Echoing the similar thoughts of many, Techdirt today talks about the VoIP bubble and the response of the US incumbents. The money quote:
Everyone seems to forget, of course, that BellSouth actually tried to offer VoIP for about a week a year ago and suddenly someone higher up freaked out and pulled the plug. While the big telcos claim they’re jumping on the VoIP bandwagon, there’s still going to be an internal struggle of cash cow vs. emerging technology. I’m not convinced that the telcos are prepared to cannibalize their own business yet.
Indeed. My personal view: the incumbents have no real commitment to VoIP roll-out, and the key motivator is to undermine those who try by pulling the bottom out of the VoIP market. The lack of spin-offs explicitly motivated to undermine the legacy business talks louder than a thousand press releases. Any VoIP upstart inside a legacy telco has to face a negative ROI according to traditional cost accounting; it requires “irrational” resource allocation to compete against other projects.
Expect also to see products that are deliberately short on service and performance that give VoIP a bad name — this is a marketing struggle, not a technology battle, and anything goes.
My prediction is that in the short term this strategy of resistance to change will meet with some success. The initial entrants will be crushed because dropping the price of PSTN lines is a viable response to a VoIP PSTN clone. The average user isn’t quite ready yet to roll their own telco service.
But the longer-term effect will be disastrous. The incumbents will fail to build end-to-end compatible business models in time: they need to find end-to-end-to-end businesses where the middleman adds value.
IBM and friends will trickle down enterprise VoIP into the middle market. Microsoft will drive integration with Exchange and demand for end-to-end IP real-time communications. The mega-ISPs will pick the winning bits out of Skype, Voicepulse, Vonage, Stealth, Free World Dialup, etc. into a “plug it in — turn it on” consumer proposition. You can’t drop the price of PSTN calls below zero and stay in business.
Posted by Martin Geddes at 01:30 PMTrackBack URL for this entry:
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In the end it comes down to a fundemental problem in business model. As intelligence moves to the network edge the traditional "smart networks" have no chance to survive at all. I thought your figures in your Nov 6 Holy **** article were interesting to say the least :-)
Their investment in copper and circuit switched technology is too much to abandon and their culture and shareholders simnply wouldn't let them if someone had heballs to stqand up and say do this or die. If I had any stock in an ILEC today I would be dumping it because they are totally doomed.
Up hereni Canada there is an additional pressure starting to form on the incumbents. That is the emergence of community owned networks that plan to encompass huge tracts of the country and are being funded in part by the federal government.
I have been closely involved at various points over the past 3 years in the planning of one network that will encompass some 140 communities in an area of around 30,000sq. mi. and will use a combination of FTTH, HFC and Wireless to bring broadband to a largely rural area that, except for a dozen cities (and only because of pressure this project and some earlier studies I did put on them) have been totally ignored by the local ILEC and national Cableco.
There are already providers lining up to offer VOIP to the roughly 60K residents in this area and they are eager to get it because almost every call in this region is a LD call. This is a region where even if you can get a T1 it's going to cost you $1400 US /mo and that's without Internet on it - want Internet on it, then pretty much double the price. Guess what this network is going to do to that model!
The ILECs response? try and bad mouth the effort, try and sign unsuspecting commercial clients to long term contracts by discounting 10 to 20% over their already outrageous fees, and mostly try and interfere on the political level - lots of FUD. What they are NOT doing is facing up to hte death of their business model and trying to find a way to build a whole new consumer market.
Admitedly a lot of the problem lays in the public nature of those corporations. Shareholder return NOW is pre-eminent, not what shareholder return will be in a decade. This is compounded by the incentive/bonus plans for top executives. They can't go to the shareholders and say we have to abandon billions of dollars of infrastructure well before it's planned obsolescence - they would never survive the bloodletting and they would lose those juicy bonuses.
They're doomed - sell your stock now :-)
Posted by: at December 11, 2003 10:34 PMWell, I wouldn't call Skype "quite a revolution in communication technology ".
I remember we used to talk with a VoIp software long before Napster invented P2P.
It is true, we could call and talk, and understanding was something else.
Skype looks much better if you consider the voice quality, thanks also to the fact that now we have faster connections.
But what people really want?
When they want to call they want a telephone ( mobile), they want to dial a number and they want to talk.
If possible cheap and, why not for free...
The real revolution is what we can give:
www.worldonip.com
1) Access point that reaches up to 15 Kilometers and up to 90 users on one line.
You can have as many as you want...
2) Wireless mobile IP telephone that works in a coverage of 15 Kilometers( 10 miles) costs around 200 dollars, is as easy to use as any other GSM .
3) Any phone can call for free another Ip phone, locally, Nationally, Internationally, Intercontinentally.
Can call any other phone using a termination.
The VoIP Access Point costs around $1400 and you can share it among 90 people.
This is a Technological revolution.
Hard to believe, but it is true.
Marconi invented the Wireless and Antonio Meucci invented the Telephone, it happens that we talk the same language...
Patrizia
patrizia@worldonip.com