|Issue:||Latin America 2006|
|Topic:||Voice telephony in an IP world|
|Author:||Per Martell and Carl-Henrik Olsson|
|Title:||Per Martell, Regional Operations Director, Caribbean and Latin America, and Carl-Henrik Olsson, Product Manager, Trading and Routing Solutions, Caribbean and Latin America|
Per Martell is Intec’s Regional Operations Director for the Caribbean and Latin America, CALA. He has more than 20 years of experience in the telecommunications and IT industry with a background in sales, business development, systems integration and alliance management. Prior to joining Intec, Mr Martell was the Systems Integration Director for Ericsson Telecommunications in Brazil. During his career he has held various management positions with companies such as EHPT, EssNet AB, ICL Business Systems AB, and Data Construction. Per Martell earned Degrees in IT and Business Management.
Carl-Henrik Olsson is Intec’s Product Manager for Trading and Routing Solutions in the Caribbean and Latin America. Prior to joining Intec, he held a variety of management positions with several OSS/BSS companies in Europe and Latin America, including Ericsson. Mr Olsson has more than ten years of experience with Wholesale Business Management Solutions at numerous operators throughout Europe and Latin America. Mr Olsson holds both an MBA and Masters of Science in Electrical Engineering from Chalmers University of Technology in Sweden.
VoIP is doing more than simply lowering the cost of voice telephony. The ease of providing VoIP is convincing a growing number of service providers to compete with traditional operating companies. The traditional operators now must re-think their business models, their cost structures, the service they offer and the quality they provide. An innovative bundle of voice, data and video, together with carefully honed traffic trading, and network interconnect skill, are now essential for the survival of modern operating companies.
In an increasingly competitive market place, telecom operators must differentiate their service offerings to acquire and retain customers. This is true for all customer types, residential, corporate and fellow telecom operators alike. It is also true regardless of the technology used to offer the service – be that traditional fixed lines, mobile or Voice over Internet Protocol, VoIP. Given a choice, customers will select the services they perceive to offer the best value for their situations. A corporate customer may choose high quality over price, while a residential customer with a large family overseas will most likely select the most economical service. Now that cable TV and broadband operators have increased their subscriber base and have smaller obstacles to market entry, primarily due to low-cost IP telephony equipment, they are strongly positioned to offer their existing customers bundled voice telephony at a very economical price. For the first time, the traditional operators who have held a virtual monopoly on voice services for so long now have effective competition. Product differentiation is now essential to the survival of these operators. Product differentiation The most obvious example of product differentiation is between fixed and mobile services, although even this is becoming blurred with the launching of new, innovative products. Quality is another typical differentiator. To an end-user, this means, apart from high voice quality and low echo, etc, that it is easy to reach the dialled number with little delay for call completion. Telecom operators may thus offer products with varying quality levels. The criteria for service quality can vary; the criteria might call for a minimum Answer Seizure Ratio, ASR, a maximum average Post Dial Delay, PDD, and guaranteed Caller Line Identification, CLI. It could also be a firm quality commitment in the form of a product Service Level Agreement, SLA, with breach penalties. Obviously, such service quality commitments will vary by destination since mobile and fixed networks, as well as different countries, have very diverse infrastructures. The advantages of these commitments are easy to see – for both the subscriber and the operator. A high ASR means that it will be easier for the subscriber to reach the called party and the operator will be able to charge for more successful calls. Making sure that the caller’s telephone number is transmitted to the called party (CLI guarantee) means that the called party can return the call to the caller, which in turn means additional interconnect revenue for the operator. Operators in the forefront typically monitor quality in near real time, and can take action within minutes after a problem arises. Service revenue and cost Traditionally, the main sources of revenue for operators come from billing subscribers and charging other operators interconnection fees for terminating traffic in their networks; additionally, in the case of mobile operators, from roaming. In the new scenario, an opportunity for trading and transiting traffic, taking advantage of arbitrage between different markets, has arisen. However, on the other side of the equation, after network costs, interconnect costs often represent the second largest operating cost for operators. With competition steadily rising and margins becoming tighter, operators must ensure that every single customer and destination is profitable. To do so, sophisticated reporting and alarm systems must be deployed to identify quickly any areas of revenue leakage. Network interconnect Network interconnect has existed ever since it first became possible for the subscriber of one operator to call a subscriber of another. At the time when only one PTT existed in each country, financial settlements for interchanged services were quite informal. However, the marketplace has become much more complex since mobile operators began delivering services, carriers emerged as pure traders, and broadband operators entered the market. Before these changes, a call that should be terminated in the United Kingdom was always handed over to British Telecom. If a direct connect did not exist, a transit operator was used, but the choices were very limited. Today an operator has many more interconnect partners and thus a broader choice of who to use to terminate a call to the United Kingdom, or any country for that matter. Trading traffic Trading traffic is, simply put, buying the rights to transmit traffic at a lower price than you sell it. Superior points of presence or market intelligence, as well as guarantees of higher quality of service, enable this arbitrage. The key to effective trading is to know your cost base and the market value of the services you offer. Reacting quickly on a favourable offer not only means that you will be able to lower your cost, it also means that you can choose to increase your revenue by attracting additional traffic at a lower price while still making a profit. In order to maximize margins when reselling wholesale traffic you need to offer differentiated products with different quality levels as well as unique destination break-outs. Finally, you must be able to create customer-unique pricelists with prices that are right for each specific customer – catering to his or her specific needs. Routing managers – the right quality at the right cost Routing Managers are responsible for determining how traffic is routed out of the network. Their primary objective is to minimise routing cost while continuing to deliver on customer commitments. In doing so, they must consider not only price but also quality and capacity. Quality is closely connected to capacity as over-usage of capacity leads to drastically reduced quality levels. In considering capacity, the routing manager needs to know the capacity constraints on the routes to the interconnected operator as well as the traffic patterns to each destination. For example, traffic congestion hours will be very different in Japan than in Argentina, since the difference in time means that business hours, and thus traffic peaks, are also different. Interconnect settlement Effective settlement of interconnect traffic has been a key focus of operators for many years. Not only do they need to ensure they charge for every minute used on their network, but they must also ensure they only pay for their actual network usage. This process is extremely complex and prone to errors. A key objective is to ensure that settlement is made exactly according to the terms specified in the interconnect agreements. The number of agreements a typical operator has is generally in the hundreds, with each one consisting of up to thousands of destinations. Different operators also offer different rates for peak, off-peak and weekends, with each offer having its own definition of peak hours – this often also varies by destination. Given that these agreements are typically updated at least once per month, this means a tremendous amount of detailed data for each agreement must be regularly, and carefully, updated. A single point-of-entry for all interconnect agreements for both the trading support system and the interconnect settlements system is therefore essential to eliminate errors and consequential losses or delays of payments. Into the future As an increasing number of service providers of all sorts begin to include VoIP in their service bundle, competition for the most valuable subscribers will increase dramatically; delivering a differentiated product offering will be the only way operators will survive. The need to maintain and monitor quality and profit margins in near real time and distinguish between the profitable and the not so profitable subscribers, and wholesale customers will become increasingly important. Operators must adapt to this new way of life in order to keep their businesses alive.