I know we are facing TDM sunset but from the looks of advertising from the likes of Birch and Bullseye, POTS is still alive and well - and profitable! POTS is still the reliable choice when it comes to voice lines for alarms, elevators and faxes.
For many scenarios, an on-premise PBX makes more sense than a haphazardly deployed Hosted VoIP scenario. Many a small business replaces POTS with SIP trunks to get mileage out of their aged key system. Switching to a new cloud PBX is not a viable option for some small offices because they don't want to change behavior. Hosted VoIP does a poor job on key system emulation despite years of partners selling it and providers trying to deliver it. It is one big face palm.
If PBX were indeed dead, wouldn't one of the leading UC companies have 1 million seats by now? Instead they are struggling to get to 700K seats.
The problem with UC is that it is mass market and it would be better off verticalized.
It would be better for all if Broadsoft wasn't competing directly with its own customers by selling direct to users at $15 per seat. That smells of desperation.
Someone asked me what I meant by that. Broadsoft selling direct cuts out their 400+ clients - like Vonage, TPX & Nextiva. Now these providers have to face price compression from their vendor. It's like ISPs and CLEcs who buy wholesale from ILECs and cablecos only to see retail rates are cheaper than their wholesale rates. Isn't that a crock?
BSFT can't add any more clients because every carrier on the planet has already picked a softswitch - BSFT, Meta, Netsapiens, or home brew. The only way to maintain revenue is to sell direct. BSFT isn't exactly raising the ocean or expanding the pie. They are just taking a big bite from the pie that their clients have been baking for 10+ years. Sure, everyone says that cloud comms is starting to take off; that it is hitting high adoption, but is it the UC we have seen or a bunch of variety?
Office 365, Cisco Spark, Dialpad, One Talk, Fuze, Shoretel, 8x8, RingCentral, Grasshopper, Mitel, Avaya, Jive, Intelepeer <- that is a lot of variety under the UC umbrella. With 2000+ providers of some form of UC in the US, even with an accelerated pace of adoption by users, will there be a clear winner soon? Probably not.
In fact, all these choices without a clear winner probably helps Microsoft more than anyone. When in doubt buy from the established.
There are factors: it isn't a replacement system so much as a change. Extra gear is required (POE switches, QoS Router). It isn't as reliable as POTS - and can't be used in all places POTS was. The call quality is often not clear (unless you put it up against cell phones). (It's why they are touting SD-WAN for UC). It isn't cheaper than POTS in many cases. The deployments are often messy. (Providers can barely turn up Internet Access without issues let alone something complicated like Hosted PBX.)
And finally it doesn't pay much in commissions. At $15 per seat and even a 20 seat deal, the MRR is $300. That is a big headache for $300 in billing revenue. Easier, faster and better to sell network still. Or POTS. Or on-premise PBX with higher compensation. 3CX has been doing everything to make a partner's business model sing.
This isn't me being a Pessimist. This is me being a Realist. This is just how it is in the street in many places.
I don't hear anyone hawking white glove service or money back guarantee or no headache install. I hear the talk of zero touch deployment. That's the wrong way to go except for the CFO who wants to maximize profit per contract. Customer experience is someone else's domain.
I don't hear anyone talking about their call quality, their customer experience, their hand holding on deployment, their world class PMO. These are better things to talk about than price and features.
]]>Even Fairport, acquired by RLEC Consolidated, is upgrading its network for higher speeds. Some of this is due to the fact that cable is winning the broadband war. Some of it is powered by USF Reform whereby broadband is the metric for dollars. Add in the Connect America Funds (CAF) and other federal and state incentives for broadband and middle mile fiber deployment. AT&T, Verizon, Windstream and CenturyLink have all talked about upgrading the broadband infrastructure. (BTW, this flies in the face of the new FCC Chairman's claims that investment went down after Title II.) It comes down to revenue - and DSL was not cutting it.
Fiber deployment is tough (just ask Google). Many providers use a mix of technologies. TPX (formerly known as TelePacific), Windstream, XO and Google Fiber use fixed wireless for broadband. Thousands of WISPs in America have been utilizing wireless to deliver broadband for years. The bigger guys are now jumping on the bandwagon. To be fair, the technology is not only better, but cheaper.
This from DSL Prime: (from Sail Internet in Fremont California) "George Ginis used Mimosa's super Wi-Fi to connect a customer a customer with 435.74 down, 331.83 up, and 4 ms ping. 5 GHz Mimosa is designed like a mmWave network but a heck of a lot cheaper than 28 GHz. Interesting alternative."
