1. Extending Network Reach with the Power of Information
There is very little to argue with in the statement, that for firms in telecom, times are
tough! For international, national, regional, and local carriers and service providers alike,
the telecommunications industry is facing a profitability crunch as escalating costs cannot
be offset by price increases.
Even three years after the bursting of the Internet Bubble, the daily news is still rife with
stories from large and small carriers alike of missed profit targets, force reductions and
layoffs, and the need to control expenses to meet stakeholder expectations (and, in the
long run, stay in business).
Whether due to increased competition or unwillingness by end users to pay what services
actually cost to deliver, profitability is an elusive target. Newly debt-free (through the
grace of the bankruptcy courts) companies are slashing prices as a means to capture
market share. With services priced near marginal cost, revenues cannot easily be
increased. A simple solution for industry survival is to lower other costs, such as SG&A,
through simplification. Regardless of the industry, simplification solutions include
outsourcing, supply chain management, and concentrating on core competencies to
effectively differentiate a firm from its competition. In telecommunications, one area
where opportunities abound to simplify business processes is in the acquisition of off-net
connectivity to extend network reach.
Telecom companies do a great job of addressing the needs of their customers whose
locations are already wired “on-net”. But, when the time comes to reach beyond owned
and in-place distribution plant (whether it be to a completely new geography or merely to
a building not yet “wired” with fiber optics), problems inevitably arise related to cost and
quality of service. At times these problems have been significant enough to lead service
providers to curtail their expansion plans at the risk of alienating customers (and
regulators). This paper will discuss why service providers need to go off-net and outline
a powerful methodology and set of tools to open up markets beyond the reaches a
provider’s in-place network.
Historically, to retain customers and open up out-of-region revenue streams, the
telecommunications fraternity has extended their reach to new geographies or to unserved
customers in one of three ways:
 Construct (or purchase) network extensions
 Strike an alliance with a partner owning network assets that suit the purpose
 Put the extension out to bid among numerous providers, eventually picking what
appears to be the best deal based on multiple criteria including price, quality of
service, and whether the provider is considered a friend or foe.

2. In today’s competitive environment, none of these alternatives are particularly attractive
as:
 Scarce capital is not available to build “success based” network extensions. As
capital budgets are cut to preserve cash flow (and enable interest payments) only
projects with the highest returns on investment will make the cut. Generally,
single tenant serving laterals into a building don’t pass this fiscal test.
 Were capital available, it often takes too long to negotiate right-of-way, municipal
permits, and building access while still meeting the customer’s delivery criteria.
Beyond this, there is the need to deploy trained (and scarce) construction
resources and the risk of service disruptions associated with tapping into outside
plant to cut in the new service.
 Acquisition and alliance candidates carry a great deal of baggage (i.e. excessive
debt, limited reach, incompatible systems) that cannot readily be assimilated by
even the healthiest companies. For those assets acquired out of receivership, the
challenge of integration and remarketing is daunting in an era marked by reduced
staffs and budget shortfalls. In the past, partners were chosen based on the
technology in place, but today’s foremost criteria are balance sheet health,
payback period, and ROI.
 Decreased market valuations have diminished the opportunity to use a firm’s own
stock as currency in an acquisition. With dilution rather than accretion the name
of the game, companies are thinking long and hard before augmenting their reach
via acquisition.
 Previous acquisitions (during the industry boom) to reach customers saddled
many companies with excessive debt or integration expenses and may have
contributed to the acquiring firms’ later difficulties.
 Potential alliance partners developed a very bad habit of entering financial
difficulty and became less than reliable partners for the long run. Placing the bulk
of the connectivity eggs into a single basket creates the potential for substantial
risk when a network suddenly goes dark leaving clients without a suitable
alternative.
 Alliance partner networks don’t necessarily reach all the places one needs to go,
necessitating special negotiations with additional partners to complete circuits
and, effectively solving nothing more than just a part of the puzzle. Alliances can
create an even more cumbersome methodology when partners have a “right of
first refusal” to provide connectivity, whether they serve the location or not,
adding significant delays when the partner also needs to go off-net to complete a
circuit.
 The bid process for requesting another carrier to provide network extensions is
time consuming and expensive.
With “Fresh Builds” looked upon by the investment community with a high degree of
skepticism, due to the general (although mostly false) perception that there is sufficient
capacity already in the ground, off net is seemingly the only way to reach customers

