Vision: We help people build their business relationships. Communication is the foundation of relationships. We make sure your channels of communication are always open.
Mission: To be the most trusted partner in business voice solutions.
SoundLogic Technologies strategic objectives
– Establish a refined online presence
– Define target vertical and ideal customer
– Develop a strong digital marketing strategy
– Define standard short list of SIP trunk providers
– Determine baseline cost for hosting with Azure, AWS and AWS Lightsail
– Establish a monthly recurring revenue stream of $3,000 to $6,000.00 in fiscal year 1
– Define long term financial sustainability
Location: North Texas and central west Florida, United States
Table of Contents
Table of Contents
Table of Contents 2
Executive Summary 4
Benefits of VoIP 4
About the SoundLogic Technologies 5
Market Segmentation 10
Targeted Customer Profile 11
Marketing Expense 13
Strengths Weaknesses Opportunities Threats for VoIP 14
DCF (Discounted Cash Flow) Valuation Model 14
EUCL Revenue 15
Planning for VoIP 17
Quality of Service 18
Legal and Regulatory 19
VoIP May Be Regulated 19
Patent Law of Equivalency 20
Interstate Access Charges 21
Regulatory Requirements for Offering VoIP 21
Appendix 1 – SWOT Analysis 22
SoundLogic Technologies will be a U.S based and world class voice over internet protocol (VoIP) company. In an industry that has experienced a decline of approximately 12% of their subscribers since 2015, VoIP could provide the “stickiness” businesses seek for their customers. VoIP as an add-on service to video and data is the proven solution that keeps subscribers from canceling their cable services. VoIP reduces churn in business from 2% per year to 1% or less for “triple play” customers. With relatively little capital investment, SoundLogic Technologies makes VoIP affordable and deployable.
This business plan is designed to enable planning a successful VoIP deployment in North Texas and central west Florida. It begins with a detailed discussion of the industry and illuminates the urgency businesses face to offer a product that will assure them low churn and high penetrations.
This business plan features the SoundLogic Technologies business voice solutions to the SMB market which requires less of an initial investment than legacy or soft switch alternatives.
Benefits of VoIP
• Reduce churn by up to 50%
• Increase penetration to 30% by year 2-4 depending on marketing intensity
• Increase NPV per subscriber
• Offer subscribers large breadth of features and functionality
• Differentiate from standard phone service with “triple play” offering
• VoIP extends the terminal value of a company by 2-3 years
• When choosing between VoIP and other services to offer, the financial justification shows that VoIP offers the most return on investment
• VoIP offers a rich career path for corporate and system associates
• VoIP could enhance customer satisfaction when subscribers view their company as their total communications provider
About the SoundLogic Technologies
SoundLogic Technologies will create and commercialize business voice solutions, the first integrated, packet-based Class 5 voice switch tailored exclusively to the cable operator’s telephony and broadband media needs. Based on Cable Labs Packet Cable specifications, the architecture is a cost-efficient, less complex alternative to current circuit switched and distributed soft-switching cable telephony options, and provides an elegant migration path from legacy circuit voice deployments. Founded by David Zacharczyk, SoundLogic Technologies will assemble a management team and an advisory board that will include cable operations, broadband communications and manufacturing experts.
VoIP may be the most important new revenue stream that most companies can concentrate on. The demand for business voice solutions have been fueled by the Coronavirus pandemic and associated stay-at-home orders. The VoIP industry has struggled over the five years to 2020, despite growing demand for the service provided by industry operators. VoIP technology converts voice communications into digital data transmitted using a high-speed connection. The industry declined during the period as competition from standard cell phone services and from free video chat services such as FaceTime and Facebook Messenger, caused demand for industry services to decrease. Although some of the abrupt spike in demand is expected to dissipate, more businesses are expected to allow their employees to work remotely even after the pandemic has subsided. As a result, demand for videoconferencing services will likely remain somewhat higher than before the onset of the ongoing pandemic. In addition, faster cellular data service, is expected to make VoIP services more competitive with traditional cellular phone service. This growth will come primarily from mobile VoIP services and the business market.
Penetration is another highly sensitive variable and businesses that have deployed VoIP, are seeing growth rates of 30% in just three years. SoundLogic Technologies will offer competitive packages and market heavily in VoIP enabled target cities. This is a smart strategy proven with the reduction of churn and improved penetration percentages with ‘triple play’ customers.
Telephony over the coax cable will enable the company to provide a variety of new features that the phone companies cannot offer such as unified messaging; personal portals; caller ID on the TV set; point, click and call personal directories; talking email; customized dial tones and greetings, as well as familiar phone features.
