Arbinet revamps exchange offerings

Dylan Bushell-Embling
16 Apr 2009

US-based international voice exchange provider Arbinet is revamping its service offering, adding two new methods of connecting users to its exchange.

The operator has added a more traditional wholesale model, as well as a method for operators to negotiate private arrangements with specific service providers, while still using Arbinet\'s infrastructure and credit management technology to route the calls.

Arbinet\'s executive vice president of sales, Dan Powdermaker, told the new services are aimed at operators that were uninterested in Arbinet\'s traditional services.

"There are service providers out there for whom the exchange model has not worked, for whatever reason - they don\'t understand it, or it doesn\'t fit well with their business processes," he said.

Powdermaker said emerging new carriers, which tend to be focused on competing on price - were some of the primary users of the private negotiation model.

"We also have some carriers that have a lot of bilateral relationships, and they\'re saying, \'in this era where there\'s significant pressure on price, on credit, maybe we should take the 20 smallest bilaterals we have, and effectively outsource that to Arbinet\'," he said.

Despite the revamping, Powdermaker said there is now more need then ever for an intermediary exchange service. There are now "hundreds or thousands of carriers, and the dial plans are extremely complicated," he said, creating a need for exchange services that is only exacerbated by shrinking voice margins and the evolution of new technologies such as VoIP.

"The companies that can do well have to be very efficient and have a great cost structure in order to be able to survive in a low margin business." Large operators typically garner just 5% of their revenue from international traffic, making it difficult to justify expending time and energy negotiating the thousands of deals required to maximize revenue, he added.

And as voice traffic becomes considered a commodity, it makes sense to trade that commodity on an exchange, he said.

Powdermaker said he disagreed that the business was just a scale game, and that the carriers with the most infrastructure have the lowest costs. "At the largest scale you have the opportunity to have the lowest costs. The largest carriers in the world do not necessarily have the lowest costs.

"If you look around the industry and talk to some of the giants - the international diversified companies - they are looking at outsourcing in various ways parts of their international business, they do not have the cost structure or they do not have the organizational structure that supports what they\'re doing," he said.

Arbinet, which sees about 20-25% of its traffic flowing in or out of Asia, has 1,100 active customers, Powdermaker said. While 18 of the biggest 20 companies with international voice traffic use its services, its customers also include every major prepaid calling-card company as well as a number of Tier 2, Tier 3 and niche players.

The global recession has definitely had an impact on the international voice business, Powdermaker said, particularly for the prepaid calling-card market.

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