Glowpoint, an IP-based managed video communications service provider, recently announced that it has been awarded a multiyear contract to provide its Video Network Operations Center (VNOC) managed services for a world-leading electrical energy service provider. The energy company will also be interconnected to Glowpoint's Telepresence interExchange Network (TEN) to facilitate business-to-business telepresence and nontelepresence video calls and calling to other public video communities, such as systems connected via ISDN, the Internet and public rooms.

As part of the service agreement, Glowpoint will provide management of the client's telepresence rooms in seven countries and will provide access to Glowpoint's video and telepresence infrastructure, including bridges, gateways, and unified communication capabilities through Glowpoint's TEN video services fabric. Glowpoint is supporting this next generation of video use as a way to help businesses communicate with other business communities through managed services and exchange capabilities. Glowpoint's TEN is a suite of services and applications designed to overcome the challenges of using video outside of a company's private network, such as interconnectivity and interoperability.

Many organizations struggle with suboptimal, internally managed videoconferencing environments, where the user experience is poor and costs are not well controlled. As a result, many organizations are now evaluating the available options for delivering video as an externally managed service and the potential benefits such an approach can bring (see Gartner research note "Managed Videoconferencing Services").

High-end immersive video telepresence solutions are almost never sold without an accompanying managed-service wrap. In this case, the managed services are as important to maintaining the user experience as the quality of the image and sound. In addition, using telepresence to conduct intercompany meetings with business partners, clients and customers is an interesting proposition for many organizations today (see Gartner research note "MarketScope for Video Telepresence Solutions, 2008"). Identifying partners and providers, such as Glowpoint, that can deliver the infrastructure and managed services in support of intercompany video communications is an important next step for those organizations.

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This week's launch of Microsoft's OCS unified communication products created a flurry of related announcements. Among the plethora of announcements of companies offering to install, support and integrate OCS with various other systems was a significant one that could easily be missed.

European network operator Interoute is offering its Interoute One service to allow the secure federation between companies of OCS systems to share presence, IM and voice calls. Interestingly, the service also allows PSTN access to fixed and mobile numbers from OCS and VoIP-to-VoIP calls to providers using Enum. For OCS to be a serious challenger to the PBX, it will need this type of next-generation "trunk lines."

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Most of you might not have paid much attention to the news that Paetec is to acquire McLeod Communications (see this article). In fact, most of you probably thought, "Who is acquiring whom?" This is not a deal to overlook, though, for several reasons.

First, the deal signals that, despite the tightening credit markets and potential impending recessionary period, some companies continue to improve their position in a market that continues to be relevant and grow.

Second, the two largest U.S.-based telecom providers, AT&T and Verizon, have been established, but the order of players below them has not. Sprint has well-publicized internal strategy issues; Qwest is making a comeback as a trusted provider, but still does not have strong mobile and wireless offerings; and Level 3, XO, Time Warner and CenturyTel have not adequately stepped up to become strong integrated enterprise players. All these contestants in the carrier marketplace have the ability to innovate services, while providing agility around scaling and meeting customer support requirements.

Finally, the combined $1.6 billion Paetec-McLeod entity, which will support 3.4 million access lines and 17,000 miles of fiber in the ground, will be another serious option for those enterprises that would rather have their network with anyone but AT&T and Verizon Business.

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The top executives of major U.S. cable companies Comcast and Time Warner Cable (TWC) made presentations at the Merrill Lynch Media & Entertainment Conference on Monday, telling attendees that they plan to launch commercial voice over IP (VoIP) services to the small and midsize business (SMB) market throughout their footprints in the coming year.

Comcast CEO Brian Roberts and Time Warner Cable COO Landel Hobbs told the investment community that residential cable VoIP services have been a major engine of growth for both their respective companies and that they are in the process of launching full-scale commercial versions of these services to the SMB market. Comcast already has more than 3.1 million residential digital voice customers, while TWC had 2.3 million at the end of 2Q07. They are both looking at the SMB segment in their respective footprints and plan more aggressive product marketing in 2008 to businesses with fewer than 30 to 50 employees that use between 12 to 16 telephone lines. In addition to voice and high-speed data services, many cable operator commercial services units are targeting cellular/mobile backhaul over their networks as a potentially lucrative business.

Cable has been very successful in attacking the residential voice market with VoIP services and now has more than 10 million customers just in the U.S. and Canada alone Deployment of commercial service to small business has been somewhat limited by the lack of suitable CPE equipment to handle more than two or four VoIP lines. However, a number of suppliers, including Arris, Motorola, Cisco/Linksys and others, are now stepping up to the plate with multiline devices in 4-, 8-, 12- and 16-line configurations, some with embedded data routers, as well as 12-line devices for multidwelling units (MDUs). In addition, to help speed the rollout of commercial services, groups of hardware and software vendors are now collaborating with one another to provide integrated dual-protocol (NCS/SIP) end-to-end solutions for commercial voice services over cable networks. These arrangements include suppliers not only of e-MTA devices, but also of session border controllers, CMTSs, e-MTAs, IMS-compliant application servers, policy servers, and service and application management platforms.