DSL Prime has an ad from Sckipio about Virtual fiber. "Extend your fiber with 100-300 meters of single-port G.fast. It can save expensive trenching for cell towers, small cells, basement fiber, commercial customers and others. A very thin management layer allows operators to keep their existing GPON management layer. Sckipio makes it effortless to add G.fast to any GPON network." G.fast uses copper like VDSL2. We'll see if it gets adopted in the US like it is in Europe.
Also on the copper side is trials by ASSIA for Terabit DSL. See here. Companies are at work to extend the life of wireline broadband to satisfy the consumer appetite for downloading videos. On the business side, the same technologies will be used to feed the business appetite for cloud apps - fixed wireless, 4G/LTE-A/5G, DSL/T1, cable modem and fiber. SD-WAN will be layered on top for metrics, failover/resilience and more. Interesting times.
]]>RC did have some wins last quarter: RC "closed six deals with TCV north of $1 million dollars up from five in Q4. One of these wins was at Hyatt Hotels Corporation. Hyatt will be replacing legacy Avaya system at their headquarters with RingCentral Office."
Some factors that are shaking things up: Avaya bankruptcy; 8x8 and Shoretel hiring bankers for strategy; and Toshiba leaving the North American market.
RC states: "For each dollar invested in sales and marketing, we continue to see $9 of revenue and $7 of gross profit over the projected life of an Office customer. " A number of UC providers should take note of that stat.
In the last 15 years, 52% of the S&P 500 have disappeared.
According to the CDC, "more than half of Americans have cut their traditional phone line and now only get wireless phone service." The other half is paying more and more for POTS service.
Verizon sold its data centers. It also sold its cloud services unit to IBM .
CenturyLink sold its data centers to a coalition of PE firms that also bought a collection of cyber-security firms. The new company will go by the name Cyxtera Technologies and it will be run by the former CEO of Terremark.
Gary Testa left Polycom last March to become President of Star2Star. That lasted 11 months, then he quietly exited telecom. Michelle Accardi has his position now. I am guessing the IPO is on hold.
John Oliver took on the new FCC Chair (former VZ lawyer btw) and net neutrality again. Want to comment on the FCC proceeding ironically named Restoring Internet Freedom (Docket 17-108) head over to the domain www.gofccyourself.com
I tried to explain this to several security people. Thankfully now there is a study. "More than 70 percent of SMB IT managers say budget considerations have forced them to compromise on security features when purchasing endpoint security," according to a survey by VIPRE.
All these Rapid Expansion press releases are funny. Yeah, you are following the Long Channel Strategy of signing up everyone you can. No idea how that pans out for most since it is a million dollar cash deal. Each of those master agencies will need co-marketing dollars just like the multitude of vendors that signed up with the likes of Jenne, Tech Data and other VADs. At some point, the cost to get a sale may be too high.
VZW has a co-sale model for One Talk. AT&T has co-selling. But RingCentral is taking this further. There is the partner, a channel manager and a SME from RC involved in each sale - from 1 seat to a million according to the release. All three getting 100% of commission. That will get expensive quick.
I would like to stop seeing ridiculous numbers in the press releases: "over 2,200 sales partners are now offering our services" and "we have more than 4,000 partners" and "300 Master Agents signed up" and the best: "8 Master Agents, providing 200,000 sub-agents". STOP!
]]>I try really hard to avoid cablecos. They don't like the Channel; they don't like wholesale. It seems that direct sales reps can get pricing much faster.
Unfortunately, cable is chasing market share by practically giving away services. So with that in mind I had to get a quote for a EPL between Nashville and Tampa. This would involve Comcast and Charter. Let's examine the timeline:
Request for quote enters the system on 3/15. On 3/21 Survey shows FL location serviceable with construction. Sent email for pricing. On 3/28 after buffing them, I get "budgetary" pricing. On 4/3 client asks for contract. On 4/26 I am still waiting for paperwork and the "formal" pricing.
How does a company who "As of December 31, 2016, Charter's network passed 49.2 million homes and businesses, and served 26.2 million residential and small and medium business ("SMB") customers" take so long to price and run contracts?
I know it would be an effort but there's this thing called Google Earth that you can use to map your network, so every site survey doesn't take days. MasterStream has a pretty good interface for quoting. There are tools in this cloud age to take some fo the friction out of the process - if anyone actually wanted to.
This raises some questions:
I can't even fathom what a Desktop as a Service process must be like now that Navisite is under the Spectrum umbrella.
I know this looks like a bully pulpit kind of blog, but I can't be the only one who finds this ridiculous.
