Hack13.Back-of-the-Envelope Estimate of Skype Savings
Hack 13. Back-of-the-Envelope Estimate of Skype Savings
Follow this simple method to get a rough idea of your potential savings from switching to Skype. Works with: all versions of Skype. On the Skype Hacks web site, you will find a hack"Save Money with Skype"that leads you through a rather complete explanation of how to determine how much you'll save by switching to Skype. However, if you simply want to get a rough idea of your potential savings, you can do so with nothing more than a pencil, a calculator, and a blank sheet of paper (or an envelope). If you look at your current telephone bill, you can logically divide it into two parts: variable calls, and fixed charges and taxes. It is not uncommon for the latter, fixed charges and taxes, to comprise the major part of your phone bill. Indeed, they represented fully 56% of my old phone bill! You can use Skype to attack both parts to reduce your overall bill for phone services. Bear in mind that adopting Skype does not mean you have to get rid of your existing phone service. You can mix-and-match regular telephone services with Skype, or with other VoIP services (see "Get the Best Deal for VoIP Telephony" [Hack #22]). 2.2.1. Estimate Your Cost-of-Call SavingsEach time you make a phone call, the cost of that call is determined by three pieces of information. The first is the duration of the call; for example, 3 minutes, 12 seconds. The second is the call rate, usually expressed as the price for 1 minute of call time; for example, $0.10 per minute. The third is the call-rounding interval, usually expressed in seconds and rounded upward; for example, calls that are rounded up in 6-second intervals will cost $0.10 X 6/60 ( = $0.01) per unit interval, while calls that are rounded up in 60-second (full-minute) intervals will cost $0.10 per unit interval. Basically, the per-unit rate for anything other than 1-minute rounding is the per-minute call rate (in your home currency), times the rounding interval measured in seconds, and divided by 60 seconds. Shorter call-rounding intervals are to your advantage, so you should know that SkypeOut calls are rounded to the full minute. To understand more about call rounding, you may want to look at "Round Call Time to Your Advantage" [Hack #23]. Table 2-1 shows some examples of call rounding.
This rounding can have quite a pronounced effect, particularly if you make lots of short-duration calls. Suppose, just for a moment, that you can make regular calls at the same per-minute cost as you can by using SkypeOut, but with 1-second rounding. Clearly, in this case, SkypeOut is at a disadvantage, but how much of a disadvantage? Table 2-2 gives the answer.
Table 2-2 shows that if your current phone plan rounds to 1-second intervals (and some plans do), by comparison, when using SkypeOut for short-duration calls, you effectively pay 38% more simply because you are paying for call time you did not use (all those fractions of unused full minutes that mount up). As your average call duration increases, this "call-rounding effect" gradually becomes less and less significant. This is all rather ugly detail, to be sure; but it is simply a reflection of the fact that phone billslike taxesare rather complex. And it puts you in a position to find out whether switching to SkypeOut for some or all of your calls will save you money, and if so, how much money. For the calls for which you'd like to consider using SkypeOut, estimate their average duration, their monthly total, and their average call rate (in your home currency per minute). You can estimate these averages by reviewing one or more past telephone bills, or if you don't hang on to old bills, by guessing your average call duration and your total call minutes per month and getting an average call rate from your phone company's web site. Let me remind you that for this back-of-the-envelope hack, we're not striving for absolute accuracy, only numbers with which you feel comfortable. Remember, you can always come back later with new numbers and redo the analysis. Enter your estimates in Table 2-3.
A worked example, Table 2-4, should make things clear.
Now go to the Skype web site and find an equivalent call rate (or an average of call rates) that matches your existing call destination(s). For example, if most of your calls are to regular U.S. phones, use the SkypeOut rate for the U.S. You can find SkypeOut rates for all call destinations at http://www.skype.com/products/skypeout/rates/all_rates.html. At the top of the SkypeOut rates web page is a pull-down list from which you can choose to have the rates quoted in your home currency. Enter your estimate for the average SkypeOut rate in terms of your home currency in Table 2-5.
Again, a worked example, Table 2-6, makes it all clear.
