TC2's David Rohde on Telecom

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The Comcast sweepstakes and the future of enterprise competition

By Posted October 6, 2015

The recent entry of Comcast into what it confidently believes will be core national enterprise competition with AT&T and Verizon occasions three additional thoughts about where the market is going. All of them relate to whether Comcast – a facilities-based heavyweight unlike any mere “CLEC” or venture-funded “competitive long distance carrier” – is going to have a major impact or is just chasing rainbows.

This is not a story that can wait two years while the Big 2 lock up major enterprises for the next generation of technology and try to convince customers that pure telecom transport deals, no matter how fat the bandwidth, are too boring for you (because they’re less profitable for them). I’ve not yet been invited to the Comcast boardroom, but it would be heartening to know that these three issues are up on a blackboard or whiteboard somewhere near the C-suite.

The brand. Comcast is kidding itself if it thinks it has a fresh start on its brand image with the enterprise market. In a way, the small-business broadband market that Comcast and other cable companies have been enthusiastically attacking is less susceptible to Comcast’s consumer reputation for bad customer service than the big-business market. All a small business has to do is get a great offer for connectivity from Comcast that beats the pants off competing options (not hard to do if there are no other carriers with building entrances), receive a reasonable-sounding service guarantee (even if more like a soothing retail “satisfaction” blanket than a rigorous network measurement), and sign the contract. By contrast, an enterprise always has an internal political task in choosing a brand-new vendor. Anyone up the management chain who laughs at the mention of the word “Comcast” can nix any consideration of the deal.

Sure, I get it: AT&T and Verizon are also unloved – but they’re not No. 8 on the list of America’s most hated companies. And yes I understand – it’s better to be hated than ignored, since consumers rail against Comcast largely because it provides a service that matters to them. But Comcast needs to be ready from the get-go to identify peer customers in whatever forum works for them to say that the new supplier is capable and “on it,” from network rollout through daily operations.

The power of the vertical industry is key here. Assuming they become relevant, Comcast will rapidly gain either a positive or a negative reputation throughout each of the broad financial, healthcare, retail and business-services industries. I’m assuming that like most new carriers it’ll have a rougher go in manufacturing, which can have longer relative last-mile loops – although even that is changing. Capture a major Fortune 500 manufacturing company and put all hands on deck in serving their needs every single day, or expect the whole initiative to fail.

The wireless equation. If Comcast is at all successful, events are bound to force it to make a decision: Are we a complete competitor to AT&T and Verizon in both wireline and wireless, or are we a wireline enterprise pure play like Level 3? Either decision is valid, provided it’s definitive. What’s not going to work is half-measures.

What’s driving this is the collapse to near-irrelevance of Sprint as a standalone company. The latest blow was a pair of announcements last week in which first Sprint said it couldn’t afford to participate in the upcoming auction of 600 MHz spectrum (well, they didn’t put it that way, but that’s what they meant in dropping out – they don’t have the money), and then said it was making up to $2.5 billion in operational cost cuts, which will obviously cost many jobs. Sprint’s last-line defenders said that the moves were perfectly rational to shore itself up financially. I agree. But it’s almost impossible to award business to a company that’s going backward like this in a wireless broadband industry that is relentlessly moving upward in performance requirements and network investment demands.

Comcast is kind of the obvious candidate to take Sprint off of SoftBank’s hands in a world where, especially after last week’s announcements, nobody really believes that SoftBank CEO Masayoshi Son fully has his heart in it anymore. That’s especially because Sprint itself has given hints that it’s begging for such a move from a cable company, and because a Comcast-Sprint tie-up would preserve the “four national carriers” policy of the current administration. But an alternate view would reconsider another go at a T-Mobile/Sprint tie-up to create – on paper – “a strong No. 3.” In our mind that only works if T-Mobile CEO John Legere gets serious about the business market – meaning he himself re-focuses on true enterprise rather than babbling on Twitter and Periscope about “Uncarrier 9.0.” But a genuine move like this from T-Mobile would free Comcast to be a next-gen WAN pure play, which is fine too.

