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SBC's VoIP End Run
Chris Holland writes "Right on the heels of a positive FCC regulation preventing individual U.S. States from levying taxes on VoIP communications, SBC, according to Om Malik, appears to have brought to a quick end the 'lets not pay any termination fees' party that had VoIP upstarts drunk. Jeff Pulver is also sharing his take."
This coming on the same day they banned a tax on internet service and shoppingr net.html
http://www.nytimes.com/2004/11/20/politics/20inte
Great news for the web
Business Voyeur
Only if its an end-to-end VoiP call. This is related to the VoiP companies such as Vonage, Voicepulse, etc, and calls placed from their customers *to* non-voip lines. And they arent charging *you* the end user, they are charging the voip company for terminating calls on their network (Obviously unless the voipco's want to lose money they will pass the costs on)
If I call another VOIP phone the problem doesn't exist, but the vast majority of phones I call are traditional telephones, not VOIP. That means the VOIP companies would either have to a) charge extra for every call I make to a non-VOIP phone, or b) charge extra across the board. Either approach would price them out of the market.
"Mission Accomplished" -- George W. Bush May 1, 2003
When the Bells were originally forced to open their networks to competition by the '96 telcom act, they lobbied for and recieved a concession called Recipricol Compensation. When the ILECs (SBC, et. al.) and newly created CLECs interconnected with each other's networks, each party would pay the other to terminate calls on the other party's network. This was done so that CLECs could not go after the high volume, profitable, business customers without sending a significant chunk of the profits back to the ILECs in the form of Recipricol Compensation.
Then along came the internet, and all of a sudden the traffic flow to CLECs was completely reversed! Now, instead of making a lot of calls, the largest customers were *recieving* a *lot* of calls, and they were lasting longer (Recip. Comp. is billed by the minute). All of a sudden, SBC decided the old system wasn't fair and that it needed to be changed. They removed the old system from their new InterConnection Agreements (ICAs) with CLECs to the best of their regulatory abilities, and eventually mostly succeded in stopping these payments to CLECs. SBC decided the regulation was no longer fair because it was no longer in its best interest! Now, when the situation has swung the back other way with VoIP, they're trying to change the rules again. It's no surprise they'd try, but what's sad about our political and regulatory systems is that, at least in the medium term, it's probably they'll get their way.
As someone who's facinated by Economics and a big fan of fair and open markets, the current situation with the former Bells seems intolerable. The '96 act has failed to create a truely competitive market in telecommunications because it relied too hevily on the Government's ability to come up with good, fair regulations, and the ILECs good behavior in obeying them. IMHO, what needs to happen is new federal legislation forcing divestment of the ILECs last mile infrastructure and tandem (interconnection) switches from their retail sides. The new entity would retain the monopoly on the physical infrastructure, but be highly regulated- prohibited from selling directly to consumers, price controlled, and would be forced to treat all carriers equally. The retail side would have to compete on a level playing field with everyone else. This situation wouldn't be perfect, but it would be better than what we have today. Look what happened with long distance once the market became competitive! Compare rates 10-15 years ago with those of today. I remember paying $0.25/min for a long distance call of less than 100 miles, and today I can buy *unlimited* local and long distance anywhere in the country for $25/mo through Vonage- less than the local line alone from SBC.
The situation we have now seems to be headed back to a private entity extracting monopoly rents for a vital infrastructure, which IMHO is even worse than state control. Even with all the barriers SBC is throwing up, some CLECs are making it work- but things seem risky. CLECs need a stable, fair, regulatory environment in order to make the investments that will, in the long run, benefit all of us. SBC has managed to virtually eliminate Recip Comp, change other significant terms of interconnection, and eliminate line sharing. If the regulators continue to let the ILECs have their way, the result will be changing rules that bankrupt existing CLECs and discourage new market entrants.
The scary thing is that there were several people on this committee who saw absolutely no problem with a company doing this. Now I don't necessarily like the idea of carriers not being able to do as they wish with their networks, but they shouldn't be able to stab a competitor in the back and make it look like it is a problem with the competitors service.
How is this going to affect Skype? I just now started using it under Mac OS X to call from my Mac in the United States to my sister's landline in Turkey and it ROCKS.
That call should be the same - unless/until the local phone company in Turkey does something similar or your VoIP carrier pays for the local cost jump by raising its overall rates.
As I understand what happened:
1) Several decades back, independent long-distance companies were formed (starting with MCI). They took advantage of court decisions and FCC regulations intended to allow attaching telephones and modems manufactured by other companies, rather than renting phones and modems from the phone company at high rates. But they used the equipment they attached to bypass the phone company's long-distance network, selling long-distance at a lower rate. To use it you had to call their local site, enter your user code, and dial the distant number (much like "phonecards" today).
Of course the tellco didn't like this - and the alternative companies wanted to let you opt to use them as your "dial 1" long-distance provider. This went to court, and ended up with a new "tarrif" (set of standards, fees, and requirement that the tellco provide the service) for connecting long distance service to a local tellco.
2) Then the big Bell tellco was broken into AT&T and the Baby Bell local companies (and a few other splinters) to settle an antitrust suit. At this point the Baby Bells (and a few legacy non-bell local tellcos) could provide their own long distance WITHIN their area, but not with their neighbors. All long distance companies BETWEEN the BBs had to go through long-distance players (AT&T, Sprint, MCI, etc.) on an even footing at the special rate.
3) After a number of years of bulldozing it, the courts decided the playing field was level enough, and let the Baby Bells start merging and get back into the long distance game.
4) The VoIP companies have apparently started up getting their termination to PSTN (Public Switched Telephone Network) phones the same way the early long-distance bypass companies did: Instead of paying the fee for connecting the way long distance companies do, they rented some ordinary phone lines and make their calls on those. This is cheaper. It's also not what was intended by the regulations.
5) The tellcos STILL don't like having their own long-distance service bypassed (and its revenue drained) by an upstart that isn't playing by the rules. The pure long-distance companies couldn't do anything but sue to require the VoIP carriers to connect like other long distance operations and pay that fee. But the local companies didn't like the competition either, and tried to define VoIP companies as phone companies providing local service, thus subjecting them to all the regulations and taxes involved (like the 911 service fee). That finally got settled, just weeks ago. The decisions was "hands off VoIP - the Fed won't regulate 'em and prohibits the states from doing so".
6) Next step would be to try to force them to do their local connect like a long-distance carrier or different local carrier, rather than a local phone customer. (This is actually reasonable. But it might also be slapped down after much expensive fighting.)
So SBC came up with a cute alternaitve: They're making a special new service with a price LOWER than that of connecting as a long-distance carrier but HIGHER than a local phone line. They say it's voluntary, that they're offering the VoIP providers a better deal than they give the traditional long-distance carriers, and that they CAN make this offer because VoIP is an internet service and thus NOT regulated. "We're being good guys!".
But the next step, of course, is to disconnect the local lines, claiming that using them to terminate long-distance service is outside the lines' terms-of-service. Or to tweak the service level actually delivered on those particular lines down to the minimum allowed by the tarrif t
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way