Telecom Vendors, Carriers Struggle for New Revenue Streams

Skepticism remains about the usefulness of many of the higher revenue services being hyped.

In the wake of a decade-long network investment bonanza in the telecommunications industry, investors, analysts and the carriers are struggling to find ways to generate more revenue from the bloated infrastructure in place. Many, like Cable & Wireless plc., are edging away from delivering low-end voice services and trying to come up with higher revenue services for enterprises. There remains considerable skepticism, however, about the usefulness of many of the services hyped recently.

At the Yankee Groups Telecom Industry Forum in Washington Tuesday, analysts expressed doubt about the potential of offerings such as voice over IP, IP PBX and unified communications. IP-based services generally do not function with the reliability users expect from traditional telephony, Yankee founder Howard Anderson said.

Officials from some of the larger vendors defended the emerging technologies and their outlook. Using the example of cellular telephony, Mike Pratt, president of the Wireline Systems Business Unit at ADC, said the marketplace often accepts new technologies even if they do not achieve a level of accuracy previously expected.

"You dont have to be 100 percent [accurate]," Pratt said, adding that he takes for granted dropped cell phone calls. "Its good enough."

Global standardization of IP networking will improve the prospects of IP-based services, said Kurt Gastrock, vice president of Hosting Solutions at Sprint Corp. In addition, advances in optical signaling hold promise for service providers to give customers greater visibility into the network. Although much work needs to be done, eventually carriers will have a way to offer self-service style provisioning options for enterprises, he said.

Telecom vendors suggested that carriers must better understand the specific needs of vertical industries if they are to find new high-margin revenue streams. Gastrock said carriers are more interested in preservation than innovation at the moment. He said Sprint is making a few targeted investments in the network, particularly in the IP platform. "But were not going to make huge investments in field-of-dreams opportunities," he said. "Im a service provider. Im not going to go out and push applications."

Successful new services will result from a merging of information technologies and communications technologies, according to Duncan Black, director of customer solutions strategy at Cable & Wireless. "The two technologies are now so linked that either they win together or they could lose together," Black said.

In a keynote speech at the forum Tuesday afternoon, AT&T CEO-elect David Dorman echoed Sprints comment on limited network investment. "Ive never seen capital this difficult to come by in my 25 years in the business," Dorman said.

In an effort to shorten the service provisioning cycle, decrease service errors and reduce rework efforts, AT&T will continue to invest in improving the processes of ordering, provisioning and billing, Dorman said. The company, which will soon separate from AT&T Broadband when that unit merges with Comcast Communications Inc., will improve automation and e-servicing tools, Dorman said. In addition, it will spend more on network management technologies to allow customers to play a greater role in managing their own services, he said.

Also from the Yankee Groups Telecom Industry Forum: