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VoIP–Networking for economic development in the Asia- Pacific region

Written by  Richard C. Grange
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Richard C. GrangeIssue:Asia-Pacific I 2005
Article no.:10
Topic:VoIP–Networking for economic development in the Asia- Pacific region
Author:Richard C. Grange
Title:President & CEO
Organisation:New Global Telecom
PDF size:80KB

About author

Richard C. Grange began his telecommunications career in 1982 when he co-founded and served as Executive Vice President and chief executive officer of TMC of Colorado, a long-distance reseller. After TMC of Colorado was sold to TelAmerica, Mr Grange founded and served as President and Chief Executive Officer of Meridian Telecom International, a provider of international call termination and international operator services. Mr Grange served also as President of the Technology Resource Group, an international call back carrier. Mr Grange founded NGT in 1996 and has served as its President and Chief Executive since its inception.

 

Article abstract

Voice-over-Internet Protocol or VoIP is changing the world’s telecommunications. A VoIP company in the USA, Vonage, won the fight to keep VoIP regulation free and is growing rapidly. Skype, which offers free software and free computer-to-computer voice service, has millions of users worldwide. Large operating companies routinely use IP services to carry much of their long-distance traffic. Within the next few years, companies of all sizes and residences throughout the world will be using VoIP for low-cost, affordable, communications.

 

