VoIP is getting
tougher every day
With the closure of
SunRocket, the problems are just starting to come to light.
What
are the problems?
Ease of entry to
market. Unsustainable business plan. Charlatans.
There are many
pieces of the puzzle required to provide VoIP?
Well most of the
pieces are here.
Even Do-It-Yourself
kits made up of Asterisk or FreeSwitch have real costs, like a
professional who will spend a good part of his day insuring that the
system is up and running.
People miss their email when the mail server crashes.
People get peeved when their dialtone is broken.
(And with 911, you could be liable for any problems that occur).
Today, everyone with a patent pertaining to VoIP is suing. Sprint,
8x8, VoIP Inc., Verizon
and names we do not know like RTI
and a fashion
model.
Unlimited plans do not scale. VoIP providers pay per minute (on average
about 1.5 cents per minute for in and out). Even when most traffic is
local, terminating across a PRI, there are port costs involved in
traffic origination and termination.
And the DID (you know, the phone number) can cost any where from
$0.25 to $2 per number per month.
The largest stumbling blocks are government regulations - CALEA, E-911,
Disability, and USF fee collection. Compliance costs money. According
to Vonage, E-911 costs them $1 per user per month. Add to that
administration costs for all the compliance headaches as well as
distraction from marketing efforts. Plus collection costs for FCC form
499a.
So far we haven't discussed redundancy, circuits, bandwidth, hardware
or marketing.
SunRocket's acquisition costs were $200 per user, who paid $199 per
year. That means year 3 is when SunRocket might have hit breakeven.
Most companies don't even know what their acquisition costs are, so
managemnet has no idea when breakeven occurs. (It becomes a cash flow,
cash burn game).
Acquisition costs consist of the following:
- the Marketing
budget.
- the Sales
budget, including sales salaries + commissions
- the
commission to referral agents
- the free month
- the free or
rebated hardware
- the
Advertising costs
- retail space
costs
All of that just to
acquire a customer. Then you have to turn that order into a Ported
phone number, dialtone, and a billing account. that brings us to the
next 2 hurdles: LNP and Billing.
LNP is Local Number Portability. No company has 100% coverage. Most
providers use Level(3) - but not directly. Usually through at least one
(or more) resellers. Typically, a TDM number port can be done in a
week. In VoIP land it can take months.
So now you have your number, your ATA is plugged in, and you have
dialtone. Yeah! Now your provider has to Bill you. Most providers
want to go to Unlimited billing because it is easy. Billing per minute
is an expensive procedure. Billing software is hardly available at
Staples. It is expensive - six figures or 7 - and usually needs to be
customized.
And even on unlimited billing, the per-minute billing applies to
International, which can get expensive fast. Since International is
billed after it is dialed, this is where the biggest risk is to the
provider. A couple of hours to Paki and you are into hundreds of
dollars.
Hunting is no picnic to get working reliably on the switch, either.
That's why so many companies only sell one line. And hunting may be
solved by using call forward busy.
And that about sums up the VoIP Provider experience.
It is much easier to act like a reseller -- let the provider do
everything and you just market and present the final bill.
Need help with this minefield? Give
RAD-INFO, Inc. a call.
813.963.5884
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