May 1, 2004

12 Min Read
Local Service on the Side

By Tara Seals

Like fast-food franchises popping up on every downtown corner, competitive telecom providers are expanding service into new regions and launching brand new local offers with the intent of using their dealer channels to bring alternative local services to market.

The moves are in response to customer demand: The competitive local market appears to be growing. Competitive providers served about 4.5 million more local phone lines than did incumbent providers in 2003, according to analysis by the CompTel/ASCENT Alliance that suggests consumers and businesses are asking for alternative phone service. The study showed the total number of customer lines now served by competitors using UNEs reached 19.1 million at the end of 2003. The Alliance analysis includes both UNE-P leasing, in which competitors lease loops along with associated switching and transport, and UNE-L leasing of only the loop.

Recent UNE-P regulatory activity has had no chilling effect on providers’ plans. “We believe that there are significant opportunities as the economy rebounds and we are poised to take advantage of them,” says Bill Patchett, vice president of agent sales for Metropolitan Telecommunications (MetTel), an integrated communications provider specializing in the business market.

MetTel has launched an ambitious expansion program for local and other services, with the goal of entering 30 states from coast to coast by the end of the first quarter of 2005. MetTel began the program in January and thus far has introduced service in Maine, New Hampshire, Rhode Island, Vermont and the communities of Byram and Greenwich, Conn. It is scheduled to begin serving California, Delaware, Georgia, Maryland, Virginia and the District of Columbia by the end of May. The company, headquartered in New York City, had been serving customers in Florida, Massachusetts, New Jersey, New York and Pennsylvania prior to the expansion.

MetTel offers customers a variety of local, long-distance, advanced business and Internet services through agents, and has recently introduced an online billing system for business customers. It says it can save customers as much as 10 percent off the going Bell rates.

BullsEye Telecom Inc., a UNE-P-based provider of voice and data solutions, is in the midst of a nationwide local service expansion with only 14 states left to go. By the end of the third quarter it expects to be in each of the lower 48 states with its Corporate Advantage program, a year-old offer that allows businesses to consolidate local service into one invoice with complete account management, reporting and analysis tool availability.

The program allows agents to target regional and national businesses that have multiple locations - crossing RBOC territories - throughout the United States. Corporate Advantage also helps businesses streamline invoice analysis, write fewer checks, lower telephone abuse from employees and control costly changes to their accounts by designating certain authorized representatives.

Customers of the service include a regional trucking company and national sporting goods, restaurant and hotel chains. The company reported in late February that it had added about 20 new customers to the program in the past six to eight months.

BullsEye provides agents with priority status on location qualifications, proposal, contract and collateral support, a one-on-one corporate/ agent support program, an assigned account manager to assist with pre- and post-sales and the “My BullsEye Account” online demo that reviews reporting capabilities. Corporate Advantage account agents can earn a 15 percent residual to start, and are eligible to receive a one-time commission of up to $95 per line plus possible bonuses of $50,000 and above for outstanding performance.

“We have received such positive feedback [from businesses on Corporate Advantage],” says Ed McNamara, vice president of alternate sales at BullsEye. “What we hear most from customers is that they have dramatically decreased the amount of time it takes to reconcile and pay their invoices because they have only one invoice to pay for all their locations. Another service they view as a bonus is the online reporting tool that allows them to ‘see’ where their dollars are being spent because they can sort local and long-distance call detail records for each individual location.”

Similarly, UNE-P-based CLEC Easton Telecom Services LLC is addressing accounts with multiple locations and diverse product needs by partnering with a second DSL provider and additional local service providers. By diversifying the product line, Easton will be able to offer more competitive rates, more product choices and higher commissions to a wider range of distributors throughout the country.

In addition, two providers, Acceris Communications and Airespring Inc., announced at the March Channel Partners Conference & Expo in Las Vegas that they are getting into the local service business using UNE-P to become CLECs in certain states.

Acceris has rolled out local dial tone services for residential and small business customers in New York and New Jersey through agents, while Airespring has become a certified CLEC in California and soon will launch local service in the state for sale exclusively through its agent channel.

