Special Access NPRM

This little baby almost snuck by me today!

11/05/2009. PARTIES ASKED TO COMMENT ON ANALYTICAL FRAMEWORK NECESSARY TO RESOLVE ISSUES IN THE SPECIAL ACCESS NPRM. (DA No. 09-2388). (Dkt No 05-25 ). WCB Contact: Marvin Sacks at 202-418-2017.

In the Special Access NPRM (Notice of Proposed Rulemaking), the FCC is examining the current state of competition for special access facilities and if the current FCC pricing flexibility rules have worked as intended.

Also, price cap rates: are they just and reasonable?

Revenues Up for Most

8x8 is doing well. See here.

TWT has another profitable quarter. See here.

Cbeyond had a so-so quarter. See here.

One Reseller Down

Phone+ is reporting that transit/transport reseller WBS Connect was bought by GTT. Yeah, I know. Who is GTT? Pink sheet company. Apparently, with only $28M in revenue and 900 customers it was a deal for GTT who is issuing stock over six months, paying in seller notes, some cash and assuming debts.

Maybe if WBS Connect was undercutting every deal I saw in 2009, they woulod have had more revenue. Anyway, good luck Scott!

I wonder what happens to PrimaCloud, the cloud product out of WBS. Also, what happens to the video conferencing H.264 exchange that WBS was touting in 1Q09.

From Phone+, GTT wanted the revenue, the 900 customers, and the Channel network. Here's the funny thing about both the Nuvox and WBS Channel: they both can only sell on price, so you are taking over a bunch of order-takers. You could replace that with an online tool.

ILEC Buys CLEC

In a move that has some scratching their heads, Windstream (formerly Alltel) bought Nuvox (formerly FDN and NewSouth). The price: $643 million (mainly stock) for 90,000 customers - that's $7100 per customer (or $198 per month per customer for 36 months).

This isn't a new adventure for Windstream. When they bought CTC, they acquired some CLEC assets. Windstream may be thinking that it isn't likely to increase revenue within its footprint, so go B2B as a CLEC to take some revenue from Ma Bell.

From the WSJ: "For privately held NuVox, Windstream will pay $280 million in cash, issue $183 million in stock and assume $180 million in debt. The company plans to use its existing cash and tap its revolving credit line to fund the deal."

WHY?

My best guess: Windstream and other ILECs have declining revenue and increased competition from MSO's. So by buying a CLEC outside its region, it gets access to Business customers and a new revenue stream. It couldn't buy cellular spectrum and build out for $643M. Phone+ says that it wanted access to the Channel program.

The Channel

Nuvox sells underwater and pays out 12-18%. More than its margins really. (Explains how debt went from $78M to $180M). So either pricing has to go up or agents get paid less - or both. Either way agents are going to take a beating. And probably so are the customers since pricing can't remain that low for long. Why?

The Fairpoint Effect.

Fairpoint filed bankruptcy less than 2 years after taking over VZ's rural landline business in New England. It wants to reneg on merger conditions and shave off more than $1B in debt. This will make it harder for other ILEC's to get debt financing for mergers, expansion, upgrades, fiber, payroll and benefits. (Frontier must be sweating.)

Google Voice Over 1M

Google Voice has more than 1M customers. I read 1.2 and 1.4 - call it 1.3M.

BusinessWeek writes: "In its correspondence with the FCC, Google also reveals several companies that help it provide Google Voice. The list includes fiber-optic network operators Level 3 Communications (LVLT) and Global Crossing (GLBC). It also mentions Broadvox Communications, Bandwidth.com, and Pac-West Telecomm. IBasis (IBAS) is responsible for connecting outbound international calls on Google Voice and Neustar (NSR) provides "porting and carrier lookup services," Google says in the letter. Syniverse Technologies (SVR) provides the free text-messaging service."

By the way, GV is only blocking about 100 numbers to Independent exchanges that are traffic pumping.

Earthlink Dropping But So What

EarthLink's revenue is doing the same thing as Sprint revenue and subscriber counts - dropping. But while Sprint is in free fall, ELN knew that it was going to lose customers - dial-up and broadband. Apparently New Edge Networks isn't bringing in enough revenue to make up for the losses. I would suggest that it never will. DSL is such a low margin business especially when you consider the infrastructure expense for nationwide footprint.

