Posted: 04/2000
Resellers Rate Wholesale Carriers
By Dr. Judy Reed Smith and Taher Bouzayen
As Internet usage and data services push network demand to record levels, the ability to meet customers' desire for fiber service is the major challenge facing wholesale long-distance carriers.
The emergence of new network providers has increased competition. It also was expected to produce an excess supply of broadband. Instead, while dark fiber is available, lit fiber is in short supply.
The bottleneck appears to be in the supply of equipment needed to connect the fiber ends, making them operational. Despite analysts' predictions of overwhelming fiber gluts by the year 2000, the demand for data, broadband and Internet lines makes the ability to provide fiber a key provisioning service wholesale carriers must fill for competitive advantage.
According to the recently released 2000 edition of "Wholesale Long Distance: Carrier Report Card" published by ATLANTIC-ACM (www.atlantic-acm.com), no carriers are successfully differentiating themselves in provisioning, a critical factor in resellers' purchasing decisions. In fact, the average provisioning rating by wholesalers' customers came out relatively low, with a score of 4.8 on a scale of 10. Global Crossing Ltd. (www.globalcrossing.com) had the best score on provisioning, followed by MCI WorldCom Inc. (www.wcom.com) and Williams Communi-cations Inc. (www.williamscommunications.com). The survey of resellers also showed that wholesale providers, such as Qwest Communications International Inc. (www.qwest.net) and Level 3 Communications (www.level3.com), lowered prices but have priced themselves ahead of the market. Unfortunately, they overpromised and underdelivered, survey respondents said. Qwest's rating on pricing, for example, was among the highest, indicating low prices for customers. Qwest's rating on interval speed, however, was the lowest of all ratings in the study indicating underdelivery for customers. Global Crossing, MCI WorldCom and Williams worked to meet Qwest in the market with competitive pricing.
Overall Scores
Resellers gave the largest wholesale carriers--MCI WorldCom, AT&T Corp. (www.att.com) and Sprint Corp. (www.sprint.com)--above average scores on the 2000 report card. But the narrow range of all carriers' scores shows that the largest carriers haven't succeeded in significantly differentiating themselves from each other or the smaller carriers despite these larger carriers' market dominance.
Graph: The Scores for Provisioning Vary Widely Among Carriers
Resellers also gave overall high scores to newer carriers, reflecting these relatively newer market entrants' ability to effectively compete. Williams joined the large carriers at the top of the range of overall scores in 2000, and Global Crossing scored above the industry average overall.
Graph: AT&T and Sprint Performed Poorly in the Pricing Category
Among the largest carriers, resellers gave AT&T the top overall ranking, but Sprint and MCI WorldCom ran a very close second and third, respectively. AT&T also achieved the top ranking in customer service, top overall scores on products and outstanding scores for its network. Sprint received its best scores for its network and scored above the industry average on products. MCI WorldCom received high scores for networking, and resellers report the longest average customer-retention rate with MCI WorldCom.
Provisioning
The ability to provide services on time is critically important to resellers who must compete more on service than price as long-distance margins decline at both the wholesale and retail levels. In fact, provisioning resellers on time will not affect their time to market, and will allow them to be more competitive while serving their customers. Hence, they will not lose any potential market share.
The wide range of rankings given to wholesalers in the provisioning category shows it is an area in need of improvement and ripe for developing competitive advantage. Resellers gave the wholesale long-distance industry significantly lower scores on provisioning overall when compared to ratings in 1998. Resellers described their dissatisfaction in terms of:
- Unavailability of services;
- Poor project management; and
- Failure to deliver on promises.
MCI WorldCom was the exception among the Big Three to receive a high provisioning score, placing third behind Global Crossing and Williams, which took the first- and second-place rankings, respectively. Resellers indicated Global Crossing's extensive knowledge of local operations provided it with a superior market edge in this category. Among the Big Three, AT&T showed the most need for improvement; resellers ranked it ninth.
Scores for provisioning given by facilities-based carriers were, on average, higher than those given by switchless resellers. AT&T, Cable & Wireless Communications plc (www.candw.com), Qwest, Teleglobe International Inc. (www.teleglobe.com) and Williams all received below-average scores in provisioning from facilities-based carriers.
