Interconnect Rates and our LCR - where to now?

We are inundated with requests for information and guidelines [from our clients and business partners alike] on what to do about the Interconnect Rates and our LCR. Many of our clients are sitting on the sidelines not making decisions because they don’t know what to do and the resulting loss in savings is punitive.

To make matters worse ICASA announced yesterday 1st Feb 2010, that they are not be accepting the proposal from the GSM networks and Interconnect rates are NOT coming down on the 1st March 2010 anymore [well for today this is the status quo anyway].

So what do you do about LCR in today’s telecoms landscape and how should your business be proceeding. Should your business leverage LCR or adopt a wait and see approach?

Here follows some guidelines on how to approach LCR and or any telecoms infrastructure for that matter –

1. Don’t renew any subscription based contracts for GSM LCR
a. There is no law stating that you cannot run month to month and all LCR service providers will allow you to run month to month
b. Subscription based LCR with a 24 month contract period is definitely not the way to go
i. As a minimum you want your business to be paying for calls made
ii. And you don’t want to be managing bundled minutes / SIM cards

2. The reality is that there is more choice in SA now with the arrival of Neotel and the VANS – meaning that Least Cost Routing of all call type’s – not just GSM – is important when it comes to containing teelcoms costs and probably always will be – especially
a. Regional
b. Inter branch - why carry costs on your MPLS if someone else will do it for R 0.15 and guarantee quality of service
i. Local, National and GSM; all these calls can now be routed cost effectively using LCR

3. Whilst price plays a big role in any RFP or procurement process; price alone cannot dictate your procurement strategy for telecoms. Business need should drive procurement strategy and price should play a role – i.e. what is the least cost route for my traffic taking my unique business need into account.
a. Market forces, Legislation and Quality of service [QoS] will dictate the right price for your unique business need
b. Buy in from all roles players on strategy is advisable
c. Ask your trusted suppliers / advisors what they think and what new “innovative” products they have available to you
d. Business needs change and therefore clarity is NB on –
i. Current Business Needs
ii. Future Business Needs

4. Ensure your commercial agreements with Service Providers provides you with a so called “technology catch fence” which is essentially an “out clause” in the contract stating that if the market moves and the service provider cannot match the service you can “get out of “ the contract -
a. This will give you and your management team the comfort levels you require to move forward knowing that if the markets move you are not tied into a long term contract
b. Most SP’s are currently joined at the hip in one way or another and when the market moves they will all move together / although we could see major changes with the new fiber networks and the competitive nature of SA’s telecoms market in 2010.

5. Whilst price is important so is -
a. Quality of service / voice quality
b. Optimised infrastructure – a “must have”.
i. So many businesses put LCR in place and don’t pay attention to the “overcapacity” issue; resulting in increased fixed monthly costs.
• Pay careful attention to Zero Billing assets
• Watch your concurrent calls analysis per site for the signs of overcapacity
• Reduce telecoms infrastructure requirements where possible
c. Service Level Agreements / response times / maintenance costs / roles and responsibility
d. Service Provider “Support Structures” such as customer service desks and operational support / project management
e. Redundancy of infrastructure / continuity of business – especially mission critical call centers / business processes / operational centers

6. The fact that you cannot squeeze SP’s until they have nothing left and then expect great service in return
a. Rather focus on great value and great service
b. There needs to balance
c. That’s why pricing only receives a 25% weighting in RFP’s we have been involved in

7. Critical business processes like – call centers / business processes / operational centers normally require redundancy
a. Redundancy should never be a price motivated decision
b. Rather savings extracted from telecoms initiatives need to pay for redundancy
i. i.e. more value for at a cheaper cost
c. User experience
i. Bad quality – bad experience for customer and employee alike
ii. Bad for business

8. Infrastructure
a. Optimised infrastructure is a “must have”. So many businesses put LCR in place and don’t pay attention to the “overcapacity” issue; resulting in increased fixed monthly costs.
i. Pay careful attention to Zero Billing assets
ii. Watch your concurrent calls analysis per site for the signs of overcapacity
iii. Reduce telecoms infrastructure requirements where possible
b. Watch the rental costs per line / port
c. “Minimum billing” versus managing “subscriptions bundles” and “rented ports “
i. Passes Risk of zero billing issue over to the SP / no longer your problem
ii. If the Service Provider carries only charges for calls and not to rent the port your business can
• drive down fixed costs
• invest in redundant options
• and save money

Waiting for the market to dictate policy and business need is not a good business practice. As a business one needs to have a plan. And DataRoom can help you formulate that plan. So get us involved in the areas where we can help you formulate a way forward and provide that much needed clarity that will enable you to make an informed decision.

There is no easy answer, but should you wish to maintain savings and or increase savings using LCR, there are no short cuts. You need to do the work before you make the call.

These are our thoughts / guidelines rather than rules and if you have any questions please pick up the phone and call us.

Peter Walsh
Cape Town
Feb 2010