"The company’s total customer base fell from over three million at the end of September 2008 to 2.3 million a year later. Of these, 832,000 retail customers were contracted to broadband services at the end of Q309, down from 845,000 three months earlier." 3Q09 revenue is down to $174.5M (24%) according to Telegeography. Fierce points out that the revenue has dipped to $174.5M from $185.6M last quarter and $230.8M in the same quarter last year.

Meanwhile, Sprint has lost money and subscribers again. According to reports, "The Overland Park, Kan.-based company said it lost $478 million in the quarter, compared to a $326 million loss in the same period of 2008. ... It also said it lost 545,000 subscribers, including 801,000 postpaid customers who sign annual contracts -- an improvement over the 1.3 million loss in the third quarter last year." Hoo boy.

BTW, Level3 revenue dropped as well. 3Q08 revnue was $916M in 3Q09; $1.07 billion for 3Q08 and $942M in 2Q09. The net loss for 3Q09 was $170M, $129M loss in 3Q08 and $134M in 2Q09 -- so revenue dropping, prices declining, and losses increasing. Oops!

Qwest was profitable but its revenue dipped 6% to about $1B. The big news is: "The company lost 328,000 customers during the quarter". "Qwest is the fourth-largest phone provider behind Century­Link with roughly 7 million lines at the end of the quarter, down 12 percent from last year."

Fairpoint in Bankruptcy. Qwest dipping. Without cellular spectrum to help stem the landline losses, ILECs are in trouble. Consumer pressure from DirecTV and Cable bundles are hurting revenue and landline losses. And fiber is needed to compete. An expensive proposition. Gary Kim suggests that some of them just go after Business clients.

Telco revenue seems to be on the decline overall - except of course for the iPhone network and its twin.

Lifetime Value of the Customer

Do you know your churn number? If you do, then you can estimate the lifetime value of your customer. (It's different for each service).

One thing about the LCV is that it demonstrates Customer Loyalty. If you have customers for 3 years at $50 per month, then the LCV is $50 times 36 or $1800. If your margins are 50%, that means you made $900 off that customer contract. It's a good number to know because if you are paying referral fees or sales commissions, it comes out of the $1800 somewhere. (Companies calculate Cost of Goods & Services Delivered separately than Cost of Sales sometimes).

Here's a good article on Calculating LCV. To that author, this calculation is so that you can determine "What Should You Spend to Acquire a Customer?" Customer Acquisition costs are important too.

In my case, if I go to a conference and sign up a client, then my customer acquisition cost is the cost of that conference (hotel, airfare, conference costs, food and beverage) - about $1500. I need to make $3000 from that customer to make it worth while.

No one enjoys doing these numbers, so make your CPA calculate it for you at least once so you have a baseline to figure out what products you make money on and what once you don't.

Update: Harvard Biz has a flash based calculator for Lifetime Customer Value here.

Knowing Your Numbers

Understanding True Costs True costs are an important calculation for pricing in order that services are not priced below the actual costs of providing those services. Recently, in discussions with quite a few ISPs, it was brought to my attention that the numbers they were using as a basis for pricing were incomplete. Here is an examination of factors that can influence the true costs of goods.

Costs to consider when calculating the true costs of providing DSL service

• ATM
• DSL circuit
• taxes
• IP Bandwidth
• Router equipment lease
• CPE
• Installation of DSL circuit
• Truck roll
• Credit card charges
• Bad debt (1.5 - 3%)
• Billing ($1.50 - $3)
• Customer Acquisition
• Marketing, Advertising & Sales budget
• Referral payments
• Payroll for sales, customer service, admin, tech
• Tech support costs including phones, PBX, desks, PCs
• Mail server
• USENET service
• RADIUS
• Collocation
• Rent, electric, utilities
• Backup Dial-up account
• ATM circuit install
• Profit margin
• Back office (rent, office equipment, software, phones, utilities)

If you were pricing out wireless access, there are similar factors, plus:

• insurance
• tower climbing
• tower rental
• IP or connectivity to tower
• radios & CPE
• financing
• truck roll
• tools & extra equipment

Need someone to go over the numbers with you? Call RAD-INFO for a True Costs Tune-Up today at 813.963.5884. (This was originally printed on my website in 2004)

Get Beyond Price

Over and over I hear from ISP's (and VoIP Providers) that they need the cheapest rate, so that they can keep their prices low. In some cases, that low price is actually costing you more than you think.

