E-Channel: Internet Spawns an Alternative Telecom Channel

Posted: 10/2000

Internet Spawns an Alternative Telecom Channel
By Bruce Christian

Point. Click. Reach a new marketplace. All those promises from telecom executives of new “e-commerce strategies” are coming to fruition, and a new, alternative channel for distributing products and services has been born on the Internet.

“When we introduced our site in January of last year, there weren’t a lot of people doing web-based telecom,” says Tom
Kilcoyne, president and CEO of Simplexity Inc. (www.simplexity.com). “People still were focusing on B2B [business to business], so we were somewhat unique when we launched.”

It was unique and noticed.

“Carriers look at it and say, ‘It could be a beneficial channel for us,'” Kilcoyne says.

It may be beneficial because the programs are designed simply enough that a residential end user or a mom-and-pop shop owner can order and change all their telecom needs without taking their hands off their
mouses.

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Yet the solutions are created to ensure all the service providers’ questions are answered–right up to difficult billing and bundling concerns.

And using the Internet as a channel has caught the attention of industry analysts. The Yankee Group
(www.yankeegroup.com) and Forrester Research Inc.
(www.forrester.com) already have done research on telecom e-business potential.

Virtually every major telecom company that responded to a Yankee Group survey says it plans to launch its e-business strategies this year.

The Yankee Group also says it has found plenty of companies looking to get into telecom e-business.

The Forrester Research data predicts that online telecom distribution will reach about $47 billion during the next three years.

The Forrester report, Buying Into Telecom Online, states: “By 2002, there will be no reason not to buy online. Some customers will insist on it–or go elsewhere.”

That report may be one reason Kilcoyne says using the Internet as a distribution channel is inevitable.

“It is not a question of if, but when, and more specifically, how quickly. I think it is ironic the people who build the backbone for the Internet are the slower to actually adopt it, but I think that won’t last long.

“By 2002, two-thirds of the small-business customers will be buying some telecom over the Internet,” Kilcoyne predicts.

Backing up Kilcoyne’s observation is a recent American Management Systems Inc.
(www.ams.com) study that finds fewer than 2 percent of service providers currently use the Internet as a sales tool.

TeleGea.com’s
(www.telegea.com) vice president of sales and marketing Kevin Martini says that figure will change.

“We view the Internet as a better way to target, sell and deliver telecommunications services to a broad range of customers,” Martini says. “The unique nature of a lot of telecom services allows them to exist ‘out there’ in a logical inventory standpoint.”

Martini explains that because the telecom industry offers services with no physical inventory associated with them, the Internet creates “sort of a natural synergy” for it.

“If Heinz could figure out a way to turn catsup into ones and zeros and zip it over
the web, they would do it,” Martini says. “The beauty of telecommunications services is that you can do that, and we have built solutions to help telecom companies do that.”

The Internet as a distribution channel for telecom services has three major advantages for carriers, Martini says. They are:

* The Internet provides a truly global marketplace;

* The Internet increases customer retention, because carriers get a “touch point” with the customer they didn’t previously have; and

* The Internet can reduce costs associated with reaching potential new customers.

“You don’t have the high costs of telemarketing services, direct sales forces, brick-and-mortar call centers, and in some cases these third-party resellers and retailers,” Martini says.

Still, it takes people willing to point and click to make it successful. According to Kilcoyne, that is why the e-business model is an efficient one.

When buyers of services do it themselves, there is less chance for miscommunicating the needs through resellers or agents, he explains.

Kilcoyne acknowledges major telecom players have their own direct channels, may have agreements with resellers or agents and have their own websites–some using TeleGea.com’s solutions.

“We really are an adjunct,” Kilcoyne says. “For us, we are an additional way to generate customers [for carriers]. What we bring to the table, not only the distribution channel, but through our partnering … through our marketing, we strive to generate a customer base.

“Putting a website up is relatively easy. Putting up a website and getting customers to come to that site and make a purchase is challenging,” Kilcoyne says.

For
Simplexity, which targets small and medium-sized businesses, that means partnering with
companies such as Intuit Inc. (www.intuit.com) or key associations such as the National Federation of Independent Businesses
(NFIB, www.nfib.com). Once it has a partner, Simplexity then builds relationships with that entity’s customer or membership base.

Some carriers do have concerns with the growing trend. That is because firms such as Simplexity or TeleBright.com Inc.
(www.telebright.com) offer their potential customers side-by-side “apples-to-apples” comparisons of several carriers.

TeleBright.com’s founder, president and CEO Chet Thaker explains services like his do the work for small businesses.

“Our experts can help them choose the right service options from among the widest assortment of service options available in one place,” Thaker says.

He adds that as small businesses see their telecom needs increase, they increasingly turn to the Internet for help.

Kilcoyne adds, “Our research shows customers certainly are concerned about price–but only as part of the mix. The reality is they need information about the services. They want to have the ability to see choice, and to make a choice.”

Using the Internet as a channel is simple. The customer completes a simple profile, which is “bounced” off the company’s database of available plans. The computer selects plans that best suit the customer’s profile and presents them in side-by-side comparison within seconds.

Once buyers make their selection, the orders are delivered online.

In Martini’s words, the process “levels the playing field” by making a small carrier in an urban Kentucky town as likely to get the customer’s business as a major international carrier.

Kilcoyne adds that he expects e-business growth to have little effect on traditional alternative channels.

In fact, he says e-channels could be a big advantage for independent agents, who really should have a website “to be able to spread the wealth.”

Kilcoyne explains the traditional agent market has focused on long distance.

“As a marketplace, we have voice, wireless, web hosting, ISPs, and soon we will add bundling and local.”

An agent who offers those services through the Internet can move into a “more balanced book of business, which of course includes data services,” Kilcoyne says.

Martini agrees that while an e-channel may appear to be a threat to the other alternative channels, they really all can work mouse in hand.

“You really do [need resellers and agents],” Martini says. “When you look at the web, how you generate traffic to your site is through relationships–third-party relationships. You create what is called an affiliate network.

“Really, that is what telecommunications companies have done today. They have created an affiliate network outside the Internet with resellers and agents. The beauty about bringing those relationships online is the carrier now will get a little more close-up look at what the end customer is buying,” Martini says.