It gets better. One of the Tier 1 ISPs agrees to sell my customer a 1GB pipe that goes to Atlanta from Jackson, Mississippi. Route diversity was needed for my client, an ISP and VoIP Provider. Turn up took 111 days on a lit path. The Tier 1 ISP used Uniti Fiber for the loop. It was a mess.
The CFA (facilities assignment inside the central office where my client is collocated) was ignored, which created the first of a number of problems. TTU (test and turn up) was basically, "We plugged it in!" Repair had to be engaged to get it to work. (A new NID had to be installed.)
BGP took an extra week to get working properly. It only all started working properly yesterday. It was ordered on 12/19/16.
And the client says it routes to Dallas, not to Atlanta. Fantastic.
I turned up another circuit with an ILEC. It was a 20 MB DIA, but I guess 20x20 had to be specified, because it came up at 18x6. I don't even know how you make these kind of mistakes. This was noticed on the day after turn up, but we had to go through repair to get it fixed after the turn up engineer ignored all emails for 3 days.
What the hell is wrong with telecom that they can't just do the job they are hired to do? Every day we hear about airlines having big issues, but telecom firms have even more problems. I think it is just that we EXPECT them in telecom.
All I keep thinking is: If they can't deploy Internet pipes correctly in a timely manner, who would want to try using them for something complex like IAAS or security or UC?
And let's let them do more M&A! Everyone of the carriers listed has been involved in M&A in the last year. All of them suffer from the integration -- or choose to blame it.
]]>Valeant stock is off by 95% from its peak in August 2015.
"Valeant acquired Salix for $11.1 billion and got what has become a key franchise of gastrointestinal drugs. Yet the products haven't sold as well as expected, and Ackman said that it now looked like Valeant "substantially overpayed for Salix, and it has not yet achieved the results anticipated by prior management."" Doesn't that sound like every telecom acquisition since 1999?
"In the letter, Ackman said he had learned lessons, including that "a management team with a superb long-term investment record is still capable of making significant mistakes"." The leadership that got you to one point may not be able to get you to the next point. We see it all the time. CEOs are blind to their own shortcomings and when they should look for advice.
"The highly acquisitive nature of Valeant's business required flawless capital allocation and operational execution, and therefore, a larger than normal degree of reliance on management," Ackman said in his letter. "In retrospect, we misjudged the prior management team and this contributed to our loss."
Frontier has bought territories from AT&T and Verizon in the last 3 years. Yet they are losing subscribers and morale is at an all time low. Bankers want Frontier to spend (millions) on network upgrades. Other RLECs have learned that without investment in network to compete with cable broadband, revenues steadily decline. Here's what the LECs spent in CAPEX. Comcast and Charter together spent $16B on network Bell Canada is spending $637M. You have to still work the acquisition. You still have to compete and sell and market.
INCOMPAS argues CenturyLink/Level 3 combo won't promote competition. I think it will be a complete flop. C-Link's HQ is in Monroe, LA. The telecom hub of talent is in Denver. Will the talent needed move to Monroe?
We have Fairpoint merging with another RLEC, too. It is NOT just about scale. It is about strategy and its execution.
These mergers won't stop, but they aren't exactly wins. It's more like: I'm tired; someone buy me. Or buy something to obscure our abysmal organic growth.
SIDE NOTE:
Two out of 5 of these Ethernet providers are gone!
]]>"The U.S. (and the world) is in the midst of a sea change in how we spend our leisure time. Young people are less inclined to indulge in America's favorite pastime: zoning out in front of the TV. On average, people ages 18 to 24 spend half as much time watching live and recorded television as 35-to-49-year-old Americans, according to Nielsen...... Young people are definitely watching video, but it's more likely something from YouTube or a friend's Snapchat story on their phone than the episode of "Grey's Anatomy" their parents are watching on the living room TV."
"All told, traditional cable, satellite and telco pay-TV services (not counting OTT offerings) lost a net of about 1.64 million video subscribers last year as compared to a loss of some 980,000 in 2015." [telecomp]
Telco TV was too late to the party. It cost the telcos billions of CAPEX dollars to find out that cord cutting was real and OTT video - Netflix, Hulu, YouTube, Amazon Prime, Sling TV -was going to be the winner.
The economics look upside down. Bear with me here. Right now the cable operators are winning the war for both broadband and voice. In many areas, cable is now the incumbent voice provider.
With triple-play the operator sees ARPU of about $161. If the customer only buys broadband - which is happening more and more - the ARPU drops to $65. Never mind the tax implications for federal, state ad local government (they are screwed either way), just consider what this does for revenue numbers.
