Comptel 2010: Competitive providers, wholesalers find new identities

As I prepare to hop aboard a plane to head down to Nashville, Tn. on Sunday to attend my first Comptel show in six years, I thought this was a good time to put out my thoughts on what I think will be the talk of the town at this show. With much of the nasty telecom nuclear winter behind us--one that claimed the life of many early CLECs that had a lot of good ideas but suspect business plans--the competitive telecom industry has increasingly consolidated with a greater focus on business services and providing wholesale services to wireless operators or as middle-mile providers for smaller independent ILECs.

And while no one is likely to agree with my predictions, I think I can say with some degree of certainty there will be three trends that will rise to the top during the two-day Comptel show:

• RLECs/Cable catch CLEC fever: Seeing an opportunity to break out of their traditional comfort zone as the local telephone POTS provider and the TV provider, cable operators and tier 2 ILECs are reaching outside their respective network territories as CLECs. While the idea of cable operators and even smaller ILECs acting as competitive providers is nothing new (take a look at Ritter Communications [1]), I think there's two events on the independent ILEC and cable side that are changing the competitive provider game. On the independent telco side, there's Windstream's acquisition of NuVox [2], a purchase that allows them to more efficiently target the SMB market with IP-based services. Then, there's Comcast's impending purchase [3] of Chicago-based Cimco, which will augment its business service drive with a host of new local and long-distance voice and data assets.
  
• Wholesale goldmine: Given the fact that Comptel is focused on competitive providers, which will either augment their existing network footprints by purchasing wholesale capacity, or just rent raw capacity, wholesale services will be on display next week. One area that you're going to hear a lot about next week is wireless backhaul. As bandwidth hungry devices such as AT&T's iPhone and the iPad grow in popularity, wireless operators are on the hunt for new wireless backhaul alternatives. Looking to fulfill this need are not only the incumbent wireline operators with wholesale arms (AT&T, Qwest Wholesale and Verizon Partners), but also a host of competitive wholesalers (Level 3) and what I would call wireless backhaul specialists (Telecom Transport Management and Tower Cloud).
  
• Don't take my copper, man: Even if Verizon's Chairman Ivan Seidenberg says he's no longer worried about landline loss or that Fiber to the Home will be everywhere someday, the reality is today in 2010 copper is the dominant form of access. Interestingly, competitive providers and even savvy independent ILECs (Windstream) have found that copper is a sound medium to deliver Ethernet over Copper services. What's become controversial in recent years in the competitive provider market is the incumbent carrier's ongoing retirement of copper.

Of course, another trend worth mentioning here is that no segment is immune to ongoing economic challenges that have strangled the world economy over the past year. Facing one of the worst economic recessions since the depression, CLECs and even wholesalers saw orders remain flat or drop in 2009, but now in 2010 they are seeing some signs of life. Roland Thornton, VP of Wholesale for Qwest told me this week that he's starting to see signs of a turnaround, albeit customers are treading lightly, adding that he's seeing opportunities to grow their data and IP products. "All of us were coming through a significant headwind with the economic downturn which affected a lot of areas in our business," he said. "The good news is as we go and enter into 2010, I am beginning to see customers buy again cautiously but nonetheless no longer are we seeing the distress of the economic conditions back in the middle to the second quarter of last year."

Regardless of the challenges that service providers face, the measure of the wholesale and competitive carrier's success will be based on how their ability to respond quickly to existing and new customer needs that emerge. --Sean [4]