How low can rates go? . . . It's worth asking

Today's economy is driving users to maintain existing investments in traditional data services. Despite a lot of hype and increasing adoption of IP VPN technology, businesses are happy to stick with tried-and-true frame relay and private-line offerings.

But sticking with what works doesn't mean users can't lower monthly service costs. Lower service rates are still available, especially if it has been more than two years since your last contract negotiation.

Embarcadero Systems recently renegotiated all its long-haul dedicated T-1s on the West Coast and reduced its monthly expenses by two-thirds, says John Montgomery, director of technical services at the San Francisco shipping company.

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Today's economy is driving users to maintain existing investments in traditional data services. Despite a lot of hype and increasing adoption of IP VPN technology, businesses are happy to stick with tried-and-true frame relay and private-line offerings.

But sticking with what works doesn't mean users can't lower monthly service costs. Lower service rates are still available, especially if it has been more than two years since your last contract negotiation.

Embarcadero Systems recently renegotiated all its long-haul dedicated T-1s on the West Coast and reduced its monthly expenses by two-thirds, says John Montgomery, director of technical services at the San Francisco shipping company.

"T-1s are pretty cheap right now," he says. "Even though we already had a contract, we were able to renegotiate with AT&T and Sprint for lower rates." Carriers will not always renegotiate contracts before they expire, but are motivated to do so when customers have other options and big budgets.

Montgomery lowered rates for six dedicated T-1s. He also says he looked into setting up two T-1s from California to Miami for a new project.

"We expected to pay around $10,000 per month for the connections, but we were getting quotes for $5,000," he says. While the project fell through for other reasons, Montgomery was surprised at how "cheap" it is to support dedicated connections across the country.

Although Montgomery says Embarcadero was able to lower its monthly private-line bill, one of its carriers, AT&T, says its listed prices are creeping up.

Fractional T-1 and full T-1 prices have gone up 2% to 5% and 1% to 2% respectively over the past year, says Steve Sobolevitch, vice president for AT&T Business service pricing. He attributes the increases to "a return to rationalization in pricing."

"The market couldn't sustain the types of price declines we were seeing," Sobolevitch says. Private-line service is not a growing piece of business, which is why prices have stabilized and in some cases have increased, he says. If the service isn't generating additional revenue, the carrier is not motivated to offer more aggressive pricing.

All carriers offer discounts for customers that have large networks or commit to spending a certain amount.

While AT&T says some private-line prices are on the rise, WorldCom says its prices still are declining.

"Prices have dropped 20% to 25% [for T-3, 45M bit/sec private-line services] in the last 12 months, which is small in relation to previous price declines," says Ronnie Bailey, senior director of data services at WorldCom.

Like AT&T, WorldCom is not offering huge price cuts on its lower-speed private-line services, but its fractional T-1 and full T-1 services have come down 10% to 12% in the last year.

Sprint refused to provide pricing information or an executive to be interviewed for this story.

One firm that tracks and analyzes pricing and usage trends around the world says prices still are coming down. "But the dip isn't as dramatic as it has been in past years," says Robert Schult, senior analyst at TeleGeography.