1 Position Paper Succession VoIP Services The dramatic downturn in the global economy over the last three years has created a number of formidable challenges for telecommunications service providers. Service providers, today, find that survival depends on their ability to generate new revenue opportunities, while at the same time cutting costs and protecting existing service revenues from commoditization and competition. This paper describes how service providers can utilize Succession* VoIP Services and Multimedia Communication Services portfolios to increase their revenue-generating potential by rapidly deploying new services on both their current TDM and next-generation packet networks, addressing the need for new revenue streams, protecting existing service revenues, and reducing costs by enabling an intelligent circuit-to-packet migration.
2 Introduction The first three years of the new millennium have not been kind to telecommunication service providers. Service providers have encountered significant challenges during this period, including: the loss of business and residential landline connections to cable modems and mobile and alternative carriers; the commoditization of long distance and other basic services; and increasing sales and marketing costs driven by the growth in customer churn rates. For example, the META Group reports that, for the first time in history, the number of wireline phones in the US dropped during 2000/2001 and the number of access lines decreased by approximately 4.7 percent. 1 In addition, Probe Research reports that, The perminute charges for IX (interexchange) voice calls have declined from $13.3B in 1984 to $5.26B in 2001, reflecting the reduction in the per-minute charge as well as some migration of landline IX calls to mobile and the increased use of to replace IX calls. This implies that those companies which derive significant revenue from long distance services will most likely suffer revenue erosion. 2 So, what are service providers doing to address these challenges i.e., to keep their basic services from being commoditized and to hold onto their core business and residential customers? To address the challenges of the new millennium, service providers are searching for solutions that create new revenue streams and retain existing revenues, while leveraging their existing infrastructure as much as possible. Whereas service providers previously focused on cutting capital and operational costs, they now recognize that continued existence requires a new strategy that focuses on revenue creation and revenue retention. With over 38 Succession customers globally, is a market leader in delivering Voice over IP (VoIP) solutions. Our success in the global marketplace is a direct result of our portfolio s ability to meet market requirements, deliver solutions customers want, and provide them at the cost and scale they require. Recognizing that the economic downturn has dramatically changed the market requirements for VoIP technology, Nortel Networks is introducing the Succession VoIP Services portfolio to add new revenue-generating opportunities to the sustainable cost reductions Succession already offers. The Succession VoIP Services portfolio including Succession Centrex IP, Succession Voice over IP Virtual Private Networks, and Succession Primary Voice enables service providers to leverage current network infrastructure investments to further improve the costeffectiveness of delivering these new services. Additionally, when coupled with Multimedia Communication Services including Personal Communication, Multimedia Business and Broadband Multimedia Services Succession VoIP Services portfolio enables service providers to deliver innovating and compelling multimedia enhanced services as well. Succession VoIP Services new Succession VoIP Services portfolio enables service providers to deploy next-generation services ubiquitously on both their existing TDM infrastructure as well as on their nextgeneration networks. Service providers can create new revenue opportunities immediately, build enterprise and consumer service demand, and drive service volumes. Service providers can introduce packet into their network for potential revenue generation, while also continuing to address the need for cost reduction. With a comprehensive portfolio that includes the only true Superclass softswitch, along with scalable multiservice gateways and the Multimedia Communication Server 5200 application and media server, is in a unique position to deliver its services vision, providing the opportunity for service providers to address their challenges of revenue creation, revenue retention, and cost reduction. is the only vendor globally with the end-to-end solution necessary to deliver the Class 4/5 service transparency and full regulatory compliance to protect existing service revenues, and also deliver the innovative and compelling multimedia enhanced services required to meet the demand for the creation of new revenue opportunities. As seen in Figure 1, Succession VoIP Services enable the deployment of next-generation services to both TDM and Voice over IP customers. It is the deployment of these next-generation services that generates new revenue opportunities and enables a seamless, demand-driven evolution to a packetized network, along with its sustainable cost reductions. Meeting enterprise and consumer service needs carrier-hosted Succession VoIP Services portfolio is designed to meet the needs of today s consumer and enterprise customers who are demanding new ways to communicate. 1 What s Wrong With Telecom? (Impact: US), META Group, November 4, Probe Research Client Alert - The ILECs Hit a Revenue Dilemma: Where Are Access Charges Going?, Probe Research Inc., October 25,
