Toronto-based Call-Net Enterprises Inc. announced last month it was closing up its Ascenda Inc. ASP subsidiary and focusing on its core business operations.
The ASP a market, according to John Laurie, vice-president of investor relations at Call-Net, was not proving fruitful for the integrated communications solutions provider.
“In regards to ASPs, we have no intention of proceeding with anything in that area. We’re basically looking at our core operations, which is the transport of voice and data over our network,” Laurie said. He added the decision was based on finances. Call-Net looked at how much money it would have to pump into the Ascenda business and how soon it would see results, and it looked like it was going to be a long-term investment with a high degree of uncertainty about the market.
In the current economic climate, Call-Net wasn’t prepared to wait for its ASP line of business to pick up. Laurie said the money that was to go into Ascenda would be better used in its core IP and voice networks.
“The general feeling, I think, is that the ASP, while it’s a pretty interesting concept, it’s a tough business model and the market has been slower to develop than most people had expected,” Laurie said.
Call-Net, a wholly owned subsidiary of Sprint Canada Inc., is also working with Sprint Corp. in the U.S. to develop an e-commerce initiative, he said, but Call-Net will not be developing any e-commerce-based lines of business itself.
“We’ll continue to partner with other people to deliver the products that we think our customers are looking for in the e-commerce area, but we’re less likely or not very likely to be investing a lot of capital ourselves,” Laurie said.
According to Mark Quigley, research director at Kanata, Ont.-based The Yankee Group in Canada, the ASP business model is one that will show success eventually, but companies like Call-Net are a little ahead of the game in terms of market acceptance not being there yet.
“Businesses, particularly, in the [small and medium enterprise] population, really aren’t looking for those kinds of solutions for any number of reasons: because they are cutting back costs internally, because they aren’t really aware of what an ASP can do for them, or how they can really leverage the Internet for something more than e-mail and Web access,” Quigley said.
He predicted it will be at least 12 to 18 months before ASP business models have any real success in the marketplace. When companies finally do accept the concept, it will be because they come to realize the cost savings associated with using them. Quigley added that there is something to be said for the increase in operation efficiency that ASP solutions provide.
Initiatives at Call-Net will probably revolve around operational efficiencies and growing the local marketplace, Quigley said.
“While Ascenda certainly did provide opportunity for increased revenue growth, it quite clearly isn’t their core business (and) quite clearly (wasn’t) where they were going to live or die. That comes from other segments of their business.”