Virtualizing Equipment to Build New Revenue

The shift towards virtualization will bring new operational efficiencies to MSOs. This transition will begin with the adoption of virtualized customer premises equipment (vCPE), which will transform the set-top box into more of an access point than an intelligent device. As a result, MSOs can dramatically reduce equipment costs in the home—by as much as a 70 percent or more in some cases. Another shift brought about by virtualization is the migration of device management to the cloud, giving MSOs the opportunity to manage devices remotely.

But the benefits of vCPE extend beyond the conventional consumer market and well into the growing business services market, especially for small and mid-sized organizations. Comcast recently said that its business services unit was a significant growth driver in 2015, with revenues increasing by 20 percent compared to the previous year. The service provider has also created a new enterprise unit to focus on Fortune 1000 companies.

Virtualization enables MSOs to simplify customer interactions and shorten the time it takes to develop and bring new services, features and applications to the market. Virtualization even allows MSOs to activate those new services without truck rolls or CPE replacements. It also helps MSOs proactively address and correct service interruptions or problems can be addressed and corrected more proactively.

Shifting the Business Model

MSOs should build business cases that highlight the operational cost and performance benefits and amortize the costs of shifting from the physical to virtual equipment. They must also look for ways to improve customer experience. Truck rolls for installations and repairs for example rank among the most costly components of cable service. Meanwhile, timely service appointments are intrinsically linked to customer satisfaction. As such, appointment delays become a source of frustration for customers, and simple CPE maintenance becomes an unnecessary and costly component over the lifetime of the customer relationship.

In an ideal scenario, technical support services would be limited to initial installations, CPE failures or disconnections. Simplifying these processes becomes a critical opportunity to improve customer experience.

And as delivery technologies evolve, so must order-to-cash strategies. Because the majority of MSOs in the U.S. outsource much of their back-office processes to third-party technology suppliers, it’s critical to align expectations for new service revenues with the needs and requirements of the back office. 

With the increased adoption of virtualization at the CPE level, the core service delivery functions of computing, storage, encryption and packaging move to the cloud, improving the flexibility of service innovation. MSOs must map this flexibility to the abilities of back-office systems.

Virtualization and back-office transformation are two significant technology shifts that can help MSOs capitalize on the growth in business services. Cable service providers have more opportunities to deliver a variety of enterprise-specific offerings, including cloud-based SMB app stores, security and data center services. But the evolution toward gigabit levels of bandwidth can only benefit an MSO if back-office processes are first aligned around current services. So now is time to prepare and ensure that the technology roadmap is ready.