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Rare Birds on a Wire
UCN Inc. and STSN Build Unique Telecom Models that Weather the Storm
by Jenie Skoy
Building a profitable telecom business is tricky. It requires access to spitfire technologies, an
inexhaustible supply of customer service and the genius to package and deliver bundles of
virtual services to answer a company’s real-world needs. Intense convergence (telecom
blending with computing software), consolidation, commoditization and subsequent
competition are all growing trends that have been hallmarks of the telecom industry.
Flash back to telecom’s halcyon days––during the late ‘90s, when telecom gurus were building
networks like they were going out of style (and going out of style they did, in a classic
technology-getting-ahead-of-itself scenario.) Fiber optic cable mushroomed faster than
demand for the bandwidth it provided. Because telecom capacity over-shot market demand,
telco businesses started crashing in 2000. New compression technologies made it so that
customers didn’t need as much bandwidth as previously believed, and many companies were
unable to sustain the debt-ratio they accrued while building networks.
Two Utah companies diverted their attention from the “if you build it, they will come” hype
that characterized that season in telecom, and took a different route. This may have been one
of the factors that accounts for their current success. STSN focused on marketing to a specific
niche; UCN, Inc. on building relationships with the leading carriers, building a strong customer
service organization, a unified billing system and a single point of contact for problem
resolution.
Through a series of strategic acquisitions, UCN built a telecom offering unique in the nation.
The company’s approach seems to have fueled hardy growth: in 2000 then-Buyers United
(now UCN, Inc.) had $7.36 million in revenue; at the end of 2003 it hit the $63.31 million
mark.
STSN also built a unique business model. This year the company’s revenue has doubled. “We
are able to sustain an unrealistic rate of growth in the middle of a down market, and we are
on track to hit our $100 million goal,” says Michael Z. Jones, STSN’s senior vice president of
sales.
UCN, Inc.
In 1997, Salt Lake-based UCN (then known as Buyers United) started as a reseller of voice
and data products, selling traditional telecom services from such providers as MCI and Qwest
to business and residential customers.
The company built its business by enlisting independent agents throughout the U.S., similar to
what insurance companies do. Its agent-base grew to 2,000 nationwide. “As we began to
grow, we had a national presence,” says UNC President Paul Jarman. “Those agents began
bringing us not only residential, but business customers.”
From 1997 to 2000, when many telecom companies were incurring massive debts to build
their own networks, UCN––because they sold carrier products on existing national networks––
was able to focus on acquiring customers and providing great service. “We felt like the
challenge in telecommunication wasn’t so much in how to run the network, but that most
telecommunications providers delivered poor service,” says Jarman. “A lot of [telco
companies] had these large debt burdens, and at the same time the pricing pressures on the
industry were driving down margins to the point that many of these companies became
insolvent. With the dot com implosion, the growth that was projected did not materialize.” One
thing that attracted customers to UCN’s offerings was its single point of contact for billing and
customer service. “We simplified their life,” says Jarman. “We provided them with expertise to
help them solve their telecom challenges. We offered them the best products from the best
networks. And they only had to deal with one bill, one single point of contact.”
Today the Draper-based national facilities reseller, through a series of acquisitions, owns its
own network and boasts clients such as Icon Health and Fitness, Usana, NuSkin and Western
Watts. UCN’s growth came on the heels of smart transitions from residential reseller to
business reseller to a solutions provider of Voice-Over- Internet Protocol (VoIP) technologies.
Combining VoIP and Call Handling Software Consolidation is another major trend in telecom.
Building your own network from scratch is costly. A less-bitter pill to swallow is buying an
existing network from a floundering telecom company when the price is right. That’s what UCN
did.
At the end of 2002, the hot new technology, VoIP, had matured enough (and gained needed
marketplace acceptance) that UCN thought buying a piece of the VoIP pie was a safe bet. It
purchased the assets of iLink, a Utah-grown company and one of the nation’s early pioneers in
VoIP. “iLink developed one of the first commercially deployed VoIP networks in the nation,”
said Mike Shelton, UCN’s chief technology officer. iLink sold a unified messaging product to
small businesses and residential customers. The acquisition of the iLink network enabled UCN
to transition from reseller to facility-based carrier utilizing the IP network.
