Wireless Carriers Urgently Need a Small UCaaS for SOHO Companies

By Special Guest
John Malone, Eastern Management Group
  |  July 30, 2020

Small enterprises want 12 unified communications applications right now for productivity improvement

Eastern Management Group consultants have learned much designing UCaaS systems for large service providers, and from studying the PBX (News - Alert) market. In this post, I'll cover why mobile carriers and enterprises quickly need a very small UCaaS; how a 1-2 seat UCaaS improves small customer productivity and carrier profitability; and how a mobile carrier can get a new UCaaS system up and running in weeks not years.

Mobile Carrier and Small Customer Financial Return

The carriers I'm referring to are wireless companies like Verizon, AT&T, T-Mobile, US Cellular, and Vodafone (News - Alert).

It's not my intention to pick on Verizon; however, the company is something of a proxy for its cohort, and Verizon just turned-in the second quarter 2020 (Q2) earnings report. Wireless service revenue was down 1.7% Y/Y and equipment down 10% for business and consumer. Business adds were 97,000 in the quarter. Roaming revenue was minimal and will be so again in Q3.

Expectations are for Verizon wireless and wireline revenue to fall 4.5% in Q3 after a dip of 3.7% in Q2. Verizon business adds for the full 2020-year look to be 540,000; this ignores 300,000 Verizon customers that have taken the FCC (News - Alert) Keep Americans Connected pledge; a percentage is sure to renege.

For the full 2020 year, J.P. Morgan analysts are modeling down Verizon business revenue by 3.4%.

Verizon and other wireless carriers should offer a new wireless UCaaS product to add a million or more 1-2 seat UCaaS customers, with greater than a billion dollars of new revenue carrying high gross margins, and zero to minimal CAPEX; this is all within reach.

During the COVID-19 pandemic, very small businesses are struggling to cope with furloughs, layoffs, and few remaining staff or no staff at all. This spring, in the course of development on our market report "Worldwide Hosted PBX Market 2020-2027," Eastern Management Group did a productivity improvement study of 300 companies with one or two employees that recently purchased a unified communications system. Ninety-three percent reported already benefiting from the system. Of the 12 UC applications we examined (e.g., messaging, presence, data sharing, video), every feature was considered valuable by at least 75% of the businesses surveyed. The study and others we've performed also found UC applications increase small business productivity by more than 50%. Customers are willing to spend a lot each month for these applications, which handsomely benefit the small customer and the carrier. And all of these features can be provided on a small carrier offered, mobile UCaaS.

Choosing a Mobile Carrier UCaaS Platform for 1-2 Employee Customers

Carriers use many class 5 switches and abound in engineering talent. Building a UCaaS suitable for 1-2 employee customers would be second nature. The problem is timing. The last decade shows telcos may spend 2-4 years bringing up a softswitch deployment to sell UCaaS.

Repurposing an existing UCaaS platform, say a Cisco HCS for large enterprises with more than 300 seats, or a BroadSoft platform for customers with 10-300 seats, is impractical. Carriers require another UCaaS solution and should choose the right tool for the job. My opinion is CPaaS is the answer for wireless carriers and customers in terms of cost and timely delivery of the benefits.

A multi-tenant CPaaS service from one of many current providers - Eastern Management Group monitors about 30 - can be brought up right away, that is to say, in weeks. With systems we have designed for carrier clients, all UC features for any vertical market or size customer are available off the shelf. Some CPaaS companies can deliver a secure cloud PBX and carrier-grade SIP trunking. There are redundant architectures, customer support, billing, and customer training. Tier 1, 2, and tier 3 support can be made available from the CPaaS vendor on day-1 and quickly transitioned to carrier-provided later on. With CPaaS, a carrier can be in the 1-2 employee UC business immediately and then build a softswitch layer below it, if desired. Over a 2-4-year period, the mobile carrier can build out a front end and back end system and transition from CPaaS to softswitch. There are no upfront costs, and carrier profit from CPaaS would be in the 43-44% range.

For mobile carriers like Verizon, AT&T (News - Alert), T-Mobile, US Cellular, and Vodafone, a new small UCaaS tees-up new customers for wireless, new revenue from applications, more long-distance revenue, more data, more roaming, more UC applications, and almost no churn. For small customers that need productivity improvement to get through the COVID crisis, there are high-value UC applications aplenty.

Vertical markets like retail, personal and professional services have many prospective customers for a small, mobile provider UCaaS. Customers will purchase pull-through services at the rate of two for every ten seats. Choose the applications needed by these prospective customers (e.g., presence, messaging), and it amounts to more revenue for the mobile operator.

Half of all small businesses are stuck in an entirely pre-UC world. Many are willing to spend on UC phone systems that our studies show yields a 50% or more increase in productivity. At the same time, wireless carriers need millions of very profitable new high-value business customers; this is a win-win, particularly in a weak economy.

Research for this post about the 1-2 seat UCaaS market is from "Worldwide Hosted PBX Market 2020-2027." For more information contact our analyst team or John Malone (News - Alert) directly jmalone@easternmanagement.com

Edited by Maurice Nagle