Voice Services (Local and Long Distance Calls) Buyer’s Guide

INTRODUCTION

This is the traditional service that most people have access to in their home and business. It is the rare company that does not spend sizeable sums of money paying local and long distance service bills. Before the introduction of mobile phones and data services, long distance and international call charges were typically the largest telecommunications expense in a firm. While competition and changing technology have reduced the magnitude of the expense, it is still a significant outlay for business.

By identifying programs that best suit your calling patterns and volume requirements, you should be able to save anywhere from 5 to 35% off your current bill.

This buying guide is designed to give you the facts you need to select the right carrier for your firm.

HISTORY

Prior to 1987 voice services in Australia was a monopoly provided by three government enterprises Telecom (now Telstra), OTC (Overseas Telecommunications Commission absorbed into Telstra) and Aussat. In 1987 the government introduced the first steps to a competitive environment with the establishment of an independent regulator Austel and allowing competition in value added services.

The Telecommunications Act of 1991 restructured the Australian telecommunications industry to provide for two full service (voice, mobile and data) carriers – Telecom and Optus. The 1991 Act also determined that Vodafone would be the third mobile provider. Optus purchased Aussat and initially used Telecom infrastructure to begin its operations while building its own network infrastructure. At the same time, the Government directed that the GSM standard for mobiles should be used by all three mobile carriers.

In 1993 a number of companies began to buy wholesale network services from the full service carriers and retail disaggregated services to business customers. The largest of these resellers was Axicorp which was purchased in 1996.

In 1997 the telecommunications sector was opened to full competition and Telstra partially privatized. Cable and Wireless purchased Optus. By the end of 1998 there were over 20 licensed telecommunications carriers controlling facilities in Australia and a significant number of companies reselling the network services of the full service carriers with the objective to churn the Telstra monopoly services. The benefits of this competition were significant savings in telecommunications costs for Australian businesses although there were some negatives namely:

  • delays in transferring services from Telstra to the new carrier or reseller with impact on customer service delivery
  • billing problems largely associated with previous point
  • customer service problems for reseller customers

In the past few years, the long distance market has continued to become more competitive. Excess network capacity has allowed smaller carriers/resellers to lease high quality long distance lines at low rates. This has placed downward pressure on rates offered by all the carriers, particularly for smaller businesses.

INDUSTRY OVERVIEW

The players in the voice services market can be categorized into three major tiers. Telstra and Optus are the full service tier 1 telephone companies (often referred to as carriers) with their own infrastructure. Telstra with its legacy of previously being the only provider, holds the largest market share and relies heavily on advertising and promotions to market to business and customers. Together with large direct sales force and a multitude of channel partners both these companies are the dominant players in the industry.

A second tier of carriers consists of companies that may have some network infrastructure (eg network switches at strategic Points of Presence (POPs), DSLAMs for broadband services and IP switches to offer value added services to specific market segments) but still rely on resale of Telstra and Optus services. These include companies like Powertel, AAPT and do not offer the breadth of service of the big two.

A third tier of companies consist of many smaller firms with a more regional or local focus. These firms almost always act as agents for the tier 1 and tier 2 carriers attracting customers using aggressive pricing, alliances or local sales reps, innovative bundling of network services with telephone systems and other products like Plasma TV s/IT equipment/photocopiers as well as multi-level marketing arrangements. Some of these companies have been very successful in quickly building a large customer base. While some of these resellers do not have the capability to offer the full range of value added services a business may require, others have relationships with a number of tier 1 carriers and can tailor the best solution for your business.

There are also consultants who, based on your telecommunications objectives, can analyse your phone bills and negotiate with the various carriers to deliver you the best value solution for your requirements.

PRICING

For some companies, choosing a local and long distance call service simply becomes a matter of finding the best price. The highly competitive nature of this industry ensures that better rates can almost always be found although this may require bundling your voice and mobile services with the one carrier/reseller.

Unfortunately, the carriers do not make it all that easy to compare offerings. Although all carriers work on a basic per minute rate cost, each tinkers with how they bill customers.

Sales reps will often quote a low local call rate as a proxy for their entire calling program, conveniently omitting mention of expensive long distance rates or during prime time hours or the cost of calls to mobiles.

Additional factors make apples to apples comparison even more difficult. Monthly line rental charges, varying minimum call lengths, flagfalls and volume discounts can increase or decrease your final bill fairly significantly.

Market research indicates that many line rental charges to businesses are for lines that are not required and in more than 10% of cases, businesses are charged a different rate than the plan they originally signed for. Our free phone audit can quickly identify if this is the case with your business.

Switching voice service carriers is as easy as calling the company of your choice and specifying which program you wish to join provided you don t have a current contract with your existing carrier. If you are hesitant to switch all your phone lines to an unfamiliar carrier, you may want to try switching a few lines as a test or use the override codes that can be programmed into your telephone system as a test. If you are satisfied with the service and savings, you can then switch over your remaining lines.

