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Published:9/07/2016

Telecom Rates: What to Know & How to Save

According to The 2015 Global Telecommunications Study, telecom operators recognize their pivotal role in today’s telecom world and the cost that goes with it. Most experts predict that telecom carriers will continue to merge, expand services, upgrade network capabilities, and overhaul price plans, which can make a serious impact on a company’s ROI.

When Voice is Data: TDM to UCaaS

The Future is Faster, More Flexible, and Cost-Effective

Time-division Multiplexing (TDM)-based circuit networks have seemingly always been a voice transmission mainstay. However, the advent of IP and virtualization of the data center changed everything. The tremendous growth in data traffic surpassed voice traffic in 2010. Now that voice is data, cloud-based UCaaS (Unified Communication as a Service) is where the industry is heading. Using UCaaS, companies can easily and cost-effectively increase or decrease data and voice consumption without needing the capital that TDM required.

Additionally, cloud-based UCaaS is faster, more flexible and considered to be a better alternative to traditional services. For carriers, there's less overhead, which increases revenue.

So…What’s the Catch?

The “catch” with UCaaS is that even though carriers will decrease overhead and increase revenue, that doesn’t mean they pass the savings along to their customers. That’s why companies need a tech advisor partner who knows how to maximize savings when negotiating contracts. Digital Direction’s experts can see the cost advantages that the carriers see, and make sure our clients benefit.

Telecom Prices That Are Increasing

Traditional TDM Services Are Becoming Less and Less Affordable

Traditional types of voice connectivity are rapidly declining. The underlying technology is aging, and maintenance has become expensive. (Most of the companies that make the wireline switches no longer exist.) As wireline business shrinks, carriers raise rates to offset the growing financial burden of these services. Companies feel like they are being priced out of the traditional services—because they are.

There is an active push by providers to move customers off of old copper networks by 2018. In the meantime, carriers often discourage customers by applying multiple rate hikes, even as often as every six months, forcing customers out of the traditional services. Since carrier reps are no longer incented to sell or manage these services, many customers have fallen “out of contract” without even realizing it. (However, customers under contract can get up to a 75 percent rate reduction.)

The Cost of Fewer (but Bigger) Carriers

When carriers merge and become larger, many offer "all-in-one" services. With this structure, customers tend to lose more than just prompt, knowledgeable customer service. Businesses realize too late that they are paying for long-canceled services, or paying too much for too little. Carrier representatives are overworked and often unable to help resolve trouble tickets, let alone help businesses implement cost-saving measures.

Telecom Prices That Are Decreasing

Mobile and Fiber Optics Are Now More Cost-Effective (Mostly)

While the prices of traditional services climb, prices for future-focused services are becoming more affordable. Lower prices are definitely good news, since traditional analog will eventually disappear because it is expensive for carriers. In its place, mobility will continue to explode, along with more competitive rates.

The one problem with competitive rates is more complicated rate negotiation, especially in a new world where fiber optics could soon become the norm. Fiber optics was once considered to be too expensive. Now, in metropolitan areas, it’s becoming more cost-efficient to install fiber than to maintain antiquated copper systems. With superior reliability and upload/download speeds, fiber is the future.

Not only will costs go down as fiber networks expand, but businesses get faster connections to new services when moving into facilities with pre-installed fiber. It’s critical to have experts to help navigate and negotiate rates and contracts for these services with new prices structures.

Where Fiber Prices Are High (and Why It Matters to You)

While it's true that fiber costs are shrinking in metropolitan areas, the cost of installing fiber in rural markets is still incredibly expensive. Carriers will do what carriers do, and pass the high cost on to both city and rural customers. It is another reason why contract negotiation is so important. Without the right information and connections, companies could find themselves paying much more for fiber than they should, just to offset rural implementation costs.

Navigating a Changing Telecom Landscape

With many trends impacting the telecom industry, it is important to find and OTM partner who can see where the industry is heading, to best position your enterprise with the right technology and services at the best prices. Here are two examples that show the power of OTM, and why contract negotiation is so important:

BorgWarner: Higher Speeds at Lower Costs

For BorgWarner, a worldwide product leader in highly engineered components and systems for powertrains, a high-performing WAN infrastructure is essential to keep data flowing securely among its 58 facilities globally. When it was time for carrier contract renewal, the company enlisted telecom specialists to manage the process of determining options.

A resulting move from traditional copper to fiber optics netted multiple advantages: speed was enhanced by 2.5 times; individual facilities finally received service levels that met their needs; internal networks can now run live-streaming broadcasts, and costs were lowered.

Samtec: 91% decrease in Cost/Mbps/Site

Samtec, a global leader in the electronic interconnect industry, knew they could save more on telecom–from carrier billing errors to unresolved trouble tickets–but did not know exactly how much. To continue to grow, they needed a telecom solution. Digital Direction’s Outsourced Telecom Management (OTM) seemed like the right answer.

First, Digital Direction found significant cost savings by streamlining the number of Samtec’s existing providers and getting competitive proposals from new ones. We proposed a service that met Samtec’s need for increased bandwidth with no increase in rates. Following those initial savings, we were able to lower bandwidth expense twice more. Currently, we are proposing an upgrade for 10 Samtec locations to expand bandwidth by seven times—again, with no rate increase.

Samtec Cost/Mbps/Site

OTM: Better Results with Industry Experts

Digital Direction’s engagement with BorgWarner and Samtec show the real-life possibilities of streamlining telecom costs while providing compelling examples of how OTM experts can improve both business efficiency and ROI. Learn more about BorgWarner’s experience with this case study from CDW, and dig deeper into Samtec’s telecom results to see the power of OTM.