Connection Telecom announces monster rate cut

Customers of Connection Telecom, the cloud-based Telco, have made significant financial gains even before the new fiscal year got properly under way.

March 20, 2013

Customers of Connection Telecom, the cloud-based Telco, have made significant financial gains even before the new fiscal year got properly under way.

As of March the company is charging64c per minute for calls made to the major cellphone networks and 24c to Telkom numbers – roughly 34.9% less than when calling Telkom geographic numbers from Telkom PSTN lines, and 45.8% less than calling MTN and Vodacom from Telkom.

‘Interconnect’ relief
The news follows close on a cut in the industry’s regulated ‘interconnect rate’ –the maximum rate that Telco’s may charge others to connect their incoming calls. In March this rate fell from 56c/minute to 40c, prompting Connection Telecom to pass onto its customers in line with its business model to bring as much traffic of the business down to a zero rate/free.

The benefit accrues automatically to all its customers, regardless of contract term. By contrast, customers of other providers may have noticed smaller price cuts from their providers – or none at all, preferring to hold customers to pre-negotiated contract terms.

Free ‘on-net’ calls
Connection Telecom MD Dave Meintjes says the company’s business model of using voice grade industry-standard converged IP-based (Internet Protocol) networks allows it to offer the industry’s best call rates. Calls between branches of a customer and between customers utilising the hosted PBX are free and represent approximately 11% of all calls made from the approximately 20 000 phones supported by the various TELVIVA cloud based PBX installations. Voice-over-IP (VoIP) calls made over its own network are free, much like Skype’s VoIP calls.

But unlike Skype’s no-guarantees consumer offering, which is provided over the public Internet, Connection Telecom offers a carrier-grade business service, with built-in security, quality assurance and redundancy over private data networks.

The price advantage in free on-net calls (originating and terminating on the same network) is significant, as on-net calls make up about 11% of an enterprise’s phone calls, says Meintjes. “We believe in time this will double, as more people organise in zero-rated IP communities.”

Cheapest ‘off-net’ calls
Even off-net calls (to other networks those that you too much for) come in far below the incumbent Telcos’ rates. With calls to Telkom and the mobile networks making up easily 80% of an enterprise’s phone calls, Connection Telecom customers are in for an even bigger saving, says Meintjes.

“On average, our customers spending more than R 10 000 per month on their Total Telco bill save 25% of their telephony bill per month, just by switching,” he says.

Market prices are driven by price setting by the incumbent large Telco’s with significant market power – all of these incumbents are experiencing mature market growth and have internal stakeholder pressure to maintain and improve margins and one means of doing so are to increase the complexity of billing plans to obfuscate the fact that prices are still maintained at a too high level.

The penny drops
With the interconnect rate having dropped steadily over the past three years, the industry has been reluctant to follow with substantial decreases. “By now, the penny has dropped in the market,” Meintjes says. “People know they are being charged more than they should when there’s potential in the new world of IP to go much lower and still have great service.”

“We have seen the market adoption in the doubling of our business through the addition of for example customers like Ellerines, Old Mutual and Takealot.co.za.

Look to the future
The latest market research from BMI-T expects the hosted PBX market to grow between 4 and 8 times the current size in the next 4 years – the South African Market cloud based PBX penetration is still low at around 2% of total market compared to approximately 33% market penetration in the US market according to Infonetics research.

Market adoption is closely related to first world voice quality in the network access layer at affordable prices. Until affordable voice quality access layer is ubiquitous in South Africa it requires more effort in engineering in the network access layer to deliver a quality service.

Meintjes says business should tie up with future-proof IP communications providers. “Cloud-based telephony providers offer flexible provisioning of high-quality unified communications on a variety of end-points, whereas incumbent and purely on-site platforms give businesses no such freedom. Quite simply, IP is the future.”