State of the Nation - June 08

During May, illume travelled the length and breadth of the country to carry out a series of face-to-face interviews with most of the key service providers currently operating in the UK hosted VoIP marketplace.

We speak to many of these regularly and are the main source of the ‘Market Numbers’ figure we publish every quarter. This time round we also wanted to get a more personal view of their thoughts and experiences; as for most, they have now been doing this for a number of years and the lessons to be learnt should… well of been learnt.

A couple of things we noted when comparing thoughts from the varies vendors, first off, the technology employed, type of softswitch, style of network etc made very little difference when it came down to common obstacles to growth and secondly, no-one was doing anywhere near as well as they had anticipated, particarrly compared to where they thought they would be now, 2 years ago.

The consensus (with very few exceptions) is that the UK’s hosted VoIP market has not met the expectations it set itself a few years back. This is not to suggest that the technology or market is flawed, merely that some of the hurdles to be overcome were bigger and more troublesome that originally anticipated.

We also noted (and again this confirmed that the technology chosen was largely irrelevant), that all the vendors experienced virtually identical issues operationally and commercially.
In essence, providing hosted VoIP is really difficult, not because you need to get a couple of things right, but because you need to get everything right; from service provisioning all the way to billing. Add to the fact that the concept in new to many resellers and their customers and the whole package can start to look a lot less appealing.

The issues to be addressed fall in to 3 camps, those that have been identified and solved, those that ‘are’ being resolved and those that have yet to be resolved.

It’s worth noting that even as new vendors enter the market, many of these issues get repeated as each new entrant has to jump through the same set of hurdles, even though their predecessors have often found better routes. What we’re saying here is that there is very little open communication between vendors who are all clearly suffering the same issues albeit at different times

Issues Solved

CPE
A few years back, VoIP handsets were scarce, expensive and rubbish. Today there is a wide variety to choose from i.e all the way from the budget end such as the Grandstream products all the way up to more futuristic wideband versions such as those from Polycom; and they are work really well.

Signalling
SIP has won, virtually nobody debates the de-fact standard of SIP as the signalling system of choice. Early days saw the MGCP, H.232 and the proprietary debate, the winner was always going to be found in the proliferation of affordable handsets. We should point out however that effort is still required in the SIP Trunking world as IP PBX manufacture often use different SIP stacks which need integration testing with each Service Provider..
VoIP as Inevitable

Early days, this wasn’t an obvious outcome; today virtually no voice switch manufacture has anything else but VoIP either on their current platform or in their development program. Ongoing TDM investment is zero

Issues Being Resolved

Porting
The administrative burden that number porting requires is always underestimated; the vendor is totally at the mercy of accurate form filling and process. Those that don’t appreciate this soon find themselves with unhappy customers and even less helpful Telcos.

Both industry and the regulator recognise the burden that the UK service providers suffer with at the hand of an inadequate system. As a result there currently exist the UKPorting group – setup by Ofcom and operating by industry executives to implement changes to the operational nature of number porting between parties. In essence a central database build with ease of porting in mind.

QoS
Quality is and always will be about cost; which is why large enterprises running VoIP across a managed MPLS network with SDSL connectivity don’t suffer from quality issues.

The commercials surrounding Hosted VoIP don’t always make this a practical alternative and as result, QoS (on the WAN) has been a smoke and mirrors exercise which has been one of the key criticisms of the service.

The reasons we feel this issue is being resolved is partly because of the efforts being made by some providers with LLU products suited to VoIP and the anticipation of the fruits of BT21CN program to deliver ‘assured’ bandwidth on a selection of new bread DSL products. The price has to be right, which means cheaper than SDSL and with UK wide availability.

Customer Awareness & Expectations (bad press)
Slightly subjective but with over half a decade of exposure out of the labs, commercial VoIP is not longer a brave new technology. Larger enterprises have felt the need to embrace the technology, partly because they have no real choice (I.e. their PBX is now IP’d) and also, the integration benefits are too attractive to ignore. The smaller SME’s have bourn the brunt of flaky service and inadequate WAN but even they now understand what VoIP is about even if they don’t trust it to work yet.

This is a process of time, early customer experience hasn’t helped but if the benefits are there, business will always be drawn back

Provisioning
As the world’s oldest telecommunications company, BT have had over 150 years to establish a provisioning system. Even if they still get it wrong at times, creating a practical, scalable and efficient provisioning system is no mean feat.

For the newer providers, the benefits of an all IP system are often out-weighed by the fact they don’t own all of it. Clicking features ‘on’ at the switch is very different from coordinating the delivery of the customers new DSL circuit, arranging their number porting and then making sure their LAN is up to the job.

Softswitches are easily scalable; it’s everything else that isn’t. Vendors that have initially struggled with and engaged the channel find that solving this part of the service can become ‘the’ differentiator in attracting and keeping resellers.

Yet to be Resolved

Of those interviewed, the more experienced can catalogue all the issues they’ve uncounted and offer the analogy the all the wheels are now on the wagon, it’s time to concentrate on driving it all forward. For this to scale you need the channel; a channel which we believe has not yet been successful.

So is the problem with the channel or with the service provider? – in truth it’s a little of both but being pragmatic, if all the wheels were in place, the decision would be a simple one for the reseller, they could get to drive.

What this analogy is trying to present is the fact that very few service providers have a service that provides resellers with an opportunity to be more than sales agents, yet when there are problems, they (the Reseller) are often the ones to feel the brunt.

Resellers who want and will accept responsibility for many aspect of the service simply don’t get that opportunity.

For instance, consider the separate activities that could be offered to a reseller; pre-sales site survey/LAN health check, advising on dials plans and service options, service provisioning from the switch itself, coordinating DSL access and number porting, 1st and possibly 2nd line support and then all in-life Moves, Adds, Changes and finally white label billing.

Very few providers have an operational service that allows resellers to engage with their resellers in such an intimate way. But not doing so in counter-productive, partly because it dilutes the resellers revenue potential (I.e. charging the customer for these services) and secondly because it stops the service provider from releasing itself from some of the operational responsibilities that would otherwise allow itself to truly scale.

Many of the providers we met with have had very indifferent experiences with resellers, yet we feel that part of this is simply because the service they’ve created is not reseller friendly. It cannot devolve responsibility or functionality other than in a very crude way. Having a proposition that is only attractive to sales agents will place an artificial cap on the true effectiveness of the channel.

Summary

We believe that the lessons of the past few years have be learnt by many and that whilst most we spoke to remain optimistic, the reality is that the hosted VoIP industry is at a watershed, those with either deep pockets other profitable services will remain a while longer, for those vendors who’s services are exclusively VoIP we believe that their success will be intrinsically linked to their attractiveness to resellers and more specifically, what operational elements they can offer them.