April 1, 2005

7 Min Read
Beyond Cheap Long-Distance

By Tara Seals

Efficiency, feature-rich service offerings, increased revenue - for a carrier, VoIP’s triple-pronged value proposition is the same no matter where in the world it’s being used. But for calling-card dealers reselling cheap international termination on a prepaid basis, VoIP primarily has been a way to shave more pennies off rates. As prepaid traffic continues to grow, international operators have found their margins becoming slimmer and slimmer - spurring them to leverage global VoIP’s value proposition beyond the rockbottom minute.

“VoIP is both a risk and an opportunity for wholesale carriers,” says Philippe Millet, the vice president of customer marketing and distribution for international wholesale for France Telecom. “VoIP is great for carriers to get more flexibility on the routing management and better utilize capacity to lower the access and transmission cost.” But he adds, “For the time being, we’re still dealing in minutes, selling and buying minutes to international destinations. How will that change once it’s undifferentiated IP traffic and not TDM? We don’t want to shoot ourselves in the foot.”

In other words, a concern is to keep the VoIP business profitable and avoid low-ball pricing and commoditization. Millet stresses that carriers cannot ignore the trend to undifferentiated traffic and need to create specific responses and offers that will enable them to continue to provide value.

According to Judy Reed Smith, CEO of research firm Atlantic-ACM, one way to do that is figuring out specific customer segments to target with differentiated features. “Because a digitized service allows these resellers to add so many new features easily, people can develop their offerings to serve different segments,” she says. “It will allow them to gain loyal customers if a provider could pull out certain calling features to make a service more attractive to certain types of users - then you’ve got a real sales model.”

Such marketing tactics are spurred on by the fact that the prepaid market is growing into new segments. “In addition to pennywise new Americans wanting to call families in their country of birth who have historically accounted for about half of the prepaid long-distance card revenue, many new segments are discovering the advantages of prepaid products,” says Reed Smith.


As if on cue, more opportunities are presenting themselves to international calling-card operators to add on applications and calling features, such as conferencing and voice mail.

“We are experiencing an era of readymade applications,” says Mike Twomey, Excel Switching Corp.’s vice president of product management and marketing. “Take SMS on the international stage, or one-number service. Users are used to paying for it, so it represents good profit and revenue for the service provider. Overall there is an uptick in the demand for services in fixed and mobile prepaid. It’s a whole new market, and operators need to be able to plug and play on a flexible and cost-effective basis. People need to change their mentality from shaving off pennies per minute to looking for new profits and ramping up revenue.”

One way to set an offer apart is by converging fixed and mobile service. One calling card can be used for potentially any type of call. For instance, SmartServ Online Inc., a Mobile Virtual Network Operator (MVNO) and reseller, has launched the Uphonia World Card, a prepaid international phone card with low rates for calling more than 190 countries from landlines and mobile phones. “[All] callers will realize a significant per-minute savings using the Uphonia World Card for international dialing,” says Daniel Wainfan, vice president of marketing. Wireless subscribers also can customize their phones with their favorite ringtones, images and mobile games at Uphonia.com.

Telic Communications Inc. lets operators take advantage of VoIP-based features over mobile and fixed networks, such as SMS callback. A user can send an SMS message to a cell phone, and by clicking on a Web link in the message, the recipient agrees to receive a call. The service then calls both phones using local phone systems with VoIP in the middle, so both calls are “local.” Telic offers the xVox managed calling-card service for prepaid operators, which gives them control over the features and functionality of an international calling service, without investing in network gear. A Web interface gives companies and their distribution partners access to reports, routing and rating managers, and a customer management system.


Wholesale carriers are bolstering their international prepaid resellers by leveraging the back-office efficiencies VoIP can bring to the table and passing on the advantages. Brooktrout Technology Inc. and BayPackets launched a joint solution for IP-based prepaid calling that allows carriers to deploy calling-card services over circuit-switched, hybrid or packetbased networks. The IP-based prepaid application runs on BayPackets’ Agility Network Services Platform, while Brooktrout’s SnowShore Media Server provides media processing for the BayPackets platform. The Agility Prepaid application comes with a comprehensive feature set that includes support for resellers, who reap the benefits of being able to add on the aforementioned enhanced services. “Operators can add on advanced services in a more flexible way than has ever been possible,” says Josh Adelson, director of market development at Brooktrout. “Now prepaid has an ecosystem of companies like us focusing on underlying media processing issues like audio mixing for conferencing, while the BayPackets of the world deal with the applications logic. Operators thus can deploy new services quickly.”

NexTone has developed a new version of its iView Management System (iVMS) that allows carriers to track interconnect costs in real time and optimize wholesale margins. According to the company, expanded alarm capabilities of the updated system allow carriers to monitor link and user call performance and automate corrective actions to maintain QoS levels. The new system also enables the logical partitioning of sessioncontroller functionality, allowing multiple carriers to share the same physical infrastructure while maintaining dedicated control of QoS. The iVMS system includes new reporting features, CDR aggregation and other enhancements to simplify network operations and streamline VoIP service delivery. All of this translates to dynamic business operation control for the operator.

“More and more companies are looking for ways to better manage their costs and to quickly set up connections with carrier partners,” says Dan Dearing, vice president of marketing at NexTone. “We offer a way to dynamically manage those partnerships. The iView Management System can take the data from each CDR and analyze it to see if a call is profitable. And a particular carrier supplier can be demoted automatically if it falls below certain defined thresholds for cost or quality.”

Supplier management can be a differentiator for the end user, too. iBasis Inc.’s IP-based Pingo retail calling-card service differentiates itself by actively monitoring evolving wholesale longdistance costs around the world with RateWatcher, and publishing the corresponding inter-national retail calling rates on the Pingo Web site on an ongoing basis. The idea is the ability to save Pingo subscribers from the chore of having to compare rates from a multitude of prepaid calling-card offerings.


Aside from enabling prepaid international long-distance with enhanced features on a calling-card basis, VoIP is presenting new models for prepaid operators.

One such model is prepaid bring-yourown- access Internet calling. “Many operators are using VoIP by private labeling a service and communicating directly with the user, with prepaid broadband VoIP,” says Twomey. “This forces a bit of a competitive change. We are seeing a range of niche providers in this new way of taking the market.”

iBasis has announced DirectVoIP Broadband, a new prepaid service for bring-your-own-access providers to offer international voice service with network quality over the iBasis global VoIP network. A service provider can combine a privatelabeled Vonage-type all-you-can-eat service with a prepaid premium international option, for instance.

Skype Technologies S.A. is putting a twist on this approach with SkypeOut, a prepaid add-on to its free softphone-tosoftphone Skype experience. SkypeOut offers users the ability to interconnect to the traditional phone network and call regular landline phones at home or internationally.


Atlantic-ACM www.atlantic-acm.com
BayPackets www.baypackets.com
Brooktrout Technology Inc. www.brooktrout.com
Excel Switching Corp. www.excelswitching.com
France Telecom www.francetelecom.com
iBasis Inc. www.ibasis.net
SmartServ Online Inc. www.smartserv.com
Skype Technologies S.A. www.skype.com
Telic Communications Inc. www.telic.net

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