On Rad's Radar? - wireline Archives

No Traction in Hosted PBX Market

2012-05-25T12:18:09Z

According to Insight Research, independent hosted PBX providers should be able to take some small business market share from the Duopoly over the next five years.

The small business market size is more than 40 millions lines, says Robert Rosenberg, INSIGHT Research president. That will mean even more hosted PBX seats since lines and seats are not 1 for 1. "Our study suggests that thus far, small businesses haven't quite latched on to this new technology so the revenue today is only in the range of one-half billion dollars, but by 2015 hosted services will be nearly a $1.2 billion market and the adoption rate of the hosted services by small businesses will accelerate," Rosenberg concluded.

If the US Hosted PBX space is just $500M, I think that they have calculated wrong or at least not taken into account the hundreds of smaller providers with less than 5000 seats. Phone.com, Pingtel, Flat Planet Phone Co., FreedomVoice, PBX-Change and many, many more providers that you find at ITEXPO and elsewhere.

All the research I have seen states that Comcast is hands down the winner in the US Hosted PBX space with about 300K seats.

8x8 is now reaching $100M in revenue with ARPU of $244 on its 27,000 business customers.

Smoothstone is now West IP Communications after a $120M bid. Smoothstone is probably at $40M in revenue.

M5 Networks, recently acquired by ShoreTel, is doing $48M in revenue.

Telesphere, a member of the Broadsoft-based Cloud Communications Alliance, is doing about $30M.

Admittedly, most Hosted VoIP companies are doing less than $4M in sales, but if you add up hundreds of them at $4M or even $1M, you get to $500M fast. I already listed over $300M in revenue, so that $500M might be low. Still even if it was $1B in pales in comparison to US wireless revenue of $335B in 2012 or fixed network voice revenue that is about $132B or even the $38B in broadband access revenue. [carrier revolution from TIA study]

Cincinnati Bell to Spin Off Data Centers

2012-05-04T17:02:23Z

Last week when asked, I said that I did not see Cincinnati Bell spinning off its data centers. One reason was that the ILEC would be left with a declining wireline business and debt, which was the reason that CinBell had pursued a data center acquisition -- to offset the line losses.

This week, CinBell announced that it will examine spinning off Cyrus One as a REIT (real estate investment trust). The IPO will bring in much needed cash to pay down debt - $2.5B.With the data center business up 21% to $53M, CinBell is expanding the data center space.

Cincinnati Bell 1Q 2012 revenue is $363 million. Wireless revenue for the quarter is $64 million; Total wireless subscribers decreased to 446,000. Postpaid ARPU in 1Q2012 increased to $50.82 with Postpaid churn for the quarter at 2.2 percent. [source]

Wireline revenue for the quarter was $182 million - down less than 1%. CinBell is offsetting wireline (copper) revenue with FTTH.

"Total local access lines declined 7.8% year over year to 621,300 at the end of 2011, and comprised 552,400 in-territory lines and 68,900 out-of-territory lines," Zacks states.

"The company passed 13,000 additional homes and businesses during the quarter with its Fioptics product suite, bringing the total number of units passed to 147,000. Wireline added 3,000 new Fioptics entertainment subscribers and 4,000 new Fioptics high-speed internet subscribers during the first quarter, bringing the totals to 43,000 entertainment and high-speed internet subscribers at the end of the quarter," reported Seeking Alpha.

I wonder if cell churn is due to coverage or handset choices.

I don't know what the IT Services and Hardware segment is but it increased 4% to $73M.

What's With Wireline?

2012-04-27T18:32:20Z

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

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

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

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

Two Other Things to Ponder

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

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

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

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

It's a quandary.

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

US Government Suing AT&T for Fraud

2012-04-26T14:49:58Z

Is Fraud rampant at Ma Bell?

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

Another item ripped from the headlines:

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

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

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

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

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

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

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

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

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

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

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

Get Off the Agents' Back

2012-04-12T21:48:50Z

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

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

Did you ever see Shift Happens?

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

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

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

Value and Telecom

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

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

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

Carriers are Unhappy with Agents

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

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

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

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

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

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

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

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

How Things Can Shift

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

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

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

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

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

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

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

This is really important to remember.