3 Overlay new services to get started... Accelerate to volume deployments with Succession Communication Server 2000 MCS 5200 Converged desktop Increased scalability Simpler to own and operate Increased network utility MCS 5200 CS 2000 Packet network PSTN Packet network PVG or MG 4000 CICM Converged desktop PC clients IP phones IP clients Web clients Figure 1. Succession VoIP Services strategy Consumers want to improve the management of their communications so that they have more control over how and when others can contact them. Consumers also want to simplify their communications, eliminating the need to have different contact numbers for each communication device (home phone, office phone, cell phone, etc.), as well as the way that they contact others. In addition, consumers want to take advantage of multiple media (including text, video, and voice) in a single communications session. Enterprises regardless of their size want to improve collaboration for geographically dispersed employees and, in doing so, increase productivity; increase the mobility of their workforce; and reduce communications operations costs. In particular, enterprises want to provide the same advanced communication services to all their employees anytime, anywhere, and give the employees more control of their communications. Enterprises also want to reap the benefits of these enhanced services while retaining their investment in existing phones and voice services. And, both enterprises and consumers want these capabilities today. Neither customer segment is willing to wait until VoIP is everywhere or give up any of their existing services. They want the full service set they have today as well as next-generation services. It s not enough, however, just to provide service providers with new, innovative services. Vendors must also provide innovative services for which consumer and enterprise customers are willing to pay. Services customers will pay for The Succession VoIP and Multimedia Communication Services portfolio is based on just that delivering the services for which consumers and enterprises are willing to pay., in conjunction with Pollara, Inc., has conducted extensive primary market research to determine which next-generation services will offer service providers the greatest revenue and market share growth opportunities. For enterprise customers, this research shows that enterprises are most willing to pay an incremental price for services that enhance employee collaboration and mobility capabilities. Enterprises are particularly interested in services such as call screening and routing, multi-party conference calling, and instant file transfer. According to the research (see Figure 2), enterprises will pay $5 to $9 per feature over the cost of their existing Centrex or PBX. These research findings also show that residential consumers are the most willing to pay an incremental price for services that simplify and enhance communications. The market research indicates that consumers are willing to pay $2 to $7 per feature (see Figure 2) over the cost of their existing broadband service offering for services such as click to dial, one voice mail box, and video calling. 3
4 Enterprise willingness to pay $5 - $9 per feature Remote access Real time call handling Plug-and-play phones Multi-party conference calling Call screening and routing Instant file transfer $2 - $7 per feature Consumer willingness to pay One voice mail box Click to dial Multi-party conference calling Video calling Call screening and routing Application sharing The Multimedia Communication Services portfolio is a multimedia feature-rich business and residential hosted service suite that can be used separately or in conjunction with Succession VoIP Services. The suite of Multimedia Communication Services includes: The primary market research also shows that although they differ in areas such as feature prioritization and willingness to pay small, medium, and large enterprises, as well as consumers, are unanimous in their willingness to pay for multimedia services that can be integrated with existing telephones. In other words, enterprises and consumers want the best of both worlds i.e. to keep their existing phones and still take advantage of multimedia services that are incorporated with their voice service. This point is critical because it indicates that enterprises want to leverage their investment in their existing, feature-rich phone systems as much as possible, while consumers want to be able to continue to depend upon the reliability of their existing phones. The ability to combine the best values of the telephony device with the capabilities of new multimedia devices is a key component of Succession VoIP Services strategy. By combining Succession VoIP and Multimedia Communication Services, service providers can now deliver a range of new services to enhance existing phone systems by exploiting the Multimedia features that will deliver market share growth potential and new revenue opportunities Add features on top of existing phones for greatest customer value Figure 2. Services enterprises and consumers want and will pay for multimedia power of complementary devices such as personal computers. From an end-user perspective, exploiting familiar user interfaces can dramatically increase the service adoption rates of new services. New hosted business and residential service suite Succession VoIP Services is a feature-rich business and residential hosted services portfolio that provides carriers with new, revenue-generating opportunities and enables an intelligent circuit-to-packet migration. The Succession VoIP Services portfolio includes a suite of three hosted business and residential services. The suite of Succession VoIP Services includes: Succession Centrex