The following is a guest post by TC2 Senior Consultant Sreeni Katta, who is based in Singapore.

I was in Mumbai recently to meet with India's major Telecommunication solution providers in conjunction with a procurement project for one of our clients. Vodafone's team, who were one of the invitees to the meetings, surprised all of us in the room by announcing their new offerings. Apparently Vodafone now offers National Private Leased Circuits (NPLC) in India, and expects to offer International Private Leased Circuits (IPLC), Internet Leased Lines, and even MPLS networks soon.

The first question that came to my mind was: Why on earth did a major global wireless service provider decide to venture into the untested waters of enterprise networking services -- and in India, no less?

In fact, Vodafone's historical (although admittedly recently softening) policy of religiously disposing of fixed line assets that it acquired incidentally through various acquisitions throughout the world, made this announcement particularly surprising. But once we'd reflected a little, we realized that in many ways it makes a lot of sense.

Firstly, enterprise customers continuously strive for a one-stop shop for all of their telecommunication needs, and a pure wireless focus leaves Vodafone behind some of its key competition. Secondly, India is at the heart of the huge growth potential in Asia Pacific. In fact, India has one of the world's largest mobile phone user markets, with 10 million new subscribers signing up every month.

Vodafone does have a very well established emerging market strategy. And over the years it has disposed of ownership interests in a number of saturated western markets in order to invest in emerging markets instead. So making a move into wireline services in a growth market, rather than in one of its more established western markets (where growth is limited and strong incumbent competitors already exist), makes good sense for Vodafone.

It also turns out that Vodafone will be able to leverage its existing wireless network backbone. It won't be building infrastructure from scratch in order to offer wireline services, rather simply upgrading and building on its existing in-country wireless network backbone. This is consistent with other carriers that offer integrated service offerings on a single platform to cater to telephony, data and video solutions.

Although a common and consistent procurement objective of enterprise customers is indeed to reduce their number of service providers, this objective is often based on little more than "telecom suppliers are a pain to deal with" and therefore the fewer the better. There can be clear efficiencies to having less, not more suppliers, but many carriers have not yet come up with much more than limited bundled discounts to reward customers who buy both wireline and wireless services.

But slowly the advantages should become more pronounced, not least as fixed to wireless integration and unified communications bring wireline and wireless solutions and technologies closer together. If Vodafone begins to establish itself as a supplier able to offer wireline and wireless services, it will be well placed to take advantage of such trends.

Vodafone also has some experience in managed services that it may be able to leverage as it moves into wireline services (not least in a disparate region such as Asia Pacific).

For a number of years Vodafone's Global Enterprise (VGE) group has been offering large global enterprise customers a one-stop shop for all a customer's global wireless needs. For countries where Vodafone does not have a wireless network, or one of its partners does not offer services, Vodafone will manage a third party supplier on the customer's behalf. Vodafone will also take care of migrating current suppliers' services to its, or its partners', network.

Vodafone established this service offering as a solution for customers desperate to deal with a reduced number of suppliers, despite global wireless services being the most fragmented global telecom market of them all. Not all customers have found it to be a compelling offering (the detail can fall short of the marketing), and extending this model to wireline services will present a different set of challenges -- particularly for global MPLS services where having a single supplier has technological advantages. But in a region as fragmented as APAC, if Vodafone is able to build on its experience in the wireless market to be able to present a similar offering to customers on the wireline side, then this could be a distinct differentiator.

So we regard this as a welcome move by Vodafone in India, and wonder if it is a sign of a wider drive by Vodafone into wireline services in Asia Pacific and beyond. In Asia Pacific in particular, Vodafone will come up against some familiar faces (not least BT but also the other main global providers of AT&T, Orange and Verizon) as well as newer players emerging from APAC such as Reliance and Tata that are investing heavily to win more customers. It will help drive more competition in this burgeoning and high-growth market, and it gives additional options to enterprise customers. We will be watching these developments carefully to see how they unfold.

Frame relay users are becoming a diminishing breed, even at AT&T. In a little-noticed statistic buried in its fourth quarter earnings report, AT&T said that two-thirds of its frame relay customers have migrated to IP-based services.

And that could have implications for the types of services -- even IP services -- that begin to generate the ever-rising USF surcharge pass-along where they never have before.

Let's see why that is. First, AT&T put a rather distinctive spin on the frame relay news. Here's how they reported it: "Two-thirds of AT&T's frame customers have made the transition to IP-based solutions, which allow them to easily add managed services such as network security, hosting and IP conferencing on top of their infrastructures."

