Clear Voice takes LCR bully boys to task - calls their tactics skulduggeries

The maturing VOIP market is going through a period of disarray and disruption as some of the bigger players - including listed companies that are still involved in the least cost routing (LCR) market - are allegedly using bullying tactics to force resellers to sell LCR minutes, rather then allowing them to focus on the more lucrative VOIP market.

These questionable tactics could sound the death knell for a number of resellers.

This is according to Felicity Menge, managing director of tier one VOIP specialist, Clear Voice, who said despite expected “consolidation and buyouts” in the VOIP market as the LCR market continues to lose steam, a number of the “big boys” are using bullying tactics to ensure their resellers still focus on LCR - even though this is a “moribund market”.

“Everyone knows that the LCR market is a dying market - and that it is having a negative impact on many LCR specialists, including listed companies. Most companies are regrouping, realising that the LCR market is on its way out, yet some of the biggest players - who still have a significant amount of money invested in LCR - are forcing their resellers to focus on LCR, including pushing them to sell premicells - the units that attach to PABXes and allow companies to make cellular-to-cellular phone calls at reduced rates.”

Menge said the attitude of some companies is “appalling and bordering on immoral. Some of our resellers are being pressurised by some larger players to stay committed to the LCR market, while they should really be refocusing on the growing VOIP market. This is placing a lot of pressure on VOIP resellers.”

She confirmed that “certain companies” had even threatened to pull the rug on their resellers if they did not sell LCR minutes by “taking back their databases”.

“This step would effectively destroy the reseller - potentially putting it out of business. I have it on good authority that this has already happened to one reseller in the market. These bully boy tactics are bringing the LCR and VOIP market into disrepute,” she said.

Although Menge was reluctant to name the companies guilty of what she called “bullying tactics”, she did say they were “well known, reputable companies - at least in the eyes of the consumer”.

She said some of the “larger players” are looking to acquire smaller companies in an endeavour to gain “their clientele and their minutes” in an effort to boost “deteriorating revenue in the LCR market sector”.

A number of listed companies, including the Huge Group and Vox Telecom, have been bemoaning the state of the LCR market, as the sector has been under severe strain since the interconnect rate was cut by Icasa.

Last year Vox was forced to impair R745 million in goodwill and intangible assets related to its acquisition of LCR specialist Orion Telecom. Since then, Vox Telecom has been working to convert its LCR clients onto its own network to offset what it believes is the looming decimation of LCR.

The LCR market was thrown into disarray when Icasa cut whole call termination rates - the fees the operators charge each other to carry calls onto their networks. Icasa reduced mobile termination rates to 73c/minute in March 2011, with further cuts on the cards for 2012 and 2013, taking the rate to just 40c/minute.

“We are seeing a lot of red being pencilled into balance sheets in the industry,” said Menge.

Daryn McMahon, business owner of Ditronics, specialising in VOIP and least cost routing - utilising the services of Clear Voice, and others - said: “The market is flooded with competition, which allows our clients to have more than one choice in SA, contributing to the overall reduction in cost, on all services, voice and data related.

“Ditronics as a whole focuses on the reduction of the monthly business expenditure, on voice and data, for all of our clientele. We have always aligned our products and services with reputable entities and believe that service is the only 'headline', which we focus on in general - without which business, of any type, would cease to exist.

“The 'controlee factor' that a lot of organisations are applying to their resellers is to be something of the past, whereby resellers, of a product or service, are realising that among all the competition, the most important part of their success in business is the relationship with their client/s - which creates an awareness for that entity, to protect their database.

“Over the last two decades, we have seen an association of many different products and services, from various companies - companies that have in fact started their businesses out of a garage and have grown considerably, accompanying a large portion of the market sector. The point of focus for these businesses is directly proportionate to service that we supply to our clients, no matter what size they are, or who they are, on the corporate ladder.

“Voice over Internet protocol is a here and now factor, and will be around for years to come, as the leading service for distribution of voice.

“At the end of it all, the customer should always know what he/she is buying into, and not be forced into signing lengthy contracts with possible service providers that may end up costing their business money, as opposed to saving money - which allows the client to control his/her own destiny.”