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HeavyDuty
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HeavyDuty,
User Rank: Light Beer
12/5/2012 | 3:10:34 AM
re: VOIP Peering: Incumbent Killer?
"Hmm, that is nice and technical. But you still haven't explained where the $50 in revenue goes when we drop the local RBOC as the voice provider and substitue with packet VOIP."

Yes, I did.

"Or where the IXC revenue goes when the traffic gets transported as VOIP via softswitching."

Also, in the post you're responding to...

"Are you saying the incumbent voice business is just dandy?"

No. What I did say is that when they lose the voice business to a VoIP provider they recover that income by providing leased lines (a subset of the PSTN) to said VoIP provider. In some cases, since the RBOCs and IXCs have kept prices for leased line and functionally leased line services (e.g., MPLS, ATM & Frame Relay, etc...) artificially high, they can make as much or more money without providing the 'voice' application.
HeavyDuty
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HeavyDuty,
User Rank: Light Beer
12/5/2012 | 3:10:33 AM
re: VOIP Peering: Incumbent Killer?
"Yes, they (RBOCs and IXCs)have access networks, but it's at a time when access methods are proliferating. At one time, the only line of communication into a house was copper. Now you have HFC, and mobile networks, and soon, WiMax."

HFC is a layer 1 provisioning method of the PSTN.

Neither mobile networks or WiMax are end-to-end services. At some point, usually very close to the user, a base station hands the signal off to a functional/leased line (part of the PSTN; see previous post) for delivery to a remote end-point.
stephencooke
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stephencooke,
User Rank: Light Beer
12/5/2012 | 3:10:33 AM
re: VOIP Peering: Incumbent Killer?
Hi,

I think that the confusion here is that the RBOCs own an access network that may or may not be used for phone calls. For example, Scott's $50 for phone service and $30 for broadband access for a total of $80 to, say the RBOC (assuming DSL connectivity). If the consumer goes for VoIP exclusively the RBOC loses the $50 in telephone service revenue. If the consumer goes for cable broadband and VoIP telephony the RBOC loses possibly $80 in revenue.

Does that mean that the RBOC dies? Possibly. What we are talking about here is the single largest part of the incumbent's food chain. Connection charges are a significant source of revenue but cannot make up for the higher margin service revenue. Saying that RBOCs still get revenue from layers 1 & 2 is correct but the question is the relative amount of revenue and can they survive without the higher margin stuff? Can they increase connection charges to cover these shortfalls? Possibly but increases of that magnitude would open the doors for competitors (there is a lot of non-RBOC dark fiber out there).

Here is the big question: Given that BT has come out with Fusion (ie: fixed - mobile convergence over an IP core, I'm assuming the WiFi-based handsets), what is stopping other mobile service providers teaming up with cable companies to offer the same service, thereby wiping out the need for home phone lines altogether? This technology essentially provides the path to the RBOCs, or any incumbent, becoming nothing more than backbone providers. Their business models are not cut out for this.

In the US this is not as big a problem as the incumbents also own most of the mobile carriers but this is not true everywhere.

I guess the main point here is that VoIP technology is hitting the carrier's revenue stream in much the same way that the CLECs did. The CLECs caused significant price erosion in the business and long distance arena. The VoIP case is for a complete loss of customers to other types of network providers or the incumbent's own relatively cheap 'unlimited' broadband offerings.

I think what is lost on most people is that any broadband internet connection has become a potential loss of telephone service revenue to carriers.

Steve.
spelurker
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spelurker,
User Rank: Light Beer
12/5/2012 | 3:10:32 AM
re: VOIP Peering: Incumbent Killer?
> HFC is a layer 1 provisioning method of the PSTN.

Not really. The PSTN owns no part of most HFC in North America. (Most HFC is DOCSIS, not TDM, including virtually all IP/HFC) VoIP calls started from an HFC node are only about 50% likely to travel over any RBOC fiber whatsoever. (of course, with RBOCs buying IXCs, maybe this changes)

I think predicting the doom of RBOCs is a little premature, but every "premium service" which migrates away will hurt them.

To play 'devils advocate'... the premium services (voice) are what translate into per-customer revenue and brand loyalty. If people move to VoIP, this brand loyalty disappears, and users migrate to other last mile providers. This turns the RBOCs into IXCs. BellSouth doesn't have much fiber, maybe they don't survive it, but Q, SBC, VZ have/will have full-blown IXC businesses already. VoIP peering eats into the peering point revenue (e.g. MAE East), but someone has to provide IXC service to the VoIP peering point. So "dumb pipe" services grow slightly, proportional to a loss in long distance service, but local POTS (the "cash cow", I believe) disappears entirely.

