reseller channel: Piecing Together Nationwide Local Service

By Khali Henderson

While some may argue there have been efforts on the M&A and regulatory fronts to put telecoms Humpty Dumpty back together again, complete nationwide local service from a single provider remains largely elusive save recent offers from resellers that piece together top CLEC and ILEC footprints.

AireSpring Inc. is one of the latest resellers to announce it is assembling a nationwide local offer. The company launched in mid-September its Unified National Local Network service, which in its debut form offers service covering 65 markets in 42 states.

In addition to a standing agreement with XO Communications Inc., AireSpring recently added MCI Inc. and Broadwing Communications Inc. (formerly the Focal network) as its underlying local service providers. Daniel Lonstein, senior vice president of marketing for AireSpring, says the company plans to close agreements with two or three additional CLECs as well.

AireSpring joins a small club of resellers that are piecing together national local service territories using both ILEC and CLEC networks. AireSprings offer different from its predecessors, however, in that it was not built on UNE-P, the local resale platform offered by the RBOCs under regulatory conditions extending from the Telecommunications Act of 1996. UNE-P is being phased out as a regulated product the final deadline for converting traffic off UNE-P contracts is March 2006 and resellers have had to negotiate commercial agreements or move their traffic to their own facilities or those of other CLECs. After the spring deadline, UNE-P resellers that do not negotiate new contracts will pay higher rates to the Bells under total service resale, also known as TSR, regulations.

Metropolitan Telecommunications, better known as MetTel, is basing its new national local service on commercial contracts with the Bell companies BellSouth Corp., Qwest Communications International Inc., SBC Communications Inc. and Verizon Communications Inc. The company formerly resold UNE-P in Verizon and BellSouth territories as well as a few SBC states. Now the company has added agreements with Qwest and the complete SBC footprint in order to offer local services nationwide by the end of 2005. The company also is looking at some independent operating companies to fill in some gaps, says company spokesperson Sue Salmansohn. She says MetTel is on track to meet the year-end deadline and is awaiting regulatory certifications in a few additional states.

MetTel is following a model pioneered by other UNE-P resellers, such as BullsEye Telecom Inc., another of the few to have negotiated commercial agreements with all four Bell companies. The deals enable BullsEye to continue to offer Corporate Advantage, a national local service for multilocation clients that it has marketed since June 2003, says Tim Basa, vice president of sales for BullsEye Telecom. Basa says the company now provides local service in the 48 contiguous states under commercial UNE-P and total service resale agreements. It also works with Sprint in offnet locations. CLECs are used on an individual case basis where price, features, redundancy or customer preference (not geography) require, he adds.

Ernest Communications Inc. and Granite Telecommunications Inc. also early this year replaced their UNE-P contracts with commercial agreements with the Bells. Neither resell any CLEC facilities, but instead fill in the gaps in the Bell networks with IOC facilities. Granite has been working with Sprint for about a year, and CEO Rob Hale says he expects resale deals with three to five more IOCs to be completed by Jan. 1, 2006. We cover 94 percent of America. Our customers wanted us to take care of the other 6 percent, says Hale, explaining the expansion of its offering. Granite offers service in 49 states all but Alaska.

Ernest Communications does not maintain formal agreements with the IOCs, says Jay Morris, senior vice president for the company. Instead, he says, it receives the paper bills the customer normally would get from the IOC and rekeys the data into its billing systems as part of its service to multilocation clients. This approach allows it to be the only local service provider to offer 100 percent coverage in all 50 states, says Morris, explaining while most customers are 70 percent to 90 percent on-net, all companies have locations within IOC regions. The companys motto is, No line left behind.

THE BIG PICTURE

The value proposition for nationwide local service providers is fairly straightforward.

We feel that as a reseller we can offer not just better pricing, but a value-add over a facilities-based carrier with only one network by combining multiple networks into a virtual network both on the longdistance and the local side, explains AireSprings Lonstein.

He adds with the expanded local footprint, AireSpring has won a bid for a multilocation hotel chain. By combining the local footprints we were able to really offer more than any other carrier could individually, he says. Because we combined them all and could give them one bill, one single point of contact, then it was very attractive to them.

Most resellers offer services at a discount off rates offered by the RBOCs. At Granite, that is about 20 percent off rack rates. It also sells without term and volume contracts, says Hale, noting that it is confident in the value it provides to its target customers.

Ernest Communications offers another option a blended rate across a state, region or even its entire footprint. While this could be risky for Ernest Communications should a customer open many new offices in highcost areas, Morris says, so far that hasnt happened and its benefit keeping customers loyal has proved out.

While cost savings on services certainly can be a driver for businesses, where they are looking to cut expenses is in the staff required to manage numerous carriers and locations.