That's an interesting way of putting it, especially when you consider that AT&T's primary platform for ex-frame users over the last few years has been the AVPN un-managed MPLS service. I'm particularly amused by the part about "easily" adding managed services, where AT&T cites the kinds of managed services that happen to add to AT&T's revenues.

Funny, I thought that users would like to "easily" add to their IP and MPLS services such rigorous VoIP networking services as SIP trunking. You know, the kind of additional service that would subtract from some other part of AT&T's revenue set, like local telephony infrastructure. But clearly, AT&T is looking for a way to make IP and MPLS mean "more money," not less.

And that's where the USF surcharge issue starts to intrude. One thing that the furious competition between AT&T and Verizon for national and global MPLS deals has kept at bay is the threat of USF pass-throughs on interstate MPLS revenues. But once the competitive bidding is out of the way, we could see these moves begin to creep in.

In addition, all of the interexchange carriers have to be on pins and needles about recovering USF charges on MPLS because of steadily increasing pressure from the FCC about counting MPLS elements in their contribution base. That's happening as the legacy revenue base of traditional telecom services generating the surcharge continues to contract -- the very issue that is forcing the contribution factor percentage ever-higher.

Remember how the shift from a non-surcharged to a surcharged service comes about. It's a continuum, not a single discrete event, because whether carriers pay the surcharge to the fund, and then pass it along to you, are two separate questions with several inputs each.

As LB3's regulatory lawyers have pointed out, even before USF on MPLS ever became an issue, the carriers could have reported interstate MPLS revenues, based on their own judgment that if frame relay was basic telecommunications, so was MPLS. Then, early last year, the FCC suggested MPLS as a service to be reported by adding it to its examples of the type of basic telecommunications" revenue carriers needed to include on their 2008 reporting forms.

Now the FCC appears to be something close to demanding MPLS revenues both now and in the past because it needs 14.1% of the money -- whoops, 15.3% as of April 1! -- especially as MPLS has become the flagship data networking service for enterprises.

Plus, consider this: AT&T recently placed a note in its Service Guide that its Ultravailable Network Service will start generating the USF pass-through on April 1. One of my LB3 colleagues labels this a form of "self-confessing" the applicability of the revenues of a relatively specialized service (in this case, high-capacity wavelength technology) to the Universal Service regime. It's circumstantial, but it's an example of how AT&T (and potentially others) may become quicker to add other, more widely deployed services to the universal service revenue base than they have in the past.

Thus, once the bulk of frame/ATM users have chosen their MPLS carriers and signed up for multiyear contracts, both AT&T and Verizon could lose their inhibition about tacking on USF for the MPLS ports and Class of Service charges. In competitive bidding, such a move will have the effect of raising the price of these elements by 15.3%. That's something neither carrier has been willing to do when worried about losing a deal to the other mega-carrier. But when that fear is gone, the surcharge pass-along could be on its way.

Before assessing how to deal with all this, there's one final input -- the effect of the FCC's newly released National Broadband Plan that appears to redraw universal service around the ambitious (and expensive) notion of universal broadband access. I'll take that up next!

Nortel Enterprise Solutions is going into the hands of its onetime arch-rival for voice premises equipment, Avaya.

That result was assured with Monday morning's announcement that an auction for the Nortel enterprise unit -- a key element of Nortel's bankruptcy proceeding -- had been completed. While not explicitly announced this way, it's widely believed that the Siemens enterprise unit bid up Avaya's original offer of $475 million over several rounds before letting Avaya have it for $900 million.

Avaya's clinching of the Nortel prize keeps intact many of the expected user impacts of the impending marriage of the one-time No. 1 and No. 2 U.S. PBX vendurs. Avaya gets feet on the street through Nortel's extensive distribution network, although much of that network is also now invested in the enterprise voice and convergence products of Cisco. Indeed, Cisco and Avaya are now set up as the Coke and Pepsi of the enterprise voice gear market, with the possibility of far more concentration than this market has ever seen in the past.

Acquirers often are ruthless wielders of power, deciding which of the acquired company's products, employees and projects to keep and which to get rid of. And let's be fair -- it's clear that Avaya would be justified in doing some rationalization. Possibilities include:

-- A convergence-products alliance that Nortel had with Microsoft has never really borne fruit, especially since Microsoft is pursuing enterprise voice in an explicitly Windows-based softphone environment, and that alliance may go.

-- Avaya may also see no value in the longstanding problem Nortel has had in making sense of its data switching product portfolio from the basically botched acquisition of Bay Networks in the 1990s.

-- Of perhaps more concern, support for some Nortel products (or some distributors) may change or drop, a concern being made explicit by Verizon as one of Nortel's legacy "RBOC"-type distributors.

