E-Channel – Surviving Telecom Portals Adopt Old-economy Tactics

Posted: 07/2001


Surviving Telecom Portals Adopt Old-economy Tactics
Movement to Market Proprietary Technology Intensifies
By Josh Long

As in most of the dot-com sagas, there’s an epilogue to the telecom portals story that goes beyond the fate of individual entities to the emergence of new variations that offer hope beyond the gloom and doom.

The telecom portal chapter began in 1997, when Fairfax, Va.-based CICAT Networks (, an agent that represents the Bells, recognized a need for a place on the Internet where a company could compare telecommunications services or shop for an optical circuit. Born out of that idea was Telco Exchange
(, a portal where Fortune 1,000 companies could price out their complex and expensive telecommunications needs.

In the ensuing years of the new economy, a throng of startups launched websites where consumers and businesses could compare and buy telecommunications services. Four years later, many of those entrepreneurs have vanished.

The survivors have returned to old-

economy tactics–recognizing the importance of human contact–and revved up efforts to obtain a greater return through their patented technology. Many of these companies are leasing their technology to carriers and enterprises, and agents and value added resellers (VARs) are tapping the proprietary resources to upsell their customers.

Others, like Herndon, Va.-based Simplexity Inc. (, have scooped up new companies like Sundial Marketplace Corp. (, an ASP provider and reseller of wireless solutions, to enrich their telecommunications platforms. Following the Sundial acquisition in April, Simplexity acquired a sophisticated business-to-business portal with quotes on business insurance and long-distance service, according to a source familiar with the transaction.

Doing Business Old School

While these platforms allow stay-at-home moms and Fortune 500 executives to compare and to buy telecommunications services, blockbuster deals still are made the old-fashioned way. Web-based businesses have discovered that human beings aren’t going to make a sophisticated purchase in a nanosecond.

Another discovery: Luring potential business customers to a website is the easy part; enticing them to purchase a T1 circuit is the real challenge.

“Buying telecom services is quite a complex undertaking by any firm,” says Elliott Hamilton, senior vice president of the Strategis Group
( “I think they just found so many variables in the marketplace that trying to buy it through a portal site didn’t make a lot of sense [for] a company.”

Acting exclusively as a virtual telecommunications agent online is a bad idea, sources say. Consequently, after demonstrating the capabilities of their technology on the web, many companies are signing deals offline to sell their platforms to carriers and enterprises. As many companies point out, their websites are the vehicles that allowed them to demonstrate the value of their technology.

But if making a profit online is your business model, cultivating a personal relationship with clients is a must, says Kevin Dunetz, CTO at Telco Exchange. Acting simply as an anonymous go-between is not the best way to garner loyal customers, he suggests.

“If I turn over my customers directly to the carrier, I have lost my contact with the customer,” Dunetz says. “The portal doesn’t replace the human side of a telecommunications sale.”

For Telco Exchange, that human interaction comes naturally: CICAT Networks, the family-owned agent business that has supported Telco Exchange, has represented carriers for more than a decade. Since its September 1998 launch, Telco Exchange has tallied $3 billion worth of quotes, Dunetz notes.

Telco Exchange and CICAT representatives work with enterprises to close a deal, such as negotiating an agreement to provide a digital subscriber line, a T1 circuit or even an OC-3. In a referral program, independent agents that provision local loops can use the company’s pricing tools and electronic ordering system. Approximately 500 agent-based companies have used Telco Exchange’s pricing tools, Dunetz says. Some agents even build the pricing features into their own website, he adds.

Selling to Carriers, Resellers

Those traditional agents are enriching their portfolios by using the technology. On the other hand, virtual agents who merely are reselling telecommunications service online by providing tools to compare and buy plans are running a more volatile business model, says Steven Domenikos, TeleGea Inc. ( chairman, CEO and founder.

What virtual agents have tried to do is “transition an offline distribution model into an online distribution model,” Domenikos says. “The agents have pretty much been squeezed out of the business.”

Despite adding features like call-detail records, portals earning revenue through

a commission by partnering with service providers must generate millions of web hits to sustain a viable business, Domenikos says.

TeleGea, which launched in late 1999, has raised $55 million in three funding rounds. It expects to break even during the next three or four quarters. Relationships with carriers–outside of the traditional partnerships online–are expected to help TeleGea reach its financial goals.

The company has signed an agreement with Cable & Wireless ( and a few resellers to give them a platform to sell long-distance calling card services, Domenikos says. TeleGea also has licensed its technology to a wireless service provider and data service provider in pilot trials, he adds.

TeleGea, which has received requests to purchase its actual website, always has treated its portal to cash in on more lucrative opportunities, Domenikos says.

“As we were launching the site and we approached several carriers to involve them in the process, we quickly realized an opportunity to sell to the carriers,” he says.

Domenikos says 200,000 subscribers have bought services on TeleGea’s website, which the company would consider selling if the right deal came along.

