James (and Kenneth),
I re-read Kenneth's post and realized that it was directed to you. I didn't mean to interject the way it may have appeared.
Re your question:
>>I'm looking for the recurring revenue stream aspect of
the IP network be it voice/fax whatever.<<
While the FCC decisions will have something to do with this, conceivably at some point, I prefer to leave that part out and focus on some of the fundamental architectural issues and their associated cost implications as they would apply in the absence of such reg/leg. For the purpose of answering your post let's assume that the traditional carriers and the VoIP providers who are registered as Interexchange carriers (IECs) will continue to pay access charges and the ITSPs who use VoIP and who are not registered as IECs don't.
(If you read between the lines of that last statement, it ought to tell you where I think the line will be drawn at some point vis a vis the USF, taxes and access fees.)
The revenues and margins that carriers can hope to achieve in this dynamic and emerging model have much to do with their levels and methods of capitalization, and their respective infrastructure build-outs. The larger, well-heeled bell-headed carriers and the top-tier ISPs and specialized SPs know what this is all about, because they have done this for a living for a very long time. Large dollar budgets and take downs for construction don't scare the boots off of them. So have their spinoffs, such as Annunziata, Nacchio, Mandl, Crowe et al.
But many of the smaller ISPs, the ones who ostensibly pose the greatest level of potential threat -and benefits- to the status quo, according to some, don't have a blessed clue.
Worse, they don't think in terms of raising an eight-, nine- or ten-figure sum to do their build outs and finance their ongoing operations. They are simply too busy with the minutiae of ISPing and dealing with bad accounts, account chruns, spamming issues, security, freedom of speech, settlement obligations, the plumbing and lighting, the carrier line costs, etc. They don't think on this kind of scale, generally, and this is, after all, what it's all about going into the future: Scale.
And the economies of scale. And the ability to reach far places and deep crevices without the need for peering and hand offs to other peoples' (competitors') costly facilities.
Nowhere has this been better exemplified recently than by AT&T's actions to cease and desist from entering into any further resale agreements for local services. The margins were just too slim, as the story goes, and I believe it. They would rather acquire CLECs (e.g., TCG and its Associated ACC subsidiary) and go after the business sector almost exclusively, and experiment with Wireless Local Loops for the time being in some residential markets, than spend their time doing pass-through billing activities for free for the LECs. But I digress, again...
Getting back to the small ISPs, there are those who are serious about the Internet side of things and who will refrain from Voice except to accommodate standards-based offerings as they are tried and sanctioned by the IETF, and then... there are those who are in it to make the fast kill using whatever means is available to them, usually proprietary (which almost always means that they can only talk to themselves over whatever they choose as a platform, or have an extremely limited reach due to the sparsity of like models available in the universe). Or, they seek to grow their subscriberships and stock prices in a short time frame, with an early exit strategy behind it all.
For example, the latter are those ISPs who will not look to enter into a long term IRU lease (indefeasible right-of-use, sometimes tantamount to an outright purchase), or ownership arrangement of strands of fiber or equivalent wavelengths on long routes. Likewise, they eschew anything that has to do with established telephony, including directory services for POTS and SS7/AIN functions (everyone's established area codes and seven digit telephone numbers, and how to get there; Oy!).
Ordinarily I'd say more power to them for looking to make the buck. But beware. What they are doing is creating infrastructures that are not extensible, and without true integration capabilities (except to become a glorified VoIP tie-line company, dependent on the more intricate and expensive fabric of their future competitors), and, as a result, these outfits will find themselves without suitors. Unless one considers ten-to-twenty cents on the dollar, suitable. Just when they think they've arrived in the end zone... nada!
Hence, they will pay top dollar for trunking their voice payloads all around the world over "rented" facilities from the top five or six carriers who will eventually go nose-to-nose with them in every way possible. This leaves them with barely anything to show but a pittance (or, worse yet, recurring and mounting losses) in the income column.
Even with TCP/IP, the greatest single cost component lies in the wide area leased lines and access pipes and ports to upper and lower tiers of the "network architecture" (an odd word to apply to the house of those who do not believe in structured networking, isn't it?)
A startup ITSP, or, an established-voice-reseller-turned-ISP/ITSP, will spend millions on routers, gateways, web widgetry and back office systems <sometimes> and multiples of those amounts on line rentals in two years. But they will refuse to spend a dime on IRUs or other long-haul facilities deals. Evidence that this is changing by some intermediate sized companies is now apparent, and made possible by some of the _temporary_ fiber glut made available by the pulls of the past two years by companies like IXC, QWST, and MFNX. But these fiber acquisitions are not cheap, and not without end in supply (where the entire strand is concerned -- not DWDM-derived), and this should serve to better clarify a previous statement above and provide you, through implication and inference, with my answers to other questions you've asked:
Those who can afford the fiber in the long haul portion will reach the short list in VoIP at the expense of those who cannot, eventually. Those who cannot afford it had better start looking for another occupation.
The qualities of altruism and egalitarianism on the 'net, when it comes to sharing and openness among all, have another year or so left in them. As for the newer ISPs who think small, I think that their days are definitely numbered, IMO, even before they leave the gate.
We are beginning to see strong evidence of this from the larger ISPs' abandonment of egalitarian principles already, in the way of "dumping" of non-cost-effective and unprofitable residential and small business accounts. Give this another couple of years, at most. Where voice is concerned, the decline in the viability of the smaller firms will not be an abrupt one, rather it will be marked with a gradual series of gasps by hold-outs, until the top tier takes it all, where the WAN is concerned.
The Local Area Networks and campus environments are another set of stories altogether, requiring more discussions. In those local environments IP will flow like electrons on the power grid, eventually. See my post to Kenneth in this regard.
All of these are, of course, only my most humble opinions.
Regards, Frank Coluccio |
