Wholesale – ISP Finds Reselling A Good Fit

Posted: 04/2001


ISP Finds Reselling A Good Fit
By Bruce Christian

Recognizing how much more competitive the telecommunications industry has
become as major carriers add IP services to their portfolios, some small ISPs
have begun to explore how they can offer telephony.

"If ISPs are not thinking about becoming a CLEC, they probably will be
eaten up by other ISPs that are CLECs," says Lance Thornton, CEO of Koyote
Communications (, a
Texas-based company making the transition. "It’s hard to compete (solely as
an ISP) against someone who can offer telephony service and can offer more

Koyote is one of four small-market ISPs currently making the move. The others
are Inc. ( in
Wichita Falls, Texas; DixieNet Communications (
in Mississippi; and LISCO ( in
Iowa. Thornton keeps in contact with the trio.

"The folks at Webfire and Dixienet are a little behind us, and the guys
in Iowa are about a month ahead of us," he says, adding that all the ISPs
face the same problems in making the transition. The largest headache they face
is provisioning.

The move from ISP to CLEC also is costly for a small company. Koyote is
spending between $2 million and $5 million–and that does not include what it
has to pay for switches.

"The cost will scare some of the smaller ISPs away," Thornton says.

Even so, the industry can expect to see more ISPs make the switch, if they
plan to survive.

"I get calls all week from folks thinking about doing this. They want to
know if they should do this, what’s involved, what are the steps," Thornton

He shares the process through which Koyote is going. Founded in 1994 as an
ISP, the company has 3,500 customers in small cities and towns east of Dallas.
In 1998, the company began exploring full-service telephony.

"It’s been a large learning curve because, while some of the information
is the same and some of the acronyms are the same, a lot is different. A lot is
new and unique," Thornton says.

After receiving certification from the Texas Public Utility Commission, the
company had to negotiate connection agreements with wholesalers.

"There are existing agreements out there that you have the option to
just opt into," Thornton says. "You can take it like it is, or take
pieces you like. For us, we are interconnecting with Southwestern Bell Telephone
Co. [], Sprint Corp. []
and Verizon Communications Inc. []."

According to Thornton, Koyote entered into the standard Southwestern and
Verizon agreements, but it had to negotiate from scratch with Sprint, which had
no agreement in place in Texas.

"We’re not actually into (telecom) as far as offering services through
our own switches, but we have already begun the process of being a
reseller," Thornton says. "You can either resell services by buying
them from the local legs and reselling them at a discounted rate to your local
customers, or you can actually lease the unbundled network elements and put them
on your own switch. "So until our switch is actually turned up and we are
passing our own traffic, we are reselling. That has given us a chance to test
the market and see if people would be willing to change to a new phone company,
before we went so far as to put a switch in and make that kind of

Koyote has since decided on Class 4 and Class 5 switches from CopperCom (

Finding customers has not been difficult. Once Koyote turned on its telephony
services, it had 38 customers in three days.

Thornton says he believes this success comes from the personal touch the
company can provide.

"We can offer our services with a local feel," Thornton says.
"We arehere.Customers can come in and see us. They can call me personally
if they want to. With the big companies, you have to call New York, or Kansas or
wherever, and they don’t have that personal feel.

"I think customers are fed up with the big monopolies, and they are
tired of not having a choice, until now. There is nothing more frustrating than
to get poor service and not be able to change companies."

While Koyote has offered its IP services in 85 small cities and towns, it
launched its telecom services in only three markets: Greenville, Commerce and
Sulphur Springs.

"We chose them because that is where the highest concentration of our
Internet customers are. It gives us our best foothold," Thornton says.

Keeping an eye on the industry, and the economy, Thornton says he believes
the model Koyote has adopted should ensure success.

"As far as we’re concerned, some CLECs have tried to get too big, too
fast," Thornton says. "We are going to try and stay small until we
feel we can safely go into some of our other cities."

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