In the next few months, Acceris plans to expand service to additional states, such as Florida, Pennsylvania and Massachusetts. The company expects that by the end of June it will be offering local services to the vast majority of Verizon Communications Inc. and BellSouth Corp. states, and will be entering SBC markets like Texas and California during the second half of the year.

19 Million ServedUNE Lines by State(as of Dec. 31, 2003)

Alabama Alaska  Arizona Arkansas California  Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois  Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan  Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York  North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas  Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming TOTAL

200,52774,246138,422 137,513 1,794,953230,884 48,644 51,583 50,804 990,289 672,128 3,271 30,039 1,145,953268,320 172,985 216,670 137,054 222,847 75,757 321,683 346,935 1,399,969303,926 146,234 226,481 13,588 56,690 78,718 74,537 877,272 26,550 2,990,571246,192 53,854 727,514 95,085 192,216 782,460 69,372 136,479 28,946 279,219 1,803,93498,371 16,010 392,819 205,962 36,304 407,394 36,905 19,135,080

“We are extremely pleased with the speed and efficiency with which we are entering the local market and have begun provisioning customers,” says Allan Silber, chairman and CEO of Acceris Communications. “As a result, we are now able to meet the strong end user and agent demand for a bundled product offering.” The Acceris local offer will be part of a bundle that leverages other portfolio items.

“We will be offering unique products, leveraging our strong international network and distribution capabilities, as well as our proprietary enhanced services and worldwide mobile platforms,” says Ken Hilton, executive vice president of sales and marketing. “As a result, we are very excited to begin offering local services to a portion of our existing base of several hundred thousand customers.”

Airespring also has plans to roll out local service to additional states, including Florida, New York and Texas within the next three to six months. Daniel Lonstein, senior vice president of marketing for Airespring, says the company is testing accounts using the UNE-P from SBC Communications Inc. It also is negotiating with other CLECs to use their facilities.

On UNE-P, Lonstein says Airespring will offer a bundled local and long-distance service as well as its International Super Dial service, which it rolled out to the channel in March as an alternative to expensive international wireless termination rates. He adds there will not be an unlimited long-distance component because the company has concluded it’s a “self-selecting” product that is abused by high-volume users. Airespring expects to offer businesses local T1, local PRI, integrated T1 along with its long-distance services, toll-free and international termination on the CLEC facilities.

Rates have not been determined, but Lonstein says there likely will be three plans offering 5 percent, 10 percent and 15 percent discounts off the Bell rate. Commissions also have not been determined.

Meanwhile, ITC^DeltaCom plans to expand its horizons not in geography, but in distribution technique. The provider of integrated communications services to customers in the southern United States will roll out an integrated voice and data service bundle, Simplici-T Plus, to the company’s dealer partners initially in 10 markets and eventually to dealers throughout the company’s other 30 markets.

The initial deployment will include Birmingham, Ala.; Charlotte, N.C.; Columbia, S.C.; Ft. Lauderdale, Fla.; Greenville, S.C.; Nashville, Tenn.; New Orleans, La.; Raleigh, N.C.; Tampa, Fla.; and one other yet-to-be-announced city.

Simplici-T Plus is based on the CLECs facilities and targets small and medium businesses with T1 delivery of Internet plus local exchange service.

The local service and data transmission share the available bandwidth - with no voice lines active, the data bursts to the full 1.228mbps. Voice takes precedence over data and as voice transmission is required, the Internet bandwidth will be reduced to accommodate voice needs. The Simplici-T Plus product accommodates local lines and Internet bandwidth on a single T1, at a single location.

To aid the educational process for distributors, ITC^DeltaCom has dealer managers in each of the markets, who will be fully trained on the new product offering. In addition, ITC^DeltaCom has technical consultants in each market who also are fully trained to answer questions and provide support.

ITC^DeltaCom is providing marketing support and promos, to make sure resources are available at the local level.

-Khali Henderson contributed to this article.