Full Article

Voice-over-Internet Protocol, or VoIP, has been changing telecommunications around the globe. In the United States, a company named Vonage has led the charge with 10,000 new residential users per month. They boldly challenged–and won–the support of the Federal Communications Council (FCC) with regard to keeping the VoIP services regulation-free. Luxembourg-based Skype has created a stir by offering a free VoIP solution. Skype’s free software has been downloaded over 32 million times since launch in August 2003. These are not isolated incidences–traditional phone companies, cable providers and Internet providers all expect to stimulate new revenue streams by implementing VoIP services. VoIP services are paving the way for rapid economic development as well as changing the manner and form of telecommunications around the world. How can service providers from within the Asia-Pacific region take advantage of VoIP services? There are ten critical considerations that emerging VoIP service providers everywhere should take into account to participate in the VoIP revolution. Targeting markets Addressable market segments for VoIP services include residential; small office / home office; small and mid-size businesses and enterprises. However, VoIP penetration is extremely low in all these segments. Today, we are still at the leading edge of the VoIP industry growth curve. Still, VoIP line shipments to the business sector will actually exceed TDM line shipments in 2005, indicating an enormous acceptance of VoIP solutions. In addition, local broadband access, DSL or high-speed Internet statistics are valuable for identifying potential markets since they are enablers for VoIP service penetration. The market segments chosen by any service provider will drive the development of a service value or sales proposition having the most appeal to that marketplace. For instance, there is a vastly different proposition for primary line residential service than for secondary line service; and a very different proposition for hosted PBX service to a business than for connectivity between an onsite PBX and the public network. Knowing your target market is central to effective product definition and development. Choosing delivery models Service providers can opt for a ‘build-my-own’ (i.e. self-provisioned) hosted VoIP services solution to address their markets, or they can utilise a managed wholesale option. This is the classic ‘'build versus buy’ decision. Figure one reflects some of the most important factors (though by no means all of the factors) that figure into this decision. Capital cost avoidance (for instance, in relation to application servers) and operating cost savings (such as technical skill sets), in conjunction with access to IP (and legacy TDM) experience are sound reasons to consider a wholesale solution. Also compelling—given the complexity and effort required to create an end-to-end service—is increased speed-to-market and access to tested systems for smooth delivery. At the same time, a managed wholesale solution may not offer the same degree of network control and flexibility in voice product packaging as the ‘build-my-own’ alternative. A thorough assessment would consider these and other important, aspects of product development, deployment and support for each particular service provider. Whichever delivery model is chosen, service providers will want to ensure they have a solid position in the market, relative to competitive alternatives. In the business market, competing head-to-head with IP PBXs and other hosted services, solutions need to effectively counter IP PBX limitations. √ Technology obsolescence—PBXs require ongoing investment to maintain state-of-the-art features and technical capabilities, indeed most IP PBX manufacturers issue ‘dot’ releases monthly and major releases every six to 12 months, which can require expensive hardware upgrades; √ Technology limitations—IP PBXs cannot generally interface to third party software or other vendor’s equipment, has limited resale value and often uses outdated technology; √ Challenging interface—The system interface is often not user-friendly and may require 10 to 15 days training; √ Security issues—Any breach of security from external sources jeopardises the integrity of your customers’ LAN network. Maximising customer acquisition Creating a compelling long-term sales proposition is critical to customer acquisition. While creating appeal for the ‘early-adopter’ user can lead to some short-term success, VoIP is going to become a mainstream service—very likely attaining primary line service status in homes and businesses across the country. So, creating a proposition that is focused on all the market ‘hot buttons’ holds the most promise of continued appeal. The choice of distribution channels is critical from the perspective of rapid customer acquisition. Since retail distribution can account for 20 per cent of your operating expense, it is also critical from a financial viewpoint. A direct sale is the highest cost approach. Indirect channels, agents, can be difficult to manage in a pre-mass adoption market. These channels need to learn how to sell VoIP services in the most time-effective way. Regardless of your chosen channel, you will need a well-constructed set of marketing support tools, including high-impact communications, benefit / cost demos, product functionality demos, easy-to-use post-sales materials and so on. Educating your target market, despite the flow of information from the large operators, is an important part of the communication process. Once prospects understand the power of VoIP services in addressing their needs, the excitement level rises—the challenge lies in making that power quickly and visibly effective. Accelerating ROI Service providers can ‘buy’ market share through ‘low ball’ pricing—but as tempting as this might be in the short-term, it is not a sound financial strategy and will not maximise Return-On-Investment. The market is likely to respond very positively to prices 10 per cent to 30 per cent below the pricing of comparable legacy (TDM) service, so that should be the target range for price-positioning. In fact, 72 per cent of SMBs express interest in VoIP services with just a 15 per cent cost savings. As figure 2 indicates, 69 per cent of service providers agree on a target range for cost savings of 10 per cent to 30 per cent. Cost reductions afforded by IP technology make this price positioning profitable and we believe, sustainable. The ability for VoIP services to attract new customers and to retain existing ones, is strengthened tremendously through product bundling—for instance, with Internet access—to create a ‘one stop’ offer. This is perceived by consumers and businesses as being much more interesting and compelling than buying VoIP service on its own. As with all sound product strategies, creating positive financials means ensuring you are delivering the value that customers want and will pay for. VoIP offers a wide range of exciting functionality that meets real consumer and business needs; this is the key to maximising long-term margins and ROI for service providers. Will the solution actually work? IP technology has been deployed for several years as a means of achieving compressed transmission in long-haul backbone carrier networks. But, VoIP as a front-line voice service is relatively new, as are the plethora of products being deployed to enable VoIP services. So, first and foremost, a wise step is to request a demo account that permits thorough trialing of any product or service you might be contemplating. This will help you answer the ‘does it work?’ question and will allow you to understand capabilities and limitations. In addition, consider all the proactive tactics a network vendor or platform / software vendor can utilise to ensure reliability of their offering, and to give you a degree of comfort. These can range from physical network redundancy and active network testing procedures, to rock-solid SLAs (Service Level Agreements) and Network Operations Center coverage. Processes and procedures have to be tailored to the unique challenges of an IP network consisting of disparate, ‘decoupled’ elements. It is important to understand plans for testing and extending the line of supported equipment, including media gateways and customer premise equipment (CPE)—the marketplace will continuously try out and adopt new equipment. The challenge of moving from testing to live implementation This is a big leap, requiring internal expertise and vendor support. IP networks, by nature, are unlike consolidated TDM networks. IP networks are essentially ‘decoupled’, requiring critical voice networking knowledge. Here are some important considerations: √ Ensure that the production systems are redundant and fully tested; √ Testing should include all ancillary systems, such as media servers, POP3 servers, DNS set-up and network connectivity (note that many times lab / testing environments do not include important ancillary systems); √ Security policies should be in-place; √ Provisioning processes should be in-place and tested—including fall-back plans for each step along the way; √ Network documentation should be in-place, accurate and sufficiently detailed; √ Procedures for carefully taking end-users through planned changes should be thorough and tested; √ User Acceptance Testing (UAT) should ensure that all features and functionality are working as planned—this should include troubleshooting checklists to systematically identify any minor problems. Voice expertise Delivering VoIP services does require experience in the voice telecom world—this is not a data service, but it is not a traditional voice service either. Engineering issues can be successfully managed using either in-house expertise or available through vendors / partners in such areas as: √ Local Number Portability (LNP); √ 911 and e911; √ Directory Assistance and Directory Listings; √ Operator Services; √ Inter / Intra LATA dialing plans and billing; √ 800 Services; √ Equal access; √ Call flows (and feature use); √ TDM-based trouble-shooting; √ Corporate CLEC (competitive local exchange carrier) status; √ Dealing effectively with LEC and other CLEC procedures, processes and people. In addition, a formalised training programme will be extremely valuable for internal staff, for business and for residential end-users. Since VoIP is new to most users, providing them with sufficient information is critical to ensure all involved are comfortable with the service. Ongoing technical and service support Quality of Service (QoS) must be addressed. The major contributing factors to QoS are: √ Latency—the time needed for a packet to traverse the network; √ Packet Loss—the percentage of packets lost while transiting the network; √ Jitter—a measure of the variation in arrival delay for a series of packets. Tier one and two customer support procedures and hierarchy must be established, with clear delineation between your company’s responsibilities and those of your vendors. Responsibilities to carefully consider include problem troubleshooting, maintenance of system integrity, as well as hardware and applications support. If you are providing VoIP services to the business market, technical knowledge for customers’ LAN / WAN assessments and interworking will be needed. Success in VoIP will be defined by short product development cycles – quickly getting new features and capabilities from testing into production. So, product development and engineering functions need to be highly skilled and tightly integrated. Scalability of back-office and delivery functions As sales volume grows, automation will be needed in such operational areas as: order input, account set up, feature assignment, billing, customer premises equipment (CPE) fulfillment, onsite network assessment and installation (business market) and customer relationship management (CRM). This requires considerable attention to automation and integration of Operational Support Systems (OSS) and Business Support Systems (BSS) in the early stages of service delivery. In addition to dealing with growing volumes, OSS / BSS systems must provide increased accuracy and audit capabilities through the entire service or product life cycle in order to ensure seamless delivery to customers. Replicating service and expanding service footprint Initial selection of geographic markets is a complex decision, considering the company’s preferred sales approach, existing network, level of anticipated competition and so on. Appropriate phasing of growth is important to maintain smooth operations and sound financial results. An orderly expansion will be facilitated by what has been learned from initial market experiences, but will nonetheless require detailed cost analysis that takes significant variations into account, including conditions such as LEC (Local Exchange Carrier) interconnection for PSTN (Public Switched Telephone Network) access, collocation costs and local support, as well as intrastate and interstate toll arrangements.

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