Recently in telco Category

It looks like AT&T is heading for a strike. Most people at AT&T I know have already been cross trained (I use that term loosely) to handle union jobs. A wholesale account manager will be heading to Michigan to be a T1 installer. Nice. Glad I don't have any AT&T orders in the system.

Also, it looks like AT&T is keeping its sales meetings quiet. (No logos. No banners.) I guess they are afraid that if the union or press get wind of the mega-bucks parties that they threw in Dallas in January and next month in Miami, that there might be trouble. The 94 Solution Providers that won Champion awards are set to meet at the Diplomat in April.

There has been much discussion about ethics in the channel. How ethical is it for carrier channel managers to poach agents and deals away from master agencies to move them to "preferred" Champions? This has been going on for some time. It doesn't say much about the Integrity of people in the Channel. And if you are a Master Agent who benefits from poaching, it comes around. The only thing anyone at Bell is loyal to is there own pocketbook. When you start slipping -- and they all do -- you will be thrown by the wayside and picked apart -- to help build up the next "preferred" partner.

IBM

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has a study out about how Social networking has co-opted many minutes of traditional talking.

 

People are communicating more things to more people than ever before, and not just by phone anymore. Internet-enabled communication models are gaining audience, attention and market share at the expense of traditional telecommunication providers (Telcos). Can Telcos fight back and find new growth opportunities in this rapidly changing ecosystem? The challenge is not just in understanding the technology, but also the unfolding fundamental shifts in human communication behavior.

Facebook, SMS, twitter, LinkedIn, Ning, YouTube, Ustream, and all the rest of the social media strata are where people are communicating. IM/chat like Skype, Google Talk, Yahoo, and MSN also have taken some minutes out of the system.

If you look at usage of cell phone minutes on the youth, you will see very little talking but lots of texting and web access. (Maybe charging per minute caused that). The primary communication method is social networks not telephony.

Telcos are losing landlines, mainly to cellular replacement. Certainly, cableco bundles have taken some landlines, but studies show that in this economic mess folks choose the mobile phone over a static line. Add in the fact that the next generation doesn't eat up minutes means that long distance revenue will be dipping as well as landline counts.
 

This presents a problem for telcos because the content folks don't want to share the revenue, which in many cases they don't have. Twitter, Facebook and Hulu are all having a challenging time monetizing a rapidly growing platform.

People are communicating in new ways -- and none of these innovations came to you from Ma or Pa Bell. Surprised? I'm not.

CircleID takes a look at America's Broadband Score

"Leonard Waverman, the dean of the Haskayne School of Business at the University of Calgary, describe a measure he developed called the 'Connectivity Scorecard.' It's meant to compare countries on the extent that consumers, businesses and government put communication technology to economically productive use. Even after deducting the untold unproductive hours spent on Facebook and YouTube, the United States comes out on top..."

What's interesting to me is the comments. How no one can find the US Broadband score is funny. (Heard of Google much?) It isn't so much the score as what the score represents.

We have a few problems to fix:

(1) ISP Competition for one. Many places only have one choice for broadband. Many have two - cable or telco. Few have three. It makes download caps and Net Neutrality a hot button that true competition would eliminate. (And please don't give me that 3G is the third rail because guess who owns that - Ma and Pa Bell in the majority just like they own the Internet backbone and the PSTN structure in more than 70% of the country).

(2) A definition of broadband. Is it 256k one way as the FCC has defined it for years? Is it now the new FCC definition of 768k? Or is it 1M x 1M minimum? Or is it 100Mbps? This would certainly help.

(3) Deployment versus Penetration. "When you look at the 2008 ITIF Broadband Rankings report ...the U.S. ranked 15th among industrial nations at a composite score of 10.25. The U.S. is reported to have an average download speed of 4.9 Mbps, which is a far distant behind Japan's 63.6 Mbps. In addition, the report states that the US broadband penetration comes in at 0.57%." [source] Here's the detail: "Composite Score: Each nation's overall score is the sum of its standard deviation score for each of the three indicators: Household penetration or subscribers per household, average download speed in Mbps and price at the lowest monthly cost per Mbps." 

