https://www.channelfutures.com/wp-content/themes/channelfutures_child/assets/images/logo/footer-new-logo.png
  • Home
  • Technologies
    • Back
    • SDN/SD-WAN
    • Cloud
    • RMM/PSA
    • Security
    • Telephony/UC/Collaboration
    • Cable
    • Mobility & Wireless
    • Fiber/Ethernet
    • Data Centers
    • Backup & Disaster Recovery
    • IoT
    • Desktop
    • Artificial Intelligence
    • Analytics
  • Strategy
    • Back
    • Mergers and Acquisitions
    • Channel Research
    • Business Models
    • Distribution
    • Technology Solutions Brokerages
    • Sales & Marketing
    • Best Practices
    • Vertical Markets
    • Regulation & Compliance
    • Diversity, Equity & Inclusion
  • MSP 501
    • Back
    • 2022 MSP 501 Rankings
    • 2022 NextGen 101 Rankings
    • MSP 501 Information Center
  • Intelligence
    • Back
    • Galleries
    • Podcasts
    • From the Industry
    • Reports/Digital Issues
    • Webinars
    • White Papers
  • Channel Futures TV
  • EMEA
  • Channel Chatter
    • Back
    • People on the Move
    • New/Changing Channel Programs
    • New Products & Services
    • Industry Honors
  • Resources
    • Back
    • Advisory Boards
    • Industry Organizations
    • Our Sponsors
    • Advertise
    • 2022 Editorial Calendar
  • Awards
    • Back
    • 2022 MSP 501
    • Channel Influencers
    • Circle of Excellence
    • DE&I 101
    • Channel Partners 101 (CP 101)
  • Events
    • Back
    • CP Conference & Expo
    • MSP Summit
    • Channel Partners Europe
    • Channel Partners Event Coverage
    • Webinars
    • Industry Events
  • About Us
  • DE&I
Channel Futures
  • NEWSLETTER
  • Home
  • Technologies
    • Back
    • SDN/SD-WAN
    • Cloud
    • RMM/PSA
    • Security
    • Telephony/UC/Collaboration
    • Cable
    • Mobility & Wireless
    • Fiber/Ethernet
    • Data Centers
    • Backup & Disaster Recovery
    • IoT
    • Desktop
    • Artificial Intelligence
    • Analytics
  • Strategy
    • Back
    • Mergers and Acquisitions
    • Channel Research
    • Business Models
    • Distribution
    • Technology Solutions Brokerages
    • Sales & Marketing
    • Best Practices
    • Vertical Markets
    • Regulation & Compliance
    • Diversity, Equity & Inclusion
  • MSP 501
    • Back
    • 2022 MSP 501 Rankings
    • 2022 NextGen 101 Rankings
    • MSP 501 Information Center
  • Intelligence
    • Back
    • Galleries
    • Podcasts
    • From the Industry
    • Reports/Digital Issues
    • Webinars
    • White Papers
  • Channel Futures TV
  • EMEA
  • Channel Chatter
    • Back
    • People on the Move
    • New/Changing Channel Programs
    • New Products & Services
    • Industry Honors
  • Resources
    • Back
    • Advisory Boards
    • Industry Organizations
    • Our Sponsors
    • Advertise
    • 2022 Editorial Calendar
  • Awards
    • Back
    • 2022 MSP 501
    • Channel Influencers
    • Circle of Excellence
    • DE&I 101
    • Channel Partners 101 (CP 101)
  • Events
    • Back
    • CP Conference & Expo
    • MSP Summit
    • Channel Partners Europe
    • Channel Partners Event Coverage
    • Webinars
    • Industry Events
  • About Us
  • DE&I
    • Newsletter
  • REGISTER
  • MSPs
  • VARs / SIs
  • Agents
  • Cloud Service Providers
  • Channel Partners Events
 Channel Futures

Telephony/UC/Collaboration


"Sell Data or Sell Your Business"

  • Written by Channel
  • August 31, 1998

Posted: 09/1998

"Sell Data or Sell Your Business"
Networked Enterprises Issue Ultimatum for Voice Resellers

By Bob Titsch Jr.

The rise of the networked firm, or virtual organization, is driving explosive demand
for data circuits and serving up a huge opportunity for long distance resellers, should
they act quickly to exploit it. Complacency, on the other hand, could leave them
vulnerable or worse.


Image: Frame Relay Network

"Sell data or sell your business," warns Bill Capraro, Jr., president of
Chicago-based Cimco Communica-tions Inc., an integrated service provider whose heritage is
long distance resale. "If all you’re selling is voice, you won’t be able to keep your
customers. We’re evolving into a data world, and voice customers will gravitate to service
providers that can meet their data needs."

