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technonerd
technonerd
12/5/2012 | 1:54:04 AM
re: Pradeep Sindhu, Juniper Networks
Look at the cost per bit of TDM gear vs. packet gear.
That's a meaningless comparison.
stephenpcooke
stephenpcooke
12/5/2012 | 1:54:01 AM
re: Pradeep Sindhu, Juniper Networks
Tony said:

First, the operating revenues are going to fall, no matter what technology is going to be used to provide the service.

This seems to be, unfortunately for the carriers, true. However, this makes it an even harder business case for spending additional funds to replace existing equipment.

Second, working, revenue-generating, paid-for equipment is not free. There's maintenance contracts, power, space, etc. At some point, the power bill on your 5E exceeds the profits that you make from it. Then what do you do? I grant you that this might not be right away and I'm not suggesting that this would happen immediately.

You are also right that opex is non-zero for existing equipment. I hope that you are not implying that it would be for something else? You are also right that carriers have to keep a sharp eye on opex vs. revenue for everything in their network. If the opex exceeds the revenue on a given piece of equipment it will still not be replaced until the difference is greater than the combined difference and the cost to remove it and install something else. The point being that it is a very large business case that is required before anything is removed from an operating network. Other considerations include OSS integration, whether the old equipment can be sold to other carriers, etc.

Third, again, the business case is about cost. Pre-deregulation, it didn't matter, but now we have the ability to deliver the voice minute for less, and some customers are drawn to it. And even if you don't believe, if you're competition deploys gear that truly gives them a lower cost structure, they will eat your lunch.

Sorry Tony, but this seems vaguely familiar... CLECs perhaps. You seem to be ignoring the barrier to entry of the fear of change. CLECs found this one very difficult to overcome. The incumbents were able to meet the reduced pricing structures and were able to keep the vast majority of their customers. The other point is that the incumbents, if forced to realize that there is a strong competitor in a key market have the option of buying that competitor. Then what happens to technology innovation in that market?

We have a saying in the Valley: you can eat your children for lunch, or someone else can. New technology inevitably drives new price points, which in turn creates more competition. Ain't capitalism grand?

Capitalism can be grand but it is not just technology that drives new price points. With margins so low on telecom services there is a higher barrier to entry now than there was 4 years ago. Niches exist and will be exploited by many players, but I haven't heard of any services that packet networks alone are capable of that would displace existing infrastructure.
Tony Li
Tony Li
12/5/2012 | 1:54:00 AM
re: Pradeep Sindhu, Juniper Networks
Look at the cost per bit of TDM gear vs. packet gear.
That's a meaningless comparison.
-----------


I beg to differ. It goes directly to the cost of providing service. Since we're all using common fiber, the net economic difference comes from the cost of capital and operations to deliver a bit. The capital difference is substantial, significant and an important consideration in carrier profitability.

Tony
technoboy
technoboy
12/5/2012 | 1:54:00 AM
re: Pradeep Sindhu, Juniper Networks
Re Post 57

The enterprise already has and IP telephony in the enterprise is maintstream. It accounts for most new deployments in this space. The main reasons the enterprises are deploying the technology. Consolidation of their separate voice and data networks, reduction in MAC, consolidation of messaging and call center applications, mobility, and the use of new workgroup and collaborative applications that leverage SIP. Now the carriers have begun to role out their VOIP networks. The next 18-24 months will be interesting to say the least.
technoboy
technoboy
12/5/2012 | 1:54:00 AM
re: Pradeep Sindhu, Juniper Networks
Re Post 62

Lets take the first bullet. Operating revenues continue to fall from PSTN service. If you are incumbent how do you deal with this reality. You are getting pressure from other wireline providers, from wireless, and now MSO's enter the game. How do you solve this issue if you are an incumbent?
Tony Li
Tony Li
12/5/2012 | 1:53:59 AM
re: Pradeep Sindhu, Juniper Networks
Re: Message 62

Technoboy already made the point about falling revenues. If you want to compete in a world of falling revenues, you basically have two choices: cut your expenses or develop new revenue streams. For the carriers this comes down to either delivering new TDM services with additional value add, or deploying new gear that cuts the cost per bit delivered. I guess that Chapter 11 also counts, but I don't see that as a good business plan. ;-)

No, I'm not suggesting that op-ex for new gear is zero. Not the point at all. I'm just trying to point out that there is methodology in how we make technology shifts that minimize the economic burdens, mitigate risks, and generally make sound managerial sense. The basic premise is simple: the falling revenues are forcing new price points which demand that carriers migrate to newer technology for the efficiency. The fact that it is packets is COMPLETELY irrelevant. This happens at EVERY technology transition. I'm sure that the folks who used to replace relays had this same argument with folks who came along to install solid state switches.

Again, I'm not arguing about replacement. I'm talking about where the continuing growth happens. It's clear that old networks don't die, regardless of technology. I know of folks who are still running a commercial X.25 service. Why? Because it works. Fine. But anyone deploying new X.25 service today would be looked up by most folks as some kind of lunatic. This is where the PSTN is headed. Continued support, but no new services and no new customers.

Re: fear of change. One of the very nice things is that broadband IP service is propagating all on its own, completely without VoIP. The technology WILL become available, and the ILEC's can't do a thing to stop it. Did I need permission to install VoIP? Nope, just plugged in. As long as there is a last mile alternative to the ILEC (cable, wireless), there are ways to compete with the ILEC, even if the ILEC acquires an ISP here or there.

