AT&T, MCI Expected To Beef-Up Enterprise Solutions

While both AT&T and MCI have indicated the chilling effect from access fees will cause them to gradually vacate local consumer-oriented markets, they are likely to address enterprise markets with

June 22, 2004

3 Min Read
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When MCI announced on Tuesday that it had agreed to provide Volvo with 32,000 remote-access links, the deal illustrated that there is still healthy life for long-distance providers in the wake of last week's access-fee developments that are viewed as disastrous for the long-distance companies.

MCI's agreement with Volvo IT calls for MCI to provide IP remote access for more than 150 countries via dial-up and Wi-Fi services.

The Volvo contract could be a harbinger of a wholesale move away from local consumer markets by the long-distance companies--AT&T is the other long-distance giant--and towards the enterprise market.

"The big savings in the enterprise market still come when you move to facilities-based service from AT&T and MCI," said Pete Wilson, of Telwares Telecommunications. "For instance, they have been laying cable into buildings for eight years now and they're not dependent on the RBOCs there."

While both AT&T and MCI have indicated the chilling effect from access fees will cause them to gradually vacate local consumer-oriented markets, they are likely to address enterprise markets with renewed vigor. The long-distance firms say they can't connect to the former RBOC (Regional Bell Operating Companies) local links at rates they believe can be profitable for them.Wilson, who is CEO and president of the Telwares telephony consultancy, says the best way for most enterprises to save money on local telephony is still usually to move to one of the long-distance companies--provided, of course, that the long-distance firm has built out its own facilities-based network.

"The enterprise market has been more facilities-based than UNE-P-based, which is for the consumer market," said Wilson, explaining that the UNE-P issue addresses the consumer market to the benefit of the RBOCs and to the detriment of the long-distance companies.

Wilson said the access-fee decision is not the "death knell" of the long-distance companies. He noted that the long-distance companies have been struggling ever since the original AT&T was broken up two decades ago. Long-distance fees have plunged, draining revenues and profits from the long-distance firms, while the importance of "the last mile" telephone line ownership by the RBOCs has ascended in value.

While Wilson believes AT&T and MCI will beef-up their efforts to serve the enterprise area, he says some segments have been particularly hard hit by the access-fee developments. He cited the retail section, particularly where big corporations have hundreds or thousands of separate locations spread around the country. They are too scattered to have facilities-based networks dedicated to their business, so they are expected to see a sharp increase in the cost of their telephone service.

The FCC is attempting to mitigate the cost of access fees. Chairman Michael Powell has said the FCC will strive to develop rules to keep wholesale access-fee rates from rising too high. The RBOCs--BellSouth, Qwest, SBC, and Verizon--have all pledged not to raise the wholesale rates they charge long-distance companies until the end of the year.As for MCI's Volvo contract, the agreement calls for MCI to migrate Volvo Group users in the U.S., Europe, the Middle East, and Africa to a Volvo IP VPN using MCI's IP-access platform. It is a perfect example of a facilities-based enterprise solution.

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