Showing posts with label product life cycle. Show all posts
Showing posts with label product life cycle. Show all posts

Saturday, September 17, 2011

How Much Effort Should Some Service Providers Put into Voice Innovation?

Voice services represent a troublesome issue these days, in most developed markets, for service providers. In the landline segment of the business, subscribers are abandoning their subscriptions and relying on mobile service for voice. Users also are talking less and per-unit prices are falling.

In the mobile segment, users in markets with high costs are figuring out ways to use alternate subscriber information modules to spend less, are switching to less-costly VoIP services or substituting text and instant messages where a voice call is another way to accomplish a task.

The troublesome issue is what to do, and how much to do, to innovate in voice. You might think those are easy questions, but they require investment, so the issue is “how much” a service provider ought to spend on a service that many would argue already is well past the peak of its product life cycle.

The typical advice for firms is to launch new products that will replace lost revenues as older products begin to decline. Some might argue that mobile service is that replacement product.

But there is an investment corollary to the product life cycle. At some point, a rational provider should stop investing in a declining product. Some people argue that innovation will extend the life of voice, or even create new markets for voice.

Others might bluntly argue that it isn't really worth the effort, though few might say so in public. The argument that "not much can be done" is weakest for business voice products, strongest for consumer voice products. In the consumer space, it might be tough to compete with Skype, Google Voice, MSN and others.

Consider "videoconferencing." Up to this point, appliance-based approaches have not made inroads, compared to use of Skype. That doesn't mean change is not possible; simply that in the consumer segment, Skype is hard to beat as a platform for consumer videoconferencing.

Innovation opportunities are strongest for IP telephony in the enterprise and business markets, many would say.

Another big issue is whether VoIP and IP telephony are replacement products for legacy voice, or only the latest version of the voice product. The earlier analogies would have included each generation of voice provided by a new generation of switches.

In other words, was voice provided by an analog switch a different product than voice provided by a digital switch? Or was the use of digital switches “merely” the next generation of an existing service? Your answer will determine whether you think of IP telephony as a “new product” or simply the “latest version of voice.”

Your decisions on investment might vary accordingly. To be sure, at some point, a complete transition to IP telephony and VoIP will be necessary. But there still is room for strategic choices that are "minimalist" in terms of investment, and other strategies that are "maximalist." 

Every voice provider will supply IP-based voice, it is clear. What is discretionary is the amount of effort a service provider wants to put into creating new applications around IP voice, in the context of pressing needs for investment in other areas such as mobility, broadband, video, machine-to-machine apps, mobile banking and payments, mobile advertising and vertical market applications for some key business segments. 

The decision will be easier for contestants that do not have realistic prospects of creating brand new businesses too far afield from basic data access, video entertainment and voice services, and primarily compete in the land-line segment of the business.

The point is that it is one thing to say "innovation is good." It is. But innovation is required across every product category, and resources will be limited, so choices have to be made. Different actors will choose different levels of commitment.

But some level of commitment is necessary. Consider the matter of “turning off the public switched telephone network.” At some point, as fewer and fewer customers are using the legacy voice network, the costs of supporting the network will grow to the point that it simply makes no sense to keep using it. At that point, we’ll have to shut down the PSTN, as mobile operators in the past have had to shut down analog mobile networks. The only issue is when it will be needed, and when to get started, much as set a date for turning off the analog TV network.

In fact, at its June 29, 2011 meeting, the Federal Communications Commission’s Technology Advisory Council ("TAC") received a report from its "Critical Legacy Transition Working Group" projecting that by 2018 only six percent of U.S. households will still retain a traditional copper wireline local exchange access line as their primary voice service, not having "cut the cord" and replaced their wireline phone with wireless or some other "new" technology.

By 2014, the United States will have fewer than 42 million voice access lines in service, the TAC predicts. By 2014,  U.S. consumers will use 31.6 million VoIP lines accounting for 42.5 percent of all U.S. voice access lines. TAC report highlights

Based on that projection, the Working Group proposed that the TAC call on the FCC to "target 2018 as the end of the PSTN."PSTN sunset

This will be a politically sensitive issue, as lots of participants in the ecosystem will be hurt by such a move. Some service providers and some suppliers whose business depends on the existence of the legacy PSTN will be harmed. Suppliers of gateway products, for example, explicitly assume the existence of the PSTN and the need to launder traffic and messages between IP and PSTN domains.

For some, the issue is whether 2018 should be the date. But no matter when the full transition happens, the practical issue will remain: how much effort should particular firms put into their voice innovation efforts?

The answer will depend on how much revenue a provider thinks that investment will yield.

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