By Frank J. Bernhard
Apparently the business for voice is still an agrarian staple of the telecom economy as Skype continues to demonstrate favorable growth connections in the company's latest earnings and market penetration announcements. While most of the attention paid this year has turned to mobility, the lucrative underpinning of international calling is back on the radar as a profit generator in a recessionary period. And right about now, profitability remains the central point of investor speculation on voice futures.
With downward pressure on ARPU across all telecom sectors, the positive upside curve for voice calls shows the realization that broadband and innovation through the Web is starting to emerge. Take Google Voice and others that demonstrate how the desktop can in fact be used for more than just an email--the notion of convergence comes full circle to the consumer. And given that wired plumbing is gaining intelligence, we expect a resurgence in spend for voice services that nimbly adapt to the presence and design of subscribers. All of this comes at a cost to operators, albeit a lower one today.
As most voice networks offer an unlimited entrée of calling profiles, smart carriers recognize the strategic imperative to own the wired premise as well as the mobile subscriber. Cincinnati Bell followed suit to AT&T and Verizon last fall with their "Why-Pay-for-Two" promotion that aimed to shore up wireline losses while improving the value proposition to the dollar-conscious customer. Playing to the sensitivity of price for wired and wireless broadband, this bundling approach harkens to a similar tactic by network providers to expand subscriber roaming at WiFi hotspots. That bodes well for some but it has lessened the buying interest of other consumers.
If carriers opt to succeed with voice platforms, they can win the long-run game by applying a few novel concepts:
- Lead with value, not price: Don't lower the price floor to the point of diminishing returns and one where operating costs eclipse the needed capital for growth in an upswing period. Too often, price becomes a race to the bottom, otherwise forcing unnecessary pressure at the cost of healthy customers. Instead, emphasize value through bundling options and services that perceivably give more a same or slightly higher price point.
- Enhance your service, innovate a new path: Vonage met the challenge of declining revenues and falling per minute prices by stabilizing a flat-rate, monthly fee. But they gained new dollars by adding such features as Visual Voicemail to generate incremental revenue. All the while, subscribers took to the fancy of services like this to expand on the value of their mobile SMS and email capabilities.
- Tap growing markets, entrench subscribers: Telecommuting is on the rise, so why not take advantage of the push for unified communications (UC) through an offering that combines the essentials of voice dialing with the sophistication of data, video, and content management? The possibilities of creating virtual desktops that follow a subscriber out of their home and into the great wide open show promise in delivering steady revenue while anchoring the must-have buyers of such.
- Think long-term, push the recovery envelope: Avoid the fallacy of price wars and start designing networks that cooperate with mobile architecture. This implies that market research functions and subscriber modeling are critical in tethering voice customers to a network provider. Intelligence starts upstream, and gaining a long-tail perspective on the needs of the buyer begins ahead of any economic rebound.
Sailing out of a stalled, global economy is not without unique challenges. And winning the race by price itself is sometimes a less-than-successful stretch to cross the finish line. Guard your future by recognizing how voice is the killer app of humans, and steer your strategy in a favorable direction by extending the communications canvass.
Frank J. Bernhard is the author of FierceTelecom's bi-weekly Telconomics column. He is a technology economist and managing principal of OMNI Consulting Group's telecommunications practice based in Davis, California.