Facing a cratering economy, entrenched incumbents, and an unfavorable regulatory environment, independent service providers are finding the path to profitability perilous but not impossible. At a panel discussion at the Internet Telephony Expo in Miami Beach today, six executives from established and startup service providers swapped war tales of surviving the current environment.
Often potential customers see themselves as having a stake in the struggles of independent providers, said Michael Rouleau, senior vice president for business development at tw Telecom (TWTC).
“We are up front with our customers, and they want to make sure we’re going to be around for a while,” Rouleau commented. “When we’re lighting a building, they want to make sure we’re gonna make buck on it.”
Besides TW Telecom, the panel included representatives from MagicJack, Telefonica (TEF), Broadvox, 8X8 and InPhonex. While the participants agreed that lower price alone is not enough to gain market share from the major carriers, it’s clear that in a time of sharply reduced IT and telecom spending, cost will drive the adoption of IP telephony over the next year or so. The independent providers, said David Byrd, VP of marketing at Broadvox, can offer cost savings that the major carriers are unwilling or unable to match.
Byrd cited the example of Verizon (VZ), which has recently begun offering VoIP service as part of its FiOS package in northern Texas.
“They’re asking people to transition from [Verizon’s] TDM facility, and give up their regular phone – and the cost is exactly the same,” Byrd commented. “Even though the cost to deliver that service is much less.”
Complaining about AT&T and Verizon – and the regulations that maintain their competitive advantage – was a common theme on the panel, naturally. But the participants agreed that customers will steadily migrate to cheaper IP-based services as the quality and reliability continue to improve. Unlike other technology adoption curves, the one for IP communications will be driven, not delayed, by hard economic times.
In the recession, Rouleau said, “budgets are driving the adoption of new technology. The economy is starting to force customers to look at new and better solutions.”
The upstarts still face a job to convince consumers and businesses of the benefits of IP communications, said Matt Bramson, chief sales officer at InPhonex.
“We have to take an active role in encouraging the next-generation technology,” Bramson asserted. “Right now most of what people know about IP telephony comes through the largest providers.”
The service provider execs were realistic, though, about the challenges they face because of the evolution of the industry over the last decade.
“It’s very difficult for someone to come in today and compete by offering quality low-cost services,” said Santiago Olaguibel, director of communication services at Telefonica. “We are all tapping into infrastructure owned today by a duopoly.”
That duopoly would be AT&T (T) and Verizon, and they are not going away any time soon.
