A regular trefor.net contributor, Peter Farmer is the Commercial and Regulatory Manager at Gamma, as well as an ITSPA Council member and Chair of ITSPA Regulatory Committee. We are pleased to present his “VoIP Week” post.
So, Trefor asked me to approach an article for “VoIP Week” from a commercial perspective as opposed to regulatory…. took me a while, but sunstroked approaching Havant cycling from Esher to Portsmouth, it dawned on me.
We’ve had our VoIP Spring. We just don’t realise it yet.
Last year, there was much furore around Ofcom’s decision (enacting an EC Recommendation) to reduce geographic termination rates to the Long Run Incremental Cost (“LRIC”). These rates were previously calculated using Fully Allocated Cost (“FAC”). Very roughly, FAC is 5x LRIC in this market, so 0.3 became 0.06 pence per minute.
All the views espoused on that subject were valid, especially as we have a diverse industry with many niche interests and many unbalanced portfolios of net termination and origination. In the same market review, however, Ofcom transferred — for BT at least — the foregone common cost (the difference between LRIC and FAC, attributable to costs such as your CEO and Finance and HR teams, etc., and not directly to each incremental unit of what you are selling) in the termination market to the origination market. Granted, this had the perverse effect of reducing the cost (through the Significant Market Power Condition that governs non-geographic out-payments), but what it did to was virtually double the per-minute cost of the origination leg of Carrier Pre-Select and Indirect Access. Granted, again, this nets off against calls to UK geographic and non BT terminating non-geographic (why BT itself is exempt is a very long story that I will tell another day), but means that calls on legacy ISDN30 estates to mobiles and international numbers increased. Markedly. We are now in a situation where the direct cost of getting a call from the Network Terminating Equipment (“NTE”) over the Local Loop to the Digital Local Exchange (“DLE”) is five times that of getting it from the DLE to a mobile in the US of A. Seriously.
If you’re an over-the-top provider, your cost base just went down. You don’t have to worry about that leg from the NTE to the DLE. Your voice traffic is ones and zeroes encoded in packets of data over broadband frequencies, not analogue on narrowband frequencies. The per minute cost of providing the service to any caller has plummeted, relative to an ISDN2 or 30 or even a single WLR line.
And that right there, Ladies and Gentlemen, was our VoIP Spring. Let’s make the most of it.
VoIP Week Posts:
- Ten Years of VoIP – Happy Birthday!
- #voipweek on trefor.net Brings Diverse Set of Posts
- The Conception and Birth of a New IP Handset
- UC Disappearing Like VoIP
- Microsoft Lync, Embrace or Ignore?
- Voice Fraud – You Need to Act!
- VoIP and Emergency Services – Location, Location, Location…
- Vastly Objectionable Ignominious Phrase