Tag Archives: Business

Managed LAN Service

local area network

local area network (Photo credit: benschke)

If you serve business customers you should consider offering managed LAN service. This is a service where you manage your customer’s LANs for them. The service has been around for years and was often provided by local IT companies. But as LECs, CLECs and cable companies have become more data-centric and are delivering Ethernet to businesses, the line between wireline provider and IT provider has blurred.

Customers want managed LAN for a number of reasons:

  • Eliminates staff and costs. With managed LAN a business would no longer need a dedicated IT person on staff. Before my own business went virtual we had a staff of about 15 in our office and we needed a full-time IT person to support us. This was an expensive overhead that I finally avoided by going virtual, but that many businesses still incur. Some businesses have solved this by hiring part-time IT help, but that is still more expensive than a managed LAN service.
  • Saves on Investment. The servers and software to support a LAN are costly. In our industry we are already familiar with helping customers made decisions about buying PBXs versus lines and this is the same sort of decision for a business.
  • Takes Away from the Core Focus. Businesses should focus on what they do best and not become IT shops.
  • Trusted Vendor. Many businesses prefer to work with somebody they know and trust. There are numerous online data centers and vendors promoting things like Managed LAN and IP Centrex, but most businesses will not trust their data and communications needs to an anonymous company in the cloud. Many businesses also prefer their data being stored somewhere locally and not in a faraway state.

The decision to offer Managed LAN Service should be driven by your philosophy as a carrier. I have talked in other blogs about the choice that you have to either be a dumb pipe provider or a full service provider. If you want to be a full-service provider, then helping your business customers with their data needs is probably a better long-term strategy than helping them with their voice needs. Many businesses are now totally reliant upon their data and as a full-service provider you can assure them that their data is secure, stored redundantly and accessible where and how they need it.

There are several ways that you can offer the service:

  • Operate the Customer’s LAN Remotely. This is the traditional model that has been used by local IT shops. Normally the customer is still expected to own the equipment and software and the service provider just takes care of the LAN remotely. The problem with this approach is that the customer doesn’t save money on equipment, and you are going to have to visit the customer’s location from time to time, adding to your cost, and the price you must charge. One option is for you to own the LAN, but that still has you buying one device for one customer which is not any more cost efficient than the customer buying it directly.
  • Put the LAN in your Hub. The most competitive scenario is for you to put the needed LAN in your own central office or headend. This allows you to buy servers and storage devices that can serve multiple customers, thus allowing for a savings on hardware and software. It also allows you to run all of your managed LAN customers with the same underlying hardware and software, making it easier to operate and troubleshoot. And if you are also the one supplying the data pipe to the business you control the customer’s data from end to end.
  • Outsource to a Data Center. If you only have a few businesses that want this service, or if you don’t have the expertise to do this, you can buy these services on a wholesale basis. There are numerous data centers around the country that offer these services and you can repackage this and still make a profit.

Selling Managed LAN opens up the door for a host of other services. A very popular service is redundant data back-up, and you will need to establish a second storage hub or else work with a data center to back up data you store at your location. You will also find that businesses that use you for Managed LAN will look to you for all of their IT advice and will ask for your help to buy and repair computers, implement custom solutions like transparent LAN or video conferencing, etc. So this business line will create an opportunity to sell your technician time on an hourly basis.

The main advantage of this business line for both you and your customers is that you can provide them with a unified solution to all of their data needs. If they use you for Ethernet and voice and somebody else to manage their LAN then they are not getting the ideal data network with seamless integration of voice and data. We always talk about customer stickiness in the industry and I think this is the best ‘stickiness’ product you can offer.

Long Distance Fraud Again – Really?

I’ve been helping clients get into and stay in the long distance business since the 80’s when long distance was a new line of business for many telcos. I remember when the industry was new that it was a challenge. If you were a rural LEC you had to convince the RBOC who owned the regional tandem switch to help you set up a trunk group to get to a long distance company. And they were reluctant and slow to respond. So a company had to fight to get into the long distance business.

But over time it got easier and fairly routine and most rural telephone companies added long distance as a product line. It worked pretty well until the time in the early 90’s when calling cards became the rage and customers all wanted them. With a calling card a customer could make a long distance call from any other phone and bill it to their own home phone number.

So companies in the long distance business started giving out calling cards, and eventually they gave a calling card to every customer. This generated a lot of new traffic, and since this was back in the day when it still was not unusual to pay 10¢ to 15¢ per minute for long distance it also drove a lot of new revenue. But within a few years after calling cards were introduced calling card fraud followed. Calling card fraud was pretty straight forward. There were people who would try to find a valid calling card number that they would then send to places like the Middle East where street vendors would hawk cheap minutes. And dozens or even hundreds of people would use the calling card until somebody figured out that fraud was going on and cut off the card.

When the fraud first started the losses got huge because nobody was looking for it. But over time the carriers that sold the long distance began monitoring for unusual usage and policies were established such as making the cards only good for domestic calling, and over time the big calling card fraud got under control, but never quite stopped.

Over the years since then I have run across cases of fraud, but it has been a random thing here and there and not widespread like the calling card fraud had once been. The companies that sold wholesale long distance got more sophisticated and monitored usage closely and for the most part the industry stopped worrying about fraud.

But recently I have seen cases of significant fraud happening again to my clients. Within recent months I have had two clients hit for over $25,000 in fraud in a single month, which in both cases was as much as they had been paying for wholesale long distance for most of a year. So for these companies this was a really big deal and it effectively doubled their cost of buying long distance for the year.

And both of these companies were buying long distance from ‘big name’ carriers and not from some small VoIP provider. I must tell you that I was surprised. Not surprised that fraud could still happen, but surprised that the big company selling the long distance did not have a fraud monitoring process in place to stop it. It’s not that hard to monitor for fraud at the large carrier level. If they process the long distance in real-time it is not hard to set some flags to look for unusual usage. When my clients decided to buy wholesale long distance from these vendors they were assured that those carriers had fraud monitoring. It turns out to not to be true.

The fraud in both of these cases was allowed due to faulty connections between my clients and their customer. In one case if was my client’s own connection that was not secure. They had installed an IAD (Integrated Access Device) at a business customer in order to supply voice and data from their fiber connection. The IAD was not properly configured and had very weak passwords and was not configured to only accept commands from my client.

The second case was similar in that another client had a connection to a customer PBX. And of course, being a full service provider, they made the connection for the customer to his PBX. As it turns out there was a backdoor connection available into the PBX into the internet, which means that the PBX could have a connection from somewhere other than my client.

Neither of those problems automatically leads to fraud, but there is a new set of bad guys in the world. They use computer worms to test against millions of phone numbers looking for phone numbers connected to PBXs or IADs. Once they find such a device they use normal hacking techniques like cracking easy passwords to gain access to the device. They then sell calling in the same way as was done in the old days of calling card fraud. In one of these cases the calling went to the Middle East and in the other went to INTELSAT calling to satellite phones – both very expensive calling. My suspicion is that these bad guys are not selling these minutes on the street like in the past, but instead hawking cheap minutes to International VoIP minute sellers who have no idea where these minutes come from.

Certainly my clients had some liability in their loss since they contributed to the customer connection being made in an insecure manner. But they also ought to be able to rely on their underlying long distance provider to protect them against a flurry of suspicious calls. The biggest worry about this new kind of fraud is that it pumps a large volume of calling to expensive places in a short period of time. So it can cost a telco a large amount of money in a hurry.

So my caution to companies that sell long distance is to beware. It has been a while since fraud was of this level of concern, but it’s back again. There are two steps you can take to protect yourself. First, make absolutely certain that the company you are buying long distance from has good fraud detection and policies. You want a carrier who will not only find the fraud but who will cut off the calling before they even contact you. But second, the responsibility rests with you to use good network practices to make sure it is hard for somebody to hack the connections to your customers. If you want to know more about how to protect yourself contact Derrel Duplechin of CCG at (337) 654-7490.

Transparent LAN Service (TLS)

local area network

local area network (Photo credit: benschke)

Transparent LAN Service (TLS) is an Ethernet service that allows a business customer to connect together multiple Local Area Networks (LANs) without complex protocol conversions, carrier equipment or expensive dedicated facilities. Probably the best way to think of it functionally is as the Ethernet version of frame relay, only much improved in terms of speed and cost. The product goes by many different names, but we prefer to call it Transparent LAN Service because transparency is the major benefit it brings to businesses. Properly configured it removes all of the barriers that were in older technologies and connects LANs and WANs seamlessly.

