VoIP

Quit Worrying and
Become the Phone Company?

Are you looking for a way to make more money from your DSL customers? Why not recoup some of your deployment costs by selling them long distance voice services, too? Heard that one before? Maybe this time it's for real.

by Ted Stevenson Executive Editor ISP Channel [November 20, 2002]

Voice over Internet Protocol (VoIP) call services work now. I know; I've had a number of phone conversations recently where the other party was connected over an Analog Telephone Adaptor (ATA), and the quality was at least as good as plain old telephone service (POTS). The advent of broadband connections has certainly been a factor here.

At ISP-Planet, we've been covering the idea that ISPs might become voice providers since our launch in April, 1999. We've seen schemes come; we've seen them go. The VoIP "opportunity" didn't play out quite the way we'd envisioned, and few ISPs were eager to give it a whirl.

But last week we chatted with Diane Brandis, Chief Operating Officer of TransPacificTelecom, San Diego Calif.-based newcomer to the VoIP arena, and concluded that perhaps this time, the stars are in the correct alignment. According to Brandis, the enthusiastic reception to services demonstrated at the recent Internet Telephony Conference & Expo (October 2002) and ISPCON (November 2002) paint a promising picture.

What's different this time?
TPT's basic product is software—a comprehensive call management, reporting, and billing application called VIVOware. Anyone in the world can license it for a mere quarter million dollars. Potential ISP or CLEC "alliance partners," however, can reap the benefits of VIVOware at no cost as part of an introductory offer of TPT's VIVO COMPLETE program, a turnkey package the company insists will turn "last-mile broadband providers" into instant long-distance carriers.

VIVOware itself provides software-based switching combined with call detail reporting (CDR), which includes full record tracking, rating and routing, call completion reporting, automated customer invoicing and payment gateway, reporting and management tools, and more—as well as a customer relationship management (CRM) system. VIVO COMPLETE adds integrations with TPT's global VoIP infrastructure and network for routed domestic and international long-distance.

Barriers to entry
In an effort to make it as easy as possible for ISPs and other service providers to get started selling long distance phone services, TPT has bundled with its online management/tracking application a free marketing training package. In other words, they'll teach you how to sell their product. TPT will also co-brand or private-label the telephony services, and even provide (and customize) brandable customer-service web pages for alliance partners.

There are no sign-up fees. Rather, alliance partners contract for services with TPT. (Letters of credit or other guarantees of payment must be put in place.)

On the other hand, the cost of customer premise equipment (CPE) may constitute a barrier, though a modest one. Residential service is currently built around the Cisco ATA (analog telephone adaptor) 186, costing about $150 retail, and providing two-line service. ISPs and CLECs may wish to pass along this cost to customers up front, amortize it, or build it in as a fixed monthly cost. Businesses wanting to connect more lines can opt for the Cisco 2600.

These hardware investments, while not enormous, do call for an ongoing sense of commitment between customer and provider. According to Brandis, however, ATAs are heading for the market in the $50 price range, which would certainly lower the psychological price barrier significantly.

Hitting the numbers
According to Brandis, the typical ISP makes in the neighborhood of $10 per month on a DSL connection. (You'll know whether this is true or not for your ISP.) Typical phone customers pay between $30 and $40 per month on long distance.

Given the wholesale price ISP/CLEC alliance partners pay TPT for domestic long distance (between 2 and 2.5 cents per minute, depending on volume) and the rates charged by typical long distance providers (for example, 5 to 6 cents per minute in Oregon) there's adequate margin for both end-users and alliance partners to benefit—letting the partners at least double their $10 average revenue per customer, Brandis said.

With small business customers, Brandis says, a long-distance partner should be able to clear between $50 and $200 per month. (Your ISP's profitability, of course, may vary.) International long distance is another option, with rates varying by country of termination. A complete listing of international long distance rates is available on TPT's website.

About 60 days out of the starting gate, according to Brandis, TransPacificTelecom has signed up 15 ISP partners, is in negotiation with some 20 others, and is receiving hundreds of enquiries every business day.

Is telephony DSL's "killer app"? Maybe it is; maybe it isn't. At least TPT allows you to test the waters without betting the shop on VoIP call services.

—End