Carriers Plug Into Private-Branded Enhanced Services
By Khali Henderson
Communications services–the enhanced IP-based ones–have not escaped the widening grip of the emerging hosted applications delivery model. Communications
ASPs, or CASPs, are springing up to deliver specialty applications, such as voice mail, e-mail and conferencing, on a subscription or per-use basis.
While these companies are enjoying their own success in providing services directly to end users, they also are finding eager partners among traditional telecom service providers that are under mounting pressure to deliver whiz-bang capabilities to their subscribers.
The hosted communications applications market opportunity is large. Equity researchers at U.S. Bancorp Piper Jaffray Inc.
(www.piperjaffray.com) project CASP revenues to grow from $250 million in 1998 to $7.2 billion in 2003.
The company sees promise in several applications, particularly messaging, Internet call management and collaborative conferencing (see market forecast on page 48).
*Messaging. Messaging solutions include voice mail, e-mail, fax mail and video mail, as well as applications that unify access to multiples messaging tools. MessageClick Inc.
(www.messageclick.com), Hotvoice Communications International Inc.
(www.hotvoice.com) and eGIX Inc. (www.egix.com), formerly Voice-Net, are a few of the many CASPs offering messaging solutions.
* Internet Call Management. Internet call managers enable Internet surfers to be notified of incoming calls via a pop-up screen. Sophisticated services like the one offered by InfoInterActive Inc.
(www.infointeractive.com) offer several call-handling options, such as answering the call, transferring the call, playing a message, sending the call to voice mail, retrieving the message without logging off the net, ignoring the call with continuous ringing, or even opening a gate or door to a visitor phoning from the lobby.
*Collaborative Conferencing. These web-enabled audio and video conferences enable instant call set-up and document sharing over the web. One example is the PhoneCube service from 3Cube Inc. (www.3cube.com), which integrates conferencing, document collaboration and text messaging in one application by using Java-enabled browsers with no software or
Most CASPs, including those listed above, serve end users directly, and rely in large part upon viral marketing, wherein early adopters refer new customers, ever-widening the user pool. While that seems to work, many CASPs also rely on channel marketing for sustained growth.
Wall Street concurs. “We believe that the distribution model that will be more successful [for CASPs] is one utilizing the established channels of larger CSPs [communications service providers],” say U.S. Bancorp Piper Jaffray researchers in their recent report on CSPs.
Certainly, CSPs’ ready customer bases and known brands appeal to CASPs that are more often than not no-name startups. However, there is obvious logic in having communications applications delivered to users through their telephone company.
“What we’re selling is a communications tool,” says Alex Peyzner, vice president of marketing for 3Cube, which is targeting telecom service providers as a primary distribution channel for its web conferencing services. He notes that end users commonly procure teleconferencing services from their telephone companies today.
In March, e-commerce-based telecom provider Talk.com Inc.
(www.talk.com) became one of 3Cube’s telco partners, offering Talk Conferencing on a co-branded basis to its small office home/office
(SOHO) and residential subscribers. Talk.com’s director of product development Alan Kirk says that while the service may have some appeal to its core customers, it is planning to market the service heavily to businesses it will be courting for its new local service offering.
It also is working with marketing partner America Online Inc.
(www.aol.com) to bring the service to AOL’s long-distance customers as well as to promote it to users frequenting the portal’s business sites.
Kirk says Talk.com is intent on bringing productivity-related services, such as online billing and web conferencing, to its callers in an effort to stave off attrition.
“One of the biggest problems of any long-distance provider is churn. People are used to switching and do it frequently,” he says. “We’ve found that the people that come to check their bill online don’t churn. We want to entice them to come to web to look at the bill and try other productivity-related products.”
“With the needs of carriers to focus on service differentiation in a market full of competition, we believe the communications ASP model has enormous potential,” the U.S. Bancorp Piper Jaffray report says. “Additionally, we note that owning and operating an entire network and all applications is turning into a less desirable strategy for emerging carriers.”
In fact, the benefits to carriers–particularly resource-strapped startups–of outsourcing to a CASP are clear; they are, primarily, getting to market quickly, avoiding high upfront capital expenditures and retaining focus on core competencies.
* Speed to Market. Depending on the application, development could take two years, says Ben Feder, CEO of MessageClick, which built it’s messaging software from the ground up.
“We have a vast footprint, and they have a time constraint,” says James Kinnett, vice president for messaging CASP eGIX, explaining the outsourcing proposition succinctly. He adds, eGIX has helped at least one carrier to market in 30 days from contract to launch, noting that a more typical timeframe is 90 days, depending on the degree of customization required by the carrier.
