More snakes than ladders?

The simple truth is that VOIP is just not viable as a cost-cutting solution in South Africa yet.

Bandwidth cost remains the single biggest inhibiting factor in SA. VOIP will only become truly cost-effective once bandwidth costs are low enough to be negligible in the total equation.

Yet, most people interested in VOIP cite cost-saving as a primary motivator. The early adopters in SA have almost all erred by judging savings against Telkom call charges, and VOIP providers all quote their savings against Telkom rates, because it makes their product look better.

But Telkom is not the competition: savings of around 40% are possible by making use of the alternate telephony routes that are already available, most well-known among which is fixed cellular.

One should distinguish between VOIP, least-cost routing (LCR) and fixed cellular. Fixed cellular is the process of initiating GSM calls directly on to GSM networks, using "fixed cellular" terminals. LCR is the broad term used to describe the total management of call traffic, directing calls via the cheapest available telephony route. Therefore fixed cellular and VOIP are simply "subsets of LCR".

Lots of snakes

Once you measure VOIP savings against the savings on existing, viable alternatives, some VOIP proposals can actually be a step backwards! Also, it is quite a complex implementation.

A VOIP installation involves a complex cohabitation of voice and data on your bandwidth, involving extra work for the IT department to manage bandwidth, services and quality of service, extra responsibilities and more equipment to buy and manage.

Compare this to currently available LCR techniques, where the LCR provider will generally install and manage everything, free of charge, with no impact on any other services such as data.

There are also costs to VOIP installations, often unquantifiable, which do not apply to other LCR routes. These include the costs of IT staff, additional bandwidth, network software and hardware upgrades, enhanced security requirements and configuration, capital purchase amortisations and the cost of managing and reconciling another supplier in the chain.

A lot of these costs are generally (and conveniently) left out of VOIP proposals.

Any ladders?

So what of the loud voices in the market singing the praises of VOIP? Not surprisingly, the main proponents of VOIP are the providers. Most technology-independent players, including the few true LCR providers, have been noticeably hesitant to recommend VOIP.

VOIP rates per minute look great on paper, but wait until you get your bill! Unexpected, sometimes higher costs are primarily caused by "billing increments". Most VOIP services are billed in units of 30 seconds, and some even in full round minutes! In contrast, Telkom, fixed cellular and some other LCR technologies bill per second, giving much lower costs at the same `perceived rate`.

Fixed cellular technology currently provides the most lucrative alternate telephone route to LCR operators, and the biggest savings to the client. Most VOIP operators have realised this and incorporated fixed cellular calls into their VOIP services.

This is nothing more than poorly disguised cross-subsidisation of VOIP. Apart from the practical inefficiencies of unnecessarily carrying traffic to a remote point via costly data bandwidth, the client also loses the distinct advantage of having Telkom-independent backup lines on site. All VOIP providers, when challenged to provide the client VOIP service at the advertised rates but excluding the cellular traffic, have so far refused!

There is no denying that despite all this, VOIP will make handsome savings on branch-to-branch calls and international calls if these form a large part of your total bill.

But the debate rages on over the viability of local and national calls, while sending cellular calls over VOIP is clearly not a good option.