered over a Type II DS3 from the LEC. T1 is delivered over the ILEC copper pair. DSL is a resell of the ILEC product offering. Then for outliers to attach to the MPLS network, there is an IPSec GRE tunnel with BYOB (bring your own broadband). Blended Access.

EarthLink is a Sprint MVNO, but it is more for 3G access where there isn't DSL to attached to the MPLS. Also, for the MPLS customers that want to have one bill that included cellular.

Something else I learned: ELNK bought STS because Rolla knew the Mark Amarant, CEO of STS, and STS had a reputation for best practices in on-boarding customers in the Hosted PBX realm. That's smart, because Hosted PBX (like VDI, another product that ELNK is rolling out), requires a detailed on-boarding process from pre-sales through post-sale, including mapping extensions to desktops, extension attributes, handset type, employee training and some on-site installation. EarthLink is not selling Hosted PBX as a stand-alone. You have to buy access from ELNK.

So in summary word of the day: "Blended Access".

Key association: Multi-location multi-access MPLS.

A Brief View of Integra Telecom

2012-02-21T18:51:16Z

I interviewed Integra in Austin last year. Like quite a few interviews I do, I just can't find the time to write up the blog. It may seem like I do this blogging thing full time, but my bills still get paid doing consulting to ISP-CLEC-VOIP-MSO companies and being a telecom agent. It makes for a lot of juggling and long hours.

Integra Telecom is a CLEC in 11 Western states, including: Arizona, California, Colorado, Idaho, Minnesota, Montana, Nevada, North Dakota, Oregon, Utah and Washington - bringing in about $700M in revenue, in part due to the acquisition of Electric Lightwave and Escheleon Telecom. The parts I like are the 5,000-mile long-haul fiber network and the 3,000-mile metro network that feeds about 1,900 buildings. Now with Kevin O'Hara as CEO, Integra is re-branding itself as a "fiber-based, business-grade networking, communications and cloud solutions provider." That's right: from CLEC to Cloud provider.

Integra Telecom is going the UC&C route by "providing network-wide availability of hosted Microsoft Communication Services, which includes Microsoft Exchange, Microsoft Outlook 2010, Microsoft Lync, Microsoft SharePoint, enhanced encryption and other valuable features," according to the pr.

At ITEXPO West in 2011, they "introduced a cloud security services suite of managed, networked-based security products for companies that rely on the Internet for their business and need to protect their network from unauthorized and malicious access and content. The first available product is Cloud Firewall Service, a network-based unified threat prevention service that provides secure inbound and outbound Internet access without the need for on-premise equipment or additional staff," according to the pr. That service keeps them in the hunt with Netwolves, EarthLink and others who have rolled out a managed firewall service. Security is supposed to be the buzz word this year. We'll see.

To me, it's all about On-Net. Whether I am talking about EarthLink or Integra or WIND or XO or TWT or L3, it is all about LIT Buildings! Why? You already spent the capital to put fiber there, so get deep into that building. Then layer on services. Big pipes will need security since everyone is getting hacked.

Did I mention that Integra Telecom is channel friendly? (Though they haven't joined TCA yet.

Has Verizon Stopped Repairing Copper?

2012-02-17T21:08:18Z

Over and over, I am hearing that Verizon has given up on copper. From repair issues to DSL to stripping copper out when FiOS is installed, the story seems to point to VZ looking to forget its copper plant.

in a discussion on LinkedIn about SLA's, one agent had this to say, "The absolute WORST cases I have seen have all been in the northeast where Verizon's copper is concerned. Verizon seems to have made the decision to put all efforts and funds behind their fiber build out (a good thing) but have completely sacrificed the quality behind their copper services such as T1. If your copper T1 goes down in New York, you might has well throw your hands up in prayer, because that's the only thing that will get it fixed."

Another commenter wrote, "Verizon in some places is actively ripping up copper as they lay fiber because they are not required to resell fiber to CLECs and ISPs at wholesale rates." This has been widely reported, because VZ doesn't want the expense of running to networks - copper and fiber. Plus the fiber doesn't have to be shared and the copper does. The copper means competition. Fiber means they just have to worry about cablecos, who quite frankly are kicking their butt.

Wholesale used to be a healthy business for ILEC's. Today, neither cablecos nor ILEC's want to wholesale anything. In fact, clients of mine in VZ regions have a lot of issues.

