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SIPTrunking WAYS to Save Money

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April 04, 2016
Trevor Warner - TrevorWarner@WarnerConsultingGroup.com

More bandwidth, better networks, mobile key, tokenization, cloud PMS, and so on and so on. Even the cost for services such as voice is on the rise. While the cost of business continues to rise, our goal is to find some cost to offset. One option is voice. It is still needed, and still used, but we haven’t really addressed it.

Copper line cost is on a steep increase. AT&T, CenturyLink and Verizon have made the decision to get out of the copper business. The cost to maintain copper facilities that date back more than 50 years has become too much for the ILEC’s who have invested a significant amount of money in fiber facilities and no longer want to maintain the millions of miles of copper wire. To encourage customers to leave copper (analog) lines, these companies have raised the cost of the copper line by as much as 100 percent on an annual basis. Lines that were $35 per month two years ago now cost more than $100 per month. 
For hotels these lines are typically modems, life safety (such as fire alarm, elevator), and fax machines. Hotels should look for alternatives. In some cases, cellular can be used as a replacement voice connection for a fire alarm. Faxes can be changed to email fax services, DIDs through the phone system, or eliminated if no longer necessary. Elevators in many states can ring to the front desk. The cost has typically been low enough and the lines worked that hotels didn’t address the cost. Now, there is the need to eliminate them and find alternatives. 
For traditional T1s and PRIs taxes and fees continue to rise.  San Francisco has instituted an “access line” tax of $417.29 per voice circuit. In many cases this doubles the cost of the service on a monthly basis. Cities and states are not the sole contributors; carriers who are seeing their base of clients erode as new technology comes to market including cellular and soft phones (software or an app on a computer) have instituted taxes to “recovery” fees to try and make up the margins. The fees are all approved by the FCC but the purpose is a very grey explanation. 
As important as taxes and fees, we are seeing significantly less competition in the market as companies move away from traditional voice. Where we used to see more than 20 companies compete for business in a given market we now see fewer than five selling traditional service. With less competition comes higher prices. Some of the competitors are no longer in business or have sold out to larger companies, while others have changed their business strategies and moved away from traditional voice. Regardless of the reasons, costs are on the rise. 
One area of concern is the decline of voice needs but the T1 or PRI comes as a set product so we are paying for more service than we need. The products are typically inflexible so negotiating price and term is really the only advantage for the customer. Given voice usage in 2016, most hotels can survive with less than 10 voice lines but a T1 or PRI comes with 24 and 23 channels respectfully.  
The technology is available now to control cost, lower spend, and buy exactly what we need. SIP lines (session initiation protocol also known as virtual phone lines on your Internet connection) give us the option of buying by the channel or line. Being able to control the amount of lines for a property absolutely controls the monthly cost to support the hotel’s needs. Businesses have been using SIP for years. The problem in the hotel industry is that more than 90 percent of phone systems can't accept a direct connection to a SIP line. Carriers must install a device to convert the SIP line to a traditional handoff (analog, T1 or PRI). This technology and support has improved dramatically, giving hotels the ability to keep the existing phone system and connect it to better, less expensive technology. 

SIP is less expensive per line. The cost of a SIP lines is typically between $8 to $12 per month. Taxes and fees are lower because it’s an Internet voice line. Typically, taxes and fees are 50 percent lower than a traditional circuit line. Usage charges are also significantly lower including local, North America and international calling since the Internet is used to make the call. 
SIP allows us to buy the exact number of channels needed so we balance need and cost. A property can purchase from two to more than 1,000 lines, and in many cases set up bursting for any short period of time needed more than what they purchased. Controlling the exact number of lines gives a hotel pinpoint control on voice cost. 
SIP gives us better redundancy because it’s an Internet-based voice line. With anything that is online, the consumer takes control of specific service aspects such as failover service should the phone lines go down. Hotels can install cellular backup that will automatically kick in if the SIP connection fails. SIP lines are monitored so the failover is automatic. It’s done real time and behind the scenes without the guest ever knowing service has been interrupted. 
While adding SIP to a traditional phone system will cost you about $100 per month for the device, all new phone systems can accept SIP direct so that when it’s time to replace your PBX (and many hotels are feeling the pain of 20-year-old phone systems) the carrier can simply remove the device and reduce your costs even further. 
Copper facilities are not failing, they are just becoming too expensive (unless you live in New York and the rats are eating the underground cable, in which case, the copper service is failing). The technology is now available for hotels to really attack the cost of voice.

Trevor Warner is the Chef de la Direction at Warner Consulting Group. He can be reached at TrevorWarner@WarnerConsultingGroup.com.

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