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A Nice Note from An Informed Source

Being Labeled A Minute Stealer..It Puts You In Good Company (Maybe)

Back in the day of when there was one choice in telcos knows as the series of regional Bells you were required to use AT&T for your long distance. Along came MCI and Sprint and a host of others who provided a dial up number locally or via an 800 number and you could start saving money on Long Distance. They were the first minute stealers.

There is nothing wrong in my mind with "minute stealing" but it's a Robin Hood play. The Minute Stealers of today buy bulk minutes from the wholesale side of carriers and route the calls over lower costing service options, sometimes the same carrier who sells service already to the same customers. The difference, by buying in bulk the "minute stealers" hope to arbitrage and settle minutes at better margins or sell more volume.

Along the way came divestiture and something called "Equal Access" which required, as part of the breakup of MaBell to allow customers of the local Bell company access to carriers other than AT&T. Instantly this moved the new carriers from "minute stealers" to direct competitors.

At the time this then gave rise to a new breed of companies who offered services that could handle "least cost routing," call-back, dial arounds, calling cards via other carriers at lower rates. It opened up competition and began the erosion of minutes over the "traditional" carriers AT&T, Sprint, MCI, etc. and opened up the door for more savings.

So while the calls are on the network, and while the carrier is still seeing some minutes, the lass of their high margin long distance business is where the minutes are being stolen from. So while one side of the house looks really healthy, the other side starts to see erosion on LD. This means that other services that would have cost less now have to make up the ARPU to the carrier.

Hey, don't get me wrong..I want to save a buck as much as the next person, but shifting dollars from the P&L, and eroding the gross margin ends up cutting into something. That something is usually R&D first, then Admin, then Marketing and Sales and eventually the network itself. So while the money flows to the mother ship, because it ends up in wholesale it may never see it's way back to where the core of the network needs it.

I'm all for the JaJahs, RebTels, Mint Telecoms to do exactly what they do...as long as their suppliers recognize that shifting where the money comes from to pay for minutes doesn't mean you stop putting the profit where it needs to be.

Comments

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Brad Templeton

I'm not quite sure why you call it "minute stealing" -- a term which surely tries to imply something nefarious is going on here.

The thing that's most wrong is companies using lock-in to sell you a product at vastly inflated prices. We all know what long distance calls to Canada and European landlines actually costs, which is below a penny a minute, wholesale. If the mobile carriers want to try to bill huge, 70s-era prices for these calls because you don't get a choice of long distance provider -- well that's exactly the thing from the 70s that the breakup was about stopping.

It's largely artificial. And you can't just change carriers, since all the carriers do this. But so many customers don't make overseas calls that this is not actually lowering your other rates all that much.

Even monopolists can only overchage so much, however, because it gives rise to companies like jahjah and rebtel. Yes, it's not a long term business but they are not stealing, they are performing an important market function -- competing.

SKO

"The Minute Stealers of today buy bulk minutes from the wholesale side of carriers and route the calls over lower costing service options..."

Sounds like the free market at work to me to the full benefit of the consumer like cheaper gas or cheaper flight tickets or cheaper hotel rates.

And,

"..as long as their suppliers recognize that shifting where the money comes from to pay for minutes doesn't mean you stop putting the profit where it needs to be."

"...where the profit *needs* to be."

Andy are you for real? Profits don't *need* to be anywhere. They are earned. That's it. If you are a network operator (or any business) and if you want the money back then come and get it. Offer a better solution and service to your customers at a better price.

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