What’s Hot for Service Providers? VOIP

VOIP and other services that can be sold as a metered service and easily over the internet are going to be VERY hot. Why is blogging so hot – it’s easy to set up, easy to do and the benefits are clear. VOIP has even clearer benefits for SMBs and will only increase.
Market research firm AMI Partners writes A pending AMI-Partners report, The Emergence of Hosted Voice Services: Enabling Service Providers to Transition from Commoditized to Value-Added Services, indicates that
-Hosted voice offerings continue to make strong inroads into the SMB sector – and the market, while still hesitant, shows strong interest and adoption plans.
-As downward pressure on basic communications services strain the margins, the RBOCs (BellSouth, SBC, Verizon and Qwest) and other hosted-voice service providers see a path to increased revenue.
-Service providers must move swiftly to capitalize on this opportunity as IP premise-based solutions from Avaya, 3Com, Cisco and others have a considerable head start and are better understood by the mass SMB market.
-SMBs increasingly note the importance of VoIP service. While less than 6% of small businesses reported VoIP to be important in AMI-Partners’ 2003 survey, this number swelled to 25% in some market segments during 2004.
-The SMB market for hosted voice services will grow at a 55% CAGR over the next three years.

AMI’s upcoming study shows that hosted voice services will continue to revolutionize the way small and medium businesses communicate. Hosted solutions are yet to become mainstream in the market, and some hesitation lingers as many businesses still desire an on-premise solution. However, AMI-Partners believes that several factors:
cost advantages,
future proofing,
predictability of monthly service charges,
easy-to-use interfaces and
feature-rich, productivity-enhancing services
will propel many businesses past these minor concerns and drive broad market adoption. “Any firm focused on cutting costs and increasing productivity should seriously consider the benefits of a hosted solution,” commented Michael Lauricella, Vice President Telecommunications Practice. “There are advantages to both premise-based and hosted; however, many businesses irrationally dismiss the hosted alternative given its newness. The fact is, hosted solutions present a reliable and viable solution to many of this nation’s 6.3 million small and medium businesses as well as enterprise customers.”
Many U.S. service providers have moved swiftly to deliver hosted voice solutions to the market:
Covad Communications, the DSL pioneer, is aggressively promoting VoIP services and recently announced the ability to deliver its hosted solution over DSL, dramatically opening the addressable market.
MCI has had its MCI Advantage product in the market for several years and reports modest growth.
M5 Networks, operating only in the New York metro, continues to show strong revenue growth with its hosted voice service.
SBC, despite potential revenue cannibalization, has entered the market with its PremierSERV offering.
Qwest introduced its OneFlex offering in June of 2004 both in region and out of region.
Verizon, with its iobi Professional service, is cautiously testing the hosted voice market.
Traditional CLECs, such as XO Communications and McLeodUSA, have entered the VoIP space with hosted offerings of their own. Surviving CLECs did so through the delivery of integrated access and hosted voice services that are a logical evolution to their product set.
The above listing is just a small sample of the activity in the U.S. market. AMI’s upcoming report will look in detail at the business strategies of all of the above operators as well as several others. For each service provider, the report will assess the technology platform, go-to-market strategy, target market, strengths and weaknesses, and future product plans.