Special Report
Dial-a-bundle
Telecom competition will keep prices low and service high
By Todd Shryock
Smart Business Cleveland | January 2002
The key word in telecom today is choice. A few years ago, you were locked into a monopoly for both your long distance and local telephone service, Internet access was limited to low speed unreliable dial-up accounts and Web hosting was done by college geeks running the business out of their garage.
Now the long distance market is flooded with competitors, the local market is starting to have choices and Internet access and Web hosting have been professionalized. And this is just the beginning.
On the horizon is consolidation. It's the rising trend in the telecommunications industry – not just among companies, but among services as well. One-stop shopping for all communications services is the goal.
"In the past, a vice president of information technology who needed Web hosting, Internet access, voice services, long distance and an 800 number for 10 different company locations would be forced to deal with five to seven different phone companies because of the geography they serve," says Mike Heath, area vice president for XO Communications. "Trying to manage a seamless network for a company was hard to do."
Customers today seek a provider that can take care of all their communication needs, regardless of geography.
"Dealing with multiple vendors is problematic," says Heath. "The small or medium enterprise won't be able to negotiate the best deal and it will divert a lot of time away from running the business."
Bundled services condense many vendors into one, which can result not only in cost savings, but also simplify service calls and billing. One call can take care of billing questions or service requests for any of the business' communication needs.
"When you are dealing with one vendor for bundled services, they can afford to offer deeper discounts," says Heath.
Another trend hitting the market is flat-rate pricing, which eliminates the need to go through your bill line item by line item, examining who called where and for how long. With flat rate pricing, you pay the same amount every month, which helps keep your cash flow steady.
The demand for traditional voice service has remained steady, because it's essential for any business to succeed. One of the biggest growth areas has been in bandwidth for Internet access.
"What was once bandwidth reserved for big companies, we now see small and medium companies buying full T1 lines," says Heath. "This is a reflection of how much dependence they have on the Internet and how they use it to run their business more successfully."
Expect to see an increase in the use of gigabit ethernet in the coming years. This is the same as your in-office ethernet, but applied to multiple locations regardless of how far away they are because the different offices would be linked with high-speed Internet connections. With gigabit ethernet, an office in Dallas could be running on the same network as the office in Cleveland with no appreciable difference in performance, eliminating the need for redundant networks in each location.
"It used to be the cost to do this was so astronomical that only the Fortune 50 could afford it, but now there is the opportunity for many businesses to have this kind of network connectivity," says Heath.
All these changes are occurring in a landscape that's full of competition.
"Competition creates better pricing and creative pricing," says Heath. "You will see consolidation as the strong survive and the weak do not. Competition is good for the consumer because it drives more aggressive pricing and better product development and solutions."
