This report provides an independent and holistic view of voice and messaging market, looking in detail at trends, drivers and detailed forecasts, the latest developments, and the opportunities for all players involved. The analysis will save valuable time, effort and money by providing more realistic forecasts of future potential, and a fast-track to developing and / or benchmarking a leading-edge strategy and approach in digital communications. It contains
Our independent, external market-level forecasts of voice and messaging in 9 selected markets (US, Canada, France, Germany, Spain, UK, Italy, Singapore, Taiwan).
Best practice and leading-edge strategies in the design and delivery of new voice and messaging services (leading to higher customer satisfaction and lower churn).
The factors that will drive best and worst case performance.
The intentions, strategies, strengths and weaknesses of formerly adjacent players now taking an active role in the V&M market (e.g. Microsoft)
Case studies of Enterprise Voice applications including Twilio and Unified Communications solutions such as Microsoft Office 365
Case studies of Telco OTT Consumer Voice and Messaging services such as like Telefonica’s TuGo
Lessons from case studies of leading-edge new voice and messaging applications globally such as Whatsapp, KakaoTalk and other so-called ‘Over The Top’ (OTT) Players
It comprises a 18 page executive summary, 260 pages and 163 figures – full details below. Prices on application – please email firstname.lastname@example.org or call +44 (0) 207 247 5003.
Benefits of the Report to Telcos, Technology Companies and Partners, and Investors
For a telco, this strategy report:
Describes and analyses the strategies that can make the difference between best and worst case performance, worth $80bn (or +/-20% revenues) in the 9 markets we analysed.
Externally benchmarks internal revenue forecasts for voice and messaging, leading to more realistic assumptions, targets, decisions, and better alignment of internal (e.g. board) and external (e.g. shareholder) expectations, and thereby potentially saving money and improving contributions.
Can help improve decisions on voice and messaging services investments, and provides valuable insight into the design of effective and attractive new services.
Enables more informed decisions on partner vs competitor status of non-traditional players in the V&M space with new business models, and thereby produce better / more sustainable future strategies.
Evaluates the attractiveness of developing and/or providing partner Unified Communication services in the Enterprise market, and ‘Telco OTT’ services for consumers.
Shows how to create a valuable and realistic new role for Voice and Messaging services in its portfolio, and thereby optimise its returns on assets and capabilities
For other players including technology and Internet companies, and telco technology vendors
The report provides independent market insight on how telcos and other players will be seeking to optimise $ multi-billion revenues from voice and messaging, including new revenue streams in some areas.
As a potential partner, the report will provide a fast-track to guide product and business development decisions to meet the needs of telcos (and others).
As a potential competitor, the report will save time and improve the quality of competitor insight by giving strategic insights into the objectives and strategies that telcos will be pursuing.
For investors, it will:
Improve investment decisions and strategies returning shareholder value by improving the quality of insight on forecasts and the outlook for telcos and other technology players active in voice and messaging.
Save vital time and effort by accelerating decision making and investment decisions.
Help them better understand and evaluate the needs, goals and key strategies of key telcos and their partners / competitors
The Future Value of Voice: Report Content Summary
Executive Summary. (18 pages outlining the opportunity and key strategic options)
Introduction. Disruption and transformation, voice vs. telephony, and scope.
The Transition in User Behaviour. Global psychological, social, pricing and segment drivers, and the changing needs of consumer and enterprise markets.
What now makes a winning Value Proposition? The fall of telephony, the value of time vs telephony, presence, Online Service Provider (OSP) competition, operators’ responses, free telco offerings, re-imaging customer service, voice developers, the changing telephony business model.
Market Trends and other Forecast Drivers. Model and forecast methodology and assumptions, general observations and drivers, ‘Peak Telephony/SMS’, fragmentation, macro-economic issues, competitive and regulatory pressures, handset subsidies.
Country-by-Country Analysis. Overview of national markets. Forecast and analysis of: UK, Germany, France, Italy, Spain, Taiwan, Singapore, Canada, US, other markets, summary and conclusions.
