Gathering Clouds: Telesphere Aims to Consolidate a Fragmented Industry

Cloud & Data Center Feature

Gathering Clouds: Telesphere Aims to Consolidate a Fragmented Industry

By Paula Bernier, Executive Editor, TMC  |  January 01, 2012

This article originally appeared in the January issue of INTERNET TELEPHONY magazine.

The cloud services space is highly fragmented and could benefit from consolidation, and Telesphere (News - Alert) believes it’s in a plumb position to pull things together. That’s the word from CEO Clark Peterson, who recently spoke with INTERNET TELEPHONY at the company’s headquarters in Scottsdale, Ariz.

Backed and operated by the same group that started and built Cellular One/ATT Wireless, Clearwire (News - Alert), Nextlink, Nextel and XO, Telesphere is actively pursuing a role as a key cloud services industry consolidator.

The company is already a relatively big fish in the cloud services pond, Peterson indicated. A nationwide provider, Telesphere has nine points of presence, and customers in almost every state.

It is one of the largest pure-play cloud providers using the BroadSoft (News - Alert) platform. Telesphere offers a range of cloud-based voice and data services, including data backup, fixed/mobile convergence solutions, hosted Exchange, Internet access, IP telephony and related features, managed firewall, SIP trunking, video services, and more. Telesphere carries these services, all the way to the customer location, over its secure IP MPLS network. The company also can provide endpoints, such as Polycom (News - Alert) HD phones, as part of its end-to-end solutions. Professional services are included as part of the Telesphere service packages.

About two years ago Telesphere bought Unity Business Networks out of Denver, which gave it what Peterson calls an unparalleled billing and operational support system platform. The BSS/OSS can do everything from generating sales proposals, to monitoring services on an end-to-end basis, to enabling customers to provision their own features. “So incredible control over the provisioning part and the customer service part of our business,” he adds.

Telesphere’s customer target is large, multi-location businesses that want to pull together somewhere in the neighborhood of 60, 70, or 100 offices around the country.

Over the last four years Telesphere raised $50 million, which enabled it to build a national network and multiple offices to serve close to 30,000 users around the country. The company has grown 310 percent over the last three years, and has received various accolades for its fast growth. It’s been cash-flow positive for almost a year, and Peterson said Telesphere is just now “turning the corner on profitability.”

Any cloud service provider acquisitions by Telesphere are likely to involve equity, as opposed to being all-cash deals, says Peterson. Purchasing other cloud providers, he explains, would enable Telesphere to attain new economies of scale, and to elevate the cloud services industry as a whole. To be a high quality provider of communications services, he continued, businesses need to have a lot of pieces in place, including good engineers, network operations centers, and reliable and secure networks, among other things. So cloud providers need to scale to get the skill sets and equipment they need.

The fragmentation in the cloud services market is also somewhat confusing to channel partners, customers and investors, he added, so the space as a whole is likely to benefit from consolidation. For example, many agents are now ready to move into selling cloud services, he said, but are not sure who to partner with because they will need to rely on those partnerships for their cloud residuals well into the future.

Of course, Telesphere is not the first to show an interest in purchasing cloud service providers. The industry has seen more than a handful of acquisitions of hosted VoIP providers in recent months.

In 2010, CBeyond paid $4 million for Arretta. The same month, M5 Networks invested $8 million in Geckotech. And this year has seen Earthlink acquire STS Telecom, TelePacific snap up Telekenex, West Corp. grab Smoothstone (News - Alert) for $120 million, and Warwick Valley Telephone get its hands on Alteva for $17 million.

 That’s not surprising, notes Telesphere’s Peterson, who says many LECs and CLECs want to get into cloud services, but they don’t have the right skill sets since their traditional businesses never went past the demarcation point.

Edited by Tammy Wolf


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