Allstream last month reached an agreement with British Telecom that will allow the Canadian carrier to offer global Multi-Protocol Label Switching (MPLS) services to Canadian outfits with international operations.
The Allstream and BT relationship did not begin with MPLS. The two companies have been working together since 1999, mostly on the exchange of traffic, private lines and frame relay links. This new partnership gives Allstream access to the global MPLS market and allows the firm to offer a different suite of applications to its customers.
The advantage of MPLS is it allows enterprises to mix and mingle various technologies and have them converted into IP, making it faster and easier to maintain new networks. It also has packet-prioritization capabilities, allowing the most important data such as voice traffic to be sent first.
According to Ron McKenzie, executive vice-president, marketing and business development with Allstream, customers were asking the company to move into this area. “We see more large multi-nationals wanting to move into MPLS service because it delivers the performance and the application capability that enables them to gain competitive advantage and reduce their costs.”
Chuck Pol, president and COO, BT Americas, called the partnership a natural extension of his firm’s existing relationship with Allstream. “Our ambition is to be a global IT networking services company. What this gives us is a very deep reach into the Canadian marketplace and the Canadian headquartered companies.”
Currently, teams at BT and Allstream are working together at combining their existing MPLS networks together.
The deal adds a lot of credibility to Allstream, said Elroy Jopling, principal analyst with the Canadian offices of Gartner Inc. “It has been a banner year for Allstream. The company was acquired by MTS (Manitoba Telecom Services Inc.), which gave them financial credibility. Now the deal with BT gives them global credibility and moves them one notch up as one of the carriers that can compete for the Canadian enterprises.”
According to Brian Sharwood, principal analyst for the SeaBoard Group in Toronto, being able to better compete for new customers and assisting its existing customers go global makes Allstream a more powerful player. “They are going to connect their MPLS network with BT and that gives them enormous advantage and global reach. It now has some strengths its competitors don’t have.”
Since this deal is making Allstream a more competitive player, both Jopling and Sharwood agreed it could help Allstream give Bell Canada a run for its money.
“It very much throws a monkey wrench into the global plans of Bell Canada,” Jopling said. He explained that Bell had a deal with Infonet, a global communications service provider, but BT’s recent acquisition of Infonet may over time negate the Bell Canada deal. With BT out of the market, Sharwood said Bell needs to look for another partner that could give it a global reach. Even with all these upsides for Allstream, Sharwood believed there is also a downside to this agreement.
“[Allstream] had aspirations at a certain point to enter the U.S. market and start going after U.S. clients. I think the downside of [the deal is] BT will put an end to that. BT wants to enter the U.S. market. They want to be a strong player in the U.S.,” he said.
Sharwood speculated that there may be something in the agreement that would prohibit Allstream from going after the same U.S. accounts that BT is competing for. One of the things BT gets out the deal, Jopling added, is solidifying its footprint in North America.