Splitting Your Network between

Carriers: The Gain Can

Outweigh the Pain

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Splitting Your Network between Today’s Provider Marketplace
Carriers: the Gain Can Outweigh the
Pain And Although the historical Tier 1 and Tier 2
nomenclature is typically still used to
categorize today’s providers, we believe the
following terms are much more effective
While organizations of all types leverage
descriptors:
multiple service delivery and product
providers to protect and enhance their
 Full-service (the legacy ILECs and today’s
operations, most enterprises sole source
incumbents, i.e., AT&T and Verizon) –
their telecommunications network services
these provide services to both businesses
to just one of today’s so-called Tier 1
and consumers. Their CAPEX make it
carriers. Their reasons for doing so are clear
clear their primary focus is on building
and understandable. The cost of moving to a
out and delivering consumer-based
different carrier is exceptionally high.
services such as content, collaboration in
Transitions are painful, anxiety-ridden and
the home and wireless 4G networks.
can be quite lengthy. And, before AT&T’s
1984 divestiture and in the initial following
 Business grade (including the legacy
years, the only telecommunications provider
CLECs) – these focus solely on the
options were the Baby Bells.
enterprise space. As they don’t have as
much legacy technology baggage as the
However, provider consolidations, dramatic
full-service providers, their CAPEX is
technological advances and escalating
being applied to building out
communications requirements have opened
technologically advanced business-grade
the floodgates for establishment of many
networks and delivering services
new carriers, each of which has its own
specifically designed for enterprise
unique upsides, downsides and “special
customers.
sauces.” Those changes, coupled with
enterprise customers’ ever-increasing
 Specialty – these are niche players with a
dissatisfaction with their incumbent network
particular focus within the network tower
services provider, lead us to predict that
and can deliver significant value to an
2013 will mark the beginning of a tectonic
organization’s full-service or business
shift in carrier market share most clearly
grade provider-based network services
evidenced by growing use of a dual provider
delivery infrastructure.
strategy.

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World-class Sourcing Advisory and Benchmarking for the CIO, CFO and CPO.
Contact: info@alsbridge.com or (214) 696-6410
The Advantages of a Dual-Provider Strategy
Our discussions with a wide range of
enterprises revealed a myriad of areas of
dissatisfaction with their incumbent,
full-service provider including: bureaucracy,
inflexible billing platforms, unnecessarily
inflated prices, exceptionally poor customer
service, lagging technologies, distracted
focus on consumer-oriented services,
inability to meet SLAs and implementation
issues to name just a few.
On the other hand, the business grade
providers know they must offer an
extremely compelling, multi-pronged value
proposition in order to effectively
sell against the incumbents, and they are
delivering. They offer substantially lower,
competitive pricing, provide significantly
better service and support, are much more
flexible, innovative and easy to work with.
They are also open to aggressive contract
terms, and may even offer added value such
as free design services or network
re-architecting as an incentive.
They present well-defined, comprehensive
transition plans replete with project plans, a
dedicated transition team and clear
milestones. All of which give prospects a
comfort level in their ability to achieve the
expected results in an agreed-to timeframe.
In many cases, they have built ground up,
ready-to-go, IP-based networks that are
technologically more stable and advanced
than those of the incumbents.
.
World-class Sourcing Advisory and Benchmarking for the CIO, CFO and CPO.
Contact: info@alsbridge.com or (214) 696-6410
Even if they must partner with another
provider to service footprints not in their
portfolio, the user experience is the same as
if they were working with just one carrier.
As stated above, they cater only to
enterprise customers.
There’s also the leverage factor. Even inti-
mating a move to a dual provider strategy
will help keep the incumbent “honest”
during rate reviews and contract
renegotiations.
The Two Dual Provider Strategies
There are two models for splitting your
network between service providers. One is a
load balance wherein each provider is
responsible for serving all the needs of
half – give or take – your locations. In the
other, which we call the “active secondary,”
one provider is responsible for services such
as legacy TDM, voice and WAN. While the
second is responsible for ancillary services
such as conferencing, collaboration and
vanilla internet, recovery, back-up and
business continuity.
In nearly all cases, we advocate an active
secondary strategy, as splitting your network
between providers by locations rather than
services eliminates your ability to migrate
the Session Initiation Protocol (SIP) or
achieve transformation throughout your
entire network.
Selecting the Right Active
Provider
Of course, given the many risks and anxieties
of transitioning services to a secondary pro-
vider, you must consider a wide range of
your enterprise’s critical requirements as
well as address the providers’ credentials,
capabilities and willingness to support them
in the initial identification, RFP and vetting
process. For example:
 What is your strategy (i.e., cost compres-
sion or transformation)? What are you
trying to accomplish today and in the fu-
ture?
 Do they provide the services you need
per the way you have decided to split
your network into logical buckets or
break points?
Secondary Pricing Negotiations
One of the biggest challenges enterprises
face during negotiations with carriers –
incumbent or potential active secondary – is
service pricing. The market today is
extremely inefficient, as there are no price
lists and there is a considerable lack of
consistency among the service names
providers give to the 900 to 2,000 different
service elements in the typical enterprise
(although most buyers believe there are only
10 or 12 to take into consideration.)
The following market pricing graphics paint a
vivid picture of how difficult it is to navigate
through the maze and pinpoint appropriate
service price points.

