Скачать презентацию Local Market Dynamics Large slow growth market Скачать презентацию Local Market Dynamics Large slow growth market

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Local Market Dynamics • Large, slow growth market • Competition really just beginning • Local Market Dynamics • Large, slow growth market • Competition really just beginning • Lots of M&A activity – SBC/Pac Bell/ SNET/ Ameritech – Bell Atlantic/ NYNEX/ GTE – World. Com/MFS/Brooks – AT&T/ TCG/ TCI

ILEC Local Market Revenues $98. 6 Billion, 1997 Access 33. 6% Toll 10. 2% ILEC Local Market Revenues $98. 6 Billion, 1997 Access 33. 6% Toll 10. 2% Dir Revenue 4. 3% Local Services 51. 9% Revenues for ILECs only, excludes non-telecom revenues

ILEC Local Services Market $51. 1 Billion, 1997 Dial tone 70. 1% Local P/L ILEC Local Services Market $51. 1 Billion, 1997 Dial tone 70. 1% Local P/L 3. 3% Features 9. 2% Termination/ connections 13. 3% other 0. 2% Residential - 54% Business - 42% Pay phone 3. 9%

What Defines the CLECs? • The Telecom Act of 1996 transformed CAPs into CLECs What Defines the CLECs? • The Telecom Act of 1996 transformed CAPs into CLECs and created the rise of an integrated carrier approach. It also sparked the entrance of other “new” competitive local exchange carriers- both start-ups and existing carriers. • CLECs are among the fastest growing , and are clearly the first wave of Integrated Carriers because they were able to leverage existing infrastructure to offer a broader portfolio of services. • CLECs are diverse; different target markets, service mixes and technology solutions. • Competition is driving carriers to unprecedented levels of business, service and infrastructure complexity

CLEC Revenue Mix 1997 & 2000 1997 - $3. 1 B Data 5% Systems CLEC Revenue Mix 1997 & 2000 1997 - $3. 1 B Data 5% Systems Integratio n 13% Special & P/L 38% 2000 - $9 B LD/Toll 23% Data 6% Systems Integration 7% Special & P/L 24% LD/Toll 15% Switched access 7% Local Exchange 22% Domestic Revenues Only Switched access 11% Local Exchange 29%

CLEC Profiles Geographic service area Key Customer Focus Sales Organization Intermediate • East Coast CLEC Profiles Geographic service area Key Customer Focus Sales Organization Intermediate • East Coast emphasis with extended Frame Relay to the West Coast and Texas • Nationwide Frame Relay service through the UNISPAN consortium • The target market for Intermedia is businesses with between 50 and 500 lines that can ultimately be served on-net. • Also targeting larger accounts with its inter-city data services and internet services • 365 Intermedia sales people and a total of 617 sales people when Shared Tech. , LDS, and national Tel are added • 102 Sales Offices located throughout the US ICG • Regional carrier • Focuses on clusters in Ohio Valley, Texas Southern California; Colorado; North Carolina; Alabama; and Tennessee. • New network in Atlanta for 1998 and no additional networks planned • Primarily focuses on Tier I and Tier II. • Sells to small and medium-sized businesses of 5 to 100 lines with a strong emphasis on accounts with 15 to 50 lines. • Utility agreements will bring on Multiple-dwelling units as a target market • ICG is trying to leverage its existing client relationships to sell bundled solutions. • Sales force is estimated at roughly 300+. • Also leverages its relationship with utilities to expand into residential and business markets. TCG • Nationwide footprint covering 28 of the 30 largest MSAs. • Biz. Tel footprint-206 areas including 96 of the top 100 MSAs. • Focus on Tier I cities some emphasis on Tier II and Tier III cities. • New emphasis on regional corridors. • Target larger businesses (550 lines or more) in certain verticals such as Financial Services, Healthcare, Education, Gov’t and Media companies. • Other Key market is on-net small/medium businesses (500 lines or less. ) • Very limited residential play. • Sales channels include both direct sales force (689+ sales representatives) and agents and resellers (approx. 2000. )

