* Long-distance opens up large business market to Bells
As they are being granted permission to offer long-distance services, the regional Bell operating companies are assembling strategies to attack the enterprise business market, which represents billions in untapped revenue for the carriers.
The ability to offer long-distance within their regions enables the RBOCs to not only serve as a business’s local exchange carrier, but long-distance carrier as well. With that comes the opportunity to offer lucrative data services such as frame relay and ATM, an opportunity that previously has gone to interexchange carriers such as AT&T, MCI and Sprint.
Frame relay alone is a $15 billion business, according to market research firms.
“We realize there are segments in the upper end of the large-business market where we do not compete. So we look at that market opportunistically,” BellSouth CEO F. Duane Ackerman said during an analyst meeting two weeks ago.
Large businesses account for only 17% of BellSouth’s overall Communications Group revenue, or about $3 billion annually. Yet the large-business telecom market in BellSouth’s region is worth $10.1 billion and growing at about 2% annually.
BellSouth has already had some success in this market. The carrier has landed 5,500 long-distance contracts valued at $600 million with large companies in its region, Ackerman says.
The carrier is also investing in network VPN and metro Ethernet services, IP PBXs, IP Centrex and softswitch equipment, and an in-region IP backbone. But Ackerman still acknowledges that BellSouth cannot meets the needs of “the highest of the high-end” enterprise customer.
That’s where many thought AT&T, with its nationwide frame relay and ATM data network, might help BellSouth. According to published reports, the two were engaged in merger discussions for some time before BellSouth walked away, reportedly believing that $19 billion was too high a price to pay.
SBC is also looking to grab a greater share of the $34 billion enterprise opportunity in its region, CEO Ed Whitacre says. SBC has long-distance penetration in eight of the 13 states in its region. The RBOC was just granted approval to offer long-distance in five Midwest states.
The carrier already has nationwide ATM/frame relay and IP networks built out. So as its long-distance offerings penetrate even further into its region, so do its data services.
That’s why, with 49% of the Fortune 500 located within its footprint, SBC considers the enterprise market “the most exciting segment” of its business, according to Ray Wilkins, SBC group president for marketing and sales.
As examples, he cited frame relay contracts with four separate companies he did not name: a five-year, $350 million nationwide network connecting 4,000 sites and 11,000 routers; a three-year, $9 million, 580-site network for a company headquartered outside, yet with a significant presence inside SBC’s region; a three-year, $10 million, 221-site network for a company present in six states – five of which are within SBC’s territory; and a three-year, $10 million, 104-site contract with a fourth company.
Verizon and Qwest have also recently announced progress and initiatives in the large-enterprise market. Verizon has landed 900 national contracts over the past year through its Enterprise Advance initiative. The average contract length is 2.5 years and customers include 59 Fortune 500 companies, says Larry Babbio, vice chairman and president of Verizon.
Qwest recently announced that it can now offer long-distance data and IP services, in addition to voice, to businesses and government agencies in most of its 14-state region. Qwest also announced that it is acquiring certain assets, such as fiber routes, from Touch America and 360networks in order to support this long-distance data initiative.
The ability to offer long-distance data to large enterprises within its region opens up a $6 billion market opportunity to Qwest, says Cliff Holtz, executive vice president, Qwest business markets group.