The ripple effects are already being seen. ESPN, the Disney owned sports channel, is in a tail spin with a loss of about $500M in revenue per year from cord cutters. Cable channels are either being closed by the content owners or re-named and re-tooled. There aren't 500 useless channels; there are 1M with all of the streams and social media. This will be a real problem for content creators, actors, writers and advertisers.
Windstream, CenturyLink and other RLECs (Frontier, Fairpoint, TDS, et al) have been working hard to get the percentage of revenue from residential/consumers from the average of 75% to a 50/50 mix with business services. Windstream bought EarthLink; CenturyLink bought Level3. TDS bought managed IT firms and data centers. Fairpoint sold itself to Consolidated Comms. Frontier keeps buying states from Verizon and AT&T; consequently, their mix is still heavily consumer.
Everyone has a revenue problem. Pricing pressure has squeezed every operator. It will get worse. Millennials don't want to pay a cable company. They have a huge cellular bill and student loans totaling $1 Trillion. Couple that with stagnant wages and a bleak jobs future that is getting darker with all the investment in robotics and AI, the economic outlook doesn't look bright. As I have asked before: if wages are stagnant, how does someone continue to keep the economy spinning with buying?
I hope, unlike cord cutting, that operators don't have their head in the sand on this issue.
With 5G trials rolling out, will the next generation - who aren't buying homes and aren't buying cars - buy wireline broadband? A few analysts say Unlikely. I already know several twenty-somethings and thirty-somethings that do NOT have terrestrial / wireline broadband. It is all smartphone and hotspot at home.
What does that do to the economics of the network? Business revenue will become even more important. And as revenues decrease, price increases will result, which will mean less subscribers.
Planet Networks believes that rural and under-served areas will still be on wireline because 4G and 5G will not get there any time soon. That may be true - so RLECs will be happy - but the majority (80%) of the population lives in urban areas.
In other nations, cellular (including fixed cellular) are sometimes the only available network. It is cheaper to put up towers and radios than to dig up streets and sidewalks to lay fiber.
]]>The Age of the CLEC - the competitive carrier - is at end. They fill gaps now, like Birch, Bullseye and Granite for POTS and other legacy services. XO is part of Verizon. EarthLink absorbed by Windstream to become like AllWorx, USLEC and Paetec, a memory. Level3 will be a division of CenturyLink, where it will cease to be a rival to the RBOC in the Enterprise.
Net Neutrality is going away. That zero rating investigation to determine if giving some content a free rideover all other content was fair has been closed.
It is simply cable or ILEC. And both groups have to be wondering how much longer they can continue to carry their massive debt. The big dilemma is that ARPU is stagnant but subscriber counts have peaked. Cord cutting is a real issue for cable, telco, satellite and content owners. NBCU closed two channels recently and re-branded another. Apparently, twenty five cents per subscriber per channel per month isn't enough any longer. And advertising rates are a little off too. The economics of many legacy businesses are being blown up!
The cost of services increases as more small cells are deployed to blanket coverage for 4G LTE, LTE-Advanced and how much will 5G cost? If ARPU is stagnant for cellcos in this price war, yet the cost to build and maintain the network remains constant and you don't lose any subscribers, all is good.
Sprint and T-Mobile have waged a brand battle against Verizon and AT&T. It has worked to a degree. But all 4 carriers are losers. The foreign owned T-Mobile and Sprint can afford to lose money for a while, but how long?
With the subsidized phones are gone so are contracts and large ETFs. More churn. Higher cost of customer acquisition. Ma and Pa Bell already saw this small business broadband and voice. Then they lost the consumer broadband and voice market. Now the cellular market is up for grabs.
Verizon is looking at buying Charter now. Rumor has Comcast looking at buying its 4G backup partner, T-Mobile. The cablecos denied cord cutting until it was too late. Telcos denied cable competition until it was too late. There really aren't any visionary CEOs in our space.
The problem remains the same: at some point you have to be make money, not just on paper.
Debt payments, network CAPEX, stock dividends, payroll and pension liabilities are a burden to ILECs - all of them: Frontier, AT&T, Verizon, CenturyLink, even Windstream and Fairpoint (who sold out to Consolidated).
Revenue is getting crushed as the cost of bandwidth, transport and transit collapse. Voice revenue has declined. Text revenue is flat. OTT apps have taken video calls (Skype, Facetime), some voice calling (Messenger, WhatsApp), SMS/MMS. What's left? The Enterprise market and the Government market.
What happens when there are just 4 carriers? Is the channel necessary to sell monopoly services? Well, see.
