Web Hosts in the VoIP Landscape
theWHIR.com on November 16, 2005
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By Wayne Epperson
This article appeared in the October 2005 issue of Web Host Industry Review magazine. Click Here to sign up for free.
November 16, 2005 — Web hosting companies are already realizing additional revenue streams from the sale of bundled VoIP services to their customer bases. And the extended offering appears to be one way for any hosting provider ? small or large ? to enrich and cement relationships with their customers.
Banking on the technology’s potential, several companies have invested in nationwide VoIP networks and will bundle branded voice services for hosts to resell as their own products. The only requirement for rapid deployment of VoIP service is that the hosts’ customers have access to broadband ? a prospect that becomes more universally likely with every month of rapid broadband growth.
Communications firm iOnosphere (ionosphere.net) is one of those companies providing wholesale VoIP services to hosting companies. IOnosphere has used VoIP since 2000 in its international wholesale telecommunications business to transport telephone calls to carriers throughout the world.
The company recently launched a dial tone consumer VoIP service designed to be sold through resellers. IOnosphere’s private label reseller solution enables hosting companies to offer a VoIP telephone service designed for residential, small office and home office users, to their existing customer bases without incurring product development or network building expenses. The host labels the VoIP product and establishes its own retail price.
Customers, for their part, are coming to realize that VoIP does not mean cutting back on quality or features. A VoIP service generally includes voice mail, voice mail delivered to email, speed dialing, automatic call back, caller ID, call waiting, call forwarding, call blocking, call return, three-way conferencing, toll-free numbers, geographic mobility, virtual numbers and low rates for international calling.
“Recent rulings by the FCC requiring that E911 be provided with VoIP service is another step toward VoIP becoming a replacement for traditional fixed line telephone service,” says Tom Berning, director of VoIP sales at iOnosphere. “By reselling VoIP services, a hosting company can easily add revenue and profits by selling a new product to their existing customer base.”
Telecommunications firm IntelaCom (intelacom.com) and its sister company, YourNetPlus also sell VoIP wholesale to Web hosts and ISPs. The companies are among the largest wholesale aggregators of the service, employing more than 30 different carriers and eight national backbones.
Gary Stanley, president of IntelaCom says that while VoIP is gaining steam, the real boom is still on the horizon. Recent analyst forecasts expect the growth of VoIP consumers to rise from four million by the end of 2005 to more than 28 million by the end of 2008.
“If you are in the Web hosting business, or any type of Internet-related business at all, VoIP is something you need to pay attention to,” says Stanley.
Like other network services, VoIP uses servers, routers, switches, applications, directories and a variety of protocols to support not only communications, but also collaboration.And so VoIP technology faces some of the same risks that threaten hosting services themselves ? viruses, worms and denial of service attacks. Web hosts looking to work with a VoIP provider have to assess whether the network is secure and the company practices good security management by applying patches and updates regularly. They should also determine whether security logs are monitored and whether personnel are properly trained. If an organization’s data network is secure, that level of security can be extended to the VoIP services network.
Another key indicator of VoIP’s immediate relevance to Web hosts is the involvement of some of the leading developers of Web hosting technology in the emerging VoIP services market. Hosting software maker Ensim (ensim.com) recently acquired TeleGea, a provider of solutions for hosted VoIP services.
Ensim’s software automates and manages back office and OSS environments for hosts. With expertise in the Web hosting space and the hosted messaging and collaboration space, Ensim’s move into VoIP is a signpost for Web hosts, and an outright request that they follow.
The company’s widely deployed control panel will now be able to automate everything from provisioning to the administration and integration of all of the systems necessary for VoIP services, simplifying the operation of deploying and providing VoIP in much the same way it does with Web hosting.
Ensim knows the value of voice and data integration. It had been using its own in-house hosted VoIP service model for quite some time before it entered the market with the purchase of TeleGea.
The company is counting on the prediction of IDC that the majority of the nation’s small to medium businesses will turn low cost vehicle coverage to hosted Voice over IP services because of the cost and the value received on their dollars spent.
While the largest share of the VoIP spoils will go to the companies that succeed in developing VoIP networks, the appeal for smaller players is much the same as in Web hosting or other network-based services. VoIP resellers can capture a smaller share of the market without providing the up-front investment in infrastructure.
“A lot of smaller vendors have chosen to become resellers as the first step to determine whether the opportunity is really there. They can focus on sales and marketing and then, if there is a real uptake and there is a confidence in the business, they can slowly take on more of the infrastructure,” says Shay Mowlem, vice president of marketing and alliances at Ensim.
One of VoIP’s most compelling benefits to Web hosts is not just as an offering, but also as a business tool that they, too, can use. The technology can help communications providers broaden their portfolios, expand their geographical boundaries and boost their revenue streams without significant capital investment or time commitments. That same service can also help hosts lower their own telecommunications costs and enhance network functionality
Of course, providing VoIP is not just about squeezing more revenue out of hosting customers. It is a service that can foster a better relationship with those customers as well.”Providers that can offer new services, and can roll them out rapidly without sacrificing quality in the process, are well positioned to earn loyalty rewards from their customers and stand apart from their competitors,” says Mark Peterson, vice president of marketing at VoIP provider CommPartners (commpartners.com).
CommPartners’ VoIP network coverage area includes 92 percent of the calling public in the domestic United States, including Hawaii. It offers the IP-based network coverage to deliver residential, SMB and enterprise hosted VoIP services.
The company designed its network for business-quality VoIP services, 911 emergency service capabilities and emerging compliance issues that pose challenges to many VoIP service providers.
The company says it was formed to “Enable the VoIP Promise” by offering the services that include IP Centrex, hosted PBX and conferencing functionality and IP-to-PSTN connectivity to broadband and service providers. It also offers a privately branded VoIP service.