The nightmare scenario is 18-24 months of press leaks, analyst forums, and back-door merger-conditions negotiations to figure out whether Comcast does want to be a wireless carrier or not. They’ve already been through that with the failed marathon saga of trying to buy Time Warner Cable. Top carrier executives only have 24 hours in a day like everyone else. Every bit of attention Comcast has to spend on “gaming” the industry before it completely decides what it wants to be when it grows up will rob it of its chance to succeed in core enterprise business.

The platforms. Comcast needs to recognize that enterprises don’t really have relationships with carriers just as a theoretical monolith. They buy on contracting platforms that must be related to specific Service Guides. They manage their networks, invoices and tickets on portals – which are not just a nice concept but go from really good to really bad (such as how many functions can be performed or how many locations or subaccounts are loaded, preferably all of them). Account teams are an enormous variable. No matter how nice it would be for any vendor organization to be fully responsive, the reality is that the effective influence of an account executive internally in his or her own company is a must in today’s world.

This is a “ramp” we’re continuing to watch. As an immediate note, I’ll be in New York City on Tuesday, November 3 discussing the industry supplier outlook as part of a special LB3/TC2 conference on Effective Sourcing & Transformation Strategies. Consider attending if you’re anywhere in the region. A glance at the packed one-day agenda will likely convince you. The story continues and we’re on it – we’ll soon see how much Comcast is as well.

Enterprise customers, get ready for life on the “New Frontier”

By Posted September 25, 2015

The following is a guest post by TC2 managing director Jack Deal.

Two weeks ago the FCC approved a telecom acquisition that started as a back-page item in February amidst all of the attention-grabbing headlines regarding industry consolidation. It may look like so much reshuffling of the essentially residential “telco” business, but the impact on your enterprise could be significant – especially if it presages more such transactions.

In the deal, Verizon is selling its local wireline operations in California, Florida and Texas to Frontier Communications for $10.54 billion in cash and assumed debt. Here are the details:

  • The deal includes 3.7 million voice connections, 2.2 million broadband connections, and 1.2 million FiOS video connections, the majority of which are consumer.
  • It also includes switched and special access lines, as well as high-speed Internet service and long-distance voice accounts in these three states.
  • It does not include the services, offerings or assets of other Verizon businesses, such as Verizon Wireless and Verizon Enterprise Solutions.
  • Subject to FCC and state regulatory approval, the transaction is expected to close in the first half of 2016. The FCC gave its approval last week.

If this all sounds vaguely familiar, it should – Frontier purchased the rural network assets in 13 former GTE states from Verizon back in 2010. Frontier currently provides voice, data and video services to customers in 28 states, and reported having about 3.2 million residential wireline customers at the end of its most recent quarter. The latest deal more than doubles its customer total and is clearly significant for Frontier.

Why should businesses pay attention given the PR focus on the deal’s extensive residential services content? Because businesses purchase local services too, often in significant quantities. The states in question are three of the nation’s four most heavily populated and likely contain significant quantities of ISDN PRIs, DID trunks, business lines and other traditional TDM local service elements deployed for enterprises.

And also because, characteristic of the network communications space, the devil is in the details – in this case the reference to “switched and special access lines” as part of the acquired infrastructure. That includes not only the TDM local service elements noted above, but also things like Ethernet “local loops” that provide connectivity to both MPLS ports and Dedicated Internet ports for all customers, consumer or otherwise. After the deal closes, Frontier will take over the “last mile” infrastructure and responsibility for these circuits from Verizon.

Most large enterprises purchase interexchange (IXC) access under what is known as a “total service arrangement,” meaning that the interexchange supplier is the single point of contact for ordering/billing/maintaining the circuits and works behind the scenes with the underlying access provider. These customers will be expecting a seamless conversion to Frontier, and in many respects they will get one. The processes addressing ordering, provisioning, maintenance and billing are likely to remain unchanged as Frontier already serves as a local provider in other states and Verizon (as well as most major IXCs) already deal with them in that footprint.

