The Role of Cloud in Telco Services: Transform Voice

Analyst firm STL Partners, as part of the Telco 2.0 Initiative, issued a report last month entitled Cloud: What is the role of telcos in cloud services in 2015?

I’m flipping this question and asking: what is the role of cloud in telco services? When it comes to voice, we think it’s central to business model transformation for telcos, ISPs and cable operators.

In the report STL Partners examines what services telcos can sell to plug into the high-growth cloud market. STL Partners reiterates how core services (notably voice and messaging) are in decline (but are still huge, totaling hundreds of billions annually). While investing in new growth areas is essential, fixing the cost structure for the cash cow services is also critical. Service providers will be hard pressed to halt the decline in ARPU or overall voice revenue (with some exceptions in high growth business services), but margin declines can be halted or even reversed.

The report summary notes that:

“With voice and messaging revenues in decline (or approaching that stage) and data revenue unlikely to back-fill the enormous gap, telcos are looking for:

  • new sources of revenue
  • new drivers for existing services
  • new sources of customer loyalty”

Yes. But service providers also need to embark on cost reduction initiatives and funnel CAPEX and operational resources to fund these new sources of revenue.

We’ve been arguing that the cloud is not just network that service providers can build and a set of services that they can sell, but also a service delivery and infrastructure replacement solution that they can leverage to improve margins, boost agility and better fund other strategic initiatives. That’s the cloud voice platform.

By service delivery solution I mean it is the next gen network built, virtualized and hosted in the cloud. It’s a technology platform that the service provider controls, customizes and manages (with the greatest of ease I might add) for the VoIP services they productize and deliver to their market. And service providers can take advantage of this solution with a zero-CAPEX, all success-based SaaS pricing model that is built to scale.

With a cloud voice platform, costs are always in line with revenue. So should subscriber counts fall, so too does the cost. No more five year ROI to justify that capital investment or high fixed OPEX that erodes margins over time. It’s straight forward business model that de-risks the VoIP endeavor. We are confident that the cloud voice platform also provides a model with lower, more fluid OPEX. Further, every dollar saved on VoIP can go to betting on the high-growth initiatives, including cloud services, Internet of Things, and faster and more mobile broadband.

Telco 2.0’s tagline is “business model innovation in the digital economy.” That’s exactly what the cloud promises and delivers for voice services.

Interested in reading more? Download our white paper Cloud Phones: 9 Transformative Benefits for Service Providers