> Trixter aka Bret McDanel wrote: > >> On Sun, 2009-01-04 at 18:09 -0500, Kristian Kielhofner wrote: >>> On 1/4/09, Alex Balashov <[email protected]> wrote: >>>> I think if this gets traction you will see a lot of providers doing >>>> ultra-low bait-and-switch rates. Most cannot afford to be in a price >>>> race to the bottom. >>>> >>> Agreed. >>> >>> This current race to the bottom, while somewhat inevitable, is not >>> necessarily a good thing for customers. >>> >> >> to a point this is where the ISP market was just over 10 years ago in >> the US. Race to the bottom, then they discovered things like churn rate >> costs, and all that. They started charging set up fees, many providers >> went under or were so strapped for cash they sold to the competition >> that had the resources to float at/near cost and all that. >> >> When the dust settled there were far fewer providers, and any provider >> with fewer than 3000 customers basically was gone. > > Speaking as someone whose professional background prior to getting into > VoIP was in the small, independent ISP industry (US), I will observe > that this is a very controversial subject. The history of that industry > is heavily tied up in the regulatory and legal climate, within which > even relatively small shifts had tectonic effects in their creation and > destruction of business models. > > The most immediate cause of the all-but-death of the independent ISP > industry in the US is widely seen to be the FCC's reclassification of > DSL as an information service that the ILECs have no obligation to lease > wholesale components of at regulated rates to competing ISPs. There > were others, of course. > > There are two basic prevailing moods within that discourse, and it's > worth taking a look at them to see what lessons can be taken away for > the small VoIP world--the one most of us are participating in here on > this list. > > Fundamentally, there were two structural "waves" on which the > independent ISPs capitalised: > > 1) Early to mid 1990s - > > The first was the appearance of dial-up Internet access: order PRIs, > get a RAS box (Portmaster, TNT, TotalControl, etc.), set up a mail and > web server, provide tech support, and pocket cash. Then the ILECs - the > folks who owned the physical copper plant and transport network from > which all this value was being extracted in such a lucrative way - > decided to get into that game themselves, on a much lower cost basis > since they own the stuff. > > The price of monthly unlimited dialup crashed to under $10 as a result, > and so simply offering it no longer amounted to any kind of value > proposition in itself. > > Of course, the emergence of mass-market broadband was the other key > reason why dialup was moribund and why the window of opportunity there > was only a few years (the so-called modem boom). By 2000 (that's an > optimistic stretch), if you hadn't sold your formerly prosperous dial-up > ISP and walked away, you were screwed. > > 2) Late 1990s to middle postmillenial 00s -- > > The Telecommunications Act of 1996 opened the local exchange loop to > competition. Most people in the VoIP world know TA96 for having > essentially created the legal phenomenon of the interconnected CLEC. > What somewhat fewer people know is that TA96 also required that the > ILECs lease certain parts of the ADSL broadband delivery infrastructure > stack (DSLAM ports, ATM/Layer 2 backhaul and handoff, line sharing, > provisioning, etc.) to competing ISPs at rates that were, until about > 2005 (+/-), regulated and fixed to a certain extent. So, big bad telco > could provide DSL, but it also had to allow other ISPs to use their > plant to provide DSL with room for a semi-decent margin in a relatively > turn-key. > > (No such obligation was levied upon cable companies. See: > http://en.wikipedia.org/wiki/National_Cable_&_Telecommunications_Association_v._Brand_X_Internet_Services) > > While the ILECs dragged their heels on actually getting a lot of the > infrastructure and B2B backoffice / provisioning stuff to make this work > rolled out in the wake of the ruling, in the end it fundamentally opened > up an arbitrage opportunity for small ISPs. They could use ILEC > facilities to provision DSL while delivering as little or as much > value-added service differentiation as they wanted and still remain at > least rudimentarily price-competitive, although of course the relatively > thin margins scale better at the level of a multibillion dollar > corporation than a local/regional ISP with a few hundred or a few > thousand customers and cost basis was always a problem. > > This game ended with a 2005 FCC ruling that reclassified DSL and > effectively ended tariff controls, allowing the ILECs to float the > pricing for wholesale access to private commercial agreements and > effectively price the independents out. The ILECs weren't so uncouth as > to simply deny access; mostly, they just raised prices so that a lot of > ISPs' wholesale loop costs were close to the price at which they > retailed the product. > > The margins were pretty shabby to begin with, there was plenty of ILEC > "slamming" of wholesalers' customers going on, and support costs and > overhead were high. So, among those ISPs that were left by 2005, there > is a broad consensus that that's the day of the industry's death, but > some will say the end of profitable dialup was really the end. > > ... > > As mentioned above, there are two dominant reactions to this situation > in the community. One is that the ILECs are corrupt, vicious predators > whose collusion with the Bush FCC and the Administration's connections > to megacorporate telecom lobbyists suffocated a valuable and