Price versus features: what is the real selling point?

Quality, price, features and markets were the points of emphasis in a discussion on the deployment of Voice over IP (VoIP) at VON Canada in Toronto last week. "You can’t come at assuming that better-than-cell-phone service is acceptable," said Matt Stein, VP new technology and services for Primus Telecommunications Canada Inc. "It has to be PSTN quality today." Quality, however, was the most agreed upon point by the panel. While Stein feels the features and capabilities of VoIP make it a natural for the business market, president and CEO of Toronto-based Comwave Telecom Yuval Barzakay disagreed. "VoIP for business is a tricky road," he said. "With mission-critical conversations you can’t afford to have garble and chop on the phone." On the other hand, Barzakay feels IP telephony is a natural fit for the residential market, especially to be used as a second line for teenagers, the home office or a fax machine. A lower-priced standard service makes it ideal for a secondary voice service, which raises the much debated issue of selling VoIP minutes based on price or on features. "Our customers are always telling us it’s about price," he said. "The question is, if you’re looking to get into the Voice over IP business now, what’s your starting price going to be?" Countering, Stein feels that VoIP service, and selling it, is all about the non-POTS features like hold music, out-of-market secondary numbers, call logs and voice mail through a portal, and find-me follow-me, to name a few. He said that once toll-quality access is established on VoIP lines, differentiation is achieved by constantly adding new options. "If we only compete with price, we know where that game goes," said Stein. Stein’s proof comes from Primus’ sales figures: only about 10% of customers order Primus’ value basic bundle – standard home phone service for $15.95 a month – while the rest opt for a more expensive package bundled with features. But according to Barzakay, bundles are where features go to die. He said that in Comwave’s search for the next big feature, everything that is brought before the marketing department just ends up being bundled in with the service, where they have a use. "How do we keep customers?" Barzakay asked. "We package more features into the goody bag." Andrew Hurrell, director of marketing for VoIP software provider Atreus Systems, told Network Letter in an interview that feature capabilities have another application. He said that carriers can customize their features depending on the market they are entering, loading up if they are going in against an established player, or scaling back in regions where they already have a dominant position. As for business versus residential, Hurrell says Atreus started out exclusively as a provider of VoIP solutions for business but in the past six months its sales have been split 50/50 between the two sectors. President and CEO of Shift Networks Inc. Trent Johnsen provided the middle ground, agreeing that features are for retention, though his firm provides VoIP services through a browser interface strictly to business customers. He said the convenience of VoIP helps sell the service because ordering a new business line from a telco is a two-week process. (For more on Shift and its business model, refer to the March 15, 2006 issue of Network Letter.) A strategy sometimes employed by Shift’s sales staff is to ask a potential client to call the telephone company to order a new business line, then setting up a new line through the Shift browser before the client is taken off hold. As far as features go, Johnsen said he’ll occasionally walk through the office asking staff how many speed dials they have programmed through their browser to their phone, and invariably more than a few people will answer zero. Barzakay concurred saying that Comwave has customers who have features that they don’t use, but keep the features anyway and stay with the company, proving there is value simply in availability. Johnsen said the overall value of Voice over IP, beyond just targeting business or residential customers, has yet to be seen. "Much the same way that the Internet took us by surprise by the end of the 90s, IP telephony will have an even bigger impact," he said. "There’s something very, very significant going on… and we’re enjoying it." He’s excited about a technology that allows a company the size of Shift – 28 employees – to offer richer services than telcos employing 10,000 people. "These technologies are not about replicating 20th century technologies… dramatically changes the business of being a business telephone provider," Johnsen continued. While there’s sure to be more innovation over time, the valuable capabilities of VoIP technology are already apparent. For instance, the nature of IP communications allow providers to monitor service to a specific home or business, so instead of calling the provider when your connection is bothersome, the provider can call you. As part of Comwave’s proactive monitoring, Barzakay said they’ll call mission-critical businesses right away if they see a problem with the service, and will email customers in instances of slow degradation. Sometimes the problem could be as simple as a family member installing a new piece of hardware into a home network. But for infrastructure-based issues, Primus’ Stein says they will call the network provider for that area, sometimes forcing direct competitors to work together to restore quality.

Price versus features: what is the real selling point?

News | April 12, 2006

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