2012

Akira Oyama, Principal Consultant

3/18/2012

Carrier Sales: Network Optimization Approach

www.netstrategysolutions.com Page 1

Executive summary

The goal of this paper is to provide opportunities for facility based carriers (CLECs and IXCs) to approach their

customers from the perspective of network optimization opportunities instead of approaching their customers

with traditional sales approach. The network optimization approach will lead to the discovery of new sales

opportunities that would be very difficult to identify using the normal sales process. The network optimization

approach will also lead to better working relationships with the carriers network planning and carrier

management groups who are responsible for making the network purchase decisions to drive down the leased

expenses.

Opportunities

Traditional sales and buyer relationships have generally been superficial. The service providers present new

services and/or new pricing plans to planning and carrier management groups that will review potential

optimization opportunities by comparing current leased expenses to the proposed rates. This approach could

lead to new sales, but it will not be a very effective approach by facility based carriers as planners and carrier

managers must deal regularly with a list of carriers where they implement the same sales approach. The

planners and carrier managers don’t have enough time or resources to do an in-depth analysis and a large

number of carrier proposals will be dismissed as little time is dedicated to analyzing these proposals. A lack of

understanding of planners and carrier managers’ optimization needs by facility based carriers will also lead to a

shot-gun approach where the majority of service features or pricing proposals will not be relevant to solve

customers’ optimization needs and end up wasting time.

The facility based carriers should consider offering one time or recurring network optimization analysis to their

customers and provide solutions that will be a win-win situation for both parties. Since planning and carrier

management resources are scarce, they will likely welcome an offer from the facility based carriers to perform

optimization analysis as long as key confidential information is protected.

The following list provides key reasons for facility based carriers to provide the network optimization analysis for

their customers:

1. Perform additional due diligence which will likely uncover new opportunities rather than relying on

customers to perform in-depth analysis which may not happen due to resource constrains.

2. Better understanding of customers’ network and their optimization needs not only improve sales

prospect, but it can also be used as an input to the facility based carriers’ own network expansion plan.

3. Build strong relationships. Because facility based carriers will be working closely with customers to

provide the optimization analysis and looking after their interests, it will likely bring the two parties

much closer. I believe this is a key ingredient for successful long-range sales growth strategy for facility

based carriers.

4. Targeted approach. By providing analysis for customers, the facility based carriers will be in a better

position to provide solutions that will be customized to each customer. The optimization approach will

help eliminate any unnecessary resources to marginal opportunities and help focus on the real

opportunity.

www.netstrategysolutions.com Page 2

5. Having in-depth knowledge of customers’ network will help facility based carriers to see potential

future business opportunities.

Overall, the network optimization approach by the facility based providers will improve the customer

experiences. This approach will lead to strong customer relationships and help win additional business.

Optimization Types

There are wide ranges of optimization activities planners and carrier managers engage in. Different

organizations may engage in different optimization activities at any given time. In this section, I listed major

optimization activities customers generally engage in. Understanding what they are and why they engage in

these types of optimization activities will be important for the facility based carriers’ to effectively approach

planners and carrier managers.

Meet-point elimination – Network planners are always looking for ways to eliminate meet-point circuits

to help reduce loop expenses as well as streamline their provisioning process. The solution could be

provided by establishing nodes in strategic locations to eliminate meet-point circuits. By helping to

solve this problem, the facility based carriers can help lower the customers’ access charges significantly.

IP transport – Many customers including independent carriers and ISPs without extensive long-haul

assets must lease circuits to connect between their routers. They must lease large bandwidth to

manage their data network infrastructures. Although there are number of options in a tier 1 market,

the independent carrier must establish data network between rural and tier 1 market where options are

limited. As a result, they must lease circuits from ILECs for a part of network segment which will drive

up the cost of maintaining their data infrastructures. For facility based carriers who can establish a node

in key locations that will help groom off expensive leased circuits.

New hub/network consolidation – A consolidation of leased network is another optimization activity

planners engage in. Because the network is dynamic and carrier pricing changes rapidly, the planners

must monitor utilization of their leased hubs for a consolidation opportunity as well as finding an

opportunity to establish new hubs. It’s important for facility based carriers to work with planners and

provide solutions where help is needed.

Diversity, latency and least cost routing – The planners must find ways to reduce leased expenses to

meet optimization target while they are constrained by latency and diversity requirements. The facility

based carriers will be able to offer alternate route to support their optimization efforts while supporting

latency and/or diversity requirements.

Network Transport between local exchanges – Independent carriers must lease circuits for a part of

their network segments to provide telecommunication services between island exchanges. They often

provision individual circuit as they need to provide transport between island exchanges. For facility

based carriers, this will be an opportunity to help bundle network by establishing interconnection points

between island exchanges.

CLEC Type 1 and 2 groom – Inter-exchange carriers spend significant amount on loop charges each

month as they have to provide telecommunication services to number of remote sites. Where there are

CLEC options, the planners make every attempt to extend CLEC transport to reduce leased access cost.

www.netstrategysolutions.com Page 3

Technology migration and optimization – Legacy inter-exchange carriers and other network re-sellers

have implemented SONET/TDM network hubs to support DS1 and DS3 loops. The planners must find an

effective way to manage their migration plan to Ethernet. Establishing a new Ethernet aggregation port

to support an Ethernet loop can be a very expensive solution if they maintain separate SONET/TDM

hubs until all TDM loops can be migrated or consolidated. The facility based carriers may consider

developing a cost effective Wave based hub that will support both Ethernet and SONET/TDM. This

solution will allow customers to reduce their leased network expenses and help them with smooth

transition to Ethernet.

Metro builds – The facility based carriers can work with planners to identify network build

opportunities. The facility based carriers can propose joint builds, sell dark-fibers or lit transport

services to customers’ target on-net build sites. Unless facility based carriers analyze customers’

network and associated costs, these opportunities will likely be missed.

Carrier negotiation and optimization opportunity – Planners and carrier managers must address

constrains with initiating optimization projects due to terms and conditions in carrier contracts as well

as large term liability impacts. As a result, planners and carrier managers continue to re-negotiate

contracts with existing network providers where they may not get the best deal possible. The facility

based carriers should work with planners and carrier managers to better understand contract structures

and help provide alternative solutions.

Challenges

A challenge for facility based carriers is to invest time and resources to develop an internal planning team who

can assist in analyzing data and providing solutions to customers’ optimization needs. If optimization analysis is

done sparsely, the investment to develop internal optimization team may not be an optimal approach for facility

based carriers.

One solution is to hire an outside expert for one-time optimization review or on a recurring basis which will be a

cheaper alternative to developing the internal optimization team. Since no training is required, the outside

expert can quickly identify optimization opportunities which will be win-win situation.

Conclusion

As I described earlier, different customers require different optimization activities to stay competitive. We can

broadly categorize service provider types to identify optimization activities they may engage in, but the facility

based carriers will not know the real opportunity until optimization analysis is conducted. Some optimization

activities will also be constrained by internal policies or resources. Engaging customers by providing value added

analysis will help lift these constrains and motivate them to initiate optimization projects.

Although it may require substantial investment to staff in-house planning team who can work with and

understand customers’ optimization needs, the facility based carriers should consider an option of bringing

outside experts who can help quickly identify customers’ optimization opportunities. Outsourcing will help not

only save time and money, but this option makes sense when facility based carriers perform one-time or annual

optimization analysis for their customers.

www.netstrategysolutions.com Page 4

I believe providing an optimization analysis will lead to discovery of additional sales opportunities, both short-

and long-term. Providing optimization analysis will also take the customer relationships to a new level where

facility based providers will truly understand customers’ needs.