Telco Model Under Threat as Business Customers Move to Over The Top Services - Expert

Ultra Fast Broadband (UFB) uptake among New Zealand businesses has reached a tipping point enabling a rapid transformation of the local telecommunications industry according to an industry expert.

More than 184,000 customers within reach of UFB have opted to connect, with New Zealand having the fastest growth in fibre penetration in the OECD at 272 percent.

Digital Island general manager Blair Stewart says that as the rate of UFB penetration among businesses grows, the market is seeing the introduction of more cloud technology.

Stewart says the future business model for the telecommunications industry will be Over The Top (OTT) services - where a telco delivers their services across all IP networks, as opposed to the carrier’s own access network.

He says one effect of this industry change will be of particular benefit to local SME’s as the capital investment required to run a phone system is completely removed from the balance sheet by moving these services to the cloud.

Stewart says the introduction of this type of cloud based technology is a signal of the rapid change now underway in the industry.

“In the same way we are seeing an almost overnight evolution in the media industry as a result of the introduction of Netflix, we are going to see UFB change the way telecommunication companies operate in this market.

“In New Zealand, the larger telcos have been historically reliant on legacy revenue from the copper infrastructure, however the growth of UFB brings a new level of reliability for alternatives to the traditional business phone systems.

“While they will continue to provide internet and mobile, these services are becoming commoditised, so it's the application industry which will see significant growth in the short term,” he says.

Stewart says slower broadband services have held back VoIP products in particular, and as a result it has been the last segment of the telecommunications industry to evolve.

“If we look at the OECD countries which have the highest proportions of fibre broadband connections; like Sweden (where 46% of broadband connections are fibre - compared to 7% for NZ), this country also has the highest per capita level of VoIP subscriptions in the region.

“We’re expecting New Zealand to follow suit - as UFB penetration in businesses reaches a critical mass, it becomes it creates a stronger business case for cloud services to launch here.”

Stewart cites the example of one of the world’s largest telecommunications companies which saw New Zealand as a high priority market.

“As a result over the past three years Digital Island has remodeled its business to be a cloud app provider and are now seeing cloud as our fastest growing product. On the back of this transformation we were able to secure a joint venture deal with Mitel to launch their new Telepo cloud technology here - making New Zealand the first market outside of Europe for this product to be released,” he says.

Stewart says the new cloud based Telepo product replaces traditional phone lines and PBX hardware with an application.

The app which is deployed quickly and cost effectively to businesses over email and SMS, is designed to increase the portability of users by offering a seamless experience on any device, as well as a range of other unified communication features such single number, presence, intelligent call routing, cloud reporting and on-demand call recording.

Stewart says the experience in Europe with their cloud hosted service shows around 80% of their users only use the mobile client - a trend New Zealand is expected to follow.

“The ability to run your office phone system from your desk, computer or mobile phone provides built-in staff, location flexibility and disaster recovery so businesses can focus on doing business.”

For more information, visit http://www.digitalisland.co.nz/