Category: CLEC

Competitive Providers, Hosted VoIP, and Old World Thinking

The ranks of telecom carriers not offering Hosted VoIP decreased by one today.  Integra Telecom, a CLEC with TDM roots, launched its Hosted VoIP offering, further augmenting its current voice service portfolio.  Like many established CLECs born in the pre-Internet era, Integra’s voice services have been largely provided over the Class 5 circuit-based infrastructure it has built over the years.  These companies are still making the transition to the new communications world centered around IP technology.  Those slower to offer a full suite of IP-based communications services risk losing wallet share as business customers increasingly push for them.

Integra’s deployment of its new softswitch platform – provided by Metaswitch Networks – opens a number of opportunities for it to pursue.  While the company is a regionally-focused carrier based in the Northwest US, it is pushing to extend its reach beyond these confines.  Regional carriers have found it challenging to win multi-location enterprise accounts without nationwide reach.  Integra’s newly installed Hosted VoIP platform allows it to plug this hole on the voice side and begins to set the stage for the company to move further up-market.

Like most other CLECs, though, Integra is tying its Hosted VoIP and local access services together.  The end results is a step in the right direction – deploying another set of IP-based services – being hindered by old telecom world thinking.


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Conference Season Fall 2012

The Fall 2012 Conference and Trade Show season is about to ramp up and many of us will hit the road shortly to begin the rounds.  Around this time we field a fairly steady of questions about the “best” conferences to attend.  “Best” is, of course, highly subjective and, depending on one’s objectives, there are a number of excellent shows to attend that will hit this mark.  Rather than attempting to discuss each of the conferences coming up, we’ll be presenting some insights in a series of blogs on the ones we’ll be attending.  Here’s a quick run down on some of the conferences we’ll be attending this Fall and that may be of interest to readers:

Feel free to post the conferences you’ll be attending and any particular insights you’d like to share on them.  Fellow readers will appreciate it.

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Microwave backhaul underestimated in fiber’s shadow

“Backhaul requires a fiber fix,” this video tells us, a sentiment echoed by its subject: no less an authority on fiber than an executive from a backhaul provider with fiber in its name.

But while fiber is front and center in wireless backhaul requirements, wireless microwave technologies are also often required to reach cell sites that can’t cost-effectively be reached by fiber. You may not hear as much about it because companies that use a mix of fiber and microwave — like Allied Fiber and Intellifiber — don’t put the word “microwave” in their names and prefer to be known for their most prized product. Quietly, though, it’s a sizable chunk of the backhaul space: Southeastern backhaul provider TowerCloud, for example, serves 80% of its sites with fiber and 20% with microwave.

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Telecom M&A shifts from fiber to cloud

At the CompTel Plus show this week, I was reminded of the prediction made at last year’s show that 2010 would represent something of a volume peak for fiber-based mergers and acquisitions. That prediction appears to have been borne out, with dealmakers reporting this week that, even assuming some more transactions before the holidays, fiber M&A in 2011 will be “not even close” to the volume seen in 2010. There simply aren’t as many assets left on the market these days.

As my hastily assembled list indicates, telecom M&A in 2011 shifted more toward cloud-centric services, including hosted communications, particularly after the starting gun of Verizon’s (VZ) $1.4-billion acquisition of Terremark Worldwide in January. (Yes, I know: This list is far from exhaustive. Please feel free to harangue me about the ones I omitted in the Comments section below.) Cloud M&A will continue to hold the spotlight for some time (more on those trends here and here), but even large-scale fiber M&A hasn’t closed its curtains yet; expectations for cable MSOs to buy nationwide fiber networks continue to grow as trade associations lobby regulators for a green light to such deals.

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Frontier’s next big move

Amid a wave of cloud-centric M&A from historically rural carriers large and small – CenturyLink’s (CTL) acquisition of Savvis, Windstream’s (WIN) purchase of Hosted Solutions, TDS Telecom’s (TDS) VISI deal – one carrier we haven’t seen make a cloud acquisition yet is Frontier Communications (FTR). That’s primarily for the obvious reason that Frontier currently has its hands full digesting its last acquisitionVerizon (VZ) wireline properties in 14 states – which closed at the beginning of last year’s third quarter.

