(new/Nov. 2003) ...goes into ntop's new cable telephony service offering, as well as others.
Unlocking the promise of VoIP
cedmagazine.com
By Jeff Baumgartner, Editor
Cable operators can now turn to a growing group of ‘turnkey’ partners that are willing to shoulder much of the capital and operational burden of IP telephony
For cable operators, IP telephony has quickly evolved into a build or buy decision.
The largest MSOs, with their deeper pockets and the operational wherewithal to offer VoIP from scratch, are the most likely candidates for the “build” route. But that still leaves plenty of operators that could use some help in deploying a service that has built plenty of momentum in recent months.
The cable industry has more than flirted with the concept before, and done so to questionable results. Early on into cable’s foray into high-speed data (HSD), so-called turnkey providers were bountiful. But, for a myriad of economic reasons in and out of their control, several HSD cable partners did not survive very far into the 21st century, including the likes of Excite@Home, ISP Channel and High Speed Access Corp. When they went under, they also left many an operator holding the bag.
So, why should operators again put their faith into the model when it comes to VoIP? Much of it stems from the fact that cable operators must embrace the “triple play” of voice, video and data services as they wage war on multiple fronts with the telcos and DBS service providers. Tier-2 and Tier-3 MSOs must then explore all of the VoIP options available to them, including a revenue- and capex-sharing partnership with an application service provider (ASP).
Still, even a Tier-1 MSO that operates small market systems might also find the turnkey option appealing. Tapping shared technology and, therefore, reduced capital expenditures, “makes sense for a cable operator without the core skills to go turnkey...and to build those resources and skills over time, with an option to purchase what will become strategic assets down the road,” says Cedar Point Communications Vice Chairman Mark Dzuban.
MSOs appear to have luck on their side. Many turnkey providers and business models have emerged, some providing more control to the operator than others. But adding various approaches to the menu will benefit the turnkey providers, because MSOs can vary widely in their personalities and financial positions.
[SEE URL: Figure 1: Choose your model. Like cars on a lot, cable operators have several turnkey VoIP models from which to choose.
Here are just three of them.]
[SEE URL: Figure 2: Build or buy? If an MSO believes it can attain 500,000 VoIP subs within 10 years, then it might make the most sense to go the O&O (owned and operated) route]
“Some operators see IP switching as a strategic asset that they wouldn’t want to see in the hands of a [potential] competitor,” Dzuban says. “Others see [turnkey VoIP] as capital without risk. They don’t want to risk or expend themselves to non-traditional revenue, so they will take less revenue…a piece of that $40 or $50 per month.”
Once an MSO decides that VoIP is a must, next, it must decide whether to build it from the ground up or to go shopping for the best solution.
If they build a PacketCable-based infrastructure from scratch, there are huge integration issues to consider. To counter that on the “buy” side of the options, several vendors have come forth with pre-integrated equipment packages and coupled them with “hosted” VoIP services.
For MSOs that opt for the “buy” route, three primary VoIP ASP models have emerged (see Figure 1), each designed to meet the particular needs of the operator. A fourth “franchise” model from Net2Phone Inc., which places even more risk on the ASP, has also come to light.
Syndeo packages with ’Plus’ platform
Recent business modeling from Syndeo Corp. (see Figure 2) suggests that MSOs that anticipate less than 500,000 VoIP subs should consider the turnkey option. At that point, the ROI (return on investment) for both approaches begins to converge, explains Maryling Yu, senior director of marketing with Syndeo.
Syndeo is tackling integration headaches of distributed PacketCable with Syndeo “Plus,” a pre-integrated platform that stars the Syion 426, the vendor’s flagship call management server (CMS).
Other components of the “Plus” platform include a gateway from Nuera Communications, a record keeping server from EDB Telesciences, an announcement server from Cognitronics Corp., an SS7 signaling gateway supplied by Intel/Datakinetics and a CALEA server from SS8 Networks Inc.
Syndeo will also supply support services for operators that take advantage of the “Plus” combination. That way, cable operators can contact one vendor (Syndeo), rather than several, to obtain support for any component on the Plus platform.
But MSOs that go the “Plus” route aren’t limited to that set of vendors.
