Comments on: Here Comes Trouble: Saving Big Iron in Telecom

By: Jesse Kopelman

Jesse Kopelman — Tue, 19 Feb 2008 17:03:23 +0000

Alan, I agree cellular voice quality issues are coming from oversubscribing the network. That’s why I was wondering about your raves about analog which responded even worse to such conditions. The reason AMPS sounded great in 1995 is because you pretty much had the whole tower to yourself in most places. Still, the trade off is voice quality for cheaper calls and the market has spoken. Not enough people are interested in paying 25 cents/minute or more for “toll” quality.

By: Link: Here Comes Trouble: Saving Big Iron in Telecom - GigaOM | Nyquist Capital

Tue, 19 Feb 2008 16:01:16 +0000

[...] Here Comes Trouble: Saving Big Iron in Telecom – GigaOM [...]

By: JohnMc

JohnMc — Tue, 19 Feb 2008 15:07:19 +0000

"There’s been fluctuation in there but I’m still trying to figure out where the problem is. The loss of landlines does not appear to be adversely affecting their bottom line either." -- FM

Frank, the POTS Telcos have a problem -- its dwindling use of a debt structure that have 5-10 years to go. POTS engineering was a 20-30yr planning cycle. It was funded by corporate bonds. 80's bond issues won't mature till way past 2010.

The other is off balance sheet -- retirees (like me, recently). All off balance sheet, buried in the fine print of the annual. Its the same Ford/GM story here.

By: JohnMc

JohnMc — Tue, 19 Feb 2008 14:48:48 +0000

To Frank Millers' points --

POTS as we know it had a chance to morph back in the 80's with ISDN. But...
In the board rooms of the Telcos the execs that had engineering degrees were being displaced by execs with biz degrees. So ISDN died for lack of effort.
The other shift that the Telcos missed was a shift of network intelligence from the network itself to the end node devices -- edge routers and handsets. Moore's Law made that possible. The Telcos could not follow suit as their cost structure was tied up in the CO.
Tax law changes. In the day, with favorable treatment for capital having the Telco install a PBX on site was 'the thing'. When the tax code made expense favorable circa 1986 that nearly killed remote telco nodes onsite.

By: Web Services Economics : The Thomas Howe Company

Web Services Economics : The Thomas Howe Company — Tue, 19 Feb 2008 12:12:09 +0000

[...] same financial benefit – from processing, to billing and even to telephony services. It’s a challenging time to be a telephony vendor… and it just got a little [...]

By: links for 2008-02-19 | stuart henshall

links for 2008-02-19 | stuart henshall — Tue, 19 Feb 2008 08:30:22 +0000

[...] Here Comes Trouble: Saving Big Iron in Telecom – GigaOM “The quality of a telephone call between neighbors in 2008 differs very little from the same call in 1958. Reliability, audio quality, and even the telephone itself remain largely unchanged. This makes the industry even more vulnerable…” no surpirse! (tags: telecom voip internet) [...]

By: Habib Ullah Khan

Habib Ullah Khan — Tue, 19 Feb 2008 07:56:57 +0000

I am with Frank on this one. The empires will strike back. The key is that like the original Clinton running for president they innovatively amalgamate the opposition's agenda. I suspect they are not stupid. If teh ocst benefit was clear theyw ould do it it wholesale. As things stand they will pick and choose and morph into new entities. Protecting old turf by suing Vonage and creating new Turf with their data initiatives.

It aint over yet by any means.

By: Jahangir Raina

Jahangir Raina — Tue, 19 Feb 2008 05:21:31 +0000

I am a bit skeptical because (1) most of the ‘re-invented voice’ applications are offered direct to the consumer and not through the service provider channel, and (2) those that are trying to bring in a ‘re-invented bundle’ like ribbit will have serious scalability issues going forward.

By: Coming soon! Telcos face troubling times of their own creation |

Coming soon! Telcos face troubling times of their own creation | — Tue, 19 Feb 2008 04:41:15 +0000

[...] David Berninger’s piece titled “Here comes trouble, saving big iron in telecom” today served as a reminder that all is not not well in the land of bell. Sure, regulations [...]

By: Alan Wilensky

Alan Wilensky — Tue, 19 Feb 2008 02:30:48 +0000

I find the call quality of the contemporary digital mobile carriers near to a criminal offense. This is mostly caused by the overloading of the voice bearer channels. which are dynamically allocated on a statistical basis to share reverse MUX with several supervisory and data bearers.

Feh. And it's not going to get better, the Codec has nada zip to do with it. Its the latencies, Jitter, and subtle effects you can barely measure with a test set that makes today's digital cell services so tiring to use on a regular basis. Mentally fatiguing. "Hey, let me catch you on a land-line".

When I first heard a skype to Skype call, I was floored. It sounded like the talk back intercom in a recording studio.

We have gone backwards in call quality, and any good mobile systems engineer that works in proof of performance will testify to that fact.