Products
Product availability is another area where wholesale carriers will find room to build market advantage, and smaller carriers are building their own niche. The Big Three currently dominate in rankings given by resellers. The 2000 scores overall, however, dropped significantly from 1998, indicating less satisfaction with carrier products.
AT&T received the best rating for products among the established carriers. MCI WorldCom followed in second place, with Sprint placing third. However, the smaller, least known wholesale providers are successfully differentiating themselves. Among switchless resellers, Williams surpassed all of the Big Three in reseller satisfaction with its products.
The wide variation of product satisfaction scores given by switchless resellers reveals an opportunity for wholesalers to build a market advantage in products within this segment. On the other hand, wholesalers are doing better meeting the product needs of facilities-based carriers that consistently gave higher scores in this category than did the switchless resellers.
Providing resellers with the range of services they need to satisfy their customers' rapidly growing demand for Internet, data, wireless, local-access and international long-distance services offers the most promising area for wholesale carriers to achieve market advantage, and therefore, to gain market share.
Customer Service
Wholesale carriers have pursued customer satisfaction as an important market differentiator, and the scores from resellers on the 2000 report card showed improvements in professionalism as well as proactive and consultative selling. Customer service, however, is a factor telecom carriers rate least important in their purchasing decisions, and the carriers' overall scores, while showing a slight decrease from 1998, hovered around average on the 2000 report card.
Wholesalers may find less opportunity to build market advantage on customer service except with switchless resellers, which report less satisfaction with customer service than do facilities-based carriers. Most carriers received higher scores from facilities-based carriers than from switchless resellers. Overall scoring on customer service by facilities-based carriers was much higher in 2000 than in 1998, suggesting wholesalers have made significant improvements in satisfying this segment of the reseller market.
Networks
Smaller carriers are proving they can build and operate networks that compete effectively with the larger carriers. But resellers ranked carriers' networks lower in 2000 than they did in 1998, continuing a decline in reseller satisfaction with networks seen in both ATLANTIC-ACM's 1996 and 1998 surveys.
In 2000, Williams joined AT&T and Sprint with the highest network rankings by resellers. Resellers gave AT&T's network the highest scores of all, for the third time in a row. Although Qwest touts its network over the incumbents in the industry, resellers scored it below the industry average. Among facilities-based carriers, the Big Three achieved the top scores, with AT&T's network ranked the best, followed by Sprint and MCI WorldCom.
Prices
Smaller carriers have succeeded in carving a market niche in pricing and are more likely than the larger carriers to have aggressive pricing strategies. AT&T and Sprint performed poorly in this category when compared with the other carriers, although AT&T has made extensive progress in pricing its inbound and outbound 800 services. Satisfaction with smaller carriers' prices is higher with both switchless and facilities-based carriers.
Qwest leads the way in price satisfaction. Resellers also gave favorable rankings to Williams and Global Crossing. Switchless resellers rated Williams and miscellaneous small providers the best in pricing, and facilities-based carriers also favored the smaller carriers on price.
Billing
Satisfaction with billing practices is another area where the largest carriers haven't been able to turn their market dominance into an advantage. Flexibility is a key concern among resellers, and carrier scores overall are lower in 2000 than they were in 1998, with scores for most carriers close to the average. But among the Big Three, only Sprint makes it into the top three spots, coming in second. Global Crossing leads the category, with Teleglobe in third and Qwest and Williams tied for fourth.
The 2000 scores show carriers are doing a better job meeting the billing demands of facilities-based carriers than switchless carriers. Williams and MCI WorldCom, however, are two exceptions.
Conclusions
Resellers, faced with declining retail prices and margins, must compete on services to survive. Internet, data and wireless communications are driving long distance demand and the demand for fiber services. To gain or retain market advantage, wholesale long-distance providers must prove they can give resellers the level of provisioning and service resellers need to succeed.
Wholesalers are differentiating themselves by helping resellers integrate products and services into one package, and smaller carriers are proving they have what it takes to deliver the next generation of services resellers' customers want.
Dr. Judy Reed Smith is CEO and Taher Bouzayen is project manager for ATLANTIC-ACM, (www.atlantic-acm.com) a Boston-based strategy-consulting firm. They can be reached at +1 617 720 3700 or atlantic@atlantic-acm.com