“They can also pick and choose the elements they want, if they prefer another vendor,” says Yu. She acknowledges, however, that adding different products or vendors to the mix would require some additional integration, but adds that Syndeo already has conducted previous interops with most major vendors in the space.
Unlike an approach offered by Net2Phone, “Plus,” Yu points out, is not an attempt by Syndeo to become a cable IP telephony ASP, or a provider of “hosted” VoIP services.
Syndeo is tapping others for help on that front, including a new “triple play ASP” based in Las Vegas called CommPartners (covered later on), but hopes “Plus” will serve as an MSO reference architecture. Syndeo has yet to announce trials or deployments for its pre-integrated platform, but the company expects to receive purchase orders sometime this fall, Yu says.
[SEE URL: Cedar Point’s “Quickstart” approach is getting some attention from the CLEC sector.]
Getting VoIP off to a ‘Quickstart’
Cedar Point Communications addresses the PacketCable integration issue of VoIP by combining several PacketCable elements into one device, the SAFARI C3 Integrated Switch. It’s taking things a step further with “QuickStart.”
QuickStart begins with a pre-configured seven-foot rack with all “necessary” headend gear, including the SAFARI C3, a provisioning and IP service management system, cable modem termination system and power supply. Voice mail support is optional. It’s enough to get a cable operator up and running with 10,000 lines of VoIP, Dzuban explains.
It can also go beyond that. “It’s a generic solution that would suit most cases, but it could be tweaked with additional CMTSs,” Dzuban says.
Two “major CLECs” have approached Cedar Point about QuickStart, says Dzuban, who declined to specify them by name. But the concept would call for the CLEC to leverage QuickStart as a primary piece for a hosted VoIP service that could be marketed to cable operators.
Calling on the ‘franchise’
When it comes to VoIP, Net2Phone sees itself as a black box that comes with an SLA (service level agreement). “How that black box gets distributed depends on the service the operator would like to market to their subscribers,” says Mike Pastor, vice president and general manager [now President] of Net2Phone’s cable telephony division.
Those decisions can range from regulated or unregulated, or whether an MSO wants to offer support for CALEA, directory and operator assistance, or a mix of those.
“We support the operator on whatever decision they make,” Pastor says.
Net2Phone provides four primary pieces of the VoIP puzzle: front-end assessment/system integration analysis, the call management platform hardware, the software backoffice support for the OSS, billing and provisioning elements, and carrier administration.
Liberty Cablevision of Puerto Rico’s deployment with Net2Phone provides 911 support, operator assistance and collect calling, but does not provide network powering. Still, Liberty Cablevision views the service as “primary line,” asking customers for north of $40 per month.
Net2Phone’s current pre-integrated PacketCable set-up includes trunking gateways from Nuera Communications, the Gallery IP Telephony softswitch, IP Unity’s announcement server, and an in-house record keeping server and “service assurance” platform. Net2Phone is presently evaluating a second softswitch supplier, and expects to make a final decision sometime this fall. The company has been lab testing call management servers from suppliers ranging from Siemens Carrier Networks, Cisco Systems, Cedar Point and Syndeo.
Net2Phone has completed integration with CMTSs and multimedia terminal adapters from Motorola Broadband and Arris, though it will work with whatever equipment the operator has already installed.
Net2Phone currently offers two approaches: a “hosted” model and a new “franchise” model.
The hosted model leverages all four VoIP elements mentioned earlier, with the operator paying a monthly recurring fee on a per-subscriber basis. The operator also pays for the multimedia terminal adapters (MTAs) and CMTSs. “They [the operator] might pay on a per-user basis that’s 30 to 40 percent of the revenue. We capitalize about one-third of the expenses,” Pastor says.
The next option, the “franchise” model, puts more risk on Net2Phone, because it calls on the vendor to capitalize virtually all of the telephony expenses, including the CPEs, CMTSs and switching platforms, and to reimburse the operator for telephony-specific sales and marketing support.
Pastor wouldn’t drill into the economics of the franchise approach. “As we finalize some agreements...we’ll talk more publicly on how that pie gets split up,” he says. At least one such agreement could be announced by this story’s publication.
But the operator, he notes, can claim ownership of the system later, at a point that assumes Net2Phone has made a good rate of return and the operator can enjoy the service’s residual upside.