It sounds to me like VoIP peering is a non-event, as compared to a possible popular move to VoIP.
Scott Raynovich
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Scott Raynovich,
User Rank: Light Sabre
12/5/2012 | 3:10:32 AM
re: VOIP Peering: Incumbent Killer?
"Neither mobilenetworks or WiMax are end-to-end services. At some point, usually very close to the user, a base station hands the signal off to a functional/leased line (part of the PSTN; see previous post) for delivery to a remote end-point."

Understood. But which is a better business -- end-user applications or transport? It seems to me that the wireless providers have done better than anybody.
Scott Raynovich
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Scott Raynovich,
User Rank: Light Sabre
12/5/2012 | 3:10:32 AM
re: VOIP Peering: Incumbent Killer?
Heavy,

Thanks you, that is a better explanation. However, I am still skeptical about several points.

"In some cases, since the RBOCs and IXCs have kept prices for leased line and functionally leased line services (e.g., MPLS, ATM & Frame Relay, etc...) artificially high, they can make as much or more money without providing the 'voice' application."

Really? Where is this revenue growth then? It was my understanding that leased-line pricing is competitive and will become more so as they are replaced with Ethernet.

stephencooke
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stephencooke,
User Rank: Light Beer
12/5/2012 | 3:10:32 AM
re: VOIP Peering: Incumbent Killer?
Further to my previous post in this thread...

A while back I saw a few articles floating around concerning 'naked' DSL services (ie: DSL service without accompanying phone service). With BT's Fusion release I would have to wonder if there would be significant demand for this type of service. I guess the more important questions would be: what the relative price would be for this service compared to the current offering? and What would be the impact to BT of not getting the monthly line rental and calling features revenue?

Steve.
HeavyDuty
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HeavyDuty,
User Rank: Light Beer
12/5/2012 | 3:10:31 AM
re: VOIP Peering: Incumbent Killer?
"The PSTN owns no part of most HFC in North America. (Most HFC is DOCSIS, not TDM, including virtually all IP/HFC)"

Hybrid Fiber Coax is used by the LECs and IXCs to carve a DS-3 out of optical bandwidth for leased line services.
HeavyDuty
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HeavyDuty,
User Rank: Light Beer
12/5/2012 | 3:10:31 AM
re: VOIP Peering: Incumbent Killer?
"I think what is lost on most people is that any broadband internet connection has become a potential loss of telephone service revenue to carriers."

What is lost on most people is that the Internet is run on leased lines that are a subset of the PSTN. If you get DSL (even if you don't get it from the LEC), the service is almost always provided via the LEC's copper pairs. A VoIP service provider backbone is leased lines or leased line-like services from the LECs and the IXCs. The wireless base-station's backbone is also leased/pseudo-leased line services from (if you guessed...) the LECs and IXCs.

Recognizing a pattern?

The local phone company may not get a check from the consumer to it's voice group when a customer choses VoIP, but it gets a check from the VoIP service provider to the leased line/statistical multiplexed services group, and it is sufficiently large to cover the difference; all the LEC's products are really high margin. If the SBC/AT&T and Verizon/MCI mergers go through LECs will be IXCs and IXCs will be LECs almost like before 1984's divestiture of the original Ma Bell. This will cause the size of the check from the VoIP service provider to become increasingly large.

There's a lot of dark fiber out there and most of it has been purchased from bankrupt installers by the ILECs and IXCs, so it often isn't an alternative.

Facilities based CLECs continue to be a slight drain on the LECs income, but they are discovering (the hard way) how expensive end-to-end connectivity is; helps to have had a century's head start as a regulated monopoly. CLECs without physical plant come then go and, for a short time, cause the aforementioned redirection of payments to the LECs/IXCs.

"Does that mean that the RBOC dies?"

RBOCs have merged and practiced anti-competitive behavior in becoming behemoths that will take more than little VoIP revenue redirection to kill.
spelurker
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spelurker,
User Rank: Light Beer
12/5/2012 | 3:10:30 AM
re: VOIP Peering: Incumbent Killer?
> Hybrid Fiber Coax is used by the LECs and IXCs to carve a DS-3 out of optical bandwidth for leased line services.

While this may be true, it is irrelevant to the context of the conversation. What you appear to be unaware of is that HFC is also the medium used by the CableTV operators to provide video and high speed data to nearly all of their customer base.
There are actually more HFC endpoints providing high-speed IP to subscriber homes from CableTV MSOs, than all PSTN leased line & DSL services combined.
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