Telco Troubles, Clec Version

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Telco Troubles, Clec Version

You forget how many CLECs there are in the US until you check a PUC list like Texas.

The big names in the channel are Birch, Level3, Zayo, EarthLink, TelePacific, XO, WIND, Integra, Mettel, Granite, Bullseye, C-Link, AireSpring, Broadview, GTT. Lot of varying business models in that list alone.

The copper retirement issue is front and center for CLECs (see this Fierce piece). So what happens when the CLECs ink a customer;, order copper; fight the ILEC; finally turn up EoC for the customer; fix the EoC so the customer gets speeds it purchased;and then the retirement notice comes in with 30 days. What happens next?

Many CLECs buy from the APEX program at AT&T. Basically we have come full circle as we are back to UNE-P. In UNE-P, the entire product (for voice) came from the ILEC. The CLEC was just sales, marketing and re-billing. Then UNE-P went away. So did many CLECs. Some went facilities based, filling up central offices with gear to offer DSL, voice, T1s and EoC.

Now we are back at the CLEC just reselling the AT&T product, whether that is as a mobile MVNO or as ASE (ethernet over fiber product) or straight DIA resale. Margins go back to being slim. CLECs are just sales and marketing.

The big difference this time isn't just data being the primary product instead of voice. The big difference is that the price of bandwidth keeps dropping, faster than the contract length.

EarthLink is one of the few CLECs who have really tried to pivot. Execution is everything though.

Icahn put some money into XO finally to beef up old network parts. It isn't likely that this was just lipstick on a pig because no one thinks Carl will actually sell XO.

Level3 seemed to right its financial ship with the TWT purchase. Yeah! Finally. We will see how long that lasts as again pricing pressure will have a ripple effect.

Zayo seems to have the magic touch right now. Congrats, Dan! They churn people because most don't like the meat grinder atmosphere but it is getting results. As they buy Allstream in Canada and Latisys, Onvoy gets bought by PE firm, GTCR.

The jury is out o GTT. We'll watch them in 2016.

Bullseye, Granite, Mettel and Birch are all taking paths away from POTS. They better hurry. Time is running out. Also, deals with Frontier are harder than deals with the RBOCs.

The cloud and fiber are the only saving grace to CLECs. It is a huge change of direction, especially for sales. There are other interesting avenues to pursue and other ways to pivot that could work, including going vertical instead of horizontal.

We'll see what the year brings.

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