Excellent discussions of these detailed matters are taking place with our friends at NoJitter.com; I particularly like a post by Allan Sulkin called Questions re the Future of Nortel ES.

But from a strategic standpoint, one thing that I think enterprise telecom managers should be asking themselves is what kind of role voice and unified communications equipment should play in managed services procurements going forward. Many corporate PBX footprints are very scattered and diverse based on long-lived legacy considerations in various business units, geographic divisions and even individual locations. But if Cisco and Avaya go head-to-head as the dominant players, we know that this can be played to strategic advantage going forward.

From a data perspective, obviously most companies are "Cisco shops." But from a VoIP/unified communications standpoint, holding out a large chunk of business for archrivals to bid on could be in the offing. Thus, the looming Cisco vs. Avaya war could be seen as a reduction of choice -- or, alternatively, a big opportunity for savvy enterprise users, especially when you consider that managed services procurements often offer the best transport pricing. Much remains to shake out, but we'll be watching this closely.

An increasing number of enterprises are now opting for truly comprehensive telecommunications procurement projects. A large part of the idea is to represent to suppliers that there are no stepchildren anymore among corporate networking services. Big companies want great deals on everything: corporate WAN services like MPLS, traditional toll and toll-free voice, LAN/WAN managed services, and expanding footprints of cell phones, smartphones and aircards. Today's diversity of user behavior probably makes all of these areas financially material to your company, and today's economy doesn't allow for bleeding, non-market costs in any of these areas.

The trick is to get suppliers to respond to the extra incentive of a big bucket of diverse business that you've put out simultaneously to the market, without sneakily creating linkage that actually subtracts from the flexibility of the ultimate deals.

Most people know that even in a full competitive refresh, it's advisable to use separate or modular RFPs for key parts of the project -- such as wireline, wireless, and complex managed services. But carriers know how to subtly pull these separate items back together in a way that may not be optimum for the deal you want in any of them.

They propose dollar commitments to count up all of the spend, or time commitments to put all of the services under the thumb of one carrier for the same relatively long period, or credits that are structured to be meaningful only using the total bucket of services. All these moves can render the entire package of services more onerous or restrictive than they would have been separately.

Consider corporate wireless contracts. Even outside a multi-service procurement project, wireless contracts typically cut across two dimensions. One is the length of wireless carrier's contract with the corporation -- say, two years. The other is the length of each subscriber's line term -- often a choice of one or two years.

It would be great for a corporate-liable user to have no "contract" on the logic that he or she is simply part of a large corporate contract, and there's nothing wrong with asking for that. But carriers generally argue that sunk device costs make it logical for them to have terms attached to individual lines with incentives for a longer term. You can and should negotiate for a pool of waivers of the resulting early termination fees up to some percentage of the total footprint, but both an overall contract term and individual line terms are still the norm.

This leads many telecom managers to try to keep things coterminous in anticipation of their next negotiation. After all, the company that puts out "on the street" a full competitive refresh across many services has often labored mightily to line up its existing wireline, managed services and wireless deals. But watch what happens: some bidders may propose a longer corporate term for all of the RFPs that make up a competitive refresh.

In the carrier's mind, the single resulting mega-commitment (if it's really a single commitment, which is another question) may simply be a sum of the anticipated commitments for each of the included services. And the commitment may have to be longer than such component parts as individual circuit terms or wireless subscriber line terms, potentially complicating future attempts at coterminality, especially if user behavior shifts to newer devices or technologies.

In the text of RFP responses, their logic is often expressed as a compliment to the customer: "It's great that you want to competitively bid out everything -- believe it or not, we think that's swell! So how about we put everything under a single converged three-year contract? We'll give you our best offer that way -- promise!"

But your goal should be that the combined commitment enables one type of service to retire the obligation to other services faster than any of them would on their own, especially if you can swing a term commitment rather than annual commitments. Just adding up the separate commitments into a new, single number, and putting everything into a single, longer-term deal doesn't accomplish that. Will the prices be better? They could be -- especially since we're seeing some of the best transport pricing in large managed services procurements -- but that's not a given just because of the fact of rolling wireline and wireless deals together. Prices still have to be compared to the market regardless.

I particularly love the word "converged" when it sneaks into carrier proposals in this context. If a carrier sells you both hundreds of managed routers for a new MPLS network and thousands of mobile phones under the same three-year term, what's "converged" about that? Nothing from a network standpoint, which is what the word "converged" should mean (e.g., sending landline voice over public or private IP). But it sounds good, doesn't it?

Bottom line: as with real convergence, it's the cost and quality details that count. A comprehensive multi-RFP procurement project may or may not result in a single contract. If it does, that contract should be at least as flexible as multiple contracts would have been.