One company that’s happy about inter-carrier compensation reforms detailed in the FCC’s recent Connect America Fund order (FCC adopts Universal Service and inter-carrier compensation reform order) is Neutral Tandem.
The company gives competitive carriers an alternative to using tandem voice service switches operated by the former Bell companies. In that role, it has competed against least-cost routers who no doubt are considerably less happy now that the FCC has cracked down on phantom traffic and other methods of avoiding the payment of access charges to terminating carriers—practices essential to some least-cost routers’ low costs.
“A lot of the low-cost router guys were accomplishing extremely low rates due to arbitrage,” said Neutral Tandem CEO Ed Evans on a conference call today with press and analysts.
With many arbitrage opportunities now outlawed, “we will be the least cost network based on the breadth of the network,” explained Surendra Saboo, chief operating officer for Neutral Tandem. The new rules “will be beneficial to us in competing for services in the least-cost route tables,” Saboo said.
Overall, Evans said, “there isn’t a significant downside” for Neutral Tandem as a result of the new rules—and in addition to winning more business with existing products, Evans said the company also sees an opportunity to get into new products and services.
Prior to the CAF order, there undoubtedly was a strong temptation for companies like Neutral Tandem to join competitors in what then were merely questionable tactics such as stripping certain information out of call detail records. Indeed some companies may have engaged in such tactics knowing full well that the business built around them might eventually come to an end, but that there would probably be no retroactive penalty for doing so. In other words to take the attitude that it was a lot of fun while it lasted.
Judging by the strong presence from the investment community on today’s call, there now seems to be a sort of shakedown occurring, with investors seeking to separate the companies that took the high ground from those that did not.