Royce on the CLEC sector

Telephony mag in an interview with Royce Holland, CEO of McLeodUSA, "foresees more consolidation for the competitive service providers, ... believing the healthier competitive industry is one that doesn't include too many companies chasing the same business. ... "I'm hopeful that consolidation will continue to gain momentum," Holland said. "The problem with the competitive industry is that it has always been way too fragmented. That is what led to industry meltdown back in the late 1990s - there were way too many companies chasing the same market opportunities. There were way too many $200 million to $700 million companies in our space. It would be much more healthy to have fewer $2 billion to $3 billion companies."

It is difficult to believe that a CLEC CEO would be saying such stuff. Competition ISN'T good? You are correct. Unless it leads to differentiation and innovation, two things that we have not seen from the CLEC sector. History shows us that big telcos choke on their own acquisitions - MCI, Intermedia, and Level3. Get Bigger to get Better! Puh-lease! Tom Peters writes: "Big Mergers don’t work. Small acquisitions can/do work—if you don’t screw with their energy." And Charles Darwin reminds us that "It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change." This Industry is changing constantly. At McLeod, Holland says: "The problem wasn't a matter of them not executing, it was that they were executing on the wrong business plan." That may be the smartest thing he said in the interview.

M&A is good for bankers, stakeholders, and the C-Level crowd cashing in options and taking packages (e.g., Royce who has now done this 3 times - Allegiance, MFS, and McLeod). But it isn't usually good for customers and agents.

It's not the size, it's the execution. Covad was small, but had serious problems with provisioning. (How many CLEC's have provisioning and billing issues? I know. A lot.) However, I have seen smaller CLEC's execute well on a narrowly defined business plan: AstroTel, Hunt Telecom, CavTel.

Tom Peters wrote In Search of Excellence in 1982, but the lessons are still valid today:

1. Have a Bias for Action;
2. Stay Close to the Customer;
3. Be Hands On, Value-Driven;
4. Stick to the Knitting;
5. Simple Form, Lean Staff; and
6. Excellence Always.

I usually boil this down to Focus, Plan and Execute. You can do anything, but not everything. These principles work - small or large. It is just very execute the larger you get.

I'll leave you with this quote from Paul Ormerod, author of Why Most Things Fail: Evolution, Extinction and Economics: "I am often asked by would-be entrepreneurs seeking escape from life within huge corporate structures, ‘How do I build a small firm for myself?’ The answer seems obvious: Buy a very large one and just wait."

FiOS quote of note

In the Herald-Tribune article about VZ giving away a TV with a 2-year FiOS triple-play contract:

"There's always specials and deals," Durkin said. "Has it risen to another level? If FiOS was all that it's cracked up to be, why would you try to entice them with a TV and try to lock them into a contract?"

Kagan is quoted as saying "Telephone and cable companies are going to start offering everything in a bundle." They have been doing this for a couple of years now - local, LD, internet and satellite TV and cellular in various (confusing) ways.

Not for nothing, Jeff, but how is it "customers will be the big winners", when "Verizon just increased the cost of its service by $5 a month, and Comcast will increase rates in Sarasota and Manatee counties by 3.2 percent as of Jan. 1"??? You "analysts" are great at giving good quote that has NOTHING to do with the market or segment you are quoted on. Good job!

Cellular, TV, Voice, and Internet Access sectors are all flattening. Just about everyone with a computer has some form of internet access. There are more cell phones than DVD players. Landlines are decreasing as people go cell-only. TV viewership is declining. (And this writer's strike did not help anyone). So the Telco says: Let's bundle them in a long term contract with good promo pricing, then add tons of fees and surcharges to make it up. Yeah, Jeff, that is GREAT for the consumer.

BTW, Ken Wieland, Editor in Chief of Telecommunications magazine, reported on a survey by KMPG that says bundling isn't working:

The results of the KPMG report shouldn’t come as a complete surprise to carriers. After all, the discount is one of the big selling points for bundled service packages. So, if triple-play packages attract mostly price conscious customers (which the KPMG survey confirms), carriers can’t expect too much loyalty based on "convenience." What surely must be depressing for carriers is how far price outweighs any other factor in consumers’ service choices. Not even extensive marketing budgets to boost a carrier’s image can alter this, it seems. "When we talk to consumers, the influence of brand is certainly not as powerful as the influence of pricing," says Carl Geppert, a KPMG partner. It also means a bundled service strategy is a dangerous one for carriers to pursue. Not only are they offering discounts, but churn, potentially, is a lot more damaging. There are now three or four services customers might abandon rather than just one. If there is little customer loyalty pay-off through discounted bundled packages, carriers seem to be running a careless risk by offering them.