If your service provider for Hosted PBX or SIP termination or LNP or Internet Backbone or MPLS has issues, they affect you and your customers. It affects your Brand.

Do you value your time? If so, that means that perhaps the cheapest wasn't the cheapest after you spend hours dealing with billing, provisioning and repair issues.

Do you value your customer? Do they need outages? Or crappy service?

Do you even know what your real costs are?

What is your Customer Acquisition cost?

What is the Lifetime Value of your Customer?

Do you understand your true costs for providing the service?

AT&T did a study: it costs $30 to handle a customer service call. Remember when Sprint fired the 1000+ customers in 2007? Because they were losing money. If a $100 customer calls in 3 times in a month, you made $10.

I know why many of you want low price: It's easier to sell. Especially without a sales team. But the fact is that if you aren't actively selling your service (and people are just finding you) price probably wasn't their main factor, so you actually gave money away.

I get there is price pressure, but you have to be realistic about your market. You aren't looking for thousands and thousands. Most of you are only invoicing about 2000 customers. That's it. You only need 2000.

When you were winning customers in the days of dial-up, you did it with a yellow page ad - because you offered something unique. Think about that. Something unique. Are you doing that today?

Trends in Telecom: Where's the Money?

When I was in Atlanta for the master agent show 2 weeks ago, I moderated a panel about the trends in telecom: Where's the Money for Agents in 2010 and beyond? These slides represent the 3 technologies that will likely pay dividends: Ubiquitous Broadband, QOS, and Apps.

Sprint is pushing M2M cellular data in the form of EVDO backup for DSL and calble modem access. Also, machine-to-machine access like security cameras, MIMO cellular broadband sharing router, and of course the Kindle from Amazon.

Ubiquitous broadband means that the public can access data and apps from any where at any time. Smartphones are pushing networks to the limit (ask AT&T). But wi-fi access and data cards (EVDO) are helping the mobile workforce work any where and access data and apps.

Now the ASP model fell apart - too early, not enough broadband penetration. But the new ASP model, SAAS (software-as-a-service) is picking up steam with SalesForce.com, Google Apps, and Hosted PBX leading the charge.

But all of this data in The Cloud means that networks need to prioritize data for access. Obviously, VoIP and Video need to have QOS (quality of service) or COS (class of service) tagging to meet real-time needs, but email and web surfing can be de-prioritized. Access to databases is another data stream that may need to be prioritized. You will need WAN Optimization gear (like Riverbed) to insure packet prioritization. But what about end to end QOS? Or securing that data stream (as per PCI Compliance)? Well, then you will to be utilizing an MPLS network for traffic segmentation. That's where New Edge and MegaPath see themselves making a splash. IP-VPN still works as well.

So broadband means access to apps; access to apps means QOS is needed. It's a nice circle.

Simple Bundles by Qwest

One thing discussed on the panel at Broadsoft was that Bundles need to be targeted at a market segment.

The other key is that for small business, you have to take away all the tech. Make it simple.

Qwest announced a simple small business bundle today. When Qwest surveyed its small business marketplace, "Qwest asked small-business owners what they thought about the IT and communication services they use and it heard the same answer again and again: “It’s complicated.”"

"Qwest is tackling the issue with something called the Core Connect bundle, tailored for small businesses, that lives up to its name. The bundle offers core connectivity needs, including high-speed Internet, phone, business e-mail and a business Web site, out of the box."

The Qwest Core Connect Solution includes:

• Phone service with up to 15 calling features
• Unlimited local and nationwide long-distance calls
• Several choices of high-speed Internet connection speeds, up to 20mbps (12mbps and 20 mbps speed tiers are available only in select areas)
• 5GB of Web hosting storage
• Access to Web design templates
• Up to a 10-page Web site, including search engine optimization (SEO)
• Custom e-mail that employees can access from anywhere they have Internet access
• Domain name and registration with Microsoft Exchange e-mail activation
• 24/7 technical support

I don't get the SEO part because that's not something you "add on" but the rest is the same simple bundle the RBOC's have used for a long time. Go figure. What does your small business bundle look like?

Mass Marketing Doesn't Work for You

Mass Marketing doesn't work for you. For a couple of reasons, like you don't have millions to spend on it; you don't spend $250,000 for the ad copy; and you aren't mailing out tens of thousands weekly in repetition.

Hence, you need to target your offer and your ad to the exact segment of your marketplace that you are marketing to.