Posted: 2/2003
Cleared for Takeoff
OSS Interconnection Service Bureaus Redux
By Khali Henderson
THE CONCEPT OF A THIRD-PARTY administrator for OSS interconnection has been floated almost as long as there have been competitive local service providers. In reality, the OSS interconnection clearinghouse business model has few successes primarily due to lack of attempt -- it was a much more arduous business than some software vendors wanted to take on when licensing deals were easy to come buy. Now, with the downturn squeezing CLEC capex, vendors may be more likely to win business for this kind of subscription-based electronic bonding service. At the same time, analysts say the CLEC shakeout and the expected pullback in the availability of certain unbundled network elements to local service resellers as a result of the FCC's Triennial Review expected this month may sufficiently shrink the addressable market for such a service so as to make it unviable.
OSS interconnection was identified early on as a candidate for outsourcing, even in the days of free-flowing capital when competitive LECs and local service resellers could afford to buy their own gateway software to manage one-off connections to the ILECs. The complexity of managing each carrier partner's interfaces and data protocols as well as changes to business rules and software makes for a headache most companies -- startups and veterans -- are keen to avoid.
Some gateway providers released managed services based on their software solutions to address this problem. With the telecom downturn and the CLEC shakeout, most of these companies like Ablion Connect Inc., Extant Inc. and Quintessent Communications Inc. went out of business. Survivor DSET Corp. announced in fall 2002 it had signed a definitive agreement to be acquired by a newly formed subsidiary of OSS vendor NE Technologies Inc., leaving NightFire Software Inc. as the primary interconnection gateway provider.
These solutions while outsourced were point-to-point and based on bilateral agreements. Multilateral solutions included a fall 1999 offer from Telcordia Technologies and GE Information Services (now Global eXchange Services) called ExchangeLink. ExchangeLink still operates according to information at the Telcordia Web site, but PHONE+'s requests for updated information about the number of trading partner connections supported were not returned. Available data indicates support for pre-order requests, local service requests (LSRs) and access service requests (ASRs).
Illuminet Holdings Inc. also developed an OSS interconnection service based on the Quintessent platform. Illuminet was acquired in late 2001 by VeriSign Inc., which continues to operate the service, but only for ASRs. "We still see potential in the administration of pre-order, LSR and PIC/CARE exchanges and we continue to look at potential vendor partners for those components," says VeriSign spokesperson Penny Thomas, who adds, its clearinghouse clients number around a dozen.
Accenture also continues to operate its interconnection exchange, Launch-Now, which debuted in September 2000. It processes pre-orders, LSRs and PIC/CARE requests, and now covers all trading partners in 35 states. Among its clients is UNE-P reseller Z-Tel Technologies Inc.
In 2002 another company, BizTelOne, entered the fray. President John Malone says it was fortunate to have received its funding just before the capital markets dried up -- a circumstance that he says also has prevented more competitors from jumping into the business.
The company launched in February 2001 and conducted a successful beta trial of its American Communications Exchange (ACX) with Verizon Communications Inc. - East in late first quarter 2002. BizTelOne is in production mode for pre-orders and LSRs with Verizon East, SBC Communications Inc. and BellSouth Corp. and Malone expected to be live with Verizon West and Qwest Communications International Inc. in January 2003. ASR support for all ILECs is expected later in 2003.
The playing field is expecting yet another player in NeuStar Inc., which announced in fall 2002 that it would launch LSRexpress, an LSR clearinghouse, as a complement to its CARE Clearinghouse. Sang Lee, director of OSS implementation for the company, says the service will be modeled after the CARE Clearinghouse and will be operational sometime in first quarter. Lee says the rollout will be phased to correspond with ILECs interconnection agreements as they are inked. He also said the company hoped to penetrate its existing customer base for the service, particularly since LSRexpress was created at their urging.
While later entrants like BizTelOne may seem to be recreating the wheel, Malone says in fact what it is doing is taking the cost out of the business by using newer, more efficient technology in XML that can be up and running in four to six weeks. ExchangeLink, by contrast, is challenged by dependence on EDI and a client-server architecture that's capital intensive, he says. ACX customers pay per transaction. An LSR, for example, is about $3, Malone says.
