admin0
03-01-2009, 09:10 AM
Hi,
Here is a brief regarding the inside of a VoIP Business for anyone interested.
VoIP Business can be classified into the following three types
VoIP Origination
VoIP Termination
VoIP Transit
A. VoIP Origination
In Origination, you generate the calls directly, meaning you print and distribute the calling cards or make customers directly (via web, calling-cards, direct contact to PCO's and cyber-cafes) If you are into voip origination, you need to have your own equipments like cisco, asterisk with digium cards and e1/t1 links from telco. As voip originator you convert the voice from PSTN to IP.
Reseller System
In VoIP, the most used model for reseller you find in the market today is the 3 level reseller system, we call it Reseller3, Reseller2 and Reseller1
The end users come under Reseller1, and depending on your software/billing the users may also appear directly below any of the resellers.
Reseller3 is almost always in postpaid
Reseller2 can be in postpaid or in prepaid, selected by the Reseller3,
Reseller1 can be in postpaid or in prepaid, selected by the Reseller2, but almost always are in prepaid.
End users are always in prepaid.
Note: The middle east is the biggest market for reseller based business
Billing Method
PrePaid:
In PrePaid Method, you add say $1000 to reseller3 and he can then add their customers and resellers upto $1000
PostPaid:
In Postpaid method, you add say $1000 to reseller3, but he in turn can add any number of resellers below him and provide them any amount.
This is like "OverSelling" feature in CPanel.
The billing system will have fields like CallsAmount and ClientsAmount; CallsAmount being the actual value of the payment and clientsamount being the amount that the reseller is given to create subresellers and accounts.
For example, when you put $1,000 as CallsAmount and $50,000 as ClientsAmount, the reseller can create sub-resellers and accounts for upto $50,000 ; and when the actual usage reaches $1,000, the calls stop and the top level reseller pays you some amount again for calls flow.
In prepaid method, since the reseller has to pay all beforehand, you hold the bulk of the $$, while in postpaid method, the reseller holds the bulk of the $$ and provides him an opportunity to grow.
Tariffs
Reseller have two types of billing features
Bonus
-> Reseller Pays you $1000 and you add $1400, 40% bonus to him. He will use the tariff and calls rate set by you. Depending on your market target, bonus are offered between 25%-60%.
Straight
-> You provide the reseller a fixed base rate, and the reseller will do his own markup, create new tariffs and then sell it to his resellers/customers.
Customers
Device Customers (cisco ata/sipura/linksys pap/voip phones)
Pc2Phone Customers (using a softphone via computer or mobile)
CallingCard/CallBack Customers
How is the money made?
Example: suppose you got a few hundred customers interested to call USA at your rate of $0.02 per minute, and they do a daily of say 20000 minutes a day to US.
Assuming your cost to USA would be $0.0015 per minute, you are making 0.005 every minute someone calls USA. At 20000 minutes a day, you are making 20000 x 0.005 = $100
5 mill or 0.005 is also sometimes referred unofficially as 5 pent.
some of the biggest voip networks will run billions of minutes per month. More established networks easily reach a few hundred million of minutes per month.
Then you search the net for people offering voip termination to usa and try to negotiate rate. If you get lucky and say you got a rate of $0.01, with your existing traffic, you make 20000 x 0.01 = 200 , a $100 more per day just from 1 destination. So in origination business, you are always trying to attract new customers in the frontend and keeping an eye for people doing voip termination to whom you can send your calls at a good rate, better than what you are getting.
As you see from the above example, when you are dealing with a few hundred thousands of calls in a day, a price difference of even 0.001 makes a lot of difference in your revenue.
Some of the biggest networks cross a billion minutes per month. For well established companies,they do it in millions. So when you come across transit companies (discussed below) offering their services at 0.00025 per minute, there is no need to wonder how they can survive on such a small amount. Even 0.00025 at volumes make a big amount.