Transparent LAN service can be configured in multiple configurations including both point-to-point or multipoint-to-multipoint arrangements. In the past businesses with multiple locations had to buy dedicated facilities to connect their LANs together. And typically the dedicated facilities were expensive, were slower than the speeds of the corporate LANs and had issues like carrier demarcation points and protocols to deal, which required quite a bit of expertise on the part of the business IT personnel.

Businesses with multiple locations like banks and grocery stores, educational institutions and government agencies are examples of institutions that want simple, distributed LAN connectivity. These kinds of business customers have outgrown the traditional LAN connectivity offered by most telcos because they have significantly greater bandwidth needs than in the past because of applications like remote monitoring, distance learning, business location integration, business disaster recovery and interconnection to cloud services.

There several variations of the service with the two most common being:

Any-to-Any service (E-LAN). This service allows any connected site to talk to any other connected site across the carrier’s network, with only one physical connection at each site. With this service, the customer controls VLAN IDs so that he can segment traffic in any desired manner among his connected LAN locations. All sites share one EVC (Ethernet Virtual Circuit). To the customer, this service is “transparent” across the carrier’s network and the customer controls everything.

Point-to-Point (E-LINE). This is a point-to-point EVC (Ethernet Virtual Circuit) solution where the carrier controls which customer sites can talk to which customer sites. This service allows one or more EVC per User Network Interface (UNI). The customer does not control VLAN IDs so that he can’t segment traffic among his locations. With the carrier controlling the site ingress and egress, better Quality of Service can be offered across the carrier network. To the customer, this service is not as “transparent” across the carrier’s network, but many customers prefer that the carrier control the network.

There are a number of benefits to customers from Transparent LAN Service

  • Reduces IT personnel expertise requirements for WAN hardware, software, protocols, testing and maintenance;
  • Reduces WAN equipment requirements;
  • Reduces complexity of networking – single network capability;
  • Can increase WAN speed to LAN or near-LAN speeds;
  • Increases network manageability – can look like single LAN for all customer sites;
  • Scalable bandwidth that can be changed as needed;
  • Accommodates a single physical interface at each customer site;
  • Scalable site connectivity – easy to add or remove sites from network;
  • IT staff can still self-manage network if desired;
  • Allows efficient redundancy across carrier’s network;
  • Allows QOS access carrier network.

And there are benefits to the carrier from offering Transparent LAN Service

  • Can leverage fiber and IP network as well as legacy transport network;
  • Managed services make your customers more dependent on your network and value-added services;
  • Less costly network compared to SONET;
  • Multiple services can be provided over a single network;
  • Can offer value added services like QOS/Performance Control over delivery of customer’s traffic.

Transparent LAN Service can be a valuable addition to your carrier Ethernet service offering. This product can support multiple locations for the same customer and can bring solutions for greater bandwidth to WANs, video content delivery, disaster recovery, and cloud services. When done right this is a killer app for larger businesses.

While this product sounds simple there are a lot of options and it can be tricky to set up. You can call Derrel Duplechin of CCG at (337) 654-7490 if you want to know more about the product.

Value Added Selling – The Only Way to Go!

Customer Service Think Tank hosted by Dell

Customer Service Think Tank hosted by Dell (Photo credit: Dell’s Official Flickr Page)

Today’s guest blogger is Mike Fox. He was one of the founders of CCG and we still work together on a number of projects. Mike is working at Fox Management Advisors and can be reached at (307) 431-6543.

In my last blog I discussed how it is important for your customers to make an emotional attachment to your brand.  You want them to think of you first when they are in the market for any telecommunications product or service.  A corollary concept is for you to focus on adding value to everything you sell.  Many telcos are order takers.  By that, I mean that they sell a suite of products that customers know and understand.  The customer is already sold. This has been the nature of the telephone business for many years.  Furthermore, for a long time, customers really had no choice but to call the telephone company when they wanted telecommunications services. So, we all got into the mode of order taking rather than selling value.

