Wholesale VoIP Blog

If you are new in the VoIP industry, you might mistakenly set your sights on big shots like Vonage as your competition. At face value, a company like Vonage seems like a giant to your small start-up VoIP business. The reality is, though, you might actually be setting your sights too low if you target these companies. Plus, you are only causing yourself undue stress and worry by focusing on the “wrong” VoIP industry players.

First of all, Vonage sells low-cost and arguably low-quality services. As a new VoIP small business, aligning yourself with such company will only set you up as either no-profit or no-quality. Doing so may be your only way to compete with a company like Vonage. This isn’t really that much of an incentive to get into the VoIP industry, right? More importantly, this isn’t much incentive for customers to pick you over your more popular chosen competition.

Taking Aim at Your Real VoIP Competition

On the condition that you get with a good wholesale VoIP provider – one that gives you good-quality VoIP services at competitive prices – your true VoIP competitors are actually cable companies. This gives you enough leeway to focus on service quality while pricing your products for enough profit.

One of the main considerations is the niche market of cable companies that offer VoIP. Your prospects here are people who put value on quality. Low-pricing won’t sell much if it comes with low-quality VoIP services. Thus, you can package your VoIP small business as quality-focused – never mind if your rates are slightly higher than others.

Also, there is an ingrained distrust of cable companies, which you can harness to benefit your VoIP small business. For too long, these companies have provided poor to zero customer support, been impersonal and “cold” to customers, given bad service and the like. This will bite back ten-fold when offering VoIP services. As their competitor, you can counter this image by being a customer-focused, professional and quality VoIP provider.

With cable companies as competition, you can push for higher reliability and quality. If your VoIP small business provides this, your prospective customers will all look at cable companies as a second choice.

Related Articles:
What You Need to Put Up Your Own voIP Business
Selling Cheap VoIP Won't Make You Money
Tip for VoIP Businesses: Know The Difference Between Hosted PBX and Hosted LEC

There are many VoIP services that purport to be the best and/or the cheapest VoIP around; and, in some ways, they’ve been successful in selling this image to the public. How else can you explain the immense popularity of Vonage and MagicJack? True though, Vonage has earned its slot in VoIP “royalty.” It is a pioneering company and has paved the way for the rest of us. This, however, does not make it the best one around. The company has dubious billing practices, which make them a not-so-cheap VoIP alternative. MagicJack, on the otherhand, did a wonderful marketing innovation with its USB device and configuration – kudos for that! However, as many have found out, there are disadvantages to using the device; some of which negate the “savings” from using it.

Clearly, these may not be the best VoIP services around. There are more alternatives available; albeit, these are less popular than Vonage and MagicJack. All that’s necessary for consumers and prospective resellers is to look beyond “rock-bottom” list prices and see where real savings come from.

The Real Price for a Vonage VoIP Service
Even when they market Vonage as one of the cheapest VoIP services, a quick look at the bill will tell you otherwise.

You’ve got your basic VoIP fee, which is unsurprisingly low. Yet again, you also have “odd” fees, such as the Enhanced 411 fee and the Regulatory, Compliance and Intellectual Property fee. You normally won’t find similar fees with other VoIP service providers. These significantly up the rate that you pay regularly.

Of course, you will only get to see this bill if you pay for some upgrades to the systems that you already have in place. Your broadband connection should average between 90 and 200 kbps. You should also get Vonage branded routers or adapters. This sums up to a quite a lot for an initial fee.

There is a 30-day money back guarantee, just in case you change your mind about your VoIP services. When you do, you will need quite an amount of patience when you make that toll-free call just to cancel. Wait time averages at 30 minutes. In case you go beyond the 30-day guarantee and before you hit your second year with the service, prepare to pay a cancellation fee.

The Not-So Amazing MagicJack
On paper, the MagicJack seems like an amazing contraption. Here, you have a simple-looking USB device that you can get for free for the first year (following years carry a $19.99 fee).  You plug it in and then you can make free calls to the US and Canada, and free international calls to other MagicJack users worldwide. That’s great, right?

But then again, you will need to contend with so much ads whenever you log in to use the service. There’s also a policy where MagicJack can mine and analyze the numbers that you call. This will then allow them to push targeted ads your way. Such practice is intrusive, to say the least.

Do not forget too that your computer has to be on all the time if you want to use your MagicJack. This is a great inconvenience. Computer usage cost can also sum up to quite a lot.

Real Savings for the Best VoIP Services
Real savings from the best VoIP services rarely come with the lowest price. It is practically impossible to offer good to great VoIP services without going over the rock-bottom pricing of the popular VoIP service providers. There are so much technology and systems investments necessary when it comes to VoIPs. A Vonage-like pricing will actually doom a VoIP into bankruptcy; that is, of course, unless they resort to “other fees.”

Real savings from the best VoIP services come with a mid-range to high-range pricing. You see your savings only once you’ve gotten set up and actually used the service. If you are a user/consumer, you may get more mobility. Your computer need not be turned on. Minute fees are smaller; and there are no hidden fees. If you are into reselling the service, you’d probably find it easier to sell a solid VoIP service even when this does not carry the lowest price tag. Performance keeps customers more than claims of lowest pricing.

Related Articles:
Vonage VoIP Just Raised Their Price without Raising Their Price AGAIN!
Even Vonage VoIP Can't Compete with Vonage VoIP
Why You Should Never Call VoIP "VoIP"

Several prospective resellers, and even a curious employee or two have asked how much it takes to put your own VoIP business. By this, I mean setting up the hardware and software, management systems and the other tangible investments necessary. What sounds like a simple question is actually not.

You see, to get set up as a reseller of a good-quality wholesale VoIP company, you only need $5,000 maximum. To set up your own, you need at least 100X that amount.

To start your own VoIP business from scratch, you need to set up several systems. For instance, just to service two customers, you need at least two trunking sources and a system to manage these in terms of their rating, routing and fail-over capacities. When you set these up, you should do so such that you can track trunk failures to specific destinations.

Then, you would need a system to manage end user connections. Alongside this, if you want to service residential clients, you need a system that automatically configures and reconfigures ATAs in the field.

And, of course, your VoIP phone service needs features that, at least, match the features that traditional phone users have gotten used to. So, you will need a feature controller system and voice mail services for end users. You also need to set up call waiting three-way calling, call forwarding and the like. These features require extra systems, or feature servers/ class 5 switches.

You will also need user interfaces or control panels where your users can set up/configure these features. You need databases for this and full-featured web servers that can back all this up. Plus, you should have switching systems in place that can be controlled via database or direct web APIs.

On the customer service side, you should have a technical support system, billing platform with recurring and extra billing capabilities, merchant account and fraud monitoring systems. Your fraud monitoring system should be extra reliable. Inept fraud monitoring exposes your clients’ data to online scams and even terrorism.

To do all this, you need at least: two database servers, two web servers, two session border controllers, two class 4 switch servers, two class 5 switch servers, two voicemail servers, and a redundant network-accessible mass storage system for voicemail. And these are only for a maximum of 2,000 users. You need more hardware if you want to serve more users.

Some have argued that the software component in VoIPs shouldn’t cost as much – what with all the free software available. The truth is these free software end up being more expensive. For one thing, all free PBX software can’t be used for residential users. You need different software for that. Plus, these free software need a session border controller; otherwise, they won’t be effective. Even the plain old asterisk needs dialplans to actually do things. You will need some capital to have those developed.

When it comes to softswitches, there are cheap options. You can find some within the range of $5,000 to $30,000. However, these are designed as “call shops” or “dial-around.” They are unsuitable for end-user dial tone delivery. The least you have to pay for when it comes to switches strong enough to serve real end users starts at around $65,000. Prices differ according to their capabilities and load. Those with features for real end user service start at $150,000.

Adding all this up, it’s clear why many entrepreneurs just turn to wholesale VoIP providers. You won’t need a humongous amount of money. It’s easy to get set up. And, you can follow through with your marketing plan right away.

Related Articles:
Selling Cheap VoIP Won't Make You Money
What is the Best Codec Formula For VoIP Businesses
Tip for VoIP Businesses: Know The Difference Between Hosted PBX and Hosted LEC

It’s a mistake that even the big guns of VoIP make. They peg the prices so low such that, in the long run, they turn to compromise one way or another. For a company such as Vonage, they mask their real pricing with “hidden fees.” In reality, their prices are not low, and border more on the mid-range level. Another way to sustain cheap VoIP rates is to offer low-quality service. Initially, a company may earn a quick buck through signups. In time, however, their clients will realize how much their service is not even worth its price and abandon them for other service providers. In the end, if you sell VoIP cheap, you might just end up turning off customers, and failing to recoup your investments and making a decent profit.

