Wholesale - Universal Access Says Resale Model is Possibility

Posted: 05/2001

Wholesale

Universal Access Says Resale Model is
Possibility
UTXs Offer Remedy for Last-Mile
Headache, Off-Net Hassles
By Josh Long

Universal Access Inc. (www.universalaccess.net)
is doing what many resellers consider one of the most frustrating tasks in the
business–delivering circuits on time.

Now, executives for the Chicago-based research and infrastructure business
say, resellers could access their services to rapidly deliver private line
circuits while conserving staff, avoiding volume commitments and diminishing the
number of carrier relationships. Ultimately, resellers could earn money faster,
a top executive says.

An official resale program has not been launched. However, the company is
mulling the development of a program.

"I would encourage people to actively contact myself or the
company," says Chris Kelly, vice president of global development for
Universal Access.

With 15 facilities enabling carriers to access other networks and an
inclusive database containing information on the whereabouts and capacity of
infrastructure throughout the nation, Universal Access provides carriers with an
end-to-end provisioning and consolidated billing service. The company stitches
together local loops and metropolitan and long-haul networks to deliver private
lines by partnering with some 80 carriers. A circuit is provisioned and managed
throughout its life, and customers receive one bill. Yankee Group analyst Seth
Libby says the company essentially acts as an alternative distribution channel
for the carriers.

Universal Access investigates where carriers operate a network and the
availability of capacity on a specific route before sending a potential client a
quote. In the company’s Universal Transport Exchange (UTX) facilities, carrier
networks intersect in metropolitan hubs.

Private line resellers could outsource their full provisioning needs to
Universal Access. Some resellers interviewed said they would be interested in
finding a solution to quickly provision the last mile and off-net circuits.

Jeff Elkins, president and CEO of Danville, Calif.-based CalTech
International Telecom Corp. (www.citc.com), a
switchless private line reseller, says the company does not have a problem with
provisioning circuits on a long-haul network. "The last mile is killing
us," he says. "There is a tremendous amount of bandwidth being laid in
the ground, and within the next couple of years, all this fiber is going to be
available. So that is not going to be causing much of the problem."

Elkins says it could take between two weeks and three months to provision a
private-line circuit. The reseller is at the mercy of the incumbent, he says,
and the incumbents have limited resources and a reputation for being slow.

Universal Access can provision a circuit twice as fast as a carrier, Kelly
says. Last year the company provisioned circuits 60 percent faster than the
industry average, according to Taher Bouzayen, senior analyst for wholesale and
broadband markets for Boston-based consulting firm Atlantic-ACM Inc. (www.atlantic-acm.com).
The industry average to turn up a T1 is 65-70 days, according to Atlantic-ACM
research. Universal Access did it in 50 to 51 days, the analyst says. The
company also provisioned an optical carrier (OC) circuit in 110 business
days–twice as fast as the industry average, Bouzayen says.

On the long-haul end, several factors can impede the provisioning of a
circuit. Such impediments include equipment delays and a backlog in orders, says
Libby. When carriers rely on another wholesaler to light a circuit for their
customer in a regional area, that can hold up the project as well, he says.

Kelly says that even if Universal Access cannot provision a circuit faster
than a reseller in a particular circumstance, the company’s personnel and
database resources would save a reseller the hassles and staff required to
arrange activation of a circuit. Such expenses are hidden, he says.

Universal Access executives have made a proposal to Mount Pleasant,
S.C.-based TelecomEXPRESS (www.telecomexpress.net),
an exclusive distributor of Williams Communications’ (www.williamscommunications.com)
domestic network, which is a division of Telecom South America (www.telecomsa.com).

Universal Access has said it could provision all of the local-access
circuits, according to Karl Faller, president of Telecom Express. Telecom
Express had not signed agreements with Universal Access as of February.

"Local loop drives us batty," he says. "The biggest problem in
dealing with RBOCs is they are so huge that they give it to you when they feel
like giving it to you. You have no clout with them."

Faller adds: "Right now, provisioning the local loop is the most serious
problem we have because it holds up long-haul, it angers customers and, more
often than not, is the cause of delay for delivering a circuit on time."

Universal Access also told Telecom Express they could provision off-net
circuits, Faller says. These circuits are located on a network that the
underlying carrier–Williams Communications, in this instance–does not operate.

"We do get requests for cities that Williams does not go to,"
Faller says.

Billing itself as a value-added and end-to-end service provider, Faller says
the company must find a full solution and variably provisions a local circuit
through a regional CLEC. But that can prove difficult.

"It is a cumbersome process for us that we are not very good at,"
he says.

Analysts believe in the value of Universal Access. The Goldman Sachs Group
Inc. (www.gs.com) raised its revenue estimates
this year after Universal Access reported fourth quarter 2000 revenue of $20.3
million, exceeding estimates by 11 percent. The investment firm projects first
quarter revenue of $24.8 million and 2001 revenue of $154.8 million.

"As telcos seek ways to maximize revenue in the midst of a capex
slowdown, we believe the UAXS [Universal Access] value proposition of
accelerating circuit provisioning and time to revenue for its customers has
become increasingly important," Goldman, Sachs & Co. said in a report
prepared on Feb. 1.

A resale program could threaten to wrench away some business from
wholesalers, the clients and suppliers with whom Universal Access negotiates
business, Bouzayen says. Rather than purchasing a private line circuit from a
carrier, a reseller could outsource its needs to Universal Access. In some
instances, that could mean wholesalers–including Universal Access
customers–are losing business.

"They have to be really careful," the analyst says.

Faller says the company is putting serious thought into outsourcing some of
its private line circuits.

"We are certainly taking a hard look [at Universal Access] as a
resource, not just for local loops, but for off-net" as well, he says.