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January 06, 2010

SIP Trunking 2.0 - The Service Provider Perspective


By TMCnet Special Guest
Curtis Hartmann, Director of Product Management, BroadSoft


In the world of business communications, SIP Trunking was one of the strongest trends in 2009. For both businesses and hosted providers, the basic rationale is evident, particularly in a weak economy where everyone is looking for ways to cut costs. Unless you’re an incumbent telco who likes the status quo, SIP Trunking makes the value proposition of IP telephony stronger by reducing telecom costs in a few basic ways. Aside from allowing even more voice traffic to be routed off the PSTN, SIP Trunking reduces the need for costly PRIs and, in some cases, can eliminate them altogether.

 
These benefits are tangible, and in many cases are reason enough to adopt SIP Trunking. However, they essentially replicate TDM services, and beyond the cost savings, offer little in the way of sustainable competitive advantage. In our view, this is SIP Trunking 1.0 – cost effective, but short on innovation that enables differentiation. With SIP Trunking becoming more mainstream now, we see the market being poised to go beyond this in 2010. SIP Trunking 2.0 speaks to the fuller potential of end-to-end IP, which builds on voice, but extends to other modes such as video, mobility, conferencing, presence and high definition – both audio and video.
 
To better understand and define the SIP Trunking 2.0 opportunity, a variety of service provider customers were interviewed at our seventh annual executive users’ conference, BroadSoft Connections 2009: Voice & Vision. Their confidential insights provided a wide range of perspectives, not just for the opportunity in front of them, but for their customers as well. This article highlights the key themes coming from these discussions, and provides a preview of what we can expect to see in 2010.
 
The Opportunity for Service Providers
SIP Trunking appeals to service providers and businesses alike, but for different reasons. Herein will be the start of our discussion. First, it must be noted, that there are many types of service providers, and each will have a distinct set of drivers. Examples include mobile operators, national CLECs, regional CLECs, incumbents, and cable operators.
 
Across the board, however, most service providers face the same challenge – their customer base is still primarily TDM – which means declining revenue for core services. All the growth is coming from IP, which they are uncertain about how to monetize. Cost conscious customers want to keep using their PBXs for as long as possible, making it a challenge to transition them to newer IP-based services.
 
Why should service providers look at SIP Trunking here? In short – customer retention. They still need to provide TDM and support legacy equipment, but there is a continuous shift occurring to IP. In time that will mean fewer PRIs, T1s, E1s, etc., which means reduced revenues. Most carriers are willing to accept this tradeoff to keep the customer, and eventually sell them on IP services, which tend to be high margin. For now, this is a SIP Trunking 1.0 story, but without the customer, there is no 2.0 story to tell.
 
To build the SIP Trunking 2.0 story, service providers are increasingly partnering with BroadSoft for hosted solutions. Most providers do not have a native SIP infrastructure, and a platform such as BroadWorks addresses many of the challenges they face to keep their business customers happy. One key challenge is ensuring QoS and proving to customers that IP is every bit as good and reliable as TDM. Without this, they will not be able to introduce 2.0-style services, especially those based on wideband codecs that deliver an experience that TDM cannot match.
 
Another challenge that hosting addresses is support across a wide range of PBX vendors. Interoperability has long been an issue, especially for multi-site enterprises, who typically have several PBX systems. SIP-based interoperability standards have advanced to the point where hosted solutions can support service across multiple vendors and allow the carrier to automate the provisioning process for their customers. This is a real value-add, since the enterprise can benefit from SIP Trunking despite having multiple systems, and without needing to replace them.
 
On a more practical level, a SIP Trunking partner makes for better management of network resources. The greater the reliance on SIP Trunking, the less need for TDM switches, which in turn frees up space in the Central Office and reduces power consumption. This is of value to carriers in a couple of ways. First, it is easier to enter new markets. Less investment is needed to set up COs and with the scalability of SIP Trunking, carriers can ramp up service quickly in new markets.

SIP Trunking also makes their overall cost structure more competitive. This is important since most operators do not own the last mile. Direct access to the customer will always be costly, so they have to make their money based on the cost efficiencies of their networks. Another example would be wireless operators who want to serve business customers. They generally do not have PRIs of their own, so SIP Trunking is the ideal way to go. In cases where their customers have MPLS networks, SIP Trunking is a natural add-on, paving the way for wireless operators to capture a larger share of the overall voice business.
 
Without these points of entry, there is no basis for SIP Trunking 2.0 services. They can choose to just focus on lower cost telephony and deliver a good 1.0 story. However, by thinking more broadly about the full potential for SIP-based services, carriers can position themselves higher up the value chain as solutions providers. This is where the growth is for services, as well as the new revenues that will replace the declining TDM business.
 
For a perspective on the enterprise impact of SIP Trunking, read part 2 of this two-part series, SIP Trunking - The Enterprise Perspective.
 
For more on the benefits of SIP Trunking, don’t miss the SIP Trunking Workshop at ITEXPO East in Miami, January 20-22, 2010. The workshop provides three full days of educational seminars ranging from general information to technical insight for service providers, resellers, integrators, and end users.
 

TMCnet publishes expert commentary on various telecommunications, IT, call center, CRM and other technology-related topics. Are you an expert in one of these fields, and interested in having your perspective published on a site that gets several million unique visitors each month? Get in touch.

Edited by Erik Linask
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