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August 31, 2010

GCS Asks: Are Carriers Leaving Money on the Table?

By Brendan B. Read, Senior Contributing Editor


The evolution from TDM to VoIP arguably provides enormous benefits for carriers and customers alike. As carriers embrace and fully implement their “Next Generation Networks (News - Alert)” new services are being developed faster, costs for interconnecting with other carriers have plummeted to zero and these new technologies have continued to redefine what constitutes as telecommunications carrier networks. All of these realities have been great for the industry, but, as Mark Delaney, chief marketing officer, Global Convergence Solutions (GCS), argues, “the blade cuts both ways”. In particular, he says the adoption of VoIP as the standard technology has exposed carrier back-office systems that are completely anachronistic in today’s dynamic marketplace.  


“These outdated systems, and the management processes they support, are costing carriers thousands of dollars per day in negative margin, lost revenue and opportunity costs,” Delaney points out. “While those amounts are alarming, when you examine how carriers manage their business on a day-to-day basis, and how the industry has changed with the evolution of VoIP, its not surprising carriers are struggling to manage the new technology while attempting to maintain business control in this marketplace.”  

As a case in point, let’s take a closer look he says at the interexchange carrier wholesale marketplace. Today, because of the broad adoption of VoIP in carriers’ networks, carriers can easily interconnect with each other by simply adding an IP address to their SBC/softswitch/gateways, thereby completely eliminating the lengthy provisioning and physical interconnection periods that are artifacts of the past.   Carriers can now easily engage each other and begin sending traffic to each other in minutes, not days, like never before. 

This ease of interconnect has allowed reports Delaney, boutique wholesale terminators to enter the market and focus on offering specific regions of termination to the global inter-carrier marketplace. This has changed the wholesale marketplace in profound ways yet the back-office systems and processes that carriers use to generate revenues and margins on this traffic has not kept up with these advances in network technologies.  

“While carriers can interconnect to dozens or even hundreds of carriers when in the past they were lucky to have ten interconnects most don’t have an intelligent and useful way of managing these suppliers in any sustainable way,” says GCS’s (News - Alert) Delaney. “The rate decks they receive (which typically have more than 5,000 unique pricing breakouts; some U.S. domestic inter-carrier suppliers have rate decks that number over 1.5 million unique break-outs) were never conceived by the companies that built the carrier tools. The result is that carriers are leaving money on the table because they can’t maintain operational control at a level congruent to the speed at which the market is moving. 

“This is obviously an unsustainable model.”  

So, what’s a carrier to do? Well, unfortunately, the majority of carriers are, by and large, adopting the “ignore it and hope it doesn’t blow-up” approach to this business challenge, observes the GCS executive. Most of them even ones with the foresight to fully embrace VoIP are ignoring the problem and focusing on new products and services while “turning a blind eye to this problem and hope that it doesn’t get exposed because a multimillion dollar issue such as arbitrage or a dispute occurs.” Yet by adopting this what he calls “hope and pray” approach, carriers are leaving tens of thousands and potentially millions of dollars in lost margin, revenues and opportunity cost annually and exposed for even more.

“The reality is that the market is continuing to evolve at a blistering pace and the downward pressure on per call margin is sure to continue,” Delaney points out. “Carriers are eventually going to be forced to finally contend with this problem and the ones that wait too long to address it put themselves at risk of survival by avoiding pursuing solutions to this problem.”  

The inter-carrier marketplace has changed dramatically and success is no longer determined by the depth and breadth of network coverage, explains Delaney. It is now a combination of the network asset and the backoffice systems that carriers use to manage the network asset from both a network and business perspective that determine who will be successful in this marketplace going forward.   It is imperative he says that carriers begin to include their back-office systems as part of their network asset and, the truly successful ones, will look for ways to add these systems and processes into the category of “Competitive advantages”.  

GCS allows carriers to eliminate the problems carriers encounter on a day-to-day basis when they manage their “Next Gen Network” with legacy systems and processes.   The GCS Dynamic Route and Rate Management Solutions allow carriers to eliminate all constraints associated with interconnecting with carriers, determining real-time, optimized LCR (least-cost routing), rating and billing, alarming, and reporting: all those facets of carriers’ day-to-day operations that touch the network.

GCS claims their customers realize immediate margin benefits of 10 percent -15 percent which is astounding Delaney says “when you consider that margin in the wholesale interexchange marketplace is a single digit proposition at best.”

The GCS Dynamic Solutions suite generates this return he explains because the solutions allow carriers to easily route and rate calls to any carrier regardless of complexity of rate scheme or code break-outs. It prevents carriers from being arbitraged and ensures that the best route choice is made for every call based on cost, quality and type of call in real-time. Whether it’s a U.S. domestic based terminator offering 1.5 million unique code breakouts to a large international wholesale supplier, the GCS Dynamic Solutions suites ensures carriers make the best decision in real-time.

“In today’s hyper-competitive marketplace where technology is changing every day, it seems imperative that carriers not only embrace the technology that will enable their networks to service customers for the foreseeable future, but also, they need to examine how they manage their Next Generation Network investments to ensure they are maximizing these investments,” concludes Delaney.


Brendan B. Read is TMCnet’s Senior Contributing Editor. To read more of Brendan’s articles, please visit his columnist page.

Edited by Ed Silverstein


 
 
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