OPEN MIC - Expanding Beyond the Network Footprint
“Business everywhere” takes shape
Do a quick scan of cable industry headlines and you’ll find that the talk of “TV Everywhere” dominates the discussion. While TV content strategy has grabbed public attention, there is another idea taking shape across the industry – how to extend services and compete everywhere for lucrative business contracts with a “business everywhere” strategy.
The model to serve cable customers with residential video, voice and data works well as designed; build the network, create a defined service area and market to those within the footprint. With that success, many cable companies have expanded their services into the lucrative SMB market with offerings that build upon the residential service model. In 2008, business VoIP service revenue growth – up 33 percent to $30.8 billion – actually outpaced residential services growth.
Now, as cable recognizes the opportunity in the enterprise market, it must be able to stand toe-to-toe with competing national providers – especially the incumbent telecom companies that maintain a stronghold in the business services market.
To deliver business-grade VoIP to enterprises outside of a footprint, cable has two options: invest time, effort and money necessary to build a VoIP services delivery platform or “buy” an existing, outsourced platform from a third-party telephony partner. The build vs. buy decision is a critical one, with implications for revenue, market share and profitability for years to come. There are three important considerations that can help cable operators decide when to build or buy to expand their VoIP platform. Let's briefly look at each.
LONG-TERM BUSINESS STRATEGY:
Medium-to-large businesses such as retailers and restaurant chains tend to have locations dispersed across the country, and many of those sites will likely fall outside of the cable franchise footprint. Unless the telephony platform includes interconnect agreements with other providers, the operator will not be able to bid successfully against telcos for multi-location businesses. Another strategic consideration: As wireless outpaces wireline growth, a VoIP solution must be able to integrate wireless services as part of a “quad-play” bundle. Since 4G wireless technology is IP-based, the design of VoIP platforms and back office systems must easily integrate wireless in the future.
Building and outsourcing each have their merits. While an in-house solution can take significant time to build, costs quickly decline after deployment. However, if extending network infrastructure isn't feasible, don't let that deter you from serving out-of-footprint customers. A network partner can bring the technical expertise and network infrastructure to extend your network reach.
COST OF OWNERSHIP:
Most operators own and operate their own delivery networks, primarily because the total cost of ownership on a per-subscriber basis is usually lower than with outsourcing. While the VoIP financial model is similar, operators can expect to invest in switching equipment, regulatory proceedings, interconnection agreements and people. While the financial model may make sense at first blush, there are reasons to consider outsourcing for this line of business.
Two such considerations include shifting technology and demand patterns. Some companies such as Skype and Google Voice are now offering services to businesses for free. Consider that an in-house VoIP platform may depreciate faster than a company can amortize it.
Again, building and outsourcing have differing benefits. Building a network may create O&O assets, but outsourcing to a partner company frees valuable capital that may be directed toward other revenue-generating services.
SATISFACTION OF KEY TECHNICAL REQUIREMENTS:
Beyond business strategy and financial considerations, there are significant technical hurdles to consider when implementing an enterprise VoIP solution. Deep expertise and state-of-the-art back office systems are critical to success. Connecting ATAs and EMTAs at residences and home offices are challenging enough. Enterprise environments present a new set of challenges with underlying system complexities. Beyond the hardware, assuring quality of service presents an ongoing challenge. Because voice traffic is sensitive to IP maladies like packet loss, jitter and delay, VoIP traffic must be conditioned and given priority over less finicky data traffic. Enterprise customers expect nothing less than stellar voice quality.
Building a network provides the operator with complete control, with in-house staff that manages the user experience. An outsourced provider that maintains core expertise in cable telephony can support a solution in a quickly changing environment.
No matter the deployment path for enterprise business services that an operator may choose, there is no doubt the segment provides profitable and untapped opportunity. Decisions now will affect revenue and product models for years to come.
Next month, Dermot O'Carroll, senior vice president of engineering and network operations for Rogers Cable Communications, will write about the SCTE Canadian Summit 2010.