How ISP's can take Advantage of the VoIP Revolution
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How ISP's can take Advantage of the VoIP Revolution






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How ISP's can take Advantage of the VoIP Revolution Document Transcript

  • 1. Riding the VoIP/PBX Revenue Wave How ISP’s can take Advantage of the VoIP Revolution
  • 2. Introduction This white paper, crafted by BlueWave Telecom, with a myriad of research and thought- provoking analysis demonstrates how every ISP, carrier, and communications reseller can jumpstart their businesses and add additional revenue streams with reasonable, cost-effective effort. BlueWave challenges all ISP’s and carriers to leverage their current business broadband customers by turing them into a new recurring monthly revenue source, through managing their business phone systems using BlueWave’s cost- effective, carrier grade technology. BlueWave’s VoIPFlow solution utilizes a centralized on-demand service with a business model that requires little up-front capital expense; this technology puts the ISP or the carrier in the lucrative virtual phone service provider business and allows them to compete effectively against the incumbent phone service providers. This service is state-of-the-art, utilizing a 64bit Linux kernel running in an on- demand software/hardware platform in the service provider’s data center and is tailored for businesses ready to move to Voice-over-IP phone systems, thereby taking advantage of all the services and additional cost savings these solutions offer both providers – and in turn – business customers.
  • 3. The Commoditization of Broadband Access The communications landscape has been changing rapidly since the late 1990’s. The advent of affordable high speed Internet connections has caused both the supply and the demand to soar to such a degree that high speed access has gone from a rarity to a commodity. Numerous new players have, upon seeing this staggering growth, entered the market. Where once there was only either a T1 or DSL offering from traditional PSTN carriers, now cable operators and independent local providers are offering a range of broadband connections. There is an almost insurmountable difficulty each of these carriers face: how to bring new, value-added services to their customers in the face of rising maintenance costs and shrinking profit margins. As a direct result, it is this very conundrum which has left ISP’s and carriers searching for ways to increase revenue, without incurring huge capital outlays and unwieldy support infrastructures. This problem can be solved through the proper provisioning and management of VoIP (voice- over-internet protocol) and more specifically, VoIP PBXs. However, simply offering this service is not enough; the forward-thinking service provider who wants to be successful in the virtual IP/PBX market must find both a business model that works, and a platform that is easy to deploy, manage, and scale. VoIP Technology: An Understanding Understanding VoIP Conceptually, VoIP is simple. Voice data is converted to digital format and broken down into IP packets. These IP packets then go through the call setup process to establish a permanent virtual circuit (PVC) that exists for the life of the call. The packets are compressed for maximum efficiency and sent via the Internet. On the receiving end, the packets are then reassembled, decompressed, and converted into the proper format for the hardware being used. There are quite a number of standards and algorithms utilized throughout this process (ITU-T H323, ITU-T G.711) and other complimentary technologies such as SIP (Session Initiation Protocol IETF RFC 3261). In short, it is sufficient to note that VoIP involves the conversion, compression, transport, de- compression, and re-conversion of a voice stream which is delivered via an existing Internet connection. Advantages of VoIP There are a number of advantages to VoIP over the traditional PSTN approach. First, the consumer save money since much of the legacy PSTN infrastructure can be bypassed. VoIP carriers do not have to charge based on usage minutes for the majority of their
  • 4. traffic since the traffic is carried over existing broadband connections. A flat fee is commonly charged for service. This provides customers with a predictable cost for telecommunications services and allows them to eliminate their existing legacy phone lines and the associated charges that come with them. There are many other advantage for the business consumer, the least of which is the concept of converged communications. This benefit allows all communication streams to converge into fewer and fewer applications. In the case of VoIP, your voicemail can be delivered to your email inbox, your phone system can be integrated with your contact management software, etc… From the provider side there are many advantages. Since the traffic is carried on existing broadband connections, there is no need