VoIP or VoHype?

Most of them know the acronym, and many will already be able to churn out facts about the latest new technology... that it will be the convergence path of the future, that one day all phones will be IP-based, that IP roaming will be available over wireless networks, that IP will find you wherever you are in the world... and all this for a nominal fee - say the price of an imported beer.

VoIP is the undoubtedly the future, and its got a much stronger case now that Telkom has legalised it. But we are not in the future, this is SA today, and today VoIP is more VoHYPE, than real cost-saving.

Getting VoIP'ed

VoIP will certainly save some companies money, but before everyone scrambles to get "VoIP'ed", they should ask a few questions, which stack up the costs against the savings.

The first is about bandwidth. Bandwidth costs money. To use VoIP successfully, companies need bandwidth that is good, clean, plentiful, and delivers consistent quality, with extra capacity. Unfortunately in SA bandwidth is exorbitantly expensive, by international standards, and very few companies have spare capacity. This means buying extra, which is normally done on a long-term contract. Typically the cost to guarantee a reliable service will be around R200 per month per VoIP channel.

Then there is the hardware, including VoIP routers, and possibly new or upgraded data routing equipment as well. If the equipment has to be written off in a year, which is the wisest policy for high-tech stuff, even the cheapest routers will come in at R50 a month for each VoIP channel. VoIP savings come, broadly speaking, from bypassing the Telkom charges for initiating and terminating the call. All clever stuff but there is no way of avoiding the cost of the VoIP channel needed to make the call, at least R250 per channel month for the party making the call - and here is the hidden bit - the same for the party receiving the call.

It is possible to launch long distance (national and international) calls via IP, and terminate them locally at their destination through the regular telephone network - at roughly the cost of a local call, plus the VoIP provider's profit. It will result in savings on international calls from SA, but not on national calls within SA. This is because the current Telkom rates differential between local and national calls is only 33% for the first minute or part thereof - leaving very little margin to pay for data lines and equipment amortization. Next year Telkom will continue to reduce the gap between local and national call charges - to the extent where national VoIP may well become more expensive, unless the cost of bandwidth reduces significantly.

Other costs, although individually insignificant, will mount up and these
include: