The Party of the 3rd

Everyone uses them, but you seldom hear about them. Their goal? Make the carriers shine.

In the increasingly competitive telecom market, service providers and OEMs are looking to third-party vendors to help them implement solutions, gain market share and add to their bottom lines. Service providers often turn to these vendors to optimize their networks. Service providers and OEMs find that third-party vendors bring services to the market more quickly and less expensively than they could do it themselves.

Generally, third-party vendors supply products, services or methods of operation that may or may not be expressly critical to the functioning of wireless systems. The offerings enhance the primary service, enabling service providers to grow their markets and subscriber bases.

Often service providers work as partners with third-party vendors to bring technological breakthroughs into reality.

"Carriers know their businesses and often brainstorm with vendors — it's a partnership approach," said Iain Gillott, IDC wireless analyst. "Fraud and prepaid are good examples of third-party interaction, but the success of prepaid and fraud solutions do not rest on the platform implementation but on how the carrier positions and sells the service," he said.

A Yankee Group report (Infrastructure/Facility Outsourcing: Third Party Vendors Becoming Wireless Industry's First Choice, December 1999) indicates that outsourcing the construction of wireless networks by wireless operators is gaining favor as well.

"Few wireless operators are constantly building their networks in every market," said Craig Ellingsworth, Yankee Group senior analyst. "For a wireless operator, allowing an outside vendor with geographic flexibility to construct their network makes a great deal of sense from both a staffing and monetary point of view."

Engineering Expertise
Sometimes, wireless-service providers install infrastructure from a primary vendor and go to a third-party vendor to improve the system functionality, such as with using repeaters.

Whereas many primary manufacturers such as Lucent include Repeater Technologies equipment as part of the network design offerings, others such as Nortel cooperate with the vendor as co-vendors.

"Nortel believes that repeaters are not there forever, just until our capacity growth dictates the installation of another base station," explained Bill Casto, general manager of LifeCom in St. Cloud, MN.

Currently using six base stations and 24 repeaters, LifeCom recently contracted to expand by adding 73 repeaters to augment 147 base stations.

"As you increase subscriber count and traffic increases, you need to increase capacity, so the repeaters are removed and replaced with base stations," Casto said. "Nortel knows that in the long haul, they will be putting in more base stations, due to increased capacity won by the use of the vendor's repeaters. Everyone wins."

"The Repeater Hybrid Network gives carriers more control over their networks," said Dave Bolan, Repeater Technologies vice president of marketing. It's a means of optimizing coverage with full capacity."

As the only local PCS provider in Western Montana, Blackfoot Communications serves a population of more than 250,000 from its headquarters in Missoula and favors third-party expertise.

"Technically, there is no argument against using the third-party vendor repeaters, and a repeater-hybrid network provides us with more coverage for our investment," said Dan Runyon, Blackfoot general manager.

He said the engineering expertise of the vendor is critical. As a small company, Blackfoot has chosen to contract the engineering design of its repeater-hybrid network to an outside vendor.

"Our business success depends upon how well we meet the needs of our customers," Runyon said. "To serve them well, we rely upon our vendors to help us accomplish our goals."

Specialized Services
For Alltel, third-party vendors deliver such revenue-strengthening safeguards as fraud prevention. Alltel relies on a third-party vendor to implement RF fingerprinting. With the hardware/software combination, the vendor is able to break cloning on any cellular phone and to spot illegal roaming on analog networks within the carrier's market.

According to Philip Junker, Alltel Mid-Atlantic market president, sharing RF fingerprints between roaming markets, using Corsair Communications' PhonePrint, is part of an innovative approach to eliminating roaming fraud in such markets as Richmond and Norfolk, VA. Without RF fingerprinting, the service provider could suffer major losses to fraud.

Another service provider depending on third-party help for fraud-fighting is MobileTel of Louisiana. Tommie Morgan, MobileTel general manager, views RF fingerprinting as necessary for curbing roaming fraud.

"As our neighboring markets implement fraud-containment measures, we have seen the fraud on our network increase," Morgan said.

These service providers find the third-party vendor important in focusing on the key industry challenge of fraud prevention. John Martin, Corsair director of product management, said the company's PhonePrint product has "virtually eliminated cloning, a crime that costs the industry hundreds of millions of dollars in lost revenue per year."

Prepaid Aptitude
Likewise, to implement a complex system such as prepaid service, wireless-service providers need to sort through myriad technologies and decide what makes the most sense for them, both from a network-infrastructure and billing perspective. They rely on third parties for assistance in understanding this area.