to invest in costly infrastructure in order to offer VoIP services. Additionally, since VoIP is digital rather than analog, a significant amount of additional services can be created and packaged for offering to either business or residential customers. The introduction of the IP based Public Branch Exchange (PBX) has opened up the opportunity for small businesses with multiple locations, or even telecommuters, to project the image of a larger company in a traditional office setting. It is this market that holds significant promise for an ISP looking to expand their offering to their existing business customer base. The Business of VoIP The Growth of VoIP It was only in 2000 that VoIP really gained a foothold and became viable; since then, it has grown steadily. For example, a recent study predicts that revenues from hosted IP voice services will grow from $726M in 2005 to $3,866M in 2008 – while traditional Centrex will decline from $487M to $310M in the same period.1 A study by Infonetics Research concluded: “Our forecasts show a continued steady uptake of VoIP over the next few years, with adoption following a relatively straight line, not the S-shaped curve typically seen in the adoption of emerging technologies,” said Matthias Machowinski, directing analyst at Infonetics Research. “That’s because VoIP uptake is largely tied to an organization needing a new phone system, and when companies buy a new phone system, they generally invest in the latest technology, which happens to be VoIP-based now. By our estimates, almost half of small and two-thirds of large organizations in North America will be using VoIP products and services by 2010.” 2 1 Study performed by Infotech in late 2005. 2
  • 5. That same study also found that adoption of VoIP among small businesses will triple by 2010. Considering the latest figures from the U.S. Census Bureau, that number is approximately 4,900,0003 businesses in this category. Hence, it is easy to understand that the growth projections currently being touted are very plausible, if not somewhat conservative. VoIP, as a digital product, offers potential carriers with numerous advantages over traditional PSTN products. In general, the infrastructure provisioning of VoIP service is significantly easier and more cost-effective than PSTN, while enabling the customer to have numerous additional options as a direct result of the digital nature of the service delivery. Traditional PSTN carriers are jumping onto the VoIP bandwagon, albeit more slowly due to their need to recoup infrastructure build out costs they incurred for their traditional PSTN networks, but still in earnest. They are lured by the growth in the market which has a potential of reaching $1.3 billion by the year 20094. Fixed Mobile Convergence (FMC) is another trend contributing to the growth of VoIP services, as well as the overall decline of PSTN services. In conjunction with this, cell phones have become so commonplace that many individuals are not installing PSTN lines in their residences, selecting the portability and convenience of having only a mobile phone in lieu of a traditional land line. FMC is introducing this same concept to the business world; reliable VoIP services are needed to meet this demand. FMC uses a combination of traditional cellular technology (GSM, CDMA, etc.) combined with VoIP services delivered on dual mode handsets which can access either communication method. The underlying infrastructure requires a VoIP PBX solution which can provide the business with seamless communication -- at a fraction of the cost of the current combination of PSTN and cellular services. Understanding Telecommuting And Its Relationship To VoIP Telecommuting is one factor driving the trend toward VoIP, as is the growth in home- based businesses. While finding authoritative figures on the number of workers currently telecommuting is difficult, according to the U.S. Department of Labor, in 2004, there were at least 14 million Americans telecommuting at least part time. This same report also stated that there were an additional 7 million running businesses out of their homes.5 Once again, the same study also noted that 44% of U.S. companies offered at least some options for telecommuters. This is up 32% from 2001. Other figures, from less authoritative sources, put the number of telecommuters and others working from home at almost 50 million. Regardless of which data source the reader chooses to give the most credence, the relality is that telecommuting is a growing trend, even though 3 4 5 Bureau of Labor Statistics
