Category: VoIP

Competitive Providers, Hosted VoIP, and Old World Thinking

The ranks of telecom carriers not offering Hosted VoIP decreased by one today.  Integra Telecom, a CLEC with TDM roots, launched its Hosted VoIP offering, further augmenting its current voice service portfolio.  Like many established CLECs born in the pre-Internet era, Integra’s voice services have been largely provided over the Class 5 circuit-based infrastructure it has built over the years.  These companies are still making the transition to the new communications world centered around IP technology.  Those slower to offer a full suite of IP-based communications services risk losing wallet share as business customers increasingly push for them.

Integra’s deployment of its new softswitch platform – provided by Metaswitch Networks – opens a number of opportunities for it to pursue.  While the company is a regionally-focused carrier based in the Northwest US, it is pushing to extend its reach beyond these confines.  Regional carriers have found it challenging to win multi-location enterprise accounts without nationwide reach.  Integra’s newly installed Hosted VoIP platform allows it to plug this hole on the voice side and begins to set the stage for the company to move further up-market.

Like most other CLECs, though, Integra is tying its Hosted VoIP and local access services together.  The end results is a step in the right direction – deploying another set of IP-based services – being hindered by old telecom world thinking.

 

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Microwave backhaul underestimated in fiber’s shadow

“Backhaul requires a fiber fix,” this video tells us, a sentiment echoed by its subject: no less an authority on fiber than an executive from a backhaul provider with fiber in its name.

But while fiber is front and center in wireless backhaul requirements, wireless microwave technologies are also often required to reach cell sites that can’t cost-effectively be reached by fiber. You may not hear as much about it because companies that use a mix of fiber and microwave — like Allied Fiber and Intellifiber — don’t put the word “microwave” in their names and prefer to be known for their most prized product. Quietly, though, it’s a sizable chunk of the backhaul space: Southeastern backhaul provider TowerCloud, for example, serves 80% of its sites with fiber and 20% with microwave.

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Telecom M&A shifts from fiber to cloud

At the CompTel Plus show this week, I was reminded of the prediction made at last year’s show that 2010 would represent something of a volume peak for fiber-based mergers and acquisitions. That prediction appears to have been borne out, with dealmakers reporting this week that, even assuming some more transactions before the holidays, fiber M&A in 2011 will be “not even close” to the volume seen in 2010. There simply aren’t as many assets left on the market these days.

As my hastily assembled list indicates, telecom M&A in 2011 shifted more toward cloud-centric services, including hosted communications, particularly after the starting gun of Verizon’s (VZ) $1.4-billion acquisition of Terremark Worldwide in January. (Yes, I know: This list is far from exhaustive. Please feel free to harangue me about the ones I omitted in the Comments section below.) Cloud M&A will continue to hold the spotlight for some time (more on those trends here and here), but even large-scale fiber M&A hasn’t closed its curtains yet; expectations for cable MSOs to buy nationwide fiber networks continue to grow as trade associations lobby regulators for a green light to such deals.

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When call analytics become more valuable than calls

When will we reach the point at which the value of a voice call is eclipsed by the value of the data surrounding the call?

Businesses are rapidly learning how valuable call metrics are to their operations in multiple ways: Knowing how the length and volume of customer service calls can be affected by the particular customer service rep, the particular customer, the particular topic or circumstances, time of day, etc. – all of these things can help businesses optimize their processes and keep customers happier.

The more call data is unleashed, the more businesses and service providers will learn about how best to harness it. And more data is being unleashed all the time. This week Google added its Voice service to those included in its Takeout offering, which allows users to download data associated with services like Gmail and Google+’s social app, Circles. So now Google Voice users will be able to download their call history, voicemail (both audio and transcripts), greetings, recordings and so on.

Google has long offered APIs for its services that allow others to cultivate and process data surrounding their use. Various developers have created mashup apps for tracking call data through Google Analytics. And Google also offers call metrics with its AdWords advertising service, so that users can measure the effectiveness of ads by looking at the number of people who place calls through the ads. But that application serves Google’s ad sales (as a sort of ad-spend-ROI calculator) more than it serves users’ own direct needs.

What may turn out to be especially valuable about Takeout for Google Voice is its

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Inside the Vocalocity Aptela merger

If you’re like me, when you saw today’s announcement that Aptela was merging with Vocalocity, your first thought was how convenient it is that Aptela and Alteva, two companies in the same space whose names you were sure to keep confusing, were both taken out of the game in the same summer.

Believe it or not, today’s deal has significance even beyond that.

As I’ve documented, M&A has been accelerating in the hosted business VoIP space for a while now — there was another deal just last month — and today’s merger (which technically closed yesterday) adds mass and momentum to that fast-growing snowball. Increasingly, we’re seeing carriers acquiring hosted VoIP providers,
such as TelePacific buying Telekenex, Earthlink (ELNK) buying STS Telecom and CBeyond (CBEY) buying Aretta Communications. But we’re also seeing pure-play hosted VoIP players combine with one another, as we did today.

Because there isn’t a great deal of product differentiation in the hosted business VoIP space right now, M&A among in this sector is typically about acquiring customer bases to build scale and, secondarily, acquiring talent to more effectively compete.

Eight-year-old Vocalocity, which had roughly 11,000 customers and 150 employees, grew by about a third with the addition of Aptela’s roughly 4000 customers and 40 employees (including one important gain in particular: Aptela’s CTO and founder, Mahesh Paolini-Subramanya, who is now CTO of Vocalocity).