Always, the key to surviving the competitive VoIP industry is to offer good – if not great – VoIP services for a reasonable price.  Consumers are a discerning lot, especially during these hard times. They look for value for money – not just at what’s on your price tag.

Pricing Your VoIP Services

When you get into the VoIP industry as a service provider, one of your major considerations is the cost for acquiring customers. Basically, your marketing plan has to focus on convincing residential and business traditional phone users to switch to digital.

And definitely, the low-quality VoIP service from cheap VoIP providers won’t convince anyone. These days, traditional phones are seen more as convenience. Mobile phones have become the primary means of communication. It follows that a VoIP service should, at least, match the services of traditional phone providers. Degradation, in this respect, will only lead customers to ditch non-mobile phones (that's traditional and VoIP) totally. If you are a VoIP reseller, it is important to get with a good wholesale VoIP provider. This way, you cover the service quality aspect of your marketing efforts.

The rest are the frills that go with any marketing plan. You spend on advertising, PR work and customer support. When you do, the ideal is to be doing it for a product worthy of the overhead costs. Then, you mark up the prices a little bit for a little profit.

While you end up with pricing that’s a little higher than others, you will have a more solid and more marketable product. You end up getting the customers that all businesses want – those who value quality and don’t mind paying a little more for it.

Related Articles:
What You Need to Put Up Your Own VoIP Business
Which VoIP Service Is Not Worth Paying For
Why You Should Never Call VoIP "VoIP"

The Vonage spin masters have done it again. I don't know about you but I am in awe at how their Marketing group can turn what to me is a price increase into a ummm...

The E911 and 411 services are basic. And, a change of name for Regulatory and Compliance Fee necessitates a fifty cents increase? Where did that come from? From the Intellectual Property fee that's a charge for what?

Now, I don't mean to diss Vonage (yet again). It is our industry's pioneering company. But let's face it: no  one likes "hidden fees." And this extra dollar they are charging me now is so much like a hidden fee.

Why don't they just call a price increase a price in crease. I'm sure, loyal clients will understand this as a necessity in this struggling economy. Plus, legions of people like me will appreciate some straightforwardness.

From: Vonage Customer Care [mailto:VonageCustomerCare@services.vonage.com] 
Sent: Monday, April 12, 2010 10:28 PM
To: Steve Jackson
Subject: Important Information About Your Vonage Account

Related Articles:
Even Vonage VoIP Can't Compete with Vonage VoIP
Real Saving From VoIP Service Providers
Which VoIP Service Is Not Worth Paying For

This is actually more of the same roller coaster that we’ve already seen in the endlessly bureaucratic market.  Regulated?  Deregulated?  Tariff?  What?  Even the big guys don’t know what their lobbying dollars will buy them next week or next year.

http://www.telecompetitor.com/verizon-promotes-naked-dsl-for-20month/

SVJ

Related Articles:
VoIP is Out; ISLE is IN
Vonage VoIP Just Raised Their Price without Raising Their Price AGAIN!
Even Vonage VoIP Can't Compete with Vonage VoIP

THIS IS A MUST-READ IF YOU ARE SHOPPING FOR WHOLESALE VOIP SERVICES!!!

Some thoughts after reviewing our latest internal switching semantics for codec selection:

As a marketer, your eyes might start to cross when a guy you suspect of being some kind of cyborg starts talking to you about “audio codecs”.  First, let me give you the quick explanation of what a codec is and what it does for you.  (Don’t worry, it’s simpler than you might think.)  In every form of VoIP, an analog voice conversation is converted into a digital format suitable for the Internet.  The “codec” is like the decoder ring that turns the analog audio into the Internet-ready digital audio.  It’s that simple.  If you want to get slightly more specific, it goes like this:  Analog (voltage based) audio from a microphone is converted to “pulse code modulation” (PCM) which is the simplest form of digital audio as found on familiar things like Compact Discs.  But this format is uncompressed and rather uncomfortably large for transmission over the Internet.  So the codec takes PCM as an input to a formula that compresses it in various ways with the output being the final Internet-ready form.

