Will Recent Telecom Mergers be a Boon to Enterprises?
December 13, 2011 2 Comments
- Service provider consolidation should be good for business customers as providers compete to develop compelling services.
- Businesses should proceed with caution if their providers are moving into new service areas.
2011 was a merger-heavy year that also included Windstream’s acquisition of PAETEC, CenturyLink’s purchase of Qwest and Savvis, EarthLink’s purchase of One Communications and Time Warner Cable’s purchase of NaviSite. While each carrier had its own reasons for making its acquisition – increasing size and footprint, and improving financial conditions were two big drivers – these carriers are all interested in moving upmarket, whether to win mid-size businesses or larger enterprises. Enhancing business services and building up the customer base to support this transition were key elements behind these transactions. In many cases, the acquirers were strong in mass market (i.e., residential and very small business) services, a tough market that can have high levels of churn and pricing pressure. Carriers are looking at increased use of mobile devices in the workplace and interest in cloud-based service models as the way to move away from commodity offers to business services, creating a revenue stream with strong growth potential. Windstream and CenturyLink are both moving from their rural local exchange carrier (LEC) roots to be national communications providers. Their respective acquisitions add business customers and services, including hosting, managed services and cloud service options. Similarly, Time Warner Cable’s NaviSite purchase added advanced services that are in demand from larger businesses. EarthLink acquired New Edge Networks in 2006: In 2010-2011 the carrier “took it up a notch”, making a string of purchases (One Communications, Deltacom and STS Telecom) to expand the reach and depth of its network footprint, and to develop managed IT services for multi-site businesses and distributed enterprises.
So, what does all this mean for business customers? The net result of this consolidation does not translate to fewer options; rather over time it should mean more service alternatives through national rather than regional service availability and broader service sets. Business customers will have an array of communications options from a varied cast of characters, from the providers described above, as well as equipment vendors and entrants such as Microsoft with its Skype play. All of these providers see businesses as a growth engine, and are highly focused on developing new business services around cloud-based unified communications applications, fixed-mobile convergence and managed services. But it will take some time for these acquisitions to yield new services, and business and enterprise IT managers evaluating communications solutions should proceed with caution. Some providers may prove to be more successful than others in integrating their acquisitions and delivering new, coordinated services. In addition to looking at offers from their current provider (assuming they are happy with their provider), businesses can start checking out other providers in their market, keeping an eye on services that are being developed by these newly merged entities.