In an IP world the idea of ‘channels’ seems a bit old fashioned, and whilst many providing hosted PBX etc. like to sell per channel, the suggestion of them having a value on the buy-side sometimes falls on bemused ears.
A minority of customers cannot fathom why they can’t have a gazillion channels or a huge number of calls per second, on demand, regardless of their spend or commitment. Worse still, a minority of non-customers or customers splitting their traffic between a number of providers, expect capacity to be reserved for them while they spend money elsewhere so it is available for when their other (usually cheaper) route fails. More sensible customers expect to reply to a channel limit warning (unlike others we mail you when you’ve hit one and a call has been rejected) asking for more channels and it to be honoured. This post attempts to explain why the answer to the above is often ‘no’.
We sit at the boundary between IP and the SS7 based PSTN. Contrary to sales bull, the PSTN is still SS7 driven although, like us, the incumbent offers a “managed service” to put an IP front-end on it. There is no IP Regulated Interconnect to the incumbent, period.
We interconnect over SS7, not just with BT, but also the likes of Virgin and this gives our customers numerous advantages:
- Our post dial delay (PDD) is very low as SS7 is quick and there aren’t an unknown number of IP legs behind us.
- We’re immune from outages such as happened last week taking multiple networks down as we are the IP interface to the PSTN, not relying on a managed service
- We can deliver more calls directly. Why would we send a call to BT to send to Virgin when we can send it directly to Virgin ourselves? It is cheaper, quicker and more reliable to send directly.
- We have choice of transit – why must we send, for example, Vodafone mobile calls via BT when we could instead (or as well) use Virgin? Again, It is more cost-effective and provides you with more reliability.
We also architect that SS7 infrastructure very differently to others to give you maximum performance and service availability. That, in theory, means we have 100% head-room on our interconnects and thus when BT need us to shut down half the network on a busy Monday afternoon, it has no impact on your business.
All this costs money. SS7 switches are very expensive, and the capacity into them takes a long time to provision. We are still waiting on capacity ordered in 2014 to go live, for example. Our business is therefore about deriving a return (or at a minimum paying for!) what is high cost and finite capacity. To run our business efficiently we need to not just to pay for that capacity but to derive the optimum return on it. That enables us to continue to invest into the IP side of our infrastructure and deliver new unique protections such as our work on VoIP Fraud.
This in itself is hopefully sufficient explanation, but there is further subtlety I’d like to explore; We only derive call revenue when a call is answered so our dream customer is one who uses all the channels they have, for calls which all answer, and do so immediately. Ringing time, failed numbers, or calls that hang up quickly are all incurring us cost and deriving little revenue. Therefore when we say channels are ‘as commercially justified’ we’re referring to your traffic being sane and commercially viable and the further away from the ideal it is, the less we want it.
Like many areas, Ofcom do not help here. Over recent years they have driven down wholesale rates, and thus margins, whilst retail rates have remained unchanged. Presumably their intent was to reduce retail rates but that hasn’t happened. The result is a shift of margin per minute from wholesale operators like us to those operating at retail. Deriving a return per minute is therefore far harder now than it was 2-3 years ago even for the same traffic. Remember when mobile was 8.5p per minute and you’d sell it for 10p with us both making healthy, viable, margin? It is now well sub-1p from us and many of you still sell it for 10p!
All of this is compounded by our competitors’ reliability. We can’t gloat about outages as they happen to us all at some stage but by luck or judgement we have a good record. It is no surprise therefore that every time someone has an outage our phone rings a lot! Existing customers want more capacity, others want to become customers immediately. Longer term, we have a waiting list of customers wishing to move on to the network from competitors that amounts to three times the capacity we have available until more comes on stream. To accommodate all these requests would jeopardise our own reliability and that is not something we’ll do.
Therefore, when you ask for more capacity we really want to help and will hopefully say yes. If we can’t though, we’re not being dicks when we say ‘no’, it is simply that we have looked at the commercials of your traffic and the commitment of our overall relationship and concluded it would be unfair or otherwise unviable to bump someone else out your way. Equally, if you have capacity with us for past competitor outages only, please don’t expect it to remain while you are not using our services; your channel limit will be reduced as your traffic decreases.
Of course, if you wish to pay for channels our commercial pressures ease greatly. Our Virtual and Managed Interconnect products (detailed in our brochure) trade, to differing degrees, revenue per minute and revenue per channel; more directly reflecting our costs. Managed Interconnect offers you our cost rates per minute and our return is derived entirely from the channel revenue. In both cases you’re committing to us for a number of years.
As you’ll see, giving these customers additional capacity is a very easy decision but otherwise if we’ve had to say ‘no’ to your request hopefully you can understand our reasoning.