With competition heating up as telecommunication companies seek to penetrate the small-business market, businesses here can expect telecom prices to fall further, and reliability to improve.


Qwest Communications International Inc. and XO Communications Inc., both telecom heavyweights here, say they expect competition to intensify when Comcast Corp., which already provides Internet services to small businesses, rolls out voice services for commercial customers here later this year. They also say that while the fight is furious across Washington state, Spokane, in particular, is proving to be a major battleground, thanks to the areas robust growth in recent years.


This is the most exciting time in the entire history of the industryits like the Wild West and nobody knows what will happen when the dust settles, but the consumer will benefit, asserts Shasha Richardson, a Seattle-based spokeswoman for Qwest. Spokane is such a growing community, and one of the most competitive marketplaces weve seen in Washington, that its attracting the best providers, which is good for businesses.


Comcast, which started offering Internet services to businesses in 2003, plans to infiltrate the small-business market further this year by offering voice services, which will certainly heat things up, says Tacoma-based spokesman Walter Neary. The company began offering its digital voice service to residential customers here in 2005.


Comcast recently announced plans to hire 280 employees in Washington state, including 20 in Spokane, within the next two months. Neary says that while most of those new hires will work initially in the residential market, their presence will allow other senior-level employees to move into business services.


Theres no question Comcast is moving very aggressively to offer competition in commercial settings, Neary says. The backbone for the business sector is small and medium-sized businesses, and there are plenty of opportunities in that underserved market right now.


Ben Henkels, principal of Communication Management Partners, a telecommunication consulting service here, says small businesses typically can find phone services for between $25 and $35 per line a month, which is about $10 cheaper than a few years ago.


In the long-distance phone service market, new providers have been putting pressure on prices by offering packages that allow customers to make unlimited long-distance calls to anywhere in the continental U.S. at no additional charge, Henkels says.


Increasingly, businesses are demanding data-driven services more so than traditional phone services, and as a result, the price of Internet bandwidth has more than cut itself in half over the past five years, he says. Carriers are providing Internet service at rates as low as $35 per megabit of bandwidth a month, compared with $80 or more several years ago, and he expects those prices will drop even further in the future.


Henkels adds that prices for data services vary widely depending on the provider, the volume of data services used, and a businesss service-level agreement.


Terry Sticka, COO of OneEighty Networks Inc., a Spokane-based competitive local exchange carrier, says businesses here can find packages that include 24 phone lines and a 1.5 megabit T-1 Internet connection for $500 a month or less. In contrast, that service would have cost between $800 and $1,100 a month five years ago. He attributes that drop to a number of factors, including technology advancements; bandwidth wholesalers lowering their prices; and competition increasing among service providers.


Because Spokane is a very competitive market, it makes for a very price-conscious consumer, which makes us smarter and sharper, Sticka says.


Richardson says Qwest has been able to join the fray more fully in recent years since the federal government and some states, including Washington, have deregulated price controls they had placed on Qwest and other big phone companies. Now that Qwest can set prices based on market demand, its able to provide telecom services to businesses at more competitive rates, she asserts.


Service quality


Both Richardson and Neary say that while businesses should compare prices when selecting a telecom provider, they also should consider the type and quality of services they want.


The price war in telecom is a little different than when youre selling a commodity like laundry detergent or milk, he says. Businesspeople depend on reliability, faster speeds, and Internet security, and are willing to pay for that.


Comcast, which offers bundled services to residential customers, expects that as the commercial market moves toward bundled services, telecom companies that offer such packages will have a competitive advantage, Neary says.


Sticka says bundled packages, which often include voice and data, are growing in popularity because they capitalize on principles of consumer behavior.


The consumer is always the same; they want the world to be simple and inexpensive, Sticka says. Thats what were striving for when we include data and voice services in one package.


XO Communications flagship product, called XOptions Flex, features five business lines with a 1.5 megabit T-1 Internet connection, Web hosting, e-mail, and voice over Internet Protocol services (telephone over the Internet) for under $475 a month, says Dana Richardson, general manager at the companys Spokane office. Five business lines can support a 10-person office, he says.


Richardson says commercial services are attractive to providers because its a more profitable segment than residential phone service. Business clients thirst for bandwidth capacity, along with the popularity of VoIP products, really is whats keeping this business going, he says.


Feeding consumers hunger for ever-faster Internet connections, though, comes at a price, as telecom companies must build up their infrastructures to meet that demand, Sticka says. Thus, providers have to find ways to pay for that investment, while staying competitive.


For instance, OneEighty Networks recently rolled out whats called a mid-band Ethernet service in Washington state, and it plans to deploy the service in Idaho. A mid-band Ethernet connection operates over conventional copper wire lines and delivers data at speeds faster than traditional phone lines, but slower than broadband networks. It has higher bandwidth capacity than a digital subscriber line (DSL) and is symmetrical, meaning its upload and download speeds are the same, unlike DSL. The technology enables OneEighty to deliver high-capacity bandwidth to customers who dont have access to fiber-optic connections, he says.


Its a huge plus, particularly for medium-sized businesses, because were able to deliver all of our products on that pipe going forward, he says.


Henkels, of Communication Management Partners, says that as technology advances in terms of the types of connections carriers can provide, he expects carriers to focus more on marketing services and applications. That trend already has started happening in the wireless phone industry, as cell phone companies introduce phones with TV and music downloading capabilities, he says.


Contact Emily Brandler at (509) 344-1265 or via e-mail at emilyb@spokanejournal.com.