A Penny for Your Thoughts

B. Washburn

B. Washburn

Summary Bullets:

  • A few big enterprises approach penny-a-minute event horizon for switched voice.
  • Detecting and disabling other revenue siphons is generally more productive.

Voice services pricing collapsed years ago. Gone are the days when businesses sent call detail records for departments to audit line by line. When they do review records, it’s more about catching rogue usage patterns and checking that employees aren’t gabbing with friends all day, not about getting “daytime dial” calls in check. Consumers that choose metered packages can get nickel-a-minute domestic calling rates; sizable businesses can shave another penny, maybe two, off metered plans.

But price erosion hasn’t stopped. There is still wiggle room for companies to tighten up their voice services and drop rates. In recent months, Current Analysis heard of several cases of carriers quoting switched voice rates that get close to a penny per minute.  A 1.1 cent rate is hard to come by – you have to be a big enterprise with a major contract in play (a million minutes per month is a good start), be mercenary about negotiating the lowest price, accept SIP Trunking (whether or not it is front-ended with an ISDN or T1 trunk interface), and be ready to buy from whatever alternate carrier is willing to bid rock-bottom to win the business. On the other hand, these rates are real switched voice service by brand name providers, not just best-effort, bring-your-own-broadband services.

Will switched voice approaching a penny per minute put the screws to all of carrier voice? Probably not any more than the long grind of market pressure already has. Per-minute rates collapsing from a quarter to a nickel in the last 20 years made a huge difference to businesses. Shaving a few more pennies, even if savings look big percentage-wise, is an area of diminishing returns. It can end up being a game of whack-a-mole: One carrier offers lower traffic rates, but access costs more; another offers lower access, but network ports are pricey; a third might have decent rates all around, but might not waive install fees, or insists on a long-term contract, or isn’t willing to back the service with guarantees.

Instead of trying to beat the system, a business is better off going with a contract that is a good enough fit, and then pay attention to avoid getting hammered by voice rate “gotchas”. Any international calling without decent negotiated rates is an obvious issue, while unmetered inter-office calling is an obvious opportunity for savings. Lurking directory assist/operator assist, reversed charges and calls to premium numbers can siphon away cash. Businesses that provide some employees with wireless service also need to keep the lid on overage minutes, or on using those phones for international mobile calls. Even if penny voice rates start to become a reality, it still pays not to be penny-wise and pound-foolish.

About Brian Washburn
Brian Washburn is Research Director for Network Services at Current Analysis. Brian tracks the technology and initiatives surrounding carrier Ethernet, IP-VPNs, optical networking and applications closely tied to high-performance networking.

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