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Everything You Need to Know about Recurring Costs, Purchase Usage When Selecting a DID Origination Provider
Addressing monthly recurring costs and non-recurring costs plays a huge role in selecting a DID origination provider, as going through this process will help you better analyze and determine the best service provider in the long run. Jason Tapolci, president at VoIP Innovations (News - Alert), walks us through this process of deciding how to purchase usage, identify monthly recurring costs (MRCs) and non-recurring costs (NRCs), and what to look for in a contract.
The first thing you need to do before selecting a service provider or a long-term partner is decide how you’ll be purchasing your usage services. Tapolci explains in a recent VoIP Innovations white paper, “Selecting a DID Origination Provider Part 2: Monthly Recurring Cost and Non-Recurring Costs,” that there are two ways to do this: by minute or by port. Simply put, per minute usage means you are billed for each minute of every call – or in other words, you pay for what you use. A per port model, on the other hand, requires you to determine the number of concurrent call attempts at peak hours and to purchase enough port to cover these calls, Tapolci adds. A commonly faced problem with the latter option is that if you purchase too many ports, you will waste valuable money, but if you purchase too little, then your end-users will receive busy signals (a definite “no-no”).
To help find a healthy balance, Tapolci suggests a three-step process. First, determine how you are selling or packaging your service to your end-users, then measure how much traffic you currently manage or have, and lastly, consider your experience in the telecommunications industry.
Typically, if you have more traffic and telecommunications experience, then you are more likely to better suit a per port model. Tapolci cautions that when buying per port, it is not financially responsible to purchase the same number of ports as end-user lines sold. “This is where managing your peak usage is very important and dollars can be lost or gained,” he says. “Typically more established and experienced organizations purchase service this way because they have people who manage port aggregation and bottom line costs. “
“A good rule of thumb to use when deciding on a per minute or per port model is this; if you average 5,000-10,000 minutes per port (total minutes/total ports), a per port model might work well. If your per port aggregation is less than 5,000 minutes per port, you may want to look into a per minute model.”
Once you have determined your model, you should then review and negotiate MRCs and NRCs, Tapolci insists. MRCs are typically associated with DIDs (local and toll-free) ports (usage), as well as 911 costs. These costs are set when you negotiate your agreement, and are billed to your account on a monthly basis, Tapolci comments, adding that “where you purchase from (ILEC, CLECs, or a wholesaler) and how much you are willing to commit to will determine the MRC for each item.”
Conversely, NRCs are typically associated with DID activation fees, such as local number port (LNP) fees, rogue 911 calls, capacity augment charges and port-out fees. “These are one-time charges but can add up quick if not managed tightly,” Tapolci warns.
Next comes the service provider’s agreement, or terms of service (TOS). “There are four main areas to keep a close eye on when negotiating an agreement; contract length, minimum commitment, contract renewal, and liability and indemnification,” writes Tapolci in the paper.
“The contract length is important, especially in our industry, due to the brisk pace of our industry. It may be best to negotiate a contract terms less than one-year. Any contractual agreement length greater than one year could pose to be a future threat. Most ILECs and CLECs will want at least one-year terms, if not three-years. Some wholesale providers, like VoIP Innovations, offer a month-to-month agreement giving their customers flexibility.”
In other words, the longer the contract, the greater the threat. This is also highlighted in another VoIP Innovations white paper, which lists long-term contracts as the number one challenge facing service providers. “In this economy, can you afford to be tied down to a supplier controller who is in complete control of your destiny?” the paper asks. I think it’s safe to say the answer to that is a big fat NO.
Some other tips regarding contracts are to keep in mind the importance of contract renewals and to not be overwhelmed by legalese, specifically focusing on the “liability” and “indemnification” clauses.
Stay tuned for the last part of this three-part series, where Tapolci will discuss service quality, customer service and account billing!
Edited by Jamie Epstein