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Can SMEs create a broadband of gold?

Predicting broadband as future market trend isn’t difficult. According to the Office of National Statistics, the number of people connected to the Internet via broadband overtook the number of dial-up connections last year. And in the business world, many believe broadband may become the key that could unlock revenues that are being lost from traditional voice technology.

Mark Cornell, head of BT Partner Management, told CRN: “This year will see the biggest broadband explosion yet.”

Broadband analyst firm Point of Topic estimated that the UK had 9.8 million broadband connections at the start of 2006. But the market, especially in the business sector, is far from saturated, according to the Organisation for Economic Cooperation and Development (OECD).

The OECD found that UK broadband subscriptions were rising rapidly, but there is a weakness in broadband take-up among SMEs. This is an area VARs are keen to tap into.

Increasing numbers of VARs are growing wise to the riches that SME broadband can bring. However, broadband is more than an Internet gateway. It could be the key to the next generation of voice over IP (VoIP) applications, video streaming, security and a range of software and applications. Having broadband will allow business users and consumers to receive phone calls over the internet, by converting voice into data packets and therefore implement VoIP.

Reselling broadband could enable channel partners to ship entire portfolios of products to a customer who can then provide an ongoing stream of revenue. Cornell was keep to emphasise channel involvement in BT’s 2006 broadband push, with resellers positioned to profit from a range of value add opportunities, he claimed.

“Broadband is a tremendous opportunity for the channel. Many partners are only just coming to terms with it. The person who holds the key to the opportunity is the person who works with broadband,” he said.

“Resellers can go to a start up or immature company and offer a service that can wrap up all of its communications needs.”

Broadband-enabled voice applications is the future direction of BT, according to Cornell, and BT VARs should embrace a new wave of convergence products.

“People are recognising that more of our applications will become will become broadband-based, and we have migrated voice to become a big broadband application. Ease of use is increasing too, and we can now offer caller display and three way calling without needing to have the PC on,” he said.

Cornell acknowledges the education obstacle that resellers face, but he hopes that BT’s web-based and face-to-face training will plug the skills gap. BT launched its Think Big programme last year (CRN, 12 December 2005) to educate VARs on the market.

This month BT launched ‘Best Ever Broadband’ to the channel, which is a fixed rate broadband voice package for the SME market. It is this offering that BT hopes will enable it to use the channel to win the broadband battle. It will also push the aim of BT’s 21st Century Network (21CN), a global IP infrastructure based upon multi-protocol label switching, which carries voice, data and internet services on a single network.

“Most of the country will have business broadband access. Competition is always tough, many ISPs understand that broadband is the future, BT is hoping to lead the way,” Cornell added.

Keith Humphreys, managing consultant at research firm EuroLAN, said, “BT is doing the right thing and a great job of replacing its eroding voice revenues. However, BT needs to become more competitive with its broadband over voice pricing for the SME market.”

BT’s channel broadband charge is overdue, and there is little doubt that BT is the brand-heavy giant suitable to dominate the broadband landscape. However, competition is mounting from NTL and Telewest and BskyB and Easynet mergers. Over the past five years the price-competitive nature of more speed, lower cost rollouts from other ISPs and providers means BT will have its work cut out.

One such rival could be broadband networking firm EasyNet, which has already established a bustling UK channel to take the fight to BT. Alan Ryan, director of broadband channels at EasyNet, said: “Broadband is no longer a cheap Internet connection, it is the underlining networking technology in the UK.

“This year is the final year of replacement legacy traffic. I also think 2006 is the year for convergence in terms of VoIP [Voice over IP]. The whole VoIP market is becoming a reality, with the carriers switching to cabling for voice and data,” he said. Ryan not only saw 2005 as a year of huge broadband growth, but also noted “a massive diversity of the partners signed. He said broadband is no longer a commodity of the traditional telecoms reseller; a surge of sundry channel players have flocked to suppliers’ channel ranks.

“Broadband is secure enough to provide convergence applications. If you are a VAR shipping a vertical application, you can provide the whole network and services to customers. Resellers can break out of their core competencies. The opportunity is there to get more out of the customer,” Ryan said. Looking ahead, Ryan said once the legacy telephony and connectivity replacements and completed next year, there will be a marked improvement in standard capacity and VoIP.

