Dialing up a bargain to cut telephone costs

Published In: The Australian Financial Review
Date Published: 9th September 2004
Author: Robin Robertson

It pays for business to shop around as telecommunication costs are expected to fall further, writes Robin Robertson. Competitive pressures are pushing the price of mobile calls down, so small to medium-sized enterprises can take advantage of the latest in telecommunications without paying top dollar.

New price plans are coming onto the market, offering SMEs mobile calls in bulk. They can now buy $199 worth of calls that the carrier values at $700.

In mid-August, Vodafone launched a multiuser, capped mobile bundle with no lock-in contracts for SMEs. This offers four options, starting with $199 (for an estimated $700 worth of calls) each month for a two to four-employee service, rising to $999 for $5000 worth of calls for businesses with two to 25 employees.

Telecommunications analyst Paul Budde says that voice-call charges are set to fall, one way or another. "Mobile phone companies are enticing people to make all their calls on the mobile network," he says.

"For instance, Hutchison started last year by offering unlimited calls for $90. Professional people can easily make this many calls. Hundreds of thousands took up that option.

"Vodaphone followed up only a few weeks ago when it announced its package of capped calls, mainly for the SME market. It is an innovative way of competing."

Of course, the other telcos are not about to let Vodaphone and Hutchison have it all their own way.

Budde says that Telstra has already indicated it will be offering a competitive deal too, and so will Optus.

"Up to now Optus was the leader in mobile growth and they will not sit back and let their competitors take over.

"Businesses are not using fixed lines as much as they once did. If a call is so cheap on the mobile phone, then that's what people will use."

One new technology that may have potential to offer substantial savings in landline phone bills is voice over the internet protocol (VoIP). You plug it into your telephone system or PABX, then route most of your telephone calls via the internet. You do not notice the difference as a user but you bypass the Telstra telephone network. The technology changes the voice into a computer application and on the other end reverts it to a normal voice, which comes through the telephone.

Budde says the technology saves costs but can be complicated.

"You might save 10 to 20 per cent, but it is not enough saving for the hassle."

The uptake of VoIP may be slow for now, but its time could come soon. The broadband network is spreading at an astonishing rate.

At the beginning of 2004, there were 500,000 customers connected to broadband. There are now more than 1 million, with 75,000 new customers signing up in the past month.

Budde says that VoIP can be delivered over broadband without the need of an extra access line. But there is still one obstacle: you need a new telephone number, and business people like to keep their telephone number as it is a vital link to their market.

"That will delay the introduction of VoIP. It will happen but it is coming much slower than we had anticipated," Budde says.

Further savings in phone bills can be found if an SME shops around. Certain carriers specialise in different parts of the market. Telstra has a strong hold on the fixed-line market, while others may not have the same reach but instead specialise in CBD-based businesses.

Expense Reduction Analysts director Graeme Cox recommends that SMEs talk to about five carriers. "A small firm of accountants with two or three partners would probably spend $30,000 to $50,000 per annum, and that includes rentals. Businesses which are larger probably have spends ranging from $100,000 to $500,000."

Cox says that all businesses have a unique mix of telecommunication needs. One business will only make local calls while others will be calling across

Australia. An export business would make heavy use of international calls.

Add the combination of mobile and fixed-line calls and this creates a profile that could be matched by one of the competing carriers.

Cox says: "If you are at the end of a two-year contract with a carrier and you are now taking a fresh look at the market, you will find that telephone prices are a lot cheaper than two years ago. Tele-communication prices are very volatile."

He says that carriers will still seek a contract. "They often invest money in switching a client across.

"They will make some concessions on installation fees. But for their investment they expect some loyalty in return.

"They will offer good prices but these may be conditional on a two-year contract."

Call charges are one aspect of the total bill, Cox says: "Typically, an SME would spend about 70 per cent of its total bill on calls and about 30 per cent on renting lines. Out of a $100,000 bill, $30,000 is for service equipment charges and these roll on, month after month, regardless of how many calls you make.

"If you have successfully cut down your call charges, the next thing is to look at your service equipment charges. You might actually be paying for more lines than you really need.

"It can happen when a business expands, spreading from two offices in one corner of the building to taking up the whole floor, and then the floor above and below. Telephone lines left by previous tenants may be still in place but not being used. Despite this, you still pay the line rental whether it is used or not."

He says that substantial savings can be made with a simple site audit: wander around the office and check that the number of telephone lines tally with the charges on the telephone bill.

On the line

* More than 1 million customers are connected to broadband.

* Small firms could spend as much as $50,000 a year on telecommunications.