More of the same really.
We had 2 major bankruptcies in 2023 – GTT and Avaya. We also have a bunch of shaky balance sheets to watch in 2024. Lumen is refinancing. A few providers have activist investors who want to spin off assets to maximize the P&L for the stockholders (like Frontier). We will see a few more BKs in 2024.
Pricing for UCaaS, CCaaS, DIA, Waves, EPL have all been decreasing. That doesn’t leave many product groups to keep margin afloat. This goes back to the previous paragraph.
We have partners who are 2 or 3 years into “retirement” who will be back to selling. That is all I am saying.
Since UCaaS growth is slowing and most of the small business PBX replacement that can be done is done, it will be transactional sales in 2024: Microsoft Direct Routing, SIP Trunks, POTS Replacement, and 5G FWA. This is the fastest path to cash for partners. Fast to sell, to implement and to get paid. It is also the least sticky product.
Omdia is saying that PBX owners will stick with PBX in 2024 and 2025.
I don’t know how the cloud comm providers can continue to pay such large SPIFFs, but that will continue for at least 2 more quarters.
The UCaaS space already has too many providers who say the same thing. In 2023, Verizon wrote off a $400M acquisition of Bluejeans video conferencing because that product was just not going to grow. Ericsson wrote down $2B on its Vonage acquisition. I see a new provider in the cloud comm space every week. I don’t know how they all survive. Plus I don’t know how they all can service clients and secure the service with a decreasing ARPU.
There was supposed to be a bunch of consolidation in UCaaS, but I think that the price tag to buy seats is just too high. The cost of sales is high, so service suffers. Service in delivery, ongoing support, user training, etc. There is a mentality that customers will self-serve, but that isn’t happening. Instead we end up with frustrated customers, who churn.
UC+CC will put added pressure on pure play CCaaS, who are already facing huge competition from new entrants like ServiceNow, SF, Aircall and UJET. If Microsoft gets into Contact Center, I wouldn’t want to own stock in any other provider.
With Broadsoft gone and Metaswitch now an Azure NFV offering, larger providers will need to reconsider the future of their voice offerings.
The PE backed ISPs will be looking for a voice offering. This will fuel some white label agreements for voice. You don’t need to sell the full spectrum of UC+CC. You can simple sell SIP offerings from a CPaaS platform.
Comcast just had a data breach. When you look at the long list of breaches, it seems like it gets easier and easier for the hackers every year. As companies use more outsourcing, the chance of breaches would seem more likely.
Cyber-Security is hard to sell, but I see Cyber Insurance entering the Channel in 2024. That requires a bunch of CyberSec service so this will be a huge win for Agents, MSP, Insurance and MSSPs.
With BEAD fund flowing in 2024, you will see a lot of M&A in the ISP space. 2023 had a large number of small deals, but this will increase as BEAD winners emerge and start to put the fiber in the ground. Right now the magic number seems to be 40% penetration on FTTH.
Although USTelecom says broadband pricing is dropping, they mean per MB. The average bill for broadband is actually stable or up for most large ISPs. TV subscribers have decline HUGE! So being sticky with Internet and some voice play (Cell or VoIP) is a helper. Home Security or Smart Home are big components to ARPU and sticky.
There will be a lot of JV (joint ventures) in 2024. AT&T did one with a PE firm for FTTH projects. Even astro turf groups like Technology for Rural America will JV for broadband (if they can score grant money).
I don’t mention AI because it is all hype until the tires leave tracks on the road. And we are not there yet.
I have seen too many RIFs and too many Musical Chairs to think that any provider will have success in Q1 and Q2 2024. It will be rough.
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