Comcast and Time Warner Cable are among a growing list of cable operators that will apply laser-like focus to new market opportunities, seeking to leverage their investment in upgraded hybrid fiber-coaxial (HFC) cable plant, and extend that capability to support five "9's" reliability and availability for commercial customers. Both plan to invest heavily in dedicated sales and technical support teams as well as frontline customer care representatives.

TWC already earned about US$300 million in revenue from commercial data services in 2006, but it is looking to really tap into what it estimates is a US$9 billion to US$11 billion total market opportunity in commercial voice and data services throughout its service footprint. It had already launched commercial voice services in 11 cities by the end of August 2007, and will complete commercial VoIP service rollout across its "legacy" footprint by YE07 (systems that they owned and operated before the Adelphia acquisition and the system trades with Comcast). TWC executives said they will start aggressively marketing the service in 2008 to drive penetration levels.

Likewise, Comcast estimates that there are more than 5 million commercial/SMB establishments within its footprint, representing a US$12 billion to US$15 billion in commercial voice and data services revenue opportunity. It has hired more than 500 new employees to support the service ramp-up, and the goal is to garner more than 20% of the service revenue by 2011.

These two U.S. cable giants will join many smaller operators that are already finding success in the commercial services business - Cox Communications, Cablevision Systems and Canada's Videotron - all of which have already started offering telephony services to the commercial market and are giving their telco competitors one more thing to worry about.

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Nortel, the Canadian infrastructure vendor for enterprise and carrier products, outlined its strategy at the 3GSM World Congress, the world's largest mobile fair. For the enterprise division, Nortel formed an alliance with Microsoft in July 2006 to transform the traditional PBX business into a more software-driven and service-oriented approach to provide IP PBX solutions as a center of unified communications. In 3Q06, the enterprise division has shown single-digit growth. Nortel has given a clear commitment to the enterprise business.

The carrier part of the business, which accounts for 50% of the revenue, looks much more challenging. After the exit of 3G radio access network, which was bought by Alcatel-Lucent, Nortel hopes for an early and massive uptake of WiMAX and Long Term Evolution (LTE) of public mobile networks, the next standard after UMTS. The Canadian supplier even sees a need for mobile operators to upgrade directly from 2G to LTE. Gartner remains skeptical about the early adoption of WiMAX and LTE. Furthermore, most existing wireless operators deploying 3G networks are struggling with low uptake of mobile data. Therefore, the need for extended mobile broadband is limited and might not occur in the next two to three years. Nortel also stated that due to cash-flow improvements, investment in carrier services, especially around outsourcing, is unlikely.

The enterprise division obviously has a more comprehensible strategy than the carrier business. Therefore, the scenario of a Nortel breakup might become a reality in 2007. I can foresee a next-generation Nortel that provides only enterprise services. Maybe Alcatel-Lucent will express its interest in the remaining carrier business, and Nortel will take over its enterprise unit. Alternatively to the swap deal, Nortel might sell off the carrier business and try to acquire Siemens Enterprise Communications. Nortel may very well incubate the next round of consolidation, in both the enterprise and carrier infrastructure businesses.

Recommended Reading:

Dataquest Insight: Top 20 Telecom Vendors, Worldwide, 1H06 Update

Vendor Rating Update: Alcatel

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Users and providers of IP PBX systems cite that approximately 40% to 50% of system costs are devoted to IP handsets. In most instances, these handsets are used in the same basic "keypunch" mode as the legacy TDM handsets they replace. The market is therefore experiencing a temporary product value mismatch, with IP handsets representing 40% to 50% of the system cost while only providing 15% to 20% of the value.

This is not to say that the newer IP handsets lack advanced capabilities. Rather, users do not value, and therefore do not take the time to learn about, advanced IP handset functionality. It is far more common for users to secure high-end IP features via IP softphones, a more cost-effective solution that allows them to use their familiar PC interface (and a larger screen).

The short-term solution to this mismatch is the deployment of third-party SIP phones from such vendors as Polycom and LG. The pricing for these handsets is in the $125 to $150 range, roughly half the cost of their Cisco and Avaya counterparts. Cost-conscious enterprises are therefore encouraged to deploy these basic third-party handsets, because they meet the needs of the vast majority of their users.

A longer-term market trend is the adoption of fixed-mobile convergence (FMC), which will package a wireless handset with the enterprise IP PBX. FMC will provide users with the long-awaited mobility capability across the enterprise. However, the FMC business model is still developing. Vendors are investigating a variety wireless connection methods, including Wi-Fi VoIP, DECT, and 2G.

The bottom-line message to the enterprise community is to be cautious in their IP handset acquisition strategy and consider basic, low-cost devices. Today's high-end IP phones are not fully leveraged by the user base, while FMC offerings are not expected to gain significant traction until the 2009 time frame. Thus, the wired IP handset purchased today may likely have a limited life span in the three- to five-year range.

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Several of my client calls revolve around telecommunications costs - especially the local access charges. I personally dislike sifting through the pricing schedules with all the finite, region- and zone-specific rates and then trying to give our clients advice on how competitive their rates are. It's just not an easy task and has driven me toward Lasik surgery with all those minute charges!

