Enhance Your Position and Profitability as an Internet Service Provider by Offering Voice.
As a broadband Internet Service Provider to small business, you've enjoyed rapidly growing demand in the category. You've also encountered a growing list of competitors. How do you differentiate your offering?
As a rule, the cost of acquiring new customers is much higher than earning more business from a loyal base. How do you attract more revenue from the business relationships you've nurtured?
You've investigated voice as a potential profit generator. You're aware that there are two basic models for delivering VoIP to small business: hosted PBX (IP centrex) and simply furnishing the voice-quality broadband to the business location for customer premise equipment (traditional PBX/key systems or IP PBX).
Epygi recommends a more profitable and customizable alternative. You, as the ITSP, deliver a turnkey solution complete with Internet access, network hardware and feature rich applications for a contractual monthly fee.
Obviously, small business owners won't even entertain the idea of converging networks unless they're certain they won't give up any service quality or reliability. In fact, most consider their functioning voice systems to be adequate and don't know what they're missing.
To profit from this opportunity, you'll need partners and a plan.
Telcos and traditional PBX vendors were at first threatened by IP telephony. The old model of earning high margins on proprietary, captive technology faced a looming threat.
Those fears came to fruition when, in 2005, market research firm In-Stat reported that orders for IP PBX lines exceeded those of traditional PBX. What's more, the report predicted most of the 6.6% annualized PBX market growth rate through 2009 would be IP.
Today the business is in somewhat chaotic transition. Telcos are providing their own version of IP at the risk of cannibalizing their bread and butter. PBX manufacturers carry the VoIP standard but have interpreted it with complex, still proprietary products. PBX resellers rely less on switch sales and more on service and maintenance of the old stuff for their income.
Meanwhile, ISPs first met the opportunity in ways that were less than lucrative. They knew that the Internet was historically a medium for “free” or low cost messaging. Their concept of voice was using low cost gateways to convert analog phone calls into an IP data stream.
The low cost of entry created a cluttered and confusing market and users were quickly disappointed by horrific quality of service issues. Competing on little more than price and insignificant add-ons these first ITSPs failed to grasp the full potential of the technology.
The voice reseller market boomed from zero to thousands in a matter of 24 months in the late 1990s. The industry then collapsed in 2001 and is only now re-emerging with any real force.
Some forward thinking ITSPs are now deploying IP centrex. Wholesalers position these services as the killer value-add application to improve service providers' margins. Carriers offer IP centrex by completely replacing phones and TDM switch with a soft switch.
Both are modeled on the old centrex concept created decades ago by the traditional telecoms: subscription to a centralized server that manages all networked data clients and delivers PBX services for voice. The customer pays a monthly fee per IP-enabled device.
Since the combatants in this arena differentiate solely on price, vendors face the constant danger that customers will switch to any rival that offers a slightly cheaper "me too" service.
Meanwhile, as with the original centrex, small businesses have generally responded negatively. Small business owners have opposed risking the critical communications element of their businesses to a centralized server that relies on a single IP line.
In a recent survey by Ovum only 12% of small businesses wanted a hosted service while 67% wanted a premise-based or hybrid solution. These decision makers will migrate to a new solution only if the proposition provides clear benefits, market pricing, reliability, and ease of installation and use.
The apparent lack of demand for VoIP among small businesses results from two factors: lack of awareness and fear of perceived risks. Fewer than half the industrialized world's business owners have even a sketchy idea of the technology's benefits. A significant number believe that VoIP service is not reliable.
The vendor that dislodges these notions will get the orders. The profitable ones will offer a total package. Imagine…