Alex
Well said. Bryant ---------------------------------------- From: "Alex Balashov" <[email protected]> Sent: Wednesday, December 28, 2011 1:12 AM To: [email protected] Subject: Re: [asterisk-biz] VoipJet went bye bye? P.S. In a scenario that combines (1) the price race to the bottom that's part of the commoditisation cycle that US PSTN termination is undergoing for some time now, (2) a variable, destination-dependent cost structure, and (3) now exposure to LNP risk for secondary and tertiary providers increasingly thrown into the mix (as Tier 1s shift the risk to their customers through terminating LATA/OCN-oriented billing instead of destination prefix billing), it is fallacious to assume that profit is being made on all calls, or even most calls. While from a commonsensical point of view, it certainly stands to reason that a rational, profit-seeking entity would sell everything offered above cost, in this market the downward pricing pressure is simply too aggressive. If you mark up everything, you can't offer attractively competitive prices, and it's become a marketing requirement to offer rock-bottom prices because the competitors are doing it. This causes business models to rely on increasingly complex statistical gambles and actuarial-style forecasts. Essentially, they make bets about the composition of your traffic and the relative profitability of different segments, and the bet is that the high-margin calls will offset the loss-makers. That's why they want to see your CDRs when they sign up - so the parameters of that bet can be refined. The folks good at this are the ones still making money. The ones who are bad at it usually get desperate and start offering "unbeatable" predatory prices, figuring that adding more customers is more important than realising short-term profit. The underlying theory there is that the cost structure will improve in the near future, so what's most important is to get the business and get the traffic onto the network -- optimising it to make money is just details. Also, remember that many VoIP companies are priming for an acquisition, and in that sense, it's no different than web 2.0 (or 1.0) companies that give away free products with no business model, because as far as they're concerned, "eyeballs" are where their valuation comes from; what the acquirer chooses to do with the customer base and infrastructure is for the acquirer to decide after the founders have been paid off. -- Alex Balashov - Principal Evariste Systems LLC 260 Peachtree Street NW Suite 2200 Atlanta, GA 30303 Tel: +1-678-954-0670 Fax: +1-404-961-1892 Web: http://www.evaristesys.com/ -- _____________________________________________________________________ -- 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
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