But a key concern for some may be unexpected and possibly adverse cost impacts. Because the economics of special access pricing are opaque to the end customer, it is unclear if Frontier will charge your incumbent supplier the same, less, or more for the last mile connection than Verizon does. The impact (if any) to your bottom line will be determined by the specifics of the agreement you have in place with your incumbent total service access supplier.

If your IXC voice and data contract specifies a single, flat-rate price nationwide for any particular access circuit bandwidth (a best practice), you are protected – at least for now. For contracts that reference a particular region/state/zone in which access pricing varies by geography, you should be concerned if the reference is contained in the carrier’s on-line service publication (“Service Guide”) and thus subject to change at its sole discretion. In one case, a leading provider’s standard price for 50Mb Ethernet local access in the U.S. was between 23% and 84% higher in Frontier service areas than in other areas. Finally, if your deal provides only a discount on per-site access circuit pricing (i.e., individual-case-basis or ICB), brace yourself for change.

The remedy to this uncertainty for IXC deals is to make certain (as part of your next contract refresh) that the access circuit pricing your enterprise requires is specified in the agreement at a single nationwide rate for each bandwidth category. These rates should be fixed over the contract term, which will protect you from similar impacts when the next industry sale is announced. If you have this today, resist supplier efforts to remove it from the deal. If you must settle for a pricing structure that varies by geography, make certain the structure is specified in the agreement and fixed/rate-stable for the same reason.

For legacy local exchanges services such as ISDN PRI, DID trunks and business lines, the environment is different – part of your existing contract will be assumed by Frontier, part of it will likely remain with Verizon, and you will be negotiating with both (paying particular attention to commitments) as the expiration date approaches. Beyond this, an enterprise might anticipate fewer qualified support personnel (technicians, account/customer service representatives) as a result of the ”synergies” that always seem to accompany such acquisitions.

If you purchase local exchange services through an aggregator such as Granite or MetTel, watch out for changes in Frontier wholesale pricing that your vendor will doubtless attempt to pass along to you. The lack of market competitiveness for local services will greatly limit your negotiating leverage, so the best way to mitigate any unpleasant impacts is to migrate legacy local voice services to SIP Trunking service with a leading industry provider. Not only will this foreclose cost increases, it will likely result in significant financial savings and improved efficiency across the enterprise.

Speculation continues that Verizon is seeking to sell more of its wireline assets, so what we see with Frontier may surface again with other buyers in other areas. Enterprises that wish to stay ahead of the curve will anticipate potential impacts like those noted above and take appropriate steps to address them early.

Comcast wants to respond to your entire demand set. Here’s what else they need to do

By Posted September 18, 2015

From the beginning of this decade it has seemed that cable companies want to “sort of” serve the enterprise market – at their own convenience rather than yours.

Enterprises know this from what are sometimes annoying individual sales pitches to branch offices that threaten to degrade contributory spend to national AT&T and Verizon contracts. Or they may know it from cable companies’ participation in “broadband RFPs” that hold appeal because of their huge on-net footprint but can fall down on their Swiss cheese network maps or operational naivete beyond consumer-grade service.

Now Comcast says it’s gotten hip to the enterprise world. First and foremost it announced this week a national enterprise “managed services” offer that gets past the classic “franchise territory” problem of the cable industry. Via an acquisition it has installed a system by which it picks up facilities-based broadband connections from other cable companies’ territories for comprehensive RFP responses and, supposedly, ongoing fulfillment and network management.

The fancy graphics accompanying the service portfolio announcement and a clear leak to the Wall Street Journal in which Comcast emphasized it wants to take core wireline business away from AT&T and Verizon make this different from some past head-fakes by the cable world in this direction. So does the motivation resulting from the rude shock that the FCC delivered to Comcast earlier this year in saying no to its attempted acquisition of Time Warner Cable.

In theory Comcast could have bolstered its own on-net territory with TWC and provided a spur to put enterprise at the head of its priorities. In practice that takeover would have buried Comcast in two years’ worth of merger-integration madness and redoubled its focus on consumer entertainment and programming issues rather than looking to Ethernet, WANs, the cloud and IP transformation for new business.