For example, "We had an outage about 3 weeks ago that lasted more than three days. This also affected [another local ISP] as I spoke him last night about the current outage. We [both have] a bunch [of customers still] out of service as well. They have been out of service since Monday. The last outage caused an exodus of customers and this one will do the same. Our guys have put in tickets, called to escalate many times. .... no one at VZ will listen. Ever. They simply close the tickets that we open."

It's a systemic problem - widespread - from the C-Suite down - the story has been that every company -- even wholesale customers - are the enemy and the Union and on-union workers must do everything they can to make it uncomfortable unless you are a direct VZ customer.

We have the case of a BK CLEC who had recorded conversations with VZ employees soliciting a customer who was down saying that it wouldn't happen if they were with VZ. [This has been a problem with both RBOC's since I got into telecom in 1999.]

Verizon faces up to $400,000 in fines after New York's Public Service Commission accused the company of not making service repairs in a timely fashion.

What do you do when the RBOC doesn't want to wholesale, doesn't want to repair, and just looks at the bottom line and the few metrics that Wall Street analysts can understand??

Many states don't even regulate the ILEC any more, so what do they do? It becomes the job of the FTC, the FCC and the court system. Talk about a deck stacked against the customer!

When our underlying telecommunications structure suffers, so too does our economic growth.

here's 2 problems with a fiber only strategy for an ILEC:

One, fiber goes out with power, so no 911 or dial-tone when the lights go out.

Two, the installation period for fiber is wicked long. Copper can be installed within two weeks. Fiber takes months. That hurts businesses. I have one moving in 3 weeks and to get 20MB of bandwidth he has to wait months. That won't work.

Ever think that just nothing in this country makes sense any more?

In the discussion about SLA's, the conclusion is to convince your clients to buy redundancy: 2 pipes. That's nice in theory but not in reality. The thing is that you have to set the expectation that if Internet or VoIP is integral to their business operations, no SLA is going to save them, redundancy and business continuity planning will. Otherwise, an outage will be a disaster that they have not planned for. It is not IF, it is WHEN.

L3 Sells Coal Mine

2011-11-28T17:50:43Z

Not many people knew that Level3 owned a coal mining operation. It was sold off last week. I do not know if L3 still owns the software integration business. (I can't find any indications in the earnings reports.)

According to the earnings, it looks like L3 is bringing less than $4B in revenue at $927M in 3Q2011 and $913M in 2Q2011. L3 closed its acquisition of Global Crossing on October 4, 2011. L3 refinanced approximately $1.36 Billion of GC debt. GC also had notes for $430M, $750M and $150M (at 9% and 12%). It was a $3B transaction that was supposed to have just $1.1B in debt attached. Looks like more. VentureBeat wrote, "Both companies are losing money. Level 3 lost $622 million last year and has been unprofitable since 1998. Global Crossing lost $172 million in 2010 and last turned an annual profit in 2003."

Most of the L3 revenue is wholesale business like being the back office for most of the VoIP Providers out there - directly and indirectly through resellers. L3 says that very little - maybe 1% of total revenue - comes in from the Channel, which is likely since, again, most of the revenue is in wholesale, which the channel doesn't sell. L3 is hoping the channel will sell some CDN, Vyvx Broadcast and website optimization services. Meanwhile, also selling big bandwidth, transport and voice.

By its own numbers, L3 should be doing better. It has 27,000 metro route miles with 100K enterprise buildings within 500 feet of its fiber. It has over 200 data center facilities with over 2 million square feet of space. It has a unique video broadcast platform and optimization services (Vyvx, CDN and similar offerings). Combined it should be doing more revenue, but some of it is commoditization and price pressure. Some of it is the reputation it garnered during the last round of acquisition integration. L3 is certainly a good alternative to the RBOC's, when it has fiber in the area.

So Who is Going to Buy XO?

2011-11-03T18:11:22Z

I got asked this question again today: Who is going to buy XO? I think we can almost all agree that Carl Icahn would like to sell his company.

XO had 2010 revenue of $1.5 billion, only $8 million more than 2009. So that's flat. XO just laid off 400 employees - probably to make the numbers look better.

Who would buy them?

WIND just received approval to acquire PAETEC, so that takes 2 names out of the running.

