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Feature Article
November 2002

Enabling Value-Added Service Creation


In 1984, the hamburger giant Wendy�s launched a campaign to steady its falling market share. A simple commercial was produced where an elderly woman stood at a fast-food restaurant counter staring at a tiny hamburger on a huge bun, and gruffly barked: �Where�s the beef?� Not only did the campaign strike a chord with consumers, but Wendy�s also credits it for boosting sales 31 percent and profit 24 percent.

Similarly, service providers have longed for the promised dollar signs of DSL only to have this vision met with questions of profitability. An economic downturn, bankruptcies, market contractions and competitive alternative solutions have contributed to DSL�s negative perception. In fact in the not too distant past, it carried its own catch phrase: �DSL Hell.�

But why all the gloom? While it may be portrayed as a failure, the technology is being deployed -- in some cases massively -- and it still holds the potential to be a critical vehicle for telco profitability.

The Business DSL Market
In terms of sheer subscriber numbers, DSL business service can certainly be considered a success; approximately two million DSL business lines are in use today, and the number is growing steadily. In 2001, Cahners surveyed business managers and found that over 60 percent consider broadband critical to business success moving forward -- clearly business DSL represents an enormous potential market.

Some suggest that DSL�s slower adoption rate among businesses is due to higher prices. Sure pricing seems to have hit a hard ceiling, but the average price of entry-level DSL business service at $80 per month, is typically not much more expensive than the cost of a dial-up analog line and a business ISP account. And business DSL costs are about one fifth of the costs of T1/E1 lines, which continue to enjoy widespread popularity among larger organizations. 

A primary reason for slow adoption lies in the marketing and makeup of business DSL service. Little has changed since the introduction of DSL, when it was positioned as simply an alternative to dial-up Internet access offering much faster speeds. 

Interestingly, DSL is delivered by the same service providers who long ago learned the importance of adding business-specific services to basic network access. Yet DSL service providers today are as limited as telephony providers would be if all they offered were basic, unlimited dial tone. 

Given the market size and pricing relative to higher and lower speed services, DSL has the opportunity to fill an immense gap between dial-up and T1/E1 service that remains largely untouched. The answer is not to reduce DSL prices, but to provide more meaningful business-specific broadband services than simple Internet access that increase per-line revenue and appeal to a greater number of potential customers.

Because every DSL connection is a point at which private data resources meet the public Internet, there are inherent issues with availability and security. The need to manage this situation is a primary concern of enterprises, and many IT professionals specialize in the management of broadband connections.

However, small to medium businesses (SMBs) and enterprise branch offices (EBOs) rarely have such IT professionals on staff, yet often have availability and security needs comparable to those of enterprises. Accounting firms, law firms, health care practices, and other SMBs that handle highly confidential information have a very real need to protect that information from unauthorized access. EBOs and retail chain locations routinely access centralized corporate resources over the Internet. And employees in all types of SMBs/EBOs are often unable to fully perform when e-mail and Web access are unavailable. This illustrates the need for specialized services to be delivered to business broadband subscribers.

While there have been some value-added services available to business DSL subscribers, they have typically been third-party aftermarket enhancements delivered by single purpose, add-on customer premises equipment (CPE), usually providing no additional revenue to the service provider. Service providers have not yet discovered a way to increase the value of the relationship with the customer, which means revenue isn�t expanding. As long as that situation exists, business DSL will remain a simple commodity offering where revenue growth can come only by adding new subscribers, without any ability to grow revenue from the existing subscriber base.

This situation is rapidly changing though with the introduction of advanced broadband CPE designed to deliver highly desirable services on top of simple network access. The newest breed of CPE, broadband business gateways -- a descriptor that reflects their enhanced functionality over traditional DSL routers -- eliminate the need for third-party add-ons, shifting revenue streams from aftermarket retailers to service providers by delivering the following popular service capabilities:

  • Managed security services. Business gateways include built-in support for managed security services -- firewalls and Virtual Private Networks (VPNs) -- that meet the unique needs of SMBs and EBOs. Managed security services for this audience have typically featured separate, single-purpose security appliances added by system integrators or VARs after the initial broadband installation. These services can now be driven by built-in gateway functionality, costs are contained and the service can be sold and provisioned conveniently at the time of initial service purchase. 
  • High availability. Until recently, such high-availability solutions as server clusters and tandem T1/E1 links have been available for some time to enterprise customers, who deploy them to keep broadband connections from becoming single points of failure for data networks. But now these emerging business gateways include built-in dial backup and virtual router redundancy protocol (VRRP) capabilities enabling service providers to offer similar, add-on high-availability service at no significant incremental cost.
  • IP Quality of Service (QoS). Another added benefit of this new breed of CPE is an emphasis on IP Quality of Service (QoS), which enables additional services expected to arrive in the business broadband arena in the near future. IP QoS differentiates between different types of IP traffic and allows for a higher priority assignment to one service over another, which is otherwise not possible over DSL. This enables the eventual delivery of such offerings as DSL voice over IP (VoIP) and video conferencing without having to swap out equipment � meaning that service providers who deploy these new business gateways today are building infrastructure for the services their customers will demand tomorrow.

So while firewall and VPN services are becoming an integral part of every small business Internet access service, convergence and voice over IP (VoIP) enable a branch office or distributed office to deliver real cost savings in the form of a single connection, low/no cost intra-company calling, and less network components to manage. Carriers now have an opportunity to couple the advanced service capabilities of new CPE with a renewed focus on the time-tested business telephony model for layering basic network access with services. 

Voice service includes a wide range of appealing, additional services that essentially afford �big business� advantages to SMBs and EBOs. These services fall into several functional areas, including:

  • Calling features. Modern telephony equipment enables carriers to extend a rich array of calling features that each customer can select to meet specific business needs, such as three-way calling, call waiting, caller ID, and call tracing.
  • Messaging services. Businesses can typically purchase messaging conveniences including voice mailboxes, outgoing announcement capabilities, and integrated voice/fax services, providing what amounts to call management in addition to basic network access.
  • Maintenance agreements. Virtually all business phone service packages include an option for inside wiring maintenance, which provides for repairs of wiring problems within the customer premises (for which the carrier is otherwise not responsible). These agreements amount to an assurance of high availability for a fee paid every month, even if there is never a problem with the internal wiring.
  • Services of this type, which are highly appealing to business customers and are purchased with great frequency, swell monthly phone bills well above the basic charges for network access. Significantly increased revenue -- without requiring additional direct overhead -- translates to very healthy margins.

Moving from the sale of commodity bandwidth to value-added services is, of course, not as simple as deploying a new kind of CPE. Layering business broadband service over DSL inevitably impacts core business operations. With this in mind, and considering the availability of new CPE with built-in service capabilities, service providers need to acknowledge the service management assistance offered by some vendors. Specialized programs exist to help service providers design and configure network capabilities for layered services, accelerate and manage mass deployment, make reliable industry alliances, and create new service opportunities.

The painted picture of gloom and doom doesn�t seem to match the forecasted landscape and potential of business DSL. Rather than ask the question of where, the real complaint should be, �what�s the beef?�

Business DSL has staked its claim. It�s no longer simply about network access. Service providers have a new opportunity to get into the driver�s seat and use business DSL as a preferred vehicle to boost sales and profit through value-added service creation.

Stewart Hulett is Director of Technology for the Business Solutions Division of Efficient Networks, a Siemens company. Hulett has been helping Local Exchange Carriers work through their broadband network design and deployment issues since 1993. For more information, visit the company on the Web at www.efficient.com.

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