IP, which enables a full suite of hosted business voice services Succession Voice over IP Virtual Private Network (VPN), which enables hosted voice networking and cost-effective converged access for enterprises Succession Primary Voice, which enables full Class 5-compliant primary line services Personal Communication Services, which enable a Web-based personal agent that allows users to easily manage who can contact them and how the call is completed Multimedia Business Services, which enable a carrier-hosted services bundle that allows enterprises to simplify and enhance their communications capabilities Broadband Multimedia Services, which enable a carrier-hosted services bundle that allows consumers to leverage their broadband service to simplify and enhance their communications capabilities Both the Succession VoIP Services and Multimedia Communication Services can be mixed and matched to meet the individual needs of each service provider. Succession Centrex IP Succession Centrex IP is a hosted service offering that combines the rich feature set and high reliability of a Centrex solution with the next-generation capabilities of Voice over IP. Succession Centrex IP supports over 200 existing Centrex features and is compatible with existing billing and provisioning systems. In addition, Centrex IP Client Manager (CICM) is supported on the DMS-100 family as well as the Succession Communication Server 2000 and Succession Communication Server Compact softswitches. This enables service providers to offer Centrex IP services directly from their DMS today and to leverage this investment as they migrate their networks to packet. 4
5 $160M $140M $120M $100M Centrex IP Without Centrex IP Figure 3: Impact of adding Succession Centrex IP to 500K lines installed base For service providers, Succession Centrex IP delivers an easy, cost-effective migration path to VoIP by permitting them to leverage their existing DMS infrastructure while also providing a clear migration path to a Succession packet network. In addition, Centrex IP allows service providers to create added revenue opportunities by enabling new services, such as mobility, to address the rapidly growing mobile workforce of their enterprise customers. Additionally, Succession Centrex IP paves the way for service providers to offer Centrex services on a national basis across a carrier-grade IP network cost-effectively linking regional small and medium branch offices with corporate headquarters. The new services delivered by Succession Centrex IP, combined with the full suite of existing Centrex services, provide a feature richness that cannot be matched by competitors IP PBXs, allowing service providers to protect their installed Centrex base and the revenues it generates. For enterprises, Succession Centrex IP is compatible with their installed Centrex base, enabling a lower cost, lower risk migration to VoIP. Enterprise customers using Centrex today also realize cost savings from the reduced expenses of moves, adds, and changes that Succession Centrex IP provides (up to $150 per move based on internal analysis). Succession Centrex IP also provides the enterprise with a venue that can increase employee productivity and reduce expenses through enhanced mobility. A detailed cost analysis by shows that the cost of Centrex IP for an enterprise is up to 35 percent less than the cost of deploying an IP PBX in the first 24 months. Succession Centrex IP service provider business case The Succession Centrex IP service provider business case is based on a fiveyear study of a 500K line installed base of Centrex users. As seen in Figure 3, the business case shows that a 10 percent penetration of Centrex IP services offers a potential increase of $41M dollars to service provider revenue by year 5 of the study. The deployment of Succession Centrex IP also provides a positive cash flow contribution in the first year and an overall payback period of 1.4 years. Succession Centrex IP yields rapid paybacks with a modest investment because it allows the service provider to retain existing Centrex services and provides the ability to augment them with new services, such as mobility. Succession Voice over IP VPN Succession Voice over IP VPN enables the replacement of costly leased private lines used to connect PBXs and key systems with secure IP-VPNs. The combination of the extensive voice VPN translations capability of the Succession Communication Server 2000 with H.323 multi-vendor IP PBX networking capability allows multiple voice networks to be collapsed onto a single, managed packet infrastructure. The Succession Voice over IP VPN service, therefore, reduces network connections, simplifies call routing, connects seamlessly to remote locations, and streamlines network management. The Succession Voice over IP VPN service also delivers both PBX and Centrex feature interworking by leveraging standards such as QSIG GF, H.323, and DPNSS (UK only). With Succession Voice over IP VPN, service providers can cost-effectively manage multiple enterprise voice networks consisting of IP PBXs, PBXs, and Centrex. By providing a natural increment to offerings such as Centrex and TDM voice VPNs, the Succession Voice over IP VPN service enables service providers to costeffectively grow their small and medium enterprise customer base while extending their service reach out-of-territory. With the Succession Voice over IP VPN service, large enterprises can benefit from operational cost savings and lower leased line charges by outsourcing the management of their voice network. Multi-site enterprises can benefit from the simplified and centralized routing and dial plan management provided by the Succession Voice over IP VPN service. In addition, small and medium enterprises benefit from the cost-effective converged access into the carrier for all their voice and data needs. Based on business case for a 21-site enterprise, Succession Voice over IP VPN provides an annual operations savings of $729K and a discounted payback period of less than one year. 5