On the other hand, the majority of clients that I also speak with are in the process of upgrading their wide-area network (WAN) to MPLS and moving away from frame relay, ATM and private line, with some building a strategy around optimizing their WAN and applications. Admittedly, these are all the correct things to do to support convergence on the enterprise network - but most people are missing the boat with local access. Few enterprises have a strategic plan to upgrade their local access circuits to truly make their WAN an "end to end" performance-based WAN. This issue of local access bottlenecks and the inability to dynamically scale bandwidth will be critical with delay-intolerant voice on the IP network.

The big question that confounds me is why enterprises haven't run to metro-area Ethernet services. The typical inhibitor of metro Ethernet services adoption (location, location, location) doesn't really make sense anymore. Both larger telcos and pure-play providers (see "An Introduction to High-Speed Ethernet Services in the U.S., 2006 Update") have built rings in the majority of metro areas in the United States and can tie them together with long-haul capability; Type II access modalities such as Ethernet over copper are now reaching the hinterlands.

Because the market for these services is growing, many carriers are in "land grab" mode, and pricing is very competitive. The advent of standards such as Virtual Private LAN Services (VPLS) is allowing LAN-to-LAN-like connectivity. Don't' forget the simple Layer 2 interfaces. The pluses are starting to stack up in the corner of metro Ethernet, and many of the minuses are piling up in the corner of TDM local circuits.

So here's my big question to the enterprises: What are your waiting for?

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On 1 August 2006, the U.S. Internal Revenue Service (IRS) stopped charging a 3% excise tax on long-distance (LD) and bundled services. Consumers and businesses can claim a refund in 2007, retroactive to February 2003. This is good news - we estimate that businesses can collect about $2 billion in refunds. However, as usual, it's not as rosy as it seems. While the IRS does not require initial proof of the amounts paid, companies are wise to investigate and substantiate such amounts in the case of an audit. This could be a monumental task, particularly for companies with multiple locations and multiple phone bills. Also, carriers will charge for copies of past invoices, with some planning a price of $5 or more per invoice. This might not seem a lot, but it could add up to a substantial amount for some companies. The good news is that the IRS has indicated that it is in discussions with the carriers to determine whether there is an easier way to calculate the refunds. For this reason, we recommend that companies that have paid the tax and are subject to refunds hold off on asking for invoices until the IRS announces its position. If the IRS decides not to calculate the refund based on a formula but on the actual amount of tax paid, enterprises should engage a telecom expense management (TEM) company to determine the refund amount. Even after paying such a vendor 30%-50% of the recouped taxes, the recovered monies could amount to millions of dollars for some companies. If companies do proceed down this path, they should negotiate a cap on the fee charged by TEM vendors. See "Findings for Communications Services: U.S. Treasury Department Announces End to Long-Distance Telephone Excise Tax" for more information.

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"At this time, we will be closing the Stamford campus and asking associates to work from home." Would this message, or one like it, create havoc in your organization?

For Gartner, the recent problem was a power outage, but there are a plethora of other reasons why an enterprise may need to do this, including severe weather, threatened terrorist activity and a local emergency such as a chemical fire. Gartner has long promoted the need for enterprises to plan for the unexpected (see "Teleworking Emerges as a Smart Way to Do Business") in order to stay in business while physically cut off from the central office. We have also highlighted the most likely reasons for failure in just such a situation as this (see "Ten Remote-Access Failures Your Company Could Avoid in an Emergency"). So, is your remote access program up to the job, or would your business unravel if remote working became a necessity rather than a choice?

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In the past, I've praised T-Mobile for its Web 'n' Walk initiative, which provides simple Internet access for mobile subscribers. However, I can't find much to like in the new Web 'n' Walk Professional offering. This provides a 3G data card with a usage cap of 2Gb a month for professional users. The price is good, at just under £20 per month in the U.K., but read the terms and conditions. They prohibit the use of voice over Internet Protocol (VoIP) and what they term "messaging over Internet Protocol" (see "Mobile Carriers Should Embrace Internet-Based Instant Messaging Services"), and they threaten to disconnect you if "use of either or both of these services is detected."

The most serious problem for commercial users is that there is no precise definition of "VoIP" or "messaging over Internet Protocol." For example, would corporate use of Microsoft Live Communications Server count as "messaging over Internet Protocol" (see "Microsoft Finally Wakes Up to Unified Communications")? Who knows? Isn't e-mail a messaging protocol transmitted over the Internet? But the terms specifically permit you to use e-mail. I guess Skype counts as VoIP, but what if I tunnel Skype through a virtual private network (VPN). Will T-Mobile ever know?

Business subscribers should avoid this service for two reasons. First, the terms and conditions are unclear; you don't know what will be permitted or banned. Second, almost every heavy Web user exploits one or more instant messaging services, so a connection that prohibits them is effectively useless.

It isn't the job of the network operator to decide what I do with my connection. The operators should realize they're just bit pipes and stop getting ideas above their station.

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