As with any telecom carrier, key to Frontier’s success is its penetration of business customers, which contribute 51% of its revenue. But attacking that market – or even retaining it — while assimilating Verizon’s properties has not been easy for Frontier, and the next nine months will be a crucial period for it to make progress.

Before Frontier acquired it, Verizon’s business it was losing about 30,000 access lines per quarter on the business side alone (nearly quadruple that on the residential side). In the long months leading up to the acquisition’s close, as both companies plodded through a politicized regulatory approval process, Frontier could only stand by and watch as cable companies (Comcast [CMCSA] in particular) pilfered those Verizon customers, easily spreading fears that the transition to Frontier would create the kind of horrible service headaches that FairPoint Communications (FRP) saw when it executed a similar deal. (That’s another reason why Frontier had to make the integration of these assets its sole focus throughout this transition before tackling any other new initiatives.)

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When call analytics become more valuable than calls

When will we reach the point at which the value of a voice call is eclipsed by the value of the data surrounding the call?

Businesses are rapidly learning how valuable call metrics are to their operations in multiple ways: Knowing how the length and volume of customer service calls can be affected by the particular customer service rep, the particular customer, the particular topic or circumstances, time of day, etc. – all of these things can help businesses optimize their processes and keep customers happier.

The more call data is unleashed, the more businesses and service providers will learn about how best to harness it. And more data is being unleashed all the time. This week Google added its Voice service to those included in its Takeout offering, which allows users to download data associated with services like Gmail and Google+’s social app, Circles. So now Google Voice users will be able to download their call history, voicemail (both audio and transcripts), greetings, recordings and so on.

Google has long offered APIs for its services that allow others to cultivate and process data surrounding their use. Various developers have created mashup apps for tracking call data through Google Analytics. And Google also offers call metrics with its AdWords advertising service, so that users can measure the effectiveness of ads by looking at the number of people who place calls through the ads. But that application serves Google’s ad sales (as a sort of ad-spend-ROI calculator) more than it serves users’ own direct needs.

What may turn out to be especially valuable about Takeout for Google Voice is its

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Voice over LTE a hard sell to enterprise

Mobile operators are having trouble casting 4G technologies as business services, according to a recent survey of nearly 40 mobile operators worldwide (conducted by mobileSQUARED for softswitch vendor Broadsoft [BSFT]), in which the bulk of respondents admitted they were ill-prepared to offer LTE as an enterprise solution.

With LTE deployments underway and voice-over-LTE expected to emerge domestically starting in 2012-2013, major U.S. mobile operators have the potential to disrupt much of the broadband and communications landscape. And the privileged position of AT&T (T) and Verizon (VZ) as both wireless and wireline providers gives them the opportunity to offer fixed-mobile convergence (FMC) services that competitors would find hard to match. Those offerings might be quite compelling to a lot of small businesses, but at the enterprise level, the value breaks down for several reasons, including the lack of uniformity among mobile devices and services among enterprise employees and the gap between carriers’ mobile and enterprise divisions. Those issues complicate enterprise VoLTE as well.

“There is still too much emphasis placed on retail and mobility offerings with little investment or support for enterprise customers,” the survey said.

That disconnect creates opportunity

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What happens when telecoms and cloud service providers can’t get along?

As cloud services snowball, they will place increasing strain on today’s telecom networks (in fact, the outlook is worse than you think; read this), putting their own performance quality in peril. The rockier things get, the more tempting it will be for telecom service providers and cloud service providers to pin the blame on one another in the public’s eye.

You can already see tensions starting to simmer: Netflix (NFLX) just updated the ranking of service providers it commenced after the high-profile spat between its CDN provider, Level 3 Communications (LVLT), and its competitor, Comcast (CMCSA). Though the ranking has the ironic side-effect of exonerating second-place Comcast, the message isn’t subtle: Carriers who displease us will be publicly shamed. And it comes from a company that produces 20% of all peak-time Internet traffic just by streaming a portion of its content online.

