WorldCom: SMEs are Suitable for Framing

WorldCom: SMEs are Suitable for Framing

Christine Zimmerman

By rolling out some low-end frame relay packages, WorldCom is counting on an aging network to deliver new revenue from untapped sources. Given the ongoing squeezes on revenues and capital expenditure budgets, the strategy makes a lot of sense.

WorldCom unveiled two new frame relay service options last month. Bundled Frame Relay targets small and medium enterprises that previously lacked the budgets or the expertise to trade up to frame relay. The $150-per-month starting price includes customer premises equipment from Verilink, bandwidth up to 1.5 Mbps, unlimited ports and unlimited permanent virtual circuits. Bundled Frame Relay does not include service-level agreements.

A second new service, WorldCom Economy Frame Relay, is aimed at larger customers, especially current frame relay users with remote offices that previously were too small to justify including in a frame relay network.

Economy Frame Relay includes local network access, local-to-global frame relay service with bandwidth up to 56 kbps, and basic service-level guarantees. Customers have to purchase a minimum of 25 ports.

Things are Still Looking Up

Such offerings suggest that there’s still plenty of life-sustaining revenue in frame relay, a data network service that debuted more than a decade ago as a replacement for private-line networks. Market watchers at Vertical Systems Group say the U.S. frame relay market, which stood at about $7.6 billion and 1.23 million ports last year, could grow to about $11.9 billion and 1.70 million ports by 2004.

The chance to get incremental revenue off a legacy service is too good for struggling service providers to pass up, says Liza Henderson, VP at TeleChoice. “WorldCom needs cash quickly, and the sales cycle for these bundles could be very short,” she says.

But Henderson says WorldCom may be making a big marketing mistake by not acknowledging the growing competition between frame relay and IP virtual private networks. “WorldCom needs to clearly articulate when a customer should use one technology or the other,” Henderson says. “Customer confusion may lengthen the sales cycle.”

For Jim Brown, executive VP of Pacor, an insulation firm with about $20 million in sales, adopting a secure, robust technology is a matter of staying in business.

“Our customers are moving to e-commerce,” he says. “They want to e-mail architectural drawings to us. They want to handle invoices online. We have been just getting by with our 56K modems, but customers demand more.”

Brown had looked at IP VPNs but feels more comfortable with frame relay. He also wanted to go with a big provider — “a known leader,” as he puts it. Pacor is installing Bundled Frame Relay now and hopes to have its network operational by early June.

One big attraction of frame relay from the carrier’s viewpoint is customer retention, says Erin Dunne, an analyst at Vertical Systems. “When they have frame relay, it becomes indispensable,” she says.

The biggest competition WorldCom faces with its new frame relay offerings won’t come from another provider but from something that Dunne calls “the sexy factor.”

“Frame relay is out there,” she says, indicating that the service is so well known that it could work against WorldCom. “It works. It’s boring.”

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in The Net Economy.