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Re: Article - "skype killer" carrier grade app filter

  • From: Andre Oppermann
  • Date: Tue Sep 20 08:42:58 2005

Fred Heutte wrote:
The cover story of the Economist this week (with a typical dollop
of hype called "How the internet killed the phone business") is about Skype and VOIP as a "disruptive technology" (in Clayton Christensen's sense) that is upending the wireline world but is even more of a threat to the mobile/cellular carriers.
Skype has only a modest presence in the US now but the
worldwide numbers are pretty staggering:

Sandvine, a telecoms-equipment firm, estimates that there are 1,100 VOIP providers in America alone. But the trend is worldwide. IDC, a market-research firm, predicts that the number of residential VOIP subscribers in America will grow from 3m at the end of 2005 to 27m by the end of 2009; Japan already has over 8m subscribers today. Worldwide, according to iSuppli, a market-research firm, the number of residential VOIP subscribers will reach 197m by 2010. Even these numbers, however, do not include people using VOIP without subscribing to a service (ie, by downloading free software from Google, Skype or others). Skype alone has 54m users.

Well, actually projected to have 54 million by December, up
from about 15 million at the beginning of the year. These are
the growth rates claimed for the net 10 years ago but which we
knew were overblown.
Of course not all of those "users" go much further than downloading something and maybe trying it out. But obviously the Bell business model is dwindling fast and the life of the network operator only gets more, um, interesting.
The entire VoIP hype is based on gross misunderstanding by various
"analysts", clueless marketing people and some political agendas.

Fist of all a clear distinction between "VoIP the technology" and
"VoIP the service business case".  Unfortunately these are more often
than not intermixed.  "VoIP the technology" is nothing spectacular.
It just replaces a wire with analog voltages with voice samples
in packets.  Instead of a wire and a TDM switch you've got a wire
and a packet switch (or router if you prefer).

"VoIP the business case" is something entirely different.  Of course
it does leverage the "VoIP the technology" together with an existing
network, the Internet, to transport voice.  Now it gets interesting.
When done as intended by god VoIP is a pure P2P concept.  Both parties
are connected to the Internet through their ISP and exchange voice
packets directly without anyone in the loop.  This is how Skype-basic
works.  Obviously there is not much money to be made other than selling
the Internet access.  The only requirement above an Internet connection
is the VoIP directory service to find out where to connect for the remote
party.  This directory will eventually be something like ENUM leveraging
the existing DNS infrastructure.  Not much money to be made here.

Then where does the money come from for "VoIP the business case"?  Very
simple actually.  From connecting someone using VoIP over the Internet
to the PSTN.  In "VoIP the business" case you only get charged for calls
going to the PSTN.  If one day a critical mass of users has VoIP as
their phone connection, the volume of calls to the PSTN will sharply
decline and "VoIP the business" case will vaporize.  So "VoIP the business
case" is only a transition phase substituting an overcharged PSTN business
case.  Other than special taxes and universal service funds there is
nothing preventing the PSTN to provide other PSTN destination calls
for the same tariff as "VoIP the business case".  The PSTN telco's already
have the switches and one day they find out that they get more return on
their investments if they lower the price of calls, rather than having more
and more people substitute their switches for the Internet.

However despite all this "VoIP the business case" or "VoIP not really a
sustainable business case" there is one certainty.  Everyone who wishes
to make a phone call, either on the PSTN or Internet, has to have a
connection.  With the current trend towards "VoIP the technology" it
spells bad news for those providing PSTN lines and good news for those
providing Internet lines (firstlast mile, not transit ISP's).

It's up the reader to figure out who provides a suitable firstlast mile.
So there is not much point in preparing the coffin for the Bells.  Eventually
they will adapt and survive, kicking and screaming.

Andre Oppermann

You are free to distribute this text provided you attribute me as the
author and source.

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