Qwest Lights Up OnFiber Nationwide for $107 Million, Looks to Ethernet Services
On May 15th Qwest announced it will acquire OnFiber Communications, a provider of custom-built and managed MAN and WAN Ethernet services, for a $107 million purchase price. The transaction, set to close in Q3, gives Qwest access to an all-optical network in 23 metropolitan areas and features a full offering of access and transport services, including Ethernet, SONET and wavelengths.
Recommended Competitive Responses
► AT&T and Verizon Business can point out that though the OnFiber deal brings a number of benefits to Qwest’s table, it does not provide any major new services that would differentiate it from the Big 2 IXCs.
► Broadband competitors and ILECs can point out that OnFiber’s 23 metro market footprint largely duplicates Qwest’s 27 metro market national network.
► Competitors should point out that OnFiber is a high-growth provider and appears to be a good bet for financial stability, but it’s moderately low asking price--$107 million—and it’s privately held status may warrant a closer look.
► Qwest has said that it will continue the wholesale relationships OnFiber had with other carriers, including the arrangement with Broadwing. However, now that Broadwing’s major metro access partner is controlled by a major competitor, the company should consider other options after the current contract runs out.
Recommended End User/Customer Responses
► Customers should ask Qwest for a full map of diverse network routes once the OnFiber integration is complete. Since the vast majority of OnFiber’s network does not follow the same path as the incumbent LEC, customers should be able to order fully physically redundant routing through Qwest.
► OnFiber’s AdaptiveBuild technology should allow Qwest to lower total times required to turn-up business services dramatically, while customizing design, installation and management to the customer specifications. But it isn’t a guarantee. End users should hold Qwest’s feet to the fire, and ask for specific details as to how AdaptiveBuild will cut costs and installation times compared to more traditional carrier intervals of 90 to 120 days.
Pac-West’s Network Expansion Goes into High Gear
On May 2nd Pac-West Telecomm announced the introduction of its Dial-Access and Managed Modem services into the Washington, D.C. and Denver, Colorado markets. The carrier plans to offer its full suite of services in these markets as the expanded footprint is brought online.
Recommended Competitive Responses
► Competitors can point to the fact that Pac-West is primarily expanding coverage to existing dial-up customers rather than new customers with IP services requirements. While dial-up is still used by millions of people, it is a shrinking market.
► Major CLECs can continue to point to their superior national reach and the advantages of operating their own networks including the ability to manage quality of service. Pac-West is beginning its expansion, but it has a long way to go before it can offer a full suite of services across all of its markets.
Recommended End User/Customer Responses
► Pac-West’s ISP customers can take advantage of the carrier’s expansion into new markets to expand the reach of their own services and to enter the emerging VoIP services market. Pac-West will manage network operations, leaving the service provider free to focus on marketing its services and expanding its customer base.
Interop: Avaya’s Entrance into the Service Sector
On May 2nd Avaya announced a set of communications services based on hosted versions of its IP telephony, contact center, and messaging platforms. IP Telephony On Demand is a hosted service that offers Avaya’s Communication Manager IP PBX software to businesses for $25 per month per user. Contact Center On Demand provides Avaya contact center applications in a repeatable, usage-based solution costing between $50 and $100 per agent per month. Messaging On Demand offers both basic and enhanced voice messaging in a secure, fully managed, high-availability solution.
Competitive Concerns
► Avaya, by offering hosted IP telephony, contact center, and managed services itself, will find itself in conflict with service providers that already offer Avaya hosted services in their own data centers. Avaya claims that these providers add their own elements of differentiation, but this could still result in channel partners being less enthusiastic about selling Avaya solutions.
► Providing hosted versions of its advanced applications would be a competitive differentiator, but Avaya is not at present offering hosted services based on unified messaging, unified communications, and collaboration software.
► Avaya’s new set of hosted services are offered in North America only and have not expanded to overseas.
► Avaya comes to market with limited security features for its service. While the company relies on partners to provide the added managed security flair, its own service lacks the support that many clients are beginning to look for.
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On May 18th Embarq, the former local communications business of Sprint Nextel, launched as a separate public company. Embarq had about $6.3 billion revenue in 2005, and has about 20,000 employees. Embarq carries forward local voice, data, Internet, wireless and video/entertainment services, and plans to launch integrated wireless/wireline voicemail among other services in 2006.
