VoIP Switches, Assest Write-Off and Carrier Response
The 2004 VoN (Voice over Network) Conference began yesterday in Boston. I plan to visit the exhibits on Wednesday. I expect to see all kinds of new and exciting equipment and services. What I do not expect to see is a forum regarding the mass adoption of VoIP technology by any telephone company.
It is not difficult to identify the immense savings a company can achieve through the rapid (during a single fiscal cycle) adoption of VoIP switches. However, the telephone companies see a large write-off of assets as being a large road-block to the rapid adoption of voice over network services. The assets written off would be the switches, installation, transport (ATM and SONET) and the oldest, non-GR303 loop carrier equipment.
Equipment manufacturers that have been manufacturing the old Class 5 switches will be dragging their feet as well. Those companies face the loss of billions of dollars in annual revenue if carriers relieve themselves of the burden of unreasonable maintenance and hardware upgrade fees.
VoIP is quite the populist movement in the US. I like using Jeff Pulver’s tag of Broadband Parasites to describe the new wave of companies that will offer 21st century services to both residential and business customers. These carriers will use the DSL line or cable modem of a subscriber and add the value of VoIP. Any person running a small office or home office will undoubtedly adopt Vonage or some other service within the next 18 months.
When this adoption takes place, the carriers that have not added VoIP service will lose those customers forever. They will be seen as the DSL supplier only. Those carriers will then have only one product to sell in a heavily contested marketplace. This has to be a far worse position to be with no hopeful prospects than the prospect of writing off assets.
It is critical that all carriers currently providing TDM based voice services shed the financial burdens placed upon them by Nortel and Lucent. This immense expense of operating the old technology will become so burdensome, companies such as Verizon, SBC and BellSouth will have to react to the change in the marketplace. Reacting after the fact has historically cost public carriers dearly. This is currently evident in the airline industry. The big boys are being beaten by “low cost” carriers. This revolution was brought about by new companies buying newer jets and systems that are far less expensive to operate. Airline hubs seat prices have dropped from nearly $1000 per seat, to about $150 per seat round trip. Sound familiar?
VoIP service will be adopted and will be adopted more quickly by a larger number of customers than previously projected. They will adopt it because the quality is acceptable and the price is about 25% of what they are currently paying. Carriers that simply graft on a VoIP switch to their current infrastructure will be carrying more expense than phone calls. Broadband Parasites will dominate the market. The investment community already believes in this trend and has awarded a record $105 million in new financing for Vonage. So why are the major carriers dragging their feet? Whatever the reasons, the VoN conference will be fascinating.
It is not difficult to identify the immense savings a company can achieve through the rapid (during a single fiscal cycle) adoption of VoIP switches. However, the telephone companies see a large write-off of assets as being a large road-block to the rapid adoption of voice over network services. The assets written off would be the switches, installation, transport (ATM and SONET) and the oldest, non-GR303 loop carrier equipment.
Equipment manufacturers that have been manufacturing the old Class 5 switches will be dragging their feet as well. Those companies face the loss of billions of dollars in annual revenue if carriers relieve themselves of the burden of unreasonable maintenance and hardware upgrade fees.
VoIP is quite the populist movement in the US. I like using Jeff Pulver’s tag of Broadband Parasites to describe the new wave of companies that will offer 21st century services to both residential and business customers. These carriers will use the DSL line or cable modem of a subscriber and add the value of VoIP. Any person running a small office or home office will undoubtedly adopt Vonage or some other service within the next 18 months.
When this adoption takes place, the carriers that have not added VoIP service will lose those customers forever. They will be seen as the DSL supplier only. Those carriers will then have only one product to sell in a heavily contested marketplace. This has to be a far worse position to be with no hopeful prospects than the prospect of writing off assets.
It is critical that all carriers currently providing TDM based voice services shed the financial burdens placed upon them by Nortel and Lucent. This immense expense of operating the old technology will become so burdensome, companies such as Verizon, SBC and BellSouth will have to react to the change in the marketplace. Reacting after the fact has historically cost public carriers dearly. This is currently evident in the airline industry. The big boys are being beaten by “low cost” carriers. This revolution was brought about by new companies buying newer jets and systems that are far less expensive to operate. Airline hubs seat prices have dropped from nearly $1000 per seat, to about $150 per seat round trip. Sound familiar?
VoIP service will be adopted and will be adopted more quickly by a larger number of customers than previously projected. They will adopt it because the quality is acceptable and the price is about 25% of what they are currently paying. Carriers that simply graft on a VoIP switch to their current infrastructure will be carrying more expense than phone calls. Broadband Parasites will dominate the market. The investment community already believes in this trend and has awarded a record $105 million in new financing for Vonage. So why are the major carriers dragging their feet? Whatever the reasons, the VoN conference will be fascinating.
posted by R.J. Walker at 11:42 AM
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