But again, why would a marketer care about this?  Audio is audio right?  Let the propeller heads sort all that out right?  The answer to that is simple and deadly:  As a branded reseller, your biggest and perhaps only expense is the cost of customer acquisition.  If the customer doesn’t stick around long enough to cover that cost, you’re losing money.  Hear this loud and clear:  USING THE WRONG CODEC MODEL WILL CAUSE CUSTOMERS TO LEAVE. Wake up in the middle of the night in a cold sweat with the voice of Vincent Price echoing in your head:  USING THE WRONG CODEC MODEL WILL CAUSE CUSTOMERS TO LEAVE. As you’re sipping your coffee tomorrow morning, utter it aloud: USING THE WRONG CODEC MODEL WILL CAUSE CUSTOMERS TO LEAVE. Get the picture?  Stay with me and I’ll explain how it will do this.

(Not to beat a dead horse, but remember that the customer doesn’t know any more about what a “codec” is than you did before you started reading this article.  What’s more, they neither want to know nor should they be expected to know.  Your customer is after one thing:  good phone service.  The rest is what you’re supposed to provide in exchange for their money.)

So here’s the meat of this article:  The audio codec is one of the cornerstones of the customer experience. If the codec compresses the audio quality until it sounds like an old cassette tape that’s been played too many times (the “GSM” codec for instance), the customer will most likely be annoyed into eventually switching to a service that someone they know uses who reports that they don’t have that problem.  If the audio quality is super-high, but using a codec that doesn’t compress much (the “uLaw” aka “711u” codec for instance), the customer will experience “jitter” (just like a skipping CD) rather often with the same end result.  But don’t worry – there IS a working formula:  the g729 codec.  Its audio quality is much better than a cell phone and the compression is intense making it very resistant to jitter.  Overall, users who talk on g729 report the highest satisfaction rating.

So if you just make sure your VoIP wholesaler uses the g729 codec everything will be fine right?  You must’ve guessed that was a trick question because knowing the best conversational codec is the tip of a very large iceberg.  This iceberg can sink your ship if your wholesaler doesn’t have a very deep understanding of how the codec can get “tangled up” in the mix of analog converter boxes, software-based phones, dial-up devices (like satellite receivers, TiVos, and fax machines), and transmission to all the various telco end-points with which they exchange calls.

Being brushed aside when asked how they handle customers with TiVo will quickly point out a disaster in the making.  Being told that only the ulaw codec is used is even worse.  Another acid test is the simple question, “Can my customer designate a phone number as being used for faxes only?”  If the answer is that this isn’t necessary or that something called “T38″ is going to save the day, again, beware the disaster just ahead.   Also, since you’re serving the end consumer, you’ll want to ask if your prospective wholesaler “transcodes” when necessary, meaning that their switch can convert from one codec to another on the fly.  You’ll also want to ask what they do to avoid it, because transcoding also costs quality and could noticeably increase delay.  To avoid transcoding, they should actively control end user codec selection and attempt to pass that selection on to the telco at the other end of the call.  They should tell you about dial prefixes available for dial-up devices and the technical support department’s procedure for setting the codec associated with each customer account.  One last tip:  If you have to explain any of this to a prospective wholesaler, you don’t need to consider them a serious option because bad performance is a bad deal at any price.

SVJ

Related Articles:
Tip for VoIP Businesses: Know The Difference Between Hosted PBX and Hosted LEC
Federal Excise Tax and VoIP
What You Need to Put Up Your Own VoIP Business

In a recent conversation, I spoke to a person who was convinced that VoIP was a good way to expand her current fixed-wireless ISP business.   She had done a lot of research and was somewhat confused by all the options, especially where start-up costs are concerned.   We consider the start-up costs for our resellers to be almost unreasonably low because they are designed as an expense reimbursement rather than a revenue source and considering the demand, maybe we’re leaving some money on the table.  But in the range of options discovered by my caller, we are on the high end and she was understandably interested in the reason for this.

As she guided me through some of the options she had considered, a trend emerged that explained everything.  As it turns out, when running a search for “branded voip” on most of the major search engines, a lot of the results are for what really amounts to a hosted PBX.  There are many open source and commercial packages out there that offer the ability to brand a PBX (usually Asterisk or FreePBX-based) and even offer things like “call shops”, calling cards, and phone extensions on the hosted software.  Service is usually, but not always based on some kind of mark-up model and there is often no clear statement about ownership of the customer (can you guess what that means?).  They tend not to talk about regulatory issues at all because they expect all of their customers to fly under the radar of the Feds.  If you’re trying to make a little cash on the side, a lot of these operations offer little or no start-up costs (and little or no customer service), so they might be just the thing for you if you’re trying to sell calling cards to your coworks down at the mill during lunch breaks.

