The Business End of Broadband

Based on telephone interviews with 401 U.S. business decision-makers, the top priorities for business telecom investment this year revolve around connectivity. Improving data security (76 percent), upgrading LANs (67 percent), improving wide-area connectivity (61 percent) and use of wireless services (59 percent) proved to be paramount to those surveyed.

Focus On Connectivity

Why, after a run-up in Internet investment and usage for the past four to five years, is there such a focus on basic connectivity? In-Stat/MDR believes the answer lies in the growth of the remote and mobile workforce. The desire of business decision-makers to address the needs of these workers is not surprising: This segment is expected to grow to more than

90 million this year, according to In-Stat/MDR. Given the changing dynamics of the workforce, combined with the changing dynamics of the economy, it follows that business plans for broadband usage would change as well. Respondents want to see voice and data merge, both on LANs and the public switched telephone network (PSTN). Roughly 26 percent indicated plans to use voice-over-data services this year, with another 24 percent planning to adopt LANs that carry both voice and data (see chart below).

Although packet telephony could be a bright spot for providers, its success in the business market will be a function of telcos' ability to deliver quality of service and effectively sell through a multitiered channel. The days of telemarketing basic telecom services are coming to an end; the value is in the depth of the customer relationship and the ability to increase the uptake of value-added-service purchases per customer over time. Given that and the notion that business customers are looking for more specialized, complex telecom solutions, it's only natural,logical, even,that channel partners will become more involved in the telco marketing mix this year.

The DSL Alternative

The importance of DSL services as part of a suite of services is also clear. Not only are these services right-sized for the broad mix of remote and mobile workers in the United States, it seems that business customers also have some other things in mind for these digital lines. According to In-Stat/MDR research, business customers are already showing a relatively high propensity to replace circuit-switched lines with DSL alternatives. It's good timing for providers that have geared up to offer HDSL services as low-cost T-1 lines. Although it won't happen quickly, we could be witnessing the beginning of the end of traditional circuit-switched services.

Willingness to replace is one thing; planning to actually do it is another. Of the 26 percent indicating a willingness to replace fractional T-1 services with a DSL alternative, only 15 percent indicate plans to do so this year. Of the 22 percent indicating desire to replace full T-1 services with DSL, only 16 percent plan to do so this year. Clearly, those results highlight that the DSL substitution effect will take some time to significantly cut into today's T-1 market. But they do underscore the very real possibility that DSL adoption could have far- reaching implications on how businesses will one day connect to the PSTN.

So, it all comes full circle; providers are going back to business, looking to add value and turn profits. Certainly, the research says now's the time for business broadband, but In-Stat/MDR believes it will hinge on the telcos' ability to engage and support channel partners to sell to, deploy and manage solutions for those customers over time. Other miracles have happened of late, so what's one more? n

Kneko Burney ([email protected]) is director of business infrastructure and services at In-Stat/MDR, a research firm headquartered in Scottsdale, Ariz.