How to sell VoIP in South Africa

Miro IP Convergence Conference, 2 August 2011, Vodacom World, Midrand

 

Transcript of presentation by Mr Mohammad Patel, CEO, O-Tel Telecom

Thank you to Miro for allowing me the opportunity to share my views and experience in this conference. Good to see many familiar names and faces. And finally meeting with many clients where we can now put a face to a name.   I’m Mohammad Patel, CEO of O-Tel Telecom. We provide VoIP and Broadband Infrastructure-as-a-Service, catering to WISPs, ISPs, IT, and PBX Companies nationwide. I sit on the executive board of WAPA, alongside Henk Kleyhans, our chairman and other prominent industry members.   Today, we will cover : HOW TO SELL VoIP IN SOUTHERN AFRICAN MARKET?! Needless to say that the outlook of VoIP has somewhat changed dramatically over the past 2 years. You will find it has become easier to approach clients with the technology. I’m not going to touch on the benefits of VoIP as Greg has already covered this section very well. I think people have a pretty good understanding of VoIP. They've done their homework. The public is now more aware and more confident to use the technology. To upgrade is inevitable. I will focus on how to change the negatives into positives when approaching clients. <<to better understand my audience, if you could please by show of a raised hand tell me who is already providing VoIP services to customers?>>   Despite the great benefits, there's still a lot of caution. People want to ensure their Service Providers can deliver good voice quality. After all, communications is the life blood of any business. An hour of downtime can wreak havoc within an organization. The biggest challenge in South Africa, amongst others, is the Last Mile Backhaul Connection from your client to the VoIP server.

 "communications is the life blood of any business"

1.     ADSL Connection Problem Predominantly, SIP is channeled via ADSL as it is the most cost effective and widely covered broadband connection available in the country. However, with South Africa’s over contended ADSL service, it is often the cause for a deal to fall through. DSL speeds at month end is horrendously slow, causing speech pattern breaks and call cutting. Rainy season also causes problems as the underground cabling in certain areas cause much noise and bad connection. I mean you must ensure that your customers understand that if their Internet connection goes down, the phone doesn't work. If the power goes out, and there's no UPS on the router, the phone doesn't work. Better to not get 10 customers because they're concerned with it up front than to lose one loudmouth because he doesn't get it, blames you for everything, and then tells all his friends and customers that your service sucks. This can be very detrimental for WISPs in smaller towns. Solutions Various methods can be used to backhaul using ADSL. 1-    Use an MPLS network to route the VoIP traffic. Keep the SIP Packets away from the internet where it can pick up noise. 2-    Avoid using ISPs ADSL accounts, whether Local Only, standard capped, or uncapped accounts. Try to setup a VPN. 3-    Wireless Internet Service Providers (WISPs) can aggregate their clients end connection to a central point and backhaul the data via multiple Load-Balanced ADSL lines to the main VoIP Switch. This has proven to stabilize the VoIP Packet transmission. 4-    Ensure these ADSL accounts connected to your wireless backhaul are channeled via an IPC or MPLS. Quality of Service settings are very important. 5-    If the clients budget allows for it, always aim for a stable Leased Line installation. Diginet is the most common, but in certain areas, Fibre is also a viable option. Alternatively there is an alternate private Leased Line over Copper service available at nearly half the price that of Diginet. Contact me afterwards for more info on this.

Ideally, Commercial VoIP is NOT to be run over the internet.

2.     ADSL Redundancy Problem The most common question is whether the VoIP lines will be down if the ADSL line is non-operational.   Solutions The answer is quite simple. Firstly, if the copper cabling is stolen in the area, it is most likely that the Telkom voice lines in the area are also down. VoIP telephony does offer a redundancy feature. a)     You may set the SIP account to forward all calls to a Cellular Phone if the account is detected as inactive/not registered. b)    You may also establish a wireless/3G connection to the SIP Server which is used in the event of ADSL downtime. You can offer both these facilities as additional benefits, or at a cost. 3.     Airtime profit Problem As much as it is very beneficial to have lower inter-connect rates, which delights the public and allows smaller players to compete, the downside is that your margins shrink. The larger players have lowered the call rates, hence reducing margins even further. <<I would like to run a very brief live poll on “Quality of services or low price?” Which do you think is a better approach for growing your business and appealing to a larger set of customers as well as retaining them: a) a properly marketed, fully-featured solution with quality support for a mid-level price, or b) offering the cheapest solution on the market/in your region. Who votes for A?............and B >>     Solution 3.1      Packaging a)     The good thing is that all the voice network providers now play in the same park.

