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Service Provider Voice Movin’ On Up (To the Cloud)

Kevin Mitchell | January 23, 2017

Kevin Mitchell
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For the past several years I’ve started the year with a post looking back on how service provider voice is moving away from legacy approaches to a radically new solution we call the cloud voice platform (see last year’s Service Provider Voice - On the Road to the Cloud).

Yes, TDM switches endure in their obsolescence and softswitches and IMS technology linger while providers ready for the next step. NFV-centric VoIP networks are being contemplated, but many challenges remain for that network to become a reality.

Whether a provider built their own network with this early generation VoIP equipment or uses a wholesale solution or is brand new to voice, this model is increasingly attractive. From our conversations and travels we see:

  • Larger cable companies are shifting more attention to broadband and mobility and less on fixed line voice; but they need voice (Heavy Reading’s survey cited below showed that 81% of service provider respondents agree that voice helps drive adoption of other services in portfolio).
  • In fact, we heard from one top cable company that about 30% of its business broadband customers were using a hosted PBX service from an OTT UCaaS provider; that’s a lost opportunity for increasing revenue and customer stickiness.
  • In the last 12 months we’ve seen two RFxs from major MSOs for cloud sourcing next-gen VoIP in the cable market
  • Smaller independent cable providers love this cloud model that’s in line with their track record of outsourcing.
  • New FTTH broadband ISPs including rural electric co-ops, municipal owned utilities and over-builders see embrace cloud voice platforms as the path forward to round out their services portfolio.
  • Telcos are keenly aware they are broadband operators first and the phone networks are holding them back. There is growing interest in this new way to deliver voice services. Today, they can power new growth initiatives and tomorrow they can replace their aging, obsolete and overly complex TDM and VoIP 1.0 solutions.
So what happened in the year as proof of this market movement?

Increasing Industry Analyst Coverage

 

Cavell Group issued a report looking at the Communications Platform as a Service (CPaaS) Market.

  • The analyst firm took a broader approach to CPaaS to include cloud voice platforms, including Alianza.
  • While there are some core technology similarities, the cloud voice platform is distinct from CPaaS as directly helps service providers better deliver, manage and monetize residential and business voice
  • CPaaS players like Twilio and Nexmo pursue a different market and enable developers to embed communications in apps

Disruptive Analysis' Dean Bubley sees a category emerging and takes a stab at giving it a name in his blog post The rise of Managed Voice Infrastructure... or perhaps VIaaS or UCaaSaaS?

  • He cites some of the major drivers for service provider adoption and the right vendor landscape
  • For what it’s worth, it’s it not going to be called cloud voice platform; I like VIaaS over managed voice infrastructure as it captures the business model and cloud delivery aspect more clearly.

Heavy Reading conducted a survey and authored a white paper (sponsored by Alianza and Level 3) Migrating Service Provider Voice Infrastructure to the Cloud.

  • Service provider respondents indicated cloud voice platforms were very high as a roadmap for voice network evolution: 77% of CSPs surveyed will consider a cloud voice platform as a solution within the next three years.
  • Over one-third of respondents believe their current voice platform will reach end of life in the next three years, so addressing next-generation decisions are relevant for a sizable portion of providers
  • The report author Jim Hodges summarized that for some CSPs, "the emerging Cloud Voice Platform model represents the most sensible approach for addressing their TCO and platform evolution requirements."

Vendor Growth and Traction

 

Alianza records best year to date

  • Building on a very strong 2015, we again saw strong adoption by new providers and growth of new voice business from our existing customers
  • Our platform revenue increased by over 70% in the year
  • Over 50 North American service providers now deliver their suite of phone services using our solution

BroadSoft BroadCloud growth outpaces software CAPEX

  • SaaS revenue is the fastest growing part of the company with annual growth rates in the mid-double digits the last three quarters and it now represents about 15% of overall revenue (up from around 12% in 2015)
  • Mid-year BroadSoft reported 290,000 BroadCloud seats, up from 200,000 in the second quarter of 2015 (but keep in mind that some of these are retail SMB/enterprise accounts from the service provider customers they acquired)

GENBAND Kandy adoption

  • GENBAND rebranded Nuvia to Kandy Business Solutions during the year, merging the identity with its CPaaS solution
  • The company announced a handful of MSP and telco customers that have adopted the cloud voice platform offering to launch new UCaaS services

Metaswitch joined the cloud voice platform club

  • Another traditional VoIP equipment (and now NFV proponent) announced the MetaSphere Cloud Service that is “100 percent managed and maintained by Metaswitch, allowing operators to focus their resources on new business growth and service offerings.”

We view 2016 as another strong year in the cloudifying service provider voice infrastructure. We expect more players to enter this space as more service providers adopt a cloud-centric model to unlock growth potential for fixed line voice.

Read more about this new solution category in our white paper Service Provider VoIP: Next Gen is the Cloud.

Get the essential guide to next gen voice - Download Service Provider VoIP: Next Gen is the Cloud

 

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