But, the world has changed in this regard (as you well know)!   The telecom world has entered a new age.  Residential customers are dropping traditional voice (landline) and video (cable TV) services at an alarming rate. Businesses are no longer happy with just vanilla voice lines or trunks. The successful communications company of the future must sell products that are different from what they sell today. These products must be attractive to the new generation of customers.  This will force many companies out of their comfort zones.  How (and what) do you sell to customers who only want broadband from which they will tie in various Over The Top (OTT) devices like Roku?

Are there additional revenues beyond simply providing the Internet pipe?  Of course there are, but they may be harder to identify and even harder to monetize.  This might mean selling products like IP Centrex, cloud services, SIP trunks, unified communications, advanced security, transparent LAN, MVNO wireless or a host of other new products. And a decade (or less) from now it will mean selling products that we haven’t even envisioned yet.  Some smart guy or gal is in their garage as I type thinking up the next “killer app” for our industry.  We just have to be ready to sell our customers on the value of this new product. Not just on the value of the new product, but HOW the new product will be valuable for them.

Selling a new product that customers don’t fully understand requires different sales skills.  You need to educate the customer on the benefits of the new products – i.e, consultative sales, which is quite different from order taking. Consultative sales means sitting and understanding what the customer most needs, and then offering a package from the suite of possible products that best fits the customer’s needs.

Actually, the very first step in selling a new product is for you to understand the VALUE PROPOSITION of each product in your portfolio. The value proposition means knowing how a product will benefit the customer. You cannot sell new products just by showing that they are new; unfortunately, many sales people take this approach and try to sell the ‘cool’ of the new product rather than the value. You have to show the value and make the customer understand how this new product or service will make their life or business better.

Finally, in order to understand the value proposition you must know your customers well. As I said in my previous blog, make them part of the club. Get to know them, and encourage them to get to know you and your company. Basically, you need to get out and talk to your customers.  Find out what they are looking for, what excites them, and what their needs are both now and in the future. Once you understand those needs you can craft products and services that will provide what your customers want; and you will have built the foundation to support a strong, loyal customer base.

Regulatory Alert: FCC Reminds ACS Providers (Advanced Communications Services) of Filing for CVAA Compliance

Seal of the United States Federal Communicatio...

The FCC recently issued a public notice reminding Advanced Communications Providers (ACS) and equipment manufacturers that they need to provide evidence that they are complying with the Twenty First Century Communications and Video Accessibility Act (CVAA). The FCC is now implementing Section 255 of the Telecommunications Act of 1996 that requires telecom products and equipment be accessible by people with disabilities.

The FCC defines an ACS provider in Section 3(1) of the Act to mean a carrier that provides one of the following: (A) interconnected VoIP service; (B) non-interconnected VoIP service; (C) electronic messaging service; and (D) interoperable video conferencing service. The FCC also defines advanced communications services providers to include all entities that offer advanced communications services in or affecting interstate commerce, including resellers and aggregators. Such providers include entities that provide advanced communications services over their own networks, as well as providers of applications or services accessed (i.e., downloaded and run) by users over other service providers’ networks.

The CVAA law was enacted in 2010 and is aimed to ensure that people with disabilities have access to advanced communications services. This requirement by the FCC is somewhat unusual in that it applies to telecom providers who are otherwise largely unregulated.

And there are a lot of nuances to be in compliance:

  • There must be a filing done for each corporate entity that provides ACS services and you can’t just designate somebody at the parent company to cover all of your subsidiaries.
  • You must provide an affidavit of compliance by a company officer.
  • It must be filed electronically.

The original deadline for these filings was April 1, but we believe a lot of entities who should have filed did not. If you provide any form of VoIP you need to comply with these rules or face eventual fines.

The filing requires the following:

  • A description of the effort the company will undertake to discuss your services with customers with disabilities.
  • A description of the features and other ways that your products will be made accessible to customers with disabilities.
  • A description of how people with disabilities would most likely be able to use your products.

So, if you provide VoIP – even on a resale basis – you need to make this filing.

If you want to know more about the specific filing requirements, or if you want assistance in making this filing contact Terri Firestein at (301) 788-6889.

Know Your Fifty Biggest Business Customers

Customers

This is an idea that is so simple that I almost didn’t make a blog entry out of it. But every service provider should personally know their largest business customers. I arbitrarily set the number to fifty customers, but fifty is not a magic number and there is some number that is right for every carrier.

