Rural Telco Transformation with the Cloud

NTCA, The Rural Broadband Association, recently released the results of its annual member survey. The NTCA 2013 Broadband/Internet Availability Survey Report provides a number of stats that underscore how telco companies are becoming broadband multi-play providers. However, they face some challenges and there are a number of areas where the cloud can help these providers, especially telco voice and broadband.

NTCA represents nearly 900 rural telephone companies in 45 states. These providers are small—only four NTCA member companies serve 40,000 lines or more—but serve their markets well. The average survey respondent serves 4,565 residential and 1,649 business voice grade access lines.

There are a number of ways that cloud solutions can help accelerate this broadband multi-service shift and help rural providers be positioned for long-term success and deliver the services their customers demand. One such cloud solution is the cloud voice platform.

Looking at the report results, here are three ways that the cloud voice platform can help.

Cloud Voice Platform Speeds TDM to Packet Migration

Despite the inexorable march of all-IP over the past decade, there is a smaller penetration/conversion to VoIP in rural markets. Only 19% of respondent telcos currently offer VoIP, up slightly from 15% last year. But there is significant growth ahead as 77% of respondents not currently offering VoIP have plans to do so in the foreseeable future, up from 47% last year. And there is a good potential market in which to sell VoIP services as well: survey results indicate an overall broadband take rate from NTCA member companies of 72%, up from 69% a year ago.

Cloud Voice Platform Can Help Fund Better Broadband

Using a cloud voice platform as opposed to building and running a voice network would help rural telcos deliver superior broadband for all customers. Research has shown that faster broadband means less churn.

That broadband endeavor takes significant CAPEX as highlighted by these responses:

  • 33% of respondents estimate that they could bring all of their customers currently receiving service below 25 Mbps up to that speed for $1 million or less in additional capital investment
  • An additional 35% could do so for between $1 million and $10 million
  • 11% at a cost of between $10 million and $20 million
  • 13% between $20 million and $50 million
  • 8 % estimate the total cost would exceed $50 million
  • Deployment costs are cited as the number one barrier to deploy FTTH

By turning to a fully managed, SaaS-based, all-OPEX model for VoIP, telcos can free up cash and resources to faster broadband.

Cloud Voice Platform Gives Competitive Leverage

A significant challenge highlighted by NTCA in the analysis was the larger competitors’ pricing advantage noting that “with their massive scale of operations compared to the average RLEC and ability to cross-subsidize operations in different areas, nationwide providers can offer consumers in the limited areas they serve price promotions that smaller carriers who serve primarily rural areas cannot hope to match.”

By turning to the cloud with a lower total cost of ownership and a business model that always aligns costs with actual revenue, telcos will improve margins for voice now and long term and give themselves more wiggle room in pricing the bundles.

Also, with continual innovation and no software on-site, telcos also have a VoIP platform that evolves with customer demand and never needs a forklift replacement. There is no end-of-life to the cloud. They can say goodbye to the disruptive CAPEX intensive 5–10 year replacement cycles.

Cool Clouds

As NTCA likes to say: rural is cool. We think clouds are too and they can help rural providers coolly transition into the all-IP world. Cloud voice platforms enable a rapid move to VoIP, a superior underlying cost structure and no-risk business model, and allows service providers to fund other strategic initiatives (e.g., faster broadband everywhere).

Read more about next-generation telco voice moving to the cloud in our white paper Service Provider VoIP: Next Gen is the Cloud.