Qwest throws down pricing gauntlet
December 15, 1998
Network World:
Arlington, Va.
For a year now, upstart carrier Qwest
Communications has seemed the epitome of
hype - an IP renegade with apparently little
more to offer users than a
consumer-oriented voice-over-IP service in a
handful of cities.
That's all about to change.
Qwest revealed to Network World last week
a new line of enterprise services in the basic
categories favored by the Big 3 carriers:
frame relay, ATM, private lines and Internet
access.
But Qwest will offer some major twists: pure
usage-based billing, voice carriage over
packet networks, souped-up service-level
agreements (SLA) and - true to CEO Joe
Nacchio's word - much lower prices.
Qwest's account representatives have
marched into the field with eye-popping
data-service deals. The company told
Network World that it is offering T-1 frame
relay at nearly $1,100 per month less than
AT&T. Qwest says it will offer T-3 ATM ports
at about one-fourth of AT&T's price (see
graphic, page 1).
To complete users' networks, Qwest can
offer standard frame relay and ATM
permanent virtual circuits (PVC). But the
company's account representatives are
pushing an alternative: switched virtual
circuits (SVC).
These circuits, which larger carriers have for
the most part avoided, eliminate the need to
preprovision paths between network nodes.
And SVCs make it possible for any corporate
site to send data or voice traffic to any
other site without prepaying a monthly fixed
circuit charge.
For SVCs, Qwest will charge simply for the
amount of traffic sent, ranging from less than
1 cent to 4 cents per megabyte across a full
spectrum of eight quality-of-service classes
of frame relay and ATM service (see graphic,
page 65).
Despite the pricing advantage, users,
analysts and Qwest officials agree the carrier
faces an uphill battle to dislodge AT&T, MCI
WorldCom and Sprint from enterprise
accounts with long-term contracts.
"The costs are really, dramatically low," says
Jim Mercer, IT director at Gerald Metals, a
commodities trading and distribution company
based in Stamford, Conn. "But I wouldn't
jump on it right away. I'd have to do a pilot."
"The dollar amount will really pique people's
interest," adds Tom Walton, president of
Walton and Walton Associates, a network
consultant and integrator based in Richmond,
Va. "But I don't think anybody is going to
just fall over, even if they brought it in for
half the price or one-third the price."
If price won't swing it, maybe expertise will.
Qwest has been raiding talent from Sprint
and MCI WorldCom's large base of network
engineers, especially in the Washington, D.C.
area near Qwest's data-services network
operations center (NOC). Qwest will be
heavily promoting the experience of these
engineers.
IP to hype, frame to sell
From the beginning, Qwest has marketed
itself as a next-generation IP carrier and has
crowed about its massive 18,449-route-mile
SONET network, which is capable of carrying
aggregate traffic at 2.5G bit/sec OC-48
speeds now, and will be capable of 10G
bit/sec OC-192 speeds in the future.
But that image has masked the fact that
from a switching standpoint, Qwest really
has two domestic networks - one based on
IP routing and one based on frame and ATM
switching. And it's the second nonpure IP
network that Qwest is currently using to
deliver enterprise services.
The Qwest frame/ATM network consists of
28 switching locations, each equipped with
Ascend 500 ATM and Ascend 9000 frame
relay switches, managed by Qwest
technicians at NOCs here and in Dublin, Ohio.
By contrast, the IP network, consisting of 17
locations that are being outfitted with
Cisco's GSR 12000 super-fast routing
switches, is still a work in progress. Qwest is
currently selling dedicated Internet access
but does not plan dial-up access or an IP
virtual private network (VPN) service until
sometime next year.
Because of the dual frame relay/ATM
capability, users can choose frame relay for
some sites and ATM for others and still
maintain a single WAN, says Mack Greene,
Qwest's director of product marketing for
frame relay, ATM and private lines. From the
start, the network supports not only the five
standard ATM service classes but also three
classes of frame relay.
If a user chooses traditional frame relay
PVCs, each PVC is assigned one of three
classes of service. The premium type, called
Variable Frame Rate (VFR) real time, takes
priority over others in case of congestion,
and is designed for applications such as SNA.
The second type, Variable Frame Rate
non-real time, takes ordinary priority and is
designed for LAN interconnection. The final
type, Unspecified Frame Rate (UFR), is more
of a best-effort circuit for lower priority
applications.