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

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

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

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

USTelecom Wants Forbearance for all ILECs

2012-04-09T18:36:04Z

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

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

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

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

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

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

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

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

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

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

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

Comments or Oppositions Due: April 9, 2012 TODAY>

And of course COMPTEL has filed opposition.

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

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

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

There's no fixing that.

Are Telcos Outside Their Delivery Zone?

2012-03-12T13:52:44Z

The ILEC's were really good at delivering a monopoly TDM-based dial-tone product. And later got very good at T1 and T3. Was that the extent of the research that the old AT&T Labs could provide? DSL, while slower than cable modem service, does provide for good, cheap broadband, despite its limitations in distance and speed.

Now the ILEC's are going Cloud with Terremark, Savvis, and roll your own. This is shocking to me, since I was there in 2001 when BellSouth (and other ILEC's) first attempted data center and e-Commerce. At the time, BellSouth had partners like EMC to deliver the managed servcies and IBM for the data center. But this isn't something they knew how to sell or how to market. Certainly, the market has changed to make it easier to sell, but are the ILEC's the right partner for Cloud?

I look at how they are struggling with declining wireline revenue (and mounting debt). They have been grasping at TV for consumer triple-play; tech support for broadband customers; and managed services. A managed router from AT&T is configured and managed in Singapore! The slight time difference affects support. Plus it is by email mainly.

Is that what Enterprise customers want?

Then I look at the Telecom Subpanel talks on Cybersecurity, in which reps from AT&T, Comcast, Century Link and MetroPCS were featured speakers in front of The House Energy and Commerce Subcommittee on Communications and Technology hearing Wednesday morning on the cybersecurity threat to the nation's communications networks. The hearings are about regulation of security of the communications infrastructure - who will have oversight, what will be required, and the like, to be added to a bill. Like that will help. Sheesh!

And, of course, the carriers do NOT want to be regulated. In fact, CenturyLink is petitioning the FCC to forbear from "dominant carrier regulation and the Computer Inquiry tariffing requirement with respect to its packet-switched and optical transmission services" for those services subject to the regulations. "CenturyLink states that, because of recent mergers, its enterprise broadband services are subject to different regulations depending on which CenturyLink affiliate - Qwest, Embarq, or CenturyTel - previously provided (or didn't provide) those services." Whatever. They do what they want anyway. There isn't any FCC enforcement (of merger conditions or forbearance conditions).

That sentiment brings me back to cybersecurity and regulations. It would be kind of joke really. The FCC took over 10 years to come to grips with VoIP, how would it ever regulate something as fluid as security? And what would enforcement look like? Would it be something like CPNI?

There are over 1000 VoIP providers in the US plus the numerous LEC's, cablecos and cellcos. Does anyone really think that enforcement is a priority at the FCC?

So back to telco cloud services.

On the one hand, I like that Savvis is still Savvis and Terremark is still Terremark (without any telco infection, no offense). In fact, "Savvis is poised to lead in Gartner's Magic Quadrant for Public Cloud Infrastructure as a Service in addition to Gartner's Magic Quadrant for Cloud Infrastructure as a Service and Web Hosting," according to Seeking Alpha. Given that every data center company from TELX to QTS have launched Cloud services, not to mention every CLEC, TWC (via Navisite) and most VAR's, would you rather sell IT services from an IT company or IT services from a telco?

The whole "I don't want to be regulated, I don't want to be a common carrier" is fine if you understand that to stop being a monopoly, you have to stop acting like one! You HAVE to provide customer service. You can't finger point when handling Managed Services or Cloud Services. You have to ANSWERS to solve problems for your customers.

I think that Cloud is going to be a bust for telcos, in general. They have been the pipe, the plumbers, for so long -- and even if you want to reach up to Layer 7 (to grab the money) doesn't mean you have the ability or will be able to deliver on it. Going into cellular was just another Layer 1 project.

Let me point out a few things. Many fiber companies (or divisions) can't find or price out their fiber. A cellco has mismanaged its network to the point of disrupting users and its 4G future. An ILEC has done such a poor job planning Metro Ethernet that it has run out of VLAN's in two major metros!

Cloud may turn out like FTTH and Telco TV: an investment that didn't work out. Or it may work out despite what I think will be glaring holes.

What About Selling Cloud?

