Playing the T1 Access Game
by David Rohde

Published June 2002

Abstract:

Corporate networking professionals view widespread reports of a national and global fiber glut with a mixture of glee and dread. Glee because, logically, it should lead to lower prices for voice and data services. Dread because it means having to explain to corporate management that complex enterprise networking services depend on a lot more than raw bandwidth capacity, and carriers don't hand out price cuts on a silver platter.

Fortunately, substantial cost reductions are available on the two enterprise services that most closely resemble raw bandwidth: Long-haul private lines and dedicated access from the customer premise to a carrier point of presence (POP). While not every corporate network employs point-to-point private lines, almost everyone uses dedicated access for one thing or another. The T1 access line remains the lingua franca for getting from the customer premise to the chosen carrier for bulk outbound calling, 800 service into a call center, frame relay and ATM networks, access to the public Internet, corporate VPN remote-access termination and even long-haul private lines themselves.

So, if T1 access is in such high demand, how do you save money on it? With a disciplined approach to procurement, that's how. Fiber glut or not, AT&T and others will tell you that T1 prices are going up, not down, and they have their recent initial contract bids to prove it.

But the "whole" truth is a lot more complicated. The six-year-old saga of rapid price erosion of dedicated access line pricing is now its third phase and it puts a premium on user negotiating skills.

In the first phase, in the mid-1990s, large corporations with many branch locations broke the tyranny of mileage-based local-carrier tariff prices. They won national contracts from long-distance carriers—who bought T1s from multiple local carriers on the user's behalf—with flat monthly rates ranging from $300 to $500 apiece. In the second phase, in the late 1990s and 2000, the carriers quietly instructed their sales forces to haul out "generic" or "promotional" flat-rate T1 offers at around $300, even for medium-sized contracts, if a user had presented even a slightly credible chance of taking their business elsewhere.

Now, in the third phase, the easy promotions are drying up—or are available at much higher prices. But both medium and large enterprises with truly rigorous competitive bid processes are winning national T1 access at rates lower than ever before, down to $200 a month or even less.

About the author:

David Rohde is a Washington, DC- based senior analyst for TechCaliber, LLC, a consulting firm for enterprise users that performs benchmark studies, contract negotiations and contract compliance for local, long distance and international carrier services.

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