By Alok Saboo on September 10th, 2008
Don’t we all hate counting minutes while calling? Fizzcall, a UK based VoIP service provider, seeks to put an end to this by charging per call instead of per minute or second. Fizzcall charges 25pence (approx 50 US cents) per call irrespective of wherever you call. Each call lasts 60 minutes and you are free to call again to the same number. You can try Fizzcall for as low as 1.5 GBP and determine if it is for you.
On the face it looks like a decent offering and so we should expect decent numbers for the company. But the more I thought about it, the less convinced I was about the company’s business model. Here’s why…
- Fizzcall charges a flat rate of 25 pence as long as your call is less than 60 minutes. How many (in percent) of your calls are greater than 60 minutes? I would be really surprised if the figure is in healthy single digits. From my own experience, it is difficult to talk for that long on a regular basis. Not to forget calls lost, guests arriving, and wrong timing of the calls.
- So looks like Fizzcall may not target the vast majority of phone users, but would rather concentrate on a select few (heavy users). There is nothing wrong with this, in fact it is a great strategy if the company can make profits out of this segment.
- Even this looks unlikely to me. Assuming that most calls do not last for 60 minutes, this offer would appeal to people living in countries where the VoIP rates are still steep. For example, SMSDiscount charges $0.997 per minute for a call to Cuba. So if you want to call Cuba, you would greatly appreciate this offer, even though your call length may be about 15-20 minutes. Note that the call volume in these countries is anyways low (read smaller customer base).
- But if you are in the US and want to call India, you may not be very excited about this offer or at best you would use it for those really long calls (read a minor fraction of your calls).
- So, most of the customers using Fizzcall will have at least one more VoIP providers for their regular calls.
- In essence, Fizzcall’s target population is very narrow and even within that population the likelihood of it getting 100% share is very slim. It will share the booty with other VoIP providers.
What is the implication?
The rate charged by Fizzcall is based on some assumption of the traffic pattern. The belief is that customers from the profitable countries will cross subsidize the customers from the not so profitable countries. What happens if their assumptions go awry and they attract all the “non profitable” customers (which is a possibility as per my arguments above).
Thus the small target base and the possibility of attracting the not so profitable customers can spell doom for the company. So if I am an investor, I would not be comfortable putting my money in Fizcall unless the company can convince me about their assumptions. It would be interesting to get a word from the company officials about this aspect.