As the (Wholesale) VoIP Turns

I’ve been keeping an eye on COMPTEL happenings and part of what’s emerged of interest to me smacks of a soap opera. Specifically, the fickleness of wholesale VoIP when it comes to giving CLECs, Verizon Communications Inc. and Sprint-Nextel Corp., the love they deserve.

Not that I would really know if the soap analogy is entirely accurate, because, truth be told, I haven’t watched a soap opera since the days of Luke and Laura back in the ‘80s. Unless you count political coverage, the health care debate or the ever-morphing state of Heidi and Spencer’s grasp on reality. But anyway, the very capricious nature of the segment seems showcased in a tale of two carriers.

Wholesale VoIP has been a pretty lucrative, volume-based business for niche, IP-only carriers like iBasis and Global Crossing that serve, say, Johann’s prepaid cards biz for cheap calling back to the homeland. But it’s also been a nice little moneymaker for IXCs catering to CLECs and cablecos, which is a big part of Verizon and Sprint’s domestic wholesale strategy.

Increasingly, however, fortunes are turning, with the latter’s wholesale customers increasingly looking to do their own VoIP thang, bringing their operations in-house as the cost of VoIP network gear continues to fall. Poor Sprint’s wholesale group took a blow at the conference when the word spread that the No. 7 domestic cableco, Mediacom Communications, has decided to bring its IP voice service operations in-house, transitioning off of Sprint’s network. Mediacom has had a relationship with Sprint since 2004, but now the love is gone. Cue the drama: No details as to motive are available. "We have initiated a project to transition these services in-house, beginning in 2010," was all Mediacom said, and that was in a 10-K filing with the Securities and Exchange Commission.

Sigh. Heavy sigh.

What makes it worse is that this is not the only betrayal for Sprint. Time Warner Cable said last week that it’s striking out on its own as well, leaving the carrier behind. Not good news when your Q4 cable VoIP revenue is only slightly up before these defections.

Only question is ... what dark revenge will the carrier exact? What CAN it extract?

Meanwhile, Verizon announced promotional bundles-in-a-box for small business that CLECs and other competitors can use to create ready-made offers for that segment. And that seemed like a hopeful and happy move until one peels back the covers to consider the drivers.

The SIP gateway service, a dedicated 1.5 Mbps T1 product, and a dedicated Ethernet service are at the heart of the strategy, all coming with special pricing and discounted hardware.

Enabling competitors to go after the SMB market rather than spending the (not insignificant) resources to implement the consultative and personalized sales process that works in that segment itself makes a lot of sense. But it also carries a certain air of defeat. And perhaps desperation. The offers expire in March 2011. Is this commitment to the market or just a thinly-veiled attempt to drive recession-based low-hanging fruit?

“We’re giving our wholesale customers new ways to support their small- and medium-sized business customers in a time when every nickel and every efficiency counts toward success,” Quintin Lew, senior vice president of marketing for Verizon Global Wholesale, said in a statement.

Well ... yes. Ah, the intrigue. Will CLECs, and more importantly their customers, be able to rely on Verizon’s continued marketing help when the VoIP situation turns again?

Shifting fortunes might be at stake on the competitive front, but there are plenty of wholesale VoIP bright spots. ATLANTIC-ACM awarded its Wholesale Excellence keynotes during a COMPTEL keynote. The research firm’s customer satisfaction benchmarking study, based on more than 1,000 individual carrier evaluations by their wholesale customers, found the winners to be as follows:

AT&T: Brand, Network, Voice Product Quality, Data Product Quality

Qwest: Provisioning

Sprint: Provisioning

XO: Sales Reps, Provisioning, Billing, Customer Service, Voice and Data Product Price, Data Quality

Oooh, XO seems to shine in a number of categories. Do you think the rest of them are jealous?

But for all the kudos, resellers are drama queens about one thing in particular: price. "For the second year in a row, we saw scores for product quality and operations improve while price satisfaction declined," said ATLANTIC-ACM president Fedor Smith. "The macroeconomic trends and pressures that impacted last year's pricing scores remain at play in this year's scores. Unlike last year, however, declines in price satisfaction were greater than satisfaction increases in other areas, signaling greater opportunities for price-based wholesalers to capture share."

In other words, be cheap and win. Are we setting the stage for an all-out dirty scramble for VoIP love? Which tramp will walk off with someone else’s customers?

See what I mean about the soap opera thing? Intrigue, betrayals, fickleness, a willingness to stop at nothing to get what some players want. Who knew wholesale VoIP could be so delicious?