“Hopefully we will have a qualified opportunity on the table,” he adds.

OmniChoice (, which has relationships with approximately 85 service providers, is negotiating with carriers to license its OmniOptimizer, a technology that recommends plans based on price and a customer’s needs and preferences. OmniChoice offers telecommunication and utility services online.

The company has signed an agreement with iPlace (, a real estate website, to create a neighborhood optimizer. The technology is particularly useful for carriers, a spokeswoman says.

“You don’t want to make people come to you for the technology,” she adds. “You want to bring the technology to them. With the amount of customers major telco customers have, the smartest thing is to integrate the technology onto the website or into their existing CRM platform. But we will definitely keep the site, because we have a lot of traffic there. And, again, it is a great test-bed for us.”

Founded in November 1999, Telebright Corp. ( is another portal that has evolved its business model. The portal represents more than 75 service providers and offers DSL, T1 circuits, web hosting, local voice service and long distance to small and medium-sized businesses.

“Since the market is changing we have been changing,” says Marcie Sullivan, a Telebright spokeswoman. “We are all going through tough economic conditions right now. We are fortunate we have developed robust technology that allows us to expand into non-e-commerce areas.”

Sullivan says Telebright, which is cash flow-positive, has signed multimillion-dollar agreements with two carriers to license its customer retention and acquisition technology.

The technology would allow a carrier to key in on customer telecom habits and perhaps offer them a more affordable plan.

“In the long-run, [service providers] are creating value and loyalty, thereby reducing churn rates which increases their bottom line,” Sullivan says.

She adds that within the last several months the number of agents and VARs using the company’s technology has grown dramatically. Agents normally don’t pay to use the technology unless they desire customization on their own website, she says.

Two-year-old CellMania
( also sells wireless products and services over the Internet, but that is a minor portion of the company’s business, says spokeswoman Jackie Peterson.

CellMania has negotiated private branding agreements with companies like Office Depot and Circuit City, allowing these businesses to offer wireless services on

their websites.

“We can sell this technology to existing brands, and it helps them offer more for their customers,” Peterson says. “It helps us because we didn’t have to build a brand as a retailer in that case.”

As a staple of its business model, CellMania also licenses various applications to carriers and enterprises. For instance, its mFinder is a directory of mobile applications. CellMania announced an agreement in March with AT&T Wireless ( to provide a search engine and wireless Internet direct-ory to AT&T Digital PocketNet service Premium plan customers.

Executives at ( say their business plan has not changed since the site was launched in March 1999. allows medium-sized and large businesses to execute

side-by-side comparisons of sophisticated products and services represented by more than 300 telecom- and network-equipment companies, executives say. The average sale exceeds $100,000, according to Marie-Louise Murville, vice president of marketing and business development. has signed partnerships on its website with system integrators and VARs. The resellers also use Telezoo’s website to post request for proposals (RFPs), Murville says.

Executives say Telezoo expects to be profitable by the end of the year.

Portal Buds in Wake of Asia

Despite the dot-com storm and movement towards the sale of proprietary

technology to carriers and others, telecom portals still are budding.

In February, Zone Telecom Inc., a subsidiary of the Zone Group Inc., launched a portal ( To enter the U.S. market last year, Zone Telecom Inc. acquired Furst Group Inc., a long-distance and international reseller with 30,000 long-distance customers, for approximately

$12 million. Ninety percent of those customers, most of them businesses, were retained, says Victor Bakunoff, Zone Telecom U.S. operations president and former Furst Inc. president.

The company, which partners with carriers to provide international long-distance service, engages channel partners to market its services. A nationwide sales-force recruits agents, VARs, joint-marketing partners and online marketing agencies to grow its business. In fact, Zone Telecom averages 15 to 20 new agents and VARs per week, Bakunoff says. Channel partners receive proprietary access to the Zone-powered engine to market the long-distance services through a shared or dedicated website,

he explains.

Zone Telecom Inc. was launched after a similar portal proved successful in Asia.

Zone Group, a member of Hong Kong-based E-Kong Group Limited (, introduced a telecom portal ( in Hong Kong and Singapore last year. Since its launch in March 2000, the portal has attracted more than 200,000 customers in Hong Kong and Singapore, Bakunoff says.

Atlantic-ACM ( senior analyst Taher Bouzayen says he recognizes the value in the company’s patented technology. The company’s software, which incorporates call logic and a

customer profile base, uses least-cost

routing software. A call to France, for instance, is routed to a long-distance carrier based on the best rate and voice quality one of the partners offers at that time. Customers can select up to five providers. Zone Telecom also provides real-time call management, enabling a caller to view the actual charges every minute as they are making a call.

In January, E-Kong Group Limited raised $90 million in an initial public offering, which funded Zone Telecom Inc. in the United States. The company declined to comment on future investment plans.

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