As a voip originator, your minutes is your biggest asset :) The more you got, the more leverage you have to negotiate rate.
B. VoIP Termination
In Termination, you terminate the calls directly, meaning you setup equipments like cisco, quintum, channelbank, asterisk etc and convert IP based voice from voip originators to PSTN. VoIP termination is unlicensed or probihitted by law in most countries, so if you are doing it in a licensed country, you will be offering a white route, and if you are doing termination from an unlicensed country, you will be offering a grey route. If white route, since it would be legal, you would be using some form of an E1/T1 and will have the ability to offer CLI - Call Line Identification .. and you will be selling your routes as white route/cli route in the market. For unlicensed ones, its almost not possible to get a E1/T1, so you would be using quintum or asterisk and using analog lines from the telco.
Suppose you are in some country, example: india, nepal, bangladesh, pakistan etc and you got a call from the US, if your mobile displays the US number or private number, it means you are getting a call via a white/CLI route, and if it displays some local number, it means you are getting the call via a Grey Route.
Routes are just white and grey. There is no black route.
The money is made in the same way as origination. When you find say a client who is willing to pay you 0.01 per minute and send 100,000 minutes a day, you are making $1000 a month. Then you start to advertise your route and be on a lookout for someone who will be willing to pay you 0.0125 .. just 0.0025 more. [you can label your route as being superior or more stable or more clear etc] , and when you find that client, you just ask him to send calls to you. At 100,000 minutes a day, at 0.0025 increment, you are making an extra $250 per day
As a voip terminator, your acd,asr and pdd is your biggest asset, sometimes before the rates.
ACD -> Average Call Duration
ASR -> Average Success Ratio
PDD -> Post Dial Delay - The seconds it takes to get a ringtone after the number was dialed.
ACD - depends on destinations, the higher the better [white: minumum 4 minutes, grey: 1-5 minutes]
ASR - depends on destination, the higher the better [white: 35-50%, grey: 15-35% ]
PDD - the lower the better [white: 1-5 seconds; grey - 4-10 seconds]
ACD and ASR depends on a lot of factors, the country, the type of people calling, the time where most calls are active, if most calls were to landline or mobile phones, special events, weekends etc .. The number presented are just overall averages.
C. VoIP Transit
This is the most popular business out there in voip now a days. The way it works is simple and is simple to setup and operate. You take in calls from party1 and then send the calls to party2 with your margin in the middle. In this model, you do not have to have any equipments for origination or termination, and you are just the middleman. You are in the lookout for people selling routes (the voip terminators) and people looking for routes (voip originators). So you act as a voip terminator to the guy looking for route and offer your rates and act as a originator to the guy selling routes. Suppose you find that the averate rate for destinationA is 0.015 in the market. You happen to stumble upon a direct voip terminator offering the route at 0.013 but at 100,000 volume per day. You then start to advertise the route at 0.014 to various people so that you can cross the 100,000 minutes per day. Once you do the test and traffic is confirmed, you make your cut. Due to the technical nature of VoIP (Media Proxies), the IP does not get passed, so the real originator cannot trace where the call is eventually ending to, and the real terminator will not be able to find out from where the call originated.
For any VOIP call being completed, there could be N levels of transit in the middle.
Originator -> Transit1 -> Transit2 -> Transit3 -> ..... -> TransitN -> Terminator
Escrow Services
Cheating is very common on VoIP and if you are not careful, you might end up losing thousands of dollars in a single day. Suppose you are into origination or transit and you come across someone who is offering a very good rate. He might sound geniune and you have tested the routes and you find it OK. Now to actually start the service, he might ask for a payment beforehand. Now with just an email/irc or a phonecall, you would not know the interests of the other party, and you are reluctunt to send payment because you cannot just blindly trust. People have been cheated many times. You test the route and find it good, you send in the payment .. Once the amount is there, the guy disappears or the traiffic flows fora few days and it stops, and the other guy disappears with your amount. Similarly, you are into termination or transit and you come across someone who says he has 50,000 minutes and is ready to send you calls, but he might say he will pay you every 1 day or every 7 day or every 15 days but not beforehand. Its again a matter of trust. You might say OK for a post-payment and if he sends you 25,000 calls at average 0.10 cents destination,and then disappear, you end up losing $2500 in a single day. Also, you might want to pay via paypal and the other party might only accept western union or moneybookers.