In the global Unified Messaging segment, USA, Canada, Japan, China and Europe will drive the 5.7% CAGR estimated for this segment. These regional markets accounting for a combined market size of US$5.3 Billion in the year 2020 will reach a projected size of US$7.7 Billion by the close of the analysis period. China will remain among the fastest growing in this cluster of regional markets. Led by countries such as Australia, India, and South Korea, the market in Asia-Pacific is forecast to reach US$7.2 Billion by the year 2027, while Latin America will expand at a 7.4% CAGR through the analysis period.
Competitors identified in this market include, among others,
• 8×8 Inc.
• Alcatel-Lucent Enterprise
• Avaya Inc.
• Broadsoft, Inc.
• Cisco Systems Inc.
• FuzeBox Inc.
• IBM Corp.
• Microsoft Corp.
• Mitel Networks Corporation
• NEC Corporation of America
• PanTerra Networks Inc.
• Premiere Global Services Inc.
• RingCentral Inc.
• Unify Inc.
• West Corporation
VoIP Market size in 2018 was over USD 20 billion and is estimated to grow at a CAGR of 12% from 2019 to 2025. SoundLogic Technologies will launch VoIP after developing a marketing strategy. The strategy chosen will determine all future actions. Typical strategies include low cost provider, product leadership, customer intimacy and niche marketing. SoundLogic Technologies will adopt a low cost provider strategy with the rationale that they are competing against the incumbent RBOC.
The VoIP market growth is attributed to factors such as efforts taken by government agencies & private companies for the development of the wireless communications infrastructure and the increased adoption of cloud-based VoIP services due to cost-efficiency. Businesses with poor communication infrastructure face issues such as low audio quality and long delays that can adversely impact their productivity. Thus, they migrate from traditional phone systems to cloud-based phone systems, which are tailored to handle voice mails & calls to enable smooth communication. As technology supports voice & video communications over the internet, enterprises are widely using such solutions to enable high business performance through a more reliable and routable calling services & reduced maintenance.
Another factor leading to VoIP market demand is the rising trend of workforce mobility. By deploying VoIP solutions, enterprises can improve communication and collaborations among employees and remote users to increase business productivity. Also, the enterprises are realizing the benefits of converged voice & data services to enhance their performance.
The product is the Unified business communication solutions using 3CX IP PBX voice over IP system. Unified Communications as a Service (UCaaS) platforms provide a broad range of communication and collaboration applications and services in the cloud. The three main capability areas UCaaS solutions cover are: voice/VoIP, audio and video conferencing, and instant messaging/chat. Many vendors also include team collaboration features, such as screen sharing or real-time document editing. As more and more organizations transition to remote working, businesses and their employees increasingly rely on UCaaS and Video Conferencing platforms to support their online collaboration needs. In this sense, UCaaS platforms are not only unifying communication across businesses, but actively facilitating collaborative activities.
UCaaS Features & Capabilities
• Instant message/chat
• Presence Technology (makes it possible to locate and identify a computing device)
• Audio, web, and video conferencing
• Voice/VoIP technology
• Team collaboration features (e.g. screen sharing)
• Business email
• Call recording
• Centralized management
SoundLogic Technologies is adopting a low cost provider approach. Our pricing model will be a monthly subscription service which will be between $20 and $30 per user.
Rather than differentiate on dial tone, SoundLogic Technologies will focus on the product mix. SoundLogic Technologies offer business voice solutions, video and data on one invoice each month. Further, SoundLogic Technologies will focus not only on the phone but on the additional feature capability. Dial tone is boring, but if a customer can get HBO, a fast connection and a couple of telephone lines for a competitive price, they may be inclined to commit for a longer term agreement.
SoundLogic Technologies will segment its subscriber base. Typical segments will include
Blue Collar, High Tech, Single Male, Single Female, Married with Children (and some subsets based on the children’s ages), Home Office, Sleeper (dial up) and Early Adopters.
Assuming the existing customers have been segmented, the marketing plan will be selected based on these segments. Packages will be formed with video and telephony features that would be attractive to specific sectors.
Global mobile VoIP market by region, 2014- 2024 (USD Billion)
Targeted Customer Profile
Bear Stearns submits that rather than counting ‘subscriber’ units of value the new standard will be changed to the ‘account’. The ‘account’ entails delineating how many households have voice, video and/or data. If Wall Street is going to dwell on this new metric, then it behooves the company to target customers in the segment that are most likely to adopt ‘triple play’. High Tech, Married with Children, Home Office, Dial-up and Early Adopters would have the highest propensity to fully utilize ‘triple play’.