Taking a SIP
Some MSOs, even those with the means to deploy PacketCable-based VoIP on their own, are starting to take a look at “enhanced” data services that utilize SIP (session initiation protocol) and a few network and trunk elements that talk the SIP language.
Though some operators might offer such a service on their own, they don’t necessarily have to.
Vonage–once considered a broadband parasite because it doesn’t have to share revenue with the high-speed provider–is quickly evolving into a cable partner.
Vonage thus far has signed partnerships with Advanced Cable, Armstrong Cable Communications and Coldwater Board of Public Utilities, an incorporated municipality located in southwest Michigan.
“There are a couple more still warming up in the bullpen,” says Phil Giordano, vice president of sales, cable and MSOs.
[SEE URL: Armstrong has branded its Vonage
service after the MSO’s “Zoom”
cable modem offering.]
Although Vonage initially put the full court press on the top 10 U.S. MSOs, the company soon realized that sales cycles are much shorter among Tier-2 and Tier-3 operators that want to offer voice service but don’t necessarily have the time and money to conduct a “science project.”
“They want to be able to go into their market very rapidly,” Giordano says. “They don’t have the people for operations, and it doesn’t make a whole lot of sense for them [to go it alone] because there’s already a lot on their plate with video-on-demand and cable modems, and so forth. They realize that partnering with a company like Vonage makes a lot of sense for them.”
But they had better be ready to relinquish a little bit of that revenue up front. Under the company’s “Private Label” model, Vonage keeps all revenue for the first three months before entering a monthly revenue sharing mode that provides the MSO about 25 percent of the cut. However, the economics of the agreement can fluctuate depending on the level of responsibility the operator assumes.
Vonage also handles everything from service fulfillment to customer care to provisioning, and sets up merchant accounts so an operator can offer the service under its own brand. Armstrong, leveraging the brand equity of its cable modem service, offers VoIP under the “ZoomPhone” name. As the fastest model, Vonage can get an operator up and running within 60 days, Giordano claims.
Though Vonage has managed to provision more than 50,000 lines and secure some MSO partnerships, the future of the service will remain up in the air until a number of regulatory issues are settled.
Vonage has maintained that it should be classified as an unregulated information service, and, so far, has been successful in arguing that point. Last month, a Minnesota judge agreed with Vonage’s position, granting a permanent injunction that barred the state’s Public Utility Commission from requiring Vonage to apply for a telephone carrier license before it could sign up customers.
Giordano says operators are wary of those regulatory activities, but that hasn’t stopped them from working with Vonage.
The triple play ASP
Voice is just one piece of the package at CommPartners, a fledgling “triple play ASP” that will target small- and medium-sized MSOs.
The Las Vegas-based startup will come to market with an integrated package of VoIP, high-speed data, billing and OSS services that complement the operator’s traditional video service tier. CommPartners will also supply the OSS glue needed to fuse all of those services under one common banner.
“We will work with companies with simplistic or archaic billing systems for data and video,” says company Chief Systems Officer Mitch Allee. “If someone wants to retain their system, we’ll integrate with that system and pass along the information. The real advantage is that the operator will have a consolidated bill with the operator’s branding.”
Although many U.S. MSOs outside the top 15 provide data, very few provide voice, notes CommPartners President David Clark. “They have the overhead in place, but they’re missing voice as a revenue tier. Cable is looking for the next killer app. We believe that application is here in the triple play.”
For IP telephony, CommPartners, which formed in June of this year, will take advantage of Syndeo’s pre-integrated “Plus” platform. The startup will also operate as a certified CLEC in the states where it offers services.
“In today’s world of heightened security, cable will have to abide by the regulatory aspects of telephony if they want to offer the product,” Allee says.
CommPartners officials declined to discuss specifics on how much of the capital burden it will shoulder or how the revenue pie will be shared with its cable partners.
“We’re structured to be as lean as we can be from a capital standpoint, so we’ll sit down with the MSOs to understand their environment today and how to craft them to our service portfolio,” Clark says.
CommPartners expects to be ready for deployment by the first half of 2004. Once the green light is given, an MSO that partners with CommPartners can get up and running with revenue-generating services in three to four months, Clark predicts. |
