Posted: 11/1999

Everybody Loves Data
By James R. Dukart

As data applications proliferate, networks expand and
employees and business partners become increasingly dispersed, companies are hot for data,
opening up vibrant new markets for resellers.

It may not be the title of a hit sitcom just yet, but talk to enough resellers and
wholesalers and you will soon find out–it seems "Everybody Loves Data."

This means data services, that is–be they dedicated private line, frame relay, virtual
private network (VPN) services or the true data apple of most customer’s eyes, Internet
protocol (IP) services. As data applications proliferate, networks expand and employees
and business partners become increasingly dispersed, companies are hot for data, opening
up vibrant new markets for resellers.

In a recent study of more than 500 resellers, for instance, Boston-based market
research firm Atlantic-ACM Inc. found that 40 percent of resellers plan to offer at least
some form of digital subscriber line (DSL) services by next year. Thirty-five percent plan
to offer IP telephony, and 28 percent say they will be offering dedicated Internet access
and/or VPN services. Even data services on the lower end of Atlantic-ACM’s
findings–enhanced fax and frame relay–were cited by nearly a quarter of respondents as
services they expect to have by 2000.

"Internet services just have to be there," says Wona Park, analyst in long
distance reselling for Atlantic-ACM. "They are a key to bundled packaging. We have
seen explosive demand for data services."

"Our data business is growing by more than 600 percent per year," says
Anthony J. Palma, vice president for carrier services at Frontier Communications,
Rochester, N.Y., which recently was acquired by Global Crossing Ltd., Hamilton, Bermuda.
"We have a large base of resellers and carriers and their business customers are
clamoring for data services." Palma says Frontier has announced several new
data-centric programs this year, and has seen strong growth in each.

In April, Frontier announced its CarrierConnect program, offering direct connectivity
to the Internet at DS-1, fractional and full DS-3 and OC-3 speeds. The service runs on the
carrier’s 20,000-route mile Optronics Network, serving 120 major U.S. markets with 22
private peering and more than 75 tier 1 public peering points. The network also includes
geographically distributed Media Distribution Centers (MDCs) that provide 24/7/365
e-commerce services and support, including domain name and IP address registration
support, network management, news feeds, e-mail, list server and bulletin board services.

More recently, the company announced a partnership called Ready, Set, Connect! with
Cisco Systems Inc., San Jose, Calif. Under the partnership, Frontier will continue
offering Internet access services, bandwidth and training support, while Cisco will
provide routers, DSL and VPN equipment as well as local area network (LAN) switches and
other customer premises equipment (CPE) such as voice over IP (VoIP) gateways.

Both programs, Palma says, point out that not only is demand for data growing, but
carriers are focusing more on delivery mechanisms rather than simply on product. When it
comes to selling data, he says, resellers often need more help than with voice. "It’s
not as simple as slapping data products out in the marketplace," Palma says.
"Some of our resellers are facing a learning curve to move into the data space."

That learning curve includes differentiating between the various types of data services
offered by wholesalers and choosing the right ones for each end-user customer. Steve
Yoder, manager of product life cycle at Williams Communications Solutions, Tulsa, Okla.,
says private line continues to be the "simplest, easiest" offering to sell, but
sees frame relay as a "heavy hitter moving forward," along with asynchronous
transfer mode (ATM). IP, he says, promises to be the star of the future. A key Williams
data services offering is its ISP Transit Service, launched in January and granting access
at T1, T3 and OC-3 speeds, along with operations support, flexible bandwidth options and
geographic diversity. The company is planning to launch its wholesale dedicated Internet
access product this fall.

On the frame relay side, Williams offers out-of-region frame to augment a carrier’s
existing network and dedicated end-to-end frame. Enhanced services include Flex-CIR, a
system that allows customers to reserve bandwidth on a time-of-day/day-of-week basis, as
well as frame-to-ATM networking. Frame, Yoder says, will continue to be a strong wholesale
offering, particularly as its "next generation" comes along, which Yoder says
will include different classes of service, end-to-end service level agreements (SLAs) and
switched virtual circuits (SVCs).

Sprint Corp. remains more sold on IP than frame. "The hot service is IP, always
IP," says Martha Begraw, group manager for data products at Sprint Wholesale’s Small
Business Products Management Group in Kansas City, Mo. Sprint began offering wholesale
data services last year, and late in the year added a wholesale frame relay product.
"We were very optimistic about frame, and although it is meeting our initial
expectations, IP is definitely exceeding them," Begraw says. The key drivers behind
increased demand for IP, she says, include the proliferation of new Internet appliances
and increased small business interest in data applications.

Begraw says Sprint’s reseller base is still heavily voice-centric, but that she expects
data to become an increasing portion of the company’s wholesale portfolio in the years to
come. "Data reselling is vibrant and growing," she says. "We sell a very
small percentage in data now, but I expect that to at least double in the next several
years. Meanwhile, the voice growth rate is trudging along."

Resellers Get On Board

TMC Communications Inc., Santa Barbara, Calif., is the type of reseller that is likely
to buy more data services from a Sprint, Frontier or Williams over the next several years.
Charlie Naulty, vice president of sales for TMC, says the main thing resellers need to do
now is beef up their own expertise in data to provide effective solutions for customers.
"A lot of the challenge is education to the end users and also to the sales
agents," Naulty says. "Companies need data training programs for agents to help
them understand what data applications can do and what they are selling."

Resellers that try to compete head-on with carriers on data sales, Naulty says, likely
will be at a significant disadvantage. "They [the carriers] have huge back offices
and have four or five data people," Naulty says. "Resellers should be focused on
the customer end, qualifying their clients to see what needs they have."

Graph: Percentage of Long Distance Providers Expecting To Offer Data
Services by 2000

Naulty says TMC sees healthy growth in the frame relay market, and suggests the target
market is defined by companies that currently have multiple LANs or multiple private
lines, are geographically dispersed and have changing bandwidth and connectivity
requirements. Engineering firms, factories, clinics and hospitals and universities are
among the clients TMC lists as frame relay target markets. Naulty estimates that TMC sales
are still split roughly 60/40 between voice and data, but that data may overtake voice by
the end of this year or early next year. "Voice is still king because people don’t
understand what data does," Naulty says. "But data has really grown over the
past six months or last year."

Al Lello, president of Millville, N.J.-based reseller Comanco Communications, also sees
big growth in data resale opportunities, pointing to frame as an attractive alternative to
private lines for smaller or mid-sized companies. In the longer term, Lello says, expect
to see more IP and ATM services offered by today’s voice resellers, and watch for more
resellers scrambling to train sales staff to sell data more effectively. "Right now,
many of the long distance resellers are looking at data as a secondary solution,"
Lello says. "But that will change. The company that does not provide a full data
solution will simply be exposing its business to someone else."

Atlantic-ACM’s Park says the chief concern of resellers going into the data resale
business is the intervention of local exchange carriers (LECs). If incumbent voice
providers are allowed to leverage their incumbency to provide a wide range of data
services, she says, margins on data may shrink quickly. That, she says, makes it all the
more important that those who want to have a data play to roll out data services soon, to
stave off future competition.

Even those who have not gotten full data religion yet appear to be listening. Mark
Jowziak, CEO of voice reseller Access One Inc., Chicago, calls his company "a bunch
of minute guys," but says it is time the company looked into data services too.
"We should go after it," Jowziak says of data sales. "We have not pushed
our agents or our internal people to proactively do this, but we need to advertise that we
have data, and for your data needs, call us."

James R. Dukart is a freelance writer based in Minneapolis. He can be reached at [email protected]