Technology: Products and Vendors’ Approaches. Unified Comminications. Microsoft Office 365, Skype, Cisco, Google, WebRTC, Rich Communications Service (RCS), Broadsoft, Twilio, Tropo, Voxeo, Hypervoice, Calltrunk, Operator voice and messaging services, summary and conclusions.
Telco Case Studies. Vodafone 360, One Net and RED, Telefonica Digital, Tu Me, Tu Go, Bluvia and AT&T.
Summary and Conclusions. Consumer, enterprise, technology and Telco OTT.
Summary: Vodafone have been quietly stealing a march in the European SMB communications market with a well executed strategy centred on its OneNet cloud-based product. We look at how, including comparisons with BT, Telenor, and others. (May 2012, Executive Briefing Service)
Below is an extract from this 24 page Telco 2.0 Report that can be downloaded in full in PDF format by members of the Telco 2.0 Executive Briefing service here. Non-members can subscribe here, buy a Single User license for this report online here for £795 (+VAT for UK buyers), or for multi-user licenses or other enquiries, please email email@example.com / call +44 (0) 207 247 5003.
We’ll also be discussing our findings at the London (12-13 June) New Digital Economics Brainstorm where we’ll be joined by Bob Brace, Vodafone’s Head of Cloud and Unified Comms, in the Cloud 2.0 stream.
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Introduction – Challenges and Opportunities in Voice and Unified Communications
Although voice minutes of use are still rising slowly worldwide, it is increasingly the case that the predictions of falling revenues from traditional services are becoming a reality, and sooner than expected. A combination of regulatory pressures, price competition between operators, and disruptive competition from new entrants is crushing margins.
Figure 1: Skype Punishes Carriers on International Voice
Most worryingly, the continued huge growth in volumes at Skype and the popularity of alternative messaging options like WhatsApp, BlackBerry Messenger, and Apple’s iMessenger show that the disruption is disproportionately affecting the most profitable segments of the traditional telecoms bundle – international and SMS respectively.
Increasingly, small and medium-sized businesses (SMBs), another key line of business, are turning to the growing numbers of independent VoIP providers. And, more broadly, voice, messaging, and video conferencing features are being disaggregated and diversified, showing up in all kinds of software, hardware, and Web service contexts – exactly as we predicted in 2007.
Again as we predicted, voice is more and more being delivered as part of a broader communications product. In the enterprise, this typically manifests itself as a “unified communications” (unicomms or UC) application, integrating telephony, voicemail, e-mail, and often also instant messaging, presence-and-availability, teleconferencing, and collaboration tools. This can be delivered on-premises, for example by an Asterisk system or an integrated hardware appliance like the ones Cisco sells, as a Web service (like Huddle or Salesforce Chatter), as a hosted/cloud-based network service, or as a telecomms operator service (like IP-Centrex).
In this context, some operators are not just surviving but succeeding. There is not only crisis here, but also opportunity. Cisco forecasts that there is a world market for $20bn of hosted unified-comms services, making up about 40% of the total “managed” UC market. Vodafone expects a 25% CAGR over the next four years in both UC and cloud services for SMBs and enterprises, with a total European market of $15bn in 2015. As for the broader communications market, BT estimates that the total UK SMB communications market is worth some £29bn from 4.8 million customers.
The drivers are clear – SMB customers are keen to get rid of the costs of owning and managing local PBXes on the one hand, to enjoy the (perceived) low, low prices of VoIP, and also to upgrade their communications services from the early 1990s GSM feature set plus the late 1990s BlackBerry e-mail service to something more in keeping with the age of Google +, the Apple iPhone, and Skype.
At the same time, operators are in search of new sources of revenue to replace the business and international voice and SMS cash cows. As always, they also need to find applications that sell-through their basic connectivity products. Hardware vendors are keen to extend their own businesses, which are challenged by the availability of open-source software and cloud-based services. And the software and Internet service players are trying, in their turn, to defend against the remorseless drift towards “free”.
In this note, we will discuss three European operators’ response to the challenge and the results, and we will also discuss how the vigorous Voice 2.0 disruptor ecosystem relates to the SMB core market. We will start with an example of success – Vodafone.
