Cisco Conferences in WebEx

On March 15th Cisco announced that it would acquire WebEx, which provides network-based on-demand collaboration applications, especially for the small to medium-sized business segment.

Recommended Competitive Responses

► Microsoft should note that it is further along in delivering premise-based and hosted conferencing solutions that are built on the same technology and complementary to one another.

► All competitors should work to raise visibility for their conferencing and collaboration solutions as they market their managed applications. ROI for unified communications solutions is often difficult to prove; however, the relative ease of proving ROI for conferencing and collaboration applications makes them a natural lead-in for unified communications solutions sales.

► Adobe should highlight that its Breeze service is now bannered as Acrobat Connect Professional. It should point out that it offers an alternative for communication and collaboration through scalable interactive Web conferencing and online personal meeting rooms for those users that do not want to be beholden to Cisco.

Recommended End User/Customer Responses

► WebEx’s customers, especially carrier partners, should monitor the way the company’s merger and integration is handled. With communications systems developers basing more of their revenues on the delivery of professional, managed, and hosted services, service providers will want to make sure that the combination of Cisco and WebEx does not have a long-term goal of setting itself up as a direct competitor for hosted telephony and other advanced communications services.

► WebEx customers should expect the same QoS levels as the company transitions over to Cisco. They should report any negative changes in QoS to customer service personnel, since Cisco will not see it in its best interest for the WebEx customer base to diminish.

XO Launches 3 Guarantee Program to Feed Optical Transport Accounts onto its New Network

On February 28th XO Communications launched its 3 Guarantee Program. XO claims that it will beat any competitor’s price for 2.5 Gbps and 10 Gbps long-haul service along select network routes, and that it will provide a one-month service credit for wavelength services that fail to meet a guaranteed install commitment date.

Recommended Competitive Responses

► Level 3 is potentially the most directly affected by XO's stepping up its long-haul optical transport services sales. The carrier can brush off XO's long-haul optical transport services and latest service guarantees as the latest antics by billionaire investor Carl Icahn, a move that has more to do with market valuation than with providing actual services to actual customers.

► Major nationwide optical transport providers including Level 3 can show off their footprint as being broader and more comprehensive than XO's network, including international presence where XO has none. XO's 18,000 route-mile long-haul network may sound impressive, but the carrier has not greatly increased its corresponding metro optical network presence. Level 3, Global Crossing, AT&T, Qwest (through partners) and Verizon each have an international optical transport capability that XO does not.

► Enterprise-focused optical transport providers should focus on XO's lack of experience both with large enterprise accounts and with owning and operating a long-haul network down to the fiber (the carrier built its long-haul network in 2006), and point toward XO's deployment of excess capacity between major carrier hotels as good for wholesale clients, but not as important for enterprise customers.

Recommended End User/Customer Responses

► XO built a major long-haul network in 2006, and it is now pre-buying capacity between major carrier hotels and offering a select “we'll beat any price” guarantee. The subtext here is that XO has sunk a lot of investment to build a national network that, except for XO's own traffic, is still largely empty. XO is going to be hungry for business, and the carrier is more likely to be flexible in order to do whatever must be done to win the business.

► Enterprise customers can shop optical services from Level 3 and XO interchangeably against each other, even down to individual city pairs. They can see which will give them the most attractive prices at approximately similar service guarantees and credits. Even if customers are not serious about buying from XO, they can use a bid to try and drive down Level 3's transport prices.

► Buyers should be aware that XO offers the entire span of optical transport services: SONET, wavelength services, optical Ethernet transport and IP transit (via optical Ethernet transport). XO's 3 Guarantee Program only has a few touchpoints among the full portfolio of optical transport services, but that should not preclude a prospective client from seeing what XO has to offer.

► As with other services, XO does not have a direct transborder or international optical transport presence. But the carrier will likely attract a number of international wholesale carrier partners, so that enterprise customers could get international capacity served domestically through XO's long-haul optical transport network.

Verizon Business Launches National Ethernet VPLS for Business and Government Customers

On March 12th Verizon Business launched a new Ethernet Virtual Private LAN Service (E-VPLS) that is available virtually anywhere in the United States, and the company plans to expand the service to international locations next year. Delivered via Verizon’s converged packet architecture, E-VPLS gives customers the ability to migrate from legacy services to a next generation network infrastructure, as well as flexibility to adjust their networks' bandwidth from 1 Mbps to 1 Gbps, and it provides four classes of service and robust SLAs.