When I say that you should know them personally I mean just that. These customers should get a visit from you every year. You should do your best to get to know each of these customers well and understand their needs. Talk to them about their business and understand how they use your existing products. If this blog has highlighted anything, it is that the needs of business customers are evolving and changing quickly, so you should also be talking with these customers about how you help them to meet their needs in the future.

Starting this process is easy. Generate a report each month that lists the highest billing customers. As you compare these results month over month you will begin to see the top customers in terms of billing.

As you find out what your largest customers want, you are going to find out that you have holes in your product offerings. You might find that these customers are buying some things elsewhere or else are going without features and products they would like. It would not be surprising to find that some of them are thinking of changing service provider. Often you will find out that they don’t know what they need in terms of product, and part of the reasons for these visits is for you to educate them on the wide range of business products that are available to them today.

The businesses should welcome your visits if you come by to get to know them and advise them. You are not be building loyalty if you only visit your customers when they have a contract expiring or some similar event. Loyalty instead comes when they know you care about them and their success.

Most service providers I know can name their top few customers, but it’s rare to find somebody who can name their top fifty. And it is far fewer who have made it a priority to visit their largest customers every year. Visiting fifty customers is one visit per week. Find a way to work that into your schedule. You will love the results.

Customers – Make Them Part of Your ‘Club’

Today’s guest blogger is Mike Fox. He was one of the founders of CCG and we still work together on a number of projects. He is working today for Fox Management Advisors. Mike can be reached at (307) 431-6543.

MotorcyclesFor the past decade or so, the telecom industry has made great strides to become more competitive and focused on evolving customer needs and desires. However, we still have a long way to go. Our industry is changing and many products and services that were once ‘cash cows’ are now becoming almost ‘commodity’ services (although, in reality, treating any of your services like commodities is both dangerous and fundamentally wrong – I’ll address this in more detail in a future entry).

For example, long distance used to be a huge money-maker for telephone companies. Today, with unlimited (although, not ‘free’) calling throughout the US as part of most calling plans (landline or wireless), the world has changed. For those of us old enough to remember, it wasn’t that long ago that every long distance call was carefully scrutinized by our parents! Today, we don’t care who or where our kids call, just so long as they don’t go over the minutes in their plan.

So, how do we structure our sales culture to attract and keep more customers? What makes them sticky? Is it price? No, that’s commodity sales think. There will always be someone willing to offer lower prices. Sure, you have to be price competitive, but you should never sell on price.  Rather, sell on value and work to generate loyal customers. Many of the most loyal customer bases in the world are very willing to pay above market prices for the stuff they want. Think of Harley Davidson, Apple Computers and Starbucks. All provide products and services at prices above their competitors, but their customer base is extremely loyal and willing to pay such prices. And, it’s not just about quality. Sure their quality is good, but it’s more the subjective aspects that make these customers loyal – e.g., it’s fun to be part of the Harley club! Simply put, passionate, loyal and, ergo, sticky customers have an emotional attachment to the brand.

Do your customers feel passionate about your products and services? If not, that can be changed.  Find a way to make help your customers connect with your products and services in a personal way. While there are many ways to accomplish this, one important aspect is to nurture your personal relationships with your customers. Make them feel like they are part of your community and an important part of your community. When I lived back east, I became friends with a manager at an Acura car dealership. Over a period of 9 years, I bought several cars from him, even two used vehicles that were not Acuras. I love the Acura brand, but that isn’t what brought me back since there were several other Acura dealers in the area. Rather, every time I walked in that dealership (and I did many times when I wasn’t buying), they made me feel welcome and ‘part of the club’.  It was fun and whenever I was in the market for a new car, that’s who I went to first. Let’s figure out a way to make your customers think of you first when they think of ANYTHING related to telecommunications. Even if you don’t sell what they need at the time, encourage them to come in to the office and just talk. Who knows, it might result in a sale and it certainly will encourage them to come back the next time when you do have something they want.

Advantages to Customers of SIP Trunking

SIP stands for Session Initiation Protocol and is a technology at the enterprise level for delivering multiple voice connections to a PBX or key system over an IP data connection. In order for a business to utilize SIP they must have a PBX with a SIP-enabled trunk side and their data provider must be able to deploy and switch SIP.