Its solution includes the CommPartners Management System, a proprietary OSS platform for automated provisioning, billing, user interface and back office support capabilities.CommPartners is an example of the kind of specialization that is beginning to emerge even among VoIP providers.
M5 Networks (m5net.com) is another such example, having chosen to keep its engagements in a well-defined major metropolitan area. The company is an outsourced IP phone system provider in the northeast United States. It was founded in 2000 and has been entirely focused on delivering reliable business phone systems service to its customer base in the New York Metro market.
Its customers have chosen not to buy on-site switching technology at all, and instead connect Cisco IP phones to their local area networks, which are then connected to M5?s dedicated network or the Internet.
“During the first five years M5 has been in business, we have focused on the basics of building a very reliable service platform because our clients’ CTOs and CFOs care most about not losing dial-tone and avoiding breakdowns,” says Dan Hoffman, CEO and president. “Now, we’re working on developing more advanced, targeted vertical applications to add value to our client’s investment in VoIP technology.”
A new player in the field of VoIP, America One Distribution (myaone.com) ? which has resellers in the United States and Canada ? aims to help its resellers plan strategies for selling and marketing VoIP to their current customers, making sure their networks are ready for VoIP and assisting with installations, whether on-site or by phone support.
“We want to support the user after the phone system is in, and make sure that every time they pick up a handset they get service comparable to that which Ma Bell offers. We are not selling VoIP equipment, we are selling total customer satisfaction,” says Christopher Pearson, CTO of America One Distribution.
Another opportunity unfolding for hosting providers is the wireless VoIP market. Voice over WiFi is a compelling application in its own right, with customers increasingly seeking unattached communication solutions. While it hasn’t picked up quite the velocity of VoIP, WiFi networks are attracting an interest that points to success in the long term.
For businesses that already have wireless LANs, running voice over the infrastructure is a natural extension of the technology. Over the last few years, wireless VoIP has made considerable in-roads in hospitals.
“It makes sense for hospitals to leverage existing wireless networks for voice, and as WiFi moves low cost vehicle coverage from a vertical technology to a more horizontal network infrastructure, you’ll see other companies doing it as well,” says IntelaCom’s Stanley.
WiFi is creating a ubiquitous wireless mesh of broadband connections, lending tremendous potential to wireless VoIP applications. But for hosting providers, the possibilities may be limited by the availability of wireless broadband technology in the areas they service.
There may be a tangible opportunity for hosts in the wireless VoIP market, but a provider must think through what it is trying to accomplish with its VoIP services. Rather than looking to reduce churn or to make as much money as possible, hosts need to work with VoIP partners that will help them achieve wireless success by evaluating their capabilities and network infrastructure, as well as explain what tools will be most successful for their customers.
Still other VoIP providers say the quality of WiFi handsets still needs to improve to match the quality of traditional telephone service. As that technology inevitably advances, though, wireless VoIP services present an area of obvious promise.Ensim’s Mowlem says VoIP is not really a voice service, but a pipe that enables support for a variety of service types. VoIP is converging voice and data services. But more importantly, it’s enabling any type of service to be provided over a data pipe. This means there will likely be a proliferation of high-value services over the very cost-effective vehicle.
“What I would say to the Web hosting community,” says Mowlem, “is you’ve got an opportunity to offer something very compelling to the residential [customers] and particularly the small-to medium-sized businesses you offer services to today.”
America One’s Pearson says the possibilities of VoIP are endless. He considers the technology to be the next big trend. Right now, he says, the foundation has been laid for hosts to integrate voice services into their offerings.
As VoIP consumer knowledge and broadband penetration increase, there will be a surge in VoIP users. Lower cost and additional features when compared to traditional telephone service will drive consumer uptake of VoIP services. And the extensive television advertising of Vonage and its attention-getting humorous messages cannot help but heighten consumer awareness and understanding of VoIP.
Microsoft is already bundling hooks for SIP-based applications into its operating system ? features that will become more important in the future.
There is a threat of market confusion, however, with the risk that some carriers will underestimate the importance of responsive and reliable service and jump into developing complicated applications and phone systems before they are ready to be delivered reliably.Still, M5 Networks’ Hoffman predicts that as the Internet becomes more reliable as a transmission mechanism for VoIP and more carriers offer quality-of-service guarantees, businesses will rely on additional hosted voice applications.
While CommPartners is building a network for control, quality of service and cost reduction, it is not replacing the public switched telephone network. What’s needed is a migration path where voice and IP totally converge. Peterson expects the migration path will be long, and that the VoIP industry will have to raise money and stay focused.
Ultimately, though, everyone currently participating in the VoIP business is excited about the potential of the technology ? not just to attract customers, but to change the way Internet users communicate.
“VoIP is the next killer application for the Internet,” says IntelaCom’s Stanley. “Voice has long been the way people communicate, and now bringing it to the Internet is certainly going to be the most sought after application by the general consumer and small businesses, as well as enterprises, for this next Internet boom.”
Any time someone makes a telephone ? call whether to a friend, family member or co-worker, he says, they are calling a person, not a place. In the future, Stanley sees that call being made not to a traditional number, but to a discrete number for a specific person. He believes telephones of the future will be compatible with both GSM and 802.11 so they can switch from a cellular networks to a wireless networks to the Web automatically as the user moves.
With the potential to resell services already in place, and a massive boom of customers on the horizon ? as well as the potential to change the way a host handles its own communications ? voice over IP’s significance to the immediate future of Web hosting is obvious, even if the details are not yet absolutely clear. Web hosts that have yet to begin evaluating how they can incorporate VoIP services into their businesses are already behind in the race to capitalize on a very exciting technology.
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