In the past, the majority of long distance salespeople resisted selling data
circuits–also called private lines.

"I can tell you from my own evolution, when I was with Sprint [Communications Co.]
years ago, that I would never lead with data," says Chip Robertson, director of
carrier sales for CapRock Communica-tions Corp., a Dallas-based carrier. "But I
learned to sell data first, because with many corporate accounts, voice is a mere
afterthought."

Similarly, long distance resellers resisted the notion of selling data circuits. They
were unimpressed with the margins offered by data resale and a little intimidated by the
complexity of the process, selling them only when it was absolutely necessary to retain
other business.

"Until six months ago, I told our agents that private lines were available, but we
didn’t want the business," explains Jack Burk, president and sales manager of
Integrated TeleServices, Fresno, Calif. "Given the pricing we were getting, it wasn’t
worth it. It was just a service we passed through, with no markup. But about six months
ago, we negotiated a data contract with WorldCom that’s made it a lot easier to price a
client and pay agents a commission."

Price Wars

Competition is heating up between the major carriers, and resellers are seeing
substantial discounts as a result. Wholesale rates for DS-3s (the equivalent of 28 T1
channels, or 672 single channels, and operating at 44.736 megabits per second) have
dropped by 25 percent in the last six months, to below a 3-cent VGE (voice grade
equivalent).

The new kids on the block, Qwest Communications Interna-tional Inc. in particular, are
forward-pricing based on future market economics when they fully light their networks, say
resellers. They’re also lowering prices on commodity routes (between major cities) to take
business away from the established network providers–which often respond in kind–and
show revenue flow for valuation purposes.

Further, when a new route is lit, carriers often rush in and commit to sizable
"take or pays" to secure capacity for future needs. Some of them over-commit and
wind up dumping it in the market to meet their take-or-pay obligations, which can run into
the hundreds of thousands of dollars.

"Qwest just lit up a route on the East Coast, and I’ve already got carriers
calling me offering lower rates on DS-3s," says Steve Hesling, vice president of
marketing for American Telesis, a Hilton Head, S.C.-based firm that sells data circuits to
long distance companies. "When that happens, I immediately adjust my pricing for T1
slots in those DS-3s, and that goes straight to our resellers, who pass along the savings
to their customers. Every time a carrier lights a new route, it wreaks havoc on the
market. The trickle down from all this new fiber is substantial."

That havoc is driving explosive demand. When service providers can lower the price of a
T1 by 20 percent, for example, end users suddenly feel they can justify ordering a T1
instead of three or four 56 kilobits per second (kbps) circuits. Couple that with
skyrocketing local area network (LAN) and wide area network (WAN) development (the
networked firm concept, tied together with private lines), and we have a bandwidth vacuum
that will drive private line and data revenues from $13.57 billion in 1997 to $23.79
billion in 2000, excluding Internet service revenues, according to Atlantic-ACM, a
Boston-based research and consulting firm. (See chart above).


Image: Summary of Growth in Private Lines and Data Revenues

Long Term, Less Churn

The majority of private-line and frame relay applications are found in businesses with
remote locations that frequently pass substantial traffic back and forth to the parent.
This traffic, or information, typically is shared via a WAN that connects all the remote
locations by private lines back to a server maintained at the parent.

About 75 percent of all data line opportunities are 56kbps circuits, according to
Hesling. "These are vanilla lines that are configured one way and allow no
options," he explains. "The older, analog data lines, sometimes referred to as
four-wire analogs, 9.6s or voice-grade DS-Os, are a distant second, and account for about
15 percent of private lines."

Analog lines were the mainstays of data providers five years ago, but as digital
technology advanced, they diminished. T1s make up approximately 10 percent of all data
lines, according to industry studies, but are projected by most analysts to make up to 25
percent of the market by 2003.

It’s worth noting that service providers that sell T1s generally get everything else.
"You’re entrenched," says Kieren McCobb, president of TeleConfusion Removal, a
consulting company based in Milltown, N.J. "And when you have a customer that buys
three services from you, you’ve got that customer for a long time, unless something
catastrophic occurs. All the studies show this."

Burk concurs: "Now that we’ve been proactive for a few months, we’ve learned that
customers who buy our data products make much more thorough clients, and the relationships
are enhanced."

What creates the long-term opportunity is the stability of service, according to Ross
Dahl, president of data-centric Huntleigh Telecom, based in El Paso, Texas.

