Channel Overview/ Internetworking's Side Order Leads To
Revenue Opportunity -- DSL Provides Perfect Complement
July 7, 1998
COMPUTER RESELLER NEWS via NewsEdge
Corporation : Vendors are serving up digital subscriber
lines (DSL) as the perfect side order to internetworking
solutions.
Resellers can offer DSL as a complement to routers, said
Mark Housman, vice president of marketing for Paradyne
Corp., Largo, Fla.
"I've heard people call it the burger-and-fries concept
and, while it's not exactly there yet, it is not unlike the
situation of [the communications devices that connect
inhouse lines with high-speed lines] of a few years ago,
" he said.
The bottom line in the fiercely competitive computer
telephony business is that DSL fires up the "last mile"
for consumers, home offices and small businesses that
crave speed but do not have six-figure budgets. Perhaps
most significantly for resellers, DSL represents a revenue
opportunity to combat falling margins and a slowdown
in corporate hardware sales. Also, the importance of
processor speed is declining, with importance shifting to
the connection speed.
DSL services' business model mirrors the approach used
successfully with cellular phones. DSL vendors provide
the modem at little or no cost and make money on the
service. Vendors seem to be emphasizing this model to
combat resistance to DSL from RBOCs that are afraid of
cannibalizing sales of their extremely profitable
high-speed services. In this hardware-giveaway model,
resellers either partner with a competitive local exchange
carrier (CLEC), which provides the DSL service, or
become a CLEC themselves.
The other approach-the so-called real-estate
plan-typically focuses on large institutions with private
phone systems, such as universities, governments and
apartment or office complexes. In this case, since the
institution owns or operates the "last mile," a reseller
does a large-scale installation.
With the exception of PairGain Technologies Inc.,
Tustin, Calif., resellers should expect middling margins
on the actual DSL modems, with most profits coming
from either the DSL service or from the installation.
Given the immaturity of DSL in North America, margins
quoted by vendors are in some cases little more than
educated guesses. Most vendors in this roundup also
suggested channel programs may be revised or scrapped
entirely as telcos embrace DSL and the technology
migrates from CAP- to DMT-based modems.
Here are the highlights of the channel programs:
-3Com: Through training and other channel programs,
the Santa Clara, Calif.-based networking giant is
marketing its DSL modems as adjuncts to its existing
product line. 3Com works with six partners to push its
modems mainly into CLECs and private networks,
particularly hotels. The company sees the greatest
growth coming from a new line of DMT-based modems,
which it plans to bundle in partnership with RBOCs.
-AG Communication Systems: This Phoenix-based
company is working with resellers to skim the top of the
market, mainly businesses that cannot afford a T-1 line
or want to move to a more attractively priced service.
Using the real-estate model, the company focuses on
partnering with a handful of computer telephony VARs.
AG offers extensive, prepackaged marketing and sales
assistance, but does not assist VARs seeking to set up a
CLEC.
-Northern Telecom Ltd.: Arguably taking the most
aggressive approach, the Toronto-based company
embraces both the cellular-phone and real-estate models
with its unusual 1-Mbps DSL modem that is priced
comparably with 56-Kbps modems. The company helps
resellers become CLECs, which then partner with retail
stores by bundling services with the modem. In the
real-estate model, Nortel works with VARs to target
universities, which then lease the units to end users.
Nortel recently acquired Bay Networks Inc., Santa Clara,
Calif., in part to beef up its channel organization. Nortel
is the only vendor currently offering a metallic loop test,
which checks a line instantly for DSL capability.
-PairGain: Taking a strict business-to-business
approach, PairGain positions its DSL products as an
extension of the LAN and targets niches such as
government (particularly the military), campuses and
hospitals. Unlike most vendors, PairGain expects
resellers to earn most margins on the sale of the modem;
the company does not emphasize CLECs or the
cell-phone model. PairGain provides additional discounts
after VARs complete four days of training, and the
company provides sales representatives for joint calls.
-Paradyne: One of only two vendors in this roundup to
sell exclusively indirect, the company offers the most
extensive array of services to resellers, including
assistance in becoming a CLEC, matching VARs with
CLECs, DSL starter kits, and various volume incentives
and priority technical assistance. Paradyne's primary
focus is working outside the telco realm with resellers
and CLECs who have access to private copper. The
company plans to unveil an online certification program
for DSL soon.
Copyright - 1998 CMP Media Inc.
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[Copyright 1998, CMP Publications] |
