Level 3 Communications

Shaun Andrews

Service Providers Turning to Cloud Voice Platforms as a Better Path to Next-Generation VoIP

If you’re the chief technology officer of a cable provider, telco or ISP, chances are you’ve had some unpleasant conversations with your CEO regarding investing in voice services. Voice is still important to consumers and enterprises, but fixed costs to deliver it have crept upward the past several years, as margins have eroded. If you built and maintain your own network, asking for capital expenditure (CAPEX) to upgrade VoIP 1.0 networks or end-of-life equipment, fixed networks, E-911—and the associated human capital to administer it all—isn’t an easy conversation. If you’ve been using traditional hosted and white-label service providers, you’re finding your marketplace agility is lagging because you lack control to offer new services and features and compete with a widening field of over-the-top (OTT) providers.

Cutting costs and running your legacy TDM or VoIP 1.0 network into the ground or exiting the voice business altogether in the face of more agile OTT providers isn’t an option for most service providers, who see a large remaining wireline voice opportunity estimated at $71B in transition, with growing mobile usage.* A new survey of North and South American communications service providers conducted in first quarter 2016 by Heavy Reading indicates that 81 percent view voice as driving adoption or growth of other services, despite delivery cost and margin challenges.

Cloud voice platforms (CVPs) can provide answers to avoiding heavy capital expenditure and operating expenditure (OPEX) investments, risk of another round of platform obsolescence, and the inability to drive growth by bringing new services rapidly. The same Heavy Reading survey indicates interest in cloud platforms among cable companies, wireless and telcos is starting to accelerate after a period of evaluation, and Level 3 is seeing the same trend among our service provider customers who span multiple segments.

Escaping the gerbil-wheel of large CAPEX investment isn’t easy. Service providers have been exploring network functions virtualization (NFV) solutions to replace CAPEX and OPEX needed to upgrade legacy infrastructure to next-generation voice networks. Recreating core service delivery elements (session border controllers and applications servers, for example) on virtualized servers in data centers aims to reduce total cost of ownership (we have doubts that will bear out), but this process is very complex and still requires  a lot of upfront capital and fixed recurring operational expenses. The service provider still has to build and manage a voice network. NFV also complicates vendor management, day to day administration, and troubleshooting of service issues. And that uncertainty and complexity may be a reason why 83 percent of CSP respondents said they are likely or very likely to use cloud to replace or augment network infrastructure.

The decision on a path forward isn’t always simple because many service providers say they lack a comprehensive understanding of their current total operational costs to deliver voice. In the survey, only 32 percent indicated they had a solid grasp on their costs, leaving 68 percentover two thirdswith an incomplete view of total cost of ownership.

Why move to the cloud now? Many providers invested in the same technology at the same time, and now those systems are aging. They’ve also seen a proliferation of customer IP end points to serve. To remain competitive, service providers have two choices—rebuild those networks and platforms, or outsource to a trusted third party. The easier path that avoids huge CAPEX is selecting a cloud voice platform with a large service footprint, embedded NFV, a ubiquitous feature set that’s available in existing and future markets, all in an environment in which APIs can be customized to plug into the service provider’s systems.

The cloud can transform VoIP economics and the way communications providers of all types more profitably deliver voice services to customers. Look for providers who can check all of the critical boxes to deliver a leading cloud voice offer.

* Atlantic ACM 2015-2020 U.S. Telecom Sizing and Share Complete Report

Take a closer look at how Level 3 and Alianza can help transform your voice services.