LCR vs. VoIP in the spotlight again

Huge Telecom CEO, James Herbst has defended least cost routing (LCR) as a business model, and believes that Voice over Internet Protocol (VoIP) will come under threat following the launch of LCR AnyNet, from mobile operator Cell C.

Alan Knott-Craig, Cell C CEO says that LCR AnyNet will reduce the cost of telecommunications for business and will bring down the barrier to entry for small businesses hoping to take advantage of least cost routing.

He notes that small businesses have previously been excluded from the benefits of LCR, due to the high monthly subscription rates associated with the service.

LCR AnyNet will cost a minimum of R150 per SIM per month and will provide a flat-rate of 99c across mobile networks and 60c to fixed-line networks. Cell C has put in place a specific activation process that will ensure the best quality of service to the customer.

Huge’s Herbst says that over the past few years many industry commentators have questioned his company’s go-it-alone strategy of sticking to fixed cellular routing (FCR), the technology solution originally used to deliver LCR.

It followed a mass exodus of LCR industry participants to VoIP strategies, including Nashua Mobile, Vox Telecom and Altech Autopage – once three of the four largest LCR Service Providers in the market.

Herbst has come under fire in the last few years for not jumping on the VoIP bandwagon and instead single-mindedly pursuing a strategy of Fixed Cellular Routing (FCR) – but Herbst says that Huge Telecom’s decision to ignore the populist approach, and focus rather on sound underlying principles and basic market rules of economics, has paid off.

“We have consistently maintained that market forces will drive down wholesale cellular prices to a point where they are on a par with or better than wholesale fixed-line prices. Quite simply, in Africa, cellular technology is the hero of the present and the way of the future,” he said.

Herbst has argued that providing VoIP over legacy fixed-lines provided nothing more than a false sense of security, and that the wireless last mile provided by the mobile network operators – being Cell C, MTN and Vodacom – would prove to be the most appropriate technology infrastructure option to deliver sustainable corporate telephony solutions in South Africa.

“We concluded a new supply agreement with a mobile operator last year that significantly increased our viability in the market for fixed cellular routing solutions,” the CEO said. “The pricing was right and the wholesale structure of the agreement allowed us to benefit from falling termination rates, as was intended by the regulator.”

However, Cell C’s new offering may logically lead one to question whether Huge Telecom’s contrarian strategy, which has by default now given it a first-to-market position, has been eroded by Cell C’s new offering.

“Absolutely not,” said Herbst. “In fact we believe that Huge Telecom is in an incredibly strong position with Cell C and other mobile operators, because, unlike the VoIP proponents, Huge Telecom deliberately chose not to build its own network to try and compete with the incumbent telecom operators.”

“Indeed, as an operator Cell C may well see the likes of Vox, Nashua, Internet Solutions, and Autopage as competitors at the operator level, whereas we believe that Huge Telecom is far better positioned to partner meaningfully with the mobile networks because of its pure service provider, rather than aspirant network operator, status,” he added.

Huge believes that, while Cell C is the first-to-market in this latest iteration of the corporate telecoms saga in South Africa, rivals in MTN and Vodacom will want to follow suit. “I think that we are about to see a wholesale price war in the corporate telephony voice market,” Herbst suggested.

The group points out that a wholesale price war between the telecom operators will serve to drive down wholesale input costs for service providers and will bring a corresponding upward swing in fortunes for the likes of Huge Telecom.

Herbst confides that one of the key reasons Huge Telecom never pursued a VoIP strategy, besides their belief that mobile was the way of the future, was because he never understood how the small albeit aspirant new telecom operators could attempt to take on the incumbent major operators in SA.

“Mobile operators in South Africa control more than 90% of voice termination. To back any other horse, or worse, to try and breed a new horse when the race started decades ago, just seemed like madness to us,” he concluded.

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LCR vs. VoIP in the spotlight again