Some other points:
With subsidized phones gone, how will that affect phone makers long term? Will we see the leaps in tech that we have so far? Unlikely. Google Pixel at $649. The iPhone 7 is $700. Not that many folks are going to drop that cash every 18 months to two years. (Note to self: Get in the smartphone/device insurance business!)
When will the next highly desired device come along to prompt an exclusive carrier deal (a la AT&T and the original iPhone) to drive signups?
Even Sprint is Buying into the business of streaming media with a $200M investment into Tidal, another money losing music streaming service.
As someone at lunch pointed out, many foreign LECs like Vodafone, BT, Telstra, even NTT, are sitting on tens of billions in cash. They could buy into the US market.
We sit at the nexus point of some interesting times.
Did you notice that UCaaS consolidation halted? Yeah, me too.
]]>With less than 25% of businesses on VoIP according to TechNova Consulting, then there is still time to make them relevant again.
Meanwhile Verizon is asking the FCC for permission to shutter more legacy SS7 voice switches. The TDM to IP transition is marching on. Frame Relay and ATM are mothballed. Soon SS7 as we are used to will be. I wonder if 9-1-1 centers have caught up yet?
AT&T told the FCC that "AT&T is progressing with its TDM-to-IP voice service transition in two cities in Florida and Alabama, telling the FCC that on a combined basis 50% of total customer accounts have voluntarily migrated to one of the telco's next-gen wireline and wireless voice services." [source]
OTT communications is growing so wide that it is now being reported on by analysts! "The VoIP market (e.g., Microsoft Skype), the IP messaging market (e.g., WhatsApp), a portion of the social networking advertising market (e.g., Facebook), Unified Communications (e.g., Cisco) and Cloud communications markets (e.g., Twillio) make up the OTT communication market." [source]
Broadsoft has 38% of the global UC market with 15 million UC lines, but that isn't a significant portion of the global business voice market. The analysts have now estimated CAGR in UCaaS at just 10% (down from the 20+% they were cheerleading for a few years ago).
Riddle me this: If the IP transition is going so well, how is the growth so slow (<10%) and the market penetration so small (15M = 38% or <25% of biz) when there are so many VoIP Providers out there?
]]>Consolidated Communications to Acquire FairPoint Communications, Inc.. Fairpoint used to be a small RLEC (rural incumbant telephone company) before it bought Verizon assets in 2007. "In that year, Verizon Communications announced plans to sell its landline operations in Maine, New Hampshire, and Vermont (Northern New England Spinco) to FairPoint ."[wikipedia = source]
The deal actually got done for $2.4 Billion as everyone - and I mean everyone - had worries about Fairpoint buckling under the acquisition. Not even 2 years later, FairPoint filed for Chapter 11 bankruptcy protection.
Now Consolidated, which bought SureWest and Eventis, is acquiring Fairpoint "in an all-stock merger transaction valued at approximately $1.5 billion, including debt." The press release says the usual dribble: "Creates a stronger business and broadband communications provider to better serve its customers." NEVER has that actually happened! And this is also standard wording, "Doubles revenue, adjusted EBITDA and provides significant scale and resources." The facts are that it increases fiber route miles to 35,100 across 24 states and adds more than 3,000 lit buildings and an extensive fiber-to-the-tower footprint.
On the podcast this week, I talk about the industry consolidation with a trio of agents. One commented after, "As significant as we [agents] think we are in a large providers eyes, we are not. As a whole we are but individually we are not. These are turbulent waters we are in, just got to make sure we are getting in the right life raft." I agree but many people in the industry don't even know what raft will be afloat in a year or who will be rowing it! The agent added, "Correct. There will be lots of boats out there, some with pirate in them, some sinking, and some that will remain afloat." Choose wisely.
Copper needs scale, I guess. This is bigger for the sake of bigger. But RLECs have their own special issues due to a significant change in USF monies and the CAPEX expected from CAF monies. All while cable is kicking their ass. They came to the Change Party a little too late.
]]>Telcos spent billions on both fiber and TV services. [Verizon reportedly spent $23 billion rolling out FiOS since 2004, some of it from rate hikes, some from government subsidies.] Unfortunately, by the time telco TV, like Windstream's Kinetic, is widely available cord cutting is accelerating.
From DSLR, "Telco TV and satellite TV providers saw record pay TV subscriber losses last quarter, according to the latest analysis by Leichtman Research. According to Leichtman, the pay TV sector lost about 210,000 subscribers last quarter, though this figure is dramatically lower than the 430,000 subscriber net loss stated by Wall Street research firms like SNL Kagan. While traditional cable providers "only" saw a net loss of 90,000 video subscribers last quarter, the telcos were particularly hard hit, losing 375,000 video subscribers last quarter -- compared 45,000 during the same quarter last year."
