Long Distance Doesn’t Have to Be an Expense for Telcos

The financial well being of many local telephone companies depends in large part on an FCC-regulated revenue model in which long-distance companies pay access charges to use their networks. Despite guaranteed revenue flow, a local telephone company needs to ask itself whether this is a business-sustaining approach to revenue generation over time, especially in such a competitive environment as telecommunications.

Revenue Pooling: A Short Background

Revenue pooling, as the model is known, allows a local telephone company to recoup its costs of providing interstate access service to long-distance companies, with any remaining access revenues shared among participants based on a local telephone company’s share of pool investment.

While important to a local telephone company’s bottom line, the practice of revenue pooling is expected to be revisited in upcoming years, and possible that it could even be phased out. Given this uncertainty, it’s important for a local telephone company to rethink its dependency on this model.

Continued reliance on revenue pooling can undermine a push toward organic revenue growth. Now is the time to study alternative options and put a plan together.

A Better Revenue Growth Model: Long Distance VoIP

Cost-effective technology options that allow a local telephone company to enter new markets should be at the core of any growth plan. One highly successful technology to achieve this is long distance Voice over Internet Protocol (VoIP) using the Session Initiation Protocol (SIP).

SIP is a text-based protocol using a message format very similar to HTTP, and it is used to establish VoIP through a straightforward exchange of IP addresses. The protocols and proxies associated with SIP work in business and residential environments.

The SIP approach has become increasingly popular and has been shown to stand up well to this increased usage. If you are a decision-maker at a local telephone company, rest assured your customers will receive quality voice calling at a lower cost. VoIP using SIP can handle lots of volume and offers benefits such as video and multicast capability.

Using this approach, a local telephone company will gain:

  • Access to other geographical markets
  • Opportunities to win larger business customers
  • Improved operational efficiency

SIP can be established quickly and easily when tapping the experience of an established provider who can build the connections and provide ease of migration. Once in place, VoIP using SIP is a means to access revenue from true organic growth, not the product of complex pooling formulas and regulation with an uncertain future.