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Today’s VoIP – Part II
Market Ecosystems, Business Models & Infrastructures
By Ken Osowski |
Last month, we looked at VoIP’s early years and two of its first stars: Skype & Vonage. In the few short years since these pioneers took the industry by storm, VoIP has evolved from a next-gen sensation into both a solid business sector and a stable, flexible network infrastructure that offers attractive economics and differentiation opportunities. The individualistic models of Skype and Vonage have been supplemented – many would say supplanted - by hosted VoIP, now a well-established, multi-tiered business model with powerful incentives for both new market entrants and established TDM-based prepaid service providers. An examination of hosted VoIP’s multi-dimensional structure and service provider hierarchy reveals why it’s a better business model. Hosted VoIP’s advantages:
• A model that leverages national and multi-national IP core transport carriers and embedded access carriers,
• An industry ecosystem that supports autonomy and differentiation in terms of regions, pricing, demographics, service bundles, etc.,
• A services infrastructure that is extremely robust, innovation-friendly, affordable and scalable, and
• An unusually broad spectrum of market opportunities that range from market entry without capital outlay via leasing, to maximizing the ROI on modest investments in services infrastructure by wholesaling capacity to other service providers.
The hosted VoIP service creation & delivery ‘hierarchy,’ infrastructure and business models can be delineated as follows:
Facilities-based VoIP Network Operators
There are two major types of facilities-based networks: the core and access. The meta minutes IP service providers who collectively “own the core” generate ‘raw’ IP transport, packaged as IP service minutes to service providers and some telecom-centric types of large enterprises, such as call centers. While it isn’t a common practice, these network operators can also layer voice services on top of this raw transport and market their services to direct end users.
These facilities-based network operators are usually just the core on-ramp that manages national-scale network elements, service logic and transport conditions. Facilities-based IP network operators can also provide SPs with direct PSTN connectivity. In a nutshell, the core facilities-based service provider typically:
• Owns their core facilities based on standardized SIP signaling, including the softswitch into which other SPs connect via network interface units, session controllers, etc.
• Offers substantial VoIP service supporting capabilities, such as 911 integration, CALEA, voice messaging, audio conferencing, operator assistance, conference recording and session control.
On the access side, the broadband network operators own the core and the access.
Virtual Network Operators
If facilities-based VoIP SPs are the meta-minutes creators of raw transport minutes, then VNOs are the creators of the voice services that sit on top of those minutes: hosted business VoIP, residential VoIP, conferencing, pre/post-paid, and even voice services integrated into entertainment, location and gaming IP-based services. VNOs typically own their own IP service delivery platforms, creating and maintaining application service logic in house, while looking to facilities-based network operators to implement E911 & CALEA.
The Virtual Network Operator:
• Typically owns their own voice service infrastructure: the service delivery platform and often the session border controller (SBC) depending on the scale of the service.
• Connects to facilities-based SIP-based carrier networks such as Level 3, Global Crossing, Quest, XO, etc. via a session border controller.
• May outsource PSTN connectivity to a facilities-based carrier who has converged IP-to-TDM media gateways.
The VNO’s investment is a VoIP service delivery platform that gives them far more capacity, service flexibility, innovation potential, and much better overall economics than traditional TDM switches. The Service Delivery Platform also should enable the VNO to ‘partition’ their services, reselling them to other service providers who will re-brand and often customize them, giving the VNO multiple lines of business and revenue streams. The service delivery platform includes 1) an application server to run the application service logic whether it is the VoIP, prepaid calling, conference calling or any other communications service, 2) an IP media server that plays prompts and collects DTMF digits and 3) the database management system for storing subscriber and call detail record information. Some providers also incorporate a web server to allow subscribers to access and manage accounts online. All of these can typically run on a single server system, and scale-out as the VNO’s business expands.
Particularly if a VNO has a multi-national business model, they’ll have SIP peering agreements & relationships with more than one facilities-based SIP carrier, in order to accommodate their full multi-national and/or multi-regional footprints. As a result, the VNO will also use a session border controller, which controls the call’s traversal and admission from one network to another.
VNOs are the quintessential ‘hosted VoIP service providers’ because they own the voice service infrastructure – the service delivery platform – and provide their hosted services to other SPs and end users.
Retail Service Providers
These value-added service providers basically are twice-removed from the facilities-based provider. Retailers/renters generally customize, re-brand and resell the service minutes of VNOs, who partition and in effect sub-lease their platforms. The retailer – through this partitioning and sub-leasing model – is likely to incorporate market-specific features such as language interfaces, currency translations, specific service limits and variations, etc. The end user interfaces directly with the retailer via a card, web provisioning, etc., and the underlying VNO is transparent.
Outsourcers
In this “white label” approach, the service provider buys the complete service from a facilities wholesaler or hosted services VNO. The only thing the Outsourcer adds is their own label and distribution strategy. This relatively new service provider hierarchy and services ecosystem creates enormous opportunity. It supports both economical and highly-differentiated VoIP market entry and TDM-to-IP migration, enables the individual service provider to self-define the levels of investment and service creation they’ll undertake, and allows for both scalable growth and multi-faceted business model expansion.
This hosted VoIP model enables enormous differentiation in terms of pricing, region, market, demographics, and affords the service provider far more market agility and business model flexibility than their larger counterpart service providers that form the IP Core and Local Access networks, and their competing TDM-based service providers.
Next month, we’ll take a look at how multiple services can be hosted over a common services infrastructure to achieve the best revenue potential from a single platform/network investment.
Ken Osowski is the VP of Marketing & Product Management at Pactolus Communications Software. He can be reached at Keno@pactolus.com.
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