Hot Desk, GTi, University of Glamorgan

Hot Desk, GTi, University of Glamorgan (Photo credit: jisc_infonet)

SIP Trunks at the enterprise level of the network replace PRIs between the central office and PBXs. A PRI is a dedicated T-1 transport circuit and can support 23 bearer paths for voice, but a SIP trunk connection typically rides an existing data circuit and can be used to carve out as many voice paths as are wanted within the limits of the bandwidth available.

Following are the reasons that businesses want SIP trunks, and thus for carriers to sell them. This list is discusses the advantages for the small and medium business customer.

Saves Money. SIP generally saves money. SIP trunks replace PRIs which are inefficient. It is not unusual for a customer with a PRI to be using only part of the capacity and yet they have to pay for it all since it is a linear product. SIP trunks are typically carved out of a company’s data or Internet connection and can be sized as needed within the constraints of the bandwidth. It is typical for a business to cut their costs at least in half using SIP trunks compared to PRIs due to the efficiency.

More Efficient Use of the Data Connection. Most businesses will already have an Internet connection and SIP trunks are carved from those connections. Most businesses use their data connections in a bursty fashion, meaning there are times of the day when they use a lot of their bandwidth, but also many times when they use very little. SIP trunking can take advantage of the unused capacity in most company data connections. Companies often do not need to increase the bandwidth they are buy SIP trunks and can fit them into their existing data product.

Enables Unified Communication. SIP enables all of the various features that comprise unified communications such as access to the phone system from cell phones or tablets, integrated voicemail and email, video chat, instant messaging and other features that make businesses more productive.

Enables Upgrade to an IP PBX. Businesses more and more want the kinds of features that are available with an IP PBX and IP handsets. Many businesses are choosing to buy an IP PBX to get these features rather than buy IP Centrex from their telco provider. The general advantage for a business to have their own IP PBX is the ability to customize their communications network, something that many service providers do not offer with IP Centrex.

Allows Multiple Locations to Act like One. With SIP trunks and an IP PBX a business with more than one location can have a unified telephone system that brings the data and voice together for all locations.

Any carrier that sells enterprise data service to businesses should offer SIP trunks. Even if you sell IP Centrex, customers who prefer to have their own phone system are going to want SIP trunks.

Smart Upgrades

Every network faces periodic upgrades of electronics or key components. We have found that cutovers are the time when any network is the most vulnerable.

There are tried and true processes that can be used to minimize the chance or duration of network outages during upgrades. The following is a list of steps that we recommend for any network upgrade that puts customer service at risk. Following these steps is never a promise of 100% safety, but we have never seen a company that upgrades in this methodical and planned manner have major problems.

  1. Have a Project Manager for the Upgrade. It is vital to have one person in charge of the upgrade. They can get assistance in planning and doing the upgrade, but they need to be the one ready and authorized to react if things don’t go as planned.
  2. Develop a Checklist. You should develop a step-by-step checklist of everything to consider for the upgrade. Make sure that you understand every piece of equipment and software that will be affected by the upgrade. And then, most importantly, develop a step-by-step list of the steps required to perform the upgrade.
  3. Break the Upgrade into Manageable Steps.  If possible, the upgrade should be done in stages where progress can be measured and tested as each step progresses.
  4. Establish a Baseline / Establish a Go-Back Process. By this we mean that you need to completely understand the current network configuration, in detail. You need to know the exact settings of every piece of equipment. And once you understand the current network configuration develop a go-back process. This would be the steps needed to get the network back to the original configuration if something goes wrong during the upgrade. Ideally the go-back would be something really fast and we sometimes have seen this programmed such that it can be done in minutes.
  5. Understand the Traffic Flow (and then monitor during the cutover). During the upgrade process you might not get the same kind of alarms that you normally would expect. Also, changing traffic patterns due to the cutover can skew traditional measurements if you are rearranging the network. So it’s vital to understand your traffic flow before the upgrade. Then, have somebody monitor the traffic during the cutover since this might be the only way you will know that you have knocked customers out of service.
  6. Make Sure you have Vendor Support. For a major upgrade you should consider having a vendor representative on site. Otherwise, make sure ahead of time that somebody will be able to help you if you run into unexpected problems. I have seen clients schedule an upgrade over a holiday, not thinking that the needed expertise at the vendor is probably not going to be available.
  7. Pre-test Every Component before the Cut. Definitely test any new equipment before you introduce it into the network to make sure that it is operating properly. For complicated upgrades you ought to consider setting up a test lab where you can test the new equipment against components that will remain in the network for interoperability.
  8. Take Every Upgrade Seriously. I often see companies follow most of the above steps for major upgrades only to see them knock out their network for some simple upgrade like introducing new cards or something they thought was a simple upgrade. Any change that can knock down your network might knock down your network, so take every upgrade seriously.
  9. Define What Success Looks Like. You should establish the needed tests ahead of time that will let you check that every aspect of the network is working as planned. You don’t want to do an upgrade that is almost right only to find that you have created future problems. So establish a detailed test plan.

