Reselling SIP trunking part 1: Where is the money?

Posted on April 1, 2014 by Andrea Mocherman

Provisioning telephone service is no longer reserved for megalithic copper-based boa constrictors – thanks to the Internet. Advancements in technology have removed infrastructure investment hurdles that used to keep the little guys off the field of telecom empire dreams. Now you can build a 5-channel phone server on a $30 Raspberry Pi, buy minutes in bulk, and hack your SEO to rank your VoIP company on SERP 1.

…Just like everyone else.

But don’t let easy access steal your ambition for telecom dominance. Take heart. There are good reasons to get in on the fun, and a few smart ways you can dial yourself into a profitable position.

There’s lots of room.

The VoIP market is growing like bamboo. Fast and strong. (Just don’t feed it to your giant panda.) A large part of what’s fueling VoIP’s growth is SIP trunking. According to Infonetics, the upward trend of SIP trunking and VoIP is becoming less of a trend and more of an established reality.

There’s lots to sell.

Switching to SIP trunking is not only a cost cutting strategy for businesses. A study by Nemertes Research concluded that CIOs and CTOs are interested in SIP trunking’s ability to “centralize PSTN access in the data center, easily failover to backup, and dynamically allocate SIP trunks to deal with seasonal or other drivers of call volume variability.”

In this new world of communication everywhere, SIP opens a world of possibilities to businesses because it’s particularly adept at enabling interoperability. Widespread adoption of SaaS applications such as Unified Communications systems will drive further demand for SIP trunking. Market research by Light Reading found SIP trunking’s ability to deploy UC across enterprises will keep the growth trend pointed skyward.

There’s profit in the numbers.

Right now, businesses buying traditional phone service from AT&T are paying at least $25.60/month/line, $49.50 if they’re doing more than 500 minutes/month (Note: AT&T only allows one service plan across each account). To include unlimited long distance, the MRC jumps up to $86.95/month.

Wholesale SIP trunking rates can sink below 1 cent, or even half that depending on the volumes you’re able to move.

It’s hard to establish an average monthly usage for business phone users (and even if you could it’s only an average anyway), but 1000 minutes is a generous guess – an average of two hours a day over 20ish days (Which is hard to do. After college, I worked outbound phone sales for Xerox, and more than a few days I struggled to meet the required 2.5 hours of talk time a day.).

I’m not telling you how to run your VoIP empire, but one model is selling unlimited minute packages. If you look around the Internet, you’ll see unlimited bundled pricing upwards of $20/month per user (some including phones). If the average user uses 1000 minutes a month, by charging $20 you’ve got $10 of gross profit per user (depending on where they’re calling and what you’ve included in your offering, like, say, DIDs). The savings are a juicy carrot to dangle in front of AT&T customers.

There are costs too.

If you’re adding SIP trunking to an existing IT or telecom integration business, you’ll be dealing with hardware. Depending on how you connect your customers to the outside world, hosted or on-prem, your infrastructure requirements will vary. But either way, you’re not on the hook for a whole lot of dough. Installing on-prem systems means your customer is buying the hardware. Alternatively, a hosted solution can be built very cheaply on cloud server space for rent starting at $20/month.

Of course, if you’re simply offering minutes to customers who are taking care of their own setup you’ll have standard operating costs such as website and marketing on top of your cost of goods sold.

There’s good business reselling SIP trunking.

Economically, it makes sense to add reselling SIP trunking to your mix of offerings. Awareness is growing, and thanks to developments in communications technology, the market is expanding. We service many successful resellers, but there’s a lot more to launching a legendary VoIP success story than simply firing up a server and cold calling the yellow pages. In the next post in this series, I’ll dig into how to build a winning SIP trunking business.