A new route to voice savings
Fully managed services for international call termination make sense for fixed and mobile network operators as they seek to cut opex and capex and improve shareholder value. IDT Telecom explains how this can easily be achieved, and why it is perfectly positioned to help reduce costs
One of the major headaches for operators worldwide in recent years has been how to continue to make money from international voice as prices carry on falling and margins are squeezed.
This is far from an easy conundrum to resolve, given the competitive pressures they face from all sides, including the move to VoIP and online messaging services.
But while per-minute prices have been on a downward trajectory, there are solutions to help operators save on costs and thus make the most of every minute – and communications provider IDT Telecom for one believes it has an innovative answer for organisations that need to terminate international calls that originate from their network. IDT’s main vision for the future centres on managed services for international voice termination. Through this innovative proposition, the company believes it can help network operators make major reductions in opex and capex by streamlining their wholesale operations.
Partnering with IDT, operators can save on opex due to a decreased need for resources in their wholesale departments, and remove the burden of dealing with the complexities of international call termination by handing over full control of these functions to IDT: “We can look after the A to Z,” as Nick Ford, president of carrier services at IDT Global, puts it.
Wholesale carrier teams within network operators are often reluctant to relinquish this kind of control, but it makes total sense given the shape of the market and IDT’s position in it. Not least among these considerations is that it will allow operators to focus even more of their energies on developing and driving revenues from data services.
But as IDT emphasises, although the focus of network operators these days may be on how to maximise return from data services and filling up capacity, that does not mean this should come at the expense of the voice side of the equation – because despite the margin squeeze in recent years, that traditional segment still brings in a large proportion of carrier revenues.
“Revenue generated from international voice traffic is still a really important driver for telcos; it’s not just about data, and we can play a pivotal role in that for operators,” says Ford.
A GLOBAL OUTLOOK
But why IDT? Firstly, in terms of simple statistics, the company has a great wealth of experience and standing in its sector. It is among the top three carriers for international wholesale voice worldwide, transporting more than 30 billion minutes of voice traffic globally last year, and it currently interconnects with more than 1,000 wholesale partners, including fixed-line, cable and mobile operators.
And while IDT is a major player in this market, it still has significant room for growth, given that its share of minutes in the international wholesale sector is around 10%. The company therefore has good reason to believe there is plenty of life left in the global voice market yet.
With certain operator partners, says Ford, IDT already terminates 40-50% of their global traffic – so for some it could make sense to move towards a managed-services model that would see IDT taking care of termination for all of an operator’s international traffic. “We’d like to take it a step further, looking at where they can make more savings on both opex and capex,” he says. “It’s a new model for us to take it to another level.”
One major source of opex savings for a potential partner would be not having to spend on maintaining a fully fledged wholesale department to deal with international termination, a segment that may only be generating single-digit margins. On top of that, this area is not necessarily a major focus for many operators, whereas for IDT it is a core part of its business.
A move towards IDT’s suggested new model could also aid the overall efficiency and effectiveness of a carrier’s business, and give them a single point of interconnect rather than having to manage many.
“There are so many moving parts in wholesale that some of these guys have to manage, such as market shifts, billing and credit control. It’s a real challenge. For a company at which this isn’t a core focus, it creates more risk than reward doing it the way they do it today,” says Ford. By removing this risk through a managed-service model, IDT believes operators would be left with just the reward.
Ford also believes it would help them better deal with the problem of ever-decreasing margins in what is an increasingly complicated marketplace.
He adds that many operators have outdated legacy systems that were built around handling national traffic. “When they try and move that into an international arena, their systems can’t handle the complexity of it.” Again, this is an area in which IDT says its experience and breadth of coverage makes it one of just a handful of carriers with the ability to manage such challenges on a global scale.
Meanwhile, IDT’s general business model makes it an ideal and reliable partner for international carriers. An extra layer of reassurance on the quality of its network is provided by the fact that aside from its wholesale offer, it has its own international retail voice business. The latter constitutes half the minutes carried on its network, driven by its flagship BOSS Revolution service – which enables foreign-born customers to stay in touch with family and friends back home at cost- effective prices.
Having this major retail business gives IDT a vested interest in optimising quality to meet the demands of those that use its network, having the clear knock-on effect of also making it better for all its wholesale partners. In addition, it has anti-
fraud systems in place that help it monitor the network, aiding with tackling this big issue in today’s voice business.
Not only that, but the model helps the company to drive down pricing for wholesale partners. By being able to guarantee large volumes of traffic onto networks around the globe from BOSS Revolution, IDT can leverage this to negotiate better termination rates for retail customers – which it can also pass on to the wholesale side.
In summary, therefore, the intrinsic link between the retail and wholesale sides of IDT’s business enables the company to achieve excellent quality on routes around the globe and improve pricing for international partners. These factors, says Ford, make the company well-placed to act as a “hub” for traffic into many countries.
On top of that, the decline in per-minute revenues over time has propelled IDT to further improve the quality and profitability of its network, and focus on higher-margin routes. It moved early to an IP-centric network and is now looking to further improve efficiency by shifting parts of the network to the cloud where possible. The result of these moves has been a more streamlined and dynamic company.
UNIQUE INSIGHT INTO TRAFFIC DATA
Another benefit of IDT’s wide international coverage is that it has made huge investments in its own proprietary systems – built and maintained in-house – for monitoring voice traffic on a global scale. This means that IDT can give partners strong insight into their international traffic, with the ability to see how it is performing on an hourly basis. This level of transparency at an international scale is quite “unique” in the industry, says Ford, giving partners more visibility of their own voice traffic in a way that they are unable to achieve themselves.
Through closer partnerships under the future model that IDT proposes, this level of insight into their international voice traffic can be further enhanced for operators. “A managed service with us can give them more dynamic routing, which increases cost savings, and more dynamic reporting,” says Ford. “They can have more visibility into what their traffic is doing if they partner with us because we have a far greater level of granularity to show them than what their own systems are capable of.”
And Ford says that IDT can help to simplify the challenge of dealing with multiple different call-termination regimes around the world, pointing out that there is much more complexity in the industry than call rates simply continuing to fall. “The market is volatile both up and down: market rates do change dramatically both ways.”
He highlights how in some countries, for example, charges for terminating international calls have in fact increased in recent times in a bid to bring in more investment. He adds that some mobile network operators have also placed surcharges on calls depending on where they originate from rather than just using the traditional model of charging for termination, in a bid to generate extra revenues in response to regulations such as those in the EU aimed at slashing interconnection costs.
Such strategies are leading to disparate charging models, as well as some unfamiliar ones, meaning extra layers of complication that can be hard for operators to get their heads round when it comes to billing, and when assessing and developing their strategy in the voice market, says Ford. He says that the surcharging model, for example, “creates a massive complexity for the wholesale industry because it changes the concept of how we bill”.
But IDT is there to help reduce such complications for network operators around the world that want to try and create a more streamlined model by linking up with the company on international voice.
“We’re here to serve that global community,” says Ford. “The international piece is almost a necessary evil for many operators, and has a lot of risk associated with it. For us, voice termination is what we do and what we’re good at, so it’s about taking that piece of the headache away, while at the same time helping them to save on opex and capex.”