My thanks to the FCC and the Justice Department for getting this perception right. Now the question is, with Comcast having taken half a decade to figure out what table stakes in enterprise really looks like, will they take the rest of the decade to learn how to actually win deals? Comcast is already a $71 billion company – No. 43 on the Fortune 500 list. For its enterprise venture to move the needle it has to win lots of business and start winning it soon. I hope they know that wannabe enterprise competitors have repeatedly fallen down on the misleading sales funnels that their sales forces innocently report up the chain of command but predictably collapse at the last minute at executive negotiating sessions all across the country.

Feel free to print out this post and hand it to your Comcast sales team the next (or first) time they call. Because that’s one thing I know Comcast knows how to do, put salespeople on the street! Here’s the list they need to make known across their entire organization:

Start with a smoking bid. You’d think this would be obvious, but it’s not. They can’t just assert that a theoretically humongous footprint gives them better economics, they have to prove it by putting those numbers on the table in Round 1. And a big caution here: Nobody – not AT&T, not Verizon, not Comcast, not Level 3, no one – has last-mile on-net facilities everywhere, or close to it. The veteran carriers work that fact into their overall bids in sophisticated ways. New carriers tend to want to impress you with on-net prices and then surround everything else with a blizzard of markups and asterisks. Any of these behaviors will force the new entry out of the picture right away. After all, they’re still the devil the customer doesn’t know.

Broaden the service portfolio. We can read the high-level descriptions of Comcast’s quote-unquote managed services in a number of different ways, but by any measure it sounds a lot like the stuff that makes up 100% of the content at industry trade shows. That’s fine for starters. Back in the real world, the large Fortune companies need a comprehensive mix of services. Network transport matters, whether it’s Ethernet access or off-net IP voice/video/multimedia by whatever technology beyond the disappearing world of POTS. Ten dollars here and two-tenths of a penny there add up to serious money. Feature sets and prices have to be comprehensive, rigorous and affordable. Holes in RFP responses are potentially deadly.

Expect feedback and guidance. Savvy enterprises don’t guess, they benchmark. Monthly recurring charges, one-time charges, usage charges, service level measurements, monitoring and management fees, and premises equipment packages are all measurable against the market. And no, you can’t just “look them up” – the various legacy disclosure methods in the telecom industry do not carry usable information and only have the purpose of tying down issues not otherwise addressed in the carrier’s favor. Prompt response to targeted RFP guidance is the key to getting to the endgame as a serious choice for the award.

Anticipate the forward implications of the cablecos in partnership. Robert Powell of Telecom Ramblings makes a great point that if Comcast can do this using a mash-up of circuits from other cablecos like TWC or Cox, those companies can turn the tables and try to offer their own comparable national service portfolios with themselves as top dog. The additional competition would be great, but the confusion and conflict of interest would be potentially massive, with acquired customers trapped in the middle. The telecom industry at least has a base level of regulations that compel certain kinds of facilities sharing and compensation according to accepted procedures. The last thing enterprises need is a new industry – the cable industry – bringing its own food fights to the daily battle for mission-critical networks at affordable prices. Someone has to cut this off at the pass.

Learn enterprise-class contractual terms and conditions quickly. This one is often the real killer, and we have reason to believe the pre-nationally-integrated Comcast has already gone down the wrong path and needs to rediscover the fork in the road. There’s a lot to chew on here, but there are broad hints we can share in both the business and legal spheres. In business “Ts & Cs,” a claim that a corporate contract doesn’t have a single dollar-volume “commitment” is meaningless if every single circuit has a material minimum period of service with a take-or-pay penalty. Enterprise rollouts and migrations are way too dynamic over time for customers to climb on that treadmill. In the core area of legal liability, one Fortune 500 company negotiating with another over something as critical as its corporate network is not going to take anything like all the liability onto itself – there’s a basic expectation of mutuality that comes into play here (especially if you’re trying to steal away a customer who’s worked hard on their AT&T deal over time).

