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Steve Lacoff: A New Standard for the ‘Cloudification’ of Communications Services

The cloudification of communications services makes it easy to include voice, data, SMS, and video within any existing service.

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The author of this Expert Opinion is Steve Lacoff, general manager of Avalara for communications

The line of demarcation between what has traditionally been considered a telecommunications service was once very clear. It was tangible – there were wires, end points, towers, switches, facilities. Essentially, there was infrastructure required to relay voice or data from point A to point B.

Today that line is fuzzy, if not invisible. The legacy infrastructure remains, but an industry of cloud-based services that don’t require the physical connections has exploded. Voice, data, SMS, and video conferencing can now be conveniently delivered OTT. Enabled by simple API integrations, businesses can embed just one of these services or a complete communications platform-as-a-service (CPaaS) into an app, service, or product.

Cloudification is a game changer

This “cloudification” of communications services makes it easy to include voice, data, SMS, and video within any existing application, product, or service. These are essential components for many business models.

Consider these services we have come to rely on in our daily lives: food or grocery delivery, ride services, and business and personal communications. These require multiple methods of communication with shoppers, drivers, co-workers, watch party groups, and external business partners.

The exciting news is there is no end in sight. Use cases will continue to evolve and growth will continue to skyrocket. The scale cloud delivery accommodates is massive. These untethered, easy to embed communications services are a critical differentiator for both business-to-business and business-to-consumer buyers, and the lifeblood of the businesses providing both the end user subscriptions and the APIs.

In fact, one industry juggernaut saw H1 YoY video application service demand grow nearly 600% in 2020.

Not surprisingly, as business demand for these services increases smaller CPaaS players continue to enter the market to quickly snag market share. According to a recent IDC study, “the global market revenue for CPaaS reached $5.9bn in 2020, up from $4.26bn in 2019, and is expected to reach $17.71bn by 2024.”

Merger and acquisition activity is aligned with this hockey stick growth forecast. Large telcos, SaaS providers, and even other CPaaS providers are all on the hunt. Whether they want to add additional features to punch up their products or eliminate the competition in a very tight, nuanced market, the end game is clear – as the market expands, the players will ultimately contract leaving only the most competitive offerings.

Don’t let communications tax take you by surprise

One of the least understood risks when adding cloud-based voice, data, SMS, or video conferencing to an existing product or service is new eligibility for and exposure to the complex world of communications taxation. Making mistakes can get costly very quickly.

Here are some of the key pitfalls to keep an eye on:

  • Expanded nexus: Understanding communications tax nexus is different – and exceptionally more complicated – than sales tax. There are approximately 60,000 federal, state, local, and special taxing jurisdictions, each with uniquely complex rules that tend to change at their own pace. Rules are very different for each service.
  • More complex calculations: The more communications services you provide via API, the more complicated communications taxes will be. Each feature can be taxed at different rates in each individual jurisdiction, or the whole bundle can be taxed at one rate. It’s critical to monitor monthly to avoid audit issues.
  • Maintaining overall compliance: Just as tax rates and rules need to be maintained, so must tax and regulatory filing forms in each jurisdiction. Some of these are very long and require significant detail.  They must be filed in a timely, accurate cadence to avoid additional audit risk.

Bottom line: Don’t assume, be prepared! As these communications services become more pervasive a larger swath of technology providers will find themselves liable for communications tax. The more your business falls behind, the more it can cost you.

It pays to be proactive and prepared. Tax and legal advisory experts can help determine your level of risk, and tax and compliance software providers can help you keep up with changing rules and regulations. Don’t underestimate the ongoing value of networking with peers who are either struggling to answer the same questions or have already overcome the hurdles you’re facing today.

Steve Lacoff is General Manager of Avalara for Communications. With a focus on data, VoIP, and video streaming, Steve has spent 15 years in various product and marketing leadership roles in communications and technology industries, including Disney’s streaming services and Comcast technology solutions. Steve now drives business strategy on today’s changing industry landscape and associated tax impacts. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Broadband's Impact

Baltimore Needs Grassroots Help to Bridge Digital Divide, Experts Say

‘Baltimore lags behind many cities when it comes to the number of households with home internet connections.’

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Photo of Jason Hardebeck, director of Baltimore's Office of Broadband and Digital Equity

WASHINGTON, July 5, 2022 – Local leaders from Baltimore said at a Benton Institute event that there needs to be an alignment with the community and leadership when it comes to closing the digital divide.

“Baltimore lags behind many cities when it comes to the number of households with home internet connections,” said Amalia Deloney from the Robert W. Deutsch Foundation, which invests in projects to improve the quality of life in the city. The foundation estimates that 74,116 households don’t have internet access.

The event’s speakers pointed to digital redlining, in which segments of racial minority and lower income Americans are disconnected from services or can be considered living in low priority areas.

Jason Hardebeck, director of Baltimore’s Office of Broadband and Digital Equity, said the city is a “pioneer in redlining,” and “a century later, we still see the effect on the digital divide.”

To address this, Deloney said the foundation’s approach to the digital divide in Baltimore by starting at the social level through its Digital Equity Leadership Lab. This is a program for Baltimore residents to “increase their understanding of the internet and strengthen their ability to advocate for fast, affordable and reliable broadband.”

The program aims to train and build leadership within the community to advocate for closing the digital divide. It points to a strategy of bringing “advocates together with community leaders,” as “digital equity is social, not a technological problem,” said Colin Rhinesmith, founder and director of the Digital Equity Research Center.

Michelle Morton from the National Telecommunications Infrastructure Association also said local leaders need to work with community members to have a bottom-up approach. “You have to work with the people doing the work on the ground.

“Their voices matter,” said Morton.

Mayor Brandon Scott has allocated $35 million from President Joe Biden’s American Rescue Plan Act to close the digital divide across Baltimore “by the end of this decade.”

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Education

Metaverse Can Serve as a Supplement, Not Replacement, For Educators: Experts

The virtual world where avatars can meet as if they were in real life can be a companion for education.

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Screenshot of the Brookings event Tuesday

WASHINGTON, June 29, 2022 – Experts said at a Brookings Institution event said Tuesday that while the “metaverse” can go a long way toward improving education for some students, it should serve as a supplement to those educational goals.

The metaverse refers to a platform of 3D virtual worlds where avatars, or virtual characters, meet as if they were in the real world. The concept has been toyed with by Facebook parent Meta and is being used as a test for the educational space.

“The metaverse is a world that is accessible to students and teachers across the globe that allows shared interactions without boundaries in a respectful optimistic way,” Simran Mulchandani, founder of education app Project Rangeet, said at Tuesday’s event.

Panelists stated that as the metaverse and education meet, researchers, educators, policymakers and digital designers should take the lead, so tech platforms do not dictate educational opportunities.

“We have to build classrooms first, not tech first,” said Mulchandani.

Rebecca Kantar, the head of education at Roblox – a video game platform that allows players to program games – added that as the metaverse is still emerging and being constructed, “we can be humble in our attempt to find the highest and best way to bring the metaverse” into the classroom for the best education for the future.

Anant Agarwal, a professor at MIT and chief open education officer for online learning platform edX, stated the technology of the metaverse has the potential to make “quality and deep education accessible to everybody everywhere.”

Not a replacement for real social experiences

Kathy Hirsh-Pasek, senior fellow of the global economy and development at the Center for Universal Education, said that while the metaverse brings potential to improve learning, it is not a complete replacement for the social experience a student has in the classroom.

“The metaverse can’t substitute for social interaction. It can supplement.”

Mulchandani noted the technology of the metaverse cannot replace the teacher, but rather can serve to solve challenges in the classroom.

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Digital Inclusion

FCC Chairwoman Jessica Rosenworcel Emphasizes 100 Percent Broadband Adoption

‘It’s about making sure wireless connections are available in 100 percent of rural America,’ said the chairwoman.

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Photo of Kelley Dunne, CEO of AmeriCrew, leading panel on workforce issues at the Rural Wireless Infrastructure Summit by Drew Clark

PARK CITY, Utah, June 28, 2022 – The Federal Communications Commission is making progress towards bringing “affordable, reliable, high-speed broadband to 100 percent of the country,” Chairwoman Jessica Rosenworcel said at the Rural Wireless Infrastructure Summit here on Tuesday.

Rosenworcel pointed to the $65 billion Infrastructure Investment and Jobs Act now being deployed across the country, with a particular focus on unconnected rural and tribal areas.

Although the Commerce Department’s National Telecommunications and Information Administration will take the lead with these funds, the FCC’s new broadband coverage maps will be important in implementing state digital equity plans.

In her remarks, Rosenworcel also discussed how the upcoming 2.5 GigaHertz spectrum auction will involve licensing spectrum primarily to rural areas.

At the July FCC open meeting, said Rosenworcel, the agency is scheduled to establish a new program to help enhance wireless competition. It is called the Enhanced Competition Incentive Program.

The program aims to build incentives for existing carriers to build opportunities for smaller carriers and tribal nations through leasing or partitioning spectrum. Existing carriers will be rewarded with longer license terms, extensions on build-out obligations, and more flexibility in construction requirements.

“It’s about making sure wireless connections are available in 100 percent of rural America,” she said.

She also indicated her commitment to work with Congress to fund the FCC’s “rip and replace” program to reimburse many rural operators’ transitions from Chinese-manufactured telecommunications equipment. She also touted the role that open radio access networks can plan in more secure telecommunications infrastructure.

In other news at the conference, FCC Commissioner Brendan Carr addressed the role of funding broadband operations in rural America, the challenges of workforce training, and ensuring that rural carriers have access to high-cost universal service support.

In a session moderated by AmeriCrew CEO Kelley Dunne, panelists from the U.S. Labor Department, the Wireless Infrastructure Association and Texas A&M Extension Education Services addressed the need to offer a vocational career path for individuals for whom a four-year degree may not be the right choice. AmeriCrew helps U.S. military veterans obtain careers in building fiber, wireless and electric vehicle charging infrastructure.

Broadband Breakfast Editor and Publisher Drew Clark contributed to this report.

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