By: Jesse Kopelman

Jesse Kopelman — Mon, 18 Feb 2008 21:53:48 +0000

Alan, when you say the original analog cell system had great audio, I hope you are talking about some proprietary network (like Chicago in the 40s) and not AMPS. Sure dynamic range was excellent, but way too much of that range was taken up by crackling and hissing. All post 1997 mainstream codecs sound way better than AMPS. Now, your phone’s speakers may be crap — that is a very real possibility.

By: Frank Miller

Frank Miller — Mon, 18 Feb 2008 21:36:09 +0000

Just looking quickly at Verizon only:

http://investor.verizon.com/financial/annual/2006/financial01.html

Revenues up to $88B in 2006 from $61B in 2002. Jeez, thats $20B additional revenue in the last 4-5 years, up about 1/3.

Net income up to $6.1B in 2006 from $4.1B in 2002. Thats an addition $2B in profit, up about 50%.

Profit then was 7% in 2006 from 6.7% in 2002.

There’s been fluctuation in there but I’m still trying to figure out where the problem is. The loss of landlines does not appear to be adversely affecting their bottom line either.

By: Daniel Berninger

Daniel Berninger — Mon, 18 Feb 2008 20:49:18 +0000

Frank,

You lost me in the comparison of lines and minutes. In any case, it is easier to track revenue and profit margins. We agree the telcos make money today. I am arguing they do not make as much money today as they did in 2000 and they will not make as much money in 2016 as they do today.

By: Alan Wilensky

Alan Wilensky — Mon, 18 Feb 2008 20:42:29 +0000

As a former Central office frame jockey and 5E technician, I can say the following:

The investment in telco facilities is immense. The copper plants that span local communities are just a thing to behold their post-industrial grandeur. Pick up a phone, get a dial tone.

Did you know that there are still some communities with mechanical crossbar switches and even some with Rotary (Stowger) plants, hidden in little brick buildings in the weeds, in your little town. Some of these tiny facilities have great art-deco features inside and out.

I worked for NE Tel after the divestiture in 1976. I was CWA member. Over time, I installed the first mobile, non-cell phones for the Boston Politicians (among them infamous mob types).

I am now a technointernet ghetto member. I miss those days of "Space Division Multiplexing", the engineers of the olde guard, reading girly mags in the 5ESS local plant, while us trainees read geavy tomes on Signaling System Number Seven.

Replace the wire line plant? Not in our life time - although I do not have a wired phone:

I have a Balckjack from ATT with horrible voice fidelity (the original analog cell system had great audio)

I have a home broadband, two Skype in numbers, and numerous Skype contacts (Stellar audio quality).

By: Daniel Berninger

Daniel Berninger — Mon, 18 Feb 2008 20:29:45 +0000

Frank,

Your argument about voice quality assumes away the difference between AM and FM radio. People clearly do prefer the latter. The 3khz telephone network quality actually compares poorly to 5khz AM radio audio quality.

The difference between the Internet and PSTN regarding feature deployment has to do with where the features get deployed. The Internet architecture facilitates functionality improvements at the edge. The PSTN requires integration throughout. As a real world example, check out AT&T's attempt to implement a base boost to audio quality - AT&T True Voice. It required modifying every echo canceler in the network. Three years and $400mn later they had to shut the whole thing down.

In any case, we shall see.

By: Frank Miller

Frank Miller — Mon, 18 Feb 2008 20:23:26 +0000

K, did that.

Started with http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-270407A1.pdf

This would be the FCC's "Trends in Telephone Service", published Feb. 2007. I guess its a year old so we'll have to take that into account.

This report covers the ILECs and CLECs so I don't think the cablecos (i.e. biggest VoIP providers) are in it.

Table 8.1 End User Switched Access Lines reported 1999 189 Million lines 2006 172 Million lines (2006 is last period reported)

These are landline phones, not broadband. Broadband is covered in another section of the report.

Table 11.1 Measures of Mobile Wireless Telephone Subscribers 1999 79 Million 2006 217 Million (2006 is last period reported)

So, if I do the math, I get a total of 268 Million lines in 1999 and 389 Million lines in 2006.

Let's look at minutes:

According to the report, local landline calls are typically not metered, thus there are no numbers for local landline minutes. However, the ILECs did report the number of calls completed. We'll stay with the same time frame:

Table 10.2 Calls and Billed Access Minutes of Large ILECs Reporting to the Commission Local Calls 1999 553 Billion 2005 336 Billion Toll Calls (aka Long Distance) 1999 102 Billion 2005 76 Billion (latest reporting)

The only measure I could find in the report for Wireless was:

Table 11.3 Mobile Wireless Telephone Service: Industry Survey Results (Survey conducted by CTIA) 1999 86 Million subs * 140 avg min. per month * 12 mo. = 144 Billion minutes 2005 207 Million subs * 740 avg min. per month * 12 mo. = 1.83 Trillion minutes

The different in the subs was the difference in the survey results vs. the formal reporting to the FCC

So, the total number of lines went up by more than 100 Million and the total number of minutes went up by an order of magnitude. And this doesn't even take into account the DSL lines they have laid that basically didn't exist in 1999.

You're going to have a hard time convincing me that Verizon is hurting because of landline shrinkage.