  • 6. there are still some technological barriers which must be overcome if the trend is to continue. There are a number of drivers affecting the growth of telecommuting -- ranging from the altruistic in reducing the amount of carbon dioxide omissions from commuters; to the purely economic, including the reduction of the costs associated with supplying physical office space. Regardless of the drivers, it is clear that the telecommuter, as an alternative to the classical on-site office worker, continues to become an upward trend. In the latest report on workplace trends done by, for example, telecommuting and flexible work hours were listed as the number 2 trend in overall changes being offered by employers in order to attract and retain qualified individuals.6 As more and more businesses realize the benefits of remote staff, it is expected that this trend will continue. Providing a workable communications infrastructure enabling individuals working at home to have the same capabilities as their traditional office-based counterparts continues to be one of the most significant barriers to telecommuting entry. It is at this intersection that hosted-VoIP-based solutions, such as an IP PBX, can offer a realistic solution at a cost-effective price. A hosted IP PBX can give each telecommuter the appearance of working on site at the main corporate campus. Market Pressures The growth of high speed Internet access is one factor fueling the VoIP revolution. In the August 15th issue of Newsweek Magazine, writer Johnnie L. Roberts wrote, “As of December (2004) more than half of U.S. homes were wired with the high speed pipeline to the Net.”7 Homes aren’t the only ones taking on this VoIP challenge; there are a number of municipalities seeking to offer their own high speed Internet solutions to citizens where private industry has been either unable or unwilling to step up to the plate. In a July 2005 article, PC World Magazine observed that both large and small municipalities are looking into providing low cost high speed Internet service to their citizens.8 In the article, although the legal challenges facing municipalities were cited, the success of local efforts was also highlighted. The small town of Chaska Minnesota has been enjoying publicly-funded wireless Internet services since 2004. The article continues, “Residents there pay only $16 monthly for 1.2-mbps access, about half the average broadband bill from commercial providers. The wireless network has been inexpensive to deploy, says Bradley Mayor, Chaska's information systems manager. He says it cost the city about $850,000 to roll out.” This is not just a small town 6 advice/part_par585_body.html 7 Johnnie L. Roberts, “Keepin’ it on the Download”, Newsweek 8/15/2005 pp 40-1 8 Tom Spring, “Public Broadband Hits Speed Bumps”, PC World, July 15, 2005
  • 7. phenomenon; major cities, including: Philadelphia, New York City, and San Francisco currently have projects underway to provide wireless Internet access as well. If the trend toward publicly available wireless Internet access continues, it will be necessary for commercial providers to find additional services to offer both business customers and consumers, in order to retain their marketshare and increase their revenues. The deployment of IP-based PBX services is the most logical add-on service available to commercial broadband ISP’s. In order to offer these services at a reasonable rate, bundling them with the standard high speed Internet connection, will allow ISP’s to compete with municipalities offering free and/or additional low cost services of their own. In short, the commoditization of high speed access combined with the relatively high cost of attracting and retaining new customers, is forcing ISP’s to rethink their overall business models, in an attempt to cut their costs whie increasing their revenue streams. VoIP and IP/PBX’s offered to existing small to medium business customers offers the greatest promise for meeting this need. Entering the VoIP and IP/PBX Market Since the business models and market directions of the VoIP and IP/PBX spaces have been analyszed, it is important to take a minute to ask “How does an ISP enter this market”? While the answer may be a bit different for each provider, it is essential to understand the basics and translate them to each individual corporate structure. The myriad of advantages an ISP, carrier, or reseller face when entering this market are significant. They include: 1. VoIP and IP/PBX services can be delivered via the current broadband infrastructure supported by ISP’s and carriers, therefore, additional investment in the expansion of the basic infrastructure is unnecessary. 2. Capital outlay for equipment and software is minimal in comparison to other IP- based service offerings, such as IP/TV and on-demand services, which are largely focused on the more costly residential customer. 3. Businesses that fall into most ISP’s core customer base are prime candidates for the services that can be delivered through VoIP and IP/PBX offerings, thereby giving the provider an opportunity to “up sell” existing customers, as opposed to prospecting for new ones. 4. By offering bundled broadband, VoIP and IP/PBX services, an ISP or a carrier can reduce the rate of customer turnover by becoming an integral part of the business customer’s communication infrastructure. This translates to cost- effective customer retention.