Figure 3: Why SMB & enterprise UC is a priority at Vodafone
Source: Vodafone interim report
Vodafone: clear definitions and responsibilities pay off
In the UK, this space is dominated by two players, Vodafone and the ex-incumbent BT. Their results contrast dramatically.
Vodafone is aggressively promoting a cloud-based UC package, OneNet, to its SMB customers in the six biggest European markets, and looking to roll it out across the wider Vodafone Group.
Meet Vodafone OneNet: Unified Comms in the Cloud for SMBs
OneNet is a cloud-based unicomms product, which offers single numbers for both fixed and mobile telephony, advanced call management, multi-ring and hunt groups, and voicemail integrated with push e-mail across mobile devices, fixed phones, and VoIP softphones, with a single bill and central account management via a Web interface and a smartphone app. Vodafone also offer Office 365 from Microsoft as an extra cost option and later this year (2012) will offer integration between One Net and Microsoft Lync enabling “click to call from Microsoft applications and the ability to answer an incoming call to a mobile number in Lync.
OneNet Express is a lightweight version of the product for small businesses, offering virtual landline numbers and some call management features, as well as the account management service, for mobile lines only. Both versions of the product are delivered as pure network services, running in Vodafone’s core network.
A Note on the Accounts
Although Vodafone is increasingly keen to boast about its performance in the SMB and enterprise markets, it doesn’t yet provide a line-of-business analysis in its accounts. However, we’ve constructed a roughly comparable data series, based on the growth figures Vodafone does provide, its own statement that 31% of its European revenue is from business customers, and its geographical segment breakdowns.
A caveat must be introduced in that Vodafone Global Enterprises (VGE), the large enterprise & government business roughly analogous to BT Global Services, is included in the Vodafone series while BTGS is broken out in the BT accounts. BT does not provide a breakdown of BTGS revenue detailed enough to create an identical BT series. However, as we will soon see, it is unlikely that Global Services have contributed enough growth to falsify the conclusion we are about to draw.
In the six OneNet markets (Germany, Italy, Spain, the UK, the Czech Republic, and Portugal) through 2011, revenue growth averaged 4.8%, and it is worth noting that there is substantial momentum. Q1 saw sequential growth of 2.4%, Q2 4.85%, and Q3 7.38%. In the market and economic context, this is a spectacular performance.
Figure 4: Vodafone Is Doing Far Better In The UK
Source: STL Partners, Vodafone, BT
In the last 7 quarters, Vodafone’s revenue from UK business customers grew in 6 of them. It beat BT in every one of the quarters we looked at. Not only is it growing quite quickly, while BT’s is shrinking dramatically, it is almost three times as big in absolute terms (although some of this will be down to the differences in segment allocation).
In Europe more broadly, the same picture is visible even more strongly, with the SMB segment growing at 5-8%% in major markets like Germany and Italy, and accounting for most of the growth in final ARPU. Although Vodafone’s south European interests are in the firing line of the economic crisis, this line of business has been remarkably robust. In the last three months of 2011, service revenue in Italy shrank almost 5 per cent – but revenue from SMBs and enterprises rose 1.9%. At the same time, service revenue in Germany grew 0.3%, but the OneNet target markets grew 5%. In Q2, service revenue in Italy was down 4.1%, but enterprise was up 5.8%, and OneNet itself was growing at 70% annually. In Germany, at the other end of the European economic spectrum, enterprise was up 6.6% year on year compared with total service revenue at 1.2%.
Figure 5: OneNet Markets Doing Rather Nicely, Thanks
Source: Vodafone interim results presentation, November 2011
To read the note in full, including the following additional analysis…
BT: Incumbent or Innovator?
BT Voice: Volumes Shrinking…
Two other European operator plays
Telenor: The Same Factors, the Same Success?
So, How Did Vodafone Do It?