As with all new services, there are many challenges relating to scaleability, implementation speed, cost and performance. Because explosive growth is a common attribute of many prepaid wireless implementations, it is necessary for the system to be flexible and scaleable in order to enable services to be provided continuously. This translates into a need to support existing infrastructure, provide customer information and ensure that switching capacity and other resources are available if subscriber interest is tenfold (or more) over forecasts.

Corsair designed its PrePay product using the emerging WIN standards. Ericsson selected the system as part of its prepaid billing architecture. By teaming with Corsair, Ericsson and its customers were able to go to market quickly with a next-generation prepaid system.

Distribution Channels
Service providers and OEMs rely on third-party vendors to help them reduce costs, increase efficiencies and refocus critical resources in order to remain competitive. In some cases, this means adding a vendor as distribution channel.

GTE Wireless, for example, finds such vendor relationships beneficial. By working with American Wireless for approximately 13 years, GTE has been able to ensure that its goals and objectives for the market are understood and endorsed by all distribution in the marketplace.

"Reaching our goals together in a growing industry is making our relationship successful," said Kurt Meyers, GTE general manager. "Back when we didn't have enough distribution channels in the industry, we went looking for a long-term relationship where there were existing channels. Our growth and opportunity have been quite successful with the small sub-agent and agent in American Wireless' distribution mix; it's been responsible for a good portion of our indirect business."

Harry Thomas, marketing director of GTE Wireless for California, added, "Agents are strong marketers who complement GTE's marketing strategies. In the Bay Area, as with other large markets, there is strong advertising competition. Our vendor uses its superior promotional expertise to come up with creative solutions."

Nextel also realizes an advantage to using third-party vendors for distribution. As with GTE, Nextel finds the third-party relationship to be extremely important to the smaller dealers who do not have the advantages of volume business to cover overhead, personnel and other operating expenses.

"Many smaller agents, while offering wonderful service to their customers, simply may not have sufficient cash flow to inventory lots of phones or have a full-time technician on staff," said Paul Harris, Nextel director of indirect distribution for the greater Bay area.

"Using a third-party vendor was a no-brainer for us," he said. "The carrier's job is to acquire channels of distribution. American Wireless already had relationships with a large number of successful wireless agents. Therefore, through our relationship, Nextel was able to bring on a number of points of presence almost immediately who had retail locations and were already selling a variety of wireless products and services."

Nextel is selective in approving agents and extremely involved in the training they receive.

In addition to activating phones, third-party distribution vendors offer many other value-added services to their smaller agents -- they inventory equipment and offer "will call" purchasing where an agent can walk in and pick up phones.

Vendors as Innovators
"Technological advantages and enhancements are one of the keys in choosing whether or not to use a third-party vendor," said Ken Dulaney, Gartner Group industrial analyst. "Speed to market is another. The basic premise is that the third-party vendor supplies something that the carrier or dealer doesn't have and can't financially produce or that helps the product get to market quickly. They permit carriers and others to reach into locations and types of services that they can't realistically offer on their own."

"Initially, vendors are innovators," Dulaney said. "But the question is if they can maintain their luster over time. For instance, notebook computers were initially distributed through third-party vendors, but the vendors required price protection and a number of incentives to keep going. Yet, the services they are providing in today's rapid-supply, chain-store-oriented world are not as valuable any more. Business parameters have changed; often, the primary vendor is learning how to provide services, and the third-party vendor becomes an unnecessary drain on profit."

To keep viable in the evolving market, according to Dulaney, a third-party vendor can go to the service provider to discuss the transition necessary to keep current with the service provider's service. If a third-party vendor is treated as an integral part of the organization, a primary vendor/service provider/third-party vendor relationship can remain intact.

As service providers continue to remain competitive in the fast-paced wireless industry, they look to innovative third-party vendors to provide the answers and market solutions that will keep them ahead of the fray.

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Advantages of Using Third-Party Vendors

Third-party vendors:

• Offer solutions beyond service providers' core competencies
• Provide speed to market
• Have engineering and financial resources for research and development
• Offer testing processes and capabilities
• Provide enhanced functionality
• Eliminate drain on internal resources, thus adding to profits
• Enable service providers to increase return on investment quicker and concentrate on their core areas of marketing and providing services to their customers
• Provide cost-effective solutions.

Lee is a freelance writer based in the Bay area.