Angus Kidman finds it's best to check around when choosing a carrier

Published in The Australian, September 4 2003

FOR individuals, changing telecommunications providers is easy, often requiring little more than signing a contract after checking the price. For businesses, choosing a carrier is more complex. Historically, corporations often used one carrier for voice and mobile services and another for data, or split their voice calls between domestic and international providers. The increasing popularity of services such as voice-over-IP is largely eliminating such distinctions.

Carriers are becoming increasingly reliant on data services, with VoIP and leased lines expected to be a major source of revenue over the next decade.

"In developed markets carriers will increasingly rely on alternative product suites, particularly IP," says Lain McNeill, research manager for Asia-Pacific telecommunications research at analyst IDC.

While carriers face the challenge of a data-centric world, businesses also need to adjust the criteria they use to judge potential communications partners.

That includes having an open mind about which technologies are appropriate.

"A trend that's powering corporate Australia is DSL," Macquarie Corporate Telecommunications hosting solutions general manager Glen Noble says.

"Pipes between offices have traditionally been very small -- if you've got lots of offices, you can't afford high-speed links.

"Now companies have installed networks with DSL and achieved that."

This change has been driven by customers.

"Customers insist on detailed metrics," AT&T Australia and New Zealand sales and marketing director Brett Barningham says.

"Australian corporates are becoming a lot smarter, a lot more demanding and a lot more technically aware."

Not all the issues to be resolved are directly related to telecommunications.

"A lot of carriers still can't get billing to work properly," Noble says.

"Total cost of ownership isn't just about call costs.

"How much does it cost you to handle a dozen different carrier bills at once?"

Few people would argue that cost was not a critical factor in choosing a partner.

"Price should not be the ultimate determinant, but of course it's a key part," Asia Netcom Australian manager Deborah Homewood says.

Although cost-cutting is a priority for many businesses, it doesn't dominate corporate thinking.

"Quality of service, network and customer service are considered the most important factors in selecting a provider by more than 90 per cent of companies," IDC telecommunications research senior analyst Landry Fevre says.

Price is a secondary factor.

"The number-one thing now is to check for financial security -- that used to be taken for granted," says Daniel Dooley, regional president for telco Sprint.

"In the corporate and government space, quality is a major issue," Macquarie's Noble says.

"Most people have data networks that are very important, if not mission-critical."

A key element in choosing a provider is defining agreed service levels. Many providers have shifted from service-level agreements to service-level guarantees -- if levels aren't met, carriers will automatically adjust the billed amount without requiring user intervention.

Just as home users are offered discounts for combining their landline, mobile and data services, businesses in recent years have been heavily wooed with a view to securing all their communications services.

Such offers aren't always taken up.

"Financial bundling is a very poor value proposition in the long term," IDC's Fevre says.

For larger businesses, working with a single carrier can pose a major risk, especially given the poor state of the global telecommunications market.

"It's not very often that one carrier will have absolute best fit," AT&T's Barningham says.

"We always advise clients to have more than one carrier, where feasible," NSC Carrier Technologies sales director Mark Bannenberg says.

But achieving that isn't always straightforward.

"Often, you'll get a carrier that's selling what looks like a complementary service, but they're actually reselling the same carrier you're using," Bannenberg says.

"When you're looking for diversity in your carriers, you must get right down to the cable."

Bundling may not offer major price advantages for customers or carriers either. Analysts say Telstra often offers bundled deals to increase the appeal of a package that can't necessarily compete on pricing of individual components.

"If you're large enough, you can out-bundle everyone," Macquarie's Noble says.

Although complete bundling may be uncommon, inertia seems to be working to the advantage of existing carriers for the moment.

"In the large corporate space, switching carriers is going to happen, but it isn't going to be common," Sprint's Dooley says.

"Nobody wants to migrate their entire network just to save a few dollars.

Noble agrees: "In the corporate world, the complexity and cost of switching outweighs a two cents a minute saving."

"On the mobile and voice side, you can change carriers on the day," Barningham says. "On the data side, switching is a much bigger decision. People are looking at it much more prudently."