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The VoIP Challenge

What makes a great phone company?

For a telephone service to be truly great, it needs to meet the following criteria:

  • Carrier-grade call quality
  • High Reliability
  • Global Footprint
  • Highly Configurable
  • Fully Managed Service

The Telephony Landscape

There are several kinds of phone providers: fixed-line (PSTN), cellular/mobile, consumer grade, commercial grade and "boutique". We discuss each of them below.

Fixed-line (PSTN)

In the past you went with the big PSTN ( public swtiched telephone network) company because there was no choice. The PSTN consisted of physical lines connecting every telephone set. Telephone companies achieved better service, efficiencies and economies of scale when operated as public utilities, much as the water and electric utilites. That was the theory, anyway. Telephone carriers have traditionally enjoyed monopoly status, whether government operated or privately held.

The quality of the telephone monopolies varied from the abysmal to the great. Japan, for instance, has enjoyed some of the finest quality of telephone service even when compared to Canada or the USA but at a relatively high price. Yet, in other parts of the world, especially in developing countries, the phone lines are so poorly maintained that you say a prayer before checking for dial tone. Regardless of price, in much of the industrialised world, we have taken high quality of service for granted.

With the deregulation of the PSTN monopolies, there is no longer the assurance of the kind of quality we once took for granted with the fixed-line service providers. These companies face competitive pressures to lower their prices, but aren't necessarily able to maintain the high quality of service that came from higher spending on infrastructure maintenance. At to that the competition from the cellular/mobile operators and, more recently, from the more agile Internet-age companies.

When you don't have a strong competitive advantage, a common pricing strategy is "bundling"; That is, the real cost of the service is obfuscated by combining features inside fixed-pricing packages. When you actually do the math, you find that there is really no cost savings in these bundles and there is actually very little difference in price/value between competitors.

The cellular/mobile carriers

Many of the issues facing the PSTN carriers are also true of the Cellular/mobile carriers tool. The have a high infrastructure maintenance cost and increasing competition from new wireless carriers and from alternative technologies such as VoIP over Wi-Fi.

Mobile carriers also resort to bundling to project the illusion of value. It is only with the advent of tablet computers that mobile carriers are now being forced to unbundle their data packet plans from their primary phone service. This can only serve to accelerate the adaption of VoIP services piggybacking on their infrastructure.

Consumer-grade VoIP companies

In the VoIP (Voice over Internet Protocol) arena, there are some early entry companies that have a well established markets and grown their brands into the consumer consciousness. These companies face the same price-vs-quality challenges as the PSTN and Mobile operators and have modelled their marketing after the big PSTNs and mobile carriers. In the consumer marketplace there is a strong competitive pressure to offer lower pricing. This is often means lower quality of service.

Business or commercial service providers

When large enterprises build out their telephone systems it is still common for them to do so through the traditional PSTN telephone carriers. Gradually, that market is being encroached by B2B telephony providers. Regardless of the provider, there is a significant amount of hardware involved, from the desktop telephone sets, paging and security systems, to the telephone switching systems themselves, usually in the form of a physical PBX (private branch exchange) or similar on-site telephone equipment.

Boutique service providers

The boutique service providers are interesting for couple of reasons: First, they provide a level of customer service that the above "big three" can't match. This is one of the competitive advantages enjoyed by smaller companies that embrace "lean" and "agile" business practises. The second is that Internet telephony in general has grown up. Thanks in part to deregulation, these boutique service providers have access to the same infrastructure as the all of the larger organisations.

There is still a wide latitude in how they are differentiating themselves. Some are opting for the bundling model and some are opting for more customer choice. The problem with offering choice is that the largely non-technical customers still view telephony the same way their grandparent did—you pick up the phone, "dial" a number and talk to the other party. They understand basic features like "call waiting" and "three-way calling" but beyond that, they don't care to know what the more advanced features do.

The challenge of the boutique service providers is educating the customer on the benefits of any feature that would enhance their business.

The Hardfocus Challenge

Before going into the Internet telephone business, we wanted to be able to meet the high standards our clients have grown to love for our Web Hosting and other Network Services. We've been watching the VoIP landscape evolve for the past 15 years waiting for the right moment to jump in. That moment has arrived.

We have made some policy decisions that affect our strategic market position:

  • We do not to offer "economy" call routing, opting instead for the slightly higher cost "carrier-grade" routing.
  • When there was a tradeoff between features and stability, we opted for stability.
  • We avoid the table d'hôte or prix fix model of creating feature bundles. Instead our services are à la carte, which means you can pick and choose the features or functionality you want. Charges are based on our real costs of providing the service, and not some illusionary one based on perceived value.. That does of course mean that we need to spend more time with the clients demonstrating to them how features translate into benefits for their organisations.

Ultimately, we feel that we have a good entry into the market with a stable, rock-solid product, excellent call quality as a fully managed service.