the xchange - First in 'FIRSTS'

On 2nd Century's ATM Networks, 'All Services Are Applications'

John Prisco, President & CEO, 2nd Century Communications

2nd Century Communications Inc. (www.2ndcentury.com) blazed a trail in telecommunications with its all-ATM-based network. It claims firsts in a variety of other areas, such as completing the first-ever voice call between an ATM-based local exchange network and the PSTN, and implementing local number portability and voice intercepts on an ATM network. It was first to receive 911 certification on a packet-based network and the first to interoperate ATM and SS7. xchange editor in chief Paula Bernier recently spoke with 2nd Century president and CEO John Prisco about the company's packet-based strategy and what lies ahead for this innovative carrier.

X: 2nd Century refers to itself as a "network application service provider" as opposed to a CLEC, ICP or ASP. What does it mean to be a NASP?

Prisco: We deliver all of our applications via our network. Most ASPs have to partner with CLECs to push their applications. 2nd Century is the first company to deliver a fully converged packet-switched network. On this network, all services become applications--voice is one of many.

X: This January, 2nd Century introduced its premier offering, ESL Pro, which converges communications and networking solutions into one package. What does that product include?

Prisco: ESL Pro delivers dedicated, high-speed Internet access and local and long-distance services, as well as e-mail, a web server, firewalls, file sharing and remote desktop and local area network monitoring. Essentially, the customer is getting almost every desktop application from one single, comprehensive package.

X: The company's target customers are small and medium-sized businesses (SMB). Why? What are the special needs of this segment?

Prisco: Statistics show that small and medium [-sized] businesses make up more than 99.3 percent of all businesses in the country [businesses with more than 250 employees make up approximately 0.7 percent]. 2nd Century's defined SMB space is 10 to 250 employees, which makes up approximately 20 percent [based upon Yankee Group, www.yankeegroup.com, and Dunn & Bradstreet Corp., www.dnbcorp.com, research] of the companies in the U.S. We decided to target this market segment because we realize that small and medium[-sized] businesses do not have the time or the money to build and/or maintain high-tech networks. To allow them to fully concentrate on their own business needs, 2nd Century offers a complete communications solution with one bill and one partner, alleviating the stress involved with managing multiple vendors. In addition, many businesses do not have the technical support staff to monitor/manage complex networks. Basically, we become their IT department--we are their technology partners.

X: The traditionally underserved small to medium-sized business market is an area many competitive carriers have recently announced their intention to target. Are you starting to run into some real competition for these customers? How do you differentiate your offering?

Prisco: Even 2nd Century's closest competition does not have the same unique product offering that we do. That's why we are in a class of our own. Our main differentiator is our ability to offer managed desktop services--we can proactively manage all the way down to an individual customer's desktop. Through our network operations center, 2nd Century can take remote control of a desktop, quickly and efficiently repairing any network problem. While this is an example of an advanced application, we understand that the SMB marketplace still needs commodity services as well. These applications [usually voice and data] are simply add-ons to our value proposition.

X: 2nd Century has what it calls the first all-ATM network for all services. Explain.

Prisco: We offer all services using one core switch, one protocol and one access facility. This architecture enables rapid deployment of services because overlay networks are not required. We can afford to deliver services on a fat DS-1 pipe because multiple revenue streams are supported on that single pipe.

X: In August 1999, 2nd Century completed the first-ever voice call between an ATM-based local exchange network and the PSTN. Describe how it happened that you were the first and what that has meant to your strategy since then.

Prisco: We implemented an ATM-based softswitch with a centralized call control processor. This call controller was the enabler. By simply upgrading the software in this device, 2nd Century will be able to offer VoIP in the future. It has taken two years for us to make this a reality. We now have a network that serves as a platform or incubator for the rapid deployment of advanced applications. We enjoy a first-to-market advantage that has influenced our buy vs. build strategy in every facet of our business.

X: 2nd Century says it is able to claim many "firsts" because it works with vendors to create new solutions. Explain.

Prisco: We do not have typical vendor relationships; in fact, we truly view our equipment and infrastructure vendors as partners. They know that by entering into a relationship with us, they will be required to work with us extensively to test services in our labs prior to any deployment. We have our vendors tailor a product specific to our network. Because our network is so unique, we have to be extremely selective in our vendor review process.

X: 2nd Century works with channel partners such as interconnect companies and LAN system integrators that have established relationships with small and medium-sized businesses. Is this the company's sole distribution/marketing source?

Prisco: Yes, our channel partner strategy allows us to avoid implementing a direct sales force. That sales strategy works well for large business but is too costly and does not scale for the SMB market. We sell through leveraging the long-standing relationships enjoyed by our channel partners with our end users. Our channel partners who know and understand our products recommend 2nd Century to their customers.

X: What about "owning the customer"?

Prisco: We own the customer--there is no question. Our channel partners not only understand it, they are thrilled that the customer knows they have one point of contact.

X: 2nd Century has developed web-based applications, which allow partners to procure business solutions via the web. For rapid field deployment, 2nd Century uses Lucent Technologies Inc.'s (www.lucent.com) NetCare to provide nationwide installation and 24-hour-a-day maintenance. Explain how this works and why it's meaningful.

Prisco: We do not have to employ large numbers of technicians in every city, although we have senior technical and operations talent in every city. Our strategy is buy vs. build in every aspect of our business. If you can pay a "best of breed" national tech/installer, we can scale our technical workforce more economically than building a self-contained operations group supported by a fleet of telephone trucks.

Lucent NetCare stages our customer premises equipment and ships it out to the customer site. Lucent installs the equipment and handles any maintenance or technical issues on a 24/7 basis including maintaining spare parts in every city.

X: Everybody these days is talking about moving up the value chain and about the ASP model. How will 2nd Century play into the value-added/application delivery idea?

Prisco: We aren't moving up the value chain. Instead, when we were building the network, we saw the fatal flaws in circuit-switched environments. Therefore, knowing that we wanted to get past the traditional demarc, we built a distributed architecture. This allows us to deliver applications from the customer premises and allows us to partner with specialized ASPs to provide large applications that sit outside the network on large server farms. We peacefully coexist in the ASP ecosystem as we do not compete with anything outside of our core competencies. We are also the ideal partner not only for ASPs, but also for software companies trying to implement or push software as a service.

X: Microsoft Inc., Dell Computer Corp. and Intel Corp. have all made investments in 2nd Century. Why?

Prisco: The overall significance in these investments is their acknowledgement that 2nd Century is moving in the right direction--the customer desktop.

X: What's next for 2nd Century?

Prisco: 2nd Century will announce the general availability of our premier offering, managed desktop services, in the next few weeks. Beyond that, we will solidify our presence in 25-plus markets this year, expanding on or ahead of schedule. We will continually enhance our product suite. Watch for us to become more vocal on the struggles that small and medium[-sized] businesses face relative to technology. This truly was an underserved market.

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