Comms race hots up as telcos vie for VARs
With giants such as BT cosying up to the channel, the telco landscape is more competitive than ever
Stoked: Virgin and BT are both clamouring for channel attention
When even BT – the sleeping giant of the telecoms channel – begins throwing its weight around, it is clear something is stirring in the carrier space.
The sands of the telco landscape have shifted irrevocably in the past two years, with familiar names including ntl:Telewest, Tiscali and Thus being removed or marginalised. Ambitious tier-two players such as Virgin and Opal have become increasingly bullish.
The SME space, meanwhile, has seen a host of providers – Chess, GCI Telecoms and, most notably, Daisy – build scale dizzyingly quickly, with a series of rapid-fire acquisitions. But has any of the carrier’s alpha-male chest-beating translated into benefits for resellers and customers?
Over the years carriers have had an up-and-down relationship with the channel, with telcos such as BT and Cable & Wireless perceived as being aloof towards partners. But the UK’s two largest communications firms – BT and Virgin – have both recently snuggled up to the channel.
Last year, BT moved its channel operations into its BT Business wing, prompting a full-scale review of its indirect strategy. Ultimately, the carrier decided to reassert its dedication to the channel.
Danny Longbottom told CRN that he was looking to add to BT’s 25 UK partners.
“In some areas, [other carriers] will pay more commission or have headline-grabbing offers,” he said. “The key thing is the total package. If you work with BT, you get a vast array of portfolio, good support, good commission and you get access to the brand. It is not one thing and one thing alone.”
Engaging resellers
A month ago, Virgin Media Business launched its first partner scheme, having rebranded the ntl:Telewest Business operations earlier this year.
Brendan Lynch, director of wholesale markets for the carrier, claimed he wanted to sign up VARs keen to make hay in the Ethernet data world, as voice margins erode.
“We are engaging the reseller market and listening to what it is they are looking for,” he said.
Lynch admitted the Virgin brand has been seen as a consumer one, but stressed that the “innovative values” associated with the name are as relevant in the business-to-business space.
“[The rebrand] has signified to our customers that we are part of the Virgin Media Group,” he said. “We have made the right investments in people and the network to make us competitive.”
Price watching Ofcom’s most recent report on the UK communications market reveals the wholesale space has not enjoyed the same growth as the retail space. UK wholesale telecoms revenue in 2008 was £8.5bn – exactly the same figure as in 2003. Over the same period, retail revenue has spiked from £25.8bn to £31bn.
During that time, the retail market has become almost entirely deregulated, but in Ofcom’s recent annual report, the watchdog’s chief executive, Ed Richards, argued that the wholesale market is not ready for that yet.
“A trigger for deregulation is the emergence of healthy competition in markets that were once dominated by a single player,” he wrote. “There remains a bottleneck in the wholesale access market for fixed-line telecoms, controlled by BT Openreach.
“Because of this, Ofcom regulates the prices that BT can charge its wholesale customers.”
At the smaller end of the market, the landscape in recent months has been marked by a glut of ambitious consolidators. Daisy has made no secret of its intention to dominate the SME and mid-market telecoms market via acquisition. Other players, such as SpiriTel and Chess, have also been involved in buyouts.
Another player seeking to build scale through acquisitions is GCI Telecoms Group, which has bought eight companies in the past four years. The firm’s chief executive, Don McQueen, claimed the company had chosen to move away from its voice resale roots several years ago, after seeing that “resellers are going to get squeezed out”. He believes his firm " needs to be a mini-BT 21CN".
“We see our business as being a three-legged stool, with the network on top,” he said. “The legs are inbound telephony, outbound telephony and data services.”
He said his firm’s LLU network and its ability to offer TDM over IP services were key differentiators in its portfolio.
Some other players made acquisitions that were “a bit opportunistic”, while GCI strives to bring in complementary businesses that represent a good strategic fit, according to McQueen.
Dave Millett, founder of Equinox Business Consulting, said that the raft of acquisitions in the industry has provided some headaches for customers, as the integration of differing billing platforms could hamper customer service. He added that companies following strategic rather than volume-building acquisition paths could cash in.
“There are far more opportunities to cross-sell,” he said.
Millett also stated that, despite the frequent talk of thinning margins, the core voice market is in solid shape.
“The minutes business is healthy – there are more than four million ISDN lines out there,” he said. “It is not like it is radically disappearing overnight."