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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.