While the great search for sources of recurring revenue has mainly focused on managed services, one of the most overlooked sources of such revenue for solutions providers is the Internet connection itself and the increasing number of applications that are running over it.
What was once considered a tactical opportunity that many solution providers felt was mainly the province of telecommunications providers is rapidly becoming a strategic issue for solution providers as they gear up to face new forms of competition.
The main source of that new competition comes from companies that were formerly known as ILEC (Incumbent Local Exchange Carriers). Many of these companies got started because the Telecommunications Act of 1996 gave them the right to sell Internet access at the same price as the major telecommunications companies.
But, since then, the courts have revoked that right, so now many of these companies are morphing into becoming full-fledged solution providers. And their competitive advantage is the fact that they already own the customer’s Internet connection, so it’s a relatively simple matter to start moving up the stack to providing Internet-based applications and services. And, of course, many of them tend to discount the network hardware to get that business, just like the big-boy providers do.
For all of the above reasons, it’s becoming crucial for solution providers to own the Internet connection with their customers. Unfortunately, most of the providers of Internet connections prefer to sell direct or outsource the recruitment of channel partners to master agents that are not particularly aggressive.
Fortunately, there is at least one provider of wholesale Internet access that is trying to level the playing field a little more. Level 3 Communications, mainly under the auspices Craig Schlagbaum, vice president of national partner sales and programs, is working to make it easier for solution providers that don’t have a history of selling Internet access to do business with Level 3.
Level 3 has acquired several providers of metro Ethernet access over the last two years, including WilTel, TelCove, Savvis CDN, Broadwing, ICG, Progress Telecom and Looking Glass, to bulk up its ability to offer differentiated services in a variety of local markets.
Whether you go with Level 3 or some other provider such as XO Communications, the key thing to remember is that the world is slowly migrating toward Internet-based applications that are delivered as a service. Ultimately, that means whoever controls the pipe to the customer is going to have a strategic advantage when it comes to selling those software services, many of which are designed to replace the on-premises software solutions sold today by traditional solution providers.
When you get right down to it, solution providers today can’t afford to rely on the kindness of others for Internet access, because most of the providers of Internet access today have serious designs on their customers, so the time to do unto others before they do unto you is now.