It's lunch hour on a sunny, but cool, spring day in downtown Cleveland. As businesspeople leave their offices and walk to the restaurants in Tower City Center, or hop in their cars to meet lunch appointments, one thing is apparent--these are some loyal folks.Everyone--OK, every other person--is sporting his or her allegiance to one or more of the town's professional franchises. There are Cleveland Indian ties, jackets and flags flying from car antennas. There are Cleveland Cavaliers sweatshirts and T-shirts. There are even a ton of hats, jackets and other paraphernalia touting the Cleveland Browns, the city's National Football League team, which left for Baltimore a few years back but will rise anew as an expansion team later this year.
Cleveland Population: 2,913,430, Cleveland-Akron metropolitan area Known for: Rock & Roll Hall of Fame, home of Drew Carey and some of the most loyal sports fans in America Largest Businesses: Cleveland Clinic Health Systems with 19,327 employees; University Hospitals Health System, with 9,687 local employees; Key Corp., a financial services company with 6,980 local employees; Ford Motor Co., with 6,540 local employees; LTV Corp., a producer of flat, rolled and tubular steel products employing 5,700 people Source: Crain's Cleveland Business, December 1998 |
After witnessing this, one can't deny that Clevelanders are a dedicated bunch. (What else could explain why there's still support for the Cavs, which have barely a .500 record in the National Basketball Association this year?)
"Clevelanders are very loyal," says Patty J. Flynt, president of CoreComm Inc., a Worthington, Ohio-based competitive local exchange carrier (CLEC) that serves the Cleveland area.
That loyalty transcends sports. Flynt tells of working for a cellular provider in Cleveland prior to the formation of her CLEC. The cellular provider's customers were plagued with dropped signals and fading service because the company was unable to secure specific cell sites along major highways. Despite the hassles, Flynt says, customers stuck with the cellular provider and the churn was low. "That's why we believe this will be an increasingly good market" for a CLEC offering, Flynt adds.
Because of devotion to what they like, and disdain for what they don't, Clevelanders base their buying decisions on more than just price. "Here there are a lot of relationships. People buy from who they like," says Steve Manna, director of sales in Cleveland for ICG Communications Inc., Englewood, Colo. "It's a well-networked business community. You have to watch your Ps and Qs. If you provide service the way it should be, you'll be rewarded. If not, well ... ."
No More Mistakes
Clevelanders now are being rewarded for their loyalty when times were tough. There was a time, in the 1970s, when Cleveland was known as the "Mistake on the Lake," when downtown was desolate and pollution caused the Cuyahoga River to catch fire. But since the 1980s, under the direction of Mayor Michael R. White, the city has taken a turn for the better.
More than $3.5 billion has been invested in redevelopment of Cleveland during the last decade. Pro sports venues have popped up downtown. These include Jacobs Field, Gund Arena and the new Browns stadium that is scheduled to open in the fall. Neighboring the Browns' stadium is the Rock & Roll Hall of Fame, a $92 million project that opened in 1995 to much fanfare. And there are other projects, such as the Great Lakes Science Center and the Playhouse Square Center for performing arts, which have brought life back to the inner city.
"The cooperation of business and government has had a dramatic impact," Flynt notes.
But investment in Cleveland hasn't only been by property developers. CLECs have contributed their share through fiber network deployment, the addition of switches that can handle voice and data services and launching of advanced technology, such as digital subscriber line (DSL) services. As business thrives around Cleveland, so does the need for telecom services.
A Surprising Amount
Cleveland has attracted many prominent competitors to its metro area since the early 1990s. As a result, some vigorous competition has ensued.
"We were a little surprised" by the amount of competition here, says Rich Wilkie, director of marketing for Hoffman Estates, Ill.-based Ameritech Corp., Cleveland's incumbent telco. "We expected it in Chicago and Detroit, but not Cleveland. Just based on circumstantial evidence, I'd say that Cleveland is the most competitive market in Ameritech's territory."
Economic growth is not the only reason why the metro area is so attractive. Cleveland is also one of the hubs for long-haul networks between the East Coast and the Midwest, so a lot of telecommunications traffic flows through the area.
But unlike most cities, in which all the telecom companies tend to congregate downtown in offices and carrier hotels within a few blocks of each other, most of Cleveland's local telecom carriers have taken up residence in the suburbs. AT&T Local Services, Frontier Communications, ICG, MCI WorldCom Inc., NEXTLINK Ohio and Teligent Inc., to name a few, operate from offices in Independence, Ohio. This area, commonly known as "Telecom Row," is about 10 minutes south of downtown Cleveland and 15 minutes north of Akron, right at the intersection of three major highways.