SoundLogic Technologies will launch VoIP business voice solutions and will start marketing to the targeted subscribers in the system at least six weeks prior to deployment. There are two approaches that the company will use – aggressively market to one or two systems and try to maximize penetration in those systems before moving on to others
• Before Launch – Reach at least 65% of the target market segments four times a week for six weeks prior to launching.
• After Launch – Reach at least 65% of the target market segments four times in an average two week period.
• Penetration – between 25-30 percent by the end of year three or midyear four.
• Churn – Reduce churn of “triple play” customers to 1% by the end of year three and to .7% in year six and after.
The rationale for these goals is that SoundLogic Technologies will be using an aggressive market strategy.
Most companies spend about 1% of gross revenues on marketing. In 2021, VoIP companies are forecasted to spend more on marketing since they have been losing subscribers to competition, and will need to promote VoIP. On the SoundLogic Technologies Financial model, the projected capital assumes nothing changes and does not take into account any marketing efforts that may bring in more revenue.
The hosted IP PBX segment in the VoIP market is expected to witness the fastest growth rate of over 15% from 2019 to 2025 as IP-based phone systems are hosted by service providers. Hosted VoIP eliminates the need to install any equipment on-premises, decreasing maintenance & training costs.
The computer-to-computer VoIP market is expected to grow at a CAGR of over 10% during the forecast timespan. Computer-to-computer VoIP calling is the most widely used method adopted by organizations to facilitate domestic & international voice communications. Organizations are using softphone applications, which will allow them to make instant & free peer-to-peer conversations and provide features such as instant messaging, file sharing, and integration with social media platforms for free. For instance, Skype facilitates free video calls & group audio calls and offers instant messaging, allowing users to share files or pictures through attachments.
Strengths Weaknesses Opportunities Threats for VoIP
A SWOT (Strengths, Weaknesses, Opportunities, Threat) Analysis is included in Appendix 2.
Our projected capital for 2021
Projected accounts receivable – $3,000
Projected inventory – $0
Projected prepaid Expenses – $0
Projected owner contributions – $3,000
Projected assets – $6,000.00
Projected accounts payable – $0
Projected accrued expenses – $1,366.00
DCF (Discounted Cash Flow) Valuation Model
SoundLogic Technologies might engage Strategic Projects, LLC and another consultant to build a “flexible” incremental VoIP financial model that will assist the company make their deployment decisions.
Package and Feature Revenue
The model allows the company to model different packages containing a variety of features. The model asks what percent of the total subscribers are assumed to take each package, and at what rate this is assumed to grow each year. The standard in the model assumes triple pay customers pay $125.95 and 25% of that goes to VoIP revenue. The Default model assumes that 10% of the subscribers will take the Triple Play package, and this will grow at 4% per year. It assumes that 20% will take the Basic Package, declining at 1% per year.
End User Common Line Charge EUCL is a source of revenue for the Local Exchange Carrier granted by the FCC to offset the lost subsidy of long distance rates. The consumer is charged EUCL. Revenue for EUCL range from $5.00 to $8.00 per subscriber per month.
The model attempts to contemplate all expenses that a company would incur when deploying VoIP. PSTN and Connectivity expenses include the cost for the T1 and/or DS3 as well as the assumption for the on net calls, busy hour calling percent average call length and average number of calls per day.
The next section allows SoundLogic Technologies to enter what percent of the installations will require a truck roll. The Default assumes that a truck roll will be required 50% of the time and the Contract model assumes a truck roll 100% of the time. The cost for a truck in both models is $75, and 100% of the truck rolls are capitalized in the first year, declining at 5% per year.
The first capital item is a Production Lab. SoundLogic Technologies will have one for VoIP. The Default model allocates $250,000 for a production lab.
Default Model Yr 1
Monthly Revenue Per sub (ARPU) $ 54.84
Expense per sub $100.15
Cash Flow (EBITDA) per sub $(45.31)
Capital Cost per sub $128.51
Capital Cost per new sub $448.58
Contrast Model Yr 1
Monthly Revenue Per sub (ARPU) $ 64.85
Expense per sub $ 97.42
Cash Flow (EBITDA) per sub $(32.56)
Capital Cost per sub $146.78
Capital Cost per new sub $536.34
Technical Support requirements are based on either homes passed, per subscriber or per line.
The addition of VoIP in a system provides an additional career path and a new level of expertise for the associates.
