fancy telephone services for small businesses

Telephone services for small businesses is a significant segment of the communications industry.  SOHO (small office/home office) is a widely recognized customer segment.  The SOHO segment is large and growing relatively rapidly.  In the U.S. in 2002, non-farm businesses with fewer than ten employees and with more than $10,000 in annual receipts numbered about 14 million and had $2.7 trillion in business receipts (about 12% of total U.S. non-farm business receipts).   Small businesses that rent office space might also be able to contract with the facilities manager/owner for telephone services.  However, home-based small businesses don’t have that contracting opportunity.  In the U.S. in 2002, non-farm, home-based firms with fewer than ten employees and with more than $10,000 in annual receipts numbered about 6.8 million and had about $700 billion in business receipts.  These home-based, small businesses are predominately in construction, retail trade, and professional, scientific, technical and other services.[1]

Small businesses value fancy voice telephone services.  Persons running small businesses have to manage communications with suppliers, customers, and contractors.   With respect to voice telephone communication, they benefit from services such as programmed greetings (attendant menus), flexible, programmed call routing across multiple devices and locations, call line hunt groups (if Jasmine’s line is busy, automatically route the call to Sasha’s line), and voice mail.   They also benefit from being able to manage these services personally from a variety of devices.  Large businesses have acquired such capabilities through private-branch exchanges (PBX) and Centrex systems.  Capital costs, skill requirements, and maintenance requirements probably favor a hosted PBX or Centrex-type system for small businesses.  U.S. businesses with less than 9 Centrex lines purchased about 2.8 million Centrex lines in 2002.   Those customers, who averaged 4.3 Centrex lines each, accounted for about 16% of total Centrex line purchases.[2]   Small businesses have long been significant customers of manageable voice telephone services.

Competition for providing communications services to small businesses is producing cheap, highly capable services.  For example, Junction Network’s OnSIP provides hosted PBX service for small businesses.  Its $40 per month SOHO package offers unlimited short-number extensions, free, unlimited intra-extension calling, five voice mailboxes, three attendant menus, three hunt or simultaneous-ring groups, dial-by-name directories, business-hour routing of incoming calls, and a browser-based call management interface.  OnSIP describes itself as “a complete business VoIP service for 5 to 100 users.”  The disadvantages of OnSIP for businesses with only a few persons appears to be cost and complexity.  Google Voice (an app pre-installed on the Nexus One) is a free service, designed for individual use, that has some capabilities similar to OnSIPVoxOx is another free service designed for individual use.  VoxOx offers a powerful virtual personal assistant as well as a dead-end feature that’s probably even more valuable than industry-standard sorry-gotta-go scripting technologies.  BT’s Ribbit provides a platform on which a wide variety of cost-effective, manageable voice telephone services can be developed.

Competition in providing manageable voice telephone services for individuals, non-employer businesses, and employer businesses with only a few employees is likely to reconnect the telephone business to the local advertising business.  AT&T introduced “Where to Buy It” telephone directories in 1928.  In 2007, U.S. Yellow Pages directories had about $14 billion in advertising revenue.  Moreover, about $71 billion of newspaper, radio, and television advertising is local advertising.[3]  Print yellow pages, newspapers, radio, and television are moving to networked digital devices.   Providing small business telephone services is likely to provide an important advantage in providing small-business advertising and local information search.  That’s the historical story of the Yellow Pages.  That’s a story that now seems ready to be re-enacted, but perhaps with different main characters.

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Data: U.S small businesses and Centrex services workbook (Excel version); coded Bell Atlantic / Verizon Centrex rate elements, 1998-2009, compiled from the full rate-detail dataset


[1] The figures for home-based businesses are my estimates.  For the source, detailed data, and estimation formulas, see the small business worksheet in the Excel version of the small business/Centrex workbook.

[2] For data details, see the Centrex worksheet.

[3]  Radio, television, and newspaper advertising, separated into local and national, is available in the full Coen Advertising dataset.  Those figures show local radio advertising, local television (cable and broadcast) advertising, and local newspaper advertising to be 53% of total advertising.  The Coen over-all local/national advertising figures for 2007 show local advertising to be 34% of total advertising.  However, the Coen over-all local/national ad figures include all direct mail advertising and almost all miscellaneous advertising as national advertising.

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