Order Up

In another sign that customers want more local service options, CustomCall Data Systems has expanded the capabilities of its StreamLine Sales Interface to enable agents to submit orders for local dial tone service. In most cases, local service orders can be processed seamlessly upon order validation.

“The Sales Interface Module was designed to provide the maximum amount of information to remote sales personnel by using Internet technology,” says Frank Peregrine, chairman and CEO of CustomCall. “The online capabilities we’ve developed for long-distance service providers are now available for agents of UNE-P CLECs.”

The StreamLine Sales Interface allows field sales personnel to perform numerous common functions over the Internet by connecting to the service provider’s live database. Any activity on a customer account by a sales agent, the customer or company personnel, can be seen by all parties and, in many cases, processed immediately. Sales agent functionality includes order entry, order status, correcting or resubmitting orders, viewing customers’ bills, reviewing customer revenue and account balances, and obtaining commission reports. Until now, much of this functionality was limited to longdistance service offerings.

The StreamLine Sales Interface also features multiple security levels, giving sales management the ability to allow or deny functionality to different members and oversight of sales teams.

Also, it can be configured to perform provisioning as soon as orders are entered via the Web, or orders can be held for review or while awaiting LOA or third-party verification. Results from electronic order activities populate billing records in the CustomCall system automatically, thus avoiding duplication of effort and eliminating clerical errors.

Supersize CLEC Combos

Local phone competitors are gaining a foothold against the market power of the Bells as carriers struggle for dominance in a highly lucrative service sector. Two recent high-profile acquisitions highlight the trend - and a potential reversal of fortune in the CLEC space.

Corvis Corp., the owner of Broadwing Communications, is going after a local phone component with the planned acquisition of agent-focused, facilities-based CLEC Focal Communications Corp., in an agreement valued at $210 million. Corvis says the agreement should close in late summer and “would help accelerate its progress with its VoIP services offering” and “support an initiative aimed at reducing local loop or access charges.” It will slash planned capital expenditures for Broadwingms voice network, says the company.

Also on the mergers and acquisitions front, XO Communications Inc. in February won the bid to acquire bankrupt CLEC Allegiance Telecom Inc., beating out Qwest Communications International Inc. The combined company will operate the largest network of nationwide connections to RBOC networks, doubling the number of PoPs within the 36 markets where XO and Allegiance both operate. XO will become the country’s largest independent local and broadband service provider, with more than 330,000 customers and $1.6 billion-plus in revenue. Both have thriving agent programs.

With Focal and Allegiance finding homes, the Age of CLEC Bankruptcy may be coming to a close. Certainly the financial picture has improved. The market value of publiclytraded CLECs competing with RBOCs has more than tripled in the last year, according to the Association for Local Telecommunications Services (ALTS). The Washington, D.C.- based trade group said the market value of 16 companies has grown to approximately $4.1 billion, up from $1.25 billion over the previous year. Covad Communications Group Inc., US LEC Corp. and Z-Tel Communications Inc. are among the CLECs that have seen their stock prices rise over the last year.

“The CLEC industry has weathered the storm and has launched an impressive comeback,” ALTS president John Windhausen Jr. says.


Acceris Communications   www.acceris.comAirespring Inc. www.airespring.comAllegiance Telecom Inc. www.algx.comAssociation for Local Telecommunications Services www.alts.orgBellSouth Corp. www.bellsouth.comCompTel/ASCENT Alliance www.comptelascent.orgCorvis Corp. www.corvis.comCovad Communications Group Inc. www.covad.comCustomCall Data Systems www.customcall.comEaston Telecom Services LLC www.eastontelecom.comFocal Communications Corp. www.focal.comITC^DeltaCom www.itcdeltacom.comMetropolitan Telecommunications (MetTel) www.mettelagents.comQwest Communications International Inc. www.qwest.comSBC Communications Inc. www.sbc.comUS LEC Corp. www.uslec.comVerizon Communications Inc. www.verizon.comXO Communications Inc. www.xo.comZ-Tel Communications Inc. www.z-tel.comBullsEye Telecom Inc.

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