3. requiring connectivity. While another urban legend is that only the ILEC provides last
mile access, within high traffic business-oriented downtown and suburban areas this is
simply not true. The same buildings seem to have been targeted by multiple carriers, so
service choices do exist and where there is a competitive opportunity, more attractive
pricing can often be negotiated. In addition, when transiting from carrier Points-of-
Presence (PoPs) to remote customer locations, there are generally multiple provider
channels available to connect a PoP to a serving central office even when the ILEC is the
only game in town for last mile access. Further complicating matters, though, is the
simple reality that it is impossible to readily determine which carriers have serving
capability to reach a given building as publicly disseminated lists are questionable at best
and buildings “passed’ most often are not buildings directly served.
The simple solution to improving the processes of off-net buying is managing the supply
chain by leveraging available information on the service landscape. This includes typical
tariff costs to develop budgets; knowledge of carrier on-net buildings, PoP locations, and
serving capabilities to choose the right partner; an understanding of purchasing and
service procedures to ensure smooth implementation and operation; and the use of the
“spot” market to obtain the best possible pricing between locations at a point in time..
This knowledge enables a carrier to reduce costs, improve customer service, and focus
internal resources on the higher margin opportunities available on their own network.
Through a business rules based analysis, Magenta netLogic has developed tools to
provide metro area pricing between buildings including carrier hotels, PoPs, central
offices, and customer locations. With competitive data sourced from carriers and
managed through processes including geo-coding and continuous cleansing, accurate and
comprehensive pricing data is created. This enables sales reps and customer support
teams to quickly respond with solutions to meet their clients’ needs.
Critical to this off-net process is identifying carrier capabilities and interconnections, “lit”
buildings, and the carrier providing service. By working with over 90 underlying carriers
we have developed a database that includes 4,571 tariffs, over 8 million supply records,
and both published and non-published pricing.
This functionality leads to the ability to:
 Minimize costs associated with obtaining network assets (while costs are
generally measured in terms of SG&A within the acquiring organization,
responding to repetitive quote requests raises costs for supplying organizations).
 Identify the best service providers from a cost as well as performance standpoint.
 Maintain optimal service delivery intervals to ensure customer satisfaction and
speed to revenue.
 Manage ongoing carrier relationships to provide for risk management as well as
ongoing optimized price and performance.
 Meet the end-customers need to simplify its own supply chain by enabling a
single carrier ready access to the available connectivity universe without the need
to negotiate multiple data sharing and interconnection agreements.

4. Through this leveraging of information, the identity of the underlying carrier is less
important than the actual knowledge of the serving capability into a given building
address. Coupling this knowledge with negotiated pricing from both competitive and
incumbent carriers alike, as well as project specific spot pricing to leverage network
supply and carrier willingness to deal, Magenta netLogic can provide the “best” solution
based on the business demands of the customer requiring connectivity.
Beyond improving the provisioning process by enabling sales reps to respond
immediately to client requests with a quote based on pricing from multiple providers,
customer service is improved and the costs of generating quotations are significantly
reduced. When first to respond can be critical in gaining client business, the ability to
instantly turn around a quote request cannot be minimized.
On the other side of the equation, companies selling off-net connectivity receive multiple
quotation requests, with very few resulting orders. Whether the project fails (with client
quotation acceptance rates in the low single digits this is an ongoing issue), multiple
iterations of the same circuit at different speeds and terms clog up the process, or there is
a failure to accurately communicate requirements, the costs of providing customer
quotations are significant monetarily as well as in terms of lost opportunities. The same
information power Magenta provides to purchasers of connectivity can be used by sellers
to reduce their cost of quotation. By letting Magenta be their channel for off-net lead
generation, carriers can remove the cost-generating “lookers” from their quotation
process while resting assured that for those opportunities where they have the right
solution, Magenta will point revenue generating qualified users their way.
With unparalleled insights into the carrier universe, a 100% focus on pricing,
provisioning and managing off-net circuits, and solutions such as netSolutions and
netSystems, Magenta netLogic is uniquely positioned as a partner for service providers’
off-net connectivity management. As service areas expand, whether through regulatory
mandate or customer demands, a partner with the ability to efficiently and cost-
effectively manage network extensions is a definite win for an industry struggling to
recover from the crisis in confidence.