How to start a VoIP wholesale business
What is VoIP wholesale business?
Wholesale VoIP, aka wholesale voice termination, is a popular business model. It includes traffic aggregation and exchange between VoIP operators. In other words, wholesale VoIP providers receive traffic from one carrier and transmit it to another one acting as a ‘man in the middle’ between them.
Wholesale VoIP termination usually doesn’t require huge initial costs and might be highly lucrative if done right. This means that all peculiarities of the business must be taken into consideration.
VoIP wholesale components
Class 4 softswitch
A core element of the VoIP wholesale provider's infrastructure
Optional component today, you can use SaaS or hosted softswitch
Other VoIP companies that will provide you with VoIP routes
You will get VoIP traffic from them and send it to your suppliers
Class 4 softswitch is the central device of the company’s VoIP network. That is why it is necessary to choose the high-performance and stable solution which will completely meet your requirements.
There are plenty of offers on the market. At first, you should learn if the softswitch is a complete all-in-one platform that has all needed modules integrated. It should include VoIP billing, transcoding, some analytical and reporting tools, integrated billing.
Billing is an important part of the network that collects information about calls and other services. CDR (call detail record) reports generated by billing are used for charging clients. If the softswitch doesn’t have integrated billing, it is necessary to buy it as a separate solution. It can cause difficulties to maintain and support such a complicated system, especially for new companies. That’s why we recommend complete solutions.
Then, transcoding is an important option. Sometimes clients and suppliers use different protocols and codecs. In such a case, it is necessary to convert them. For this reason, the best option is when your softswitch not only supports protocols and codecs but converts them.
Another important thing is routing functionality. The VoIP business is highly nuanced. That’s why traditional LCR is not enough. It is important to have specific routing modes, like jurisdictional routing, origin-based routing, etc.
Some softswitches can have additional functionality that helps in operation and saves time. For example, there can be report generation, automatic invoice generating and sending, traffic analyzer, traffic quality control system, etc.
MediaCore SBC by Speedflow has all the needed routing modes and is a flexible and user-friendly platform. New companies can launch it quickly without any hassles. So, we recommend you to try the MediaCore demo and try its advanced features by yourself.
Required equipment for wholesale VoIP
The on-premises model, when a company has its own equipment, becomes the past. In fact, most companies prefer to cut CAPEX and use cloud or hosted software. It helps them to avoid investments in the expensive equipment.
Cloud, SaaS and hosted models allow providers to save on the maintenance and administration too. The vendor usually takes care of all the software and hardware-related questions. Therefore, you can concentrate your efforts on the core business.
Furthermore, this option gives you more flexibility and scalability. You can easily increase or decrease your license with no worries about servers.
If you decide to have on-premises servers, you should keep in mind that the type and quantity of equipment depends on the volume of traffic you are going to operate with. When starting with a small volume, you can make do with one server only, but we would recommend two servers for better stability and to have an option to grow.
We recommend to begin with:
● Billing server for financial data processing
● The server that combines RTP for traffic streaming and RADIUS intended for centralized authentication, authorization, and accounting management for computers to connect and use a network service.
Increasing the traffic volume you may separate RTP and RADIUS onto two servers.
But again, if you use cloud-based or hosted softswitch, you don’t need any servers, a regular PC or laptop is enough for access to the web-interface.
Finding Suppliers and Clients
Suppliers and Clients are the main contractors in VoIP wholesale business. Provider buys VoIP routes from suppliers and sends traffic to them. At the same time, he sells VoIP routes to his clients and they send him their international VoIP traffic. One VoIP company can be both your Supplier and Client.
You can find them via Internet forums (for example, callsmarket.com, voipproviderslist.com, etc.) just using a web search and keywords. You can use such Internet communities as LinkedIn or Facebook as well. Also, you can contact Speedflow Team to discuss VoIP traffic exchange opportunities.
Your company should have corporate pages on Internet communities. It helps to communicate with other providers and stay updated about VoIP market trends. LinkedIn and Internet forums are very important marketing channels in VoIP wholesale business.