CLEC Profiles Geographic service area Key Customer Focus Sales Organization GST • Regional player-mostly CLEC Profiles Geographic service area Key Customer Focus Sales Organization GST • Regional player-mostly West and Southwest U. S. and Hawaii. • Not looking to go national. • Mostly Tier II and Tier III cities. • Target SMBs business-between 2 to 200 access lines. • Continue to serve wholesale and retail businesses. • Sales force approx. 290 • Focus on customer care and “holding-the-hand” of the customer. E-spire • Southeast and Southwest U. S. • Tier II and III cities. • Accelerating roll out in 98. • Targeting small to medium businesses spending. • Targets firms in professional services, health care, gov’t, and financial services. • No interest in residential. • Sales and Marketing staff grew from 56 people in 1996 to 277 people in 1997. USN • Regional focus - Midwest, New England, and Mid Atlantic. • All TRS based. • Target businesses with 2 -10 business lines. • Focus on providing full bundles and superior customer service. • Direct Sales focus. • Sales force grew from 206 in 1996 to 426 in 1997.

Key Market Trends and Influences Affecting the CLEC Market • • Wall Street Deregulation Key Market Trends and Influences Affecting the CLEC Market • • Wall Street Deregulation Mergers and Acquisitions Alliances and Partnerships Integrating the product portfolio Network Build-out Growth- Can they sustain their current growth and will they be able to manage and survive their growth

Wall Street and Deregulation • Wall Street • Pressure to show profit- EBIDTA positive Wall Street and Deregulation • Wall Street • Pressure to show profit- EBIDTA positive • None of the CLECs EBIDTA positive except for TCG • Wall Street looking for a return on investments • Push towards deployment of success-based capital • Deregulation • Telecom Reform Act of 1996 • Required the RBOCs to open the local markets via resale, UNE and facilities based • Competition in the business market. Cherry-picking the profitable customers. Residential markets have seen very little to any competition.

Deregulation (Continued) • 8 th Circuit court interconnection rulings • Removed the ILECs burden Deregulation (Continued) • 8 th Circuit court interconnection rulings • Removed the ILECs burden of recombining UNEs and placed that burden on the competing carrier. Ruling now under consideration by the Supreme Court. • Interconnection pricing in the hands of the state regulatory commissions. Leaves competition fragmented and makes a national TSR or UNE local entry strategy difficult. • RBOCs into Long Distance • RBOCs need to meet 14 point checklist to gain entry into inregion Long Distance, • FCC vs. SBC granted RBOCs the ability to immediately enter inregion. Overturned on appeal. • RBOCS plannin ressive attack of the in-region long distance market. Expecting to take most market share in the small and medium business market and the consumer market.

Mergers / Acquisitions and Alliances / Partnerships • CLECs are positioning themselves both to Mergers / Acquisitions and Alliances / Partnerships • CLECs are positioning themselves both to be acquired or to acquire. Are the CLECs looking for an exit strategy? • Acquisitions, alliances, and partnerships have allowed for quick, lower-cost entry into new markets • Large IXCs continue to look to the “CAPs turned CLECs” as an access alternative to the ILECs • Internet’s demand for dedicated access, the call for alternatives to the PSTN, and the lure of the ISP retail business have driven many CLECs to acquire ISPs • ICG/Netcom, Intermedia/Digex, MFS/UUNET, TCG/Cerfnet, RCN/ Ultra. NEt and Erols • Challenge is integrating acquisitions. Importance of a seamless entity to customers

Network Build-out: Expansion Today; Growth Tomorrow • Still in the Build Out Stage for Network Build-out: Expansion Today; Growth Tomorrow • Still in the Build Out Stage for Most CLECs; • Many Are Expanding Into New Cities, Others Are Consolidating their existing networks to Ensure Seamless Regional corridors • Third Tier Cities Now the Focus of New CLEC Opportunities (i. e. , Cities With 750, 000 Population or Less); Tier 1 and many Tier 2 cities saturated • Move into Switched Services & Long Distance helping to achieve profitability and positive cash flow while traditional CAP segment faces threat from IXC acquisitions

Network Build-out: Expansion Today; Growth Tomorrow (Continued) • Yankee Group Forecasts More MFS-Style Exit Network Build-out: Expansion Today; Growth Tomorrow (Continued) • Yankee Group Forecasts More MFS-Style Exit Strategies for facilities-based CLECs. Network build-out is expensive and it is less expensive to buy the networks • Move towards 3 rd generation CLECs- dropping in switches and leasing the fiber between the switches. Allows for a faster turn-up time and generation of positive cash flow. CLECs to look for in this category include: US LEC; Allegiance; and Focal

