Wireless and wireline usage is at an all-time high, so there has never been a better time for carriers to buy and sell voice, SMS and data services. However, Neil Kitcher at RTX believes a faster payments model is required to allow carriers to conduct business with more confidence, meet capacity demand and guarantee quality assurance. With ITW taking place in Chicago this week, Kitcher explains how carriers can expedite payment terms and close the cash flow gap that has inhibited supply and demand in the industry.
The wholesale market for voice and data is booming as a result of usage, driven by consumer, enterprise and other commercial markets. Research firm Hot Telecom reported wholesale voice revenues will grow 5% a year to reach $13.2B in 2018, which equates to a staggering 421 billion minutes over the period.
Despite this market opportunity, carriers are being hampered by the payments model that underpins transactions between buyers and sellers. Based on the current model, suppliers are subject to extended payment terms, leading to long delays before they receive settlements, which can have a disruptive effect on cash flow and business performance.
Delays in settlements can disrupt cash flow for smaller, niche suppliers depending on revenue from carrier exchanges. These and other carriers looking to leverage capacity demand would benefit enormously from reduced payment terms. It would allow them to improve their cash flow and give them greater confidence to market their services to other carriers, and in turn will increase revenues and raise their profile as a trusted supplier. The flipside to this is that tier one carriers will gain access to routes they had not considered previously, enabling them to expand their network reach.
The wholesale telecoms market may be in rude health, but despite this suppliers need to be careful they don’t find themselves in a situation where they overcommit, and buyers don’t want to be in a situation where they have a surplus. This is where a usage based system comes into play ensuring carriers enter into agreements based on specific capacity requirements. Buyers gain access to voice and data traffic that meets with immediate and short term demand, safe in the knowledge they have the option to leverage that source again as and when necessary. Suppliers also find themselves in a position where they have capacity available and more scope to plan how to use it strategically.
This whole process isn’t restricted to voice alone, or traditional wholesale voice to be more precise. VoIP usage is on the increase, driven by carrier adoption of all-IP networks, both in the mobile and fixed line world. This surge isn’t just down to consumers using Skype (News - Alert) on their smartphones. Enterprises are leveraging VoIP, and various conferencing platforms, for voice and video calling as a result of the migration to all-IP network infrastructure. The demand for data services in the enterprise is increasing rapidly, regardless of whether usage is taking place on private networks, mobile and fixed-line operator channels or over leased lines, provided by wholesale carriers.
Carriers can also derive enormous value from SMS. Despite P2P messaging being overtaken by OTT messaging traffic in terms of volume, A2P messaging adoption continues to grow. Juniper Research estimates that A2P messaging will surpass P2P messaging by 2016, driving revenues of up to $70bn, while Ovum (News - Alert) estimates that more than 2 trillion A2P messages will be sent by 2018. The applications for A2P will continue to grow, two-factor authentication (2FA), banking notifications and appointment reminders, to name but a few. The growth of A2P will be driven by OTT providers, the enterprise and SME sectors. Even public sector organisations are adopting A2P messaging. However, P2P messaging isn’t going into decline and it will continue to thrive particularly in the developing markets where access to mobile broadband is restricted. Put simply, there will always be a demand for messaging capacity.
The wholesale market has opened up to provide carriers with the opportunity to expand their network reach, gain a foothold in new territories and monetise capacity. This doesn’t just apply to traditional carrier markets either; the nascent demand for data services extends to the enterprise sector, creating new and sustainable revenue opportunities. This is just the beginning for data services; VoIP may be popular today, but demand for the full range of IP services is increasing rapidly. The market is evolving and so is the need for a platform that provides carriers with the ability to buy and sell capacity, meet demand, and secure new revenues.
A faster payments model will help increase the number of carrier-to-carrier transactions, creating more commercial opportunities from the buying and selling of voice, SMS and data. The implementation of a faster payments service would improve the cash flow for suppliers and provide buyers with the reassurance they need, safe in the knowledge they’re working with a credible partner. Faster settlements can be facilitated as a result of reduction in payment terms, while transactions can be conducted via an exchange platform, providing a stable and financially secure environment in which carriers can enter into agreements. This would represent a radical departure from the traditional carrier exchange model that is still seen as being unreliable and high risk, at a time when the wholesale market is booming.
Neil Kitcher is the CMO of RTX http://rtx.routetrader.com/ , a Global Carrier Exchange for Telecoms operators.