Another marketing activity that generates business leads is taking part in telecom conferences and exhibitions. However, it might be cost-consuming. Thus, it is fitted mainly for well-established companies with an existing customer base. Nevertheless, you can begin with attending telecom events as a visitor.
Generally, VoIP traffic is the flow of data across the Internet. As any other commodity traffic possess specific quality characteristics that determine demand and price for it. Quality means that VoIP calls are successfully connected and users receive an acceptable level of voice quality without unwanted sounds.
There are specific parameters that are used for estimating traffic quality in VoIP wholesale business. The main of them are ACD (average call duration), ASR (answer seizure ratio), and PDD (post-dial delay).
The better is the quality, the higher is the demand and, of course, the price.
Specific risks while VoIP wholesale activity
VoIP wholesale business as any kind of business has its specific failure risks. The main risk is not to get money from your clients. It may happen when a wholesale provider uses a postpaid type of payment while selling traffic. There are several ways to minimize this risk. Firstly, work with partners who have market experience and are well-known among the VoIP community. Before starting cooperation with a partner ensure yourself using anti-fraud forums (for example, on www.voipfraud.net/en or in special sections on VoIP forums) that he hasn’t been involved in VoIP fraud activity and check information about the company (http://www.domaintools.com/). Secondly, check the company registration documents, make sure you deal with a real company.
Finally, after signing the agreement you should always keep in touch with your partner.
Another way is to work via prepayment. But there can be difficulties if you are a brand-new company. Big market players usually don’t prepay to small and unknown companies.
Be careful while signing the contract. To avoid risks of disputes or fraud activity you should pay attention to such aspects as a type of payment (prepaid or postpaid); billing conditions – per second/per minute; bank details presence; terms of confidentially, etc.
Additionally, there is a common FAS (False Answer Supervision) problem. It means incorrect extra billing of calls because some calls are billed without connection to the subscriber. You should avoid cooperation with companies that have too much FAS. There is a risk that your customers won’t pay for these calls, although your suppliers will include them in their invoices.
You can identify FAS when ASR is higher than average, but ACD is lower or the same.
Actually, you can’t avoid the risks but checking for instructions helps to minimize them.
Now it’s time to research how to make money in VoIP wholesale.
As we have found out, the core of VoIP wholesale business is VoIP traffic transit from one carrier to another (from origination side to termination side). You get profit from the margin between buying and selling prices.
For example, you’ve found some suppliers and clients. Two of your suppliers offer destination “Country A” with prices of 10 and 10.5 cents per minute. The price for your clients is 11 cents per minute. When your softswitch supports Least Cost Routing the system automatically chooses the most profitable destination for the traffic, in our case, it will be 10 cents. Your margin from 1 minute will be 1 cent (11.0-10.0). But we know that price is not the only key traffic characteristic in VoIP wholesale business. With the low quality parameters, your partners won’t co-operate with you.
This problem is solved by the MediaCore. It has an advanced routing that takes into account many parameters. Additionally, it has a unique revenue assurance system called Guardian for traffic quality estimation. The Guardian can block the route with low parameters of quality even if the price is also low. In such a case, you will buy this destination from the second provider and your margin from one minute will be 11 – 10.5 = 0,5 cents. Actually, unprofitable calls will be automatically blocked. Also, you can fix a minimal profit from the call.
To clarify more, let us share some insights. Judging from our experience, the minimal MediaCore Softswitch renting package (50 concurrent calls) can help you to process approximately 1 million minutes per month. The margin per minute can be different depending on the destination. Now that you know your traffic portfolio, you can calculate your estimated revenue from VoIP wholesale business.
Download our Whitepaper
So, we explored the main aspects of the VoIP Wholesale business. We hope this information was useful for you and cleared up the main questions. Finally, we invite you to download a PDF version of the whitepaper “How to Start a VoIP Wholesale Business”.
Cooperate with Speedflow
Summing up, we would like to note that you can start VoIP Wholesale business without any capital investment. You can get a hosted MediaCore Softswitch with monthly paymnets, and Speedflow will provide you with a complete VoIP wholesale platform installed on our hardware. The platform doesn’t require any third-party solutions to operate in VoIP wholesale. So, contact our software team and start your business today with no hassle!