  • 8. 5. By offering bundled broadband, VoIP and IP/PBX services, an ISP or carrier can differentiate themselves from their competition. What are the cost factors for entering the VoIP IP/PBX Market As with any endeavor, there are costs associated with entering the VoIP market. No new technology is free to deploy, but the critical business decision is to understand the up front cost and the pricing for the service, so any organization entering this market can determine a realistic ROI timeframe. The costs associated with setting up VoIP and IP/PBX services typically include: hardware, software, provisioning, maintenance, marketing, and finally, and sales. In general, the cost for hardware and software are the bulk of the upfront capital expenditures. Facilities costs can be controlled by installing the hardware in existing rack space. Since the hardware are usually standard Intel® or AMD™ chipsets, the cost of the hardware is held to a minimum, and since software is usually bundled with the hardware those costs are realized together. The real savings come with the provisioning, maintenance, marketing, and sales. Since VoIP and an IP/PBX are software-driven digital services, there is little need for a field service team involved in the provisioning process. The majority of concerns can be addressed from the customer service office, offsite, by logging in to the appropriate system. Additionally, this minimizes the maintenance costs, since once again there are no customer premise equipment beyond the phone sets, and possibly the routers which are needed to make the system work. These can be pre-configured and shipped to the customer, who can install it without the assistance of a field engineer. Marketing and sales costs can become a huge variable, depending on your customer list and current communication methods. However; as we mentioned earlier, since you can sell this new service to your existing customer base first, it is easy for an organization to maximize their marketing dollars, by utilizing existing customer communication vehicles and offering them this additional service. Cost-Effective IP Services Deployment with VoIPFlow™ BlueWave Telecom has developed a product which allows ISP’s to enter the VoIP market quickly, efficiently, and with minimal capital outlay, thereby giving them the ability to control ongoing maintenance costs, as well as user expansion. VoipFlow, BlueWave’s flagship product, is a software platform which exists for the express purpose of enabling service providers to provision and manage hundreds, even thousands, of virtual PBXs in concert with each other. VoIPFlow’s user interface is abstracted away from the
  • 9. underlying open PBX configuration files, and allows the user to completely provision and manage the PBX via a simple and intuitive user interface. Systemwide settings are available to manage the entire PBX inventory. VoIPFlow’s foundation runs on an Intel® or AMD™-based server so a service provider may either host the solution in its data center, or select an on-demand solution, with a BlueWave-hosted platform. Regardless of which methodology is selected, VoipFlow enables the provider to have the ability to provision and manage a significant – and growing -- number of virtual PBXs through a reliable and highly-scaleable platform, thereby enabling them to offer additional services, while continuing to maintain the cost structure. VoIPFlow Architecture VoipFlow is built on a custom 64bit Linux foundation known as the BlueWave Kernel. BlueWave built the kernel so they could control and manage the internal facets of said kernel. As a result, there is nothing unnecessary in the software; merely the core which is required to provide a highly efficient operating system. On top of this foundation BlueWave’s team of Fortune 500-experienced technologists has added a custom virtualization layer that allows every BlueWave-defined PBX to appear as if it is running on its own server, complete with its own Linux image. BlueWave’s engineers have ensured, as a result of this technology foresight, that the overhead of the virtualization layer is extremely efficient, typically utilizing less than 2% of system resources. Security and licensing are key cornerstones which are included, to provide accurate billing, inventory, and software updates to both sets of systems. The pluggable PBX module resides on top of the virtualization environment and enables BlueWave to take advantage of any IP/PBX system on the market supporting open standards. BlueWave’s technology, it is important to note, is carrier-grade and carrier-agnostic. High availability has been engineered into the platform by providing auto-leveling, load balancing, and fail-over capabilities. In addition, BlueWave has created a friendly CSS-based user interface which provides features, including: One Click PBX Deployment™, allowing service personnel to quickly and easily provision new PBX instances.
  • 10. The BlueWave Advantage BlueWave’s hosted virtual PBX solution is special; there is no hardware to install on the customer premises which virtually eliminates the need for field service personnel. From a customer point of view, this deployment method also means the customer gets the appearance of a single location, even if its’ employees are geographically dispersed. Organizations utilizing BlueWave and VoIPFlow technology have even more to gain; the entire featureset of an advanced PBX in integral to the VoIPFlow product, including • Auto-attendant • Music on hold • Unlimited menus • Call Queues • Voicemail • Find me / Follow me • Unlimited extensions • Local Directory • IVR • Security Bibliography Cromer, Douglas E. [1997], Computer Networks and Internets, Prentice Hall, Upper Saddle River, New Jersey