Another Hosted PBX Merger

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

Another Hosted PBX Merger

Tampa-based Telovations acquires North Carolina based FeatureTel, combining two Broadsoft providers. No financial details were released. Could this be a sign about the viability of the US Hosted PBX space?

Many of the Cloud Comm companies haven't grown as fast as their backers would like. Mainly it's a sales problem. As I mentioned yesterday, it's sold on price in many instances. There aren't that many ITSP's with a notable value statement or with a chief differentiator. This leads to a commoditization.

It's expensive to run a sales organization - paying sales people even when they aren't closing enough business to cover their expense. It's also expensive to brand your company nationally (as many have tried to do). Still others don't really do any marketing, marketing that might establish at least a regional reputation, which makes sales easier. Even better would be a marketing campaign that produced inbound sales calls, but let's not get crazy.

The funny thing is that the worst examples of VoIP IMO - MagicJack, SunRocket and Vonage - did spend on marketing and branding successfully. The marketing even overcame their customer service issues and quality.

Just as Unity Business was acquired by Telesphere and Geckotech was acquired by M5, there will have to be more consolidation of this type for a few reasons.  The Broadsoft providers can merge almost seamlessly (at least on the customer side). The Broadsoft providers have huge amounts of cash invested in the softswitch, the complex licensing and their current customers - which doesn't leave a lot of cash for acquisitions and marketing campaigns.

And time is running out. Comcast, TDS, Windstream, and Cox have started rolling out Broadsoft-based Hosted PBX to the SMB market with two notable difference: each has a brand and each is a network operator, which means it controls the voice quality and has the price advantage.

We have seen what happens when the ILEC's enter a market late. DSL was brought to the nation by DLEC's - Covad & Co. Then dial-up ISP's got into the game. Then the ILEC's came in and grabbed it all up. The ILEC's were not just the vendor for the ISP's and DLEC's, but their chief competitor, who dropped retail pricing below wholesale rates (and caused the CLEC and ISP expensive challenges through its usual games of billing, install and repair problems). I fear that Hosted PBX will be the next DSL as the Duopoly marches in and takes the lion's share of the market.

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