The Kolmisoft team is back from the International Telecoms Week (ITW) in Atlanta, USA. The conference is one of the most important events for the telecommunications industry, with more than 7,000 attendees (2,000+ companies) from more than 135 countries.
We had many productive meetings with both current and potential partners during the three days of the show.
A wide variety of companies were present, offering different types of products, services and solutions, but in general ITW is mainly dedicated to those in the wholesale transit business. So it’s natural that the majority of the attendees are companies that buy or sell voice traffic at a wholesale level.
Each year we ask the same question: “How’s your business doing?”
And each year we get the same answer: “Wholesale traffic is going down.”
Despite this, we see the same familiar faces at ITW, who, despite all the challenges, are able to sustain themselves in this competitive market.
We think it’s natural that margins in wholesale business are tight (just 1–3%): the competition is high and traffic is reducing. There’s not much value you can add to calls because if we consider call termination as a product, there are just three main factors: price, quality and payment terms.
Want to get a better quality? Interconnect with a Tier 1 carrier. But the thing is that they won’t give you a really good price and their payment terms won’t be flexible. And there’s a big chance that they won’t even speak to you if you are just a small player. So most probably you’ll end up dealing with a Tier 2 or Tier 3 carrier, who aggregate traffic and are able to offer a better rate and more flexible payment terms. That creates a chain of carriers, where all parties need to split the profit margin.
Despite all this, probably the two most important elements in wholesale business are relations and trust. We’ve met many people who operate one-man-companies and have worked in this business for 20 years. They all look relaxed and they come to ITW just to maintain their relationships.
Now let’s get back to the previously mentioned challenge.
If voice traffic is going down and margins are tight, what are the alternatives?
We’ve noticed that many wholesale carriers have either started, or are considering starting, SMS transit services. A lot of corporations like Facebook and Google are sending millions of SMS messages for notifications or confirmations. Moreover, plenty of companies are using SMS messaging for marketing purposes. That’s a good opportunity for small transit providers to diversify their income and reduce dependence on voice business.
Another interesting thing that we’ve noticed is that not all businesses are price sensitive. We’ve met many clients who work in a specific niche, e.g., they provide different services (including voice-related, such as SIP trunking, DIDs, etc.) to 4- and 5-star hotels, embassies or other companies. Their clients don’t really care about call price because that’s only a tiny percentage of their operating expenses. What they care about is that it should work perfectly, with no issues.
Providers that operate in a certain niche are more successful than those that operate within a worldwide voice transit market and deal with other providers.
These are just a few of the insights that we took from ITW. In the future we’ll try to share more content about VoIP business. Hope you find it all useful!
Kolmisoft would like to thank everyone who has placed their trust in our products, services and team.
Do not hesitate to contact us at info@kolmisoft.com. We will be happy to answer all of your questions.
We hope to meet you at the following conferences and exhibitions:
- Africa 2019 GCCM – Cape Town, 10-11 November
- Asia 2020 GCCM – Singapore, 10-11 March
Finally, I’d love to hear your thoughts.
What trends do you see in your own telecom market?
Is VoIP business increasing or decreasing in your opinion?