Tony
technonerd
technonerd
12/5/2012 | 1:53:59 AM
re: Pradeep Sindhu, Juniper Networks
I beg to differ. It goes directly to the cost of providing service. Since we're all using common fiber, the net economic difference comes from the cost of capital and operations to deliver a bit.
The PSTN is not about delivering bits. It is about providing a service. The bit count is incidental. Tony, your accounting framework is simply wrong. It's data-centric, making no distinction for the value added by QoS.
technonerd
technonerd
12/5/2012 | 1:53:59 AM
re: Pradeep Sindhu, Juniper Networks
Operating revenues continue to fall from PSTN service. If you are incumbent how do you deal with this reality. You are getting pressure from other wireline providers, from wireless, and now MSO's enter the game. How do you solve this issue if you are an incumbent?
First off, you analyze the cause for the decline so you figure out what you can and cannot do about it. In the context of this discussion, RBOC declines in PSTN revenues emanate mainly from two sources, neither of which is migration away from circuit switched technology for voice traffic.

One issue is that some of your dialup customers are migrating to broadband for Internet use. Not much you can do to keep them on the switch, and frankly not much you'd want to do. All you can do is try to get them to pick DSL instead of a cable modem.

Another issue is that (mostly) business customers are being poached by CLECs. You launch win-back programs, which actually have worked to some degree. On the resi side, some customers have gone to CLECs, such as how SBC has lost 500,000 rural customers to Sage Telecom, one of the few profitable CLECs.

There, if you're SBC there's probably not much you really want to do about that because you're better off having Sage as your poster child for openness and competition. Besides, Sage is poaching some of your least profitable customers. So you let it happen without resistance.

On the wireless side, I'd say you've got a potential ticking time bomb. As soon as wireless NIDs really get into the market you could have massive cannibalization of resi wireline. On that front, you make "second-strike" plans, i.e., if you're Verizon and Cingular does it to you (by distributing Cidco wireless NIDs), then you launch a retaliatory strike.

In the meantime, you probably see if there's a way to hold a quiet, private little chat with your counterparts in the wireless biz to let them know that you'll do unto others. But frankly, you know that this is going to happen.

So ... you prepare to abandon your wireline plant in the long run and relegate wireline voice to "VoIP" over DSL. At least it will be unregulated. The governments will scream bloody murder, in which case you offer to sell them your stranded copper for much more than it's worth. Being governments, they'll do it especially if you've hired Michael Powell as your lobbyist at $2 million a year.
technonerd
technonerd
12/5/2012 | 1:53:58 AM
re: Pradeep Sindhu, Juniper Networks
Sure, there may be a finite amount of surplus right now on the voice side of things, but that cannot last forever. What happens when it is consumed? Do you spend more on expanding your 5E? Devoting more trunks to TDM?
Phone lines grow with the population, which is 1% a year. And given the migration of dial-up to broadband, there will be ongoing shrinkage for a long time. Not to mention even further reduced demands on the switching fabric itself (as opposed to ports) given the average hold times for dial-up vs. voice calls.

I suspect that the RBOCs won't have to buy much if any big iron for a decade or more. In North America, this stuff is in surplus on a scale that railroad tracks are in surplus.


IP is perfectly satisfactory for call quality. It far exceeds what people find acceptable on a cell phone, so please, drop this argument that it's not good enough. I use it daily and it Just Plain Works.
I'm glad it works for you. When I listen to one-way streaming audio over the Internet, it sucks. I can only imagine what end-to-end two-way VoIP would be on a regular basis. Let's face it, there's not a single lie that an equipment vendor and/or a carrier won't tell.


As to the economics, they are very clear: I pay X dollars a month for broadband access. I pay Y dollars a month for telephony. X + Y > X. If I can reduce Y, then I 'win'. Ergo, I make VoIP calls when possible. Now you can argue that I'm the uber-geek who is an exception
Leaving the geektitude aside, I'm going to argue that you're a rich guy who has no idea how the average family budgets its money. If Mr. & Ms. Ordinary in Des Moines, Iowa are looking at their $50 phone bill including LD and hear about Vonage at $35, how will they react?

He'll think about the toys, but she will do the math. She say to herself, "we save $15 a month on the phone, but we've got to buy one of these things to plug into the wall for $100. Then we have to buy cordless phones for $150. And we have to get a cable modem which costs $20 a month more than our AOL account."

Guess what happens? She says to her husband, "Honey, this isn't a good deal at all. We'll have to spend $250 to get started and I'm already getting calls from the dentist's office about Billy's fillings that we haven't paid for. And any of the savings from the phone service are going to be eaten up by the cable modem we have to get."

Tony, that is how real people do it.


but when the enterprise picks up on this so that they can optimise their LD bill, you can bet that it's going to become a common bit of gear.
At least until the president of the company picks up his phone one morning and the line is dead, and the IT staff says the phones and the computers are dead for the rest of the day because they can't get through to Cisco.
Tony Li
Tony Li
12/5/2012 | 1:53:57 AM
re: Pradeep Sindhu, Juniper Networks
The PSTN is not about delivering bits. It is about providing a service. The bit count is incidental. Tony, your accounting framework is simply wrong. It's data-centric, making no distinction for the value added by QoS.

---------------

Hmmm... I'm being chided for mentioning both analog and digital. Obviously I should just cut my losses.

Look, whatever you want to call it, I want to be able to make a phone call for less. For the same call, the VoIP call is cheaper than the PSTN call. Yes, ok, I sacrifice QoS, but then again, I'm happy to sacrifice it if my call isn't life-threatening.

Tony
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