Telecom inefficiency makes universal access money
How do you know that the Internet service provider taking your order actually has a network in place to fulfill it? The reality is, you dont.
Analysts estimate that 70 percent of network connectivity sales are made by carriers that dont actually have the network to connect customers.
But what if you could outsource provisioning to a company with a huge database that provides it a clear roadmap to which company has what network resources available when? Chicago-based Universal has deployed a network compass, aiming to take the guesswork out of connectivity.
In most cases today, if your company asks for a dedicated T1 (1.5-megabit-per-second) line from New York to Sacramento, Calif., it is likely that after selling it to you and promising delivery in 60 days, the service provider would call at least three other carriers and place orders of its own. First, the service provider will order a line from its network to your building; then from the central office where that line terminates to the service providers point of presence in New York; and finally from the providers POP in Sacramento to the building that you want to reach.
Service providers going through these steps often dont know for sure whether the partners they tap have the network infrastructure, either, though network engineers often have a clue, tapping vast networks of personal contacts to gather crucial intelligence on other carriers networking situations.
It seems that the more networking business is sent service providers way, the more chance there is for screw-ups. And numbers back this assumption: According to The Yankee Group, while an OC-3 (155-Mbps) line took 60 days to 90 days to provision in 1998, the average provisioning time in 2000 was from 180 days to 240 days.
One way to navigate the maze is to build a network that reaches every corner of the world. This is an expensive proposition, though.
Another tact is Universal accesses: Gather up-to-date information from all major service providers and place orders only with partners that can deliver. There are still hoops to jump through, but chances are youll do it faster than the other guy.
"Nobody can build a network that is ubiquitous. So we have to figure out how to work together," Robert Pommer, Universal Access vice chairman and co-founder, said during a recent interview at Starbucks.
Casually placing his laptop next to a couple of lattes, Pommer took slightly less than a minute to provision a private line between Interactive Weeks Rockville, Md., and Silicon Valley offices. It required six different carriers, and would take slightly less than two months to set up.
Universal Access knows the inner workings of every carrier it does business with, Pommer explains. This means account managers know which departments within which companies will clear line requests and when they will do it. And if there are delays, he says, the reps are ready to ruffle some feathers.
"When the wheel needs to get real squeaky, it squeaks real loud," Pommer says.
The appeal of the service is apparent, Pommer says. The Internet cloud consists of thousands of private lines, and ISPs would rather work with a company such as Universal Access that offers some guarantee that their connections and the revenue that comes with them will be delivered on time. A three-month delay in activating an OC-3 customer could result in $120,000 in lost revenue.
Universal Access seems to be gaining ground steadily. The company reported $14 million in revenue in the third quarter of 2000, up from $4.3 million in the same period in 1999.
Analysts say Universal Access biggest asset is its database, which will allow the company to be a category killer in network provisioning. In a sense, Universal Access aims to do for service providers today what payment processing giant Automatic Data Processing did for outsourcing payroll services two decades ago.
"Outsourcing cycled through the electronics industry first in the 1980s with what was called contract manufacturing, so Dell [Computer] doesnt manufacture its own computers now," says Jamie Friedman, an analyst at The Goldman Sachs Group.
Universal Access may be in the right place at the right time, as carriers scramble to make good on every possible sale, Friedman says. "I think there is a genuine urgency among suppliers who have deployed all this capital to accelerate their time to market to accelerate the present value of the cash flows related to that capital deployment."