Broadband Communities

JUL 2017

BROADBAND COMMUNITIES is the leading source of information on digital and broadband technologies for buildings and communities. Our editorial aims to accelerate the deployment of Fiber-To-The-Home and Fiber-To-The-Premises.

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JULY 2017 | www.broadbandcommunities.com | BROADBAND COMMUNITIES | 85 accelerate revenues with a success-based business model that tightly aligns investments with service demand. THE RESIDENTIAL MARKET In the residential market, many ISPs can package voice with data and video to grow residential service revenues and curb churn. According to the Leichtman Research Group, nearly 70 percent of broadband subscribers and nearly 60 percent of all households purchase bundled services today. ough multiplay packages are fundamental for keeping pace with the competition, they are also a major revenue source; nearly half of gigabit broadband providers say they take in $150 per month per subscriber or more for triple-play services. With prices ranging from $15 to $35 per month – depending on market and competition – residential VoIP services are a straightforward way to boost average revenue per user. Customer adoption can be strong, too. Across all U.S. cable operators, nearly 40 percent of cable broadband subscribers take phone services. One electric cooperative that has been in the triple-play game for more than five years reported a 56 percent take rate on voice. In rural markets, there is often no choice for advanced VoIP services from local providers, and customers are stuck with antiquated, expensive phone options that have unwieldy à la carte pricing models. Many of these customers are ready to switch and bundle when they have options. VoIP services also help broadband providers recover costly fiber plant investments more quickly. With the right VoIP solution, broadband providers can realize 60–80 percent gross margins on residential voice services, accelerating investment payback. THE SMB VOIP OPPORTUNITY When it comes to VoIP, SMBs are a vast, largely untapped market for fiber broadband providers. ough a majority of large enterprises have already made the move to VoIP and unified communications solutions, most SMBs still rely on legacy TDM- based voice solutions. A survey of SMBs revealed that approximately 70 percent of businesses with 100–500 employees still use TDM solutions (legacy PBXs, key systems or Centrex), yet more than 80 percent of them are interested or very interested in moving to IP. And there are lots of SMBs: More than 2.3 million U.S. companies have 500 or fewer employees, according to the U.S. Census Bureau. ey employ a total of 56 million workers – each of whom represents a potential recurring revenue source. Small offices and home offices (SOHOs) represent another substantial market opportunity for broadband providers, as there are more than 3.6 million businesses with five employees or fewer in the United States. Accordingly, analysts see growth ahead for service providers. Hosted PBX/UC licenses for North American SMBs are projected to grow from 8 million in 2014 to 41.9 million in 2021, according to Frost & Sullivan. SMB SIP trunking adoption is also expected to increase; an IHS Markit survey found that 62 percent of SMB respondents would use SIP for a portion of their voice connectivity requirements in 2017 as the use of legacy TDM trunks decreases. ese SMB VoIP services have stronger margin profiles than residential services, and business customers have longer lifetime value and greater customer stickiness. Broadband providers can cash in on this massive market opportunity by capturing SMBs as they transition to IP. A Hanover Research survey found that nearly half of U.S. SMBs plan to evaluate a new business phone system – most within the next one to three years. In addition, newly launched businesses will choose IP-based systems from the get-go. VOIP IMPLEMENTATION OPTIONS Service providers have a variety of options for delivering residential and business VoIP services. ey can build out and manage their own infrastructure, leverage a traditional VoIP wholesale hosted/white-label solution or take advantage of new cloud voice platforms that deliver VoIP as an elastic service. Build your own network. e build model is the most capex-intensive, resource-demanding and time- consuming of the three approaches. With the build approach, the service provider designs, integrates and manages its own voice infrastructure, using traditional VoIP network elements (softswitches, session border controllers, application servers and so forth) or newer network functions virtualization (NFV) solutions – a complex, costly and technologically immature proposition. Large capital outlays and high ongoing operations expenses translate to lopsided SMB VOIP OPPORTUNITIES FOR BROADBAND PROVIDERS Business Lines offer advanced features such as hunt groups, advanced call forwarding and other hosted call-control capabilities for analog phones and key systems. Ideal for smaller offices that do not require a complete set of premium communications capabilities. Hosted IP PBX/UCaaS delivers a fully managed, feature-rich, cloud- based communications solution with IP phones that can be integrated into business systems such as CRMs and office productivity suites. Perfect for SMBs that want to extend office voice and uni fi ed communications (UC) services to multiple offices, mobile employees and teleworkers. SIP Trunking offers IP-based PSTN connectivity services for on- premises PBXs and UC systems.

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