Paul Riss interview.
Death of UNEP Driving Switch, Carrier Sales
Randy Barrett - 9/21/2004
The death of a key regulated wholesale telecom pricing regime is creating opportunities for carriers and switch makers who see a chance to fill the vacuum.
The Unbundled Network Element Platform, or UNE-P, price controls will disappear by the middle of 2005, leaving many competitive local exchange carriers facing much higher network costs from incumbent carriers. Some are now moving to buy their own switches to avail themselves of regulated pricing under the UNE-Line pricing structure, or as a stepping stone to VoIP services.
MetaSwitch of Alameda, Calif., has seen a big surge in inquiries about its Class-5 soft switch. “We’re seeing strong interest,” said Vice President of Marketing Andy Randall. “It has been a big driver for us for the last few months.”
Calabasas, Calif.-based Tekelec is also seeing an uptick in CLEC interest and is reorienting its marketing to take advantage of companies trying to replace their UNE-P services. The company offers a family of software switches ranging $250,000 to $500,000 that can handle both standard telephone lines and VoIP services.
“There is a demand there,” said Carl Crawford, director of
marketing for Tekelec. “We are just getting out and formalizing our place in the market.”
It’s not a moment too soon. CLECs are moving fast to
reposition themselves in a post-UNE-P world. North Hollywood, Calif.-based PCS1 has made the decision to become facilities-based and is close to buying switches to serve its 100,000 small-business customers.
“Our plan is to roll out facilities,” says PCS1 Operations Manager Josh Ploude who is looking over several products
that offer both circuit and IP switching to provide a migration path to future VoIP services.
MetaSwitch’s products, which range from $200,000 to $500,000, provide circuit and IP switching and Randall says CLEC customers aren’t blinking at the price tags: “They realize they have to do something now.”
Wholesale carriers are also moving in to offer UNE-P alternatives. On Sept. 13, Global Internetworking of Vienna, Va., announced a replacement service for CLECs seeking new, reasonably priced transit and bandwidth.
“We think UNE-L, loop and transport [regulated pricing] is going away,” said Andrew Goldsmith, vice president of marketing and strategic planning for Global Internetworking. “Our service won’t be as cheap as UNE rates, but it will be far less expensive than what [carriers] would have to pay under the Special Access Tariff.”
Goldsmith says the new offering will be 20 percent to 50 percent cheaper than what the regional Bells will offer.
Ironically, Global Internetworking doesn’t own its own facilities. Instead, it acts as a middle man and service provider to carriers needing quick connectivity. Goldsmith says his CLEC customers an eye on VoIP but their existing end users are still using standard telephone lines and their calls need to be handled through POTS switches.
“VoIP takes time, effort and money. Some CLECs will do it over time, some won’t,” Goldsmith says.
Even some incumbent carriers are trying to stay in the wholesale game. Qwest is marketing a new product line called Platform Plus as a replacement for UNE-P. MCI and Granite Telecom have already signed contracts under the plan Qwest says will only go up $5 over a two-year transition period.
With a growing list of alternatives, some CLECs are deciding to avoid the facilities question altogether. White Plains, NY-based eLEC Communications plans to keep using wholesalers for both switched services and VoIP.
They company has been enjoying 60 percent profit margins under UNE-P and is now shopping around for alternative carriers for its 23,000 business and residential customers.
“UNE-P has been very good to us but our costs are increasing, ” says eLEC CEO Paul Riss.
There doesn’t appear to be a dearth of suppliers. The company announced a new VoIP subsidiary called Vox Communications yesterday which runs through several wholesale providers. As well, both Broadwing and Conversent are knocking on the door to offer cheaper landline services and Riss predicts he will still be able to maintain a 50 percent profit margin in any case.
“We find that rather exciting,” he says. “The [UNE-P] rate increase with Verizon isn’t the end of the world.”
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