There’s more, but that’s a good start. If we keep hammering on this, it’s only because the potential for serious and scalable competition from a huge provider like Comcast is a terrific thing for a WAN industry that is starting to see AT&T and (especially) Verizon fracture in its attention over the massive growth of wireless. Nothing could be better than an “insider” like Level 3 and an “outsider” like Comcast creating a new, credible, top-level 4-way competition for the next generation of corporate networks. Game on? It’s up to you, Comcast.

Are you benefiting from “IP Price Compression”?

By Posted September 16, 2015

The following is a guest post by TC2 managing director Ben Fox.

At an investor meeting last week, John Stratton, EVP and president of operations for Verizon, lamented what he called “IP price compression.” He meant the competitive pressure in the marketplace that is driving down prices for various enterprise products and services.

Verizon’s laments are no surprise. We continue to see fierce competition between vendors for customers’ business, and not just between the established global carriers such as AT&T, BT and Verizon. Trends such as the growth of regional network strategies and regional players such as SingTel, NTT, Colt, Telefonica and Telmex that are willing to be extremely competitive on pricing, terms and conditions and commercial flexibility are putting huge pressure on the large global carriers like Verizon.

Add to that customers’ growing willingness to use alternative carriers such as Level 3, especially for non-core or redundant services, and customers have more choices than ever. But not all customers benefit from this renewed market competitiveness.

At TC2 we’ve long talked about the Jekyll and Hyde nature of telecom suppliers. When a customer creates a competitive environment, not least when competitively procuring services, but also simply when incumbent suppliers know that they are not the default choice for a customer’s business (e.g. when you have a primary carrier plus a secondary carrier), carriers will deliver competitive pricing and terms. But when a carrier is not subjected to competition by its customer, the pricing the customer will receive substantially lags the leading edge of the market, and is very often encumbered by less flexible commercial terms.

Hence the rewards of driving healthy competitive tension in your supply chain for telecom services are greater than ever. Those customers that regularly competitively procure their services, and that are willing to change service providers, are the only ones that benefit from best-in-class pricing, commercial flexibility, service levels and terms and conditions.

Service migration and contractual business terms: Always think of them together

By Posted September 8, 2015

Last week my colleague Keith Cook updated everyone on AT&T’s Withdrawal of Service Matrix in the AT&T Service Guide. Greater specificity means that AT&T could be contacting you about particular components of services that are going away in as little as 120 days from the time of notification. If you didn’t recognize that these components are “on the list” you could be caught flat-footed.

There’s an associated task that should go hand-in-hand with these preparations. That is to stay on top of the business terms and conditions that tend to get changed up any time services migrate – and not in the customer’s favor if you’re not in control of the situation.

It’s exactly like the migration of services themselves: Everything revolves around who is being proactive and who is being reactive. The very reason why a “migration” matrix – well literally, a service ”withdrawal” matrix – exists is to give the carrier more of the forward impulse than either the government or the customer has in the situation.

Well, on contractual business terms, if you don’t appoint yourself the hand that deals the cards, you’re likely to be stuck with whatever cards you’re dealt. Individual circuit terms are a great example of this type of contractual clause in question.

Think about it: When you change out that NxT1 dedicated line for something new – either because you want to or you have to – is the next higher-up Ethernet access increment likely to come with no strings attached? Not likely when carriers seem to be treating Ethernet (even “just” access rather than end-to-end Ethernet private line) as something like broadband wireless, with every individual case carrying its own mini-contract term! Remember – a “minimum payment period” or words to that effect is a circuit term by any other name if the liability percentage for exiting “early” is at all material.

If I assume that your company is at all economically dynamic, or even that any new network rollout will take a significant period of time across your footprint, then you’ve put yourself on a contractual treadmill that’s hard to get off no matter what the ostensible overall “contract” term is supposed to be.

