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October 08, 2008

Next-Generation Services: Market Challenges

By Mae Kowalke, TMCnet Senior Editor

Next-generation service providers face a number of challenges to staying successful. This market is a very competitive one, and as such players tend to quickly run through all the standard techniques for beating rivals, including slashing prices as much as possible. The inevitable result of the downward spiral in prices means that, eventually, every service provider will have to find some other way to differentiate itself.
The problem with competing on price alone can be illustrated by examining trends in the telecommunications industry. Getting up-to-date and accurate data on the correlation between price and demand can be tricky, but even data from a few years ago can suffice to see a broad picture of what’s going on.
For example, 2005 data from International Bureau, an arm of the U.S. Federal Communications Commission (FCC (News - Alert)), shows a dramatic trend that should make next-gen service providers sit up and take notice. Since 1980, the number of billed minutes globally rose to nearly 45 billion. Meanwhile, revenue per minutes dropped from about $1.50 in 1980 to less than $0.25 in 2005. The two lines crossed around 1999, and since then it has become increasingly obvious that price alone as a selling point isn’t something provider can depend on to maintain sustainable profit margins.
On a related note, billed revenue per minutes and billed revenue per call also has shown a dramatic downward slope since 1980. That year, according to International Bureau data, revenue per minute was roughly $1.40, and revenue per call was just a tad higher than that. Since 1980, these two lines have sloped sharply downward, and as of 2004 both were continuing to drop past $0.25.
So, what’s a provider to do — how to compete if prices continue being driven downward? The answer lies in a combination of techniques. Price will always be a factor in attracting and retaining customers, but adapting to new technologies, adding new features, and boosting customer support are equally important in the long run.
This is the first in a four-part articles series examining how next-gen providers can achieve and sustain success. Next up: reaching customers today.
Much more about next-generation services can be found on’s Billing and SIP Server channels, brought to you by IVR Technologies.
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Mae Kowalke is senior editor for TMCnet, covering VoIP, CRM, call center and wireless technologies. To read more of Mae's articles, please visit her columnist page. She also blogs for TMCnet here.

Edited by Mae Kowalke

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