Compare and Contrast: Vodafone 360
The Disruptors: Twilio, Tropo, and friends
The Future: beyond hunt groups
Conclusions & Recommendations
1: Service design
2: Organisational focus
3: Channels to market
4: Cloud and software power
The Telco 2.0™ Initiative
…and the following figures…
Figure 1: Skype Punishes Carriers on International Voice
Figure 3: Why SMB & enterprise UC is a priority at Vodafone
Figure 4: Vodafone Is Doing Far Better In The UK
Figure 5: OneNet Markets Doing Rather Nicely, Thanks
Figure 6: Enterprise & SMB Outgrowing Vodafone Group Revenues in last two quarters
Figure 7: BT Group strategic priorities
Figure 8: BT Organisational Structure – an SMB might touch all of these
Figure 9: BT Global Services revenues year-on-year
Figure 10: BT losing call volume in the UK…
Figure 11: A simple proposition
Figure 12: Enterprise revenue in Turkey growing 33% sequentially
Figure 13: Cisco’s view of SMB, Developer, and Enterprise Requirements
…Members of the Telco 2.0 Executive Briefing Subscription Service can download the full 24 page report in PDF format here. Non-Members, please subscribe here, buy a Single User license for this report online here for £795 (+VAT for UK buyers), or for multi-user licenses or other enquiries, please email firstname.lastname@example.org / call +44 (0) 207 247 5003.
Technologies and industry terms referenced: SMBs, strategy, voice, unified communications, channel marketing, partners, business model, Vodafone, BT, Telenor, Twilio, Tropo, VOIP.
Summary: Telenor’s new ‘Mobile Business Network’ integrates SME’s mobile and fixed phone systems via managed APIs, providing added functionality and delivering greater business efficiency. It uses a ‘two-sided’ business model strategy and targets the market via developers.
The enterprise is the key field for new forms of voice and messaging; it’s where the social and economic value of bits exceeds their quantity by the greatest margin, and where the problems of bad voice & messaging are most severe.
People spend hours answering phone calls and typing information into computers – calls they take from people sitting behind computers that are internetworked with the ones they sit behind. Quite often, the answer is to send the caller on to someone else. Meanwhile, other people struggle to avoid calls from enterprises.
It’s got to change, and here’s a start: Mobilt Bedriftsnett or the ‘Mobile Business Network’ from Telenor.
Telenor are a large, Norwegian integrated telecoms operator, and a pioneer and early adopter of some Telco 2.0 ideas. As long ago as 2001, their head of strategy Lars Godell, was working on an early implementation of some of the ideas we’ve been promoting. They also have an active ‘Telenor 2.0′ strategic transformation programme.
Content Provider Access – CPA – established a standard interface for the ingestion, delivery, billing, and settlement of mobile content of any description that would be delivered to Telenor subscribers, and was the first service of this kind to share revenue from content sales with third parties and to interwork with other mobile and fixed line operators, years before the iPhone or even NTT’s pioneering i-Mode. Later, they added a developer sandbox (Playground) as well.
So, what would they do when they encountered the need for better voice & messaging? The importance of this line of business, and its focus on enterprises, has been part and parcel of Telco 2.0 since its inception (here’s a note on “digital workers” from the spring of 2007, and another on better telephony from the same period), and we’ve only become more convinced of its importance as a wave of disruptive innovators have entered the field.
We spoke to Telenor’s product manager for charging APIs, Elisabeth Falck, and strategy director Frank Elter; they think MB is “our latest move towards Telco 2.0”.
Voice 2.0: despite the changing value proposition…
In the Voice & Messaging 2.0 strategy report, we identified a fundamental shift in the value proposition of telephony; in the past, telephony was scarce relative to labour. That stopped being true between 1986 and 2001 in the US, when the price per minute of telephony fell below that of people’s time (the exact crossover points are 1986 for unskilled workers and landline calls, 1998 for graduates and mobile calls, and finally 2001 for unskilled workers and mobile calls).
Now, telephony is relatively plentiful; this is why there are now call-centre help desks and repair centres rather than service engineers and local repair shops. It’s no longer worth employing workers to avoid telephone calls; rather, it’s worth delivering services to the customer by phone rather than having a field sales or service force. The chart below visualises this relationship.
…and changing position in the value chain…
We also identified two other major trends in voice – commoditisation and fragmentation.
Voice is increasingly commoditised – that is to say, it’s a bulk product, cheap, and largely homeogenous. These are also the classic conditions of a product in perfect competition; despite the name and the ideological baggage, this isn’t a good thing, as in this situation economic theory predicts that profit margins will be competed away down to the absolute minimum required to keep the participants from giving up.
