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TELECOM STUDY: LOCAL DISTRIBUTORS OF TELECOM SYSTEMS MAINTENANCE FACING STIFF COMPETITION FROM NATIONAL FIRMS; NEW NATIONAL COMPANIES ACHIEVE SCALE THROUGH ACQUISITION October 26, 2000 - Maintenance Services PARSIPPANY, NJ, October 26, 2000- Small, local distributors of customer premises equipment (CPE) or traditional corporate phone systems - like Key/Hybrid or Private Branch Exchange (PBX) systems - are finding it increasingly difficult to compete with national competitors with sophisticated maintenance service offerings, indicating good news for telecommunication equipment leaders Avaya Communication (NYSE:), Williams Communications (NYSE: WCG), Norstan Communications (NASDAQ: NRRD), Siemens, GTE (NYSE: GTE), NEC (NASDAQ: NIPNY), SBC Communications, Inc. (NYSE: SBC), Bell South (NYSE: BLS), and Sprint Communications (NYSE; FON). According to a report from PBI Media-InfoTech (www.accessintel-infotech.com), regional and local telecom equipment companies, are constrained in how they price post warranty maintenance by a market made increasingly competitive by a growing number of major, national firms. For most configurations, local telecom equipment companies - or local channels -- maintenance contract prices differ from those offered by national telecom equipment companies - or national channels -- on average by less than 1 percent for key/hybrid systems, and by less than 6 percent for PBX systems. Due to their size, these national channels not only have restricted the price points that local channels can set for maintenance contracts, but also are able to offer more advanced capabilities than their local competitors. "Larger distributors like Avaya Communication (NYSE:), Williams Communications (NYSE: WCG), Norstan Communications (NASDAQ: NRRD), Siemens, GTE (NYSE: GTE), NEC (NASDAQ: NIPNY), SBC Communications, Inc. (NYSE: SBC), Bell South (NYSE: BLS), and Sprint Communications (NYSE; FON), are able to offer more sophisticated maintenance contract features such as advanced remote monitoring and repair, that smaller local channels do not have the resources to offer. And while many regional players offer remote monitoring, most do not offer the same level of sophistication," said Frank Stinson, senior product manager at PBI Media-InfoTech. "Increasingly complex applications have also resulted in higher labor and training costs for all maintenance providers. Smaller vendors do not have the resources to absorb these costs without passing some of them along to the customer. But, in a price competitive market, it is very difficult for them to do that," added Stinson. The net result of this has been a trend of consolidation in the regional/local segment of the CPE distribution market, as several regional players have merged or grown in size by acquiring local channels in key markets. Expanets, for example, has purchased regional channels, KLF and ATS, as well as, Lucent Technologies (NYSE:LU) former small business direct sales channel, all in the past 2 years. "Companies like Expanets, Inter-Tel, Staplescom, and Convergent Communications (NASDAQ: CONV) have all achieved national presence recently, due largely to acquisition of local channels or merger with other regional channels," added Stinson. In what may be the only study of its kind, PBI Media-InfoTech research provides detailed information on maintenance contract pricing by every major and comprehensive sampling of minor vendors, enabling them to determine how well their service offerings are positioned competitively. The vendors researched for this study represent 85 percent of the U.S. PBX installed base and 55 percent of Key/Hybrid installed base. These vendors include more than 70 manufacturer direct, RBOC, independent telco, distributor, and dealer channels. The report provides detailed analysis of all aspects of maintenance contract feature and pricing by vendor as well as market analysis of installed base, U.S. market share, and revenues. PBI Media-InfoTech (www.accessintel-infotech.com), a global professional services company with offices in Parsippany, N.J., London and Washington, D.C., specializes in market intelligence for the telecommunications and information technologies industries. In addition to conducting primary research studies, the company offers a comprehensive range of professional services, including custom consulting, InfoTracks and TelecomTactics database products, professional conferences, market and competitive intelligence analyses and custom marketing programs. |
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