[deacom]

Can someone give me some insight as to exactly how Vonage etc offer "unlimited" minutes per month?

It seems that ultimately they are paying a flat fee for each DID, and a per/minute rate for toll calling (albeit reduced by routing VoIP as long as possible).

So are they counting on the fact that subscriber usage will continue as normal, at 200 minutes of toll calling per month?

And what are their LD and DID rates given their volumes?

Thanks.

- ben

[PhoneBoy]

All providers that offer "unlimited" calling are playing a numbers game. Providers pay for outgoing and incoming minutes. They buy them in large quantities and thus get a good rate. The providers come up with a high estimate of how many incoming and outgoing minutes customers use in a month, where they tend on calling, etc, and charge accordingly. Since most people are using a number of minutes under their estimates, they make money. There are a few people that use over the average. The provider might lose money on that particular subscriber.

Many providers terms of service have excessive usage clauses to protect themselves from egregious losses.

[Cain]

Do the providers pay per minute on incoming calls to the telco or is it a connection fee regardless of call duration? I can see that there are bandwidth costs, but those should be minimal.

How can ipkall provide their free service? From what I heard they're getting paid for every incoming connection - is that true?

Another Q - if I get a DID from libretel will they lose money on me if I made 8000 inbound mins to that DID #? They charge only $6/mo!

[mberlant]

What we are discussing on this thread is called Revenue Settlement in the telecommunications business. Everyone who handles a call is entitled to be paid for providing their piece of the service.

Let's take, for example, a Long Distance call from Miami to IPKall in Washington. You pick up your Verizon phone and dial directly, using XYZ long distance company (your selected carrier) to carry the call. Your agreement with XYZ is to pay 5 cents per minute anywhere within the US, and they put their charges on your Verizon bill. You speak for 10 minutes, costing 50 cents.

You're already paying Verizon $6 per month for unlimited Long Distance access, so they don't get anything for actually transporting this call. They do get 3 cents for handling the billing for this call, though. A company in Seattle named International Telecom, Ltd., IPKall's telephone company, gets 10 cents from this call (1 cent per minute), and they have agreed to share it 50/50 with IPKall because IPKall takes ITL's service in bulk, relieving ITL of much of their workload. XYZ Long Distance still has to pay Sprint 1 cent per minute (10 cents) for carrying your call much of the distance between Miami and Seattle, so that leaves XYZ with 27 cents after paying everyone directly involved in handling your call.

There are, of course, many more variables that can come into play, but this is basically how IPKall can afford to offer DID for free and how Libretel won't likely lose money on your DID number. They're all betting that volume will be high enough to make the entire service worthwhile.

Being that VoIP companies are not Regulated they do not receive recip-comp (Settlement compensation).

VoIP companies pay by the minute for every incoming and outgoing call. The incoming rate is something less than the outgoine rate.

The outgoing rate is based on market tier, not how far you are calling. In other words it costs a VoIP company the same amount per minute, or close to it, to terminate a call in a tier 1 market regardless of this being next door to your house or across the country. Tier 2 markets are more expensive, and so on to tier 3.

Until tier 2 and 3 markets come WAY down in cost you will not see any VoIP companies with local DID's in those markets. To offer local DID's in these markets would not only cost more for the number, and much more for the interconnection, but more per minute for people to call their local friends.

The costs are not just transport, it is equipment, the interconnection between the VoIP company and the cLEC (Providing the VoIP company is facilities based), costs for the number, for provisioning, call setup, per minute transport, Broadband access, etc.

[PhoneBoy]

An excellent post! A small nit:

Originally Posted by mberlant

A company in Seattle named International Telecom, Ltd., IPKall's telephone company, gets 10 cents from this call (1 cent per minute), and they have agreed to share it 50/50 with IPKall because IPKall takes ITL's service in bulk, relieving ITL of much of their workload.

A whois on ipkall.com shows that the domain is owned by International Telecom LTD. ITL is a CLEC in Washington, so they definately get all their settlement costs.

Now if only they let me CHOOSE which part of 360 I could get my number in. I wouldn't mind having a Port Orchard DID, which I know they have numbers in (at least according to telco-data.us).

[mberlant]

I never did a whois on IPKall. I only pulled up the registration records for the NPA-NNX my IPKall number is in. Also, the numbers I used to illustrate the split are purely fictional for the purpose of illustrating how complicated a revenue settlement agreement can become. As complicated as this illustration is, international agreements are an order of magnitude more complicated.

My guess is that ITL chose to contribute numbers from Belfair Rate Center to IPKall simply because they had many available numbers in 360-227. They might have chosen Port Orchard Rate Center just as easily if 360-519 had been quieter at the moment. Now, does the 15 mile distance mean that Belfair is a Zone Call for you?

[PhoneBoy]

It was a good illustration, don't get me wrong.

Belfair is a local call for me, though I think it's on the outskirts of being a local call. Silverdale definately is, which is where I have one of my IPKall DIDs. The other DIDs I have are in Port Angeles and Bellingham, which are definately not local calls for me.

[mberlant]

Your information also makes sense. ITL can afford to give this service for free by spreading the wealth across all of their service points, taking a little from the excess capacity of each NXX. I guess you have to just keep checking until 519 pops up.

[PhoneBoy]

Heh, I just got a 360-227 number this time around. Cool.