Broadband buyers turning over the reins

More companies use managed service providers

Companies purchasing broadband Internet access for branch and home offices increasingly are turning to service providers rather than trying to manage DSL or cable connections themselves.

Relying on managed service providers for broadband spares companies from dealing with multiple Internet service providers, whose provisioning and billing processes vary widely and can't match private-line or frame relay services, customers and industry watchers say.

Managed service providers are responding to the rapid growth in business-class broadband, which has been adopted by Pitney Bowes, Sbarro Restaurants, Jenny Craig and RadioShack, among other U.S.-based multinationals. (Corporations are helping drive overall DSL usage, which topped 138.8 million subscribers worldwide in 2005, according to the DSL Forum.)

In early May, Netifice Communications and MegaPath Networks completed a merger to create what they say is the largest provider of managed broadband VPNs in North America, with more than $125 million in revenue. In April, EarthLink Inc. completed its $114.3 million acquisition of New Edge Networks, a Vancouver, Wash.-based managed service provider with extensive DSL capabilities.

Top-tier carriers including Verizon Business also are targeting this market with expanded offerings in the areas of remote access, telework and mobility. For example, Verizon Business now offers Evolution Data Optimized (EV-DO) wireless services as well as DSL services that are integrated with its enterprise mobility offerings.

"A lot of the big telcos are offering DSL to replace frame relay access, and they are becoming pretty comfortable using the technology for business-class services,'' said Courtney Munroe, a telecommunications analyst at IDC. "If you already are buying an IP VPN service, you can buy broadband access and use the VPN to get the security you need. That's where you really get the bang for your buck, by leveraging the IP VPN's security and authentication and the faster speeds of broadband.''

KidsPeace, a children's charity in Orefield, Pa., has built an IP VPN that takes advantage of broadband. KidsPeace has more than 2,500 employees at 40 locations.

"Our locations are very small. They have 10 to 15 employees per location, and it wasn't really cost-effective to put in fractional T1s or T1 connectivity in all of those locations,'' said Debbie Kruszewski-Warner, manager of network and hardware support at KidsPeace. "Most of these people work with foster families. They're out on the road a lot. They don't need a T1 connection that we would be paying a lot of money for.''

Before turning to broadband, KidsPeace used dial-up connections that proved problematic and required technical expertise that many locations didn't have.

"The social workers' computer skills are fairly low-level, and trying to dial into our network was really troublesome for them,'' Kruszewski-Warner said. "If the connection didn't work, it was really difficult for them to diagnose why it didn't work.''

KidsPeace turned to Virtela Communications Inc., a managed service provider, to put together a broadband network to replace its old dial-in system. KidsPeace has DSL and cable connections in its foster care locations and T-1 lines in its headquarters location. Virtela manages all the connections at the remote locations, which involves overseeing 15 access providers.

"Virtela orders all the services for us. They get and install all the equipment, and they coordinate with the ISPs,'' Kruszewski-Warner said. "If we had done this ourselves, I would have had to hire one or two more people.''

KidsPeace has 25 people in its IT shop.

Virtela handles ordering and provisioning of KidsPeace's broadband network and provides a consolidated monthly bill. Virtela also handles any outages that occur and deals with the local access providers to get service up and running again.

"We haven't had extended periods of time where the service is down. It's typically back up and running in a day or two,'' Kruszewski-Warner said, adding that she believes the local access providers are more responsive to Virtela when outages occur. "I don't think they would respond to us in a timely manner because we'd be such a small customer.''

Kruszewski-Warner said she's happy with Virtela's service; in fact, she recently extended her contract with the service provider for another four years. However, she would like to see local DSL and cable providers offer enterprise-class service-level agreements that include guaranteed installation times and faster responses to outages.

"I'd like to have known installation times. It's hard because we lease offices, and sometimes an office will tell us just two weeks before they are moving,'' she said. "We don't really have SLAs either because the broadband service providers don't offer them.''

She said she'd also like to see the prices for business-class DSL services drop. KidsPeace pays $200 to $300 per month, per location, for broadband service.

"I could go to Verizon and get it for $14.95 per month,'' Kruszewski-Warner said. "But Virtela is providing the equipment and the management of this network. Our office thinks it's really expensive, but they don't see all of the expenses that I would have to spend in terms of hiring people and buying equipment that now I get from Virtela.''

Improved reliability from the local broadband providers would be nice, too. KidsPeace has replaced all the PCs at its remote locations with thin clients that are easy for staff to use. However, employees can't access their e-mail, human resources, payroll or patient account systems if their network connections go down.

"Unless you have a large IT staff, you need to outsource broadband services,'' Kruszewski-Warner advises.

KidsPeace is not alone. Retail outlets such as HandiMart Food Stores and Shell gasoline stations are moving to outsourced DSL services, as are financial services and insurance companies such as GAB Robins North America that have many small, branch offices.

Some U.S.-based multinationals are turning to DSL to replace more expensive T-1 or slower dial-up connections overseas. Pitney Bowes Inc. uses managed DSL services for an IP VPN that replaced dial-up services in Australia, China, Hong Kong, Japan, South Korea and Thailand.

Some of these companies use DSL for all of their access, while others use it as a backup.

"Everyone is getting rid of low-speed frame relay services,'' said Jeff Phillips, vice president of product marketing at Virtela. "Typically, companies are buying MPLS and using DSL as backup for offices with up to 15 to 20 people.... They're getting rid of dial-up for backup.''

Sal Cinquegrani, executive director for communications at New Edge Networks, said it's hard for network managers to oversee DSL services nationwide or overseas, since so many carriers are involved.

"It's very difficult to provide a single-source solution everywhere that a company has employees,'' Cinquegrani said. "There are different flavors of DSL. In some areas, DSL is not available. The merger between New Edge and EarthLink brings us much closer to providing a solution that's going to be valuable and acceptable to many large companies.''

For example, New Edge built a network for Sbarro Inc. using DSL connections to link its headquarters in Melville, N.Y., with each of its 400 locations nationwide. The DSL connections replaced dial-up telephone lines. New Edge provides network management and reporting services to Sbarro.

On the horizon are better service level agreements and improved quality of service for business-class broadband services.

"DSL has been a best-effort kind of capability. What buyers want is some quality of service, especially if they are running voice or video. That's one of the biggest trends on the performance side,'' Phillips said.

This story, "Broadband buyers turning over the reins" was originally published by Network World.

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Copyright © 2006 IDG Communications, Inc.

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