Service provider executives surveyed by Metaswitch Networks say uncertainty about new services and revenues, plus competition, remain the top concerns over the next decade. That has been true for most of the past decade, and the survey results confirm that the search for new revenue sources and the pressure of competition remain dominant facts of life in competitive and changing marketplaces.
The significant new difference is that telecom regulators—and what they might do—now are among the top three concerns. Of the three top concerns, though, only service innovation and the organizational response to competition are under direct control. (CLICK ON THE SLIDE SHOW FOR A LARGER VIEW)
Asked to rank the level of threat, with a “1” being the “greatest” threat, and a “7” being the “least threatening,” about 34 percent of survey respondents indicated regulators were the single biggest threat they face, but competition from other cable companies or telcos also are top concerns.
And in a sign of where new threats are perceived, Google is seen as a challenge as big as competition from “other telcos,” the survey of 165 companies found.
About 27 percent of respondents indicated cable companies were the single biggest threat. Some 20 percent of respondents indicated “other telcos” were the second-biggest threat.
But Google is not far behind cable or telco competition as a perceived threat for all contestants, the Metaswitch survey of service provider executives found. Some 17 percent of respondents said Google posed the single greatest threat to business success over the next decade.
Apple and Microsoft are viewed as the least threatening of seven potential sources of competition, while Skype and other telcos are seen as mid-level threats.
The sobering findings indicate that executives now correctly understand that regulatory risk must be added to the list of top commercial risks for the next decade, even though the search for new revenues, the business models that underlie new services, and staying abreast of competitors remain top issues.
New service creation, especially uncertainty about potential demand, was cited as a huge issue. Some 45 percent of respondents indicated such uncertainty was the greatest of five challenges they face, vastly greater than ability to innovate, regulatory impact, risk of technology failure or brand exposure.
The second-greatest barrier is innovation skill, followed very closely—nearly identically—by regulatory impact. It is worth noting that demand uncertainty was deemed more than twice as big an obstacle as innovation ability or regulatory uncertainty.
On a five-point scale where “1” is the most significant danger, technology failure got a 2.87 average score, while regulatory impact got a 3.02 score. Demand uncertainty got a 1.95 score.
Risks that company brands could suffer, and innovation prowess, were issues of lesser concern to respondents.
The clear implication is that obstacles can be overcome if customer demand is known. However, respondents suggested that technology failure was the single most worrisome issue, once demand is understood.
Everyone might agree that innovation is a huge issue over the next decade, for firms in virtually every part of the business ecosystem. Business model, service and organizational innovation are on the list of subjects studied by Metaswitch. But one issue vastly outweighs the others.
Fully 71 percent of respondents indicated that business model innovation, including new revenue models, delivery and production models, were the top concern. By way of comparison, just 18 percent consider service innovation (marketing and partnerships) the top issue, while just 10 percent believe organizational innovation (people and structure) is the most-important issue.
Voice Mail Future
Given the changes in product set and end user demand all service providers now are seeing, it is not a surprise that executives expect changes in the voice services area. About 47 percent believe that voice mail will be a revenue-generating service for two to five more years.
But 35 percent of respondents believe voice mail will continue to be a revenue-generating service for less than two more years. Some 16 percent think voice mail will continue to generate revenue for another five to 10 years. Less than two percent believe they will still be making money from voice mail for more than 10 years.
Hosted Voice Demand
Most respondents believe the business customer now is ready to buy hosted voice services. About half (49 percent) believe customers are ready to buy now if the marketing is done properly. About 28 percent think businesses are ready to buy because the consumer trend is towards consumption of cloud-based services.
About 10 percent of respondents believe it might take another two to three years before business customers are ready to buy hosted voice services.
About 12 percent of respondents were not sure whether business customers were ready to buy, or think the issue is complicated. Installation, training and support; price; network readiness and solution stability were among the issues that could affect buyer attitudes.
Of many new services service providers could introduce, the runaway favorites are hosted business services and other managed applications. About 80 percent of all respondents indicated that managed business services were new services they already offer or plan to offer.
Remote storage (46 percent), over-the-top video (42 percent) and security services (40 percent) also are among services that respondents already offer or will offer. Some 39 percent plan to offer, or already offer, home network or residential gateway services.
About 35 percent offer, or plan to offer, premium technical support. Perhaps surprisingly, 40 percent of respondents say they plan to offer, or already offer, wireless services.
Aside from the decision to deploy a softswitch itself, and launching new services such as hosted voice using a Metaswitch, respondents reported taking a number of steps to recreate their businesses over the last year. Some steps were organizational, such as creating partner programs or founding small business sales forces.
Some companies adopted aggressive pricing models, began service bundling or added new voice features. Others revamped billing systems.
One provider added a “lifetime price guarantee” and added “lunch and learn” demonstrations for business prospects.
Many firms built fiber to customer networks or added IPTV services. Some started selling services such as Internet backhaul to other firms. Others expanded their service territories to compete with other firms, or made acquisitions.
Others adopted flow-through order provisioning, added customer portals or e-billing, created cordless broadband services or founded a video studio. Some added videoconferencing services or created new “free local calling” areas.
Some providers, especially cable companies, started selling consumer VoIP for the first time, or switched to all-digital TV.
Others customized the user experience by adding applications, including such innovations as single number service.
In other cases providers added quality of service levels of service for the first time, or started selling bundles services for the first time. Home security services were launched by at least one provider.
In the business services area, some added VPN service, e-fax or security services. Others added Ethernet or dynamic T1 service.
A number of firms expanded or started up fixed wireless services, including voice services.
Lots of Big Challenges
Business risk from competition and the need to discover new revenue models and services are key concerns of executives running today’s communications businesses. But regulation also is among the biggest risks executives say will affect them most over the next decade, the Metaswitch survey finds.
Overall, it is uncertainty itself which seems to dominate executive thinking about their challenges over the next 10 years. Service providers seem confident of their ability to execute, to handle technology changes and protect good brand images.
But the unsettled and unproven customer demand for particular new services, and the creation of viable revenue models to serve that demand, while ensuring that competitors do not get ahead, are the issues that executives seem most concerned with.