We may have "broadband" deployed in a large swath of America, but the speed is low compared to other countries. Because we are a suburban and rural country, it takes more infrastructure to hit everywhere with broadband, especially very high-speed Internet Access (greater than 3Mbps). And because most places hit are single family homes - we do live in suburban sprawl consisting of McMansions filled with Yuppies and 2.2 kids - it also affects our score at the ITIF.  According to a CWA study, the speed in the US is just over 2Mbps.

(4) Cost! We probably pay more per MB than any other G8 country. We get less speed and pay more for it. That hurts us. Surprisedly, in Wilson NC, the Muni fiber sells 100MB symmetric while TWCable and Embarq just gape at the speed and price. Well, not gape, so much as sue that it's unfair that a city would provide services it refuses to.

So we have cost, penetration, subscriber per household (density), and speed. Can't do much about density, but you can improve speed and cost. Also, there is a Digital Divide in America. Poorer families do not have computers, so do not have a need (or a budget) to buy broadband. It poses a problem that funding broadband for libraries and schools is supposed to throw a rope at. The Pew Report reflects this chasm.

BTW, the Connectivity Scorecard study has been analyzed here and by my favorite snarky blog, TechDirt.

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]

Ten to fifteen years ago, LEC-based networks carried more than 90 percent of voice traffic. Today, that number has dropped to about 40 percent -- and it continues to fall quickly. A similar trend, in smaller numbers, finds users moving to Voice over Internet Protocol (VoIP). And, according to Frost & Sullivan, U.S. mobile phone penetration will practically double in the period spanning 2002 - 2012, from 45.7% to 87.4%. As wireless continues its momentum to become the pervasive technology for communications, Level 3 Communications® is prepared to deliver.

Fairport is trialing out IPTV in a New Hampshire town. As DSLR points out, VZ couldn't (or wouldn't) roll out fiber to the New England tri-state region, but Fairpoint thinks it can. How when Fairpoint got stuck with such huge debt over the deal with VZ that the PUC offices of the 3 states weren't certain that Fairpoint could remain solvent.

Fairpoint doesn't have much choice as TWC has launched digital voice service in region causing POTS line loss for Fairpoint. With the economy, some folks (about 25%) are shutting POTS lines in favor of a cellular only option for voice. This also does not help Fairpoint, Embarq, CenturyTel, and Windstream.

Meanwhile, Jim Crowe, telecom visionary and CEO at Level3, pontificates that the overall industry is healthy at the Colorado Broadband Summit. Just some players are sick.

Let's examine today's telecommunications sales landscape:

Case 1: If the pricing starts discounted at $9000, but ends up being sold at $2700, is there value in Telecom?

Case 2: If Carrier A sells a 1GB Private line for $17K between two lit buildings, how can Carrier B offer the same for $6800? 

Case 3: If BellSouth used to charge a company $680 for their service and now presents a "Winback" offer of $320, what's the deal?

Where's the value? Or is there none and it's just a matter of putting revenue on the books, any revenue?

How do you pay down debt and commissions when you sell underwater?

In Case 3, I just think that the ILEC's have been overcharging us for years (and still do when they can). Their monopoly mindset does not have room in it to fathom Competition.

Savvy customers play carriers against each other. Then they throw a reseller into the mix to really shake it up. Then they get an agent or account exec involved to really stir up a price war. The only one who wins is the customer, temporarily.

It's a race to the bottom.

In the real estate boom, many telecom sales folks left for RE careers. (I don't know how many came back). We are seeing mortgage folks moving into telecom. But how many professional telecom folks have left the industry?

It used to be that if you sold a FastE pipe, it was a good month. But today, you need to sell a couple per week to make a living. Are there that many deals to be had every month?

While price erodes and good sales folks leave, the Industry is training their customers that everything is FREE. From all the VoIP players, widgets, gizmos, to the executives in the ivory towers who just look at quarterly reports.

Interesting report from Strategy Analytics: More folks would switch their triple play provider if they didn't have to waste a day or two waiting for the install.  With that kind of stat, will any of the duopoly companies fix their install process?

People often claim to be satisfied with what they already have. 76% of broadband subscribers in the US suggest they are very or somewhat satisfied with their broadband service. But when they are asked if they would be willing to switch, three in every four say they would do so, depending on the price and performance of an alternative service.

Can't be too satisfied if you would switch.