"To be in downtown Cleveland, there's no advantage," says Scott A. Schneider, regional director for Frontier. "While Cleveland itself is huge, there's a lot of market in Akron, too." Most CLECs competing in northern Ohio consider the Cleveland-Akron metropolitan area, which is home to almost 3 million people, to be one contiguous service territory.
The Unusual Suspects
Cleveland wasn't a market where the usual suspects were the first to make their mark on local competition.
AT&T Local Services (formerly Teleport Communications Group Inc.) was late to the dance in Cleveland, compared to other major metro areas where it was one of the major CLECs to make the first competitive footprints.
Instead, companies like ICG and NEXTLINK were some of the bigger names to kick off local competition with Ameritech. Both of these CLECs came to Cleveland through the acquisition of companies with existing infrastructure there, rather than having to start from scratch building their own networks.
ICG came into Cleveland when it bought a small competitive access provider (CAP) called Ohio Links in 1993. For four years, ICG provided alternative access between business customers and their long distance providers over a dedicated fiber network. About a year after passage of the Telecommunications Act of 1996, ICG began providing switched local services.
The CLEC has a local fiber network of 127 miles, as well as a long-haul system connecting Akron, Cleveland, Columbus and Dayton. "Having long-haul fiber makes it more attractive. That allows customers to be 100 percent on-net," Manna says.
In its early days, ICG had a shotgun approach of selling to customers wherever they could. "Now we have a rifle approach, targeting customers on our fiber," Manna notes.
Like ICG, NEXTLINK used an acquisition of a Cleveland company to make its entrance quickly. In January 1996, NEXTLINK purchased FoneNet LLC, a facilities-based CLEC that was serving the Akron, Cleveland and Columbus areas over its own fiber. It wasn't until May 1997 that NEXTLINK got into the switched local services game. Currently, the company has about 2,600 route miles of fiber throughout Cleveland and Akron and is collocated in 17 Ameritech central offices (COs) (see chart, pages 64-65).
Table: List of CLECs in Cleveland Market
NEXTLINK has realized that in Cleveland a competitor is not going to win on price alone, especially if you're not the incumbent. "We do a lot of creative things," says Jeff Winnett, vice president and general manager of NEXTLINK's Ohio operations. For instance, for its large business customers, NEXTLINK provides a full-time employee on site to help that company manage its telecommunications and data services. NEXTLINK's customer account representatives also are responsible for specific customers 24 hours a day, seven days a week.
Another unique thing about NEXTLINK's operation is that all decisions, from capital expenditures to what buildings to put on-net, are made by Winnett and crew, rather than by executives at NEXTLINK's headquarters in Bellevue, Wash. "We're really a local phone company. The bureaucracy is not there, and we can do what we want," Winnett says.
ICG and NEXTLINK are just the tip of the iceberg for competition in Cleveland. MCI WorldCom has multiple synchronous optical network (SONET) rings in the area as a result of networks built by MCImetro (MCI's CLEC subsidiary) and MFS Communications Co.--both of which were purchased by MCI WorldCom over the last few years. The company wouldn't divulge how many total route miles it had deployed.
The hot offering from MCI WorldCom is On-Net, through which business customers get discounted local and long distance service if they're calling others also connected to MCI WorldCom's worldwide network. "There are lots of large companies here and businesses that have locations in Cleveland and other areas of the country," says Richard Hyland, MCI WorldCom's local city sales manager.
Also among MCI WorldCom's services, available in Cleveland and nationwide, is Interact. This is a business-class service that allows customers to monitor, track and pay for services via a secure website.
Because it was later getting into Cleveland than other major cities, AT&T Local adopted a slightly different strategy, says David Thomas, vice president of local services for the company. Rather than starting with only private-line services and evolving to a switched offering, AT&T Local jumped in with switched services and its own fiber network all at once in fall 1997.
AT&T Local faced a challenge with its Cleveland network buildout that didn't exist in the other cities in which it launched CLEC services. In most other markets, AT&T Local could use the conduits and rights of way controlled by its three cable company partners. But in Cleveland, none of those cable companies had operations, so AT&T Local started from scratch. Now AT&T Local has 149 miles of fiber through Cleveland and is adding another 50 miles around the metro area.
Frontier has been in the Cleveland market for several years now, first with long distance and data services. The company's national frame relay, asynchronous transfer mode (ATM) and Internet protocol (IP) networks all come through Cleveland, Schneider says.
In 1995, Frontier began offering a Centrex product and now also provides local digital service. The premier local offering from Frontier is its integrated T1, which allows businesses to put local, long distance and data services on one T1 line, Schneider says. With the integrated T1, Frontier offers Ucommand, an Internet-based product that allows customers to change their T1 channel allocations themselves.