Local resellers manage hundreds or thousands of business lines across tens, hundreds or even thousands of business locations. This function extends from service ordering and trouble calls to adds, moves and changes.

Granites typical customer, for example, has anywhere from 1,000 to 3,000 locations. Think Walgreens drugstores. Who do you call? With Granite, they send an e-mail to one account manager, says Hale, explaining that that persons job is to deal with all the entities required to get service up and keep it working.

Similarly, Morris says Ernest Communications role is to reduce the number of calls its customers have to make for service or when they open new locations. In some cases, such as in IOC territories, clients may not have a track record with the telco and must provide credit verification. Ernest also handles those requests. Its not rocket science, he says. Well, maybe it is a little bit, he concedes. It took us two to three years to get it right.

Reducing the number of bills multilocation customers receive also is a primary selling point for a nationwide local service, says Morris. A good percentage of our accounts want us to ease the pain of having to go through bills and key punch them into an AP system, he says.

BullsEyes Basa says consolidated billing, in general, takes away several pain points for multilocation businesses, including fewer invoices to manage, less chance of late payment or nonpayment and fewer disconnect notices. Basa says that one of the key points for multisite clients is bringing uniformity to the billing and payment schedules and the way charges are identified and presented. Every ILEC bill looks different, he says, explaining that while one might break out Universal Service Fees, another may not. We eliminate all the funny business. We give our customers a clean bill, he says, noting that for some distributed businesses like retailers that often are not telecom savvy, this can be a significant benefit. Even for companies that employ teams of telecom or accounting professionals to analyze and audit bills, reducing the complexity of the invoices can enable them to redeploy staff to other tasks, he says.

BullsEye Telecom offers custom billing packages to subscribers of its Corporate Advantage service. Customers get an MBA My BullsEye Account login to see their call detail and access preprogrammed and custom reports. Basa says most customers opt for customized view of their usage and charges. They are able to slice the billing data by location, usage type, exceptions or other criteria as best suits their needs.

Hale says Granite also offers customers the ability to see their call detail on the Web.

And, he says, they also can download it into a file format they can manipulate. If youve got thousands of paper bills, you are struggling just to pay the bills, let alone trying to figure out what you are paying for, says Hale, noting that by running an exception report on downloaded CDRs, Granite clients can discover potential problems in less than 15 minutes.

Morris says Ernest Communications also customizes its billing information so that it can be imported directly into its customers AP systems. This approach is possible for its targets, which average 500 lines, but often have as many as 20,000 lines.

Most local service resellers offer parent-child invoicing and variations on the theme. So, the parent may get summaries of the (child) locations charges/usage along with an invoice. Or, in some instances, the locations may get a copy of the call detail. Other combinations are possible as well. Salmansohn says MetTel often bills by company division or by state (since taxes vary by state).

Filling in the Gaps

Nationwide local resellers might offer some common value propositions, but none has quite the same model.

Ernest for example, specializes in POTS lines for business with many locations but low line count — less than 10 per site. Its “sweet spot” is retail store or fast food chains, says Morris. Ernest may rebill for DSL and the occasional PRI, but it does not offer T1s. It also will provide long-distance services, but only to local subscribers, not as a standalone product. It also will not serve clients that only want Ernest to fill in the gaps left by their direct contracts with the Bells.

Granite has a similar specialty in POTS lines for business with a high location count. IT also provides long-distance services only to local subscribers, and will resell DSL from the Bell company.

BullsEye, on the other hand, only offers service as a bundle of local and long-distance service. It offers several pricing plans to fit usage patterns. It resells DSL and also TI services. Its ideal customer is 500 lines or greater, but it has customers ranging in size from 100 to 8,000 lines. In 2006, BullsEye’s multisite clients will be able to add VoIP services into the mix at various corporate locations. Basa says Fusion, BullsEye’s VoIP service is operational in its home state of Michigan and will be nationwide in 2006.

MetTel serves SMBs and enterprise clients and offers a full complement of voice and data services above and beyond POTS lines. It resells DSL from Covad Communications Inc. and Verizon. It also offers ISDN PRIs, integrated T1s, private lines and frame relay. MetTel also is going to be rolling out VoIP trunks and hosted PBX services in the first half of 2006. Initial markets for the service, MetVoIP, in New York and New Jersey are operational today. Salmansohn says customers will be able to add VoIP at branch and remote offices as they become more comfortable with the technology.

AireSpring also is a full-service provider, bundling in a myriad of services, such as Switched and Dedicated Long Distance, Calling Cards, Integrated Access, Toll Free, International, Private Lines, DSL, T1s, Frame Relay, ATM and IP VPN. While its new unified local product has obvious applications for mutlisite clients, it also offers advantages to single site clients. “Instead of having to go to all the carriers, they can come to us and qualify them on any of the networks,” says Lonstein.