Spring VON 2006: EarthLink and Covad Add Markets for Unique Voice and DSL Bundle

On March 16th Covad and EarthLink announced expanded coverage for EarthLink's VoIP service to eight additional cities: Chicago, Los Angeles, Miami, New York City, Philadelphia, San Diego, and Washington, DC. EarthLink's VoIP service utilizes Covad's line-powered voice access (LPVA) technology, which enables the service to be used with existing phones and inside wiring.

Competitive Concerns

► Covad’s service depends on local access and services through the ILECs, and the carrier will have to rely on the ILECs’ cooperation to ensure that the cutover and local number portability process goes smoothly as new customers are transferred to EarthLink.

► EarthLink has indicated that it will not offer the service in areas where state regulatory committees have set UNE-L prices too high. LPVA is based on Covad leasing UNE-Ls from ILECs at rates set by state committees, and there may be areas where the cost of the UNE-L will not justify offering the service.

► Since the VoIP service that EarthLink is providing relies on Covad’s LPVA technology, EarthLink is vulnerable to any disruptions in Covad’s network or business.

AT&T Unveils Widely Anticipated Plan to Buy BellSouth, Resolving Cingular's Joint Ownership

On March 5th AT&T announced that it intends to acquire BellSouth in a stock swap currently valued at $67 billion, representing a 17.9% premium over BellSouth's currently traded stock price. The acquisition would resolve the joint ownership of wireless carrier Cingular; it also would augment AT&T's global reach with BellSouth's regional penetration in the southeastern U.S., and would bring AT&T's development of IPTV technology to BellSouth's regional network.

Recommended Competitive Responses

► If AT&T stumbles in competing against Verizon or BellSouth in the coming year, it gives critics ammunition that the vigorous competition they see appears to be a temporary facade put on for the benefit of lawmakers and regulators.

► At a $10 billion premium, AT&T has set the bar very high for any would-be competing bids for BellSouth.

► Cable competitors might want to use AT&T's acquisition of BellSouth to explore ways they can chip away at the FCC's media concentration of ownership restrictions.

► In general, competitors have an opportunity to make their perspectives known with regulators as the AT&T acquisition of BellSouth enters the state and national review process. It seems at this time unlikely that competitors will be able to introduce a showstopper – not unless AT&T somehow stumbles badly in the coming months, which does not seem likely.

► Aside from the revenue hit that will come from losing BellSouth as a wholesale partner in the wake of the AT&T acquisition, Qwest has a lot of opportunities it can explore.

Recommended End User/Customer Responses

► For now, it's business as usual for BellSouth customers. It will take as much as a year for the AT&T acquisition bid on BellSouth to clear the requisite regulatory and legal hurdles, though the SBC acquisition of AT&T and Verizon of MCI showed that the process might finish faster than expected.

► From the other end of the telescope, the prospective acquisition of BellSouth by AT&T also doesn't change the picture for now. But AT&T customers (both AT&T-side and SBC-side) may be finding changes are being introduced in their product and service portfolios and in their account particulars from the closing of the AT&T acquisition by SBC in November 2005.

AT&T Brings Affordable DWDM to the Mid-market Enterprise

On March 8th AT&T announced a new optical high speed access option for the small to mid size enterprise. The new service, AT&T Ultravailable Service Option 2, provides a lower-cost yet full-featured, end-to-end ring access alternative for customers who require up to four channels of DWDM.

Recommended Competitive Responses

► Competitors can point out that Ultravailable Service Option 2 SLAs are going to be less rigorous than what customers might negotiate with Ultravailable Network Service, since they are “off-the-shelf” instead of customized according to customer preference.

► Verizon Business can point to its own Dedicated Wavelength Ring (DWR) solution for enterprises, as a competitive answer to AT&T’s Ultravailable Network Service; while not specifically aimed at the small to midsize enterprise market like Service Option 2, DWR can provide the same basic functionality as Ultravailable Service Option 2.

► Metro fiber-based competitors can tout cheaper prices and a dedication to operations within a specific metro, which they can contrast against AT&T's national focus.

Recommended End User/Customer Responses

► AT&T ACCU-Ring customers should evaluate Ultravailable Service Option 2 on a price-performance basis. Those customers looking to grow and expand their bandwidth or application requirements may find the price point suitably attractive compared to a premium service like Ultravailable Network Service, given the additional functionality the extra bandwidth allows.

► Similarly, customers of Ultravailable Network Service should study Service Option 2 pricing to see if it makes sense to drop down to the lower-priced service. It’s possible some customers may be paying more for some bells and whistles they don’t truly need.

► Those customers contemplating moving to Ultravailable Service Option 2 should be aware that one of the reasons for its lower price is its SLAs, which are “off-the-shelf” instead of customized according to customer preference.

► Customers should definitely look into all the fiber options near their current addresses. If they can find competing fiber routes to build their metro ring, and point out to AT&T that they have options including building their own metro DWDM network, they can put price pressure on AT&T to get the very best possible metro DWDM pricing from the carrier.

Projity Debuts with Managed Project Service

On March 14th Projity officially launched its Project-ON-Demand. The on-demand managed application offers users a complete replacement of Microsoft Project, available cross-platform and priced/delivered on a monthly subscription basis. Projity shares a similar business model with salesforce.com.

Recommended Competitive Responses

► Projity is in many ways pioneering new ground, with Microsoft being the chief direct competitor to this service. Other managed applications providers such as USi, IBM, etc. should monitor Projity’s success and consider ways they could partner with the company, or evaluate what they may need to do if Projity is acquired by direct competitor.

► Microsoft should point out that if a user is looking for a software packaging “like Project” maybe they should go with the original Project that Microsoft offers and not a newborn alternative which might not be around or continue to work with Project files.

Recommended End User/Customer Responses

► End users looking for an online project management solution may find a lot appealing in Projity’s new service offering, especially among users that have embraced the Internet to facilitate their work environment.

► Users will want to evaluate and ensure that they are comfortable paying for all specific team members to be included in the project as some functionality is not available for non-members.

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