2012-02-21T15:55:02Z

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

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

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

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

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

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

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

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

Back to being mad about the prices falling:

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

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

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

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

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

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

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

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

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

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

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.

FCC Rules on Rural

2012-02-07T14:53:20Z

Following Congress sending him a letter, FCC Chairman Julius Genachowski has finally issued a ruling on Rural Call Completion [pdf].

ATIS and NTCA have been hounding the FCC as complaints went from about 100 a month in 2009 to over 1000 a month in late 2010. A group of them sent a letter to the FCC [pdf], which stated:

"the Rural Representatives identified a variety of concerns, including but not limited to: (1) calls that ring for the calling party, but not at all or on a delayed basis for the called customer of the RLEC; (2) calling parties who receive incorrect or misleading message interceptions before the call ever reaches the RLEC or the tandem it subtends; (3) calls that appear to "loop" between routing providers, but never reach the RLEC or the tandem it subtends; and (4) incorrect caller ID that displays to called parties."

Many carriers point the finger at their underlying network operator - another carrier that they dump the rural traffic on. MagicJack and Google Voice have a reputation for not completing calls to high expense rural areas.

The underlying problem is Inter-Carrier Compensation. Rural telcos not only get USF funds to operate, but also get many pennies per minute for call termination. In comparison, RBOC's usually charge $0.005 for termination - a half a penny per minute. As traffic to rural increased due to businesses like FreeConference.com, many carriers including VoIP providers and cellcos, chose not to complete calls to those areas. It was getting expensive.

The FCC rules, "If carriers continue to hand off calls to agents, intermediate providers or others that a carrier knows are not completing a reasonable percentage of calls, or are otherwise restricting traffic, that is an unjust or unreasonable practice prohibited by section 201 of the Act."

All of this could be solved by reform to the Inter-Carrier Compensation but the RLEC's and State Utility agencies are actually holding that up (and likely will for years). Just another example of (A) Arbitrage, which the telecom industry is built on; and (B) an industry that doesn't want to adjust to the Internet and its ripple effect on its business model.

Verizon Puts the Move on Video

2012-02-06T15:26:03Z

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

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

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

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

Metering is one way. It increases the ARPU.

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

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

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

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

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

LightSquare, GPS, ADTRAN and West

2011-12-12T20:56:24Z

ADTRAN "announced today that it plans to acquire, through an asset sale and purchase agreement, the Nokia Siemens Networks fixed line Broadband Access business (BBA), and associated professional services and network management solutions. The planned acquisition would include the Broadband Access intellectual properties, technologies and the established customer base." This gets ADTRAN some revenue and a foot into International customers.

IN other acquisition news, HyberCube is being bought by West Corp.

"West Corporation, a leading provider of technology-driven, voice and data solutions, today announced that it has entered into a definitive agreement to acquire HyperCube LLC, a premier provider of tandem switching services to telecommunications providers. .... Founded in 2005 and backed from its inception by Kamine Credit Corporation, Annex Capital and Chambers Street Investors, HyperCube has rapidly grown to become a leading provider of toll-free origination services in the United States. HyperCube's unique network provides neutral interconnection services for all types of providers, including wireless, wireline, and voice over Internet protocol (VoIP). Hypercube currently serves eight of the top ten largest wireless companies in the U.S.

That's an interesting grab for West Corp, which bought Intercall (conferencing) and Smoothstome (Hosted PBX). Now to grab some toll-free minutes. Maybe its just a revenue play.

Luckily, T-Mobile knows where's its bread can get buttered: T-Mobile Keeps Eyes On The Channel Amid AT&T Merger Turmoil

According to its own press, LightSquared Has Now Signed More Than 30 Wholesale Customers. Clearwire's financial stability coupled with the SpectrumCo-VZW deal has probably helped. Or maybe LSqd was giving it away cheap just to get commitments, some cash and some buzz. However, that GPS issue won't go away. A document leaked to Bloomberg states that 75% of GPS devices experience interference. OOPS!

LSqd called for an investigation stating that only select data was leaked and it was misleading. Personally, I don't think it is misleading. There are few radio operators that have a tight control of the power and frequency that they broadcast on. GPS was their first, LSqd. Too bad. (Plus you don't have the cash to do it anyway!)