"Voice business is here today but gone tomorrow when a competitor offers your
customer a half-cent better rate, even when you have a contract," says Dahl.
"Not so with data circuits. In fact, there are very few replacement opportunities.
The vast majority of our accounts didn’t know about data circuits when we called on
them."

In other words, first in, you win. And there are plenty of new accounts to call on out
there.

"Our customers often run across medium-size companies with remote locations that
don’t even realize they can have dedicated circuits between offices," notes James
Ross, chief executive officer of Camanco Communications, a private network services
wholesaler. "The opportunity is huge, if resellers go for it."

Looking Ahead

Unless long distance resellers aggressively pursue this opportunity, a growing
contingent of data-savvy companies could take the business, and long distance
minutes-of-use business with it.

These competitors include value-added resellers (VARs) that design, install and support
LANs; competitive local exchange carriers (CLECs) with customer premise equipment (CPE)
and data networking expertise; Internet service providers (ISPs) with similar skill sets;
and interconnects that install voice LANs, better known as private branch exchanges (PBXs)
and key systems.

VARs, in particular, are excellent candidates to "back into" the
minutes-of-use business. They make a living at the customer premises, which is a powerful
position to be in as computing and communications technologies converge. (You know what
they say: If you own the premises, you own the customer).

Cimco is rare in that it began as a long distance reseller and evolved into also being
a VAR. The company sells channel service units/data service units (CSUs/DSUs) for Adtran
Inc. and is a Premier Certified Partner for Cisco Systems Inc., a leading vendor of data
networking gear.

"Many of our accounts get started with a data equipment sale," says Capraro.
"But they typically grow into much more. That’s the great thing about being a
full-service provider. You simply gather facts about the company’s needs and use more of a
consulting approach. You don’t have to lead with anything. If you’re handling local, long
distance, data and Internet solutions, you can let the customer tell you what’s most
important."

Nick Ertz, director of information services at Chicago-based executive placement firm
Witt/Kieffer, Ford, Hadelman, Lloyd, is one of those customers.

"Cimco is truly a one-stop shop for me," he says. "Since it integrates
both my equipment and network services onto one platform, I don’t have to be a referee
between multiple vendors."

Until recently, Witt/Kieffer, et al, was using a Cimco-provided 56kbps point-to-point
data network with routers it had purchased several years ago. Its network was ready for
additional bandwidth because it was reaching its maximum throughput and planned to migrate
to a centralized e-mail platform. Cimco configured a frame relay solution for the firm,
using a minimum of 128kbps to all sites–essentially doubling bandwidth for the same
price, according to Ertz. The firm was able to fine-tune its network port sizes to ensure
it was using the right amount of bandwidth at each individual location without purchasing
too much or too little. Finally, Ertz pays for frame relay network charges, equipment
leasing, equipment installation and maintenance on a single bill.

Still, the idea of becoming a VAR or even acquiring one to immediately procure data
networking expertise doesn’t appeal to most resellers.

"There’s sort of a big black line between equipment and service people,"
notes Rob Mocas, president of Easton Telecom Services Inc., a Richfield, Ohio-based
company that resells private lines. "I don’t want to have a guy on a truck. Cimco’s
model is formidable, but I don’t want to be a VAR. I don’t want to own a VAR. However, I
am interested in partnering with several of them."

Bob Titsch Jr. is group editor for the Telecom Division of Virgo Publishing Inc.,
which includes PHONE+ Magazine.

Tags: Agents Telephony/UC/Collaboration

Most Recent


  • Chatbot on laptop
    Avaya Reshapes Partner Landscape with New Cloud Products for a Hybrid World
    The company is offering more low code, no code solutions as well.
  • Conversation Intelligence Improves Outcomes for Contact Centers, Observe.AI Research Shows
    However, two-thirds of contact centers still rely on manual processes for critical workflows like agent coaching and quality assurance.
  • Unified Communications
    Vonage, GoTo, Cisco Among Key Companies in UC Market Approaching $190 Billion
    The rising adoption of mobility is increasing the demand for unified communication solutions.
  • Adam Wilson Vonage CP Europe Still
    Vonage a 'Single Communications Stack Provider' for Partners, Customers
    These are the biggest opportunities for Vonage partners today.

