Resale is a Real Business

Posted: 7/2004

Resale is a Real Business

As I write this, it’s just a few
hours before the network-sharing rules issued in the FCC’s Triennial Review Order last August are vacated.

It’s the beginning of the end for UNE-P - a platform that has supported the entry of competitive local service providers over the past several years.

The FCC has withdrawn its request for appeal of the March 2 ruling overturning the rules. While competitors’ appeals remain, it appears unlikely that the Supreme Court will hear the case since it did not stay the lower court’s ruling. Meanwhile, competitors are making a mad dash to state regulatory commissions, seeking preservation of existing wholesale interconnection agreements.

UNE-P’s likely collapse is devastating to a slew of small competitors that have used it to bundle long-distance and Internet services with local dial tone. As wholesale rates go up, providers will have to raise prices or, more likely, abandon markets. AT&T, for example, already indicated plans to pull out of two markets, though it did not specify which ones.

MCI also said it will also consider deserting.

Others will follow.

The Bell companies will be left holding the last mile.

One fallback plan of the UNE-P resellers is VoIP. But they are still dealing with the lastmile issue and will have to rely, in most cases, on Bell DSL to provide access. Where possible they have entered wholesale deals with competitive DSL providers like Covad and aggregators of Bell DSL. This supply hardly qualifies as diverse and, to me, is further proof of the lack of competition in the last mile. Many also will be migrating to a UNE-L strategy or resale deals with facilities-based CLECs where possible.

While they may be fewer in number, resellers of local - and long-distance and wireless - will continue to exist despite the facilities- based bias of naysayers like the Cato Institute. In recent commentary regarding AT&T, the think-tank says: “Real companies must build real networks if they want to survive. Networks built of paper - which is about all the Telecom Act’s infrastructuresharing rules produced - have very little chance of surviving in the long run. Although there may be room for a handful of telecom resellers in this market, it will likely remain a small niche, and that is how it should be. It’s time to let the big boys get on with the serious business of building the big networks this country needs.”

While acknowledging a limited role for resellers, the author overlooks the larger impact they have had on the forward movement of the marketplace. It is their innovation that has spurred greater service options like unified billing and bundled services that consumers and businesses have come to expect. It’s their ability to package and present service from diverse vendors and network providers to a particular ethnic target or vertical industry that has fueled service creation and lower prices - pushing technology and demand for it ever further down market.

While they do not build networks of their own, resellers push their boundaries. What more can we do? How do we solve this business problem? Most industries have thriving resale channels because of this “value added” proposition.

Why should telecom be different? Why should we entrust innovation to a few behemoth companies?

So, let the big boys get serious about building big networks (finally) and let the resellers continue to innovate on top of them with content, applications, bundles and pricing plans designed for customers.

Editor in Chief

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