To overcome all this, there are escrow services, who will transit the calls for you and they guarantee your payment. Usual service charges are 0.0025 per minute, and the buyer and seller can decide to pay 50% of each i.e 0.00125 each (1 cent might be the lowest you use in daily life, but margins like 0.00125 and 0.001 are common in voip calculation)
To use escrow, you usually create an account and deposit your payment to the escrow via paypal, credit-card or various other means. Then you ask the other guy to also creat an account and you just add the IP of the escrow. The escrow will take care of the internal routing. If you want to protect your IP address, this is also a safe bet. There are many escrows and a few turn out to be fraud also, while some are good too. The selection of escrow depends on the both party. You might want to go with one escrow while the other party may want in another one. So I will not be naming any escrow providers here. You can google.
D. Hardware/Software
For A# VoIP Originators and B# VoIP Terminators, due to the direct nature of interface with PSTN, a physical hardware is required that bridges PSNT to IP
For C# VoIP Transit -> Due to the nature of this, no physical hardware is required and all that is required is a softswitch, which ususally is a leased linux or windows server with the necessary software for signalling, media proxy and billing. MVTS (Mera VoIP Transit Softswitch - Linux/UNIX), VPS(VoipSwitch), VM(VoiceMaster), Asterisk, SER, GNUGK are the most popular softswitches used in the market today.
This concludes the part#1 of inside voip business which details on the business side of voip.
If there is a demand, I will put down a part#2 on the technical aspects of the business and how it works.
With good feedback and demand for information, this could be a multi-parts also.
Here is a brief regarding the inside of a VoIP Business for anyone interested.
VoIP Business can be classified into the following three types
VoIP Origination
VoIP Termination
VoIP Transit
A. VoIP Origination
In Origination, you generate the calls directly, meaning you print and distribute the calling cards or make customers directly (via web, calling-cards, direct contact to PCO's and cyber-cafes) If you are into voip origination, you need to have your own equipments like cisco, asterisk with digium cards and e1/t1 links from telco. As voip originator you convert the voice from PSTN to IP.
Reseller System
In VoIP, the most used model for reseller you find in the market today is the 3 level reseller system, we call it Reseller3, Reseller2 and Reseller1
The end users come under Reseller1, and depending on your software/billing the users may also appear directly below any of the resellers.
Reseller3 is almost always in postpaid
Reseller2 can be in postpaid or in prepaid, selected by the Reseller3,
Reseller1 can be in postpaid or in prepaid, selected by the Reseller2, but almost always are in prepaid.
End users are always in prepaid.
Note: The middle east is the biggest market for reseller based business
Billing Method
PrePaid:
In PrePaid Method, you add say $1000 to reseller3 and he can then add their customers and resellers upto $1000
PostPaid:
In Postpaid method, you add say $1000 to reseller3, but he in turn can add any number of resellers below him and provide them any amount.
This is like "OverSelling" feature in CPanel.
The billing system will have fields like CallsAmount and ClientsAmount; CallsAmount being the actual value of the payment and clientsamount being the amount that the reseller is given to create subresellers and accounts.
For example, when you put $1,000 as CallsAmount and $50,000 as ClientsAmount, the reseller can create sub-resellers and accounts for upto $50,000 ; and when the actual usage reaches $1,000, the calls stop and the top level reseller pays you some amount again for calls flow.
In prepaid method, since the reseller has to pay all beforehand, you hold the bulk of the $$, while in postpaid method, the reseller holds the bulk of the $$ and provides him an opportunity to grow.
