Deconstructing SIP Trunk Deals (Session Initiation Protocol)
2 weeks ago, I got an email and it was actually pretty surprising. So I was curious and intrigued and, I'm gonna walk you through it real quick. Let me share my screen here. Share. Here we go.
Speaker 1:We start with this, this cold email, and this person is is pitching, SIP trunks. And they've included they've included the rates, and and and this was this was the body of the email. It was interesting to me because I couldn't figure out the math. That's one channel, 8 hours a day, 20 days a month, 96 100 minutes. So a SIP trunk, 1 channel, 96 100 minutes conservatively.
Speaker 1:At 8 50, I've got the wrong math in here, but, 850 divided by 96100 is actually this, point 0008. And this line right here, point this would be point 0 1 would be 1penny. Point008 is really, really aggressive. I can't possibly be right, can it? So I replied.
Speaker 1:Does that include US 48 and CA 13? So this is this is code lingo for US 48 being the continental United States and CA 13 being the 13 Canadian provinces. This is pretty typical in in North American voice traffic that includes US 48 and CA 13 and, extended US. So Alaska, Hawaii, Caribbean, would be a permanent rate. And, so we get this email back and the email comes back with a little more information which is a format a little bit better and and, some details.
Speaker 1:Peerless is not the provider. I think they're their underlying provider, and they're saying, oh, there's a little note here. You get DIDs. And look at this one. There's 1,000 free l d.
Speaker 1:So 1,000 free minutes at a minimum of 5 SIP trunk SIP trunks required. So you're gonna do 8.50 times 5 is your minimum. And I replied, hey. You know, what is the per minute rate on this exactly? Because now I'm suspicious.
Speaker 1:And, here's the catch. Once your 1,000 minutes are used up, you're gonna pay 2.9¢ per minute. So this notation would be 0.029. Now let's let's talk about voice and SIP trunking for a second. SIP trunks are really just the methodology of connecting 2 voice systems together.
Speaker 1:You use SIP. Before that was h 323. Everything is SIP today. Asterisk tried to start IX, and it went somewhere for a little while. And it was really about dealing with NAT traversal, but it it never it never got really super popular because the actual core telephony equipment used by phone companies are all SIP.
Speaker 1:So we have SIP. Anyways, so a SIP trunk is just really the ability for, you know, 2 things to interconnect to each other and send voice traffic back and forth via SIP. Okay? When you when when you hear people talk about SIP trunks in terms of channels and number of channels, this is a billing construct now against voice. And there's lots of different ways of doing billing constructs.
Speaker 1:So you can charge you you can do a SIP trunk where you say I'm gonna sell you 2020 trunks and they're unlimited usage. And the provider at that point is making a bet that you are not going to exceed a profile of traffic on that SIP trunk on that channel outside of what they're assuming on their forecast. And the the the way this breaks down is you just saw a math where I was calculating out to 96100 minutes a month. You can skew this up a little bit, and you can say, okay. If you're actually doing 12 hours, 6 days a week, what are the maximum number of minutes gonna be?
Speaker 1:Or, you know, you you really the provider should be looking at it across their existing customers and figure out what is and is not applicable to them, and what's a good benchmark for them to use. You know, old math we used to use for a knowledge worker inside of an enterprise, sitting at desk in a cubicle and saying and making phone calls was 600 minutes a month per person. That's just another little tidbit to kinda keep in the back of your mind. So, you know, it used to be popular. And and SIP trunks, by the way, channelize this idea of, like, selling a channel of a SIP trunk comes back from selling PRIs.
Speaker 1:So if you were in a business selling PRIs, you were selling 23 channels at a time per PRI and the scaling up number of PRIs. Oh, you need to be able to make, 40 simultaneous phone calls? Well, hey. Guess what? That's 2 PRIs.
Speaker 1:There is no there's an equipment limitation to how much calls the provider can manage based on the equipment that they have. So if they've licensed an SBC that has a set number of channels in their license, that that limits them. But, otherwise, there's no real limit in SIP trunking. You could have any amount of voice traffic that you have capacity on that circuit to provide. So, you know, uncompress, you're at 96 kilobits per call.
