Competing in VoIP Based on Price = Lowered Call Quality

Competition in the VoIP industry is fierce and no wonder. VoIP is well on its way to dethroning PSTN as the dominant standard for voice communication. Of course this will take more than a few years since quite a few countries do not have the required Internet infrastructure to upgrade. But carriers in other nations have already announced cutoff dates for the PSTN i.e. the date after which it will no longer be available for purchase.

All that is in the future for VoIP. The technology has come a long way from when it was first introduced as well. In the beginning, it was easy to discern the difference in audio quality between a regular call and one made over VoIP. Today most people cannot differentiate between the two. In fact many of us use VoIP all the time even if we don’t know it. Many network operators are replacing their PSTN infrastructure with VoIP behind the scenes.

Competition in the VoIP Sector

There are many ways for providers to compete with each other in the race for market share, customers and revenue. You could compete on the number of features, audio quality, the reliability of your infrastructure, the type of customers who cater for etc. However the most obvious trait on which to compete is price.

There are a number of reasons why service providers choose to compete on price. It is easy to understand and advertise to clients. It is a figure that you can put on all marketing materials. Comparing prices is much easier than trying to decide between service providers on the basis of customer service or other qualitative metrics. Most people assume that higher price equates to higher quality, even if it is not actually true. On the other hand, lower prices are attractive to price-sensitive clients who are looking to cut costs.

What Type of VoIP Service Are You Looking for?

The bottom line is very important for any organization. You might want the highest quality service with the greatest number of features but all of that comes at a price. Quite often you don’t even need everything that a provider offers. What features are right for you will depend on your requirements and business conditions. The same feature that is useless today may prove invaluable tomorrow and vice versa.

This is why most experts and consultants will advise you not to focus solely on the price when purchasing VoIP services. The price doesn’t tell you anything other than the will you can expect at the end of each month. VoIP rates are much less expensive than PSTN calls, especially for long-distance calling. It makes it difficult for companies to evaluate savings and to compare between different services. Even a provider that does not offer good value for money will save you quite a lot compared to your existing bill. So the purchase decision requires more thought than simply selecting the cheapest or costliest option.

Price-based Competition Lowers Call Quality

There are other reasons why price-based competition is actually bad for everyone. We have seen this pattern repeated in other industries and it generally doesn’t end well for companies, clients or the industry overall. Competing on price means that VoIP providers will race to offer the lowest rates for clients. This has many unfortunate consequences.

One is that price competition becomes a race to the bottom. Lowering prices usually comes at the cost of sacrificing something else – whether it is quality, number of features, reliability or customer service. Most providers don’t want to cut the number of features because it is easy to compare between different providers. Clients are more likely to notice if key features are missing or incomplete.

Unfortunately it means that quality and customer service are often sacrificed for lower prices. The issue with customer service is that clients can’t evaluate service quality until something goes wrong. So even if a provider does not offer top-notch service, you won’t know until you have started using the service already. When a crisis does arise, companies are generally concerned with restoring service as quickly as possible. You don’t stop to think about whose fault it is when something was wrong.

The other casualty is audio quality and reliability. It might mean that the service provider uses low quality codecs or doesn’t invest in better hardware. The quality of your voice calls also depends on the Internet infrastructure. So without optimizing software and robust equipment, you’re not likely to get top-quality voice calls. That is the price you pay for getting lower monthly bills and cost savings.

At the end of the day, some organizations are ready to make the compromise. They would rather have lower prices at the expense of quality because that is all they can afford. But for most companies, call quality is worth paying for!