What is the Value Prop of VoIP?

Peter : On Rad's Radar?
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| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

What is the Value Prop of VoIP?

"It is happening and no one seems interested in stopping it - that hosted voice services are rapidly becoming a commodity service," Dave Michels

"According to the Telecommunications Industry Association, wireless has become the preferred voice-services option. Wireless revenue in 2012 is forecast at $335 billion, while all other forms of fixed network voice revenue will only total $176 billion ($132 billion for wireline, $38 billion for broadband access and $6 billion in cable/television revenue)," blogs David Byrd of Broadvox.

Those are interesting numbers. And there is more interesting numbers when you look at VoIP.

"Zeus Kerravala estimates penetration [of SIP Trunking] is right around 5% in the United States," reports Razorsight. Just 5%! The blog continues with: "In some cases, it is argued, SIP trunks do not save money." This statement flies in the face of an imperative in our industry. If a SIP Trunk isn't saving money, why not sell and install a TDM PRI that has known stability and quality? This would certainly be the reverse of where the Industry is heading: all IP. But if we are heading all IP in a move to save money - more for the carriers than the customers, I think - and SIP Trunks are not a big cost savings, where does that leave the sales proposition?

According to Insight Research, Hosted PBX is about $500M now. That's not a lot. I figure with 1000 service providers running around yelling "I'll save you money" while cutting pricing to close any deal, that figure would have to be greater than $1B.

Revenue is dipping in everything - GigE ports in a data center, T1's, MPLS, DIA, broadband. The only rates going up are cellular and TV.

Scary stat: "In 2010, operators made on average only $13.21 per user per year from mobile VoIP services."

There are reasons that the Hosted PBX revenue is small: VoIP is sold as cheaper than TDM, so on the conversion from TDM to VoIP the bill declines. Also, there is no way to accurately report the Hosted PBX industry with its 1000+ providers out there with everything from an Asterisk box to a Broadsoft suite. Also, switched voice traffic is migrating to other avenues like chat, IM, SMS, and cellular. That's why Unified Messaging and Hosted UC should be huge - but sadly are not.

One reason is that the sales pitch has been so loud for so long on I Will Save You Money that we have trained the marketplace to buy it that way. Sure, you can blame the Agents and the Direct Sales folks, but at the end of the day -- going back to the pin drop in 1986, we have been working on giving away margin and revenue. Oh and neglecting Value.

"The cable industry, without a doubt, is the main purveyor of VoIP in the United States. An industry strategy is to bundle video, VoIP voice and data. The approach is to offer a good deal on the three services....The bundling strategy has served cable operators well and has been embraced by telephone companies," reports Carl Weinschenk. This bundling has even resulted in a Price War. Again no Value, just commodity price shopping.

The thing about VoIP that most companies don't get is that it is just an app - Google Talk or any chat app that adds voice; gaming consoles that let you chat with your peers; Skype; MagicJack; mobile apps on your cellphone; audio conferencing; and now Hosted PBX. The Value of VoIP is that it can be attached to other apps like email or a computer we call a PBX or on another computer we call an IP Phone. The Value isn't in the dial-tone. The Value is in how it is applied and used.

Hosted PBX (and its complicated cousin, Hosted UC) take VoIP to a different level. Therein lies the problem though. Now it's tougher to sell!

The value of VoIP is in a click-to-call button or a Speak Live app on your website that converts prospects into customers.

The value in VoIP is allowing the medical office scheduling to be completed by the computer and not a human to save time, be efficient and let the office manager do other tasks.

With debt piling up and revenue waning, it's time for the carriers to change the way they sell. It's time to sell on Value. It's also time to realize that Layer 7 of the OSI model - Apps - is where they break-away from the ILEC's.

I've written before about what EarthLink should do, about niche marketing and about bundling. No is listening yet. But I will keep trying to drive this point home.

Another way to look at it:

People would pay more for Voice if we would sell it in a non-traditional way. Stop selling it like a POTS line.

Look at what Jon Arnold writes, "Building off that base, [ShoreTel] understands the voice 2.0 value proposition - it's all about the applications and the experience - not just cheaper, reliable connectivity. With VoIP, dial tone quickly becomes a commodity, and their view is that high value applications are the best way to differentiate against low priced competitors. One example was their Live Answer demo - a simple cloud-based diagnostic tool that shows what percentage of calls is being answered live. This basic piece of information has inherent value not just in the contact center, but for any business where phone inquiries can lead to sales."



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