Rating your service provider

For those of you seeking a sanity check on your telecom providers’ financial viability and business effectiveness, here are a few benchmarks to look for.

You’ve got to love Warren Buffett. Not because he’s an investment genius who’s made a bazillion dollars betting on down-home businesses. Nor even because from all accounts he appears to be a genuinely nice guy (how many bazillionnaires can you say that about?).

It’s because he’s possibly the only telecom investor who honestly will admit that assessing telcos effectively is a challenge. Last month, the über-investor sold the majority of his shares in Level 3 Communications. Reportedly he did so because, as he put it, “I don’t know how to value telecommunications companies.”

He’s not alone. In recent columns I’ve noted that most so-called telco analysts have their heads – ahem – on backwards when it comes to assessing the value of telcos. (That’s not what I said, but the editors at Network World preferred the more tasteful phrasing.) Don’t get me started on guys such as former Salomon Smith Barney analyst Jack Grubman, who knowingly pumped stocks for personal profit. But even honest analysts don’t understand how to determine whether a telco is well-run or not. That makes things hard for an IT executive who’s trying to decide whether an up-and-coming carrier should be entrusted with the company’s business.

For those of you seeking a sanity check on your telecom providers’ financial viability and business effectiveness, here are a few benchmarks to look for:

Provisioning time. How long does it take to turn up a circuit? The right answer for this varies depending on the complexity of service required (and whether or not physical infrastructure is already in place). However, this metric is an important measure of the effectiveness of a telco’s operation support system – a key part of a telco’s overall effectiveness.

Provisioning accuracy. What percentage of service orders are provisioned correctly from the get-go?

Mean-time-to-respond and mean-time-to-repair (MTTR) for service outages and complaints. Telco executives should have these figures at their fingertips – and they shouldn’t be measured in days, weeks or months. Overly long MTTR ratings tell you the company’s underinvesting in troubleshooting and support – or has an overly complex infrastructure.

Revenue per customer and support costs per customer. Revenue per customer tells you whether you qualify as a large, small or midsize customer for the carrier. Support costs per customer gives you some insight as to the operating efficiency of the carrier. Lower costs means greater automation and standardization – good signs.

Billing accuracy. How often are bills contested? The answer tells you a lot about a telco’s business efficiency.

For all these metrics, you should ask your carrier for historical trending and current figures – so you can see if the company’s improving. Sure, carriers could shade the truth, and in a perfect world, these statistics would be audited and validated externally. But if they actually are tracking this information and are willing to provide you with it, that’s in and of itself positive.

If telecom analysts simply looked at these figures, they’d have an easier time evaluating companies accurately.