Shorter Sales Cycles for Communication Services?

Life always is so much more interesting than one suspects. Consider the conventional wisdom that enterprise buyers are spending more time than they used to making communications decisions.

Arunas Chesonis, PAETEC CEO, says sales cycles now are shorter than they were three to six months ago. "People are being forced to make decisions much faster," he says. A client was looking at buying an MPLS network. The chief information officer said he was going to make a decision in about 10 days. 

"Typically, you'd see something like that goes 60 days before they make a call," says Chesonis. "I can't quantify exactly for you how fast people are making decisions, but the economic pressures are absolutely affecting sales cycles on operating type services, something that would affect operating expense.

"If you're talking CapEx, a lot of these people are just deferring the decision till later this year, early next year, they're trying to conserve cash just like a lot of folks that are out there," he adds.

Lots of executives say sales cycles are stretching out. But Chesonis may be on to something. 

Nokia Mulls Making PCs

Nokia CEO Olli-Pekka Kallasvuo has hinted that the Finnish handset giant could soon enter the laptop market, reports Reuters.

IKallasvuo says the firm is "looking very actively" at the opportunity. His comments appear to confirm long-running speculation that the world's largest handset vendor will diversify into laptops. "We don't have to look even for five years from now to see that what we know as a cellphone and what we know as a PC are in many ways converging," Kallasvuo said.

The vendor is rumoured to be developing computers based on ARM's new 'Sparrow' processor for netbooks and Mobile Internet Devices (MIDs) and is reportedly looking at a 2011 launch.

Ethernet Installs: Mostly Follow-Ons?

IU.S. demand for business Ethernet service ports expanded at a rate of 43% during 2008, Vertical Systems says.

Spurred by lower bandwidth costs and higher service availability, enterprises of all sizes purchased carrier-based Ethernet to support their business networking applications, according to Vertical Systems.
 
"Despite a near paralysis of new telecom spending at the end of the year, there were tens of thousands of new Business Ethernet service installs during 2008," said Rick Malone, principal at Vertical Systems Group. "Deployments were most active in the third quarter before many enterprises implemented spending freezes or staff reductions. Customer installations in the fourth quarter consisted primarily of follow-through on in-process network conversions."
 
Based on retail customer port installations, AT&T maintained its U.S. market leadership in 2008, although considerable momentum by Verizon narrowed the gap. Attaining a position on Vertical Systems Group's 2008 Business Ethernet Leaderboard with 5% or more of the market are eight service providers in the following order by share: AT&T, Verizon, tw Telecom, Cox, Qwest, Cogent, Time Warner Cable and Level 3.
 

Will Rural Broadband Create Jobs?

The general notion about broadband spending mandated as part of the national economic “stimulus” plan is that it will create jobs. To be sure, construction of the access networks will drive some direct employment.

Some 128,000 jobs (or 32,000 jobs per year) could be generated from network construction over a four year period, and each job would cost $50,000, according to Dr. Raul Katz, adjunct professor at the Columbia Business School.

Beyond that, such new broadband facilities are supposed to spur economic development as well. But will it?

Unfortunately, says Katz, research on the productivity impact of broadband indicates the potential for capital-labor substitution and consequently, the likelihood of job destruction resulting from broadband deployment, as well as some incremental job creation. So the issue is whether net job creation exceeds net job destruction, and by how much.

You might think bringing broadband access to any community can only be a plus. As it turns, out broadband creates jobs and destroys them as well.

Since broadband tends to enable the outsourcing of jobs, a potential displacement of employment in the service sector from the area targeted for deployment might also occur, says Katz.

Also, some job creation in the targeted areas could be the result of relocation of functions from other areas of the country, and therefore, should not be considered as creating incremental employment, he adds.

Still, Katz says, the study results indicate that some job creation aside from the actual construction jobs is feasible. “Our estimates indicate that over four years the network effects could range from zero to 270,000 jobs over four years (approximately 67,500 jobs per year), although anecdotal evidence would point to the lower end of this range,” says Katz.

Firms Losing 40% of Time Because of Communications Inefficiency?

On average, 70 percent of of small and medium business execitives recently surveyed say they spend 17.5 hours each week addressing the pain points caused by communications barriers and latencies, according to a global study sponsored by Siemens Enterprise Communications and conducted by SIS International Research.

If Siemens results are typical, mid-sized organization personnel might be wasting as much as 40 percent of their available time dealing with communication latencies of one sort or another. Most small businesses probably will not agree, but communications inefficiency obviously scales with organization size.

Tracking Service Provider Capex

People who track telecom service provider capex are going to have to account for some likely shifts in the composition of that capital investment. For telcos providing IPTV, a significant percentage of ongoing capex is related to providing customers with relatively-costly in-home decoders. Comcast, which has built its business on the use of such terminals, is about as efficient as any provider can be, and gets the absolute best volume pricing on its gear. Yet it still devotes at least 18 percent of overall capex to the purchase of such boxes.

Telcos, who likely are not yet getting volume discounts as large as Comcast's may find as much as a fifth of their overall capex now devoted to customer premises equipment. That is going to shift thinking in the direction of variable CPE investment rather than the network transmission categories that traditionally have dominated spending. 

The other change is that IP-based gear in most cases costs less than legacy equivalents, so any given dollar of capex spending buys more capabilities than used to be the case. The clear implication is that less gross capex might be needed for any given unit of derived revenue. 

The other long-term change is that more of the value of capital comes from software investments rather than hardware. So telcos will be spending more capex on software, and less, proportionally, on hardware, or transmission hardware. More of the hardware spend is going to be premises based. 

One probably can see that in the case of Ethernet, DSL, video, telepresence or virtual private network services, for example. 

Where's the Competence?

Financial markets hate uncertainty. Right now, all we've got is massive uncertainty. Where's the governmental competence?