The effective SkypeOut rate is simply the average SkypeOut rate adjusted upward by the factor for the call-rounding effect. Now you are in a position to estimate your phone call savings should you switch to using SkypeOut. In Table 2-7, per-minute call savings are obtained simply by subtracting the effective SkypeOut rate (Table 2-5) from your average current regular phone call rate (Table 2-3). To turn this number into a percentage, divide it by your average current call rate. Monthly call savings are obtained by multiplying your current typical monthly cost of calls (Table 2-3) by 1, minus the effective SkypeOut rate (Table 2-5), and dividing that by your average current call rate (Table 2-3); that is, by (1effective SkypeOut rate/average current call rate). Your annual savings are, of course, just 12 times your monthly savings.
Table 2-8 shows a worked example.
2.2.2. Estimate Your Fixed Charges and Taxes SavingsIn terms of fixed charges and taxes, your phone bill is a veritable minefield of complexity. You could be forgiven for thinking that it is a conspiracy concocted by your telephone company (usually a government-regulated monopoly) and the government to get from you as much money as possible before you even lift the handset to make a call! Not lifting the handset from its cradle for a month might reduce the cost of your calls to zero, but it will likely have very little impact on your fixed charges and taxes. For that reason, I will assume that your fixed charges and taxes scale in proportion to the number of telephone lines you have. Remember, this hack is a back-of-the-envelope estimate and this is just an assumption. If you don't like it, simply change it and work through the details of your new assumption. To carry out a more thorough analysis, see the web extra hack "Save Money with Skype" (you'll find more details on this at the end of this hack). In Table 2-9, enter your estimate for current monthly fixed charges and taxes.
Table 2-10 is a worked example.
Given the assumption that fixed charges and taxes scale in proportion to the number of phone lines, you will start to save money on fixed charges and taxes only if you can eliminate regular phone lines. Before providing an entry for Table 2-11, you might want to quickly skip ahead and skim parts of Chapter 3, as that chapter has several configurations for Skype that eliminate somein some cases allregular phone lines.
For the worked example, Table 2-12, assume you can eliminate one of your two regular phone lines.
To calculate your savings of fixed charges and taxes by eliminating existing phone lines (Table 2-13), take your existing fixed monthly charges and taxes (Table 2-9) and divide it by your existing number of phone lines (Table 2-9), and then multiply the result by the number of phone lines you intend to eliminate (Table 2-11). You obtain your savings, expressed as a percentage of your existing fixed charges and taxes, by dividing your estimated savings by your current charges and taxes. To convert your estimated monthly savings to an annual basis, simply multiply them by 12.
A worked example, Table 2-14, makes the necessary calculations clear.
2.2.3. Estimate Your Total SavingsNow you're at the easy part, because you've done all the hard work. First, copy your previous entries and results into Table 2-15. Your total current phone bill is simply the sum of your cost of calls and your fixed charges and taxes. Likewise, your total estimated savings are the sum of your estimated call savings and fixed charges and taxes savings. To express your total savings as a percentage, divide them by your total current phone bill. Total estimated savings on an annual basis are 12 times your total monthly savings.
At last, our worked example, Table 2-16, is complete.
2.2.4. Making Adjustments and DecisionsThe foregoing analysis is meant only as a rough and ready analysis of your potential savings from adopting Skype, in one form or another, for phone services. It made several assumptions, not the least of which was that your existing phone plan rounds calls in increments of 6 seconds (or less) and that no other out-of-pocket expenses arise from adopting Skype. In the latter category, things such as a USB box to interface your existing phone system to Skype and the need to keep a PC running all the time if you want Skype available 24/7 are items that you should include in your analysis. How you choose to configure Skype will affect both how you can use Skype and how much money this might save you. I discuss how to configure Skype in many interesting and different ways in Chapter 3. When making a decision, you should also factor in some margin for error to cover the possibility that your back-of-the-envelope analysis is wide of the mark. Clearly, the more uncertain your data, the more margin for error you should allow in your decision making. Of course, another option is to improve your savings estimate by doing a more thorough analysis. What is certain is that before you switch to Skype, some due diligence in terms of analyzing the potential savings and weighing the pros and cons of features gained versus features foregone is required. This book provides some tools and ways of thinking about the issues. But in the final analysis, it's your decision. 2.2.5. See Also
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EAN: 2147483647
Pages: 168