Network Expansion: Growing CLEC Switch Deployment Number of Switches 600 520 500 410 400 Network Expansion: Growing CLEC Switch Deployment Number of Switches 600 520 500 410 400 320 300 210 100 0 1995 1996 1997 1998 1999 2000 Installed Base, Switches

Can the CLECs Survive Growth? • Managing Growth • Customer Growth- can they meet Can the CLECs Survive Growth? • Managing Growth • Customer Growth- can they meet customer expectations and demand • Market Growth- Are they going too fast too quickly? Do they have the resources to maintain their current pace or are they trying to be everything to everyone? Example being US ONE which crashed and burned • Ensuring Quality while Maintaining Growth • Leased Networks • Manage unbundled elements- need to own the customer end-to-end and control the customer’s entire experience • Talent: Finite number of talented people in the industry

Local Exchange Market - 2000 $44 billion ILECs 88. 9% CLECs 3. 6% IXCs Local Exchange Market - 2000 $44 billion ILECs 88. 9% CLECs 3. 6% IXCs 7. 4% CLEC revenues EXCLUDES MFS & MCImetro (MFS and MCImetro included in IXCs); revenues for dial tone ONLY, EULC, taxes, and toll are not included

CLEC Market Dynamics 36 to 48 Months • Multiple facilities-based CLECs in major Tier CLEC Market Dynamics 36 to 48 Months • Multiple facilities-based CLECs in major Tier 1 and 2 cities – Tier 3 cities offer some growth opportunity • UNEs widely available • RBOCs have gained Inregion LD relief • Technology increases bandwidth • Potential for oversupply of inventory • Bandwidth & Exchange prices fall • CLECs Employing Exit Strategies • Increased IXC / ILEC Partnerships

Long Distance Market Long Distance Market

1997 Long Distance: The $86. 7 Billion Market Other Data Inbound 1% 15% Outbound 1997 Long Distance: The $86. 7 Billion Market Other Data Inbound 1% 15% Outbound 4% 9% Carrier Services 5% Wholesale Private Line 6% 10% VPN 4% Residential Business= 54% Residential= 46%

1997 Business Long Distance: $46. 7 billion Outbound 16% Inbound Private Line 29% 18% 1997 Business Long Distance: $46. 7 billion Outbound 16% Inbound Private Line 29% 18% Other VPN 2% 7% Data 8% Carrier Services 9% Grew approx. 10. 9% from 1996 Wholesale 11%

Key Segment Growth (1996 -97) 14 12 13. 3 11. 9 1996 10 $ Key Segment Growth (1996 -97) 14 12 13. 3 11. 9 1996 10 $ in bn 1997 8. 6 7. 2 7. 5 8 7. 4 6 4. 8 5. 1 3. 5 4 2. 95 3. 7 2 0 Inbound Outbound Private Line VPN Wholesale Data

Business Long-Distance Market Shares (1996) Sprint 11. 4% World. Com Others 10. 2% 3. Business Long-Distance Market Shares (1996) Sprint 11. 4% World. Com Others 10. 2% 3. 9% MCI 23. 2% AT&T 51. 3% The Big 2 = ~85%

AT&T: Consolidations and Acquisitions, in defense of the core business • Divesting non- core AT&T: Consolidations and Acquisitions, in defense of the core business • Divesting non- core assets and businesses – AT&T Universal Card to Citibank – AT&T Solutions customer care to Cincinnati Bell – Termination of Direct TV marketing agreement • • Acquires TCG and Defines Local Business Entry Strategy Paid $ 11. 3 billion in stock Time to market a key factor in influencing the acquisition decision AT&T gains Cost efficiencies, Local network coverage, and Local market experience • TCG gains scale, access to the AT&T brand, and easier access to capital and other resources

Sprint: Looking for Partners? • With MCIWorld. Com merger, Sprint falls further behind • Sprint: Looking for Partners? • With MCIWorld. Com merger, Sprint falls further behind • Existing Local properties not all that attractive • However, with its LD brand, Wireless assets, and local presence, it is well positioned to partner or merge with: – LECs with national ambitions – Foreign PTTs that are seeking a US presence • World. Com acquires MCI to become the leading integrated carrier • MCI spurns GTE and leaves BT standing at the altar • Overnight, MCIWorld. Com becomes: – the second largest LD carrier with 25% share – the largest CLEC, with 56% share – the leading global ISP – Fourth largest international telco