Level3 didn't win Paetec and just grabbed Global Crossing, but I could see L3 making a pitch to Icahn, because it would be revenue for L3 and a good portion of it is VoIP revenue. However, integration would be a flashback to the 2006-2008 era. Plus while revenue is up for L3 this past quarter, losses also increased. OUCH! [Plus as I have mentioned before L3 needs to take Cogent off the table, since that is their main competitor in the IP space.]

CenturyLink just swallowed Qwest and Savvis. That plate is full, plus I think focus at C-Link is Cloud not TDM/network.

EarthLink has just purchased 3 MSP's, following more in the PAETEC play book than any other. EarthLink acquired IT Solution Center and Hosted Application Business from Synergy Global Solutions. ELNK has completed the acquisition of xDefenders, a managed IT security company based in Rochester, NY, to "Enhances National Managed Services Provider Strategy". And ELNK "completed its acquisition of Business Vitals, a national provider of managed information technology (IT), security and professional services based in Columbia, South Carolina." They also bought LogicalSolutions.net. That's 4 quickies on the heels of STS Telecom, Deltacom and ONE Comm. Just it looks like the play book centers around MSLEC, the strategy that MegaPath re-branded under. Do they have room in the fold for XO? Probably. And ELNK has an easy time getting credit.

[BTW, have you seen the new ELNK website? It looks great! Seems like wordpress with its clean template design. It includes video testimonial!]

Zayo just surprised many folks by buying 360. I thought it would be the other way around, but I'm wrong often. (Well at least 20% of the time according to Dane!) Is there enough VC dough to get XO? (Or will I have that reversed as well?)

Broadview Networks, TelePacific, Broadvox and Integra aren't candidates, but who knows what private equity money is thinking.

Frontier and Fairport have not moved to cloud yet. They both have indigestion from eating up Verizon assets. Maybe one of them will pop some TUMS and give Icahn a bid.

Cox and Comcast - do the cable guys want to buy some VoIP and fiber?

Some outliers:

I remember being surprised when Host.Net bought WV Fiber, so it could happen again. Not likely with its strict focus on data center and cloud services.

A foreign company looking for network - like Tinet, Telefonica, Tata, Reliance (which bought Yipes in 2007), Orange telecom. I would have listed T-Systems, but with DT still wondering what is happening with T-Mobile, that seems unlikely - or if AT&T pays T-Mobile its break-up fee of $3-6 billion, they could buy XO with that!

360, OpenRange and Hosting.com

2011-10-11T13:10:10Z

It looks like Zayo Group is going to buy 360 Networks. Back in May, Zayo and 360 entered into a long-term dark fiber deal that must have set off talks of an acquisition. (It explains why 360 was too busy to keynote this week.) Zayo, backed by M/C Ventures, reported sales of $77.8 million and a profit of $11 million in 4Q11. Instead of being acquired, Zayo is grabbing its 17th sale.

Hosting.com acquired Neospire, a Dallas based mission critical, managed hosting provider. It adds higher margin services to its portfolio.

OpenRange went bankrupt, Gary Kim reports. GigaOm's Stacey has been reporting on OpenRange since 2008 when they filed an application for a broadband stimulus grant. Now they leave the taxpayers hanging. The numbers look kind of bleak. A few of these broadband stimulus winners will turn sour. It's bound to happen because of many factors: the cost of accounting and reporting the grant is huge. It's been almost 3 years since the application and the landscape in telecom has changed a lot. In fact, some LEC's and cablecos used the apps to find underserved areas to serve before the app winner even got his first dollar. Then there is the whole "Bit off more than I could chew" effect as well.

We are going to see a lot more M&A and a lot more BK in the next 24 months. No shock and awe, just an industry that is chewing itself to pieces for short term gains and too much long term uncertainty. CFO's can only perform magic until they blink.

MVNO and Name Changes

2011-10-03T18:35:12Z

Here at COMPTEL there have been some announcements. The big one is that Sprint has signed up two new MVNO's - XO and Easton Telecom. Easton Telecom is a reseller CLEC that has contracts with 100+ carriers (according to its PR). The interesting move comes from XO whose interim CEO inked an MVNO deal with Sprint. The email I received this morning had the headline: Will We Get the iPhone? Quick answer: not any time soon. MVNO means hadnset fulfillment from a third party like Telispire.

At the same time, Sprint is re-announcing its integration with Broadsoft, which it has been touting since last February. From experience, maybe they just now released some marketing collateral on it.

