Voice over IP may be cheap, but there are other ways of reducing long-distance costs

A major driving force behind voice over Internet Protocol (VoIP) has been the ability to bypass long-distance tolls on the public switched telephone network.

But Charles Zwebner, founder, president and CEO of Yak Communications Inc., says his company rarely uses VoIP to route customers’ calls.

Yak customers access lower long-distance rates by entering a dial-around number.

Zwebner recently spoke with C&N about the ways in which Yak routes calls to the least-cost provider, and his predictions of the future of business telecom service.

C&N: Can you give some details on the technology that Yak uses to find the least-cost routes?

CZ: When a person dials a code, the call is then routed to our switch. We have three Harris circuit-based switches. We will then switch and route that call through one of several long-distance suppliers depending on the least-cost route. We will create billable records and give it back to the carrier for collection. We do essentially no voice over IP routing right now. We have not been satisfied with the quality to date, although that is beginning to change. We have purchased a next-generation switch, a SanteraOne switch from Tekelec. It will allow us to, first of all, increase capacity. Right now, the Harris switches are 10,000 ports per switch. The new switches go to 200,000 ports. The SanteraOne switch can handle both traditional telephony and also VoIP telephony. With the deployment of the switch we will be able to mix and match traffic, whether it’s traditional traffic or VoIP. We will also bring in carriers that will promise us some quality VoIP. In North America, we don’t have the advantage of VoIP from a costing point of view. If you have your own network, you’re routing traffic at such a minimal cost, it really doesn’t make sense to use VoIP. Yes we can do it at low cost, but we’re going to lose the quality. I believe the quality of VoIP is getting there. It’s close to being there, but definitely over the last two or three years it hasn’t been there.

C&N: What sort of factors go into the cost? For example, Cuba is $1.49 a minute. Norway is 12 cents a minute.

CZ: It’s the amount of bandwidth into the countries, it’s the number of providers in the countries and the kind of systems. You take Europe. You’re talking about tons and tons of fibre going from New York to the U.K. You’ve also got a lot of suppliers going from the United States into the U.K. Therefore, it’s highly, highly competitive. They are highly, highly developed systems — state-of-the- art technology and the price is really low. But when you talk about Cuba, there are limited lines, and everyone’s fighting for those lines. There’s a bit of a monopoly there, and they set the price.

C&N: Can you comment in general on the long-distance rates and what effect they’re having on the industry?

CZ: Ten years ago, when the rates were 51 cents and the carriers had all the traffic, it was a cash cow for the incumbents. The trend has been to take that rate down, so it’s gone from 51 cents down to five. It’s somewhere near the bottom, if it hasn’t bottomed out. And that has caused the revenue base of the large carriers to erode. What they’ve had to do is wake up and say, ‘Where else are we going to create a revenue base and make some money?’ and that has been in other technologies and products and services. That’s why you have localized, with feature-rich services — whether it’s three-way calling or call forwarding or call blocking or Caller ID. You’ve got Internet, you’ve got data. You’ve got everything else. They’ve had to create other technologies, and innovative products and services to replenish that revenue. They really haven’t been able to make money on those services and therefore there’s been so many problems in the telecom industry. However, it’s pretty much stabilized. Typically, in a deregulated market, you get 5,000 companies coming in, and in the end, 4,990 go bankrupt and you end up with 10 competitors and they piece out the marketplace — different products and services. It stabilizes, and you get choice. In the long run, consumers benefit from more products, more services more technology and cheaper rates.

C&N: Is there anything in the telecommunications industry that has taken you by surprise?

CZ: The only thing that really shocked me was the dot-com boom. You saw financial models that just didn’t make sense. You saw the investment community jumping into it like crazy. But otherwise, no, technology is evolving and I think it’s going to evolve further. I think there’s going to be a huge change, starting in 2004, and moving to 2005 and 2006 and 2007. We’re looking at that market right now, whereby you take an SME spender, which is about anywhere from $800 to $1,000. They have maybe 10 lines, they’ve got a PBX, call distribution, long-distance and toll-free, and they’ve got Internet access and a bunch of other services. They’ll soon see a single line of high-speed access coming into their premises. You’ve got local line service, long distance, call distribution and toll free. You may even have teleconferencing and Web conferencing. You’ve got your voicemail, e-mail and fax. The world is going to change a lot in the next two to three years.

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Jim Love, Chief Content Officer, IT World Canada

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