Brockmann and Company | Customer Insights

I went to Ottawa last week , the R&D capital of Canada and the home of Nortel Networks' vaunted research operation. Despite the financial travails of Nortel, the company remains a major employer in Ottawa (a region of nearly 1 million Canadians), and the top R&D player in the country, which has just about the same population as California.

It was there, or perhaps during the long drive home through the Adirondack mountains (saved 50 miles, but took same traveling time as going west to 81, south to Syracuse and then rte 90 East) that a fabulous idea struck me. Nortel needs to be part of something bigger, but what?

Verizon!

Why should they?

Gives Verizon faster access to new technologies. Verizon buys all of the core technologies that Nortel offers - landline, CDMA including LTE, optical and enterprise - which are four major competencies of Nortel. Verizon's capex budget is $16.8 Billion/year. Although Nortel only represents 7% of that budget, they could represent more share of that budget if there were price or economies of scale advantages for inter-division transactions. AT&T operated with manufacturing too until the IPO of Lucent in 1995 which rewarded AT&T shareholders handsomely. Why not have competitors and off-shore peers finance part of your operation through their purchases of products and services from your equipment subsidiary?

The price is right. Nortel was trading at $0.5813 earlier today, which gives it a market capitalization of only $289.2 Million;  valuing the revenue stream at about 35¢ per $ of revenue. At twice the price, it's still a good deal.

Stabilizes supply. Verizon is Nortel's largest customer, accounting for 11% of Nortel's 2007 revenue (total spend with Nortel was $1.15 Billion last year and $0.79 Billion in the past three quarters which will make it about the same $ as 2007) and 10% of Nortel revenues of the last nine months.

Nortel has services expertise that is growing quickly, and could grow faster if coupled with Verizon's strategic services. Verizon Business (formerly MCI) calls out the 'Strategic Services' revenues including Private IP, Managed Services, Security and Hosting services as a segment of solid growth - revenues up 15.4% in the 3Q08. These services are a perfect mesh for the Nortel Global Services unit which accounted for $2 billion of Nortel revenue in 2007 and a third of the workforce. Merging these professionals and operations with Verizon Business would give Verizon Business added scale, increasing revenues by 30%, providing thousands of new customers and service offerings.

Low risk investment. If it doesn't work in 2 years, spin the equipment units back out. How much lower can their value go? I mean really go? Logical business rules no longer apply in this stockholder environment, so it makes sense for Verizon to seize this techology foundry and services unit.

What did you do on Thanksgiving?

We traveled to Canada this year, to celebrate US Thanksgiving with family in the Ottawa area. Of course, it was also my youngest sister's 33rd birthday and her 3-year old son's too, and my wife and I celebrated our 25th anniversary (2 weeks ago). Even though Canadian's normally celebrate Thanksgiving on the first Monday in October (history provides the answers as to why this holiday is different), my fiercely independent siblings bowed to the US-centric sentiment with unusual grace.

Frankly, giving thanks is something we need to do more often. Personally and professionally, 2008 (so far) was a fantastic year. I am eternally grateful to God for all the many blessings that we have shared this year and every year.

While here in Ottawa, I did get a chance to catch up on a few uniquely Canadian perspectives on high tech. The Nortel troubles are matched by the troubles of the Ontario Teacher's Pension Fund's plan to acquire BCE, the largest phone and mobile service company in Canada. It sure looks like the BCE deal is dead. The stock is trading at a discount to the offer price, amid statements by a hired gun that the deal would require Bell to acquire debt that it can't pay back. Not good for BCE shareholders hoping for the premium (extra thick now that the rest of the market has collapsed), but the teachers are probably ecstatic. This looks like it gives them a way out of the disaster.

Atif Shamin, Muhammed Arsalan are electronics PhD students under the supervision of Langis Roy at Carleton University  invented a 'transmitter system on-package' that significantly extends the battery life of mobile devices. The Ottawa Citizen reports that it can do so by factors of up to 12 times longer life. He targetted the connection between the circuit board and the antenna. Instead of wire, he designed a high frequency micro-transmitter and receiver, avoiding the usual loss of power pumping bits through a wire.

That's the lesson for all folks dealing with electrical power supply limitations. Automakers and battery manufacturers need to take this into account. Maybe the Chevy Volt is the reason to reconsider intelligent roads and redo the entire driving paradigm - for more efficient driving, power management and a better consumer experience.

The Canadian Adam Guerbuez and his company Atlantis Blue Capital were found liable for statutory damages and aggravated damages totalling $873 million to Facebook for sending some 4 million spam email. 

Often times, the spammer forges other people's identities. This is usually the best evidence that they are an illegitimate emailer.

Although it is unlikely that Facebook will every see the judgment, it does suggest that there is finally a cost being assigned to these nasty and ignorant abusers of the email service. Note that last week the cessation of ISP interconnectivity for McColo by Global Crossing and Hurricane Electric significantly dropped the total volume of spam. 

A recent article in FierceTelecom's newsletter highlighted how Cincinnati Bell was enhancing landline service with SMS. To make the service work, you need a special telephone ($29.99), a bundled service involving both DSL Internet and home phone service and then for a $9.99/month, you can send and receive SMS on the home phone. 

Cincinnati Bell promises more integrated features including wireless address books, white pages and email in the future. For incremental $ charges of course.

This is reminiscent of the New Brunswick Tel (now Aliant) service implementation in the mid 1990s: using unused spectrum on the twisted pair plant, they sent data messages to large-screen phones at home. Advertising, News, Sports and other items were broadcast into whole neighborhoods. Nortel made the networking gear, the software and the phones. It only worked in those days as a phone rental because the phones were so expensive. Apparently it was successful for a time when Internet dialup was awkward and painful.

This is also reminiscent of the walled garden model, which really doesn't work in the long run. To create value in the physical connection, Cincinnati Bell has to develop and present applications that users will find valuable and useful. Pricing-wise, the new services must replace some of the value lost as users discover the utility of mobility and VoIP. The business case should be to slow the decline in landline service a la 'REVENUE PROTECTION.' Reduce a 5% decline into a 4% decline is worth a great deal to the phone company, because it's a service you don't have to blow your brains out to deliver. Some of these can and should link up with other networks, but they should be able to deliver informational value on their own.

Landline providers must not sit back and wait for their monopoly to dry up.

They should be thinking of and rolling out services like wake up calls, network clock, time zone change warning calls and messages, remotely visible voicemail (use a browser to see the messages stored in the central office for you) without $10 incremental monthly costs. Of course, advertising jingles delivered instead of dialtone could be scored for discounts - listen to the whole ad and win a 50¢ discount off the monthly bill (provided the advertiser pay s $1.00 for the service).

REPORT.

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First Contact is the sales process milestone where the potential customer acknowledges their interest and identifies themselves. Most commonly, this could be through an email, a telephone call or some automated form on the website.

For the small business, defined in this report as those organizations employing less than 100 employees, email is the First Contact method of choice. This is consistent for larger firms too and is due largely to the great time-shifting convenience of email: I send at my convenience, and you send at yours.

Of course, if the First Contact email were to be intercepted by the anti-spam technology, the users' experience will be greatly affected and the customer will think less of the potential vendor who may never know that they had lost an opportunity, or even why. In this case, ignorance may be bliss, but it sure is a waste of resource.

Respondents did report greater frustration with their emails being trapped than being challenged. Earlier Brockmann & Company reports showed that challenge-response technologies are responsible for much higher levels of user satisfaction with email, and in First Contact circumstances.