If you have questions about upgrades or want help developing an upgrade plan contact Derrel Duplechin of CCG at (337) 654-7490.

Cable TV Trends

There are a number of trends affecting the cable TV industry that all add up to an industry that is going to be seeing big changes over the next decade. These are what I see as the biggest trends affecting the industry:

  • Cord Cutters. The number of people who are completely dropping cable is growing and the speed of that drop is accelerating. I have seen several different recent estimate that 5 million households will have completely dropped all cable service by the end of 2013. And only the cable providers know how many other million households that have cut back on the size of the package they buy rather than drop service totally. I anecdotally know many people, myself included, who have gone from the big cable packages to something less – in my case I now have only the basic package of about 20 channels.
  • Higher Programming Costs. Programming costs have been rising steadily for the last decade and until the last few years were climbing between 6% and 7% per year. Costs have climbed even faster in recent years due to the high fees being demanded by local network channels in each market (ABC, NBC, CBS and Fox). Local network programming was free for cable companies until a few years ago, but now they paying as much as $1 per month per customer for each major network channel. Many contracts between cable providers and programmers are for multiple years and those contracts show the price increases are going to continue to come.
  • Even Higher Rate Increases. The large cable companies have increased rates around 7% per year for many years. The programmers have usually blamed the size of the increases on increased programming costs, but until the recent increases in local network programming the increases were generally about twice what was needed to cover programming cost increases. If the rate increases continue at that level, then a $70 package today will cost $129 in ten years. Prices are already at a point that are forcing households off the network.
  • Very Solid Cable Modem Business. To a large degree the cable companies have won the war with DSL. However, they have stiff competition from Verizon and FiOS on fiber. There is limited competition outside the Verizon footprint, but with Google building fiber in Kansas City and having announced Austin and Provo there is going to be more competition for the residential business.

What do these trends add up to? I see them resulting in the following:

  • Ever decreasing cable customer base. The most dire trend for the industry is that young people are not interested in traditional cable, and as that demographic ages the percentage of households wanting cable is going to drop faster and faster. Add to this the households dropping due to never-ending price increases and most experts see cable subscribership going down the same path as landline telephones. Subscribers are dropping somewhat slowly now, but every prediction I have seen believes the rate of disconnects will accelerate over time.
  • Cable Providers Become Data Companies. As cable penetration decreases the cable companies will become more and more reliant on selling data. This is going to lead them over time to maximize their networks for providing bandwidth for data rather than cable TV. And I predict it also means that they will start raising data prices over time, something that we just started seeing in the last year. There is not much profit in selling cable packages and the cable companies could be more profitable selling data eventually (assuming they are in markets where they don’t have stiff competition).
  • Winnowing of Cable Networks. As the industry loses subscribers and as people downgrade from larger packages to smaller ones, the demand for some of the networks is going to diminish. One way for cable companies to control costs is going to be to whittle away at their line-up, and that is not that hard to do with 300+ channels on many cable systems. So some of the marginal networks are going to either die or greatly reduce the fees they charge if they want to stay in business.

There is one change that might affect the industry that could upset these trends, and that is a la carte programming.  There are a lot of barriers to make that happen, but cable companies might get new life if they are able to sell only those channels that people want to watch. It’s certainly possible that they could sell a package of 20 channels to a family at an affordable price and make more profit than they do today with the large expensive packages. But this is going to require a major change in an industry that is currently controlled by the programmers and not by the cable companies.