Calix Inc. (NYSE: CALX) today introduced the second part of its Compass software-as-a-service (SaaS) suite, a new cloud-based offering called Consumer Connect that lets smaller telcos deliver better customer service by remotely activating and monitoring broadband service down to the individual device in a home. (See Calix Takes SaaS View of Customer Service.)

Calix Consumer Connect uses a long-established industry standard, TR-069, to give telcos visibility into their customers' homes, down to the device level, so they can remotely diagnose problems.

That isn't anything new. But offering smaller telcos the ability to deliver more sophisticated customer support without deploying a lot of hardware and software is a change, says Jeff Heynen, directing analyst for broadband and video at Infonetics Research Inc.

"The software-as-a-service piece is definitely new," Heynen says. "They are hosting all the equipment to make this service possible for Tier 3 and smaller telcos, who don't want to have to spend all that capital to get something up and running."

The need for this kind of service is increasing, says Teresa Mastrangelo, analyst with Broadbandtrends LLC , because customers of all telcos have more in-home devices to access broadband services and expect them all to work.

"The home environment is getting more complicated and this is a fairly simple service that will help telcos address that with their customers," Mastrangelo says. That will improve customer retention rates and could conceivably be a new source of revenue, she adds.

Calix is positioning Consumer Connect as the second jewel in the Compass crown, alongside Flow Analyze, which lets telcos determine exactly what kind of traffic is traversing their networks. Together the services are designed to let telcos be more intelligent in designing, delivering and supporting their broadband services to compete more effectively while also operating more efficiently, says Geoff Burke, senior director of corporate marketing for Calix. (See Calix Jumps Into SaaS.)

Burke foresees new revenue potential -- something for which smaller telcos are pretty desperate -- in the form of new broadband services that target heavy video users, gamers or other groups with a more upscale service.

And that's where the analysts are less rosy in their outlook. While such services have been discussed for several years now, the industry has yet to see them materialize, Heynen observes, and the primary benefit of a service such as Calix Consumer Connect might initially be the cost savings of reducing truck rolls and improving customer retention -- both affect the bottom line but neither generates badly needed new revenue dollars.

Mastrangelo believes that as broadband penetration peaks and subscriber growth slows, there will be movement to higher-value broadband services targeting those willing to pay more to download their movies or get an advantage in a video game.

"And I think they might be able to charge a dollar or two a month for a higher level of customer service," she speculates. "It's really no different than offering security service or other value-added services."

Why this matters
Smaller telcos and the vendors who serve them are both hurting. The former are facing the same wireline revenue loss that larger telcos have while also seeing the decline in federal subsidy dollars. As a result, they are spending less, which is squeezing companies such as Calix. Efforts to help smaller telcos find new revenues and operate more efficiently could loosen the purse strings, and help both parties through a tough patch. (See Calix Lowers Q2 Estimates and Calix Posts $7.5M Loss in Q1.)

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— Carol Wilson, Chief Editor, Events, Light Reading