Planning for VoIP
1. “Analyze your network wiring infrastructure.
2. Rethink your switches and routers. Aim for 100-Mpbs Ethernet switched ports and backbone connectivity. VoIP is also a good excuse for putting in a Gigabit Ethernet backbone.
3. Check your electricity distribution system. With your network providing telephone service, you’ll need stable and reliable power to your switches and phones.
4. Make sure your network management tools can analyze down to the packet level so you can keep voice-call quality high.
5. Build a list of business rules and support applications that touch your voice service.
6. Choose an integrator based on his or her track record and ability to implement all the VoIP-related applications you want to deploy.
7. Keep an open mine.
There are three options for powering – inside the home, outside the home and centralized, or network powering. Network powering provides powering to each tap and drop. SoundLogic Technologies is considering this type of power, it is best to focus on highly populated areas with the most homes passed per node. This type of powering option is the most expensive with prices for the NIU installed by the company outside the home ranging from $175-$243. The cost for centralized power is the same whether the system signs up one subscriber or millions. In addition to the NIU and tap & drop charges, centralized batter backup powering source is estimated at $15.00 per home passed.
According to Yankee Group analyst, Christin Flynn, “VOIP peering is not a trivial exercise. Obstacles for service providers include firewall penetration for VoIP, Network Address Translation [NAT] capability, QoS mediation, session admission control and the ability to generate session records.” Anytime there is a point of entry or a gateway in the network, the system can be hacked. One advantage of SoundLogic Technologies Switching System is that the components are consolidated and therefore there are fewer opportunities for a hacker to infiltrate the system. The Switching System uses a new category of switching called Cable Media Switching System (CMSS) which “integrates into one system the Call Management Server, switching, Media Gateway, Signaling gateway, Media Gateway Control and traffic bearing interface functions.”
Quality of Service
Unified communications is making sure you have the best mix of technology to address your specific business needs. It is about interlinking our products and services to connect your people, applications, clouds and networks around the world. In an article dated 3/3/03 entitled “Implementing IP Telephony: What to Watch For, by Johna Jonhson published in Network World, the following tips are offered regarding QoS:
1. “Don’t neglect quality of service. Perform a QoS assessment up front.
2. Start by benchmarking your existing network performance.
3. Then put in place a framework for implanting QoS. Decide where the packets are going to be marked and how the network will process them.
4. Test your scenario exhaustively before deployment. Approaches that work perfectly on paper might fail to perform in a real network.
5. Most importantly: if you’re just beginning to consider an IP telephony implementation, make sure you budget for the QoS assessment piece.”
With cable VoIP, there are three potential problems with packets. They are packet loss, which may affect voice quality; latency of packet transmission because of 200 ms or more of delay; inter-arrival variance – jitter which means the packet may not arrive on time. Industry-wide decisions on bandwidth standards will mitigate these issues.
Legal and Regulatory
VoIP May Be Regulated
In their February, 2003 meeting, NARUC the National Association of Regulatory Utility Commissioners urged states not to regulate VoIP. Those against regulating argue that it could stifle the growth of the technology. There are concerns that subscribers cannot effectively delineate between the RBOC supplied phone and the VoIP phones. Is VoIP a common carrier service? If it is deemed to be common carrier, then it can be regulated by the states. Further, if it is common carrier, then it must support Universal Service – a tax to subsidize rural areas. Some feel that VoIP should be required to pay Universal Service Fees if the VoIP phone displaces a regular phone. It has been proposed to the NARUC that VoIP fall under Kathleen’s Nascent Services Doctrine which would protect VoIP from regulation since the technology is still being developed and there are no standards yet. Former FCC Cable Bureau Chief Deborah Lathen says “the Commission is unlikely to take action until companies had ironed out technical issues associated with VoIP and until the service became something more vital than an additional 2nd line.”
Another question is whether VoIP is an information service or a telecom service. If VoIP is determined to be an information service, then it will not be regulated and anyone could use the network without paying for it. But if VoIP is defined as a telecom service, it will be regulated. This is a decision that will ultimately be made at both the Federal and State levels. Another argument concerns packets. The Internet is packet-based and is not regulated. VoIP is also packet-based. Therefore should it be regulated? Many fear that regulation will result in burdensome taxes and oppressive administration. The decision may be forced if the a local CLEC files a grievance at the state PUC or at the federal level if a company providing telephone services does not apply for a CLEC license. Analyst Daniel Berninger of the telecom research group Pulver.com says “the FCC should wait until VoIP reaches certain “critical mass” of 15% of the total market before intervening.” The Bells disagree. Robert Blau, BellSouth VP Regulatory Affairs says “It is going to be increasingly difficult for the cable guys to say the telephony is something else, because the same technology and same pipes will be used for both.”