Recommended Competitive Responses

► AT&T and Qwest both have plans to introduce VPLS services, driven both by customer demand and by the Networx RFP. AT&T customers have been demanding a Layer 2 alternative to both ATM/Frame and IP VPNs for some time, and now some must be wondering when they will get the same alternatives enjoyed by Verizon customers, so the carrier needs to at least articulate a definitive timetable for VPLS deployment and a roadmap for feature enhancements.

► Qwest has said it plans to launch a VPLS service in the second half of 2007. When it does, it should follow Verizon’s example of pricing the new Layer 2 VPN offer at parity with its Layer 3 VPN service. This pricing model removes pricing differentials as a reason to select one service over the other, and allows the market to dictate which will prevail. Establishing service quality parity between VPLS and MPLS/IP VPNs, to the extent possible, is also recommended.

► Smaller carriers, including Masergy, Time Warner Telecom, and Yipes have led the market with introductions of VPLS-based Ethernet services dating back to 2005. These carriers need to point out that they are way ahead of the Tier 1 carriers in this regard, and that their services have an established track record in contrast to the 1.0 versions that are just beginning to be introduced by the larger carriers.

► Level 3 can point to the fact that VPLS is based on technology (Martini Pseudowires) that was developed by one of their own network architects, and therefore they could claim to have invented the core principals underlying the new services.

Recommended End User/Customer Responses

► Small to medium sized businesses needing to link a number of locations in major cities but not wanting to get involved in the complexity of IP routing protocols should look at Verizon’s new E-VPLS service. E-VPLS can offer the advantage of using simple and familiar Ethernet protocols and equipment, including MAC addresses and VLAN tagging, to create partial or fully meshed wide area networks with multiple classes of service and solid SLAs.

► Medium to large enterprises looking to migrate from frame relay and/or ATM to next generation network services should consider Verizon’s E-VPLS alongside Private IP solutions to see which is the most suitable for their needs. For those network management teams with in-house expertise in IP routing protocols, a Layer 2 VPN service such as E-VPLS would eliminate the need to open up and share the internal routing tables with the service provider.

► Multinational enterprise organizations should evaluate Verizon’s E-VPLS service based on their roadmap for planned international deployment in 2008. This roadmap should be compared to international Ethernet VPN services already available from a few carriers such as Masergy, VSNL, or Yipes.

Integra to Acquire Eschelon Telecom, Creating Fourth-largest U.S. CLEC

On March 20th Integra Telecom, a provider of local, long-distance and Internet services for small and mid-size businesses, signed an agreement to purchase Eschelon Telecom, for $566 million in cash plus the payoff of approximately $144 million of Eschelon debt.

The combination of two small regional CLECs will create the fourth-largest CLEC in the country with an estimated $700 million in combined annual revenues. This move will also greatly extend Integra’s geographic presence over a large western region covering 11 states from Minnesota to Arizona, including the lucrative California market.

Recommended Competitive Responses

► Incumbent local exchange carriers in the regions covered by the Integra-Eschelon match up, such as Qwest and Verizon, should look for any signs of discontent caused by the usual merger related confusion, and act quickly to target the larger customers of either company with special win-back incentives.

► Other CLECs and regional competitors should point out to customers that bigger is not always better, and the inevitable pains of consolidation of people and networks could cause customer service to slip or account teams to become disconnected from customers. Competing CLECs should also point out that smaller customers with operations within a single metro area will have nothing to gain from Integra’s acquisition of a similar regional CLEC, except possibly less choice.

Recommended End User/Customer Responses

► Potential customers of Integra services should closely compare the speeds, feeds and prices for access and transport options with competing carriers, including the RBOCs and national CLECs, that have operations in the same metro areas, to see if Integra can now offer better deals following the link up with Eschelon.

► Existing customers have until Q3 2007 to evaluate whether the merger will improve, or lower the quality of services and prices offered by Integra. In the meantime, existing customers that might be impacted by the merger should refrain from signing long term contracts until after the deal has closed and the dust has settled.