Speaker 1:So if you've got, you know, if you think about that, if you've got a 100 meg circuit or a 1000 meg circuit or a 10 gig circuit, you have lots and lots and lots and lots of voice calls that you can do on that Internet connection. So doing a channelized SIP trunk deal where you're actually paying per interface or per channel is not really ideal. And and the reason why this isn't ideal and I'm gonna use Twilio as an example here as I as I pull it up here. Let me do Twilio SIP trunk rates. So let me share the screen here and I'll navigate over to this thing.
Speaker 1:So here's Twilio's SIP trunk rates and we'll just come here. Now notice pay as you go calls per second committee use discounts. They're gonna tell you how many calls per second you can actually do and there's gonna be some caveats here. This is no channels, as many channels as you need, just go out and use it and you're gonna pay 0.0053. So this is half of a penny per minute and this is for US 48.
Speaker 1:So you can see here Alaska, Hawaii, high cost zone, toll free, you know, receiving calls, inbound, outbound. Now so I wanna tell you, Twilio is massively expensive. They're like 4 to 5 x what you can get if you actually need to do this. So if you're doing a lot of voice traffic, you shouldn't be using Twilio in the 1st place. You should be using somebody that can actually deliver you high quality voice traffic at an appropriate cost.
Speaker 1:And we're doing these deals right now at, like, at, point 0010, point 0012. It's this becomes volume dependent and some some other, you know, nuances that that, you know, factor in the scale. But just understand that Twilio is making a ton of money when they sell you anything on their services. Well, let me rephrase that. Twilio is not making any money right now.
Speaker 1:They're losing money hand over fist, but their margin on this product, the point 053 is is great. They're making, you know, 400%, right, on on this actual service. Now no cost per channel, as many channels as you need, get off and run, 0.005 3 versus what this, you know, other person was trying to cold email and say, hey. You know, buy a bunch of SIP trunks and, pay us for the SIP trunks and then also pay us for the usage on top of the SIP trunks. It's really it's really old school telephony, and it's old school telecom mentality.
Speaker 1:And it's, you know, it was interesting. It it seemed like a good deal upfront. And then digging into it a little bit, it turned out to be, you know, not a good deal. And this is something that as you're provisioning services and this really applies, when we start talking about Microsoft Teams. So first off, almost every platform and I'll use the trade terminology.
Speaker 1:So UCaaS and CCaaS. So unified, communications as a service platform. So these are, you know, Zoom, RingCentral, 8 by 8, Vonage, Dialpad, Nextiva. I mean, go down that list. List or, CCaaS contact centers or service providers.
Speaker 1:So, you know, the UCaaS all have CCaaS. So, like, Vonage has theirs. RingCentral has theirs. Actually, RingCentral doesn't have theirs. They partner with, with NICE.
Speaker 1:Zoom has one, but they partner with 59 as well. You see all these partnerships. But if you look at the CCaaS vendors, so Genesis, 59, Talkdesk, you know, go down this list of of primary providers in the CCaaS space as well as the UCaaS space, and you can start doing a bring bring your own telco, BYOT programs, where if you're big enough, you can pay them for the seats, but you can bring your own voice and you can bring your own voice telephony. And so at certain scales, you'll understand where bringing your own voice provider actually makes sense. And the place that we see this most commonly right now is in the Microsoft Teams world.
Speaker 1:And so Microsoft popularized this with direct routing, and now we see Orchestrator Connect. And what direct routing and Orchestrator Connect really is, it's it's a server it's a certified service provider that went out and purchased a certified SBC. So this is an AudioCodes ribbon, you know, I think ribbon's probably the most common and most popular one. AudioCodes is a huge one. SBC is for service providers.
Speaker 1:And if you're in the certified list for Microsoft, you can then go through the program and get certified and get listed as a direct routing or an Orchestrator Connect partner and Operator Connect? Orchestrator Connect. I don't know. It's gonna be it's gonna be wrong. OC partner.
Speaker 1:And then you can start selling voice mails. Well and, again, you know, you're gonna see most providers out there in market that are selling, direct routing or a c connections for Microsoft are doing it as a named user basis. So maybe they're out. They're gonna sell you, you know, a, $8 seat, $8 per month voice enablement. So you hear people talk about, like, the race to 0 in Microsoft Teams and voice.
Speaker 1:It's not a race to 0. If I just told you that the average consumption of voice for an enterprise user at a cubicle was 600 minutes a month and they're selling it to you for $8, you know, what's that what's that math work out to? It's it's point 1 0.013. It's 1.3¢ per minute. If the service provider's cost per minute, point 001, which is called you know, like like, there's a huge margin still built into that business.