In the name chjange game, Covad has been re-named Megapath Wholesale.

Intellifiber is re-launching as Intellifiber, a PAETEC fiber services company. Intellifiber was a CavTel asset when Paetec bought them.

A Couple of M&A Items

2011-09-09T15:48:25Z

It seems that Apple put in a bid for Dropbox for $800M (for $100M in revenue). But Dropbox decided to get another round of funds and think IPO instead. [BusinessInsider]

Cablevision will resell Sprint wireless service through its Optimum Business unit. Quad play for SMB.

WAN optimization is buzzing. That will be the next "big thing" companies will be begging the Channel to sell.

Ntelos spun off its wireline business, including the Fibertech asset it bought, into a new company called Lumos Networks. This is the same thing that Alltel and Sprint did. For sale?

Broadsoft decided to shore up its BroadCloud service by buying iLinc in an all-cash deal. (No figures found yet.) This deal means that the web conferencing and collaboration piece of BroadCloud will be an in-house offering instead of a third-party resale or add-on. This is an attempt by Broadsoft to get beyond just trunking and seat licensing. Add-on sales is where the gravy is. Otherwise Broadsoft customers would be incorporating other options like Microsoft, Citrix or Cisco (Linc, GoToMeeting, Webex).

And one last plug for the CMO SUmmit next Tuesday at ITEXPO with this link: CMO's To Increase Spending On Social Media But Integration Still Lacking

Are They Reading from the Same Playbook?

2011-08-01T15:17:52Z

Are Windstream and CenturyLink reading from the same script?

CenturyTel built up a wireline base from Embarq, Verizon (2001-2002), and Madison River. In 2003 to 2005, C-Tel bought fiber networks - Digital Teleport (which became LightCore), MFON and KMC. Then in 2010 announced it was buying Qwest - federal government contracts, fiber, international, data centers and more wireline. Then it went Cloud by buying Savvis. This creates an $18B telco with 190K route-mile fiber network and only 45K employees. (Oh, the layoffs!)

At the same time, Windstream has a colorful history. In 2005, Alltel spun off its wireline business (from its cellular assets) to form Windstream. It was a combination of Alltel and VALOR. VALOR Telecom being an Alltel company formed from GTE assets that Alltel purchased in 2002 in the wake of GTE and Bell Atlantic merging to become Verizon. In 2007, Windstream bought a rural ILEC called CTC in NC. Then it bought Lexcom and D&E in 2009. 2010 was a banner year with Windstream buying Iowa Telecom (ILEC), Nuvox (CLEC), KDL (fiber), and Hosted Solutions (cloud). Today, WIND bought PAETEC, a collage of VAR, Energy, Hardware, fiber, telco and CLEC.

Both ILEC's bought Cloud companies.
Both bought CLEC's with a big Channel presence.
Both grabbed fiber assets.
Both (plus Fairpoint, Frontier) acquired GTE or VZ wireline assets.
Both think that national business accounts, especially federal government, will be the growth stage since the ILEC wireline division is the diminishing asset.

In a lot of ways, EarthLink is similar to both these companies. Riding out its cash cow of dial-up, which is a diminishing asset, it bought STS, New Edge Networks, ITC Deltacom and ONE Comm. Hosted/Cloud, CLEC and fiber. That must be the new playbook.

If Frontier and Fairpoint did have problems with their Verizon purchases, they might be following the same playbook. Maybe they will.

A Strange Way to Start Monday

2011-08-01T13:23:14Z

The party might be over at the PAETEC, as they announced today an $891M stock only sale to WINDSTREAM. USLEC, AllWorx, CavTel, McLeodUSA, Quagga, Xeta, US Energy Partners - all acquired by PAETEC to create a billion dollar CLEC. As if hitting the billion dollar mark was meaningful. Intermedia was the first billion dollar CLEC and HAD to sell itslef to MCI, as short-term debt became due. ($1B in rev; $3B in debt.)

It shouldn't be about the revenue number. It should be about the Strategy, Execution and margin.

I remember when Paetec bought Allworx. My reaction was that running a public company was a different ball game from running a private one. I wondered even then what the strategy was. I still don't know.

All that unused fiber (from MacLeodUSA and CavTel). The owners of the VAR's - of Quagga, XETA and USEP - who now have to feel slighted - are probably asking themselves the same thing that I am: WTH???