World. Com and MCI– A comparison Assets World. Com MCI Long Distance • $7 World. Com and MCI– A comparison Assets World. Com MCI Long Distance • $7 Billion Annual revenue (1997) • former Wiltel wholesale LD • $16. 5 billion annual revenue (1996) • $7. 06 billion in consumer revenue • 9. 4 million households Local • • • Estimated 1996 CLEC revenues of $1. 9 bn 52 MFS Metros 34 Brooks Metros 23 markets under development 7500 on-net buildings (est) 75 Class 5 switches 25% of all competitive access lines CLEC (Metro) Revenue of $450 million Presence in 36 cities Local switched service in 32 cities 30 Class 5 switches

World. Com and MCI– A Comparison World. Com MCI Internet • UUNet, largest global World. Com and MCI– A Comparison World. Com MCI Internet • UUNet, largest global ISP • 50, 000 business customers (access and hosting) • Compuserve Network Services • ANS ISP • Provides transport to America Online, Earthlink, Microsoft Network • $500 million in Internet Revenue • 400, 000 dial-up customers • Private wholesale services to 25 -35% of all ISPs. • $200 million estimated revenue • Sold to C&W as part of EU approval International • • • 200 settlement agreements globally • Licenses in UK, Germany • Top bid on Embratel Wireless • Choicecom • Few of its other LD or CLEC acquisitions have major wireless play 60 settlement agreements globally $470 million in revenues Metro infrastructure in 12 cities UUNet’s European backbone in 10 cities • • • Holds on wireless licenses Nationwide Cellular Services (a reseller) Operates in 15 -20 markets 400, 000 subscribers Paging reseller (through Pag. Net), over 600 k subs.

RBOCs into Long Distance RBOCs into Long Distance

Telecom Act of 1996 New Competitive Telecom Services Market • “An act to promote Telecom Act of 1996 New Competitive Telecom Services Market • “An act to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies” – Ixcs, cable and caps allowed to enter local exchange • Ixcs with more than 5% of the nations presubscribed lines is not able to joint market local and long distance services until rbocs are granted in-region relief – Mandated LEC resale at fair and reasonable prices – Rbocs enter out-of-region long distance immediately – Rbocs open local markets in exchange for in-region long distance • Pressure of new integrated telecom market beyond resale/bundling to service innovation

RBOC Entry into Long Distance Offering Services Approved Services Wholesale Supplier In-region Launch Ameritech RBOC Entry into Long Distance Offering Services Approved Services Wholesale Supplier In-region Launch Ameritech • Announced it will begin offering long distance in Missouri; • Marketing Alliance with Qwest (in-region) • 45 States • World. Com • 1999 Bell Atlantic / NYNEX • 34 States and plans to file in Minnesota and Oklahoma • Sprint • 1998? • 39 states and applications pending in Vermont and Alaska • AT&T • 1999 Bell South ----- SBC / Pac. Tel • 5 States • Sprint • 1999 US WEST • NONE • Marketing Alliance with Qwest (in-region) • 34 States • Frontier Card • Williams? • Qwest? • 1999 Leveraging Established Customer Relationships to Provide New Services

Biggest Hurdle for the RBOCs OSS Access and Interconnection • Required under the Act Biggest Hurdle for the RBOCs OSS Access and Interconnection • Required under the Act – ILEC must provide access to its OSSs on terms that are just reasonable, and non discriminatory • RBOCs have been frustrated in their 271 applications by OSS issues: – Not able to show flow through of orders and service transactions from CLECs • Push for National Gateway in some quarters, but who pays the bill? – Call for Standards by many parties (NARUC, ATIS, etc. )

Conclusions • Nice try but too early. Not likely to make first-round approval based Conclusions • Nice try but too early. Not likely to make first-round approval based on Track A (of two tracks) benchmarks • Lack of ‘competing providers to residential and business subscribers’ by companies that ‘offer services predominantly over their own telephone service facilities’ – Competition and interconnect deals are with competitors that are focused on business – AT&T, has stopped marketing to residential customers in the six markets where it resells ILEC services to the residential market

Integrated Carrier Strategies & Large Business Market Issues Integrated Carrier Strategies & Large Business Market Issues