Patent Law of Equivalency
This law, as stated by the Supreme Court says: “If two devices do the same work in substantially the same way, and accomplish substantially the same result, they are the same, even though they differ in name, form, or shape.” Will this argument be posed for VoIP versus circuit switched phones? The result may rest with how many subscribers the companies lure from the standard phone companies. If many flee their regular phone service, it is almost guaranteed that VoIP will be regulated, taxed and administered just as the standard phone companies are today.
Interstate Access Charges
In a recent petition to the FCC, AT&T asked to be exempted from the interstate access charges for VoIP telephones. The National Exchange Carriers Association (NECA) is against this proposition because they fear if they exempt VoIP, the circuit-switched telephone companies will convert to VoIP.
Regulatory Requirements for Offering VoIP
Before offering VoIP, a company must obtain CLEC status. As mentioned above, it is not mandatory, but highly recommended since most states have laws governing telecom services. The company must also negotiate Interconnect Agreements, file tariffs and work and confer local franchise agreements.
CLEC status ranges from a few hundred dollars to a several thousand depending on the state and can take a couple of weeks to many months to secure.
VoIP has been forecasted to make circuit switched telephones obsolete. The breadth and depth of features and functionality of a VoIP phone far exceed even our imaginations. The DCF Financial model proves that it is a sound business yielding high returns. Because of the affect ‘triple play’ has on diminishing churn, it instills a sense of urgency for SoundLogic Technologies to offer it sooner rather than later
Appendix 1 – SWOT Analysis
Appendix 1 – SWOT Analysis – VoIP Business Plan
Strengths Weaknesses Opportunities Threats
Lower cost to deploy VoIP rather than CBR technology Still working through technology issues — jitter / latency SoundLogic Technologies does not have jitter or latency problems Need for “grounded” phones taken over by cell phones
Enables companies to offer “triple play” Offers competition in a market that has been a monopoly Pricing war may result with incumbent RBOC and DBS co’s
SoundLogic Technologies offers a lower cost entry solution High cost to enter into the VoIP market Longer term commitment from customers in form of contracts Over builders may grab subs first
Reduces churn in businesses that offer “double play” or “triple play” services FCC may decide VoIP is regulated the same as RBOC phones (Patent Law – Doctrine of Equivalency)
Ability to offer second line at a reduced price Second line is often a ‘reduced’ quality phone VoIP phones can “plug in” anywhere – mobile Liability issues may result if phone is needed in an emergency
Increases the NPV per subscriber by $124-$334 over seven years (depending on assumptions) May need to pay universal fees when VoIP phone replaces RBOC phone
Requires a new level of technical engineer in the
plant More career opportunities for system employees
Internet calls are not taxed at present Nat’l Assn. of Reg. Utility Comrs. (NARUC) opposes allowing VoIP svcs to be treated differently from standard phone service.
May offer way for dial up customers to “trade up” This is known as the “sleeper segment” because they are often overlooked.
Offers products for multiple marketing segments
Summary Per Subscriber (average value in each year)
Monthly Revenue (ARPU) per sub $64.86 $56.55 $55.92 $55.19 $55.55 $55.92
Expense per sub $97.42 $46.22 $38.61 $31.17 $30.25 $29.40
Cash Flow (EBITDA) per sub ($32.56) $10.33 $17.31 $24.02 $25.30 $26.52
Capital Cost per sub $146.78 $36.98 $24.32 $9.83 $9.18 $8.43
Capital Cost per New
sub $536.34 $544.41 $547.22 $571.42 $583.85 $588.41
Bezoza, Alan and Tadros, Michelle (2002), “A ‘Triple Play’ Can be a Home Run; Initiating Coverage on Cable Services”, CIBC World Markets Equity Research.
Morgan Stanley Dean Witter (2001), “IP Telephony: Leveraging the Cable Network to Profitability in Voice”, Industry Report, February 14.
Stump, Matt (2003), “Operators Kick the Tires on Voice-Encryption Strategies, Multichannel News, February 17, p. 31.
Hettick, Larry; Taylor, Steve(2002), “E-911 and VOIP systems: calling for help from phones behind IP-PBXs and other VOW systems can be as simple, or as complicated, as it is from phones behind traditional PBXs”, Business Communications Review.