The company also continued to purchase customer bases from companies undergoing
difficulties, such as Touch America in Montana. The combination of acquiring distressed assets
and the success of its independent agents rocketed the company’s revenues from $7 million,
to $13 million, to $30 million to over $60 million in the past few years, says Jarman.
UCN discovered that only a small segment––about ten percent––of US-based contact center
operations can afford to acquire the software and hardware necessary to have access to
advanced contact center functions, such as skills-based call routing, interactive voice response
and call-blending. UNC capitalized on this underserved market by providing an affordable
solution.
In 2003, UCN and myACD entered into an exclusive marketing and sales agreement with an
option to purchase myACD. myACD is a call center software development company. This
created a unique environment in which UCN could combine telecom services with a software
solution, offering it to businesses on a per-use basis.
“Because we own the network and have exclusive rights to use the software, we now offer
much more than just a commodity,” said Jarman. “Our technology solution, bundled with long
distance, eliminates a company’s need to purchase traditional and expensive onsite hardware
and software for call handling functions. What used to be onsite is now in our network.”
STSN
Explaining STSNs success in the telecom industry, Michael Z. Jones points to its ability to focus
on a very specific segment: delivering secure broadband services to mobile travelers. Because
of this tight focus, Salt Lake-based STSN, which also has offices in London, Amsterdam and
Frankfurt, has become the premier provider of broadband services to the hospitality industry.
“Other companies have either been too general in what they’ve been trying to deliver to the
industry segment, or have tried to be a low-cost hardware manufacturer, or are aimed at just
doing the system’s integration and then moving on,” says Jones.
In contrast, STSN focuses on providing secure broadband services in ways that companies can
get only inside a corporate firewall environment. STSN sources hardware, provide systems
integration as well as long-term support services that maintain a lasting relationship with the
properties and provide the services.
More than 675,000 business travelers rely on STSN every month to provide secure high-speed
broadband options in more than 2,000 hotels with 266,000 guest and meeting rooms around
the world. With 27,000 potential properties in the U.S. and two to three times as many
properties in the rest of the world, there’s a big market for STSN to play in. Jones reports that
STSN is also beginning to look at wiring other spaces, such as time-share properties, one of
the fastest growing sectors in the hospitality industry.
One-third of STSN’s revenue comes from delivering broadband services to large events and
conferences and training environments. These large events are the bread and butter of resort
destination properties, and STSN’s solutions are a key part of its business. One of its
customers is the largest Marriott Property, the Orlando World Center.
Targeting a specific market is what has kept STSN’s products from becoming commoditized.
“The unique needs of business traveler are very diverse,” says Jones. “They are very
demanding, and any organization’s ability to cost-effectively address those needs using a
combination of domain knowledge and intellectual property combined with scalability is what
will differentiate them.”
Jones also points to the discipline it has taken for STSN to stay focused on that niche. “We’ve
been very focused in pursuing our opportunities—we are very selective in the deals we are
willing to do, in terms of what properties are wanting.”
Jones and Jarman agree that focus and leveraging existing market demand and resources will
continue to be the keys to achieving and maintaining success in this volatile industry.
Telecom Longevity
Going strong for 50 years, Mountain West Telecom is the oldest telecom company in Utah.
The company started as Executone Mountain West offering the only hospital bed buzzer alert
system on the market. Mountain West is now the largest independent telecommunication
provider in the state with 65 associates and 20 service trucks on the road daily. When
Executone sold their business, the company dropped the Executone from the name and added
Avaya and Mitel products to their offerings.
The company’s years of experience have wrought a strong asset base and a following of loyal
customers. Mountain West Telecom is a service business not just a dealer, servicing
everything sold, and supporting customers through the life-cycle of products and services The
company offers a range of custom-designed products for diverse communications needs. “We
provide a full solution to the customer, we sell Avaya and Mitel. We design, install and
maintain everything we sell, we have a large structured cabling division, and provide network
solutions including Qwest, AT&T and Sprint, “says President Jeff Pitts.