How businesses can cut call costs now

[By Rob Lith]

Holding out for cuts in wholesale mobile termination rates to lower the extortionate cost of mobile communication in SA is a sure recipe for disappointment. If you want to see action, you have to look for a more direct intervention.

Mobile termination rates are the tip of the iceberg that makes up SA’s mobile call cost structure. According to AfricaNext Research, the differential between peak on-network and off-network airtime prices is less than 20%.

On-net calls, where users call others on the same network, which don’t include any termination fee, are nearly as high as off-net calls. This means that even if mobile termination rates drop to 40c/minute by 2012 from 89c/minute now, it’s unlikely to have much of an effect on retail prices.

The hard truth is that call charges are so high because the operators choose to set them so.

This is not a tenable situation. Businesses are forking out around 60% of their telecommunications budgets on the most expensive calls — to mobile phones. Some 30% are to landline phones, and are not that much cheaper, and only 10% on Internet Protocol (IP) telephony.

A solution is to migrate voice traffic to the data network for “on-net” calls, terminated at data rates (a fraction of land-line rates), and removing the requirement for on-site least-cost routers. This can immediately save companies about 25% to 28% in mobile termination rate fees.

Thanks to better wide-area networks and telephony software, call management can be done via a private cloud, or the public cloud supported by an extended management network.

Adding mobile into IP on-net traffic delivers even better returns. Mobile users can terminate calls using voice-over-IP from mobile-to-mobile or fixed-to-mobile at a few cents each — for example, Internet Solutions and Vox Telecom charge around 17c a call for their mobile voice-over-IP offerings.

The more phones you can get to talk to voice-over-IP PBXs and gateways, the more this mobile on-net community expands, as well as the accompanying cost savings.

The result of increasing IP “on-net” traffic is reduced cost of ownership for your telecoms infrastructure, greater flexibility and greater control.

This “on-net” concept also holds opportunities for the mobile telecoms industry in the IP convergence or substitution market to claw back profit losses from cuts in mobile termination rates.

By introducing fixed voice-over-IP to cellular telephony and mobile voice-over-IP to fixed telephony, operators will have opportunities to grow on a unified voice and multimedia service experience.

Mobile number portability has already supported the move of the principal voice relationship away from Telkom’s fixed lines, giving the company or end user more control and choice. Full geographic portability is starting, completing the picture.

According to Visiongain’s “Mobile VoIP Market Report 2010-2015”, the worldwide mobile “on-net” or voice-over-IP market will grow about 1% to €417bn in 2010. Sales of Internet connections and data services on fixed networks will grow in 2010 by 7% to almost €200bn. Mobile data services such as mobile voice-over-IP are posting even stronger growth: up 16% to more than €140bn. This is clearly where the focus of international business is moving.

SA has the same potential rate of uptake for IP telephony as international markets, following developed countries where mobile voice-over-IP over Wi-Fi and 3G is taking off.

BMI-TechKnowledge’s recent research report, “SA Voice Services Market Forecast and Analysis 2009–2014”, forecasts fixed and mobile revenues will grow at compound annual growth rates of 3% and 7% respectively. Voice-over-IP is predicted to be the biggest growth area, with minutes and revenues expected to record double-digit growth figures, albeit off a very low base currently. Time will tell if mobile voice-over-IP will grow as fast here, but it seems very likely, as cost pressures caused by high mobile termination rates are a huge incentive to switch.

Companies can start to do something about this shift now. The important issue when planning communication systems for the future is to start looking at PBXs that can talk to the mobile, fixed-line and IP layers in one solution, so that alternative voice connectivity methods can be easily made as the market matures.

Alternatively, companies can just keep on handing over large bags of cash to mobile operators until there’s substantial enough competition in the market to drive retail rates down many, many years from now.

  • Rob Lith is director of open standards telephony company Connection Telecom

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  • http://www.is.co.za Brian Pinnock

    Great article. Agree with the sentiment. The trick is to make it a seamless user experience. Technologies succeed or are widely adopted when they meet people’s existing needs in a user-centric manner.

    Right now the technology to disinter-mediate the mobile operators (telephony services not data services) is mostly there. It just needs to become seamless and end users will adopt it.

  • http://techjunkie.co.za Gordon

    Good article Rob.

    I think most people have crossed the “fear of voice over IP” bridge. It’s just a matter of delivering the disintermediation technology to as many people as possible.

    We’ll sort it out, one voice minute at a time…

  • http://www.nashuazulu.co.za Malcolm Mersham

    Once again there is a major dependency on bandwidth when looking at IP voice or data links instead of your traditional methods. One hands washes the other though, so with the need for cheaper call rates, there will be a higher demand for data access and therefore the market should move in that direction.

    I’ve noticed a larger move towards IP voice services, with SLA on the traffic. A major move forward, that will definitely ease fears about going this route. I’m excited for the future.

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