6 Succession Voice over IP VPN service provider business case The service provider business case is based on a new-build network for the Succession Voice over IP VPN service alone. As seen in Figure 4, the business case shows a positive operating cash flow in the first year and a discounted payback of just over 2 years. If Succession Voice over IP VPN is treated as an incremental service to an existing network, the payback drops to about 1.5 years. Succession Primary Voice Succession Primary Voice service provides full Class 5 regulatorycompliant residential voice services for new markets and enables competitive VoIP services for existing markets. Succession Primary Voice is applicable for both ATM or IP network infrastructures and supports a variety of access options, including: Integrated Access Devices for VoIP access, standard DOCSIS-compliant cable Multimedia Terminal Adapters for cable Multiple System Operators, and the Succession Media Gateway 9000 for copper-based packet access. Succession Primary Voice provides service providers with a proven primary voice US$ (M) $100 $80 $60 $40 $20 $0 -$20 -$40 -$60 Discounted cash flow Figure 4. Succession Voice over IP business case service set that presents revenue-generating opportunities for new market entry. By supporting full Class 5 functionality including LNP, E911, and CALEA Succession Primary Voice also provides significant competitive service differentiation. Succession Primary Voice also enables a graceful circuit-to-packet evolution, with service transparency and seamless integration into existing service provider billing and provisioning systems. Succession Primary Voice service allows consumers to enjoy the feature-rich, reliable primary line services they have come to depend on without any compromise. Personal Communication Services Personal Communication Services provide a Web-based personal agent that allows users to easily manage who can contact them and how the call is completed. Personal Agent provides enhanced call screening and routing capabilities by allowing users to define rules to redirect incoming calls (based on call attributes such as caller ID, time of day, etc.) from a single directory number (or SIP address) to their most convenient communications device. Net income NPV Capital cost Year 1 Year 2 Year 3 Year 4 Year 5 With Personal Communication Services, service providers can now expand their service offerings for traditional phones, creating incremental revenue opportunities. For service providers with both mobile and landline offerings, Personal Communication Services allow them to deliver a bundled service to their wireline and wireless customers, increasing the potential average revenue per user and reducing customer churn. For the consumer, Personal Communication Services provide end users greater control over how and when they are reached, while simplifying the way they reach others. Personal Communication Services also address the consumer s problem of having a different contact number for each communication device, including office phone, home phone, and mobile phone. By providing a single address for all communication devices, Personal Communication Services enable user-based rather than device-based services. Multimedia Business Services Multimedia Business Services allow enterprises to efficiently utilize multiple media in a single communications session sending and receiving video, instant messages, text, and images, all while collaborating in real time. With Multimedia Business Services, point-to-point video calling from a user s desktop is as simple to use as clicking on a name in a personal or group directory, without the need for special rooms or complicated dialing procedures. Multimedia Business Services also facilitate the sharing of files, images, text, and other content by geographically dispersed individuals, including the following features: Instant Messaging, which allows text notes to be sent and received amongst one or more recipients, even while they are engaged in an active call Whiteboarding, which facilitates collaboration through the sharing of text and graphic objects in a common workspace 6
7 Web Push, which enables users to display Web pages on other users screens during active calls Instant File Transfer, which permits the sending and receiving of files from remote collaborators, even while the user is engaged in a voice/video/multimedia session with that individual In addition, Multimedia Business Services provide the ability to use a combination of a telephone and a PC to participate in a multimedia call. Service providers can provide, and their customers can utilize, multimedia and collaboration capabilities without displacing the existing voice infrastructure. Multimedia Business Services provide service providers with significant competitive differentiation by enabling innovative and compelling multimedia-enhanced services that augment existing voice service offerings. Multimedia Business Services allow service providers to offer hosted multimedia services, opening new revenue opportunities and maximizing the market potential for these service offerings by enabling video and collaboration features for traditional phones. For the enterprises, Multimedia Business Services dramatically increase the productivity of geographically dispersed teams while reducing the need and associated travel costs for participating in face-toface meetings. Broadband Multimedia Services Broadband Multimedia Services provide solutions to address the unique