Peter Radizeski is Founder and President of RAD-INFO INC. He is an accomplished blogalyst, speaker, author and consultant. He has helped many service providers with sales training, marketing, channel development and business strategy. He is a trusted source of knowledge about the telecom sector. His honest and direct approach make him a refreshing speaker.

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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, 8×8, 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.