Open Source Not Likely for Small Biz

Telecomweb recounts a survey that The 451 Group did on the SMB space and open-source software adoption.

The 451 Group has found that while many vendors consider small and medium-sized businesses (SMBs) to be a hot market for adopting open-source software, the SMB market opportunity for open-source software vendors actually is limited. The group, which focuses on the business of enterprise IT innovation, believes SMB customers are highly cost-conscious and generally lack the IT resources to effectively manage anything beyond the simplest open-source software. The 451 Group sees Microsoft's dominance in the SMB market as "a significant barrier for many open-source software vendors attempting to infiltrate this market, and that is unlikely to change anytime soon," adding the prevalence of Windows and Office, and the sheer number of IT experts with MCSE certification means most SMBs will continue to use the technology they know, even if that means adjusting internal business processes to meet the technology available. As such, open-source software that integrates with and supports Windows and other Microsoft products will have an advantage among SMBs.

I was at an IAMCP event last night discussing whether Web 2.0 apps and open-source like Google Apps, IBM's Lotus Symphony, OpenOffice.org would unseat Microsoft. One guy was mad I didn't agree with him -- and this survey kind of proves my point.

People do NOT like change. Most are technophobic so when they get used to something, they stick with it. UNLESS something Remarkable comes along that can unseat that anxiety, like the iPod or the DVD player.

It's a tough hump to get over - changing what people have - that's why you have to find the Pain Point. Once you isolate the Pain, you can get them open to a Solution. (Read more stuff like this in my upcoming book, SELLECOM. It is in final edit now and should be released by mid-January. Pre-order it to save $5!)

Over 200 Bidders for the 700 Auction

Auction of the 700 MHz Band Licenses; Upfront Payment Deadline Rescheduled for Jan. 4, 2008; Mock Auction Rescheduled; Status of Short-Form Applications to Participate in Auction 73. (DA No. 07-5030) The Wireless Telecommunications Bureau announces the upfront payment deadline for the auction of 700 MHz Band licenses has been changed to Jan. 4, 2008, and announces the status of applications received for Auction 73. The list of Accepted Applications are here. The list of incomplete applications includes PART-15.ORG!!!

Cellcos that are bidding, of course: VZW and Ma Bell, Alltel, Leap Wireless and MetroPCS. Not Sprint nor T-Mobile - both of whom have plenty of unused spectrum. T bought AWS spectrum and Sprint has all that 2.x WiMax spectrum for XOHM.

Towerstream, Qualcomm, Cablevision, Cox, Google, Frontline Wireless and Chevron are also bidders. (Chevron probably wants Gulf of Mexico rights). [Story on Cox bidding]. [Forbes.com on Towerstream's bid].

Mexican telecom billionaire Carlos Slim Helu is backing a firm hoping to bid. Roy Disney is also backing a bidder. Microsoft co-founder and Charter cable majority shareholder Paul Allen is also set to bid through his Vulcan Ventures investment firm. Wired.com has a story here.

In the Spirit of Christmas at the FCC

Busy day in DC. While the FCC was giving away the store to Big Media, Congress was getting ready to overhaul the FCC:

1. FCC Adopts Rules to Promote Video Programming Diversity by Ensuring New Video Programmers Can Enter and Compete in the Video Market. The Order will increase diversity in programming and choices for consumers. Adopted: 12/18/2007.
2. FCC Adopts Rules to Promote Diversification of Broadcast Ownership. Adopted Report and Order which will expand opportunities for participation in the broadcasting industry by new entrants and small businesses, including minority- and women-owned businesses, to own broadcast outlets. (Dkt No 07-294). Adopted: 12/18/2007.
3. FCC Adopts Localism Proposals to Ensure Programming is Responsive to Needs of Local Communities. The FCC took measures to help ensure that broadcast stations offer programming responsive to the needs and interests of the communities that they are licensed to serve. Adopted: 12/18/2007. ---> IOW: The FCC creates one more useless measure that it cannot enforce. But it appeases the sheeple. And they know that Big Media will tout # 4 as great and "See, we have all these new guidelines to follow." BAH!
4. FCC Adopts Revision to Newspaper/Broadcast Cross-Ownership Rule. Amended the 32-year-old absolute ban on newspaper/broadcastcross-ownership by crafting an approach that would presumptively allow a newspaper to own one TV station or one radio station in the 20 largest markets, subject to strict criteria and limitations. Adopted: 12/18/2007. IOW: Kevin Martin wishes Big Media a Happy New Year!

I guess Martin is calling Congress' bluff. We'll see next year, if that myopic excuse for a Chairman still has a job. Or if he has to cash in all of his favors to either find gainful employment with any of the many companies he helped enrich while selling America down the river with this Administration or if K-Mart starts his run at Congress.

"The 30% limit, set first in 1993 and modified in 1999, was challenged by Time Warner in 2001. The DC Circuit Court then remanded it back to the FCC seeking further justification. That remand has been pending six years at the Commission."---> 6 YEARS

The Media Ownership issue was reviewed for years as well and Overwhelmingly the public outcry was for more localism and less corporate ownership of media properties. Glad we spent so much time and money (over $1M was spent in 2007 for the local meetings) to get input that was going to be ignored.

I just wish for consistency. If you "worry" about the viability of Media Companies (since that is mainly what I hear this little weasel talk about all the time), then he should also had been worried about the viability of Small Businesses like ISP's and the mom-and-pop radio stations and newspapers trying to make headway in this country.

Sprint Names Embarq CEO as CEO

Yeah, that headline is as confusing as naming Hesse Sprint's new CEO.

This is the problem with American Telecom: They continue to rotate the same Bell-heads from executive position to executive position. (And their sycophants with them). This guy hasn't done much with wireline at Embarq in the 1.5 years he was heading that.

Hesse had literally nothing to lose in the first 6 months (starting May 2006 when Sprint spun-off Embarq). Hesse could have done anything - tried any INNOVATION. It was a free ride for 6 months. But NO! Let's go with dial-tone and DSL.

His only win (in my book) was FMC. And I wonder if that was foisted upon him by either a manufacturer or Sprint.

Now the wireline guy has to turn around a demoralized Wireless company, that has forgotten that it used to be the # 3 LD company and owns a nice Internet Backbone.

Stock went up a penny --- and I think that is as high as it will ever get.

As Predicted: Zayo Buys CityNet

The newly formed Zayo Group bought CityNet's wholesale unit, adding 8500 fiber route miles to Zayo Bandwidth, according to Telephony. This purchase follows Zayo's acquiring the following fiber assets in Tier 2 and Tier 3 markets:

1. Indiana Fiber Works,
2. Minnesota’s Onvoy,
3. Pennsylvania’s PPL Telecom,
4. Memphis Networx.

Zayo also purchased VoicePipe. "VoicePipe began as a hosted IP PBX service offering from ICG that was spun off before ICG was acquired by Level 3 last year." [Telephony] Zayo's founders are from ICG and L3.

XO Selling through Tech Data

Tech Data is a large IT distributor here in Tampa Bay. XO has announced a partnership with Tech Data, which exclaims: "XO Significantly Expands Indirect Sales Channel." "Tech Data U.S. to Offer Converged IP Voice and Data Solutions from XO Communications."

It looks like XO designed a product for the Cisco UC resellers at Tech Data: "Tech Data resellers will be able to offer a bundled solution combining XO SIP Service with Cisco Unified Communications solutions to deliver a cost-effective, feature-rich IP communications system."

