In my never-ending quest to be the best analyst I can be, I sometimes go under cover to try to get inside the minds of some of the companies I am tracking. Here's an excerpt from a conversation I overheard through a boardroom window while repelling down the side of a building, posing as a window washer.

"Wait a second!! What is going on here? We are talking about Broadband aren't we? If you build it, they will come. I mean for crying out loud, with a fiber connection you can get speeds that are measured in Gigabits... GIGABITS. Who would not want that? Do they not realize that Giga is bigger than Mega?!"

But seriously, let's ponder: if you are the typical tenant in an MTU (meaning the average small to medium sized business, and assuming you are not that rare company that encourages its employees to indulge in downloading an unending stream of movie trailers, and MP3 files while carrying on the day's activities) are you really interested in data rates measured in light speeds?

With the telecom cash crunch apparently a reality, the measure of success in the MTU world has shifted from number of agreements signed to number of customers in service. ROI is no longer a B-school acronym that takes up an extra slide on the sales pitch. Investors are beginning to tighten up the belt straps and demand that they actually see a little something for the effort. Just as Covad, NorthPoint and Rhythms are taking it on the chin in the DLEC world, questions are arising as to the soundness of the business plans of the some more vaunted names in the BLEC world.

OK, am I being flippant? Yes, slightly. I do not want to use my first occasion on the P&WB stump to knock some of the brightest and most innovative forces in the MTU space. What I would like to do, however, is spend a little time exploring the possibility that maybe customers in this space don't necessarily need to drive the Space Shuttle, rather they would be more than happy cruising around in a shiny Mustang.

Let's take a little company that I recently came across called Wired Business for example. Their business plan calls for them to stick a pizza box DSLAM in the basement of a building, use the building's existing wiring, and offer their customers SDSL service with speeds of (GASP!!) 384 Kbps to 1.5 Mbps. Not too many bells or whistles, just the basic high-speed Internet. I know what you are thinking... C'mon, that's bush league. You can't sustain a business just delivering data services.

Or can you?

Let's do some quick math: Assume that the cost of lighting a building, using the existing wiring and a pizza box DSLAM is about $10,000. Let's also go on the premise that one DSLAM serve between 10-15 tenants. OK, now let's be cautious and assume a 30% take rate, and charge the customers $200/month for 384K SDSL service. Based on a building with 10 tenants, the ROI is roughly 16 months. In a 15 tenant building the ROI would be 11 months!

I know what you are thinking. "Margins are thin. Can't make money doing just data. Note to self: remember to send this guy an E-mail and tell him about a little thing called Value Added Services." To this I say, "True. Umm, possibly. And I always enjoy e-mails about value added services." But let me digress to the point of my banter. In this day where cutting edge technology and the promise of services that were thought only to exist on the Jetsons have been the only real topics of conversation at the trade shows during the past 18 months, maybe it would be wise to take a step back and reflect on why we are in business: to give our customers what they really need, rather than what we think they would be better off with.

Doing business in a fiber-laced building would be great. Having a provider who will grant the masses unlimited bandwidth, DVD quality video conferencing, e-mail hosting, VPNs, and a host of other products would all be nice. However, for the vast majority of law firms, travel agencies, insurance agents, and any business owner with a few dozen or less employees, these services are just more than they want or need. Could it possibly be enough to go into a building, and provide an affordable service to a firm that is looking to upgrade from dial-up, or find a solution to an over-priced fractional T-1? The answer to that question may very well be "Yes". Especially, if you are in the position to generate positive cash flow in a matter of several months rather than several years.

I am not attempting to halt the broadband revolution. I am merely putting forth the proposition that the free love and debauchery of the past year and a half in the telecom industry is coming to an end. Old school business rules are beginning to re-assert themselves and firms who are not saddled with unmanageable debt should be in the best position to make the transition from the land grab to the business of serving customers.

Regardless of where you may be on the service provider spectrum, there is one message that I think everyone in telecom would be wise to consider: focus less on the coolest new technology and more on what the customer needs today.

And oh yeah, be nice to the people who clean the office. You never know, they may be writing the market research that you are reading.

About the Author
Jason Marcheck is an analyst with the Strategis Group. The Strategis Group is a market research
publications and consulting firm headquarted in Washington, DC with offices in London and Singapore. The author may be reached with questions or comments via email at jmarcheck@strategisgroup.com