The solution here is to extend certain disciplines of full RFPs to smaller and more discrete procurement exercises. Numbers and words have the most power in combination. There’s no reason why you can’t ask even a single supplier in a contractual refresh and/or migration exercise to restate how it’s going to condition certain proposed prices for the services that people are generally moving to. And the proper way to make this “ask” is to state what your expectations are for a particular contractual term and then have the carrier say whether it agrees to the requirement.

Ethernet access to your locations is a great example of this because the very fact that some of it introduces the ticklish issue of “special construction” seems to give carriers the license to pretend that all of it requires fresh, new capital investment that they need to “recover” over lengthy periods of time. That’s not at all realistic – if that really were the case, you almost certainly wouldn’t agree to buy it from that carrier because it’s not a legitimate candidate for the service! You need to set a realistic, truly very high-bandwidth turning point on which it makes to sense for both parties to agree to this kind of tie-up.

Look across your suite of transport and, increasingly, managed, hybrid-cloud and systems-integration type services for these hinge-points where price proposals and business terms need to be yoked together in procurement work. You’ll be glad you identified them whether the discussion involves a single supplier or many prospective candidates for the work.

And remember the key implication of the Withdrawal of Service Matrix for this matter: You are now in effect always in a prospective migration situation, so most procurement projects should operate along this line of thinking, whether they carry a fancy “migration” or “transformation” title or not. At this time of rapid network change, making this connection is more important – and will pay more dividends well into the future – than ever before.

Control your own network transition by staying a step ahead of AT&T’s Withdrawal of Service Matrix

By Posted August 31, 2015

The following is a guest post by Keith Cook, a TC2 Project Director based in the Atlanta area.

By now, most of AT&T’s large enterprise customers are probably at least vaguely aware of the carrier’s “Withdrawal of Service Matrix.” This filing in AT&T’s Service Guide gets the carrier out in front of any official mandates or permissions to withdraw legacy TDM services, which AT&T is obviously determined to do on its own timetable or convenience. We’re written about the concept and alerted customers to keep their eye on the ball for AT&T’s notifications.

The key question now is whether you’re going to cede control of the great enterprise network transition just because the biggest carrier gets to file its own transition plans in its Service Guide. It doesn’t have to be that way. The unusually powerful status of Service Guides in the telecom industry is a reality, but the big variable in the real world is whether you’re going to anticipate the Service Guide details or let them surprise you at the last minute.

Remember that IP transformation and related transitions from both major and incidental legacy services are a double-edged sword for enterprises as well as well as carriers. In an era when wireless is chewing up virtually all the attention of senior carrier managements and an increasingly huge share of carrier network investment, enterprise customers want the carriers to free up attention from wireline services that are truly outmoded to be able to focus on state-of-the-art wireline WAN service platforms.

Yet most large enterprises – simply by virtue of their own size and complexity – have a mission-critical stake in one mature service area or another that can’t be uprooted without doing damage to at least one strategic business unit if not the whole company. You don’t want a Service Guide surprise to hit you in the very area your company is most sensitive to!

What’s important at the moment is the burgeoning detail of the Withdrawal of Service Matrix. First, find this matrix in the General Provisions and Glossary section of AT&T’s Service Guide, and see Sections GP-4 and GP-4.1. Note that it now spans almost four full pages and covers services from things that few care about these days (calling cards) to those that affect many (certain portions of AT&T Internet services).

Now note that AT&T can notify you of the withdrawal of any of these services with 12 months’ notice, or a component of the services with only 120 days’ notice. For example, if you buy DS-3, OC-3 or OC-12 Internet service, it’s possible that you could find yourself needing to find, install and test alternative service(s) within a short 4-month span and make you move to Ethernet-based Internet service.

There may be nothing wrong with the idea of going to Ethernet access, but there’s probably a great deal wrong with having only four months to do it! But the only way for that to happen is to not know in advance that a four-month notification could be coming and only realize it when AT&T actually activates what it’s already given itself the right to withdraw, on the schedule that it’s given itself the luxury to employ.

If you understand the lifecycle of telecom procurement, you can see the clear implications – all items in the Withdrawal of Service Matrix need to be proactively discussed and addressed in whatever is the current state of contractual discussions in your AT&T relationship.