 What footprint do you need? Interna-

tional coverage or just in what we call the
“U.S. NFL cities,” i.e., big cities in which
there is POP density?

 Are you looking for innovation, e.g., cloud

-based offerings for IP audio bridging
with usage-based pricing, or additional “One of the biggest
bandwidth on a site-by-site basis? challenges enterprises
 What is their business and growth face during negotiations
model? with carriers, is service
 Are they investing in emerging technolo- pricing.”
gies and tool kits? Will they offer co-
location, conferencing or collaboration
services, MPLS networking, Internet,
managed services, VOIP, Ethernet access,
etc?
_________________________________________________________________________________________
World-class Sourcing Advisory and Benchmarking for the CIO, CFO and CPO.
Contact: info@alsbridge.com or (214) 696-6410
Figure 1

In Figure 1, the left axis is price points, and at the bottom are the dollar commitments in the
contracts written between the carriers and their customers for interstate direct dial/dedicated
-switched service. The blue diamonds are the full-service providers, and the red squares are
the business grade providers. The green line is the best price available from the full-service
providers. The price trend is the dotted blue line. Clearly, the pricing is all over the map. If you
look at a $3.5 million contract, price points range from 1.4 cents to more than 2 cents per
minute for the same service. Although if you are willing to move to a business provider, you
can move from 1.5 cents to 1 cent relatively quickly.

_________________________________________________________________________________________
World-class Sourcing Advisory and Benchmarking for the CIO, CFO and CPO.
Contact: info@alsbridge.com or (214) 696-6410
Figure 2

In Figure 2, you can see there is some downward trend in full-service provider pricing, but
there is not much of a gap between theirs and that of business grade providers. What is not
evident, but is critically important to understand, is that the full-service providers have
concluded that they are not going to lose on price in the data world. They are likely correct,
as it is not necessarily a wise strategy to move a portion of your TDM minutes to another
provider. As a result, they are going to be very aggressive and try to convince you that a T-1
port costs most than a 512 port, while in reality their cost is the same because all they need
to do is make a software change to increase your bandwidth.

The bottom line is that although the full-service providers will tell you there are many
variables that drive service costs, you should never pay over standard market rates for similar
customers, even if they attempt to bait you with an SLA concession, good rate review, or cross
-subsidization of wireless services through higher wire line prices. However, such negotiations
are highly complex, and most carriers’ negotiators have considerably more experience in the
pricing war than do service buyers.

_________________________________________________________________________________________
World-class Sourcing Advisory and Benchmarking for the CIO, CFO and CPO.
Contact: info@alsbridge.com or (214) 696-6410
Conclusion

The idea of transitioning a portion of your network from your incumbent to another provider
can be fraught with unease and lead to many sleepless nights. And to use a computing
industry analogy, “No one ever got fired for going with IBM.” Although, the advantages of
doing so, while making your incumbent abundantly aware of your plans, can be significant.

_________________________________________________________________________________________
World-class Sourcing Advisory and Benchmarking for the CIO, CFO and CPO.
Contact: info@alsbridge.com or (214) 696-6410