Stop
Innovating...And Say Goodbye!
As competition grows, ISPs around the world are rapidly moving
from being mere Net-access vendors to becoming providers of
next-generation services.
Internet
Service Providers (ISPs) have sprung up in impressive numbers
as the Internet and the WWW have grown dramatically over the
past few years. Local, regional, and national ISPs compete for
a diverse array of business and consumer accounts. Today, at
the turn of the millennium, they are poised to compete with
old-line telecommunications companies as well as a new group
of emerging company types. While they face serious challenges
in hanging onto their current businesses, on the other hand,
they may be ideally positioned to gain significant new businesses.
The telecom
picture has entered an era of rapid change. Voice-over-IP (VoIP)
services are in increasing demand. Unified messaging solutions
represent another major opportunity. And a horde of next-generation
solutions, such as leased-applications, software on demand,
and managed network services are set to be offered by a mosaic
of company types. It does appear that those ISPs that simply
stand still will not survive in the rugged, competitive landscape
of the new diverse telecom market.
A Global
Deregulated Market
The telecom market is a true global market-there are companies
that try to reach all corners of the globe and customers who
demand world-wide services. As a result, telecom is undergoing
rapid and extensive changes across the globe. The United States
started the ball rolling with the
Telecommunications
Act of 1996, which caused a dramatic transformation of the US
telecom industry, in many cases, with unexpected results. The
wave of Mergers and Acquisitions (M&As) has spurred telecom
companies to expand their product and service lines in an effort
to maintain their customer base and find profitable new markets.
Europe is
undergoing deregulation, albeit at varying rates in different
countries, but is not lagging behind the US in the way some
may think. European deregulation started in earnest in 1997
and will be under way in almost all countries by the year 2000.
Asia, although beset by currency and other financial crises,
still features a lot of consolidation and deregulation (two
earmarks of the US market). The current, slower economy is weeding
out the smaller players while the big ones are becoming stronger.
It is important to note that Asia has the widest variety of
telephone line penetration rates in the world, and the current
economic situation has caused many governments to liberalize
their telecom markets to stimulate competition.
year is being heralded as "the year of the IP build-out";
infrastructure spending is estimated to be in the range of $200
to $300 billion over the next three years. Although the bulk
of the spending is expected in North American and European markets,
significant long-term opportunities are also perceptible in
markets in Asia. In all markets, increasingly inexpensive and
plentiful bandwidths, along with improved routing and switching
capabilities and intelligent networks, herald the continued
convergence of computers and communications. As a result, the
entire telecom market, characterized by various vendor types
is quite complex. Starting from exchange traffic companies,
local exchange companies to wireless service providers, next
generation carriers and cable-access television providers, everyone
wants to exploit the tremendous opportunity! But each of these
has its own core focus and key challenges and none can serve
all people all the time.
The Challenge
Where does that leave the ISPs? In the glass-half-empty scenario,
they must compete with one another and defend their enviable
positions in the Internet market against all comers. They must
continuously work on lowering costs while simultaneously building
their infrastructure. They must figure out a way to offer traditional
telephony services and convince customers they are viable in
those markets. They have low revenues and low investment capabilities
compared to the very large companies among the traditional telephony
providers.
In the glass-half-full
scenario, they dominate Internet traffic-the hottest thing in
telecommunications since the invention of the telephone. They
typically have strong brand equity, whether locally, regionally,
or nationally. They (unlike the local phone companies) are used
to providing sophisticated services
without
having to provide the basic, wired infrastructure that enables
the connection. As
the trend toward voice conversations over the Internet emerges,
they are the de facto providers of a certain percentage of traditional
telephony. Internet services have been perceived as enhanced
services, providing a premium to the lucky service providers.
This is likely to change as Internet services become more standardized.
But the current hands-off government policy toward the Internet
will most likely continue, so Internet growth should not be
hobbled by unwarranted interference.
But Internet
services and telephony represent only slices of the overall
opportunity the diverse telecom companies are targeting. Unified
messaging, for example, encompasses voice-mail, e-mail, fax,
basic and mobile phone services. The unified messaging environment
delivers all these services to the desktop; the palmtop; faxes;
and of course, telephones. Unified messaging requires a single,
logical message store and interoperability among media types.
It needs intelligence for general, systemic message management
as well as personal call management to handle inbound calls
intelligently. Complete solution providers in the unified messaging
space need to deliver best-in-class web clients and browsers,
messaging applications, mail messaging software, call processing
hardware, message store databases, and computer hardware platforms.
services appear to be less complex than unified messaging, it
is replete with challenges. It also represents an enormous opportunity,
with almost all businesses and many consumers demanding voice
and data communications. VoIP currently suffers from lack of
standards, especially in the areas of cross-platform billing
and customer authentication. Network latency problems, commonly
associated with routine data transmission, are unacceptable
when it comes to VoIP. Mapping between IP addresses and telephone
numbers is another key challenge in this market. VoIP solution
providers must deliver web clients, a billing system, gateway
and gatekeeper solutions, IP translation databases, and serious
hardware platforms.
Things intensify
further with the surge into next-generation services. A road
map for this emerging market shows a need for Web-enabled customer
care; trouble-ticketing/help-desk functionality; LAN and WAN
management; leased applications; and value-added applications
such as information aggregation, search and retrieval, and the
enabling of e-commerce. Delivering end-to-end solutions for
next-generation services involves independent software vendors,
system integrators, network equipment providers, and computer
hardware platforms. High-level concepts such as workflow solutions,
GroupWare, and ERP reside with basic, critical tasks such as
e-mail filtering and virus protection in the next-generation
environment. To ensure faster marketing and successful deployment
of proven solutions, service providers are turning to integrated
solutions based on best-in-class applications, practices, and
platforms.
Business
and residential customers also seem to be increasingly looking
to single companies to provide a complete solution that meets
their needs for a broad set of services especially data/IP and
video. These customers are also looking for quality-of-service
guarantees.
ISPs that
plan to be successful in the coming months and years will need
to consolidate or diversify so they can provide the demanded
total solutions, or emerge as the best in their class so they
themselves can be part of those solutions.