The time to review and plan is now, so that you can properly address this issue as required, either at your next renewal negotiation or sooner if warranted. You can’t make AT&T decide to not retire a service just for you, but you can do things to make sure that you’re positioned well. There’s a clear translation here to network stability, organizational and personal stress, and real dollars and cents. Watch for frequent updates, and keep it near the top of your agenda.

Bandwidth and pricing: When less is more, and more is less

By Posted August 27, 2015

The following is a guest post by Janis Stephens, a TC2 Senior Consultant based in the Wilmington, Delaware area.

Everyone knows that more bandwidth costs more than less bandwidth, right? In the world of actual cost to provide service, that might be true. And maybe it’s true in your contract also.

But there are a lot of contracts out there in which pricing for various circuit or port speeds doesn’t follow that rule. Sometimes less bandwidth costs a lot more, and more bandwidth costs a lot less.

Ideally, of course, your pricing should be scalable and equally competitive at every price point. But carriers have different techniques they use to make your price vs. speed graph look more like a wildly fluctuating stock market chart than a nice smooth curve – like this one:

MPLS Port Pricing

Some carriers will establish a (low) default discount that applies to every speed, but then have (higher) custom discounts for specific speeds. So if you carelessly order a speed that only gets the default discount, you will pay much too much. Other carriers will establish a single discount that applies to every speed, but then they will set lower custom gross rates for specific speeds.

And sometimes even the standard list prices will vary for the same speed – higher for TDM access, and lower for Ethernet, for example. So again, if you order the wrong speed or even the wrong access type, you will pay too much.

Most ordering and provisioning decisions are left up to your engineers – after all, they are the ones who know the bandwidth requirements for your locations. And they typically will specify the lowest speed that meets the need, because they think that is the most economical solution. But they could end up ordering the “less is more” speeds. And the carrier certainly isn’t going to point out that they could order a “more is less” speed!

So what do you do about this?

First, check your contract and the supplier’s gross prices to see if you have the potential for “less is more.” If you do, immediately create a net pricing “cheat sheet” for your provisioning team, so they can double-check the prices before placing any orders – after all, they don’t know the prices unless you give them a list. Your cheat sheet could list the price for every possible speed, or you could pre-select speeds with competitive pricing and tell your team to order only those particular speeds.

Next, review your bills and find any “less is more” services that could produce immediate savings by simply writing orders to upgrade to the next highest “more is less” speed, and get those orders out the door quickly.

Finally, next time you are negotiating those contract rates, work to persuade the carrier to smooth out that pricing structure. Carrier pricing doesn’t always make logical sense for you, but it makes sense for them in terms of higher revenue when you make a mistake and order “less is more.” Learn how to play their game so you don’t lose without even knowing it.

SoftBank boss stands alone in the logic of his plan to fix Sprint

By Posted August 7, 2015

There’s really no way to paper this over any longer. Sprint is in trouble.

It’s not that the carrier doesn’t have considerable assets. It has over 55 million retail customers, reasonably ubiquitous coverage, and a boatload of spectrum.

But at this point Sprint cannot reasonably do all of the following at the same time: 1) accelerate mobile broadband network investment; 2) maintain its credit rating by avoiding further borrowings; 3) keep customer service from falling back down; 4) generate positive cash flow.

Sprint could do some of these things together. It could speed up the “densification” of its network while taking decent care of current customers. But that would require a dangerous dip into the bond market at rates exceeding what former financial basket case Level 3 now pays. It could force a cash profit for the rest of the year and start reducing its $34 billion in debt, but at the risk of falling further behind the other three national carriers due to underinvestment.

Sprint could also try to further reduce customer-facing operating expenses and divert those extra dollars to its capital budget. But that would risk forfeiting the one positive in its second-quarter earnings report – a reduction in churn, or loss of current customers, to 1.56% (which is low for Sprint though high for everyone else).

If Sprint were in some other business it might not face such a panoply of unhappy trade-offs. But Sprint doesn’t make drywall or ketchup. It’s in wireless telecommunications, a capital-intensive industry that won’t stand still. (Sprint’s wireline business is being effectively killed off even though they haven’t found a buyer for it.) Whatever resources Sprint can now find to keep up, Verizon and AT&T can find more. And T-Mobile, now the outright No. 3 U.S. wireless carrier, can both legitimately invest and bluster its way into vital competition, at least in the retail mass market.

There seems to be only one man who disagrees that Sprint has such a dark dilemma, and that’s Sprint’s own chairman – Masayoshi Son, the head of Japanese parent SoftBank.

In a somewhat bizarre conference call to discuss Sprint’s earnings this week, Mr. Son came on the line first to declare that he wasn’t interested in selling Sprint (although he said it in a way that suggested he did consider it after regulators quietly blocked SoftBank from adding T-Mobile). Then, under questioning by some politely incredulous analysts who couldn’t see how Sprint’s 3-year capital expense budget of less than $15 billion can maintain pace with Verizon and AT&T (each of whom spend more than that in 1 year), Mr. Son claimed that Sprint can indeed build up its network far more cost-efficiently than its rivals.

The key to it is a financing plan under which SoftBank and some unnamed financial partner will effectively monetize future lease payments by Sprint customers for their devices such that Sprint gets its hands on the money faster. It’s an alternative to scaring the bond markets with another debt raise, but it sounds like those dodgy ads for people to hand over their “structured settlements” for some discounted upfront lump sum.

In the meantime, Sprint’s cash-generating activities are constrained by the type of customer it’s now getting as a result of its horrible advertising over the last few years. I admit I’ve gotten some pushback on this from folks who say that Sprint’s recent advertising with soccer superstar David Beckham is at least entertaining to watch. But notice something about all of Sprint’s marketing appeals – they’re all generic. Sprint is repeatedly promising to save people money in some vanilla sort of comparison that never gets at actual pain points or, conversely, the aspirational side of broadband wireless.

By contrast, T-Mobile’s John Legere hits specific nerves – Contracts! Early Termination Fees! Roaming! Free Apple Music! Sure there’s some flim-flam to Legere’s “Uncarrier” shtick. But it’s almost as if Sprint no longer knows the business it serves and doesn’t connect with the way that wireless device connectivity has become mission-critical to people’s lives.

Mr. Son likes to tell stories about how he now personally is guiding and tweaking Sprint network plans in calls with the United States from 10 p.m. to 2 a.m. Japan time. At first it can sort of sound cool for a company chairman to pitch in like that. But combined with almost complete turnover in Sprint’s U.S. executive suite – the CFO was just replaced this week – it’s the kind of mysterious and overbearing management that can leave a professional employee base feeling confused and unempowered. The Kansas City Business Journal recently reported that if it weren’t for Sprint, the commercial real estate market in the Kansas City metro area would have grown last year rather than shrunk.

Mr. Son repeatedly says that wireless networks in the U.S. are inferior to those in Japan and that he can make his network-upgrade plan work for Sprint because he did it during the last decade when SoftBank brought Vodafone Japan. No number of observations that the U.S. is exponentially larger and more diverse geographically than Japan seems to dissuade him from this analogy. I daresay that some U.S. enterprise users are in a good position to recognize from their own shops the phenomenon of a new boss from a different company or a different country who over-analogizes in this fashion.

Yet there’s still a faint echo of enterprise account knowledge at Sprint that T-Mobile has never truly developed. What might a new mash-up of Sprint and T-Mobile – only this time with T-Mobile and Deutsche Telekom on the buying side – achieve to firm up a true No. 3 enterprise wireless carrier? With Sprint’s stock having collapsed to barely $3 a share, everyone from the retail power user (who will only consider the three other carriers) to the enterprise user (who now sees wireless as almost more of a duopoly than wireline) is affected. Here’s betting something bigger is going to change in the U.S. wireless industry before Masayoshi Son finishes trying to fix Sprint’s network problems on the cheap via late-night phone calls from Tokyo.