Tariffs
Reseller have two types of billing features
Bonus
-> Reseller Pays you $1000 and you add $1400, 40% bonus to him. He will use the tariff and calls rate set by you. Depending on your market target, bonus are offered between 25%-60%.
Straight
-> You provide the reseller a fixed base rate, and the reseller will do his own markup, create new tariffs and then sell it to his resellers/customers.
Customers
Device Customers (cisco ata/sipura/linksys pap/voip phones)
Pc2Phone Customers (using a softphone via computer or mobile)
CallingCard/CallBack Customers
How is the money made?
Example: suppose you got a few hundred customers interested to call USA at your rate of $0.02 per minute, and they do a daily of say 20000 minutes a day to US.
Assuming your cost to USA would be $0.0015 per minute, you are making 0.005 every minute someone calls USA. At 20000 minutes a day, you are making 20000 x 0.005 = $100
5 mill or 0.005 is also sometimes referred unofficially as 5 pent.
some of the biggest voip networks will run billions of minutes per month. More established networks easily reach a few hundred million of minutes per month.
Then you search the net for people offering voip termination to usa and try to negotiate rate. If you get lucky and say you got a rate of $0.01, with your existing traffic, you make 20000 x 0.01 = 200 , a $100 more per day just from 1 destination. So in origination business, you are always trying to attract new customers in the frontend and keeping an eye for people doing voip termination to whom you can send your calls at a good rate, better than what you are getting.
As you see from the above example, when you are dealing with a few hundred thousands of calls in a day, a price difference of even 0.001 makes a lot of difference in your revenue.
Some of the biggest networks cross a billion minutes per month. For well established companies,they do it in millions. So when you come across transit companies (discussed below) offering their services at 0.00025 per minute, there is no need to wonder how they can survive on such a small amount. Even 0.00025 at volumes make a big amount.
As a voip originator, your minutes is your biggest asset :) The more you got, the more leverage you have to negotiate rate.
B. VoIP Termination
In Termination, you terminate the calls directly, meaning you setup equipments like cisco, quintum, channelbank, asterisk etc and convert IP based voice from voip originators to PSTN. VoIP termination is unlicensed or probihitted by law in most countries, so if you are doing it in a licensed country, you will be offering a white route, and if you are doing termination from an unlicensed country, you will be offering a grey route. If white route, since it would be legal, you would be using some form of an E1/T1 and will have the ability to offer CLI - Call Line Identification .. and you will be selling your routes as white route/cli route in the market. For unlicensed ones, its almost not possible to get a E1/T1, so you would be using quintum or asterisk and using analog lines from the telco.
Suppose you are in some country, example: india, nepal, bangladesh, pakistan etc and you got a call from the US, if your mobile displays the US number or private number, it means you are getting a call via a white/CLI route, and if it displays some local number, it means you are getting the call via a Grey Route.
Routes are just white and grey. There is no black route.
The money is made in the same way as origination. When you find say a client who is willing to pay you 0.01 per minute and send 100,000 minutes a day, you are making $1000 a month. Then you start to advertise your route and be on a lookout for someone who will be willing to pay you 0.0125 .. just 0.0025 more. [you can label your route as being superior or more stable or more clear etc] , and when you find that client, you just ask him to send calls to you. At 100,000 minutes a day, at 0.0025 increment, you are making an extra $250 per day
As a voip terminator, your acd,asr and pdd is your biggest asset, sometimes before the rates.
ACD -> Average Call Duration
ASR -> Average Success Ratio
PDD -> Post Dial Delay - The seconds it takes to get a ringtone after the number was dialed.
ACD - depends on destinations, the higher the better [white: minumum 4 minutes, grey: 1-5 minutes]
ASR - depends on destination, the higher the better [white: 35-50%, grey: 15-35% ]
PDD - the lower the better [white: 1-5 seconds; grey - 4-10 seconds]
ACD and ASR depends on a lot of factors, the country, the type of people calling, the time where most calls are active, if most calls were to landline or mobile phones, special events, weekends etc .. The number presented are just overall averages.