And really the perception varies greatly. In Tampa Bay, I have used Bright House for broadband for 10 years at home and at the office. Rock solid. Someone on Twitter was complaining today about the Verizon install. In the course of the conversation, she mentioned that she hates BH. Me? I don't want to give Verizon a dime, but I want that one POTS line for my business - which they keep charging me more and more for - almost as if they were forcing me to switch. (If they would stop mailing me something every single day, they could lower my rates!)

I think the surveys are flawed. Or people don't understand what satisfied means.

So on Linkedin, Neal Lachman, asked if the $100 Triple Play was Viable in today's economic molasses. Neal writes:

Bundling voice, video, data services for a higher ARPU was an obvious, great move when broadband services and advanced digital services were first introducded......  However, the market is moving more towards a lower ARPU for the triple play services. This is especially going to play a big role in future operations. The time of high ARPUs is going, and soon it will be history.

I believe operators have to lower their ARPU estimates from 2010 onward, simply because the customer won't be willing to pay as much. Today operators generate $100+ revenue per month on their triple play services. In 2010 and later, they should be happy if they can reach ARPU of $50. One example is the FTTH service in Holland, where people do not even want to pay more than €50 for their triple play bundle.

My thoughts on it are here:

Telcos like AT&T and Verizon are actually losing money on triple-play. Think about the fact that they were getting $35 for a phone line and $35 for DSL (averages for consumers 2 years ago). Now they have to upgrade the network to offer TV, which is the least profitable service. And do that for $30.

Install and maintain the network that they will be capping. Install home equipment like ONT and STB. To give it away for $100. Now usually the telcos will add taxes and fees on that to increase their profit.  But its the MSO's who are making out. They went from the least profitable service (TV) to the more profitable services of phone and Internet.

With all of the CAPEX for DOCSIS upgrades as well as FTTx and WiMax build-outs, these companies won't be able to lower ARPU for triple play.

The cost of TV content is increasing. Must carry TV channels are now asking for a bite of the pie. You have seen the battle that NFL Network and the other sports networks are having to get carried by the systems -- and to be carried in the most popular packages.

I can see how the MSO's and telcos would have to lower ARPU averages in the face of the economic tsunami we are experiencing, but they won't be offering triple play for $50.

Remember that for the Bells, RGU's include security, cellular, and now tech support. Cablevision rolled out a $350M wi-fi network in NY. The duopoly knows that to keep churn down, they have to get sticky with ubiquitous Internet Access and to get close to a quad-play. Surprisingly, while Verizon has the quad play in my town (Tampa) - FiOS TV, Internet, phone and Cell - that is not the package that they advertise to my house Every Single Day.

 The cost of customer acquisition, retention, advertising, tech support, customer care, bad debt, security, upgrades, and maintenance are too high for the triple play ARPU to drop below $99.

Typical Sales Situation: So I meet a prospective buyer. We exchange cards. A couple weeks later, he has a circuit need to be quoted. We have a conversation. It gets complicated. Next thing you know I am competing against the inside sales team and the Reseller.

So why is an Agent in a price war with the direct account exec? No idea, but it happens more and more. Who loses? The carrier usually. Why? Because they are losing margin with each pitch and counter pitch. At some point - like in the beginning - Siebel should flag that client and a floor should be established. That way the carrier makes a profit; the sales cycle doesn't spin out of control; and the conversation with the buyer can move beyond price to solutions and value.

Who else loses? The agent. Why? Usually direct can get lower than indirect. Also, the agent is spending a lot of time on a deal that may not close, but one that certainly has diminishing return.

I can understand it from a Buyer's perspective: get in a bidding war and I win. Short term, certainly. You win lower prices. Long term you get poorer service. Less profit equals less service. Period. The next time you want a deal, word is out. It's going to be the low price RFP bidding war again. Not everyone wants to get into that. As an agent it is a waste of my time and effort, because people only interested in price, are a PITA.

As an agent for 9 years, I provide value to my clients. One way is as their advocate to the carrier - if they have billing, provisioning, or other issues that need resolution. In provisioning, I interface with carrier and coordinate the installation times with all parties - hardware vendor, buyer, tech guy, carrier and installer. Another way is in the information I provide - beyond who the carriers are that I can quote. Maybe I need to do a better job with messaging this to avoid the Price War later.