The provision of Voice is also increasingly fragmented and diverse – there are more and more producers, and more and more different applications, networks, and hardware devices incorporate some form of telephony. For example, games consoles like the Xbox have a voice chat capability, and CRM systems like Salesforce.com can be integrated with click-to-call services.
As a result, there’s less and less value in the telephone call itself – the period between the ringing tone and the click, when the circuit is established and bearer traffic is flowing. This bit is now cheap or free, and although Skype hasn’t eaten the world as it seemed it might in 2005, this is largely because the industry has reacted by bundling – i.e. slashing prices. Of course, neither the disruptors nor the traditional telcos can base a business on a permanent price war – eventually, prices go to zero. We’ve seen the results of this; several VoIP carriers whose business was based on offering the same features as the PSTN, but cheaper, have already gone under.
The outlook of Telco 2.0 Executive Brainstorm delegates as far back as 2007 demonstrates the widespread acceptance of these trends in the industry, and the increasing proliferation of diverse means of delivery of voice as show in the following chart.
… Voice is still the biggest game in Telcotown…
So why bother with voice? The short answer is that there are three communications products the public gladly pays for – voice, SMS, and IP access.
Telenor’s CPA, one of the most successful and longest-running mobile content plays, is proud of $100m in revenues. In comparison, the business voice market in Norway is NOK6.9bn – $1.22bn. Even in 10 years’ time, voice will comprise the bulk of Telco revenue streams. However grim the prospects, defending Voice is only optional in the sense that survival is optional.
Moreover the emergence of the first wave of internet voice players – Skype, Vonage, etc., and the subsequent fight back by Operators, demonstrates that there is still much scope for innovation in voice and messaging, and that the option of better voice and messaging is still open.
…although the rules are changing…
Specifically, the possible zone of value is now adjacent to the call – features like presence-and-availability, dynamic call routing, speech-to-text, collaboration, history, and integration with the field of CEBP (Communications-Enabled Business Processes). There may also be some scope for improving the bearer quality – HD voice is currently gaining buzz – although the challenge there is that the Internet Players can use better voice codecs as well (Skype already does).
…and the Enterprise market is where the smart money is
The crucial market for better voice & messaging is the enterprise, because that’s where the money is. Nowhere else does the economic value of bits exceed their quantity and cost so much.
For large enterprises, the answer will almost certainly come from custom developments. They are already extensive users of VoIP internally, and increasingly externally as well. They tend to have large customised IT and unified communications installations, and the money and infrastructure to either do their own development or hire software/systems integration firms to do it for them. The appropriate telco play is something like BT Global Services – the systems integration/managed services wing of BT.
But using the toolkit of Voice 2.0 is technically challenging. It’s been said that free software is usually only free if you value your time at zero; small and medium-sized businesses can never afford to do that.
Mobilt Bedriftsnett (MB) is Telenor’s response to this situation, aimed at Small and Medium Enterprises (SMEs). Its primary benefit is to improve business efficiency by extending the functions of an internal PBX and/or unified communications system to include all the companies’ mobile phones.
Telenor’s internal business modelling estimates the cost of CRM failures – missed appointments, rework of mistakes, complaints, lost sales – to a potential SME customer at between $500 and $2,000 a year. This is the economic ‘friction’ that the product is designed to address.
The Core Product is based on Telenor APIs…
The product is based on a suite of APIs into Telenor infrastructure, one of which replicates a hosted IP-PBX, i.e. IP Centrex, solution. It’s aimed at SMEs, and in particular, at integrating with their existing PBX, unified communications, and CRM installations. There’s a browser-based end user interface, which lets nontechnical customers manage their services.
There is also considerable scope for further development, and MB also provides four other APIs, which provide a click-to-call capability, bulk or programmatic SMS, location information, and “Status Push”. This last one provides information on whether a user is currently in coverage, power level, bandwidth, etc, and will be extended to carry presence-and-availability information and integrate with groupware and CRM systems in Q1 2010.
