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The Pitch: Size Matters–With Self-Provisioning, Smaller Can Be Better

Posted: 05/2000

Size Matters–
With Self-Provisioning, Smaller Can Be Better
By Josh Martin

While major long-distance carriers tout long-awaited services, they probably should keep an eye on independents. That is because some smaller carriers are attracting new customers as they forge strategic alliances and develop niche markets.

Web-based self-provisioning is not evolving the way some analysts predicted. The smaller players were supposed to test it, and the RBOCs and other telecommunications giants were expected to take it over.

Instead, hundreds of service providers have carved up the market and sold it to individual and corporate users as well as large and small telecoms.

“It’s been a case of
‘telco lethargy,'” says Jeff Gaus, vice president of marketing at eFusion Inc. (www.efusion.com), a bundled service provider.
"RBOCs and LECs have been slow to respond to market demands.”

While Sprint Corp.
(www.sprint.com), MCI WorldCom Inc. (www.wcom.com) and several other large telecommunications companies have rolled out their proprietary unified messaging programs, many have found it more cost-effective to subcontract for the web-based services they want to provide to their end users. The rationale being: If a unified messaging product can be incorporated into a carrier’s existing network, sales can be realized quickly.

That is why some carriers have turned to companies like
eFusion, Sonic Telecom Ltd. (www.sonictelecom.com), ThinkLink Inc.
(www.thinklink.com) or Voice Mobility International Inc.
(www.voicemobility.com)–most of which didn’t exist a year ago.

“We’re just at the beginning of this industry,” says Gaus. “This market is underserved.”

Voice Mobility launched its unified messaging software in January, and within three months had one Caribbean-based CLEC, a “baby” RBOC, and three ISPs on its client roster.

“The switchover to ITSP [Internet telephony service provider] service is happening quicker than anyone originally anticipated,” says John Nix, co-founder of Go2Call.com
(www.go2call.com).

Go2Call started doing business in 1999. Its website was launched in January, and it already posts more than 20,000 rates and service menus.

According to Nix, the site had more than 200,000 hits from people in 100 countries during its first month. Most of those came from individuals, but Nix says he expects significant growth will come from the business sector.

It’s All About Products

If people and businesses have to shop for the best prices, so do the carriers.

Throughout late 1999 and early 2000, the number of vendors of web-based
self-provisioning mushroomed. Industry experts say currently several hundred companies offer web-based self-provisioning menus.

The basic menu allows the end user to surf the net, send a fax and make a phone call simultaneously. However, many service providers offer additional features to distinguish themselves from the competition.

Gentner Communications Corp.
(www.gentner.com) has a web-based self-provisioning
service–TheDataPort.com which lets the user set up a teleconference with up to 2,000 participants at different sites.

Founded in 1982, Gentner is an old hand in the communications field.

COM2001.com Inc.’s
(www.com2001.com) InternetPBX allows users to check, compose, forward and reply to e-mail and voice mail from any telephone or computer.

“We’re the only company offering real-time call control over the web,” says company CEO David Perez.

Sonic Telecom’s Celerity on Demand allows end users to self-provision by “grabbing” bandwidth they need right from
the Internet.

“Users can go to our network and get the time and bandwidth they need to transmit voice, data
or video,” explains Santiago Testa, marketing vice president. “Companies can use this to transmit data at the same time they’re teleconferencing.”

As with carriers, self-provisioning service vendors find that retaining a customer base depends more on the QoS than its cost. This was underscored recently in Deloitte Consulting LLC’s
(www.dc.com) Fifth Annual Telecommunications Customer Expectations Survey.

The survey of 500 U.S. business executives found that with falling unit costs, customer retention and loyalty hinge on the service provided. The survey showed 75 percent of customers prefer a full range of services from a single provider. However, 56 percent are ready to change carriers to get “overall satisfaction.”

Seeking a Customer Base

While most companies market their web-based software to ISPs and carriers, a handful of them targets end users.

“There are several critical dynamics
in this industry,” says Gaus. “We’ve gotten over the Y2K issues. Now we’ll see much more attention paid to customer satisfaction.”

ThinkLink targets students and “road warriors”–mobile workers who do their business via the Internet while traveling. According to ThinkLink’s marketing vice president, David Dix, the company has 50,000 customers, and that base is growing between 5,000 and 10,000 people a week.

ThinkLink also sells its unified message service to ISPs and telecoms.

Pay Structures

How to pay for these services is as creative as the strategies used to hook customers. Several payment policies are used in the industry. Some companies offer different plans, depending on volume and composition of the subscriber base.

For example, at eFusion, pay-per-use and flat monthly fee models are used.

“We went from the product vendor to the service provider pricing model,” explains Gaus. “We’ve tied the price to actual use of the product, and to our users’ revenue generation.”

ThinkLink’s individual customers are charged at a 15 cents-per-minute rate for use of the 800 number, or 5 cents per minute if using a local (home) phone link. The company charges a flat-rate storage fee of $2.50 per month, if the customer uses more than 10 megabits of message space.

Gentner’s InstantAccess conferencing program is available on a per use and monthly fee basis, with per participant rates that range from 36 cents per person per minute (with operator assistance), to 2.5 cents per person per minute for large-volume clients.

For ISP and carrier clients, the fee structures depend on each client’s contract.

Future Growth

Because the unified messaging industry is so young initial growth is skewed, in terms of annual percentage. But the absolute numbers tell a tale.

ThinkLink expects to have 500,000
customers by the end of the year.

Voice Mobility expects to see similar growth, predicting it will leap from 10,000 users to more than 500,000 users.

With this kind of growth, it is only natural to recognize a similar increase could be expected in dollar volume.

Web-based unified messaging has become a $50 million service sector, but industry experts believe it will grow to $500 million in annual fees and sales by the end of 2003. And this is only a beginning.

Vendors look for strategic alliances to tap into more lucrative fields like the $55 billion +1 800 market.

“We are still selling the concept to some groups,” says Jay Hutton, CEO and co-founder of Voice Mobility. “But most of the marketing effort now deals with how it can be billed, and how it can be marketed to end users. Unified messaging is poised for massive growth.”

Josh Martin is a freelance writer based in New York City. He can be reached at
martinjosh@aol.com.


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