Speaker 1:Now there's lots of other things that you have to do that the service provider has to account for. Right? You have to account for the cost of certification, what your equipment cost, your SBC cost, your r and d work, your software platform to maintain that interact interaction and API with Microsoft, your customer service cost, your, you know, sales cost, marketing cost, all these other things that that build into your SG and A, you have to account for. And when you're selling something that is being expressed in fractions of a cent per minute, you know, even if you're selling, you know, a 100000000 minutes a month worth of traffic, if you're if you're making if you have a 100000000 minute per month business and you're making 0.1¢ per minute, that 100000000 minutes turns into a $100,000. That's not a lot of money and revenue off these businesses.
Speaker 1:So the name of the game within the voice world becomes scale and efficiency. How much can you scale? How efficient are you? How big are you? And generally speaking, when you're talking with voice companies, what you're trying to suss out because they can hide this very easily is where do they sit in the stack?
Speaker 1:What I mean by that is at the bottom of the stack, you actually have the PSTN. You have the real phone company. So this is the AT and T. This is Verizon. This is, Lumen in certain markets.
Speaker 1:So you have the actual phone company that provides the wires that go into buildings and then you have the wireless provider, you know, where who's actually? So Verizon, AT and T, T Mobile who actually has the subscribers on on on these, you know, on, you know, the subscribers, the actual users. So now if you're not, you know, doing business directly with the phone company, the phone company doesn't wanna do business with a 100,000,000 people. Like, it's inefficient for them. So what do they do?
Speaker 1:They start selling service to, you know, what you would call, like, an aggregator or a wholesaler. So and, you you know, it used to be a CLEC was the big, you know, providers and the big aggregators and the big so, you know, now you classify, you say, like, Twilio is really not this. Twilio was a was an API tier on top of it, but, like, the bandwidth dotcom, XO when they were still around. These were the huge CLEX level 3 before it was acquired by CenturyLink and turned into Lumen. These were the big CLEX that were this, like, second layer.
Speaker 1:So there was there was phone company, and then there was this aggregator wholesaler, and then they had another aggregator layer. And then there might be another one on top of that. And then you have this, like, stack of, like, who who knows how many kind of people in between point a you know, between you as a customer and the actual other side. And this is really easy again to hide in the voice world because you can't see that traffic. The only way that you see it is you see it in call quality and you see it in in the post dial delay and PDD.
Speaker 1:So when we're engaged with clients that are serving a lot of voice traffic, and whether it's a lot of voice traffic or a lot of SMS traffic or a lot of, you know, they have a lot of DIDs or they're trying to get to, program programmable voice where they're they're interacting and doing, text messaging at scale and interaction with scale or maybe they're trying to do alerts, notifications, updates, hey. Your, you know, haircut's next week. Do you wanna reschedule? You know, these sorts of things. The trick that we do is just knowing what these aggregation tiers are between point a and point b in this chain and saying, okay.
Speaker 1:If you're currently interacting here, you know, the real value for you isn't to be here anymore. It's like, how do you get closer actually down to the metal? So when we talk you know, like, I'll use a term from cloud computing. Right? Like, the farther abstract you are, the lower the less value you have and the more middle, you know, players that you have.
Speaker 1:And each player has to exert margin and take a cut out of it. So going from here down to here, can produce a lot of value. The closer you get to the metal, the better off you are. The less other hands that are being fed or mouths that are being fed along the way and, the more influence that you have, in in controlling your own destiny. So this whole thought stemmed from this email.
Speaker 1:No. I'm not you know, for I mean, nice people. There are no issues whatsoever in this message. And I'm sure there's there's a target market for this still, and it doesn't make sense for what I do. And I would tell my clients, like, I don't necessarily think this is the right path for you because there's other alternatives and other opportunities for you.
Speaker 1:If you still need a SIP trunking based product for a legacy on premise PBX, let's take you an approach that's slightly different. You know, I'm not gonna get you point 1, you know, on an enterprise user, know, with a couple 100 users. But if you got, you know, 20, 30, 40, 50,000 users on on, on your PBX, you still have a Cisco system or you have a Avaya system or a Mitel system for whatever reason, that efficiency of scale exists you, and those are places where we can help you a lot.
