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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 76.07-1.1%Dec 1 3:59 PM EST
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To: RetiredNow who wrote (67046)2/13/2005 2:05:07 AM
From: Elroy  Read Replies (1) of 77400
 
All of the major telecom companies are getting rid of their circuit switched networks and replacing them with IP networks. In addition, all corporations are getting rid of their old PBX phone networks and getting IP phone networks. In addition, consumer VOIP is starting to ramp up very fast, since the economics are so compeling.

Intuitively, it doesn't add up.

If VoiP is replacing circuit switched networks, AND the economics are compelling (I guess this implies VoiP systems do the same thing for less), then adoption of VoiP would shrink the total telecom spending budget, not drive growth. It sounds like you can spend $7 on VoiP systems and get the same thing that used to cost you $10 on a circuit switched system. That's great for pure play VoiP companies (which don't exist!), but it causes the whole spending pie to shrink, not grow.

On the other hand, if VoiP DOES cause the whole telecom equipment pie to grow, how can the economics be compelling since it just does the same thing as legacy circuit switched systems?

It's gotta either shrink the total communcations system pie (which I think it does) or it can't have compelling economics since it doesn't provide a new service, it just replaces an older system with the same service.
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