In the broadband realm, "Cable companies added a net of 775,000 broadband subscribers last quarter, compared to a net loss of 150,000 broadband subscribers during the same period," writes DSLR. [see chart here]
For consumers, it is all about the Internet and smartphones, according to Pew.
Telcos didn't want to get into the DSL game. Mainly to protect a highly profitable T1 business. The same way they threw obstacles at Google Fiber, the LECs threw obstacles at the newly minted DLECs - NorthPoint, Rhythms and Covad. Sure, some of it was incompetence on the part of the DLECs and GF, but the hurdles kept tripping them up. After they all filed bankruptcy, the RBOCs decided to get into the DSL retil game, to the chagrin of the independent ISP, who was finally making money on DSL. Undercut by the vendor, many ISPs failed or limped along for years, which affected many small businesses as the ISP was usually the local computer expert and Internet Provider. This was something that the LEC could not provide: personal service to the small business. To this day, the Duopoly can only supply commodity service with almost non-existent support. As they have gotten bigger and bigger to take advantage of scale, the support to the small business has suffered.
Small business is 99% of the businesses in America. Yet every provider wants to go up market.
There are almost 28 million small businesses in the US and over 22 million are self employed with no additional payroll or employees (these are called nonemployers). Over 50% of the working population (120 million individuals) works in a small business. But it is under-served by the Duopoly.
From the FCC's 2016 Broadband Report:
Think about those numbers. VZ spent $23B. Other telcos spent billions. The FCC donated billions in BTOP, BIP, ARRA, CAF, CAF II and USF funds to the effort to build out broadband across America. Private companies (PCOs, ISPs, WISPs and CLECs) have invested hundreds of millions more. Cable dropped bilions. Yet not everyone has good Internet????Or a choice of more than 1 ISP?
I have to wonder where this goes. The telcos spent billions to get triple-play just as that bundle becomes undesirable. They now have to build out fiber to stop losing broadband subscribers, so more hundreds of millions. At a time when their debt is High - and the pies for TV, broadband and voice are stagnant. Even cellular has peaked.
They are all chasing Enterprise, which I imagine means 500+ employees. There are only 30K businesses in the US with more than 500 employees. So Comcast, Charter, AT&T, Verizon, CenturyLink and Windstream are fighting desperately over the same 30,000 businesses and government contracts. With VZ acquiring XO (approved today); C-Link acquiring Level3 (ugh); and WIND Buying EarthLink, that leaves Zayo as the sole big indie.
What happened? Bad short-term decisions that cost jobs, revenue losses and more CAPEX spending than if they had just done it from the beginning. To still see announcements from the telcos about Gigabit deployments in select cities is just plain sad. The monopolies that were the Bell companies re-constituted but lost their edge. It's like they don't know how to compete at all. They just lean on their brand and hope for the best.
EoC wasn't widely enough deployed and sold. Yet everyone is banking on SD-WAN, which will likely just make SLAs crumble.
Small business has suffered from this mess -- and further with the mega-mergers and consolidation. Small businesses - all businesses - rely on telecommunications to do business. The Internet is vital to our economy. Let's hope we don't stifle it anymore.
]]>If you can't see that flash mp3 player, you can download the mp3 or listen on Soundcloud.
]]>Inteliquent was formerly known as Neutral Tandem, with an initial business plan to be an alternative tandem switching platform for CLECs and VoIP Providers. They re-branded after they bought Tinet adding network to their strong voice service. They sold Tinet to GTT in 2013 for about $55M. Inteliquent has been focused on voice and competing pretty well against both Level3 and Bandwidth.
"As the nation's highest quality provider of voice and messaging interconnection services, Inteliquent is used by nearly all national and regional wireless carriers, cable companies, and CLECs in the markets it serves, and its network carries approximately 21 billion minutes of traffic per month." They added some CPaaS capability as well. I have to wonder 21B in minutes and just $90M in annual revenue?
Zayo spun out its voice business as Onvoy. It was acquired by GTCR. Onvoy has acquired ANPI, Broadvox and Layered. Now it will combine Inteliquent into that mix.
These deals have made partners and customers nervous. The uncertainty seems to be a normal now.
These integrations are smooth and often have some customer facing problems. (See Frontier for how that works.) There is so much M&A that as a partner it is difficult to choose who to present to your client as a vendor.
