What To Look For In A CPaaS // Costs, Not Pricing

October 13, 2021 // Product

In telecom, “pricing” and “costs” are two very distinct, and sometimes confused, things. Historically, there has been an intense focus on achieving the lowest price-per-minute/message. Seemingly endless amounts of time, resources and infrastructure have been thrown at winning these rock-bottom prices. Often, though, the ongoing costs of achieving those prices are not routinely reviewed or are altogether no longer being considered.

Better understanding of telecom pricing and costs is crucial in deciding whether to continue to host your own telecom infrastructure, switch to a CPaaS for the first time, or wisely choose between CPaaS providers.

We’re here to help you make a better informed choice.

Switching to a CPaaS?

If you currently host your own telecom infrastructure and are considering transitioning to the cloud, continue reading. If you are currently buying from a CPaaS and just looking to switch providers, you can skip the next section by clicking here.

Over the past two decades, price-per-minute rates have plummeted towards zero, a far cry from the old days of MCI’s ten cents a minute, leaving little margin left to be won by your in-house telecom team. In fact, if you are still hosting your own telecom infrastructure, the true costs need to include your telecom infrastructure software and hardware, including your switch, network, hosting, as well as the salaries/contracts with your carrier relations person, VoIP engineers, networking person, NOCs, and sometimes specialized support people.

The carrier person will be proud of the rates they’ve negotiated, and rightfully so, but the basis of their pride may be predicated on an outdated assumption of where telecom prices are. The industry’s race to zero has been leveling off which removes the need for an entire team dedicated to telecom, eliminates traditional equipment requirements, and reduces your true all-in telecom costs.

While there are exceptions, the expensive staff traditionally involved in hosting your own telecom infrastructure are attempting to optimize prices that have already been maximally optimized. When all the math is done, your true "price-per-minute" may be a lot closer to 10-cents-a-minute than you want to think about.

A CPaaS like Voxology enables you to move away from the quagmire of traditional pricing and cost structures, while repurposing staff for higher value work and empowering your engineers to build an ideal, cost-efficient telecom infrastructure through an easy-to-use API.

Massive Savings

A recent customer that switched to Voxology was able to save almost a half a million dollars/year, thanks purely to the reduction of all the associated costs they previously had to maintain. As an added benefit, they were able to repurpose their telecom team for more impactful work with their customers and on their product.

Of course, there are pocket-cases where hosting your own telecom infrastructure may still make sense even with all the additional costs taken into consideration. Those instances are few and far between, and becoming increasingly more rare thanks to the advancements in telecom technologies.

CPaaS Pricing 101

Remember the days when your cellphone bill was as long and confusing as a CVS receipt still is today? Well, unfortunately, some CPaaS providers continue to employ the same cloak-and-dagger methods when it comes to explaining their own pricing models to customers.

Many providers use a 60/60 (sixty over sixty) billing method when calculating charges for each phone call made and received by your company, also known as “60 second rounding”. This is known as incremental billing, which has been an industry standard since the days of rotary phones. The first number (60/60) describes the rounding increment of the first block in seconds, and the second number (60/60) describes the rounding increment of each block thereafter in seconds.

Here’s how it works:

60/60 Rounding Examples

• 10 second call // Let’s say your price per minute is $0.02. You call your customer to confirm a meeting tomorrow, it goes to voicemail and you decide to hang up and send them a text message. The call only lasted 10 seconds, however if you are paying 60/60, you will be charged for a full 60 seconds ($0.02), even though you didn’t use the additional 50 seconds.
• 2 minute, 5 second call // Now, let’s say your customer calls you back to confirm, and the call lasts 125 seconds. In the 60/60 method, you will obviously pay for the first 60 seconds (which you used), and then each minute after that will be rounded up to the next minute. So, by the time you both hang up, you will be charged for 3 full minutes (180 seconds) even though you didn’t use 55 seconds of the time you were billed.

While 60/60 is used by many in the CPaaS world, at Voxology we use a 6/6 (six over six) billing increment for all US and NANPA calls, also known as “six second rounding”. This means that we round up to the nearest tenth of a minute (6 seconds). 6/6 is the standard billing increment that underlying carriers charge, and we feel like this is appropriate to pass along to our customers. To highlight the difference between 60/60 and 6/6, we will use the same example from above:

6/6 Rounding Examples

• 10 second call // Let’s say your price per minute is the same as above, $0.02. However this time you are billed in 6/6 increments, which means your 10 second call is no longer rounded up to 60 seconds, it’s rounded up to 12 seconds, or two tenths of a minute. So, your call would cost $0.004, an 80% savings compared to the 60/60 provider.
• 2 minute, 5 second call // Your 125 second call would no longer be rounded up to 3 full minutes, rather 2.1 minutes. So, your call would cost $0.042 rather than $0.06, a 30% savings.

60/60 vs. 6/6 Rounding

Rounding matters. As you can see, even the same price/minute can lead to wildly different costs. The chart below illustrates the difference in costs between 6/6 rounding vs. 60/60, both with the same price per minute ($0.02). The grey area represents the 6/6 savings.

Apples, Oranges, and Lemonade?

When assessing the price-per-minute costs of various providers, you have to understand the incremental pricing they use. Comparing telecom pricing can be apples and oranges. One vendor may have a significantly higher price/min, but if they are billing in six second increments (as opposed to full minute increments) they may actually save you money.

Here is a dumb lemonade stand example to demonstrate how a lower price doesn’t always mean lower costs.

The Lemonade Stand Paradox

Imagine there are two lemonade stands on your street. Both advertise “bring your own cup, no refills”. The first stand charges $1.00/gallon, while the second is charging $6.00/gallon.

Assuming the lemonades are of similar quality, the $1.00/gallon stand is a no brainer. Right? Wrong. Here’s the deal — you only have a 16oz. cup, so you only need 16 ounces of lemonade (remember, no refills). The $1.00/gallon stand is very proud of their low price, but they only sell in gallon increments.

Meanwhile, the $6.00/gallon stand allows you to pay for only what you need. Since you only need 16 ounces, the lemonade stand with the 6X price is shockingly the most cost effective. It only costs you 75 cents, making it 25% less than the lower priced option.

Hidden Costs

Finally, when comparing CPaaS providers, be sure you know when you aren’t comparing apples to apples. For instance, some providers charge additionally for conferencing or answering machine/voicemail detection and delivery. If your application requires those features it can completely change the provider’s cost structure and fatten up your bill. These “hidden costs” add up fast, and can eat away at the savings promised to you by switching to a CPaaS. The advertised price-per-minute prices can often be misleading, leaving you with a huge bill.

At Voxology, we can help you make sense of your pricing and help you interpret and uncover the actual costs.

Why Voxology?

Don’t get distracted with telecom pricing nonsense when evaluating the true costs of your communications. If you are considering switching CPaaS providers, let’s talk. Voxology could save you 20-60%. If you are migrating your telecommunications to the cloud, even better. Voxology could save you even more.