EasyNet is one of many business broadband providers hoping to lead the way. Ryan’s confidence in backing broadband is well founded, but a period of education still seems necessary for some end-users. John Carter, managing director of BT distributor DMSL, said: “There is still a massive period of education in the market. BT wants the broadband market, and it needs VARs to do the educating. We found resilience from voice resellers to sell broadband and resilience from IT VARs to do voice, but this has all converged.”

Dr Jyoti Choudrie, operations director of the Brunel Broadband Research Centre, said: “SMEs need to be made aware of how to use broadband. It is so much more than a quick and cost-effective way of downloading large files, emailing or accessing the Internet. It sounds obvious, but broadband training is key.

“Companies also need to be prepared to change their working practices to accommodate broadband.”

But Carter had no such reservations about the uptake of broadband and the doors it will open. “BT needs the broadband market to get the VoIP market. It needs to own the market. Availability is no longer an issue with broadband; it is a case of what we can deliver on broadband,” he said.

The opportunities for resellers in broadband are vast, according to Carter. He said if resellers look to sell on business benefits such as reducing costs and improving service, then the transition towards BT’s 21CN will be smooth and profitable.

“This year broadband is going up and up, because people are seeing they can make saving on their calls. By 2010 broadband will be the whole network, and if you haven’t got broadband VoIP you are paying too much for your calls,” Carter added.

Fellow BT distributor, Crane Telecommunications, is also in no doubt about broadband’s potential. Lucy Dougherty, business development manager at Crane’s network service, said: “It will be Crane’s focus to push broadband. With BT’s new VoIP offerings, people will be picking up on broadband.” Dougherty also played the channel opportunity card and warned that VARs not working towards broadband and VoIP now could get their fingers burned.

“If VARs don’t offer broadband and VoIP, someone else will. Resellers can offer a total solution for the end-user. VARs that don’t get into VoIP or convergence will be left behind.”

However, vendors and distributors highlighting value-add opportunities and firing out warnings does not always paint the fairest picture. It is VARs who understand the benefits, and more importantly the pitfalls of entering a new market.

Gary Duke, sales director at BT and EasyNet reseller LAN2LAN, said he could see broadband growth, but he warned of unyielding margins if VARs fail to add value. “You cannot make a lot of many on broadband alone. You get a small commission, but it’s the other services that enable VARs to make money. We have been active in broadband and home-working is a key area,” he said. Duke added that it would be “foolish” for VARs not to resell broadband with the projected growth and explanation of VoIP projects.

Tom Fellowes, sales director at telecoms reseller, Spitfire, which also resells BT and EasyNet, said: “We can now go to a customer in a new office or a start-up and provide the cabling, the phone system, the broadband and the mobile system. Customers have one port of call, and resellers have on-going revenue.”

Mark Evans, director at BT reseller ME Consultancy, said: “The broadband market has done well over the past few years, and this will continue. There are a number of value-add opportunities based on extra call features. This is the way for VARs to go.”

Tom Leaney, managing director of broadband reseller Digital Network Solutions, said: “We offer ongoing support, and we have free calls built into this. We become core to everything the customer needs and makes money from the savings they make money from the savings they make from the free calls. It is a toe-in-the-water and a value-add opportunity.”

However, not all VoIP VARs are hedging on broadband profits. Steven Winstone-Adair, sales director at Margolis, does not sell broadband, but admitted that it opens doors to other applications. “Broadband has expanded as wider bandwidth has come at a lower price. We can offer video, voice and software applications,” he said.

However, despite the opportunities touted by many channel players, Humphreys offered a more tampered view. “There is not enough bandwidth in broadband at present to provide VoIP. It is difficult to have just one conversation and email over broadband. I think the market will open up once we get into a higher speed broadband,” he said.

BT and like-minded providers have acknowledged the importance of processing for broadband market. But while resellers should expect a series of ISP channel pushes and ‘cutting-edge’ technology releases, it is the services and support add-ons that will appease the bank manager, especially as VoIP, video and security over broadband give rise to a host of revenue boosting deals for VARs.


Featured in CRN, January 2006



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