The Networkologist

More Telecom Options, Not Better Prices

Businesses are focused on the connectivity concerns of linking the last of their remote offices to headquarters over higher-speed lines and bringing the increasing numbers of mobile and home-based workers into the enterprise loop. And they are focused on the newfound challenge of connecting their business partners and suppliers to their enterprise networks. The realization of these connections is predicated on the ubiquity of a relatively inexpensive global communications infrastructure. Standing in the way is the simple fact that users and client/server applications seem to have a glutton's appetite for bandwidth--bandwidth that always seems too expensive when it's budgeting time.

The Telecommunications Act and the Internet answer the call as the next great hopes to solving the bandwidth crunch. But do they really?

At the Gartner symposium, analyst Ken McGee begged to differ with the idea that the Telecommuni cations Act is the salvation. The oft-quoted goals of the legislation--increased competition and lower cos t of service--won't necessarily be the outcome because of the increased pace of mergers and acquisitions and carriers' focus on protecting their traditional businesses. The real intent of the law, McGee says, is to change the decades-old telecommunications law to reduce barriers to market entry and to establish fair rules for market competition in an economy where information services, hardware and software account for 12 percent of the U.S. gross domestic product. The upshot of the eventual competition means that telecom customers have an opportunity to spend their money with different players.

"For the next three years, carriers first will protect their historical market; second, go after competition; and third, develop new services," McGee says.

Clearly, organizations will have a new set of service providers to choose from, which will change after each spate of mergers and acquisitions. But who gets what? Gartner has found that its client base shows little resistance to having a current regional h olding company (RHC) provide not only local service, network access and intra-local access transport area (LATA) service, but also inter-LATA service. In contrast, Gartner asked its clients if they would want their current interexchange carriers (IXCs) to deliver their current set of services, and add network access, local service and intra-LATA service to the mix. According to Gartner, while few clients objected to having IXCs deliver network access and intra-LATA services, they wholeheartedly objected to having their local services provided by IXCs.

Gartner predicts that few organizations will change providers for local phone service. But given the general dissatisfaction with dealing with different providers for different services, Gartner forecasts that the regional holding companies will take $5 billion of the inter-LATA business from the IXCs over the next six years.

According to McGee, more ca rriers are increasingly using "lock-in" strategies of seemingly attractive prices and very long-term contracts. About a third of the session attendees acknowledged that their carrier representatives had approached them with such a deal. You, of course, don't know if it's a deal until long after the contract ink has dried.

For the savvy negotiator, the opportunity for good deals lies ahead. If you can arrange your carrier service contracts to terminate at the time when RHCs and IXCs are permitted on each others' turf, then you stand in better negotiating position. Issue competitive bids for all aspects of your telecom services, including ones you typically don't bid, such as inter-LATA. Understand your tariff level rates, not just the discount rate but the ultimate rate. Understand how much you're really paying to support those scads of remote users and work-at-home users. Maybe the increased competition will provide the market dynamics that will enable this ubiquitous communications infrastructure upon which will ride your business partner networks and your organization's internal information.

P atricia Schnaidt can be reached at pschnaidt@nwc.com.