]]>In 2008, C-Link bought Embarq, formerly Sprint/United.in $11.6B deal including assumed debt. In 2010, C-Link bought Qwest which included RBOC assets that flew the US West banner. "The valuation of CenturyLink's purchase was $22.4 billion, including the assumption of $11.8 billion of outstanding debt held by Qwest."
In 2011, CenturyLink begins to stray from grabbing fiber and POTS lines in favor of the data center business it acquired with Qwest. Much to the chagrin of the agent channel, Savvis was scooped up for $3.2B including debt. This started a series of acquisitions to beef up a cloud business that for all intents and purposes C-Link is mired in for no reason.
The ITO Business Division of Ciber (managed services), AppFrog (PAAS), Tier3 (IAAS), Cognilytics (analytics), DataGardens (DRaaS), Orchestrate (DBaaS), netAura LLC (security services) and ElasticBox (VPS) - all scooped up in the last 3 years to make a soup out of a cloud division that it is still trying to sell. The rumor today is that Savvis will be spun off. No word if that will be just data center or both data center and cloud. And that makes even less sense since Level3 actually knows how to sell colocation - unlike practically anyone in Monroe.
I understand that being rural and watching your CAF and USF subsidies slowly decrease makes you yearn for fatter and happier days. And when you look at Level3's $10B in NOLs, you start to think like Carl Icahn. However, have you seen what Icahn did to XO???? Have you seen what C-Link did to Qwest and Savvis??? That husk will next be Level3.
With debt this deal will be worth about $34B to get combined revenues to $25B.
Not a single merger in telecom in the last fifteen years resulted in anything good. Not one.
The integrations rarely go as planned. These two companies probably have 26 or more separate and different software systems in the BSS/OSS. These will NEVER be integrated. Orders, status and asset availability will be a nightmare. I know. I know. You think I am a pessimist. But truly this will suck especially for the channel.
Any agent that says this is good is either (a) looking for press or (b) is delusional.
There is now less choice. When VZ takes over XO, except for Zayo, who is left that isn't a LEC or cableco? What happened to the CLEC industry? Totally collapsed as its owners cashed out. Everyone got bigger and no one got better. One by one they have fallen.
It is why Cable is winning the broadband game. (Cable is single minded.) It is why businesses buy cloud services from OTT. (Bell-head mentality precludes anything but network and voice.)
This is the LEC problem: lack of focus; deficient long term strategy; and a missing willingness to win the customer. It's all about the creation of value without actually creating any value.
Since the Board will almost stay intact and the CEO remains, what new gen strategy or thinking do you think will occur with the combined entity? I get why the L3 CFO is staying: someone has to keep that debt at bay and play with the NOLs so that the stock doesn't crash when revenues start to slide.
I won't even get into the culture differences between the 2 companies. L3 and TWT had only slightly different cultures but most of the TWT people exited. This is a good payday for L3 CEO but he will go down as the guy who killed a good idea. The blood of thousands of employees and agents are on Story's head.
Hopefully, someone else will make a BID for Level3 as a white knight - Comcast, Zayo, or a PE firm*.
**Although STT owns about 13% of Level3, I don't see a PE firm wanting the company, except to do to it what Icahn did to XO. L3 doesn't throw off enough cash.
According to CenturyLink press release, the deal, which is expected to close by the end of the 3Q 2017, results in:
I wonder back to when AT&T tried to buy T-Mobile in 2011. That Obama Admin said NO. Despite the fact that AT&T was actively helping the NSA and other 3-letter agencies since before 2006, when Klein exposed Room 641A.
Then there is the other program that AT&T runs for the feds: "Hemisphere was used far beyond the war on drugs to include everything from investigations of homicide to Medicaid fraud." The Daily Beast explains how AT&T is spying on Americans for profit. (It would be weirder if they were just doing it for fun.)
Barry Eisler spells out how all this works via his "fictional" book God's Eye View.
AT&T has hedged its bets since the T-Monile No. It won approval for DirecTV. It plans to get a Yes from the DOJ - and has told the FCC that they don't have a say in this acquisition.
From NEXTDRAFT by Dave Pell: "Will the AT&T acquisition of TimeWarner get federal approval? Before you place your bet, consider this data provided by the NYT: "AT&T is the biggest donor to federal lawmakers and their causes among cable and cellular telecommunications companies, with its employees and political action committee sending money to 374 of the House's 435 members and 85 of the Senate's 100 members this election cycle."
