ISP consolidation: Customer buying tips from the experts, Part 1

Getting the best deals as the market consolidates

By Carolyn Duffy Marsan, Network World
February 14, 2005 11:47 AM ET

The times they are a-changin'. That Bob Dylan refrain rings especially true in today's ISP market.

SBC is buying AT&T. BT is buying Infonet. France Telecom is taking control of Equant. Sprint is merging with Nextel. And this week, Verizon announced plans to acquire MCI. These recent deals mean that all of the top-tier ISPs are in flux. What's a corporate network manager to do as the old ISP order is rapidly fadin'?

In the next few issues of the ISP News Report, we'll offer advice to corporate network managers about what to expect in these uncertain times, how to get the best deal when renegotiating contracts, and warning signs that a carrier may be in trouble.

Here are some general tips from analysts who track the telecom industry:

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1. If you are a customer of a top-tier ISP, stick with your carrier during the acquisition. The reason that Equant, Infonet, AT&T and MCI are being acquired is for their enterprise customers. The new owner wants your account, says David Rohde, a senior analyst at Tech Caliber. "In general, you should not leave your current carrier even if it is being bought," Rohde says. "In the past, that wasn't always true. But it seems to be true now."

2. If your contract is up for renewal, issue a competitive bid. And don't be surprised if both ISPs in these pending merger deals submit a bid. "If I were a network manager looking at a bid from SBC and another one from AT&T, I'd certainly play one off the other anyways but I'd do so more aggressively right now," says Brian Van Dussen, director of telecommunications strategies at Yankee Group.

3. If your contract is not up for renewal, try to renegotiate it anyways. By next year, you may lose some of your leverage, analysts say. "If there's any leeway to renegotiate, now is the time to do it," says Melanie Posey, research director of the telecommunications market for IDC. Posey says that ISPs like AT&T that are being acquired want to bring existing contracts to the new parent company. "Presumably, AT&T would be more willing to make sure that they bring the maximum number of customers to SBC," she says.

4. Don't move all of your traffic to one of the RBOCs. All of the RBOCs have national strategies, but those strategies are up in the air now that SBC is buying AT&T. Instead of building-out their own national networks, the RBOCs appear to be buying infrastructures from others. The enterprise customers of RBOCs may end up having to transition their services to other networks if deals like SBC's purchase of AT&T and Verizon's acquisition of MCI are approved.

5. If you have global needs, consider Infonet or Equant. The new owners of these ISPs - BT and France Telecom, respectively - are committed to global expansion. In contrast, AT&T may not be as committed to building out its global IP infrastructure with an RBOC as its owner. The same fate might befall MCI. So Rohde advises network managers with global locations to take another look at Infonet and Equant.

6. Don't send all your traffic over smaller ISPs such as Broadwing or Global Crossing. These carriers might have a tougher time competing against newly formed behemoths such as an SBC/AT&T combination. "With these carriers you want as little commitment as possible," Rohde says. "They're really the ones that are most disadvantaged by all of this [merger] activity."