XO SIP is a fully integrated solution designed to support the needs of businesses with the most demanding voice and data applications at single locations or multiple locations nationwide. The service includes a broad range of bandwidth options to maintain optimal network performance. XO SIP features include:

• Unlimited local calling
• Unlimited site to site calling for multi-location customers
• Long distance calling
• Dedicated Internet Access in speeds up to 45 Mbps with Dynamic
• Bandwidth Allocation
• Optional Voice Compression
• Online Feature Management through the XO Business Center

Since current telecom agents have no problem:

• figuring out what this SIP service is
• how to sell it
• how to describe it to the customer
• how to compare it to Dynamic T1

the VAR's at Tech Data should have no problem. I can see this being a nightmare for XO in provisioning as well as in "Returns" -- customers not getting what they thought they bought.

Hiring is tough, but so is Retention

Bryan Rader is a consultant who used to own a PCO (private cable company that provided triple play to about 10,000 MDU units). He is also president of IMCC. He has a nice article in Broadband Properties magazine about inattentive staff. Give it a read here (it's just one page).

Rust hits CopperCom

"As of December 14th , 2007, CopperCom will cut back its operation to the maintenance and support of products only. It will no longer market the CSX, CopperCommander and Switchmaxx/VoiceMaxx product lines. This decision was necessary due to the lack of demand for our products. We anticipate discontinuing our product lines, and we will provide details of these programs soon. We plan to continue to provide maintenance, support and software fixes for our products. We regret the need to implement such a decision at this time but it is necessary in the face of current and expected sales levels for our products."

CopperCom is NOT shutting down. Due to inadequate demand for our products, we are cutting back our operations to only support and maintenance at this time.

CopperCom plans to meet its warranty and support obligations. Parts and software bug fixes will continue to be available.

Synced Email is the Killer Biz App

"Webmail.us LLC, a business-class e-mail-hosting specialist and the mail division of Rackspace Managed Hosting, announced the launch of Outlook-Sync, a service that allows business email users to synchronize web-based shared calendars, contacts, and task lists with Microsoft Outlook. "Based on the Funambol open source software project, Outlook-Sync leverages SyncML wireless technology to share data between the web and Outlook. Outlook-Sync, which is installed as a plug-in to Microsoft Outlook, can increase productivity by allowing business email users to access their shared calendars, contacts, and task lists from Outlook or webmail without having to enter data into both locations."

I'm not promoting Webmail.us, but I like to see companies that have taken my advice (using Funambol and marketing Sync to business email users). It a crowded marketplace, being different means sales (if marketed and branded correctly).

Funambol is open source with a Mozilla plug-in and an iPhone portal.

There's even a decent HOWTO available.

Will DSL Go Away?

Back in September when AT&T Southeast released the new commercial agreement for DSL to the ISP's in the wholesale program, I stated that DSL may go away. I want to correct that view. It would appear that ISP's will always have the hampered access to DSL that they have now, without much hope for an upgrade path.

Offering even this limited program allows the ILECs to look good in the FCC view. "See? We do share our network. Now forbear on special access. Okay?"

With the current roll-out of Naked DSL (now bundled with AT&T Mobility service), just selling DSL to residential customers may not be enough.

It's painful, but you need to take the time to examine your business. If things are not looking great - revenues flat, churn, not excited - the fix won't be easy. But the sooner you start, the sooner you get moving.

Nothing happens in the comfort zone. All advances are made when you are Uncomfortable (outside your comfort zone).

I hope you signed the new agreement to keep the status quo.

Are you getting in your own way?

Seth Godin has 2 posts we are going to examine today.

The first is about marketing to "the most". Seth writes about a beer made by Belgium monks versus Bud. Bud is trying to sell the most beer to the most people -- it makes average beer and it makes many varieties to appeal to the "Long Tail", although that isn't why A-B does it. A-B is utilizing its facilities to capacity to put out as many beer products as necessary to retain market share. It wants to be all things to all people. (Do you see where I am going with this yet?) A-B has incremental costs to make other brands of beer. It already has the supplies, the factories, the labor, the time, the distribution system, and the marketing machine in place. What parts are you missing?

Most embraces systems and policies that make sense. But most rarely succeeds.

Seth talks about the idea of Ritual to the monks brewing beer. I would say that the human touch and the ability to fine tune an offering to each customer is what sets the Independent Service Provider apart from the Gorillas.

All too often clients want to market to everyone. That's where you directly compete with the million-dollar marketing machine. It is much better to drive deep into niches. To be the world's best in that subdivision or that neck of the woods or in delivering that specific service.