The new improved Vocalocity, with nearly 15,000 customers, should have annual revenue

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Businesses need multimodal communications

Years ago there were only three ways for companies to communicate directly with customers—phone, mail and door-to-door canvassing. (Radio, television and print advertising isn’t really direct communication.) Today companies still use these three avenues but to a much lesser degree, at least for mail and door-to-door. The phone is still a very effective way to reach customers, especially those few who haven’t embraced the newer avenues yet. And phone communication is more efficient now with the help of automated systems. But the Internet has opened things up considerably.

New communication avenues have quickly become vital for reaching targeted audiences. And unified communications have made it easier to manage them. Business has followed our private lives and the way we communicate there—texting, emailing, writing on social networking sites. It’s how we communicate now, and it’s how businesses have to communicate too.

When businesses started using email to reach customers, it was very effective. That effectiveness has lessened somewhat because of spam, but targeted email campaigns still generate a lot of sales leads. Texting almost immediately became the most used communication tool on cell phones when it came out. It’s still the most used. And now companies are using it perhaps most effectively for high-touch service to current customers (sale announcements, appointment reminders, thank yous, et cetera).

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Warwick buys Alteva: Are hosted VoIP valuations rising?

Last week Warwick Valley Telephone became the latest telecom carrier to acquire a cloud-based hosted VoIP provider, joining others such as TelePacific, Earthlink (ELNK) and CBeyond (CBEY). The $17-million acquisition of eight-year-old Philadelphia-based Alteva gives the New-York based telco hundreds if not thousands of hosted VoIP customers in the Mid-Atlantic and elsewhere and roughly $5 million in annual revenue (though that number is quickly growing). And the pricetag appears to carry a slight premium over recent similar deals. Is this the start of a trend?

For Warwick, which is an ILEC/CLEC hybrid, Alteva provides some much-needed revenue growth to compensate for line losses on the company’s ILEC side that aren’t being sufficiently offset by organic growth on the CLEC side. That may be one factor in the deal price.

Warwick is paying 3.1x Alteva’s annual revenue, a number that, Warwick says, seems lower if you consider Alteva’s growth trajectory (the company has averaged 60% annual growth over the past three years). That’s a slightly higher price than hosted VoIP players have been fetching thus far. In 2010, CBeyond paid $4 million ($2.3 million net of cash) for Arretta, which was expected to contribute about $2 million in 2011 revenue. The same month, M5 Networks paid $8 million for Geckotech, which claimed $4.7 million in 2009 revenue. And earlier this summer, West Corp. paid $120 million for Smoothstone, whose revenues are unknown but estimated by NPRG to be in the range of $60 million this year. Is Alteva’s multiple a sign of growing valuations in this increasingly hot sector or a reflection of Warwick’s uncomfortable position amid residential line loss?

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Voice over LTE a hard sell to enterprise

Mobile operators are having trouble casting 4G technologies as business services, according to a recent survey of nearly 40 mobile operators worldwide (conducted by mobileSQUARED for softswitch vendor Broadsoft [BSFT]), in which the bulk of respondents admitted they were ill-prepared to offer LTE as an enterprise solution.

With LTE deployments underway and voice-over-LTE expected to emerge domestically starting in 2012-2013, major U.S. mobile operators have the potential to disrupt much of the broadband and communications landscape. And the privileged position of AT&T (T) and Verizon (VZ) as both wireless and wireline providers gives them the opportunity to offer fixed-mobile convergence (FMC) services that competitors would find hard to match. Those offerings might be quite compelling to a lot of small businesses, but at the enterprise level, the value breaks down for several reasons, including the lack of uniformity among mobile devices and services among enterprise employees and the gap between carriers’ mobile and enterprise divisions. Those issues complicate enterprise VoLTE as well.

“There is still too much emphasis placed on retail and mobility offerings with little investment or support for enterprise customers,” the survey said.

That disconnect creates opportunity

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Masergy’s next moves

Masergy is looking for acquisitions to beef up its bottom line following the new injection of capital it will receive from being acquired by private equity firm ABRY Partners. As it’s shopping, the provider of global VPNs and MPLS services would do well to add hosted VoIP and other cloud services to its in-house capabilities, emulating the strategy of several others including Cbeyond (CBEY), which last year acquired both a cloud computing firm and a hosted VoIP provider.

Masergy made the case fairly well for combining its own services with hosted VoIP in the press release announcing its partnership with hosted VoIP provider Thinking Phone Networks: When you blend the benefits of a cloud-based application with the performance quality and QoS controls of a secure, intelligent MPLS connection, you have a powerful package. (Throw in SIP trunking, and customers have a way to get the most of their existing premise-based PBXs.)

But wait, you say: Doesn’t Masergy mainly serve large businesses? What do large businesses want with hosted VoIP? Isn’t that just for small businesses that don’t have their own dedicated IT staff?

On the contrary. Hosted VoIP is not just for small businesses anymore. As I detail in a new report just recently made available (“Hosted Business VoIP: UpMarket Opportunities”), demand for hosted VoIP services is quickly catching fire among businesses with hundreds or thousands of employees.

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Telephony API/mashup market growing up

The telephony API (application programming interface) and mashup market is growing more mature by the month, as voice increasingly fractures, from a discrete service into a variety of features within a range of applications. Just a few months after two cloud telephony platform providers bulked up with new waves of investment, a new startup is throwing its hat in the ring with aims to take telephony APIs higher upmarket.

Twilio, whose web-based platform has been helping application developers add telephony functions since late 2008, raised $12 million in new funding last fall after collecting more than 20,000 customers. A few months later, a similar outfit called IfbyPhone, raised $10 million, having already made its own cloud startup acquisition. And last week a new venture called Plivo launched a Twilio alternative aimed at the higher end of the market.

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