…and integrated with PBX/UC Vendor Client Solutions
Extensive work has been carried out with PBX/UC vendors, notably Alcatel-Lucent and Microsoft, to ensure integration. For example, one of the current use cases for the click-to-call API permits a user to launch a conference call from within MS Outlook or a CRM application. The voice switch receives an event from the SOAP API, initiates a call to the user’s mobile device, then bridges in the target number.
The ‘two-sided’ Enterprise ‘App Store’
MB is also the gateway to a business-focused app store, which markets the work of third-party software developers using the MB API to their base of SME customers. This element qualifies it as a two-sided business model. Telenor is thereby facilitating trade that wouldn’t otherwise occur, by sharing revenue from its customers with upstream producers and also by bringing SMEs that might not otherwise attract any interest from the developer community into contact with it. Developers either pay per use or receive a 70% revenue share depending on the APIs in use.
Telenor are using the existing infrastructure created for CPA to pay out the revenue share and carry out the digital logistics, and targeting the developer community they’re already building under their iLabs project. So far, third-party applications include integration with Microsoft’s Office Communication Server line of products, integration with Alcatel-Lucent and some other proprietary IP-PBXs, and a mobile-based CRM solution, WebOfficeOne.
Route to Market: Enterprise ICT Specialists
In a twist on the two-sided business model, MB services are primarily marketed to systems integrators, independent software developers, and CRM and IP telephony vendors, who act as a channel to market for core Telenor products such as voice, messaging, presence & availability, and location. This differs quite sharply from their experience with CPA, whose business is dominated by content providers.
Pricing is based on a freemium model; some API usage is free, businesses that choose to use the CPA payments system pay through the revenue sharing mechanism, and ones that don’t but do use the APIs heavily pay by usage.
Technical Architecture: migrating to industry standards
Telco 2.0 has previously articulated the seven questions concept – seven key customer questions that can be answered using telecom’s operator’s data assets as shown in the following diagram.
Telenor’s API layer consists of Simple Object Access Protocol (SOAP) and Web service interfaces between the customer needs on the left of the diagram, and a bank of service gateways which communicate with various elements of in the core network on the right.
At the moment, the click-to-call and status push interfaces are implemented using the proprietary Computer-Support Telecoms Applications (CSTA) standard, in order to integrate more easily with the Alcatel-Lucent range of PBXs. So far, they don’t implement Parlay-X (or OneAPI as the GSMA calls it), but they intend to migrate to the standard in the future. Like Microsoft OCS, Asterisk, and much else, the industry standard IETF SIP is used for the core voice, messaging, and availability functions.
Early days, high hopes…
Telenor is unwilling to describe what it would consider to constitute success with Mobilt Bedriftsnett; however, they do say that they expect it to be a “great source of income”. MB has only been live since June 2009, and traffic to CPA inevitably dwarfs that to the MB APIs at present.
…and part of a bigger strategic plan
Mobilt Bedriftsnett makes up the Voice & Messaging 2.0 element of Telenor’s transformation towards Telco 2.0. The other components of ‘Telenor 2.0’ are:
CPA, the platform enabling 3rd party mobile content transactions
the iLabs/Playground developer community
increasing strategic interest in M2M applications
a recently launched Content Delivery Network (or CDN – a subject gaining salience again, after the recent Arbor Networks study that showed them accounting for 10-15% of global Internet traffic )
Mobile Payments, Money transfer and Banking at Grameenphone in Bangladesh.
Lessons from Telenor 2.0
With Mobilt Bedriftsnett, Telenor has carried on its tradition of pioneering Telco 2.0 style business model innovations, though it is relatively early to judge the success of the ‘Telenor 2.0′ strategy.
At this stage of market development, Telenor’s approach therefore shows three important lessons to other industry players.
1) They are taking serious steps to create and try ‘two-sided’ telecoms business models.
2) The repeated mentions of CPA’s role in MB point to an important truth about Telco 2.0 – the elements of it are mutually supporting. It becomes dramatically easier to create a developer community, bill for sender-pays data, operate an app store, etc, if you already have an effective payments and revenue-sharing solution. Similarly, an effective identification/authorisation capability underlies billing and payments. Telenor understands and is acting on this network principle.