PVC prices will vary accordingly. For every 8K
bit/sec of committed information rate -
guaranteed bandwidth that can't be
squeezed if the network gets congested -
users will pay $8 per month for VFR real time,
$6 for VFR non-real time and $4 for UFR.
The five standard types of ATM PVCs -
ranging from a private-line emulation circuit
known as constant bit rate (CBR) down to a
best-effort circuit known as unspecified bit
rate (UBR) - will also vary in price. CBR will
cost $4.50 per month per 8K bit/sec of
reserved bandwidth, while UBR will cost only
50 cents per 8K bit/sec.
Mixed blessings
But for users who are willing to choose SVCs,
the prices are strictly usage-based. That can
be a mixed blessing, according to some
analysts.
"I have my doubts about the usefulness of
either SVCs or usage-based billing," says
Johna Johnson, vice president for global
networking strategies at META Group, a
consultancy in Stamford, Conn. "The nice
thing about frame relay is that you know
exactly what you're going to pay month by
month."
Qwest officials acknowledge that the
usage-based billing could make some users
nervous. "They're concerned about the cash
register being open until the end of the
month," Qwest's Greene says.
To sweeten the pot, Qwest sales
representatives have been given a special
promotion to wave in users' faces. For
customers who agree to try frame relay
SVCs, Qwest will provide the first 100G bytes
of traffic free for each of the first three
months of a service term. Those who pick
ATM SVCs will get 1,000G bytes free for
each of the first three months.
Several customers pointed out that because
most companies would try any service before
installing it, the promotion may mean that
the entire first three months' usage is free
except for port charges.
And part of the idea behind the promotion is
to give users a chance to see their usage
patterns risk-free for a few months so
they're not hit with sticker shock later,
Greene says.
Big advantage
Users who employ SVCs to get the free
traffic may see another big advantage. Often
the only traffic traveling between branch
offices is voice, while data travels exclusively
from branch to data center. That's not
usually enough of a justification to install
PVCs between branches and pay the fixed
monthly fee.
So users can employ Qwest's SVCs for
intracompany voice calls among branch
offices without having to prepay for a
branch-to-branch PVC that might not be
used for anything else. And because Qwest
charges by the megabyte, Greene claims
that with 8K bit/ sec compressed voice on
Qwest's ATM service, employees can talk for
17 minutes for less than 1 cent.
For conservative users, Qwest has a
traditional VPN circuit-switched voice
service, which carries a traditional
per-minute toll charge. But the company will
let users decide whether to pay regular tolls
or eliminate them by placing phone calls over
the data network. Some users find that
enticing.
"I think that's a better approach," says Jeff
Hafer, manager of telecom engineering for
GPU Energy, a power company based in
Reading, Pa. "The tendency is that when a
vendor is pushing you in a certain direction it
has nothing else to offer." With Qwest "you
feel more like there's nothing hidden behind
the curtain," Hafer adds.
Supplementing the frame and ATM offers will
be an SLA that offers data-throughput
guarantees that vary by class of service
(see graphic, this page).
But some prospective operational issues may
trip up Qwest's efforts.
One Atlanta-area AT&T user says he's
concerned that if he puts voice on Qwest
frame relay or ATM SVCs, he will have
difficulty figuring out how to charge the
expenses back to departments. "I can't
imagine what my tables would look like to
charge back to my users," he says. "Part of
what we've worked for with AT&T is
simplification in pricing. Qwest's
class-of-service and usage-based pricing
doesn't do that."
Catching up
Qwest is also starting out behind the Big 3
carriers in other areas. For example, Qwest
does not yet have any of its own
managed-router or managed frame relay
access device programs, in which the carrier
takes responsibility for configuring and
maintaining the user's WAN equipment.
One way Qwest hopes to catch up to the Big
3 in managed services and certain
performance-monitoring activities is with an
aggressive hiring program that so far has hit
the big carriers where they live.
Sprint has proven a particularly fertile
hunting ground for Qwest headhunters. It all
started last year when Qwest hired Paul
Nemirovsky as vice president of data
services, after he had spent 15 years at
Sprint and its affiliates, most recently the
international alliance Global One. Since then,
Nemirovsky estimates that 50 to 70
employees or full-time contractors have
come over to Qwest from Sprint and Global
One.
Why? At Qwest "there's more appreciation of
their technical skills and less of the red
tape," Nemirovsky says. "There's more
freedom to do what people enjoy, and see
the results of their work." |
