The next step with regards to long distance is FREE

by Jeff Wiener on December 7, 2009

Picture 34Over the course of the last week I have had a few conversations with clients and suppliers about the corporate long distance market and have come to the conclusion that the rates have probably reached the bottom of the market. The next step with regards to long distance is FREE.

We signed a new customer onto a carriers PRI service last week. Rather then the carrier dictate the customer’s long distance rate, which has been the normal course, this carrier asked me what the customer’s long distance rate should be. Although I replied back to the carrier with a rate of 2.3 cents / minute, I’m wondering what he would have said had I told him 1.7 cents / minute. A conversation with the same carrier the week before left me with the impression that he really didn’t care. His flippant attitude toward the LD market made me realize that it’s almost a loss leader. After adding in the processing fees, billing, collection, stamp … there was so little margin and profit in that business that the next step with regards to long distance is FREE.

Then, last Friday I was discussing a legal client’s PRI renewal rate. At the conclusion of the call I asked him about long distance – he suggested that the amount had become so insignificant that their firm had stopped billing clients for long distance calls. It was taking more effort for the staff to look up the account codes, and administratively more work then they were collecting that they had recently realized that their was no point in processing invoices to clients for LD rates.

A mid sized downtown Toronto law firm not billing clients back for long distance fees ? Now you know the long distance market is nearly dead !

When I first entered Telecom in 1991 long distance rates were a big discussion point with clients, and at $0.25 / minute for long distance there was good reason for customer’s to shop around. I remember the first drop from $0.25 to $0.20 / minute – quite significant. Then 18, 15, 10, 5, and now 2.1 cents per minute where it’s been for a couple of years. At 2.1 cents the business has become so eroded that unless the client is doing MANY thousands of minutes / month there isn’t much profit after processing and billing. And with VoIP, Skype, SIP trunking, multi site connectivity … customer and carrier apathy toward rates, I’m quite certain that we’ve reached the bottom of the market with regards to rates, and the next step with regards to rates is FREE.

Yes, the carriers will throw LD in as part of the line rate. Some small carriers are already doing this. The larger ones (Bell Canada, Allstream, Telus, AT&T, Verizon) will raise their PRI and line rates slightly and include North American LD as part of the package. I’m figuring you will see this some time in the next two years. And you know we’re almost there because no one really cares.

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