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DOWNLOAD; Is there an ASP in the house? - Company Business and Marketing

Last week's ISPCon in Orlando turned out to be a debut for several carriers that have been inching toward the application service provider market and a reaffirmation for those already in it. But in an environment that changes on a seemingly weekly basis, carriers have as many strategies for attacking the market as there are definitions of ASPs.

Of course, the strategy for most carriers is a direct function of history and assets.

Broadwing Communications, for instance, made what was likely the most significant announcement of the show by unveiling six new Web-hosting services that target small and medium-sized businesses. The new services, which provide 20 to 200 Mb/s of Web space, represent the company's entry into the market and likely could not be offered without the national fiber network or data centers gained from its IXC Communications acquisition. In addition, the company is rolling out four e-commerce packages that lets retail dealers develop their own storefronts using a Web-based interface.

Broadwing's entry into the hosting market, while relatively late compared with companies such as Exodus Communications and Qwest Cyber.Solutions, is part of a larger strategy to support the ASP market. In the early enterprise market, though, the company will package hosting with its existing services.

"It's a very logical strategy," said Fran Kienle, director of transmission services for Broadwing. "This is just the tip of the iceberg as far as services go. Broadwing is initially going to be an application infrastructure provider."

Having services such as dial-up access may help carriers, but not enough to overcome the time advantage enjoyed by those already in the market, said John Charters, president and CEO of QCS. The company last week also rolled out a series of ASP services aimed at several key market sectors. The new services, Enterprise Freedom, will be targeted at the finance, communications, health care and services sectors.

"You can't organically grow [an ASP] from a carrier," Charters said. "The skill sets don't exist there. Supporting Oracle financials is nothing like

supporting a T-1 line."

For QCS, the new services are another move into the business-critical application market. And the company has made a conscious decisionto target complex applications because of their profitability and "stickiness."

"Supporting non-critical applications like [Microsoft] Word or e-mail are rapidly commoditized with no differentiation," Charters said.

At this early stage of the ASP market, carriers are less concerned about applications than getting the processes and network in place to support ASPs. Sprint, for one, has developed a separate organization with 50 staff members to target large enterprises. Like QCS, the company is relying on complex applications to get it into the market, though it now is evaluating hosting more simplistic applications, said Gayle Howard, director of eBusiness applications for Sprint.

Sprint has three categories for applications, based on the level of trust placed in the ASP or carriers and the amount of data stored in the networks, Howard said.

"The ASP model is a fundamental shift in the trust relationship," she said. "At the top, that's really where you start fleshing out into mission-critical applications."

But many carriers are not ready to assume that added trust of running mission-critical applications, she added. Instead, most rely on their hosting groups to grow the ASP business.

For instance, ICG is running tests with beta customers but is not detailing its plans yet. One thing the company certainly won't do is become an ASP itself, said Vince DiBiase, senior vice president and chief sales officer of ICG. Instead, the company will offer its backbone and other hosting services to support ASPs.

That model of carriers fading into support roles is becoming more common. Carriers don't have the brand equity or application expertise to maintain the customer contact in the ASP model, said Martin Cooper, chairman and CEO of ArrayComm.

"The Internet is inherently an open platform," he said. "But the structure of today's telecommunications industry is fundamentally a closed platform. The carrier of today owns the network, the pipe and wants to own the customer by virtue of historical precedent, if nothing else."

However, application providers such as Sony and Microsoft may not be willing to give up ownership just yet.

"Those are the people that insist on owning the customer," Cooper said.