communications needs of today's broadband subscriber. Broadband subscribers are demanding these new services to help them manage their many communications devices, applications, and contacts. Using Session Initiation Protocol (SIP) capabilities, Broadband Multimedia Services deliver key telephony features including call forwarding, call hold, call transfer, call waiting, and caller ID all Millions US currency $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Annual revenue Figure 5. Broadband Multimedia/Personal Communication/Multimedia Business Services Carrier Business Case over broadband in a Voice over IP infrastructure. Broadband Multimedia Services provide service providers with the key service differentiation necessary to accelerate deployment of broadband services. Service providers can also utilize Broadband Multimedia Services to offer home office customers a more cost-effective communications service. Broadband Multimedia Services allow broadband service providers to offer a new, billable service for the consumer market. For the Small Office/Home Office (SoHo) consumers, Broadband Multimedia Services provide affordable advanced communications over an existing broadband connection. For the consumer, Broadband Multimedia Services provide affordable multi-user communications over an existing broadband connection. In addition, the graphical interface available with Succession Internet Voice makes traditional residential calling features easier to use. BMS only PC only MBS only BMS and PC BMS, MBS, and PC Combined business case for Personal Communication, Multimedia Business, and Broadband Multimedia Services The combined business case shows how Personal Communication, Multimedia Business, and Broadband Multimedia Services can add value to both a service provider s enterprise and consumer services portfolio. This business case represents a local exchange carrier deploying these three Multimedia Communication Services to enterprise, residential, and SoHo customers within a Tier 1 Metropolitan Statistical Area (MSA). The service pricing and penetration assumptions were generated using analysis from primary research study of 600 enterprises and 600 residential and SoHo users. As seen in Figure 5, these services provide positive cash flow in the second year of operation and have a fiveyear NPV of $37.6 million. Succession VoIP Services Scaling So, if service providers can realize nextgeneration service revenues today, why do they need to evolve to fully packetized networks? The answer is simple a service provider cannot cost-effectively scale these services by using overlay or edge networks. 7
8 Nodal limitations of TDM do not effectively allow carriers to deploy ubiquitous IP services. Network packetization is required to ensure a sustainable business case for the introduction of multiple services on a mass market basis. Network packetization not only enables effective scaling, it also enables the centralization of service management, greatly improving operational efficiencies as well as bandwidth utilization. Packetization also increases network utility with a single, truly converged network from which any service can be offered. Succession VoIP Services position service providers to realize immediate benefits from new service revenues and, in parallel, invest in the packetization of their networks. Through network packetization, Succession VoIP Services allow service providers to more cost-effectively address a larger customer base, driving added revenue opportunities through offerings such as national Centrex IP or global Voice over IP VPN. Service providers are positioned to realize improved margins on existing services and faster out-of-territory expansion, further improving their business case. Summary The Succession VoIP Services strategy has been developed based on solid market research and customer input to address the challenges faced by service providers today generating new revenue opportunities, while at the same time cutting costs and protecting existing service revenues. The hosted business and residential services delivered by the Succession VoIP Services portfolio allow service providers to accelerate next-generation service revenues today, without requiring the packetization of their entire network. Service providers can leverage existing network assets and minimize capital risk, while economically and intelligently migrating to packet. Doing so will lower their operational costs, increase service scalability, and facilitate deployment. Succession portfolio is not standing still. has responded to the changing market realities by delivering the revenue-generating opportunities required by service providers and the next-generation services demanded by their end users. In the United States: 35 Davis Drive Research Triangle Park, NC USA In Canada: 8200 Dixie Road, Suite 100 Brampton, Ontario L6T 5P6 Canada In Caribbean and Latin America: 1500 Concorde Terrace Sunrise, FL USA In Europe: Maidenhead Office Park Westacott Way Maidenhead Berkshire SL6 3QH UK In Asia: 6/F Cityplaza 4, Taikooshing, 12 Taikoo Wan Road, Hong Kong is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical Networks. As a global company, does business in more than 150 countries. More information about can be found on the Web at: For more information, contact your representative, or call NORTEL or from anywhere in North America. *, the logo, and the globemark design, and Succession are trademarks of. All other trademarks are the property of their owners. Copyright All rights reserved. Information in this document is subject to change without notice. assumes no responsibility for any errors that may appear in this document. GSA Schedule GS-35F-0140L GSA-NTEL NN
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