But if you look at the acquisitions being all over the map - and that Arunas was in India recently, where he was rumored to be trying to sell to Tata - then you have to figure the runway ran out on Wall Street for Paetec. By that I mean that organic growth just was not happening.

With everything that is going on in the economy and our industry, sustaining growth is almost impossible. Revenues can not go up when prices are dropping. (This is why the cellcos are going metered -- it's the only way to bring in much needed revenue in a flat market.)

In the Channel, Master Agents are buying VAR's. Why? To get to a vertical, to add a sales force, to grow - at a time when the traditional channel is stalling. Agents can't really make a living selling just $380 T1's. And the quotas keep going up, while prices either decline or remain flat. Broadband, wireline, cellular, TV - it's all flat markets.

Internet bandwidth is growing.
Replacing WAN's with MPLS is an option, especially for that Converged Network effect.(But it's replacement rev.)
SIP Trunking is just replacing PRI's (at a lower rate).
Regular flavored VoIP is replacing POTS.
Hosted PBX is coming out of the gate to replace PRI+PBX.
Hosted UC and Cloud - when we figure it out.

There hasn't been much innovation in telecommunications. VDSL2 was probably the last of it. The only broadband growth is in the rural market with some form of FTTx and Fixed Wireless. M&A is the only avenue - or watch your stock tumble and your ability to get credit get more expensive.

Why Paetec and not XO for Windstream? Two reasons. It takes one of Windstream's competitors out of the market and Icahn would want cash for XO, not all stock like this deal. Windstream gets the $1.4B in Paetec debt to re-fi. If you read this blog post, it's all about the Street.

They will have over 100,000 route miles of fiber that will still be under-utilized. There will be massive layoffs. The integration will be a challenge. And the Channel? No one knows, but both companies had an Agent appreciated Channel, so we will see.

This is a rather large CLEC-ILEC deal, but the Nuvox-Windstream deal went pretty smoothly. WIND has come a long way from combining with Valor when the wireline was spun out of Alltel in 2006.

Ethernet is Spreading

2011-07-18T15:59:55Z

So many notices this week about Ethernet. It's the preferred protocol for most businesses. (No one wants to buy a DS3 card and configure it, I guess). Ethernet is becoming more and more available as the delivery protocol for Internet bandwidth, MPLS, IP/VPN, and Private Line.

The M&A targets are all fiber guys like FiberLight, AboveNet, Zayo, Sidera, Fibertower, Fibertech and XO. All are Ethernet players.

AT&T announced that come August 1st it is almost doubling the Metro Ethernet rates in the 9-state BLS region. What a bonus for customers.

Sprint launched Ethernet access in 25 new markets and expanded offerings in five existing markets. Ethernet is available for MPLS and IP products. Sprint finally leveraging their pin-drop network. [Don't want to play with Sprint directly, TNCI resells Sprint.]

FiberLight released a new IP network architecture based on Ethernet for governemnet and enterprise customers. Juniper and IBM are technology partners in this new IP platform.

In a similar fasion, Comcast and Ciena went on the road to train salespeople on how to sell Comcast Metro E. "Ciena's Carrier Ethernet Service Delivery (CESD) platforms are being deployed by Comcast as customer premise equipment for business services and wireless backhaul."

Media reports that wireless backhaul is a huge market - and it is slowly migrating to Ethernet. I think physics determines that wireless tower backhaul is a finite market - - you can only get so many bits into X amount of spectrum, no matter how many radios you use. So with everyone spouting off about backhaul opportunities, I don't know how many players will actually make a huge dent in revenue from it. I have seen figures that VZW pays less than $1000 per tower backhaul. That would take a lot of towers to move the revenue meter. And let's not forget that it is a competitive market -- RFQ and bidding war anyone? Especially after you told Wall Street how much the backhaul market would bring in. DUH!

In other Ethernet news in July that affects the Channel:

Netwolves announced that they can put multiple Ethernet providers with managed services on 1 invoice. NetWolves has relationships with over 50 different providers that sell Ethernet services. This allows us to find the provider that is best suited to deliver the service for you. We also have the ability to bundle multiple Ethernet providers onto a single bill for your customers.

Also, Airespring uses the lowest cost provider per area to build an inter-connected MPLS network. (Can you say NNI?)

NITEL is another carrier that can help Agents expand their product offering to with nationwide MPLS, Ethernet, dedicated Internet (DIA) and private line services.

