Wednesday, February 16, 2005

The VoIP Revolution: 2005

The exact number of VoIP (SIP) over broadband service providers has grown to somewhere between 300 and 400. While the exact number is not known, one only needs to perform a Google search for VoIP service for your home town to find that there are about 3 to 4 per market. At 235 major markets in the US, the estimate seems believable.

Many of these companies are using a proxy server to interconnect to Softswitch services offered by Qwest, AT&T and Level3. These suppliers control the call state and PSTN terminations for a per call fee. These fees range between 0.53 and 1.5 cents per terminated call. Most companies charge a minimum per month that comes to around $15,000 per month regardless of the usage. Most of these VoIP over broadband service firms have no way to accurately account for completed calls. This leaves them open to whatever charges the IP delivery carriers wish to charge that month. It is rather similar to the early days of the Internet. There are methods of accurately accounting for these calls. However, these methods call for SS7 A-links and expensive equipment and software. They are by no means practical for the typical VoBB provider.

The VoBB provider is attempting to grab as many customers as possible and as soon as possible. Make no mistake; it is land grab time in the broadband world. Each acquired customer should fetch between $1000 to $1500 per customer when the VoBB service company owner finally decides to cash in. It is expected that service providers will spend all of their investment in customer acquisition at the expense of IOCs and RBOCs. The customers they gain will be sold, ostensibly, to CLECs and WiMax carriers. The CLECs and wireless carriers (read Craig McCaw’s Clearwire) will be trying to gain critical mass in their respective markets. RBOCs will use their purchases to gain entry to those pesky IOCs that are beginning to poach on the RBOCs formerly politically protected empires. The IOCs stand to lose the most in this game. They are currently valued at about $3000 per customer. That valuation will be cut to a half or a third when all of this shakes out. Sell your IOC shares now before it is too late.

The VoBB providers have another advantage: no regulation at the state level. This translates into no expensive lobbying (or other forms of compensation) of the PUCs in each state. It means no state taxes on the “Internet” based service. It means no USF and Al Gore tax that go to support government pork projects and deliver little other benefit to US citizens. RUS funds will go to DSL deployments, keeping the rural and underserved connected to the rest of the world.

This year will see the surge of VoIP deployments that will revitalize the industry from a manufacturer’s standpoint. However, the rise in VoIP service means fewer and fewer operational jobs in the telecommunications industry. VoIP service does not require the level of technical support previously necessary when DMS100s and 5ESS switches were plentiful. One only needs a couple of good IP router engineers (CCIEs need not apply) and some good systems people. A typical company with 100,000 customers will only need about 4 or 5 technical support people. Customer service is going to be Web based for the most part and billing will be directly to a credit card. No need for CIOs and expensive IT staff. With this massive shift in relative expense, the RBOCs will have to reduce their cost structure before the end of 2006. That translates into massive layoffs in customer service, IT, engineering and switch support. RBOCs will be transformed into DSL service providers over the next 3 to 5 years. This will require very little staff.

It is the Wild, Wild West out there. The revolution is here. This should be interesting at the very least.

53 Comments:

Blogger Joe Muka said...

Just checking out blogs for ideas to add to my site about voip network and other voip stuff. (I know its a boring subject) I liked your site

October 3, 2005 at 8:35 AM  
Blogger Joe Muka said...

Just surfing around late night and came upon your blog...I liked it.
My site about Residential Voip is hard to have a blog for VOIP stuff and boring too

October 3, 2005 at 9:46 AM  
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October 28, 2005 at 2:28 AM  
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Maybe you can find looking for "careers" at www.directmatch4free.com
Just make sure you come back to this site to let us know how you are doing!

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