Disruptive Innovation: The Cloud Helps Drive Value for Cable MSOs

Cable MSOs have delivered impressive growth, but in order to not shed value, they must respond to the coming disruption with innovation across products and business models. That’s the message from Accenture’s report Driving a New Era of Value Growth in the Cable Industry. We see the cloud voice platform as one such response to the headwinds associated with cable voice services and aging VoIP networks today.

The four potential disruptors—totaling up to a negative impact of $147 billion—were cited as:

  • The explosion of mobile data, devices, and usage – the speed and widespread availability of LTE and WiFi are a threat to the core fixed broadband business
  • Disintermediation and value chain migration – former supply chain friends emerge as competitors and deliver content directly to customers and cut out the MSO
  • Integrated digital super platforms – much like above, a new set of rivals for MSOs, the OTT players deliver triple-play and more
  • Digital operating models for delivering customer service – MSOs are margin challenged but cannot cut costs with customer service

The report notes that “each disruptor also provides an opportunity for MSOs to respond in innovative and value-generating ways.” We think moving cable voice to the cloud creates or enables some of the opportunistic responses that Accenture outlines.

In the last decade, MSOs elevated ARPU and won customers through voice services. According to SNL Kagan, U.S. cable providers served nearly 28 million VoIP subscribers in 2013 and grabbed a 36% share of the wireline voice market. But cable VoIP 1.0 solutions are obsolete or have reached the end of life – and the voice market dynamics dictate that a change be made in order to revitalize the residential segment and win new business customers.

Using this paper’s framework, we see cloud voice platforms helping address three of the responses identified by the authors:

  1.  Increase the pace of next-gen products and services with a cooperative approach to innovation and business model innovation – cloud voice platforms allow MSOs to quickly get to market with new SMB hosted PBX and SIP trunking services and do so with a success-based business model. Cloud voice platform is a complete, ready-to-go VoIP/IMS solution; the complex technology is hosted and MSOs can leverage the simple, easy-to-use interfaces to manage their voice businesses. The per-seat SaaS solution offers a clear business case as all infrastructure CAPEX is eliminated and the overall operating costs are also reduced and forever in line with revenue streams. The cloud makes it easy to leverage all that WiFi and LTE and extend voice everywhere (see opportunity two below).
  2. Transform the customer value proposition by delivering an integrated customer experience across devices. Using a cloud-based approach to VoIP makes it easy to add voice to mobile devices and tablets. MSOs extend their brand to new screens and add more value and usability to the residential or business voice service and aim to make their services stickier.
  3.  Extend the marketplace footprint – the cloud voice platform enables MSOs to offer hosted PBX and SIP trunking on a nationwide basis, a key to winning bigger business contracts. And for the MSOs with mergers and acquisitions planned, the cloud voice platform provides a solution to consolidate voice functionality onto a single universal platform and realize the cost savings promised through M&A.

Further, by moving cable VoIP infrastructure to the cloud, MSOs can free up dollars and people to execute on growth initiatives and defensive moves against the disruption.

There are lots of winners in this move. The cable provider gets a success-based, zero-CAPEX SaaS model that aligns with its revenue streams. The end customer gets the same reliable, high quality, and feature-rich service. The product and marketing staff at the MSO makes the voice cash cow more profitable and continues to have cutting-edge VoIP services in their portfolio. The engineering and operations groups end up with more capital expenditures and resources to fund other high-growth projects.

The market dynamics and the realities of today’s aging networks mean that cable providers need to consider new options for voice service delivery. For years service providers have demanded not just the latest and greatest technology, but also a transformation of the business model for voice. Cloud voice platforms provide that answer with a future-proof technology solution that is easier to manage, less expensive, and more agile than traditional infrastructure approaches.

Read more about cable voice evolution and the cloud-powered use cases and benefits to cable operators in our eBook Cable VoIP 2.0: Voice Moves to the Cloud.