TDS betting on economic value of hosted IP phone service

Madison, Wis. - TDS Telecom, a Madison-based telecommunications provider, has introduced a hosted Voice over IP service that it believes will remove costs for businesses and be a difference maker in productivity and efficiency gains.

TDS has been rolling out the service in Wisconsin, Michigan, Minnesota, and Illinois. One of the key selling points, especially in a struggling economy, is that businesses can improve their telecommunications without any impact on their capital budgets.

“As a business strategy, it's one of our top initiatives as it relates to our commercial services,” said Ben Goth, manager of commercial product development for TDS.

Trendy hosts

An Internet Protocol solution, the managed service is designed to provide businesses with a single, converged voice and data communications service. As the host, TDS manages and upgrades the client's communications system. The system uses a symmetrical Internet pipe to deliver voice and data service over a single T1 line. Cisco routers and switches are installed at the customer's premises, and Wide Area Network connectivity is provided back to TDS, eliminating the need for the customer to purchase equipment.

Instead, business customers pay a monthly fee based on the services they use.

Dan O'Connell, a Gartner analyst with expertise in hosted VoIP services, said the avoidance of capital expenditures is significant. He said business customers do not have to invest in an IP PBX phone system, which can cost anywhere from $800 to $1,000 per user.

Nor do business customers have to worry about technological obsolescence. With new infrastructure developed every three to four years, the upgrade cycle of IP technology mirrors that of laptop computers, but that's the host's concern, O'Connell said.

In addition, business users do not incur support costs, which can be considerable when you consider that Cisco certified engineers can command upwards of $100,000 a year in salary.

Kathy Jowett, operations manager for the Madison-based Window Design Center, said her company has been using the service for about one year. She said the center, which has experienced improved sound quality, cannot afford to hire a full-time information technology professional “just to monitor our phone line.”

With its previous IP telephony system, “we needed an IT person to tweak the system to make sure the quality of the calls was good,” she added. “We had terrible echoing and dropped calls.”

Another advantage of a hosted system is that it features a larger technology platform shared by thousands of users, so costs are quite a bit lower per user - up to 30 percent lower. According to O'Connell, that typically translates into a $30 to $35 monthly charge, although some installations come with a monthly charge as low as $20 per user.

Unlike most VoIP services, which use the pubic Internet to deliver voice services, the TDS service is delivered over a private and secure dedicated network that is hosted at a TDS facility.

The traffic never actually crosses the public Internet, Goth explained. “There are a couple of other providers that offer similar services,” he said, “but the way we deliver and manage it are different than other providers.”

O'Connell said other providers - including Verizon and AT&T - refer to hosted VoIP service as IP Centrex.

He said the move to hosted VoIP is consistent with another technology trend. “It ties into the broader move to software as a service, where IT leases its functionality,” O'Connell said. “This is part of that movement.”

More business benefits

The enhanced functionality, which is not available with a traditional PBX phone, enables users to track their calls logs so that even if people don't leave a voice message, the system will provide their phone number so that no calls are missed.

In addition, the system has a simultaneous ring function, allowing users to program their service to send all incoming calls to their office phone to ring their mobile phone, home phone, hotel phone, or any phone at the same time so they never miss a call.

With the old wiring set up, service was delivered over one wire for voice and another for data; with hosted VoIP, one T1 wire handles both. Business people do not have to rearrange or rewire their offices to gain telecommunications efficiencies; they simply unplug one phone line, replug it in their new office, and it automatically recognizes it as the user's phone extension.

According to Al Ripp, market manager for TDS, a hosted VoIP solution also brings disaster recovery benefits in that the host can remotely control business calls, enabling disaster response teams to communicate and the business to continue to track sales calls.

Future enhancements will include a conference call bridge that will enable users to conference 14 people at one time, and a call receptionist function.

TDS's research and development group is working on a call Receptionist function that Ripp calls a glorified auto attendant. TDS will be offering a software-based attendant console that would give receptionists the ability to see the status of all the lines they are monitoring, and to drag and drop calls to transfer them to the appropriate extension.

Strategic call?

TDS is looking to capture a large share of a growing market. According to a 2007 Yankee Group study, 72 percent of small businesses and 76 percent of medium-sized businesses reported that IP telephony either is or will be strategic to their business.

To capture a sufficient share of the market, TDS sales people will need to be trained to effectively communicate its benefits and be well compensated, O'Connell said. This is where hosted VoIP providers can fall short.

“The risk is they need to get a big enough base of customers to make it work economically,” O'Connell said.