Seth writes in another post: "So, as a percentage of the time you spend at work, what percent would you say qualifies as "marketing"?"

In 2007, this was my biggest mistake. I did a lot of stuff - speak, write, blog, book, video, etc. - but didn't have an overall Marketing Plan and didn't spend enough time regularly (weekly) marketing to my audience. I was in front of them, but not with a clear message and call to action.

Seth counts marketing as: "educating yourself, networking, creating products, creating media, spending money, building networks of sneezers, inventing great stuff, executing great stuff, motivating front-line people and telling stories." How much of this are you doing?

Now here are the Questions to think about for the New Year:

Do you have a game plan for 2008?

Is it written down?

Have you shared it with your employees?

With the engine of our economy seizing up, what will you do to retain customers in 2008? What will you do to increase revenue (whether that means more customers or more ARPU)?

How many books did you read in 2007? How many will you read in 2008?

NOW the fun part: Email me your answers to these question to win a copy of my book, SELLECOM.

If you have never done this exercise, ask yourself why not. Have a nice holiday season!

Embarq needs new ideas; you too.

KansasCity.com has the headline: "Hesse says new services to determine Embarq’s future"

Seems pretty obvious to me. Same old, same old, will not work well any more. Cable is in a bloody fight with telco and DBS. Telco is in a battle with CLEC's and ISP's. Mainly it's Wall St. Growth must continue. Revenue must go up. Kind of hard in flat markets like TV, phone and Internet.

The prevailing thought about the next generation of consumers is that they won't have landlines or use a PC -- it will be devices, handsets, VoIP, cellular, and mobile.

Embarq, the nation’s fourth largest local telephone company, continues to see the telephone lines at the heart of its business erode and produce declining sales. In the third quarter, for example, sales from Embarq’s voice business dropped by 5 percent.... His company has a strategy to overcome these trends with a series of new services... For one, Embarq sells its own brand of wireless service that is closely tied to the home phones of its customers. It recently rolled out a service that uses an automated computer system to translate text messages sent on a cell phone so they can be received on a landline phone.... Embarq, which is increasingly is depending on its growing high-speed Internet business, now has a branded Web-page portal with the potential to produce online advertising and search sales.

Read the comments on this article. Apparently, layoffs -- the first salvo of the creatively challenged telco exec - has reduced morale to zero. And Hesse made $5M while laying off and losing 5% of the business. Nice.

Nourish a Newsletter with RSS

This sounds pretty neat: "Nourish is a next generation newsletter service which allows you to take any RSS feed from content you publish (like a blog), and convert it into an automated email newsletter your readers can subscribe to. We want you to focus on creating great content. We’ll take care of the rest." I'll be giving this a try soon!

NebuAd and Privacy

Targeted advertising is here. Google and others do it. Tracking cookies have been helping identify consumer trends for a while. Now CenturyTel is testing out NebuAd.

NebuAd debuted (for me any way) at ISPCON in October 2007. NebuAd's system doesn't just track what sites you visit.

But the fact that you visited a site doesn't say as much about your interests as knowing what you did there and afterward. Did you read several articles or quit halfway through one? Did you leave the site to research the topic further on a search engine? To glean those deeper insights, NebuAd installs equipment inside the facilities of Internet service providers (ISPs), which see everything their customers do online. NebuAd's boxes examine many of the sites people visit, what they do there and what they hunt for on search engines. [source ]

ISP-Planet has a write up on the company here.

CenturyTel is known to be using NebuAd. If I were competing with C-Tel for broadband subs, I would use as much FUD about privacy as I could to win customers. For example,

Why pay $10 more for OUR DSL? Isn't your privacy worth that much?

TP: 100 Ways to Succeed #98

Tom Peters writes 100 ways to Succeed on his blog. # 98 is "Relentlessly Focus on Pragmatic Actions:"

1. See the list.
2. Implement.
3. Pick one item.
4. Start today.

The list is "50 Ways to Enhance Cross-Functional Effectiveness and Deliver Speed, "Service Excellence," and "Value-added Customer 'Solutions"" (see TP's XF list here). Or implement just one idea from our list of 50 Ideas.

