Industry Voices: Unbundling the bundle

By Kevin Breault, Vice President Sales and Business Development, Dash Carrier Services

In today's marketplace, buying of wholesale services are more often than not, acquired as a 'bundled' offering.  For example, one such bundle could include the DID, E911, UC features, and actual minutes. 

When VoIP first hit the scene, all of the aforementioned services were purchased separately, as the technologies did not exist in an available format to provision all the services from the same vendor.  SIP dramatically changed the landscape and enables service providers to deliver what I referred to earlier as a "bundle". 

The benefit of the bundle is obvious: simplicity of product delivery through a single provider.  Until now, that method has been an effective model driving VoIP growth. But as competition grows increasingly fierce, buying habits change, and new services become more readily available. As such, the pricing model must change in parallel with the changes in the market.

"Because of the ubiquity of VoIP and the Internet, enterprises are able to save money by buying from a larger array of service providers directly rather than through ‘bundling' intermediaries, said Micah Singer, CEO, VoIP Logic.  "Several of the over 100 service providers who use VoIP Logic for Managed Services are beginning to sell ‘wholesale' services directly to the enterprise."

The downside of the bundle is the profit lost before the end-subscriber makes his or her first call.  This margin ranges from as low as 10 percent to as much as 50 percent. For providers to remain competitive, this lost margin must be recouped to ensure continued market penetration. In addition, as all providers make the move to converged IP communications, per minute rates continue to fall, reating more opportunities to recoup costs.

Unbundling the bundle for wholesale services is a clear necessity: better margins, more pricing flexibility, and better positioning from which to offer other high-margin applications.  In addition, service providers will need to place more emphasis on back office applications and accurate billing - an area most have avoided in the past.