He adds the company has about 25 customers -- a mix of new entrants and and existing CLECs that tried to do it on their own or that are using the ILEC GUI -- and is adding five to seven per month.
One of BizTelOne's early customers is UNE-P reseller Xtel Communications Inc. Xtel president Don Flynn says the company has been using ACX since it began reselling UNE-P from Verizon in August 2002, selecting the service bureau as an alternative to both software-based solutions and the Verizon GUI. The decision, he says, was prompted by the historical problems of orders being rejected by the ILEC. "With ACX, the vast majority of orders go through on the first pass," he says.
Another BizTelOne customer, UNE-P reseller InfoHighway Communications Corporation reports 95 percent of its orders are going through on the first try. The company has been working with ACX since May 2002. The company, which operates primarily in Verizon territory, has been making a hard push with UNE-P since mid-2001 and previously used the ILEC's GUI.
InfoHighway CIO Bob Iorizzo, who previously was the lead manager on interconnection for KPMG Consulting, says the company decided against the software license solution because of change management costs. "We kind of came to the conclusion that the ongoing maintenance and support of keeping the interface current and dealing with all the various ILECs -- I remember from doing it, I built it once already -- it's huge," he says. "That maintenance just eats your lunch over time so I was really looking for someone to give me a service bureau type arrangement."
Ron Angner, general manager of OSS for consulting firm The Management Network Group Inc. (TMNG) says even if you buy software, the maintenance fees are upwards of 20 percent of the original license.
He says local providers addressing 20,000 to 25,000 lines want to outsource, but at 100,000 lines, "the decision gets more dicey about whether to pay per transaction."
Angner says the value proposition also goes up with integration between billing companies and clearinghouses to provide an end-to-end solution. BizTelOne has several such agreements, including one with Profitec Inc. and another with CustomCall Data Systems Inc. With ACX integration, carriers can enter orders through the billing system or e-commerce application, screen them, and pass them to ACX. Orders are placed with the ILEC and the information is then electronically downloaded into the billing system. Further, ACX can be engaged from within the billing system so there is one interface.
Angner suggests other apps like CRM also could be wrapped around the combined order-gateway-billing functionality for a complete outsourced solution.
While advances in technology can make it easier to be in the competitive local service business, analyst Robert Rosenberg, president of Insight Research Corp. says the current "political scene means there is less and less competition not more and more," making "the whole idea of easing access to LECs" less viable. "In the last few weeks, they have been raising trial balloons that the FCC may rule against the competitors in its Triennial Review," he says and notes should that happen there will be fewer competitors requiring access to such services.
At the same time, he notes the RBOCs have been securing in-region long-distance approval in droves. "[Regulators] are reneging on their promise of quid pro quo," Rosenberg says. He asserts the Telecommunications Act of 1996 called for the Bells to open their local markets to competition before receiving in-region long-distance authority. "They are abandoning that requirement."
NeuStar's Lee says, although some CLECs have gone out of business, there are plenty of network players remaining and the number of new entrants is steady. In addition, he says, the clearinghouse's pay-as-you-go proposition fits much better into startups' models since they are leaner organizations than their predecessors.
Xtel's Flynn, whose company would be considered new to the local service business with just six months under its belt, underscores the model's value to managing the carrier's risk. "I don't want to spend six figures for software and have the Bells go out of the UNE-P business in six months," he says, referring to high cost of licensing given the uncertain regulatory climate.
InfoHighway's Iorizzo says if the switching UNE is repealed, there still are loops that need to be provisioned to CLECs. Further, the transition likely would happen in a phased manner so moves, adds and changes for existing UNE-P customers will need to continue until there is a replacement service for those customers. Such a replacement, he suggests, could come from facilities-based CLECs that will take on the wholesale provider role for nonfacilities-based companies.
Considering both the industry's challenges and opportunities, it is likely consolidation among the competing OSS interconnection service bureaus is in the offing.
