[February 9, 2001]

What Is A Communications ASP? Rich Tehrani Speaks From Internet Telephony Conference & Expo's Exhibit Hall

BY RICH TEHRANI, TMC President

I'm here at the Internet Telephony Conference & Expo in Miami and I just had a great meeting with Jonathan Shapiro, CEO of Alliance Systems, one of the major systems integrators in the converged communications space. Jon is a real visionary -- he has been in the communications business for a long time, and has a diverse history in telecom. Alliance Systems is getting into the application hosting space, and one of the areas they are focusing on is the communications ASP (CASP) market. Jon and I discussed this growing market segment, and tried to decipher exactly what a communications ASP is. Perhaps the definition of a CASP is much broader than we would think: Is AT&T Wireless a CASP? How about a pre-paid calling card vendor, or GM's OnStar? The definition of "communications ASP" is probably a lot broader than we think.

Of course, Centrex is the original CASP model; I have noticed that Verizon is advertising their Centrex service on the radio lately. I was wondering if this was a new type of Centrex, or just the same plain old service. Then I discovered a new device, the Hi-Phone Desktop being shown at Way2call's booth, that has just been bought by Verizon to help IP telephony-enable their Centrex offering.

Getting back to Jon, asked a really interesting question: How do you think these hosted services are going to be sold? I told him that service providers are the channel we all expect to dominate the resale of these services.

Certainly, CLECs are one of the segments we're counting on to make these services happen, and to jump-start the market. But with the financing problems most CLECs are currently experiencing, how are these services going to get the attention they deserve? Jon thinks (and I agree) that wireless carriers are going to be a big user of hosted communications services as they try to boost the number of minutes customers spend on their networks. He cited some examples of these services, such as Bertelsmann in Europe, which has a room full of servers loaded with CDs so users can call in and listen to music on their cell phones. Jon tells me this is one of the hottest apps in Europe now, and there are many kids walking around the streets of Europe listening to music on their wireless phones!

But of course there are so many other types of services that can't be sold through wireless carriers. We discussed which apps might be successfully hosted by wireline communications ASPs. One idea is community-based communications systems such as those you might find in hotels, hospitals, MDUs (multiple dwelling units) and even inmate phone systems (which is, unfortunately, an extremely fast-growing market). He sees CASPs as being difficult to sell in the SME market as these people (he referred to both he and myself) are tougher customers and are typically more stingy (cautious?) with their money.

Jon referred to a study he recently saw that pegs the spending on technology of a typical SME in the $3,000 range, while contact centers can spend $15,000 to $20,000 per user. He argues that call centers are the best target for these types of services. Personally, I think the SME market is a good fit for these services, but the time to consider a CASP if you are a smaller company is when you are moving or expanding. Will we be ripping out legacy equipment to CASP-enable our offices? Perhaps not. But maybe CASPs that add functionality to our existing equipment can coexist nicely with what lives in our closets today.

Regardless, who will sell these systems? Jon argues that if CASPs expect the traditional channel such as VARs and interconnects to sell these services, how will they be paid? I said, they'll get a percentage of the sales each month. Jon disagrees, saying that resellers aren't going to want to sell a service and not get paid upfront. Currently, they make a percentage of all equipment immediately sold, it seems unreasonable for them to accept a percentage over time. Does a car dealer pay salespeople differently if they lease a car? No. So the question is how do these resellers get paid? Well, it makes sense to pay them a lump sum if they sign long-term contracts with their customers. Perhaps even a combination of cash up-front and a payment each month.

This market is so new, these issues still need to be resolved. If you have any suggestions or answers to these questions, please respond to rtehrani@tmcnet.com and we'll run them in Communications ASP magazine.

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