As the conversation went on about the kind of end user experience she would find acceptable, it became clear that the hosted PBX was not for her.  She has a reputation to consider with existing customers and really needs to be more than just a “call shop”.  She needs to add phone company capabilities to her wireless ISP to present her customers with a stable, valuable, and marketable proposition as a diversified communications company.  She needs all of the features, support structures, and systems to BE a phone company.  In short, she needs to be vLEC.  After walking through this exercise of predicting the end user experience, she realized that there were many components that she had not previously considered required to present the desired phone company image including customer interfaces, support standards, and regulatory compliance.  At the end of it all, she wasn’t jumping for joy that it cost more than she had hoped, but she did at least know what she was getting for that money was well worth it.

SVJ

Related Articles:
Federal Excise Tax and VoIP
Shopping Tips for VoIP Wholesale Service Providers
What is the Best Codec Formula For VoIP Businesses

In the midst of all the consumer confusion over exactly what the term “VoIP” means, it has become important for the simple sake of accuracy to seek a new term for the type of service some replacement phone service providers (including us) offer.  Until someone comes up with a better idea, we are going with the term “ISLE” for “Internet Subscriber Line Exchange”.  A “subscriber line” is the traditional term for the pair of wires used by the wire-line provider to connect the end user to the local central office.  Our use of the term points out that our service is simply a replacement for those exclusively owned wires and the uncompetitive pricing they bring.

An ISLE customer’s conversation leaves the Internet once it arrives at our central office and becomes traffic on the fiercely competitive PSTN interchange market.  This creates savings for the end consumer not by trying to cut the PSTN out of the equation, but by simply allowing the consumer to bypass the part of the wire-line phone company’s monopoly that even government regulation was never able to control.  This not only provides a much higher quality call, but it also eliminates the business risks of trying to skirt government regulation of inter- and intra-state communications.  This consideration has proven to be critical by the lack of profits in companies like Vongage who invested heavily in customer acquisition only to find their revenue models inadequate in the face of the eventual regulatory consequences.

SVJ

Related Articles:
Shopping Tips for VoIP Wholesale Service Providers
What You Need to Put Up Your Own VoIP Business
Selling Cheap VoIP Won't Make You Money

The following is a hot-off-the-press “friendly little notice” from Vonage to customers about an increase in prices.  Of course they aren’t calling it an increase in prices.  Instead they’re renaming and increasing some of their not-really-regulatory charges.  I don’t blame them for charging the 911 fee separately because it IS in fact required by law.  But the “Regulatory and Compliance Fee” is absolutely ridiculous.  The cost of privacy and identity theft are known to every other business on Earth as part of the plain old “cost of doing business”.  I guess if you’ve staked everything on your rock bottom prices and just can’t stop losing money, you get to call it something else.

As I’ve said many times, I appreciate the trail-blazing that Vonage has done on behalf of the technology and the industry.  BUT some of that trail blazing has come in the form of proof that pricing yourself out of business and then trying to make it up by lying to customers in plain sight is not a profitable business model.

SVJ

Their actual email to customers:

(Vonage Logo)

Re: Account # 1234567890

Dear (Customer Name),

At Vonage, we’re committed to providing our valued customers with the best experience possible through meaningful updates to our services. To ensure that we continue to deliver top-notch service and quality, we will modify two of our existing fees as follows:

The Emergency 911 Cost Recovery will become the Emergency 911 Service Fee, which ensures we maintain nationwide E911 service in compliance with FCC regulations. Our customers’ safety in an emergency is our primary concern and this update allows us to continue delivering reliable emergency services.

The Regulatory Recovery Fee will become the Regulatory and Compliance Fee, which covers our regulatory-related and legal compliance expenses. For example, this fee pays for charges associated with benefits like procedures to ensure customer privacy, identity theft protection measures and phone number porting.

These fees will each increase from $0.99 to $1.49, effective July 15, 2009. This change allows Vonage to maintain our commitment to safety, innovation and customer service.

If you have any questions, call 1-VONAGE-HELP and speak to a customer service representative. We’re always available, 24 hours a day, everyday.

Thank you for your business,

Vonage

Related Articles:
Vonage VoIP Just Raised Their Price without Raising Their Price AGAIN!
Selling Cheap VoIP Won't Make You Money
Shopping Tips for VoIP Wholesale Service Providers