Vancouver, Wash.-based Electric Lightwave Inc. (ELI) is perhaps the newest kid on the block, but its strategy differs from traditional CLECs. "One of the leads we're championing is our Internet backbone. It's a niche for us to provide high-grade data services," says Trent Anderson, vice president of data sales for ELI.
In Cleveland, ELI will have a full array of services, from fractional DS-1 to optical connectivity. The company also will be selling its Remote Service Virtual Portal, a dialup Internet service bundled with bandwidth and hardware for businesses with remote workers or for resale by Internet service providers (ISPs). For local-loop access, ELI partners with NEXTLINK.
At Home
Businesses have plenty of options in Cleveland, but residential customers aren't quite as fortunate. There is one provider, however, that is starting to make inroads in the consumer market.
That company is CoreComm, which has a split of about 40 percent business customers and 60 percent residential. CoreComm has been reselling Ameritech's services for the last year. Resale has allowed CoreComm to gain experience with what kind of services packages work and experiment with different ways to market to customers, according to Flynt.
"Our biggest challenge is getting the word out that customers have a choice. We spend more time explaining that to them then we do actually selling the service," Flynt explains.
Later this year, CoreComm will become a facilities-based provider when it installs a switch in Cleveland and one in Columbus. Once the switches are in operation, the resale customers will get transitioned onto CoreComm facilities.
CoreComm's success in the residential market has been due to grassroots advertising, door-to-door sales and an easy-to-understand offering. The company bundles long distance, local usage and enhanced services into packages at various price points.
On the business side, CoreComm has focused mainly on small businesses with one to 20 lines. For instance, Flynt says that CoreComm serves 100 lines for its Burger King account. However, that account comprises mostly individual franchise locations with just one line.
"In some cases, the bill goes directly to a local franchise. In other cases, there is one bill for 15 or 20 locations," Flynt says. "Our main advantage is that we have a good back office and do our own billing."
Jockeying for Position
With so many new entrants descending on its territory, Ameritech has readjusted its strategy to remain viable in a competitive environment. "Competition makes incumbents take a strong look at themselves," Wilkie says.
In fact, many CLECs have witnessed Ameritech aggressively trying to keep its market share. "Ameritech's [strategy] is one of retention. Every one of the new players has an acquisition strategy," Wilkie notes.
One method of retaining customers is ValueLink, in which Ameritech offers discounted local usage, access and toll services if customers sign long term contracts of two, three or four years. "Customers don't want the risk of change. Plus the cost to us to continually market to them in a competitive environment is significant," Wilkie says.
Another thing Ameritech has done is hire additional sales people to handle business accounts. "We've done that because customers say they see other reps, but they haven't seen Ameritech's," Wilkie adds.
On Your Mark, Get Set ...
The story of competition in Cleveland doesn't end with existing players. Several new companies are in the throes of their own network deployments.
Coudersport, Pa.-based Hyperion Communications Inc. already has started in the market using a total service resale (TSR) strategy. By year's end, Hyperion hopes to have a 114-mile fiber network in place. All local service will be backhauled through Hyperion's switch in Buffalo, N.Y., until enough customers are online to justify the expense of adding a switch in Ohio, says Paul Allen, Hyperion's general manager in Cleveland. The company then expects to expand into Akron, Canton and Youngstown.
At press time, Teligent was ramping up its wireless network by securing roof rights throughout the Cleveland metro area. A formal commercial launch of services was expected to take place by the end of this month, says Ray Potts, Teligent's regional vice president.
And last, but not least, is San Francisco-based NorthPoint Communi-cations Inc. The data CLEC, which is deploying DSL technology, has begun testing its network with customers. In Cleveland, NorthPoint will partner with local and national ISPs, such as Verio Inc., to bring high-speed data services primarily to business customers.
"We're the first real competitors coming in from the data CLEC perspective," says John Hambidge, NorthPoint's director of market development. "We expect Cleveland to be a great market" because not even Ameritech is offering DSL.
| Can You Help Me with Directions? If you're providing service in one of the cities and want to provide information for a market study, contact me, Gail Lawyer, at (703) 567-5167 or glawyer@erols.com. |
| Correction Between the smog and the traffic jams, X-CHANGE didn't see San Francisco-based NorthPoint Communications Inc. during its visit to Los Angeles (in the February issue). NorthPoint has offices at Six Venture, Suite 100, Irvine, Calif. 92618, (949) 727-0430. NorthPoint is a competitive local exchange carrier (CLEC) that provides symmetric digital subscriber line (SDSL) service in partnership with Internet service providers (ISPs). The DSL service is available at speeds from 160 kilobits per second (kbps) to 1.5 megabits per second (mbps). Roger House is NorthPoint's regional sales manager in the L.A. area. NorthPoint targets small and mid-sized businesses, as well as the small office/home office (SOHO) and telecommuter markets. |