Bob Richardson, CEO of InfoInterActive, says an ASP deployment of its Internet call management system takes four to six weeks, depending on the branding and which party is providing the customer service.
Speed to market also can include coverage. Hotvoice, for example, is deploying a global network in conjunction with its unified messaging solution, enabling subscribers to access the system via a local number. The company is in 42 markets currently and will have 100 hubs worldwide by the end of the year, says CEO Aymar de Lencquesaing.
For international providers, this reach and capability may offer additional opportunities to bring services to customers in locations where Internet access is uncommon, such as China or where users are adopting wireless web phones, such as Japan, he says.
* Cost Savings. While limiting the risk inherent in a new product rollout, outsourcing enhanced services offers to a proven CASP eliminates much of the up-front investment as well.
“Carriers have to look at it holistically, including the infrastructure and what’ s required to deploy the services,” says Chris Ward, director of marketing for iBasis Inc.
(www.ibasis.net), an IP telephony wholesaler turned CASP with the June launch of its OneCore unified communications service. “In terms of personnel, it’s significant. Ask any CLEC how many Oracle database programmers they have. I guarantee you it’s not a lot.”
Additionally, carriers should benefit instantly from the economies of scale their wholesaler achieves by providing enhanced services to a large base of users, the U.S. Bancorp Piper Jaffray report notes.
Because of the unique nature of each agreement, including terms and service levels, no hard and fast rules exist. However, most wholesale contracts include a one-time setup fee and monthly fees based on the number of users. If the reseller uses the CASPs’ network rather than its own, per-minute fees also may apply.
iBasis charges carriers per-user fees in blocks of 25,000 to 50,000. Charges range from $3 to $25 per user per month, depending on the feature set the carrier requested.
In contrast, Hotvoice charges carriers for active users on a per-user, per-month basis and may share in ad revenues if applicable.
* Focus. MessageClick’s Feder says he sees a shift among carriers, which increasingly are making it a “strategic imperative to focus on what they do best.”
For example, Talk.com’s decision to partner with 3Cube had a lot to do with retaining focus on core functions and avoiding reinvention of the wheel.
“We do a lot of development internally. However, we are focused on developing our online billing capabilities and our ability to process local orders,” Talk.com’s Kirk explains. “We were motivated less by the lack of IT resources than we were lured by the completeness of 3Cube’s service.”
The retention of focus extends beyond product development and rollout to ongoing maintenance and upgrades. The CASP manages the systems and software development. “Many service providers are looking for hosted applications because the pace of applications development is so much faster when driven by developers than an in-house team,” iBasis’ Ward notes.
All or Part
Within the wholesale relationship structure are shades of gray. Some carriers choose to outsource only parts of a CASP’s total application, bringing in parts they want to manage.
“Sometimes the service provider wants it branded without being on a separate server, or they just want voice mail and fax mail, but not call forwarding features. Sometimes it’s tied into their existing infrastructure,” says Feder. “There is a realization among carriers that owning it all doesn’t really make sense. They need to decide what part to own.”
In Talk.com’s case, for example, the service provider uses its own network and conference bridge; 3Cube hosts the website and the call record database. Kirk says this lets the company reduce costs and drive minutes on its network.
Similarly, InfoInterActive has agreements with several telephone companies, including Cincinnati Bell Telephone Co.
(www.cinbelltel.com), which houses the Internet call manager server locally but provides customer service itself, accessing databases housed with InfoInterActive in Halifax, Nova Scotia.
InfoInterActive’s Richardson says many carriers want to get started quickly and take it in house, particularly the servers or communications portions rather than the back office.
“It’s a way of judging whether it will be commercially viable,” he says.
Kinnett notes that while carriers often have the intention to bring applications in house at a predetermined time based on gaining a critical mass of customers, escalating development requirements are causing them to extend their outsourcing contracts for longer and longer periods.
“They’ve got the money, but not the time [to bring services to market], so they outsource,” he says. “Most have in their head that they will bring it in house after a period of two to three years. But it ends up being more like three to five years. Applications are more complex, and they have to have the latest technology.”
In the case that a carrier is intent on owning the asset, many CASPs offer a logical migration path through licensing programs.
“There are service providers who want to take in in-house for control purposes. For mid-sized companies, outsourcing is more efficient. It makes more sense for the large companies to license it and take it in house,” says Feder. His company, MessageClick, will enable service providers to license its technology on a per-user basis beginning in fourth quarter.
Khali Henderson is editor in chief of PHONE+ magazine.