Why are they buying TW? Well, to catch up to VZ and Comcast. And because all the pies are flat. AT&T had a bad quarter. VZ has a had a couple. They are laden with debt. Cellular which is half the revenue or more is being picked apart by T-Mobile and to a much smaller extent Sprint. Cable is eating the wireline broadband lunch*. Since all of the bets were on cellular, it is now a run to use fixed wireless (LTE or licensed) for broadband deployment which will increase ARPU for them -- and the bills to consumers.
Ma and Pa Bell have spent tens of billions on spectrum. They will use it to get out of terrestrial broadband and have everything be wireless. They will still have to figure out the T-Mobile problem as well as the cable wi-fi problem.
They want content to build a walled garden - like Facebook or AOL before them. When you own the content you can be king, just ask Comcast/NBCU or Disney.
The one thing that will kill off the telco is an economic depression. When the US experiences another economic slowdown - like say 3Q2017 - consumers will have a lot less money to spend. That means ARPU will not go - and subscriber counts will go down. When you have to eat, you skip HBO and cable TV.
The auto industry is already feeling this crunch. More leasing, less sales, more discounts, interest free loans. The cars last longer. And driverless cars are coming.
One reason for immigration is to actually increase the population of the US. Millennials aren't having kids - in many cases because student loan debt and poor salaries make a child too expensive, except by accident.
In the midst of this noise 2 things to note: (1) ABRY is selling Masergy to Berkshire Partners for about $1 Billion dollars. The reports say $900M; I was told it is more than that.
(2) Google Fiber is laying off. The CEO of Google Access, Craig Barratt, is also stepping down. Too few subscribers, too many hassles means they will try fixed wireless then probably call it a day. The Duopoly of cable and telco have successfully squashed competition. And for all the little guys cheering, it could be you next!
Please note that in the middle of all this, despite the skyrocketing analyst forecasts, cloud computing is not mentioned in this scenario. Why? It amounts to peanuts in revenue for the Duopoly. "Total SaaS/PaaS revenues of top 50 software companies globally are $22.4B. Microsoft, Oracle, IBM, SAP, Symantec, EMC, VMWare, HP, Salesforce and Intuit are the top ten software companies worldwide," according to Fortune and PWC. Unless they were to buy Salesforce to gain $5.5Billion in revenue, they have to go content. Microsoft bought LinkedIN for $26B!! And LI revenue isn't even $4B dollars.
IOT isn't even a billion dollars in revenue for VZW yet. So how do you move the revenue needle at the former Bells?
* Per telecompetitor, "The number of U.S. fixed broadband subscribers dropped by nearly 200,000 on a net basis in 2Q 2016, a decline of 0.2 percent, according to the latest market data from Point Topic."
]]>As I watch Hurricane Matthew, I wonder how many elderly and infirm still have POTS lines.
Verizon workers can now be fired if they fix copper phone lines for DSL, according to reports (and HERE). Verizon wants people to buy fixed wireless and 4G LTE-A in place of anything copper.
Certainly, VZ needed the money when it sold off VZT in Cali, Texas and Florida to Frontier. It had to pay the FCC $10B for spectrum - and that is what the sale price was to Frontier. But it wants out of the union labor based telco business. Buying Yahoo and AOL is a way to be a mobile and entertainment business. So copper has to go.
Windstream is using copper for G.Fast and VDSL2 in Project Excel as it beefs up broadband in its ILEC regions. Their ARPU is up, which is what they need - to pay for the upgrades AND to keep Wall Street happy AND to pay down debt.
AT&T uses copper for VDSL2 for the now retired brand U-Verse. "AT&T notes that "AT&T Fiber" may not actually mean fiber -- the telco noting that "under the AT&T Fiber umbrella brand we will use a variety of network technologies." That's likely to include wireless broadband, and should it ever come to market, AT&T's AirGig initiative which utilizes power lines." [DSLR]
After Google Fiber finished up its acquisition of WISP, WebPass, it started thinking about fixed wireless in places, instead of always actual fiber. Why? It got exhausted trying to jump through hoops with local governments for rights of way, pole attachments and more. Then there was the matter of the electric companies who also own poles. And finally dealing with the ILEC, who also owns poles, and who along with cable was suing to slow it down. Louisville being a good example.
Google Fiber reminds me a lot of Covad and the DLECs (and Earthlink's Muni wi-fi project): Good idea, poor execution, no telco experience, learning the lessons all CLECs know the hard way: ILECs will screw you to hamper competition. So will cable. Monopoly mentality just can't be changed.
It would be nice if the copper plant could be rolled up into a nationwide REIT (similar to CS&L), so that EoC, DSL and T1s could still be utilized by alternative carriers. It is the one thing that other CLECs find a use for XO: EoC. We'll see how it plays out.
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