Cost of calls

Feeling the pinch of South Africa's high telecommunications costs, local businesses are slowly but surely embracing voice over Internet Protocol (VOIP). Recent reports forecast the VOIP industry to experience a compound annual growth rate (CAGR) of 29% - particularly as VOIP adoption rises among small and medium enterprises (SMEs) - and the sector is expected to rake in amounts rising from $46 million in 2013 to $160 million in 2018.

Globally, the VOIP market is also on an upward trajectory. In its 2014 VOIP and Unified Communications (UC) Services and Subscribers report, Infonetics Research predicts revenue for VOIP services will reach $88 billion by 2018. According to the study, the global market for VOIP services brought in $68 million in revenue in 2013, which was an 8% gain over 2012 and subscriber growth was one of the reasons behind the steady development of VOIP around the world.

The fact that South Africans are increasingly opting for VOIP isn't surprising, says Mitchell Barker, founder and CEO of WhichVoIP.co.za, a directory Web site containing a comprehensive list of the country's top VOIP providers, because it is considerably more affordable. "By international standards, South Africans still pay too much for mobile calls. In a study conducted among 46 African countries in the middle of last year, South Africa was ranked 23rd when it came to the most affordable prepaid mobile products. Another international study ranked the country 117 out of 140," Barker says.

While the introduction of a second landline operator in SA has seen call tariffs drop over the past few years, South Africans still pay more for calls to other networks. It costs 43c during peak times for a local Telkom-to-Telkom call, and 19c during off-peak times. This cost rises to 65c for a national Telkom-to-Telkom call during peak times and 33c off-peak. Telkom-to-Neotel, however, costs 65c regardless of whether the call is during peak or off-peak periods, while a Neotel-to-Neotel call costs 17c for local calls and 43c for national calls.

"A landline to cellphone call is far more expensive, ranging from R1.09 per minute from Neotel to R1.17 from Telkom," says Barker. "Add to this the complexity when a client is calling a ShareCall, Maxicall or toll free number, in which case sometimes the person receiving the call is paying the exorbitant fee. There is also a company called Paytel.co.za, which runs a premium service where customers calling their numbers are actually charged over R2.80 per minute, which is about six times what they should be paying."

A study commissioned by Informa Telecoms and Media in July 2013 and also cited by local Web site MyBroadband, found smartphone users in SA spend on average US$31 (R321) per month on their mobile phone bills, since basic call costs can vary anywhere between 75c and R2.80 per minute, with data varying wildly between 3c and R2 per megabyte, depending on which operator and package had been selected.

"The other thing is that South Africa's cellular providers are notorious for having billing methods and contractual terms and conditions which can be extremely difficult to decipher," Barker says. "While choice is usually good for consumers, the plethora of package deals offered by the networks can leave consumers so confused and bewildered, they are often stuck with sky-high bills because they made a choice not best suited to their needs, like opting for SMS bundles when what they actually needed was more talk-time, etc."

VOIP is therefore often the most cost-efficient solution. However, the cost of a VOIP call is dependent on the cost of the data via which the call is being made. Last year, MTN warned its customers that they may be charged as much as R25 per MB if they use the cellular operator's network for VOIP calls.

Barker advises that business consumers looking for more reliability and stability, especially in terms of telecommunications pricing and billing, need to consider switching over to VOIP now. "Just as with mobile, there are several operators offering competitive deals and packages, but in this instance, it can be tailored to meet your business's specific needs. However, unlike South Africa's cell networks, the billing is straightforward. And unlike landline deployment, implementation of VOIP is swift," he says.

"The other great trait that VOIP has in common with cellular is that it offers users the same mobility and flexibility, since it allows you to port your existing landline numbers and retain them, even if you relocate to different offices, and allows for call forwarding to your mobile, so that you never miss an important call again, even if you're out on the road, or working away from the office."