A Delicate Balance

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A Delicate Balance

By Paula Bernier, Executive Editor, IP Communications Magazines  |  November 01, 2010


This article originally appeared in the November 2010 issue of INTERNET TELEPHONY

Today’s public networks are at an inflection point.

VoIP, video, broadband, and mobile services and capabilities are creating great new functionality for business users and consumers. That can translate into new opportunities for incumbent network operators, competitive carriers and over-the-top application providers to introduce new offerings, capture new customers and, potentially, grow ARPU.

A recent Harris Interactive (News - Alert) online study suggests that new entrants like Facetime now have the opportunity to dominate the market. About 56 percent of adults are looking to switch the way they make international calls and 43 percent of those individuals indicate they would switch to using their mobile phone to make those calls, according to the U.S. survey, conducted between Sept. 1 and 3, which included 2,258 adults. Of the adults who said they would switch to their mobile phone, 19 percent suggested they would switch to using special long-distance packages, 16 percent would switch to using their mobile phone using regular carrier calling rates; and 11 percent talked about their interest in using a VoIP service or application.

“The message seems clear, consumers want to change their existing provider and change to calling from a mobile hand set,” says Andreas Bernstrom, CEO of Rebtel (News - Alert), which sponsored the report.

 And that indicates there’s significant opportunity for new service providers of both voice and video services to capture a majority of the U.S. consumer market, he says.

Of course new technologies and networks don’t always translate into more money and new growth – at least not for everybody. And they can create a lot of uncertainty for all players in the market as those players, and regulators and legislators, decide on the different models for network engineering, pricing and setting other requirements for new networks and services.

As many of the readers of the publication keenly understand, it can be a huge challenge for newcomers to come up with innovative approaches; find the funding that will enable them to bring them to market and sustain them until they are self sustaining; get the necessary legal, technical, marketing and distribution requirements in place; and then capture and keep enough of the customers that will allow them generate enough margin to enable their businesses grow and become profitable.

Meanwhile, for incumbent service providers – which typically have more assets and have had the experience of addressing new technologies and changing business models over the years – the industry’s move to IP-based communications and the open application creation model that has recently emerged are viewed both as an opportunity and a threat.

These companies have existing network assets and customers they are paying for, deriving revenues from, and fighting to protect. At the same time, network owners need figure out how to contend with all this new bandwidth-loving traffic, which is putting an ever-greater load on public networks. That is pushing those that own these networks to invest in new infrastructure so they can bump up their capacity, and better manage bandwidth and real-time application considerations like latency and jitter. The question is, what kind of solutions will help these companies move forward to support more, and more high-margin, services and not set them up for losses, as bandwidth pricing trends are not tracking at the same rate as are bandwidth demands – far from it, in fact.

Another major question for all involved is to what kind of control network owners will be able to have over their own networks, and how it will impact them and their competitors.

At the same time, there’s a big question mark as to how remote and rural customers services will be supported over time given the federal government’s national broadband initiatives and the fact that IP-to-IP federations are moving traffic – and dollars – away from the public switched telephone network.

Pointing to Sprint’s (News - Alert) recent PIN announcement as just one example of services that are enabling VoIP providers to bypass the PSTN, Tom Skidmore, regional sales director of of BillSoft (News - Alert) Inc., recently noted that while this may be a positive development for the VoIP space, it only complicates things for Washington regulators who have long been trying to figure out how to contend with the Universal Service Fund’s “death spiral”.

That said, while there’s a great amount of new opportunity out there for companies in the IP communications space, there are also many challenges for both IP service providers, and those that are working with them and other interested parties to create the physical and legal infrastructure to support all of this.

It’s a delicate balance.

Edited by Stefania Viscusi