Do Large Biz Customers Care About Service Integration? • If Given A Choice: – Do Large Biz Customers Care About Service Integration? • If Given A Choice: – 70% of Businesses Say They Would Use One Company for All Their Communication Needs – Key Reasons: • Less Effort to Manage the Network • One Stop Shopping • Lower Costs source: YC 100 1996 68% 62% 59%

…but Price isn’t Everything How important to the purchasing decision are the following factors? …but Price isn’t Everything How important to the purchasing decision are the following factors? 5= very important 1 = not important Source: YG WSTA Survey 1996

Long Distance Integrated Carriers Brand Local Internet Wireless Enhanced Telephony Video Long Distance Integrated Carriers Brand Local Internet Wireless Enhanced Telephony Video

Wholesale Services Wholesale Services

Wholesale • All facilities based LD carriers, whether they are national or regional in Wholesale • All facilities based LD carriers, whether they are national or regional in nature wholesale LD services to each other, to smaller carriers and to resellers • Over time, the four largest LD carriers have increased their revenue contribution from the wholesale channels • Frontier’s agreement to sell capacity to Level 3 is an example of the renewed focus on wholesale by smaller LD carriers such as C&W and LCI

Wholesale (Continued) • New entrants such as Qwest, IXC, Williams and Level 3 will Wholesale (Continued) • New entrants such as Qwest, IXC, Williams and Level 3 will expand the wholesale market but will also put significant price pressure on wholesale rates • New services such as IP, and new entrants in local and LD market are expected to feed the demand for wholesale service • We estimate the wholesale market to be around $ 8. 3 billion

 • ELDP Diversification Strategies IXC Communications – in addition to carrier’s carrier services, • ELDP Diversification Strategies IXC Communications – in addition to carrier’s carrier services, offering switched, freephone, calling card and data services – Looking to acquire smaller retail players • Qwest Communications – direct retail plays through Vo. IP, dial-around – acquisitions of LCI, Super. Net – looking to enter the large corporate market • Williams Companies – leverage already large network integration business • Level 3 Communications – purchased Data CLEC XCOM

Voice Over Whatever: Demand for Alternative Voice Services Voice Over Whatever: Demand for Alternative Voice Services

Key Issue: What is the current status of Voice Services Over Alternative Networks (TCP/IP, Key Issue: What is the current status of Voice Services Over Alternative Networks (TCP/IP, Frame Relay and ATM)?

Key Context Issue: How much data is moving over TCP/IP, Frame Relay and ATM Key Context Issue: How much data is moving over TCP/IP, Frame Relay and ATM today. . . % traffic >50 26 to 50 11 to 25 1 to 10 0% 20% 40% 60% 80% % respondents PL Intra/ Managed Internet FR ATM

Key Context Issue: How much data is moving over TCP/IP, Frame Relay and ATM Key Context Issue: How much data is moving over TCP/IP, Frame Relay and ATM in 5 years. . . % of traffic >50 26 to 50 11 to 25 1 to 10 0% 10% 20% 30% 40% 50% 60% % respondents PL Intra/ Managed Frame Relay takes over Internet FR ATM

Key Issue: How much voice traffic will migrate to VSANs over the next five Key Issue: How much voice traffic will migrate to VSANs over the next five years? % of traffic >50 26 to 50 11 to 25 1 to 10 0% 5% 10% 15% % respondents PL Intra/ Managed Internet FR Slow migration of voice, for all services ATM

Fax keeps pace % of traffic >50 26 to 50 11 to 25 1 Fax keeps pace % of traffic >50 26 to 50 11 to 25 1 to 10 0% 5% 10% 15% 20% % of respondents PL Intra/ Managed Internet FR ATM

Key Issue: What are the reasons for choosing VSANs? Save Money Better Bandwidth Utilization Key Issue: What are the reasons for choosing VSANs? Save Money Better Bandwidth Utilization Support Multimedia Improve Network Management 0% 20% 40% 60% 80% 100%

IP Telephony MOUs as a Percentage of Total Consumer MOUs (1998 -2005) 16 14 IP Telephony MOUs as a Percentage of Total Consumer MOUs (1998 -2005) 16 14 12 10 % of LD 8 MOUs 6 4 2 0 15 12 9 7 3. 5 0. 4 0. 8 1. 9 1998 1999 2000 2001 2002 2003 2004 2005