C. VoIP Transit
This is the most popular business out there in voip now a days. The way it works is simple and is simple to setup and operate. You take in calls from party1 and then send the calls to party2 with your margin in the middle. In this model, you do not have to have any equipments for origination or termination, and you are just the middleman. You are in the lookout for people selling routes (the voip terminators) and people looking for routes (voip originators). So you act as a voip terminator to the guy looking for route and offer your rates and act as a originator to the guy selling routes. Suppose you find that the averate rate for destinationA is 0.015 in the market. You happen to stumble upon a direct voip terminator offering the route at 0.013 but at 100,000 volume per day. You then start to advertise the route at 0.014 to various people so that you can cross the 100,000 minutes per day. Once you do the test and traffic is confirmed, you make your cut. Due to the technical nature of VoIP (Media Proxies), the IP does not get passed, so the real originator cannot trace where the call is eventually ending to, and the real terminator will not be able to find out from where the call originated.
For any VOIP call being completed, there could be N levels of transit in the middle.
Originator -> Transit1 -> Transit2 -> Transit3 -> ..... -> TransitN -> Terminator
Escrow Services
Cheating is very common on VoIP and if you are not careful, you might end up losing thousands of dollars in a single day. Suppose you are into origination or transit and you come across someone who is offering a very good rate. He might sound geniune and you have tested the routes and you find it OK. Now to actually start the service, he might ask for a payment beforehand. Now with just an email/irc or a phonecall, you would not know the interests of the other party, and you are reluctunt to send payment because you cannot just blindly trust. People have been cheated many times. You test the route and find it good, you send in the payment .. Once the amount is there, the guy disappears or the traiffic flows fora few days and it stops, and the other guy disappears with your amount. Similarly, you are into termination or transit and you come across someone who says he has 50,000 minutes and is ready to send you calls, but he might say he will pay you every 1 day or every 7 day or every 15 days but not beforehand. Its again a matter of trust. You might say OK for a post-payment and if he sends you 25,000 calls at average 0.10 cents destination,and then disappear, you end up losing $2500 in a single day. Also, you might want to pay via paypal and the other party might only accept western union or moneybookers.
To overcome all this, there are escrow services, who will transit the calls for you and they guarantee your payment. Usual service charges are 0.0025 per minute, and the buyer and seller can decide to pay 50% of each i.e 0.00125 each (1 cent might be the lowest you use in daily life, but margins like 0.00125 and 0.001 are common in voip calculation)
To use escrow, you usually create an account and deposit your payment to the escrow via paypal, credit-card or various other means. Then you ask the other guy to also creat an account and you just add the IP of the escrow. The escrow will take care of the internal routing. If you want to protect your IP address, this is also a safe bet. There are many escrows and a few turn out to be fraud also, while some are good too. The selection of escrow depends on the both party. You might want to go with one escrow while the other party may want in another one. So I will not be naming any escrow providers here. You can google.
D. Hardware/Software
For A# VoIP Originators and B# VoIP Terminators, due to the direct nature of interface with PSTN, a physical hardware is required that bridges PSNT to IP
For C# VoIP Transit -> Due to the nature of this, no physical hardware is required and all that is required is a softswitch, which ususally is a leased linux or windows server with the necessary software for signalling, media proxy and billing. MVTS (Mera VoIP Transit Softswitch - Linux/UNIX), VPS(VoipSwitch), VM(VoiceMaster), Asterisk, SER, GNUGK are the most popular softswitches used in the market today.
This concludes the part#1 of inside voip business which details on the business side of voip.
If there is a demand, I will put down a part#2 on the technical aspects of the business and how it works.
With good feedback and demand for information, this could be a multi-parts also.