SBC’s VoIP end run


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.


Darrell Gentry

Regarding “Nothing illegal here: SBC’Äôs 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…”

I was at the TelcoTV conference the week before last (mostly attended by non-RBOC incumbents looking for the 3rd piece of their triple play) and was shocked to hear an executive from one ILEC who was exasperated that Vonage and other VOIP providers were competing with him on _his_ data network. He said he was seriously considering buying a box to shut out Vonage’s traffic or, better yet, kill the service quality. So I don’t know that such concerns are all that far fetched. At the same time, as someone running a WISP focused on providing service in rural communities, it reminded me of the dire need for competition in this sector…


This may be naive, as I’m new to the nuances of these battles:

Would it not be helpful if client tools for telco (phones, software interfaces, mobiles) had some global standard METHOD for calculating true call costs.

Each of our addressbooks would contain various types of contact “numbers” for our contacts and when we hit dial, the software would calculate the cheapest way to call.

If the termination fees are high, and somehow exposed in this call cost calculator, then seek alternate method to call – skype ID, FWC ID, SIP address, mobile, etc.

Would this not force SBC termination fees to be market priced or they would risk losing all the pots subscribers as more and more people move to IP-based soulutions?

Rik Sagar

not suprising at all. If I call my family in California from England using VoIP and it terminates to a SBC line, then I am making a long distance call! Whether it goes over VoIP or the circuits of AT&T/MCI/BT the local telco wants its pound of flesh for terminating the call.

Like someone said in an earlier comment :- If you don’t like it, rip out your POTS lines and make all your phone calls via your PC. Let’s see how convenient that really is. Don’t bitch at the local telco just cuz they want reimbursing for the use of their infrastructure!

Al Brown

All the more reason to focus on fixing the fundamentals. Until we have true electoral and legislative reform (and by this I mean switching to proportional representation), business interests will continue to trump the common interest.

Sean @ Verizon

Since there were more Cable modem adds last quarter than DSL adds, I think that to paint the RBOCs as a oligarchy controlling telecom is a bit off the mark. There is competition for broadband and voice, it just might not be from smaller start-ups.

I also agree that the effort to de-prioritize packets from competing carriers is immense. It’s much more likely that the RBOCs would use a price war to force the small players out of the game.


SBC does not use Cisco core routers. They are much too small. They use Juniper core routers and Redback and Alcatel’s DSLAMs.

They already rate shape and use QoS today on the network, but not to limit your access to services. It requires a huge amount of resources to tag a packet for QoS – more then you know when you are pushing the entire countries’ traffic.

Erik Fair

Two rules kill their ability to do anything:

1. Accept no xDSL service that requires you to use Network Address Translation (NAT).

2. Use IP Security in Transport mode to communication with your VoIP provider(s)/peers.

Problem solved: the ISP can’t see what transport protocol (e.g. UDP, TCP) that you’re using because that’s inside the encrypted part of the packet. Seeing what application protocol you’re using is out of the question.

Now, they could still play some games by shaping traffic to particular IP networks (e.g. “Vonage is in this IP network block, so…”), but the next counter to that is to have a Service Level Agreement with the xDSL provider which prohibits that. Preferably one with teeth in it if you catch them at it.


We sell naked DSL in Qwest territory, and while it is not POPULAR, it is a viable alternative. We have a few customers who use it and have no complaints… It was needed by Qwest to combat the cable co’s, who will eventually be offering VOIP and other forms of telephone to their customers, also without paying normal taxes (such as universal service fund) — however, they will be made to pay TERMINATING minutes just like anyone else who terminates calls on the PSTN should be.

I think alot of the time the bells get a bad rap out of spite alone… when you have your DSL line, keep in mind what helps pay for that.. its the fees that the telco charges in other areas, if they made no money to keep the network up, they would not be able to deploy DSL… you’d be stuck with WIFI or Cable only… and more choice is always better, IMHO.


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.


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???

Forget policy and discussions vote with $$

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.


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.

Ameritech and SBC customer

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.


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.


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.

Jesse Kopelman

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.


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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