It has been decades since voice over IP networks (VoIP) turned voice on its head. As tech goes, telephony had a great run. Modern telephony was born on copper networks around the beginning of the 20th century. Sure, there were some big improvements, but it was VoIP that changed everything.
The early battles with VoIP were between the emerging Internet service providers and legacy telcos. The VoIP pioneers didn’t have all that copper but did have lower prices and better audio quality. And they were the first companies to really educate business customers on the benefits of VoIP, or hosted PBX – the category that evolved to be known as unified communications as a service (UCaaS).
These pioneering service providers were selling cloud. They offered OpEx models, evergreen software, and their advanced features were essentially software as a service. What is ironic is that these cloud pioneers built their solutions on premises-based platforms. They bought perpetual software licenses from companies such as BroadSoft, MetaSwitch, Genband, and others that they hosted in their non-elastic data centers.
This article spans about 20 years of evolution and the terms have all changed over that period. Back then we regularly used three terms: Internet Service Provider (ISP), Communications Service Provider (CSP), and Service Provider (SP). ISP has faded as we typically get Internet from the major telcos and cable companies. CSP was meant to separate a communications provider from a provider of other services. But that’s a blur because other services often have communications. The terms have also evolved into “cloud,” but cloud is the most nebulous term (pun intended). So, the catchall term used in this article is service provider (SP).
The SPs that disrupted telcos were disrupted themselves. First, the hyperscalers redefined cloud, and then companies such as Microsoft, Zoom, and RingCentral bypassed the VoIP service provider as over-the-top (OTT) applications. Today, most UCaaS is delivered this way. Teams, Webex, RingCentral MVP, Zoom Phone are all OTT cloud-native, OTT solutions. It’s become difficult for SPs to host their own services that can compete with these global brands. However, they have another option: obtain cloud-delivered UCaaS services as a wholesale service that they can rebrand.
While BroadSoft, Genband, and Metaswitch have all been acquired, there’s still a tremendous installed base of users on these platforms. Millions of customers still obtain their communications combined with bandwidth services from local or regional service providers. Many believe that base will grow. Voice is becoming more commoditized, and the convenience of a bundled solution is becoming more important. It’s not clear yet if the next movie is Return of the SP or OTT Strikes Back.
What if SPs used cloud-delivered services to power their offerings? I'm essentially describing a wholesale cloud-service that delivers both the service provider and its customers the benefits of cloud-delivered communications. This isn’t the same as offering OTT services, it’s offering cloud-delivered communications that gives the service provider control over branding and pricing.
Alianza, Intermedia, Crexendo, and Ooma are among the providers that see an installed base of service providers that are deprived of the broader applications that OTT providers include. They also see an increasing amount of frustration over OTT models over account control and commission structures.
Global telecom market growth has been sluggish, according to a recent report from Alianza and Omdia which found that net global telecom revenue declined from $1.99 trillion in 2014 to $1.98 trillion in 2022. Concurrently, CapEx has significantly increased, reaching $3.6 trillion. While network investments have brought enhanced bandwidth capacity, profit margins have diminished. Research data shows that removing legacy equipment and simplifying networks results in energy cost savings of up to 30% annually.
Additionally, prominent vendors such as Microsoft are holding sway over large enterprises, their OTT reach is broadening through the Internet and continues to encroach on the traditional telecom providers.
Service providers have a long history of innovation through controlling their own technologies. In the case of these VoIP platforms, they purchased software that they can’t control. Cisco has provided some integrations to Webex for providers using BroadSoft, but Metaswitch and Genband have been largely untouched for years. Despite the value proposition of evergreen software, these pioneering platforms have not kept up with the pace of innovation we are seeing from OTT UCaaS providers.
So, how are service providers moving forward? Many are now realizing that the belief that owning their own network infrastructure was a mistake. The costs of owning the platform can actually be a hindrance to making money and creating innovation. Just as enterprises have been letting go of their PBXes for SaaS models, the service providers are beginning to let go of their servers. In this post, I covered how Lumen upgraded its offerings by switching from its own hosted platforms to using services provided by Alianza – yet the services are still Lumen branded.
One thing I’ve learned about enterprise communications, and tech in general, is that the pendulum is always swinging. There’s been a lot of consolidation in the UCaaS space, and I would not be surprised if we are at peak OTT. SPs need to make a decision about their “legacy VoIP” platforms. Those that want to invest, should evaluate partnering with a wholesale provider, and practice what’s preached.
Here are four disruptive wholesale providers to keep an eye on.
Alianza has been in the mix since 2009 and has used the model of first moving businesses to adopt cloud communications and then using that model to support service providers as they transition from legacy systems. The company designed, built, and launched a cloud communications platform for voice. Having control over its own platform allows Alianza to deliver new features and products more quickly and continuously. The company has worked with over 200 service providers, including Liberty Global, SELCO, XPLORNET and CenturyLink. Over the past six months, Alianza announced a strategic collaboration with AWS to help deliver and monetize voice and cloud communications and the company also had a funding raise of $61 million. The funding will help accelerate its movement towards its goal of investing $200 million in R&D.
With the acquisition of NetSapiens, Crexendo expanded its portfolio to include software and wholesale UCaaS, CCaaS, and CPaaS for service providers. The NetSapiens Platform offers scalable, carrier-grade, multi-tenant services. A compelling twist is its commercial model that charges (licenses or subscriptions) by “sessions not seats.” Licensees can host the fully brandable solution themselves or in the NetSapiens Hosted Cloud powered by Oracle Cloud Infrastructure. Crexendo reports that its NetSapiens Platform is growing at 2X the global market and has over 4 million users worldwide.
Cloud communications company Intermedia has been around since 1993, and has made a solid place for itself by supporting 135,000 businesses with solutions for voice as well as video conferencing, chat, contact center, etc. The company provides customers with an all-in-one, brandable platform for service providers. Intermedia powers business communications services behind many familiar brands, including NEC and Costco. It is NEC’s sole cloud communication provider, which has an installed base of over 80 million business users around the world. Late last year Intermedia demonstrated Unite AI Assistant that helps employees with writing content, summarizing information, performing calculations, writing and reviewing code, etc.
Ooma recently expanded into wholesale services with its acquisition of 2600Hz. This added a rich collection of API-based cloud-delivered services for UCaaS, CCaaS, and CPaaS. Ooma was already heavily using 2600Hz, so the acquisition transformed its solution from service provider into a full stack platform vendor. Ooma also offers SPs its AirDial solution, a device that adapts cellular channels to analog. A large base of customers still rely on analog services, but that hasn’t stopped the major carriers from abandoning their copper-based services and charging excessive rates for the legacy service. In 2022, Ooma acquired OnSIP.
While these companies have been around awhile, they are all well positioned to leverage the strategy of being partners to service providers and giving them the reliable platform that is needed to move away from legacy systems and toward innovation.
Dave Michels is a contributing editor and analyst at TalkingPointz.