important > business model. A lot of the ISP owners sit around and gripe still > about how the assholes at AT&T did this to them and Verizon that. > > There is the additional - and very justifiable - cause for resentment > that has to do with the fact that the ILECs' buildout of their networks > and physical plant over the last century has been anything but the > purely private endeavour that they attempt to characterise it as when > arguing that there is no reason they should be required to lease it to > competitors on advantageous terms. On the contrary, they have been the > beneficiaries of billions in grants, subsidies, funds (stuff like USF), > state-sanctioned legal advantages (i.e. easements, rights-of-way, > leases), revolving-door nepotism in government regulatory bodies, > monopolism, and so on. The argument here is that in this respect, the > last mile of the PSTN operated by the telcos is more of a public utility > - like the road system - than a fixture of adventurous and innovative > private investment; thus, the least they should do is be forced to open > it up to competition on favourable terms. > > On the other side of the coin, it could be reasonably said that TA96 was > conceived as a modernisation initiative to incentivise the build-out of > competing *physical* *networks*, with the idea that increased > competition will drive down prices and spur innovation in broadband and > other telecommunications services. Instead, most of these small > independent ISPs latched onto easy money in the form of legally > supported arbitrage/resale opportunities without actually building > anything of substance themselves, with a few notable exceptions (mostly > from wireless-ISP-in-the-boonies land). POPs and RAS boxes and circuit > orders out the yazoo, but no parallel fiber transport cores, FTTH, etc, > etc, etc. In other words, the "meat" of the service. Instead, most of > them put faith in the small business mystique (your small, friendly > local company that knows you by name and gets you superior customer > service as compared to scripted, outsourced/offshored call-center > monkeys from the Bells and cable MSOs) as a marketing technique. > > Instead, they just resold Bell facility while they could. And in the > end the market rationalised away this inefficiency (with a little help > from some regulatory bodies) and gave them the finger. It turns out, > according to this account of the situation, that the companies best > equipped to provide pricing efficiency and value in consumer-grade > broadband are the ones that literally own the network (or at least 90% > of it) it's all framed over. > > There are survivors, of course; folks that hang on providing > higher-margin business services (whatever the justification for $150/mo > "business DSL" that is the exact same product as residential, some > businesses are willing to buy into it), value-added service > > Anyway, it's obvious that the VoIP ITSP business is not like this in > many ways. What keeps VoIP wholesale PSTN O/T providers going isn't so > much that they are taking advantage of a legally mandated arbitrage > lever as that most of the big carriers that offer this stuff wholesale > don't want to deal with small amounts of traffic. But there's always > pressure to "cut out the middle man," and as these carriers roll out > newer and improved SIP trunking products, the pricing efficiency and > dimensional flexibility of that offering (as it relates to volume > commitments) will increase. > > In the end, what you are offering as a wholesale O/T provider is going > to become commoditised and come down to price. More and more people are > going to simply find a way to go around you and go to your suppliers. > Domestic LD in the US has already collapsed to the point where I fail to > see how anyone can make any margin off customers that have even a little > bit of commercially viable volume (100,000+ minutes) to the table and > actually know how to shop for deals. And no market opportunity that > relies on people simply not knowing how to get what you're getting will > last forever; you have to add real value. Some of that can be achieved > through neat rating engines and nice OSS/BSS systems and other business > process-related value propositions, but at the end of the day, when the > gap in quality narrows, people are going to want to go straight to the > farmer to buy their wheat. > > -- Alex > > -- > Alex Balashov > Evariste Systems > Web : http://www.evaristesys.com/ > Tel : (+1) (678) 954-0670 > Direct : (+1) (678) 954-0671 > Mobile : (+1) (678) 237-1775 > >
Alex, Thanks for the small lesso in telecom. I think the minute market is shot. It's like what the web hosting business used to be. If I charged $120.00 a month for a server and my customer found one for $115.00 they would leave right away. What I have found (as I am sure many others have) is that there are plenty of customers out there that are looking for service and they are willing to pay for it. While I am not the cheapest out there I give customers what they need and they are willing to pay for it. By sevice I mean A)Customer service/support B)Give them what ever they need. If they need a customly built dialer they have one in a few days. Most of the time when they buy equipment from you (e.g. dailer, PBX etc.) they are willing to get the minutes from you even if it is a bit more if they see that the service is good. At the end of the day people need reliability. _______________________________________________ --Bandwidth and Colocation Provided by http://www.api-digital.com-- asterisk-biz mailing list To UNSUBSCRIBE or update options visit: http://lists.digium.com/mailman/listinfo/asterisk-biz