EarthLink Business has nationwide MPLS, formerly sold under the New Edge brand. Since adding Deltacom, Ethernet should be available extensively in the Southeast.

All this Ethernet talk makes me think of the numerous Carrier Ethernet Exchanges that have evolved - from TELX and Equinix to Neutral Tandem and CENX. It's a lot of spots popping up to inter-connect using Ethernet. Basically, it's a meet-me-room with carrier ethernet switching gear (usually from Cisco) that allows the exchange of traffic at 100MB or higher. It is a cost-effective way to pay for peering (sort of), as you exchange traffic of HD voice, video, SAAS, mobile data, CDN and tele-presence packets. Carrier Ethernet Exchanges mean Ethernet sales and in many cases collocation sales for agents.

US Signal deploys Cisco ASR 9000 Series for enhanced Carrier Ethernet and a new managed Data Center service. The ASR will allow US Signal, a TCA vendor member, to scale its Ethernet offerings in the Midwest. "US Signal Managed Data Center service is built with dedicated resource pools designed to rapidly provision and host Virtual Private Servers accessible through the upgraded US Signal IP NGN." So we go from Ethernet to Cloud just like that.

Tele-Pacific Buys into Hosted

2011-05-06T19:16:11Z

Tele-Pacific is buying its way into Hosted PBX with its acquisition of Telekenex. TelePacific will gain approximately 1,000 business customers and 122 employees along with the hosted PBX platform. Tele-Pacific will run Telekenex as a separate channel, which is a good thing.

This is a good move for Tele-Pacific as it continues to dominate its region with more services plus another data center. It also gains a nationwide MPLS backbone and a fiber network in the San Francisco-Oakland Bay area.

Some telcos think they have to get into Cloud, so they are buying Savvis, Terremark and data centers. Other telcos realize that cablecos have a leg up on Hosted VoIP services, so they have to consider whether to jump in that pond. Some have, like XO and now Tele-Pacific. Still others, like MegaPath, realize that just selling Layer 2 and Layer 3 won't cut it long term, so they need to look more like an MSP (managed services provider). Tele-Pacific gets a data center, fiber, a Hosted PBX platform, customers and managed services - as well as talent to pull it off.

Since Tele-Pacific is so channel friendly, hopefully agents will get to make money from the new services division.

The Number from Above(Net)

2011-03-16T19:56:30Z

Here is AboveNet CEO Bill LaPerch presenting the business numbers to the channel partners at their private event at the CP Expo in Vegas this week. AboveNet has some interesting numbers:

2400 lit buildings including 450 data centers

1400 customers, most of whom are not wholesale. Dark fiber sales are growing at 8%.

AboveNet's aim is to capture the clients that have big bandwidth needs, like media production houses (like Pixar); content companies; Radiology centers; and the like.

AboveNet is building where the need is. For example, they built out on the Upper East Side in NYC because they didn't have fiber there but there was a need for it along hospital row. An interesting figure is that 85% of CAPEX spending is success based. In other words, CAPEX is spent to improve the customer base, the customer experience and the network for prospective customers. They invested in Europe because of global access needs.

One interesting point is that AboveNet offers a lower latency and more secure route because it is private line designed. It doesn't hit every CO and tandem. The loop generally travels from the customer premise to a data center. That private network design adds security.

AboveNet just opened in Denver without a sales force because, as LaPerch stated, the agent community is strong in Denver and we think that you can sell it for us. AboveNet is Agent focused and driven.

LaPerch ended with this quote, "We'll invest in the customer with you."

My EarthLink Strategy

2011-03-04T14:38:37Z

When I analyze the four CLEC components of the new EarthLink Business, I wonder what Atlanta will do with it.

Deltacom had a huge fiber network (IFN) that essentially went under-utilized. In my experience, many employees did not know about IFN. Assets like lit buildings, collocations, colo gear, and the fiber maps are crucial to revenue generation from those hard cost assets.

Essentially, Deltacom was competing on price in the T1 space. It's two core products - Metro-E off IFN and the MVNO - were not marketed well. It's Channel strategy was bipolar - first terminating agents, then out courting them.

Admittedly, I did not have much experience with ONE Communications. Based in the Northeast, it was a regional CLEC that did not have a strong brand; a market differentiator (like Deltacom's MVNO); or a powerful sales force. After the integration of CTC, Choice One, and Conversant, it was touting almost a billion in revenue, 700 collocations, etc. The purchase price of $370M including paying off the $285M of debt means that $800M in revenue sold for $85M. 160,000 business customers went for $85M, which is an acquisition cost of about $531 each.