The key call cost components that appear on your telephone bills are:

  1. Local calls
    Rates can vary from 4 cents to 21 cents flat rate per call and in some cases a fixed amount of calls are bundled into the monthly plan cost. However as local calls are a small percentage of most business voice bills (around 20%), some providers offer very attractive local call rates but are more expensive in other areas. For some services (eg ISDN) local calls are timed like long distance.
  2. A.Long Distance Calls
    Offer different rates for capital city to capital city calls and regional calls which can also be split into less than 50 kms and more than 50 kms. This is usually a high proportion of your call spend so make sure you understand the impact of new rates on your call costs
  3. International Calls
    Rates vary by country so you need to have a good understanding of your businesses calling patterns to assess the cost impacts of a new rate plan
  4. Calls to Mobiles
    Today this is usually the largest component of a fixed-wire bill and needs to be looked at closely.
  5. Other calls
    Includes calls to special numbers (eg 19 numbers, directory calls¦..)
  6. Line Rental
    Can vary significantly depending on the how the service is delivered eg using ISDN or ADSL

Have a look at our case studies which give you some good examples of how businesses have got a better overall telecommunications service at a lower cost through a telephone bill analysis approach.

SERVICE

Although selecting a local and long distance telephone carrier is by and large a pricing game, there are a number of service factors to watch out for, especially when considering a smaller carrier.

One key factor is the business hours of technical support. Generally, the tier 1 carriers will offer either 24-hour or 9 to 5 service. With carriers offering 9 to 5 service, any after-hour calling problems will need to wait to the next day to be resolved.

As a result, these carriers may be a poor choice for businesses that make calls after hours or on weekends.

However if the threat of network failure has kept you with larger and more expensive carriers, it may be reassuring to know that the liklihood of breakdown is very remote. If network reliability is an important concern, you are better off using two or more carriers and splitting your traffic. While this solution may reduce the volume discounts you receive from either carrier, it will be far more reliable than using any single carrier. It is worth pointing out, however, that this is not necessarily a failsafe measure because of the extensive reselling that goes on in the industry.

BUYING TIPS

1 – Understand Your Calling Patterns

Before you start comparing programs, you need to understand your company’s calling profile. The best way to do so is to examine a recent phone bill. Break out where the calls went, when they were made, and how long they lasted. Use this analysis and information about your total call volume to direct your comparison of programs, focusing on rates that apply to the majority of your calls. This is not an easy task so it may be better to use telephone systems no obligation analysis of your telephone bill

2 – Include your mobile and data costs in your negotiations

With the convergence of voice, data and mobile services, the best deal usually involves combining all 3 areas of your telecom spend. This also allows the smarter carriers to suggest innovative solutions that may improve your productivity or give you a competitive edge. Bundling your telecom bill with your telephone system is a common solution that will reduce your total telecommunications cost.

3 – Avoid Signing up for Long-term Contracts

Carriers often offer lower rates to entice customers to sign up for a multiple-year contract. While signing up for long terms of service can also help you obtain low rates, we recommend that you avoid plans that lock you in for more than 24 months. Because the industry is changing rapidly, you will want to keep your options open to take advantage of lower rates in the future.

4 – Look Carefully at Calls to Mobiles

Things to check are:

  • The flagfall (one off charge that applies to any call to a mobile)
  • Is the rate charge per second, per 10 second or per minute? For instance a 3 second call charge will vary significantly depending on this
  • Does the rate charge vary with different mobile providers? So is the cost of a call to a Telstra mobile different than one to a Vodafone mobile. Some plans that offer free calls to designated mobile numbers or mobiles provided by the carrier can be very attractive if you have a large team of road warriors.
  • Do they offer different rates for business hours and other times

5 – Check the line rental charges

While there is a lot of emphasis placed on call rates by consumers and telephone companies, many consumers fail to realize that a large component of their telecommunications costs is attributed to line rental charges.

6 – Identify unnecessary or unused services

Many businesses, especially those that have been in business for a long time, have phone lines that are not used or too many for their current requirements. Cancelling unwanted services can reap huge savings.

7 – Watch out for Monthly Minimums

Make sure to build in a cushion when signing up for service that requires a monthly call minimum. If you fail to meet this minimum, most programs will simply bill your company the difference. To be safe, your calling volume should be at least 15% above a given threshold.

8 – Review Your Voice Service Regularly

Like spring cleaning, it can be useful to take stock of your telecommunications holdings on a yearly basis. Use our our no obligation analysis of your telephone bill.

Do you need help with your telephone systems?

Whether you require a new phone system or an upgrade, we are willing to help you make the best choice.