From TP's list of XF (cross functionality):

21. All (almost all) rewards are team rewards.

33. An "Open talent market" helps make the projects "silo-free." People want in on the project because of the opportunity to do something memorable—no one will tolerate delays based on traditional functional squabbling

The Buzz on OPEN

Om writes about the cellcos - att mobility & VZW - being OPEN. It's just spin.

Buzz words usually lead to confusion. (Like WiMax). Especially to the consumer, which I think is the point. Treat the consumer like mushrooms -- keep them in the dark and feed them manure. (Politicians and FCC officials you have to feed money).

Open doesn't mean that it is easy to use a phone you own, but that is as open as it gets in the States. Since cellular penetration is approaching 90%, it is now a flat market. Now the carriers start playing take-away.

Two things become important: Acquisition Costs and Customer Retention. Carriers don't look at Retention metrics because the Street doesn't. But that should change. Acquisition costs in a flat market are big. (Look at VZ FiOS costs to get TV customers, another flat market).

One of the biggest acquisition costs is the phone subsidy. It would make sense to let the customer buy his/her own phone. No subsidy cost.

Plus it is a "Green" maneuver. No phone added to the landfill. (Speaking to this, why doesn't every cellco recycle cell phones?)

BTW, Skype petitioned the FCC to apply the Carterphone decision to cellular networks. If Carterphone were applied, any device could be used on the cellular network.

P2P Caching

Shout out to Van at Microcorp for pointing me to UltraBand, the P2P Caching App for ISP's.

PeerApp UltraBand is built on patented P2P caching technology, which makes it possible and efficient for ISPs to serve all P2P users’ requests. UltraBand eliminates up to 80% of P2P traffic across ISPs’ networks through high-performance caching.

Since many ISP's have problems with P2P traffic clogging thier pipes, this may be a way to eliminate some of the problem. (No magic bullet, but some help is better than none. Right?)

More Than $3B in Debt

Ma Bell sold off $3B in debt, according to Reuters.

The sale included $1 billion in five-year notes yielding 1.70 percentage points over U.S. Treasuries and $2 billion in 30-year bonds yielding 2.00 percentage points more than Treasuries. The joint lead managers on the sale were Goldman Sachs, J.P. Morgan and Wachovia Bank.

With the credit crunch, you have to wonder where all these billions are coming from, from these banks.

Then Ma Bell ran out and bought another cellco:

"AT&T Inc. has announced that AT&T, through an affiliate, has entered into a definitive agreement with Edge Wireless Holding Company to acquire full ownership in Edge Wireless LLC, a regional wireless company with approximately 172,000 subscribers that operates in several markets in the Pacific Northwest." [CNN Money]

Sprint Spins Round and Round

Sprint cans its CEO. Integration with Nextel is still a mess. Revenues are down. Sprint forgot that it owns a fiber optic network. It's WiMax deal with Clearwire is called off.

Sprint rejected bail-outs from SK telecom (owners of Helio) and a private equity firm, according to Fierce. (That's a $5B investment - much needed for its WiMax build out.)

Om back in June suggested that Sprint would spin-off its WiMax project (XOHM). Fierce and InfoWeek also had stories. The stories are back (mixed with rumors of Google buying Sprint. That's wishful bankers hoping someone bites so they can make $100's of millions in fees.)

Email Archive... Lawsuits?

Data Center Journal has an article titled: "Survey Shows 1 in 5 Have Settled a Lawsuit to Avoid the Cost of Recovering & Searching emails". "As the one-year anniversary of the amended Federal Rules of Civil Procedure (FRCP) approaches on December 1, a survey of professionals directly involved in legal discovery shows that a significant number of businesses have been negatively impacted by the challenges of e-discovery. In fact, one-fifth of the professionals say their business has settled a lawsuit to avoid the cost of recovering and searching through electronic documents such as email."

• 37 percent of respondents conduct more than 21 searches through old email to gather information for legal reasons each year;
• Nearly half of respondents (40 percent ) reported that their organization searches through email five or more times each year in response to a formal legal discovery request;
• Of those who were familiar with the costs of litigation, more than half (51 percent) claimed the average cost of litigation (excluding settlement costs) was over $200,000, with 8 percent putting the average cost over $1 million.

What an opportunity to sell email archiving and more importantly retrieval!