Is LCR really dead?

The recent lowering of mobile interconnect fees has led to many predictions of the death of the least-cost routing (LCR) market – but, says Jacques du Toit, MD of Vox Orion, rumours of its death are greatly exaggerated.

‚Cellular LCR is dead, that’s true,‚ says Du Toit. ‚Anybody whose business is still based on Premicells or SIM farms is going to see that business vanish. But a much bigger market has opened up – from our perspective, we think this is the first time LCR in general can really come into its own.‚

LCR, explains Du Toit, is basically a form of arbitrage: ‚Anytime there’s a price difference between two markets, there is an opportunity for both customers and suppliers to derive benefit from this,‚ he says. ‚It used to be that the difference was just between calling Vodacom from a MTN SIM card vs. a Vodacom SIM card: if you could keep all your calls on-network, you saved. But now you have a choice of operators across the board.‚

Du Toit says that for Vox Orion’s typical client, cellular traffic used to account for only around 40% of total call minutes but 70% of costs. ‚That was where the pain was, and where the biggest cost savings could be realised,‚ he said. ‚In fact, that was the only cost we could control at all. Now, we can look at saving on local, national and international calls.‚

‚LCR really comes into its own in a fully deregulated market,‚ says Du Toit, ‚when you can freely choose your operator for all categories of calls. Nobody even has to use Telkom to make local calls anymore – they can choose a VOIP operator like Vox instead. We charge by the second from the very first second, whereas Telkom uses incremental billing methodologies starting with a minimum call setup of one minute. That’s a saving straight away.‚

Vox Orion also gives a rebate on incoming calls, says Du Toit, adding a second area of savings. Thirdly, ‚we are network or infrastructure agnostic – you can use the most cost-effective network to make any call, not just cellular calls.‚

Du Toit says smaller operators like Vox Orion have the advantage over bigger telcos in having lower fixed costs and highly efficient systems. ‚We started building our voice network four years ago in anticipation of the deregulated market we have now. We’re in a position to provide a complete telecommunications service to our customers, including all their voice and data needs. For us, that means the opening of an exciting new market. But those who don’t have their own networks will probably find their business vanishing with traditional cellular LCR.‚