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Wake Up, RBOC!
[November 07, 2005]

Wake Up, RBOC!

By RICH TEHRANI
President & Group Editor-in-Chief

"Wake up Jeff!" If you have a child that watches the Wiggles, you know this saying. I get to overhear it all the time and it is a fitting statement to borrow for the article I am currently writing about BOCs and VoIP peering. It is not news that many analysts are predicting the ever-decreasing costs of telephony due to competition from various companies. There are a number of competitors in this space from less expensive ones like Skype or "relatively" expensive ones like some of the cable-based VoIP providers. I keep wondering why one of the concepts that could change the telecom landscape overnight -- VoIP peering, gets virtually zero media coverage. VoIP articles rarely touch on this topic.


After all, I declared
2006 the year of VoIP peering… If this prediction is to come true; the mainstream business magazines should be catching on the concept any day now. Perhaps this topic hasn't made the business magazine radar yet. I wonder if we need to see a major deal in this space before the coverage of VoIP peering picks up.

I recently spoke at the
Voice Peering Summit in Manhattan and I am still getting calls and e-mails from the people in the audience about the conference and how excited they are about the opportunities afforded them via peering.


You remember the first days of the Internet, where a few people knew about it and interconnected with one another? VoIP peering is becoming the same sort of phenomenon. I would imagine it is analogous to the way e-mail and websites were about a decade ago.

As more and more service providers, government agencies and corporations join peering networks the cost of long-distance will plummet even faster than it is dropping now. VoIP peering really is the ultimate application of Metcalfe's Law. If you recall, this law says the power of the network becomes exponentially greater as more users are connected to it. Think of the power of a single fax machine and then think of the power of a million interconnected fax machines and you'll see what Metcalfe was talking about.

What does this mean in the real-world? It means that the need to connect to peering networks will increase in this same exponential manner as the benefits of peering become exponentially greater as more people connect. In this case the "need" directly correlates to the savings afforded those entities who connect later and later.

If you are wondering who attends peering events, I'll let you know. I attended two voip peering events in two weeks. The Voice Peering Summit mentioned above and the
VoIP Peering Summit at Internet Telephony Conference & Expo in Los Angeles . In both cases the people I met were primarily VoIP providers and CLECS looking for ways to add new services to their offerings and trying to figure out how to save money.

Furthermore I met equipment providers but more interesting was the incumbent telcos I spoke with. These companies know that the future is peering but in general are trying to figure out how to make money from this phenomenon. They want to interconnect but aren't sure how to generate revenus from interconnecting.

That is where VoIP 2.0 comes in. The companies who make a living in communications tomorrow are going to have to be 100% committed to coming up with new applications that consumers and businesses will pay for.

But the mentality of incumbent providers is woefully inadequate to come up with new revenue models. For example, everyone in telecom knows the mobile market has turned ring tones into a multi-billion dollar market. This has been a massively profitable market for many years and yet the wireline incumbents don't seem to be in this space.

By now the entrenched telcos should be the leaders n the ringtone market. Guess what though… Skype is the first major service provider to have rolled these out. Why? Because while entrenched telecom companies for as long as I have been around have been slow moving behemoths, Skype is a new company based on innovation.

For a decade I have spoken about how service providers need to focus on selling services and not minutes and a decade later they aren't but new players such as Skype and Vonage are.

It is a culture issue that incumbents need to change. If the incumbents in every country want to be around in ten years they need to drastically change the way they do business. They cannot live life as usual. They must understand that VoIP, p2p networks and peering are going to erode their core business faster than they ever thought possible.

If the RBOCs don't act quickly they are toast. The longer they wait the less wiggle-room they will have. I just hope the executives who head up the LECs are reading this and every time they overhear "Wake up Jeff," they start thinking about how they can roll out new revenue-generating services to consumers in the upcoming months and years.

-----

Rich Tehrani is President and Group Editor in Chief at TMC. In addition he is the Chairman of the world's best attended VoIP event, Internet Telephony Conference & Expo.

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