"The Creative Packaging of Services is key to make profit."

b)    When you look at adding VoIP to your bundle of services , package the service with a good balance between your customers needs and your profitability. c)     If you are giving low call rates, make up the lower income with charging higher line rental, or get a higher monthly airtime commitment. d)    For Wireless Internet Service Providers, bundle a VoIP account with your Internet service. Ensure you enable Quality of Service on the clients CPE. e)     Study how the Cellular Companies package their Plans. It’s a good guide on how to ensure profitability. f)      Do not try to compete on price because you'll lose. Think of all the advantages in dealing with YOU, and punt that. Set a price that you will be comfortable and happy with.

"After all, you’re not running a charity organisation."

g)     I would recommend deciding on your selling points: are you selling low price, premium service, top-notch support? Is the offering local, regional, nationwide? Who are your competitors? What do you offer that they don't? These may be ideas to start with.   3.2      Calculating Cost a)  Infrastructure- If you are running your own servers and transiting via a larger VoIP provider, the     cost of the call is not the only item when calculating your cost price. Your servers hosting, maintenance, licensing, and client support must be factored into your cost. Don't forget that technology infrastructure is not the only hurdle. Marketing is costly too. b)  Free Calling- One very important point I always advise our partners is that

"when enticing clients with ‘FREE CALLING’, there has to be ‘Terms and Conditions’ and ‘Fair Use Policy’ that apply."

After all, the client is using your network and resources for that call, so it is costing you money. Hence you need to limit that free calling by including a ‘limit’ in the free minutes. Example: Free 200 on-net minutes.   3.3      Charging Plans The Core of VoIP service. Billing plans has to be calibrated in such a way that it is sustainable in order to provide value to your subscribers while maintaining high service levels. You should classify your clients into 3 groups. a)  Residential users: This group consists of residence and home office. Due to the low monthly call billing, the recurring income should be set on the line rental income. You could offer certain amount of airtime within the monthly rental. If client under-uses it, it’s an added bonus to you. The billing mechanism should be set as per minute. Hardware should be included in offerings to this group. b)   Small to Medium Enterprises- A higher line rental should be set here. Package them into 2 or 5 concurrent calls. Set the billing to Per Second from the 31^st Second, so you have a minimum connection fee of 30 seconds. Include some airtime in the package, with carry over for unused credit. c)   Large Enterprise and Corporate-  This group can be sensitive to call rates. So you can bill per second, although the ‘per second from 31^st second is the First Prize’. Due to higher volumes in call billing, it somewhat makes up for the thin layer in a call plan. However, opportunity should be taken here to sign up a Phone Maintenance plan, or even better, a Hosted PBX Facility, which can be very juicy at this level. Look at the Pyramid, the largest profit potential is the per minute billing model, with the 30 second minimum coming in next, and very little for per second. Ultimately, your focus should be on building up your recurring income channel. You need to think long term, how wil you support the client is you’re making no money off him?! With the inter-connect call rate dropping in 2012 and 2013, the margins will surely shrink.

"You need to sow the seeds now to reap the rewards in 2 years time."

Whilst your competitors are stressing on their shrinking profits and increasing expenses, you are in comfy zone as your main source of income is not affected by the lowering call rates.

"Client habit will not change in making more calls because it is now cheaper."

   4.     Conversion from Analog to Digital Problem Changing to Telephone 2.0 is a stressful transition for clients who are not well acquainted with the technology. They are aware that it is a major change, and they welcome it, but they do not want any downtime. When porting the number to Digital, a popular myth is that the company will be without phones for a week! This is obviously untrue. Solution Phase Transition On the first visit to the client after he’s signed and paid his deposit, you walk in with a plan. It's how to get installed and up and running. The number one unspoken objection to VoIP is the fear that installation will be highly disruptive, a huge burden for somebody. So we tell them, “on day one we'll do this, on day two we'll do that, and on day three it's done. We'll show how the switch over happens at night and if you want us to, we'll take the old stuff away., No downtime!" It is strongly recommended that you have a project manager well trained in deployments. The experience he has will save many hours of installation in future deployment. Whilst you’re deploying, try a couple of times to sign up a maintenance contract at the client.

"Most clients believe that they’ve become a master of 21st century telecommunications after attending

the Google Search University."

The fact of the matter is that some customers cannot tell the difference between problems on their network and problems on your network. So many times, you fix the problem on their network. They'll call up angry, but you just take the abuse and proceed to make them look good.   There are many other ways to sell VoIP. I’ve listed what I feel is the most important points. Your customers understanding of the technology and your profitability upkeep is vital to provide a long term service. Sure, competition will always be there, but after a hundred years, Mercedes Benz is still doing brisk business, despite Kia having a car which offers all the bells and whistles which the Benz has.   That’s all we have time for folks, I’ll be available for a chat later if you have any questions.   Thank you.