November 09, 2005
The Intermediators: DialAbroad
This is the first of a trio of little articles on people intermediating telephony in different ways to add value and bypass traditional toll charges.
There are many providers of cheap dialling service in the UK. The windows of local ethnic shops are covered in adverts for them. It isn’t an exaggeration to say that London is the dominant hub of intercontinental traffic exchange in this hemisphere. Calls are very, very cheap. I can call people in the US for less than the usual intra-US long distance call rates. National calls are cheap, too. For instance the 18866 access code gives you unlimited UK landline calls for a 3p (about 5¢) flat connection charge. No metered calls, unless you really like paying.
So if you’re going to stand out from the crowd, you’d better be good.
What attracted me to DialAbroad was its unique unbundling of the telecom business model, and their blending of wireline and wireless toll re-intermediation.
To obtain credit they use reverse premium SMS, where you text a string to a short code number and are dinged a few pounds by your cellular operator. The cellco takes a cut, and passes on the bulk to the partner. This becomes your credit balance, nominally the same amount as you were charged. You then dial the access number, dial a PIN (if not from your cell phone), and drain down your credit balance. In additional you use minutes at the usual rate (i.e. virtually free on landlines, and cheap inclusive ones on mobile).
This is different from many of the other cheap dialling plans. They either rely on direct regulatory mandate to get access (such as the 18866 example), or directly piggy-back on mid-rate tolled calls like 0870 numbers that offer revenue share. In this latter case, you might be paying 15p/minute to call an 0870 number, 4p/minute goes to the partner, and 2p/minute is used to pay for international call termination, leaving a small profit for the partner.
The advantage of the DialAbroad way is that mobile users are calling a standard number which can be part of heir inclusive minutes, whereas whacky numbers like 0870 aren’t inclusive and are often charged at high rates.
I don’t normally use any of these services — I don’t make enough non-Skype calls for it ever to be worth my while shopping around! But for your benefit, dead reader, I spent my £3 and made a test call to my US SkypeIn number. It works!
So as an example of the different functions of an operator being separated and re-mixed, I can’t find a better case. Payment and access separated and re-modelled. A brilliant arbitrage play, if only subtly different from the bog-standard norm.
So I contacted one of the founders, Chris Smith, for an interview to find out more.
Telepocalypse: What difficulties have you encountered in getting your business set up?
Chris Smith: The main difficulty was largely a technical one; how to integrate an incoming and outgoing facility into one account to try and reduce roaming charges. The amount of research and development was vastly in excess of what we had originally expected.
T: Have the telcos or regulators put up and barriers in your way?
CS: Not yet! We did carry out some preliminary talks with OFCOM [the UK regulator] to check that our position was secure and that the mobile operators could not simply deny access to our service, and were told in no uncertain terms that OFCOM only really deals with BT and competition issues related to BT.
T: Do you think that the telcos will restructure their international call pricing as a result of your service?
CS: Undoubtedly, yes. The industry generally is moving away from voice to data to maintain AMPU in the realisation that voice margins are going to be cut to the bare bones in the wake of competition anyway. The cost of roaming data is certainly going to be the next point of attack for us - currently you could find yourself paying up to £10/mb when travelling abroad.
T: What about your customer base or business has surprised you most?
CS: We were surprised that our customer base is made up mainly of normal people, not the early adopters and technophiles that we expected. It seems that almost everybody is aware of the prohibitive cost of roaming and now they have a comprehensive solution.
T: How do you see the future for businesses like yours 2-3 years out from now?
CS: Telecoms changes very quickly so it is hard to predict. Clearly the mobile operators will respond and price will once again be the key driver - we feel we have a very robust business model and pricing structure and intend to compete with the big 4 for some time to come.
So in conclusion, whilst DialAbroad is hardly going to lead the Voice2.0 charge, it renders the carrier into separate “dumb payment service” and access pipe. And it’s an interesting example of the 2rd law of telecom: for every toll booth, there is an equal and opposite bypass. Many thanks to Chris for sparing the time to talk. I wonder if any of the telcos will take the hint and realise that all those CRM systems, billing engines and retail outlets make them look rather like banks? Who said you needed to make money moving bits when you can do it moving money?
UPDATE: Here’s a typical convenience store shop front from my cosmopolitan neighbourhood.
TrackBack URL for this entry:
http://www.telepocalypse.net/cgi-sys/cgiwrap/mgeddes/MT/mt-tb.cgi/603.