found this this morning. Does it add or detract from the discussion ???
redherring.com
Rise of the access agnostic
By Phil Harvey
Redherring.com, June 08, 2000
ATLANTA -- As voice and data networks come closer together,
executives here at Supercomm 2000 expect that the fight to provide
basic communication services to consumers and businesses will
become broader and bloodier.
The ultimate goal for service providers -- including companies as
diverse as incumbent local exchange carriers (ILECs, such as Bell
Atlantic (NYSE: BEL)), competitive local exchange carriers (CLECs,
such as Nextlink (Nasdaq: NXLK)), Internet service providers (ISPs,
such as Earthlink (Nasdaq: ELNK)), and Internet portals (such as
Yahoo (Nasdaq: YHOO)) -- will be to "own" a customer by providing
several kinds of services under one bill.
But more and more customers won't care how a service provider
enables such things as high-speed Net access, long-distance calling,
online data storage, Web hosting, and other services. What will matter
is how reliable such services are and how easy it will be to add or
subtract bandwidth, phone lines, and other things from a menu.
This will require quite a change in mentality from what the Bell System
companies allowed, says Nancy Gofus, Nextlink's chief marketing
officer. "Our customers shouldn't have to check with us before they
acquire another company or expand. We should be able to turn on
services as quickly as they need them."
Naturally, with such a broad cross-section of firms wading into this
services pond, the differences between one provider and another
won't become transparent overnight. "It takes a different set of skills
to build a network than to run a Web site," says "Ranger" Royce
Holland, CEO of Allegiance Telecom (Nasdaq: ALGX).
But it will eventually mean that, as so often happens in the tech
industry, the better-managed plan will trump any argument over which
last-mile access technology is better.
THE AGNOSTIC LAST MILE
While quite a lot of the end game for service providers is up in the air,
a couple of basic themes developed among the executives surveyed
for this article. First, nearly every one of them uses the term
"technology agnostic" to describe their strategy for providing network
access to customers.
Additionally, service providers say they're moving to offer whatever
kind of access -- be it fixed wireless, fiber, laser, or DSL -- is needed
to win accounts. "Instead of worrying about the last mile, they're
trying to go the extra mile," says Thomas U. Koll, vice president of
Microsoft (Nasdaq: MSFT)'s Network Solutions Group.
What was once seen as a key differentiator among service providers is
becoming less significant. The attitude now is that if a service provider
can't provide a few different kinds of last-mile access, it won't be able
to serve the broadest number of customers possible.
Even Robert Knowling, the CEO and chief hell-raiser at Covad (Nasdaq:
COVD), a CLEC that sells DSL access to other service providers, says
his company's future lies in being a global broadband provider, not just
a DSL company. He said that within the next couple of years, Covad
intends either to invest in or to acquire the assets to make that
happen.
FROM WHOLESALE TO RETAIL
Another common thread here is the belief that wholesale bandwidth
providers, such as Covad, Rhythms Netconnections (Nasdaq: RTHM),
and others, will see increasing pressure to augment their wholesale
Net access model by also selling directly to consumers. Without a
direct connection to consumers, these providers miss being able to
pass along retail markup prices, and they miss the chance to sell other
network services. "In the future, if you're not a retail player, you're
probably going to be acquired," says Mr. Holland. "Wholesale is a good
business, but you just don't own the customer."
It's noteworthy that Covad started out as a retail DSL provider but,
under the guidance of Mr. Knowling, switched to the wholesale model
and saw its business grow more quickly. Certainly Covad's momentum
is testament that, if being in retail is vital, it won't become as
apparent until Net access becomes more of a commodity.
Besides, for a DSL-only service provider, a far worse position may be
that of having to buy from a wholesaler such as Covad and reselling
DSL access to consumers. If those firms aren't able to offer some
high-margin services quickly, we'll see a huge shakeout, says Ken
Feldman, president and founder of Airpower Communications, a Los
Angeles-based broadband provider.
BREAKING THE ILEC SHACKLES
Service providers here are also scrambling to build enough of their
networks so that they're as truly independent from the incumbent
carriers as possible. Instead of renting real estate in ILECs' central
offices, the newest service providers are housing equipment in
colocation facilities and data centers.
For example, Vince Rocca, 2nd Century Networks's chief technology
officer, says about two-thirds of the cost of his company's network
comes from equipment that's set up at the customers' premises. While
this model requires that 2nd Century buy and resell wholesale Net
access from another firm, it also means 2nd Century is not paying for
a network until a customer is under contract.
Moreover, Mr. Rocca explains, 2nd Century's plan is to offer services
as far-reaching as remote desktop PC management and applications
hosting, thanks to a server that's installed at the customer's site. It's
no wonder companies previously associated with the enterprise, such
as Dell Computer (Nasdaq: DELL), Intel (Nasdaq: INTC) and Microsoft,
have taken an equity stake in 2nd Century.
VOICE AND DATA
Perhaps the most interesting point of all this is that as networks begin
to treat voice and data the same, service providers, no matter what
their technology underpinnings, will more outwardly resemble one
another. Even Microsoft's MSN Internet access service will soon offer
broadband services and, probably, voice-over-IP.
But Microsoft won't be viewed as a competitor to most of the service
providers' efforts. Indeed, most of the new service providers are
choosing to chase the small to midsized business market, leaving the
ILEC monopolies uncontested in the consumer and Fortune 500
market.
So with all the vetting about how difficult ILECs are to deal with -- Mr.
Knowling affectionately calls them "incompetent and anticompetitive"
-- the only real competition for the ILECs comes from AT&T (NYSE: T)
as it bypasses their central offices with cable acquisitions.
As service providers begin to forfeit cosmetic differences for the sake
of serving as many customers as possible, telling them apart becomes
tricky, but not impossible.
Mr. Holland says the best way is to bet on the jockey, not the horse.
"What will really make a difference isn't the technology, its
management execution and the management's ability to get access to
capital. And you either have both, or you've got nothing." |