Telecom network providers, meanwhile, have their own complaints. At the Open Mobile Summit in London this month, some of Europe’s largest mobile operators called out app makers for clogging up their networks with excessive signaling – i.e., messages that update the current activity of the app are being sent too frequently. App makers are naturally incentivized to keep their apps chatting but less concerned about how that affects entire networks. So what are network owners to do?

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Zayo: Wireless backhaul demand now 31 Mbps per tenant

Just a quick look at bandwidth demand growth in wireless backhaul. Zayo, which serves a lot of tier-two and tier-three markets, says demand for bandwidth per tower tenant has grown to 31 Mbps in the first quarter from 19 Mbps a year earlier. (And in Zayo’s footprint, each tower has an average of 1.5 tenants.)

On a conference call today, Zayo executives pointed out the amount of bandwidth actually consumed at these towers could be increasing at a more significant rate, as service providers try to order more capacity than they think they’ll use. But of course, when it comes to wireless bandwidth consumption, predicting future demand ain’t easy. With runaway innovation in the mobile Internet world these days, projecting future growth is NOT as simple as extrapolating recent and current trends. NPRG illuminated this important issue in our recent report, The Mobile Traffic Deluge, which is now available for purchase and immediate download.

Here’s another example of the lack of certainty surrounding what lies ahead for mobile backhaul: Just last week, executives at Windstream (which, like Zayo, serves a lot of secondary and tertiary markets) called the fiber-to-the-tower business a two- to three-year opporunity that would likely be completely “extinguished” by 2014 as wireless operators complete their 4G network upgrades. However, today Zayo’s CEO Dan Caruso countered that assessment, predicting a “longer-term dynamic” that comes in “phases.” Just as carriers are asking for 20 Mpbs, 50 Mpbs and 100 Mpbs for towers that once held just a few T-1s as the first iPhones were hitting stores, he said, carriers may need big bandwidth upgrades a few years from now where not much need exists today. And it will be easier to cost-justify fiber to those locations because the rollouts that backhaul providers are making today will put fiber that much closer to them. “I’m not so sure there won’t be a steady diet of opportunity for the next several years,” Caruso said.

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Wireless backhaul demand surprises again; What if everything we know is wrong?

The wireless backhaul market continues to surprise.

The latest example: Windstream (WIN) has now doubled the amount it expects to spend this year on fiber to the tower (FTTT), raising its estimates from the $50-million range to the $100-million range. That will boost its total capex by 16% to 29% over 2010 and put its FTTT spend at about 16% to 17% of its total capex as a company.

This is despite the fact that Windstream does not anticipate any change to its expectations of flat or slightly negative revenue growth this year. Because FTTT deployments typically take 9 to 12 months, revenue likely won’t show up meaningfully until next year. But the investment has to be made now. FTTT is a short-term “land grab,” as Windstream describes it, a 2-to-3-year opportunity that will peak in 2012, decline in 2013 and probably be “extinguished” completely in 2014 as carriers complete their 4G network rollouts. That’s why the company is willing to put in the upfront investment now despite having already shelled out a great deal of capital lately on acquisitions. And it’s worth it; according to Windstream: Margins for FTTT services are above 90%.

Windstream isn’t alone in ramping up spending on FTTT. Earlier this year, CenturyLink (CTL) raised its capex by about $135 million over last year’s level in order to make its own land grab. And that was before the company closed its acquisition of Qwest. With that deal now complete, the company could easily be spending more than $300 million on backhaul this year. (The legacy CenturyLink side is spending about $180 million this year on FTTT, and legacy Qwest is spending $300 million on a mix of FTTT and fiber-to-the-node.)

But here’s a question for everyone chasing the wireless backhaul market: Given that Windstream underestimated, by half, the amount of backhaul demand it would see this year, to what extent will the backhaul market continue to surprise those serving it?

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