Yesterday we announced a new hosted fixed LTE voice over solution (VoLTE) that enables mobile service providers to further monetize their LTE spectrum with easy-to-launch and profitable VoIP services. This is ideally suited for the rural, regional and competitive mobile network operators (MNOs), but it works for any mobile operator that wants to add additional voice revenue to their fixed LTE broadband service without taking on the risk and significant investments.
Why Fixed LTE?
There are three primary reasons mobile providers have started using the latest mobile technology for a fixed offering:
1. Protect and monetize spectrum today
While waiting for the mobile ecosystem to develop and LTE penetration to expand, MNOs are deploying an additional revenue-generating service that leverages their investment in spectrum and LTE gear. The regional MNO community does not have access to the broad device ecosystem as tier 1 MNOs nor have they yet fully overlaid LTE across their footprint. Consequently, analyst firm iGR projects that LTE penetration of the subscriber base of the Regional and Small Operators (RSOs) in the U.S.—essentially all those MNOs not AT&T, Sprint, T-Mobile, and Verizon—will only each 20% in 2015.
Further, fixed broadband services help where there are “use it or lose it” provisions associated with operators holding LTE spectrum. Fixed broadband is such a service utilizing that spectrum. The Competitive Carriers Association reports a hefty sum spent in spectrum—its members spent approximately $1.8 billion on 700 MHz spectrum—so the more revenue that can be derived from that investment today, the better.
2. Net new revenue opportunity
Fixed LTE broadband enables MNOs to expand to new markets and capture bigger portions of the communications budget of consumers and businesses. They can add more services to the mobile bill and grab larger portions of subscriber spending.
3. Address rural broadband demand
Fixed LTE is a viable technology for addressing the “Digital Divide.” In the Executive Summary of the National Broadband Plan published in 2009, the FCC noted that broadband is the infrastructure challenge of this century and that “broadband in America is not all it needs to be. Approximately 100 million Americans do not have broadband at home.” The transformation of the Universal Service Fund and the advent of the Connect America Fund aim to address that gap and get underserved and unserved areas on par with the rest of the country.
Fixed LTE provides a cost-effective alternative to wired technologies for delivering sought-after broadband connectivity to rural America.
Add Voice to that Broadband
Voice is a key part of service bundles, helping to enhance ARPU and subscriber loyalty. Globally, single-player services have plateaued and it’s all about the double-play and triple-play bundle. Leveraging that LTE fixed broadband service, MNOs can address the demand for low-cost voice services for homes and businesses. In competitive markets, MNOs with a solo broadband play are at a disadvantage compared to telcos and cable operators in that same region, so voice protects their overall push into fixed services.
As an example, one of our customers that launched voice for the first time on their broadband offering saw a positive impact in overall subscriber take rates. The addition of VoIP services reduced the number of customer cancellations that take place between signup and installation by 90%.
We believe that voice services remain essential and mobile service providers can add more revenue to their LTE endeavors with fixed VoIP services and capture portions of the $80 billion fixed voice services market in North America. These new services include residential VoIP, hosted business VoIP and SIP trunking. These services can also be extended via soft clients/apps to smartphones, tablets, and PCs.
However, the traditional build-it-and-they-will-come approach of VoIP presents a risky and lopsided business case calling for high capital expenditures and operational costs including equipment maintenance and operations and support staff. That cost remains even if subscriber take rates do not match forecasts. This gives MNOs pause even as the incremental revenue beckons.
iGR’s Iain Gillot recently stated in a webinar that “RSOs need alternative operating solutions for LTE” as the traditional model will not work due to the overall high CAPEX and OPEX. He argues that more hosting and virtualizing is required for these MNOs to thrive.
We agree with that sentiment and believe it applies to services running over LTE as well. Alianza has delivered a hosted solution for fixed and cable providers since 2009. Our new fixed VoLTE solution is built on that proven Cloud Voice Platform and leverages more than four years of experience delivering VoIP over WiMAX, satellite, and fixed broadband. Alianza hosts and manages the entire solution, allowing service providers to cloud source VoIP instead of building and running a voice network. Employing a SaaS-based model, Alianza eliminates capital expenditures and provides a clear business case for VoIP over fixed LTE.
While mobile VoLTE is on the horizon, fixed VoLTE or VoIP—and that incremental revenue opportunity—need not be. Cloud voice platforms provide an easy path to add revenue and deliver a double-play VoIP and broadband bundle to customers. The old way of building a network and justifying that investment over a five to ten-year period does not make sense. The cloud maximizes net margin contribution starting with customer number one and assures profitability at the outset.