Leave a comment Cancel reply

-or-

Log in with your Channel Futures account

Alternatively, post a comment by completing the form below:

Your email address will not be published. Required fields are marked *

Related Content

  • PlanetOne Gainey Golf Event Feature
    PlanetOne Golf Event: In-Person Channel Networking Makes Big Comeback
  • Lawsuit
    FTC Lawsuit: Frontier Communications Misled Customers About DSL Speeds
  • SaaS provider
    8x8 XCaaS Eliminates Silos, Optimizes Customer Experience
  • Welcome stick figures
    Another Telarus Alum Joins Scott Forbush at Upstack

Upcoming Events

View all

MSP Summit

September 13, 2022 - September 16, 2022

Channel Partners Conference & Expo

May 1, 2023 - May 4, 2023

Galleries

View all

Images: HPE Discover 2022 Expo Hall Featuring Microsoft, Ingram Micro, VMware

July 1, 2022

Tetra Defense: Unpatched Systems Behind Costliest Cyberattacks in Q1

July 1, 2022

The Gately Report: Synopsys to Jump-Start Investment in WhiteHat Security Partners

June 30, 2022

Industry Perspectives

View all

How to Make Embracing Change Part of Your Company Culture

July 1, 2022

How to Differentiate to Leverage 5G’s Revenue Opportunity

June 28, 2022

Why MSPs are Attractive Cyberattack Targets

June 24, 2022

Webinars

View all

VEP Platform for Delivery of uCPE, SD-WAN and SASE

June 29, 2022

The Digital Worker: How to Empower Customers with a Flexible, Scalable VDI Solution to Enable Remote Work

June 30, 2022

Growing Partner Revenue and Customer Satisfaction with Power Management Services

June 23, 2022

White Papers

View all

Work Goes Remote – (and Other Top ITOps Trends)

May 25, 2022

The New Bottom Line: How MSPs Can Meet the Healthcare Crisis While Evolving Their Businesses

April 19, 2022

How to build a Security Operations Center (on a budget)

April 4, 2022

Channel Futures TV

View all

Vonage a ‘Single Communications Stack Provider’ for Partners, Customers

IBM, Partners and the $1 Trillion Hybrid Cloud Opportunity

June 26, 2022

Agents Share ‘Secrets,’ Industry Opportunity

May 11, 2022

AT&T, Microsoft, Cisco, ThreatLocker on Unlocking Partner Potential

May 6, 2022

Twitter

ChannelFutures

New @PureStorage #ITchannel leader details jump from Veritas. dlvr.it/STBsLB https://t.co/BFSmZ5ubff

July 1, 2022
ChannelFutures

New Pure Storage EMEA Channel Leader Details Jump from Veritas dlvr.it/STBrPQ https://t.co/LjFXo6FbVF

July 1, 2022
ChannelFutures

.@qumulo latest channel business to confirm layoffs impacting 80 workers. #storage dlvr.it/STBh1L https://t.co/hE10wBA3ka

July 1, 2022
ChannelFutures

Ranking on the #MSP501 isn't just an industry accolade... it brings pride to each company and their team. Congratu… twitter.com/i/web/status/1…

July 1, 2022
ChannelFutures

Company culture is ever changing in today's society - here are ways to embrace that change with @coxbusiness… twitter.com/i/web/status/1…

July 1, 2022
ChannelFutures

#HPEDiscover expo hall images. Featuring @IngramMicroInc @msPartner @Veeam @Commvault and more.… twitter.com/i/web/status/1…

July 1, 2022
ChannelFutures

.@TetraDef report shows unpatched systems behind most costly cyberattacks in Q1. dlvr.it/ST9RSF https://t.co/ovvS3aJKD6

July 1, 2022
ChannelFutures

.@HPE highlighted channel & ecosystem partners around the globe for high business & customer performance with their… twitter.com/i/web/status/1…

July 1, 2022

MSP 501

The industry's largest and most comprehensive partner awards program.

Newsletters and Updates

Sign up for The Channel Report, Channel Futures Update, MSP 501 Newsletter and more.

Live Channel Events

Get the latest information on the next industry-leading Channel Partners event.

Galleries

Educational slide shows and images from live events.

Media Kit And Advertising

Want to reach our audience? Access our media kit.

DISCOVER MORE FROM INFORMA TECH

  • Channel Partners Events
  • Telecoms.com
  • MSP 501
  • Black Hat
  • IoT World Today
  • Omdia

WORKING WITH US

  • Contact
  • About Us
  • Advertise
  • Newsletter

FOLLOW Channel Futures ON SOCIAL

  • Privacy
  • CCPA: “Do Not Sell My Data”
  • Cookie Policy
  • Terms
Copyright © 2022 Informa PLC. Informa PLC is registered in England and Wales with company number 8860726 whose registered and Head office is 5 Howick Place, London, SW1P 1WG.
This website uses cookies, including third party ones, to allow for analysis of how people use our website in order to improve your experience and our services. By continuing to use our website, you agree to the use of such cookies. Click here for more information on our Cookie Policy and Privacy Policy.
X