The Cellular Battle

2011-11-28T18:56:18Z

I don't mean the AT&T-T-Mobile merger, although that is just one battle in the war for cellular supremacy. (Other battles are Sprint with Clearwire, Sprint with the cablecos and the MVNO model.)

"Former T-Mobile CMO Denny Post says carriers should focus on retention, rather than relentless promotions aimed at new sign-ups." Post says that it is the end of the New-to-Wireless Customer Era and that cellcos must re-think customer care.

Post continues, "It is going to become an absolute competitive scrap battle, [because] any customer is going to have to come from somewhere else."

This isn't just the cellular market. Look at broadband, landlines, cable TV, voice - all flat.

While VoIP revenues are increasing, it is because TDM revenue is decreasing. Hosted UC or Hosted PBX sales are more than voice sales, but functionality, productivity, efficiency, collaboration and one-inbox. (At least, in my humble opinion).

And while the FCC has a $4B fund to get more broadband deployed, those sales will go to the first network operator that provides it IF the price is right. Although even in rural, it is a battle between satellite, local wi-fi, dial-up, and 3G/4G data cards - which isn't exactly a slam dunk customer acquisition market. Everywhere else, it is

The nice thing is that Channel churn numbers are better than direct sales. Now if the Channel could just cross-sell and upsell better....

Cramming Star

2011-10-24T16:37:16Z

Cramming is when the carrier's bill contains unauthorized fees (either on cellular or wireline bills). The FCC explains it in detail here.

One agent has been quoted in USA Today about cramming.

"With today's economy, where employees are often doing the job of two or more people, bills are not audited as closely as they may have been in the past," according to Michael Bremmer, CEO of
Globally, America is in a battle for good jobs, natural resources, oil, and soon clean water. (Georgia and Tennessee are already battling over water rights.) This planet can not sustain 7 billion people, which will be the population this weekend.

The US is a service based economy, the engine of which is consumer spending. As more folks are unemployed and as debt increases, that leaves less discretionary income to spend in the economy. Hence, the economy dries up. We are seeing this now.

VISA and Mastercard had their heyday, enjoying profits as Americans spent, spent, spent their way into average household debt of $15k. Did either company do anything to educate their customers about debt, spending or personal finance? Hell no. There's only one thing left to these companies: a spiral down in revenue and profitability.

Banks hit their peak too. They made all their money on re-financing and mortgage. No brakes on that speeding train either. Now the it all comes home to roost. Banks make money lending. It's very challenging to get a small business loan, a mortgage or a car loan - all of which keeps the economy buzzing. How will the economy turn and the bank make money without loans?

Another industry that has peaked is health insurance. (Auto insurance might be in the same boat). I think we have seen the height of employment. And without employment, there's less people with health insurance. Couple that with Boomers migrating to Medicare and health insurance companies are set to make less revenue going forward.

From personal experience, solopreneurs and freelancers have a tough time finding insurance. I didn't say affordable, I said insurance. They don't want to cover anything. It's peaked.

And lastly, ILEC's, especially the RLEC's. They have seen their golden years; it's all rust going forward. The RLEC's want to continue to do business as they have before: funded by USF. It's broken. As rural LEC customers go cell only or switch to Vonage or cable, the house of cards tumbles.

The ripple effect of the Broadband Stimulus will be a tightening of RUS loans. NFBA and Open Range are probably just the beginning of a string of failures and investigations. This will have far reaching effects.

The ILECs are used to having all the customers in their region. Now they have to split with cable. ILEC's had the most profitable service - voice on plant that was paid for and cheaply maintained. Even when they had to share that copper plant, they still made money, but alas greed. DSL was also highly profitable and didn't require too much construction. But moving to TV has proven to be a challenge. Fiber, head-ends, content distribution rights, set top boxes, ONT's, et al - meant that the ILEC's had to spend big money to make little profit (if at all. See Frontier FiOS TV fiasco). And now we are seeing OTT video and cable cutting due to the economy and consumer dissatisfaction with the content empire.

ILEC's like Windstream, TDS and CenturyLink have made cloud and CLEC acquisitions to chase new revenue while the consumer wireline business decreases. Fairpoint and Frontier still have to figure out their next move. VZ and ATT have a booming cellular business (that has almost peaked for them too).

Sorry for the doom and gloom. This was just some thoughts that I needed to write down. I'm not saying I am 100% right, but it makes sense to me.