It's a Jump Ball!

Posted: 1/2003

It's a Jump Ball!

By Arunas A. Chesonis

THE THRILL OF THE FAST-BREAK, the beauty of a three-point shot that hits "nothing but net," the power of a slam dunk and the discipline of a well played zone defense. Each of these basketball strategies could describe the dynamic situation of the telecommunications industry today, but the metaphor that stands out more than any other is the jump ball!

It's an understatement to say the telecom industry has undergone major upheavals. The names of the companies relegated to the telecom graveyard are well known and their stories are reminders of the perils of being an operator in today's challenging environment. The long-haul industry has been decimated with the superstar of the '90s shamefully falling under the weight of alleged fraud. The RBOCs are rumored to be next... . The telecom industry is in utter disrepair, right? Wrong! There never has been a better time to be a telecom service provider than in today's market.

Someone once said there is opportunity in chaos. In our industry, where there has been two years of dislocation and disarray, there now exists such an opportunity. We believe the window for establishing sound, profitable market share has never been open wider. Why is the market so good amidst such turmoil? First, with all of the dislocation in the market, there is more customer awareness of quality. Customers are more focused on quality of service, quality of value and overall quality of their carrier.

There is an intense focus on the provision of integrated, value-added services supported by exceptional customer care. High-quality service increases customers' comfort level and results in companies being much more willing to take the risk of leaving the larger players for the provider that keeps its promises to the customer. The playing field has been leveled -- succeeding in telecom now boils down to managing profitably, while delivering big.

There continues to be a focus on value, which does not always mean providing the lowest price per minute just to win the business. We have found that focusing on an increasingly complex value proposition and offering the customer a single point of contact to manage that value proposition has resulted in a highly loyal and highly motivated relationship.

Customers today are eager to take the time to understand the quality of their telecom carrier. Many savvy customers spend time better understanding the overall financial condition of their underlying carrier. Strength begets comfort and, with that, further enhancement of the overall relationship.

Secondly, as the broader economy continues to founder, customers of all shapes and sizes have aggressively sought out lower pricing. Customers who previously said a 15 percent to 20 percent discount on their existing service did not merit looking at another carrier, today are much more interested in reviewing proposals now that they need to get that extra savings. While we always stress the value proposition, the marginal benefit of providing lower cost service has become much more attractive as all businesses seek to improve their bottom lines.

Thirdly, a new and broader telecommunications talent pool is available. Previously, human resources were limited and expensive. Today, strong telecom talent is abundant and fairly valued. The ability to create a team of driven, knowledgeable and innovative professionals is unprecedented. Such resources invariably translate into stronger management leading to increased attention on service excellence, sustained growth and profitability. Consistency in the workforce is critical to long-term success, as it generates stronger customer relationships and more loyal users (read: less churn).

Finally, while the RBOCs always have been the primary competition for any emerging telecommunications provider, the industry shakeout has helped the overall competitive dynamic. Inside the wholesale divisions of the RBOCs, there are fewer companies competing for facilities, thereby translating into faster provisioning times. On those occasions when there are other emerging providers competing for the business, price rationalization has started to surface. And ultimately, with less competition attacking the RBOCs, they have become less focused on trying to prevent competition and more focused on competing in the long-distance and wireless sectors.

Granted, fund raising is very challenging. However, the dislocation that we are witnessing inevitably will be healthier for the industry and the competitors remaining. The end result should be superior value for the end user, including a broader portfolio of products and services, strengthened customer care and lower costs.

Yes, right now is a great time to be in the telecom sector, because every customer out there is a jump ball.

Arunas A. Chesonis is chairman and CEO of PaeTec Communications Inc., an integrated communications provider serving customers in more than 27 markets. The company has been providing long-distance service since 1998 and local service since 1999.