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Summary:

Someone at SBC Communications got to be nominated for the best media strategist of the year award. What a masterful strategy! Announce VoIP plans, then to layer it thick, announce IP-TV plans, and while the whole world was gushing over you (SBC) embracing the future, stick […]

Someone at SBC Communications got to be nominated for the best media strategist of the year award. What a masterful strategy! Announce VoIP plans, then to layer it thick, announce IP-TV plans, and while the whole world was gushing over you (SBC) embracing the future, stick a knife in the back of every potential VoIP rival with a simple, relatively little know yet lethal regulation. In other words, thanks to a regulatory filing, SBC has brought to a quick end the “lets not pay any termination fees” party that VoIP upstarts had started.

There is shock and outrage in the blogger community. I am not a little bit surprised. My stance has been that Bells will win the VoIP sweepstakes. Now take this ruling as an example. Folks at Vonage and Sunrocket are busy building their brands and are spending their money on advertising. AT&T, MCI and Sprint are financially hobbled and are basically saying: we got no friends in Washington anyway. So where are the millions of dollars needed to spend on lobbying efforts. Think of this as a classic Silicon Valley hallucination. The techies believe innovation will change the world. Eventually… meanwhile Washington, the soft dollars, and powerful groups control the future.

Bells have what they want: no regulation and interference from pesky state officials. They have monopolistic control of the last mile of today and the future. They have near total ownership of the wireless waves. They have now basically imposed the old order on the world, and they are going to print money. Good for their share holders, too bad for venture investors. It happened with DSL, and it will happen again. Why does anyone get surprised by all this, I don’t get. Listen up guys: when Bells’ livelihood is threatened they firebomb the opposition. As simple as that. I am told Michael Powell is very upset about this end run by SBC. He cannot do anything much right now.

So you think, it is over. Think again. Many overlooked the fact that Cisco bought a company called P-Cube recently. One of the things P-Cube can do is prioritize the traffic flows on an IP network. SBC could use it and lower the priority of the traffic coming from say Vonage or AT&T. Nothing illegal here: SBC’s network and it can do pretty much what it wants on its own network. Poor quality, lags, dropped packets and soon Vonage customers could be switching to SBC VoIP: which is more expensive, has better quality and of course is highly profitable. Do I like it? No! Will I use it? Of course! Like I will have an option. You thought I was joking when I said monopoly for next 100 years.

  1. Lesson to be learned – don’t watch their mouthes, watch their regulatory departments. And lesson #2 for competitors, eloquently stated by Om ad infinitum, Bells won’t buy you, they’ll crush you. Can’t beat that army of MBA’s and lawyers.

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  2. Potter… u are more succinct than I am. Well said!

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  3. This move could backfire, though. If nobody wants to call you on your land line anymore (because those calls have become the equivalent of long distance), maybe it is time to drop that landline and go Vonage, or cable, or even Skype, or just go completely mobile (though I guess it will have to be Sprint, Nextel, or T-Mobile). The thing about P-Cube is it is only a good idea if everyone is doing it. If it is only on DSL, that is a good arguement to choose cable.

    Just like MVNO has begun to catch fire in the wireless telco world, I think there is a place for Vonage-like service in the wired world. Companies should learn from the IBM of the 80s: if you spend all your time and money trying to hold on to the past, the future is going to get you. The Bells seem to hold all the cards right now, but they are playing a losing game.

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  4. here’s the hitch, though… SBC needs to play nice. Vonage does not provide broadband — in essence, SBC could do a lot better by playing nice and partnering up with these new networks. Every customer that gets hooked on VoIP still needs to stay with bell for the last mile DSL (in most cases). SBC’s playing a dangerous game pushing regulation like this, especially considering every aggressive move they make will hurt their chances of winning the big UNE-P battle. Vonage and the others are gaining more customers at a much faster rate than any of Bell’s previous competitors. If enough customers leave, SBCs termination fees will be useless to them. A final point, SBC moves VERY slowly. Their current VoIP strategy involves reselling Level3 with the HIPCS solution — it takes months to deploy, and per-seat fees are ridiculous.

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  5. It actually is illegal for SBC to interfere in the business operations of their competitors by prioritizing traffic. SBC could do it anyway, but they would open themselves up to criminal liability, so it’Äôs doubtful that they would.

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  6. Ameritech and SBC customer Saturday, November 20, 2004

    We have used SBC for years and the one thing we have learned is they do not care about contracts or laws. They only care about profits. If it is profitable to break the law, they will (like os many other companies).

    Good luck fighting this monster.

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  7. In one fell swoop, a city like San Francisco can implement its own High Speed WiFi system for all residents, for free.

    With virtually no infrastructure to speak of it would be quite simple, and quite leveling.

    Don’t forget that the backbone originated on public campuses of Universities all over the world, we’ve at least got that in our corner.

    After all the gold has been stripped from the initial build out, the whole web may end up public domain any way, with the big boys competing with “Joe DV-cine cam” for audience.

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  8. Forget policy and discussions vote with $$ Saturday, November 20, 2004

    When it comes to the RBOC’s no amount of discussion or policy will fix their attitude or stance.

    If you want change. Vote with your $$. Drop the LL (local loop) — go wireless, VoIP, send PDFs instead of faxes.

    I’m personally proud to be down from a leased line and four phone lines to two phone lines. I’m headed to 0 (subscriber lines) within the next six months.

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  9. I guess I’m confused…. Everyone on the planet pays for terminating calls. Any other telco has to pay SBC to terminate calls on its network, SBC has to pay other telco’s to terminate calls… because it costs MONEY to run the network, and thats how telcos make money.

    Simply because the call ORIGINATED on a VOIP network (and thus, avoids the ORIGINATING charges) doesnt mean it should avoid TERMINATING minutes… because the call is still terminated on a traditional telco network that costs REAL money to maintain and operate.

    This tariff doesnt apply to IP to IP telephone calls… so it makes perfect sense to me.. sounds like they are making it fair for everyone???

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  10. Annonymos, I totally agree with you. I think VoIP had become an arbitrage play on termination fees and as a result you saw the rise of flat rate plans and how quickly the prices were declining. Some one mentioned earlier, that the only way to fight these guys is by going all wireless and dropping the local loop. I think that might be one way of expressing your displeasure. I don’t have a local line, but had to get one when I needed DSL. the whole thing about naked DSL did not really work out in the end. That is a shame. ANyway thanks for your great comments.

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