When ONE talks about 10,000 miles of IOF fiber, it is talking about inter-office fiber between collocations ordered via a favorable inter-connect agreement with the ILEC. Although this IOF does mean that there is a solid network connecting the 700 colos.

STS Telecom was once a large UNE-P shop. Now it is a Broadsoft based VoIP Provider. This purchase by EarthLink was the quietest. STS is supposed to provide $15M in revenue to ELNK this year. It makes me wonder what the New Edge AX partners like Simple Signal do. STS telecom does provide ELNK with an experienced Hosted PBX team. That is certainly something that can be leveraged across the merged entity.

New Edge Networks does an adequate job of sticking to its knitting of DSL. It was shadowed in the last year by the Megapath deal. In fact, it has been all Megapath news that I have seen in this CLEC sector. NEN seems to be missing the boat on G.SHDSL. For a company that relies on its copper plant access, it seems to be missing the boat on Mid-Band Ethernet as a means to jump the T1 chasm and compete in the business bandwidth war.

New Edge has a good channel strategy with no channel conflict.

Launching the AX platform was a great positioning move. Following the idea of the smartphone apps stores, the AX was a chance for cloud partners to offer services on the New Edge Network in a "private cloud". Much different than the public cloud approach of so many today. It needs to add a number of partners in the data backup/storage space, merchant credit card processing, POS and business applications. I don't mean a connection to Salesforce, but more like practice management software, point-of-sale software, and other applications that are business process requirements for companies.

New Edge has a strong retail presence, showcasing itself as a PCI Compliance expert. It could take this a step further. Taking Skype's idea of partnering with Citrix for conferencing, NEN should partner with Citrix for POS software. Then when the bundle includes POS, merchant card processing, a SIP trunk and video surveillance over the MPLS network, agents can offer a turn-key solution for the retail sector that New Edge Networks already chases.

This integration of 4 CLEC's will be about how well the final entity, EarthLink Business, can leverage its assets: current customers; fiber network; collocation footprint; and channel partners. The back office system integration is another story and will certainly make the rest of this year uncomfortable in many areas: ordering, billing, provisioning, and commissions - while all of it moves to one system.

The future of EarthLink Business depends on whether they come to market with the same old products that ONE and Deltacom struggled to sell or if it develops new product offerings and bundles that will stand out from the CLEC competition. Brand Relevance is the key to the future. PAETEC attempts this with energy and MSP plays. With PAETEC, XO, Megapath, AireSpring, Windstream Business, Broadvox, Level3 and more all clamoring for business, EarthLink needs some unique ideas.

Deltacom hasn't marketed its MVNO play. Moreover, it is a move that Cbeyond was first to market with; now Tele-Pacific is also selling. Yet, it is a start in the business bundle program. The question becomes What next?

Like Cloud, Unified Communications, and Convergence, the CLEC space is filled with me-too offerings. Not just the resellers either. Even the facilities based CLEC's offer the same boring products that they have for years. Calling it a Dynamic T1 or IP-Flex doesn't make it sparkle. At the end of the day it is a T1. And we are near the death of the T1. To the business owner cable broadband speeds are faster and cheaper than T1. Is a T1 even adequate for a business that is moving deeper into cloud apps? And how significant is Internet Access to a business today?

Thousands of collocations when you count Deltacom, New Edge and ONE. That's a large copper footprint for Mid-Band Ethernet to reach a large footprint of businesses (prospects). But what is the Value Proposition?

After spending two days at Enterprise Connect where everyone was shouting UC, Cloud and Collaboration without being able to define it, clarify it or make it concrete in any way, I feel that too often in our industry we forget that we need to stand out - like a Kindle or a Prius - and have a tangible benefit and value to our intended target market. Another example, if your press release is titled Enterprise offering, then you should not be talking about businesses with less than 250 employees. It's confusing.

This is a perfect opportunity for EarthLink as most of the big boys are also integrating acquisition (Windstream, Qwest-CenturyLink, Paetec). It's a chance to be loud and stand out. (By the way, I would love to help you figure it out. I have plenty of ideas how to go-to-market; on bundles; on channel; and on sales strategy. Call my office at 813-963-5884).