article

Dedicated Service: An Easier Sell Than You Think

Posted: 11/1998

Dedicated Service: An Easier Sell Than You Think

By Kieren McCobb

Stepping over a
dollar to make a dime, most long distance agents are overlooking a profitable opportunity
in dedicated voice services. Their reasons for doing so largely are ignorance and fear.
Behind the veil of mystery surrounding dedicated voice service, however, agents will find
a worthwhile, business-building pursuit.

What Is Dedicated Service?

Simply stated, a dedicated circuit is one that connects two points, usually referred to
as "A" and "B." These circuits generally are used for two purposes:
the transmission of data between locations and the direct connection between your
customer’s telephone system and the long distance carrier’s point of presence (POP).

Dedicated data service primarily is used to connect computers or local area networks
(LANs) between the two locations. To do this, data circuits are installed offering fixed
rates of bandwidth that are always "on," meaning they don’t need to be dialed
up. These circuits are sometimes referred to as "nailed connections" because
they are always available for use. Speeds vary, but the most common are 56/64 kilobits per
second (kbps), 1.544 megabits per second (mbps) for a T1 and 44mbps for a T3. These data
services are transmitted by using a number of technologies; two of the most common are
digital connect service (DCS) and frame relay.

In contrast, dedicated voice service simply is the direct connection between your
customer’s private branch exchange (PBX) telephone system and the long distance carrier’s
POP. The circuit between A and B is called a local loop. This local loop is a T1
connection. Because this direct connection reduces originating/ completion costs that
carriers pay to a local exchange carrier (LEC), they can charge significantly less per
minute for traffic. The difference easily is 1.5 cents to 3 cents per minute.

A T1, which contains 24 channels at 64kbps each, is essentially a tie line between the
phone system and the POP. A voice conversation can take place on each channel and, if set
up properly, can be inbound (toll-free) traffic, outbound or some combination of both.

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Image: Does Dedicated Service Make Sense?

Imagine each T1 is a 24-lane highway and each conversation a vehicle. Up to 24
conversations may take place at a time. With two T1s, up to 48 conversations may take
place and so on.

The difference between a point-to-POP and a 1+ connection is the customer pays for the
T1 local loop between his or her phone system and the POP. This loop is mileage-sensitive
and its cost is usually a fixed price plus a per-mile fee. Local loop pricing varies by
LEC, but as an example, in some Bell Atlantic areas, point-to-POP loops are less than $200
per month. Many customers (and long distance agents) are surprised that the cost for
dedicated service is so low.

Who Needs Dedicated Access?

Figuring out which customers are candidates for dedicated access is pure math. Let’s
take a customer that is billing $3,000 per month at 10 cents per minute. They are,
therefore, billing 30,000 minutes per month. If dedicated access pricing is only 7.5 cents
a minute and a point-to-POP loop (assuming five miles from POP) is about $238 per month,
then your customer’s bill from you will drop by $750 per month and his or her local bill
will go up $238. The customer will net a $512 savings per month, or $6,144 a year.

So to whom do you propose dedicated access? Those customers whose per-minute price
(multiplied by the total minutes of use) drops enough to equal or exceed the T1 cost.
Simple.

Win-Win Proposition

Offering dedicated services benefits both the agent and the customer. The end-user
customer benefits from:

  • Cleaner connections. T1s are digital circuits and therefore clearer than analog
    plain old telephone service (POTS).
  • Caller identification (ID). Your long distance carrier can pass along the
    automatic number identification (ANI) of an incoming call so your customer can use it in
    the customer service departments to call up a customer file from a database and onto his
    or her desktop screen.
  • Dialed number identification service (DNIS). If your customer has inbound
    toll-free service, information is passed along by the carrier, including the number that
    the caller dialed. Knowing this has many benefits, such as providing distinctive answering
    to the caller based on the number he or she dialed.
  • Saving money on telephone system hardware. T1 cards usually consume one card slot
    in the PBX, whereas 24 ports worth of POTS lines can use up as many as six card slots.
    T1s, therefore, are much more efficient users of PBX "real estate."
  • Less hassle. Have any of your customers ever been slammed? Dedicated access
    customers are connected directly to the POP so by definition there is no presubscribed
    interexchange carrier (PIC) code to steal.

The extra benefits to the agent are equally noteworthy. For example, you can expect to
realize:

  • Greater customer loyalty. Customers would rather stay with a vendor who is
    capable of handling all of their needs.
  • Better margins. It is entirely possible that you can upgrade an existing customer
    from, say, a 10 percent commissioned switched rate that all your competitors are trying to
    steal away to a 15 percent commissioned dedicated rate that fewer competitors have the
    knowledge and/or guts to propose (or do properly).
  • Lower churn. It is common to secure dedicated business on at least a one-year
    contract. Customers also perceive, with some justification, that dedicated service is more
    complicated to install. Human nature says they won’t want to go through the effort as
    often as changing their PIC code on switched service.
  • Never having to fight for 1+ business again. When your customer gives you his or
    her dedicated traffic, you’re virtually assured the switched as well. Frequently it’s a
    throw-in.
  • Loop commission. Companies that are authorized local exchange carrier (LEC) or
    competitive LEC (CLEC) agents offer sales agents commissions of mortgage payment
    proportions. Don’t leave that money on the table.

No Fear

Selling dedicated services is fairly simple, but it’s not easy. Few rewarding things
are. That said, the "complexities" that prevent most agents from taking
advantage of this opportunity largely are exaggerated. Yes, there is some training
required and a learning curve, just as in anything new. But for someone determined to
offer a complete package to his or her clients, the knowledge will come quickly. And like
any other win-win situation, it’s worth it.

Kieren McCobb is president of TeleConfusion Removal Inc., which specializes in
designing end-to-end networks. He can be reached by e-mail at kdotmack@ix.netcom.com.


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