GSM LCR is dead. Long live LCR

Least Cost Routing (LCR) – the business of routing outbound calls via the cheapest route – has been given less of a chance to survive in the long term than the chance that the Lions will be winning the Super 15 rugby competition in 2011.

The high mobile termination rates (aka interconnect rates) in South Africa made the country a particularly suitable environment to develop LCR services – saving businesses millions of Rands when compared to traditional fixed line call rates.

The 36c peak mobile interconnect price cut in March last year, which will be followed by more interconnect price cuts in March 2011, March 2012 and March 2013, is hurting the traditional GSM LCR market and is putting pressure on LCR margins.

With Telkom and Neotel passing on mobile termination rate cuts to subscribers, LCR operators are forced to also reduce their rates, putting the whole business model under pressure.

GSM LCR dying, but LCR lives through VoIP

Local LCR operators have traditionally relied on the savings made possible through GSM LCR to win customers and make money, but in an environment with lower interconnect rates these companies are forced to adapt their business models to survive.  However, it is not all bad.

Vox Orion MD Jacques du Toit explains that traditional GSM LCR has most probably around a year left in it – until the interconnect price cuts in March 2012.  The death of GSM LCR, Du Toit explains, is definitely not the death of LCR.

Du Toit said that they are already migrating many of their customers to VoIP platforms which the Vox Orion MD sees as the ‘ultimate LCR technology.’  With VoIP, he explains, he has a flexible network making it possible to route all traffic via the most affordable route.

Du Toit is also not particularly concerned about the financial future of Vox Orion. He explains that the migration to a VoIP platform provides the company additional income from local and national fixed line calls as well as incoming calls – a revenue stream which they did not have when only using GSM LCR.

Vox Orion is further growing the business through additional product offerings, including a range of data, PBX, SMS, video conferencing, virtual hosting and fax solutions. 

Du Toit said that they will also be offering call recording and storage solutions – which will become compulsory in August this year under the new FICA legislation – to all institutions which need to keep records of financial calls.

What more can be done?

According to Du Toit, Vox Orion’s future looks rosy despite the challenges they face migrating subscribers from GSM LCR platforms to VoIP services, but he said more can be done to make the South African telecoms environment more competitive.

Du Toit said that the current high costs of bandwidth and access in South Africa – specifically using leased line services – are prohibitive and should be reduced significantly.

The Vox Orion MD further asked for ‘proper number portability’ on all number ranges to make it easier for companies to move to another provider without fear of losing some of their numbers. 

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