May 19, 2011 3:41 AM
When Microsoft's acquisition of Skype for $8.5 billion was announced
last week, a lot of members of the financial press were quick to criticize the amount of money Microsoft paid for Skype
. But, I'm not a Microsoft shareholder, so I couldn't care less how they spend their money.
Still, there were a number of stories that intrigued me--all of which suggested that Microsoft's purchase of Skype may strain its relationship with the large phone companies, because Microsoft will further cut into the phone companies' revenues by expanding the Skype revenue base. Here is a representative article
, but there are lots more that say the same thing. The "Conventional Wisdom"
All articles echoing this theme assume that Microsoft will be able to continue to offer the same Skype service at the same Skype rates (around 2.3¢/min for calls to the PSTN/mobile networks) from all of Microsoft's operating systems and devices? The concern the writers express is whether Microsoft's inevitable erosion of phone company revenues will strain Microsoft's relationships with the telephone companies, insinuating that Microsoft may have a difficult time getting its Windows Mobile O/S placed with the major carriers, while "eating their lunches" with Skype's super cheap rates.
Based on a few facts, and some incorrect assumptions, this conclusion has some superficial appeal, and it's understandable that the financial press would mistake appearance for analysis. On this one, though, I'm taking the opposite side of the financial writers.
Continue reading Microsoft-Skype: The End of the "Free Lunch"?
January 12, 2010 6:21 PM
Yesterday, I did a post
--based on a court case initiated in 2007--that suggested traffic pumpers looking for revenue sharing arrangements (for traffic transport and termination) with high-cost LECs was maybe a little scandalous, or at least something you wouldn't want to go around asking about in polite company. Well . . . as with a lot of things, it all depends on who's asking the question, how the question is asked, and whether the person asking really gives 2 cents what anyone thinks. (At this point, transition to your best Rod Serling voice.) But in the Telecom Zone, everything is not always as it appears, which brings us to our next case. Submitted for your consideration, the case of one TRX Telecommunications
. . . .
If the "minute broker", mentioned yesterday, brought "buyers" and "sellers" of minutes together in a discrete, low-key, manner, TRX Telecom--the phone company that pays you--(by the way, that's their real tag-line
) looks for revenue sharing arrangements with all the zeal of a direct marketing version of a monster truck show promoter. No apologies, no discretion, no shame, no fear, just BUTT-KICKING, PLATFORM POUNDING, MINUTE CRANKING!!
Heck, a better way to say it might be: no business plan? NO PROBLEM! No software-based calling platform? NO PROBLEM! No services to sell? NO PROBLEM! TRX Tel does all the work: they offer basic to more advanced, chat room and teleconferencing services. What they don't do is judge
. . . or ask you for anything . . . but MINUTES! Even then, they don't make customers commit to any "minimum" level of minutes. They just ask you to do your best, brother. Any incremental minute (on the TRX platform) is a good minute, and you always get a cut--whether you produce 18 minutes or 18 MILLION minutes . . . .
But, if you DO produce 18 million minutes (per month)? Well, you get a prize, my friend. What type of prize? AN A@$-KICKING, NITRO-FUELED, 5 CENTS/MINUTE! That's right, brother, 5 CENTS/MINUTE
! That's 100 TIMES the large LEC interstate termination rate! And this is a BOUNTY--it's not like they're giving you ALL the money that's being generated from your 18 million minutes.
And here's the best part: all it takes to add a million dollars/month to your bottom line is to keep 500 lines busy 24/7 for a month. Convince 500 friends to use their flat-rated, bundled, triple-play phone line to stay on a 24/7 conference call, use their mobile phones for voice, and you can give them a nice discount. Another option would be to use your Skype account while you're sleeping. If that bothers you, then just get non-profits, and other groups looking to save money to actually use the services in a normal fashion
! It doesn't matter
! Whether Al Quaida or Alpa Chino, "real" or "fake", the fact is that minutes are minutes, and "bounties" are "bounties." I didn't invent this system, but I can't "un-invent" it either . . . . So, here's to you TRX Tel, crack open a cold Bud Light, because you always tell it like it is, and, thanks to you, talk isn't always cheap![Note: I don't let my clients pay for this type of shenanigans, so if you're an IXC reading this, give me a call. But, if you don't call, or you're not one of my clients, then your best bet is to just take the advice of "Teddy KGB" (from "Rounders"). Admit you got beat, and pay these men their money.]
January 11, 2010 5:24 PM
["None of us are going to deny what other people are doing. If saying bullshit is somebody's thing, then he says bullshit. If somebody is an ass-kicker, then that's what he's going to do on this trip, kick asses. He's going to do it right out front and nobody is going to have anything to get pissed off about. He can just say, 'I'm sorry I kicked you in the ass, but I'm not sorry I'm an ass-kicker. That's what I do, I kick people in the ass.' Everybody is going to be what they are, and whatever they are, there's not going to be anything to apologize about. What we are, we're going to wail with on this whole trip."]
-- Tom Wolfe (The Electric Kool-Aid Acid Test)
I kicked off with that quote, and I want you to read it--and understand this--I respect authentic, original, people in the telecom business. They may not be the most likeable people in popular opinion polls, but they do want they do without regard to the opinions of others, and they almost always drive change (for better or for worse). Dave Erickson of FreeConferenceCalls.com ("FCC.com") is such an individual. And, as much as I might crack on "traffic pumpers", Dave has posted up on this blog--under his own name--without regard to what anyone thinks . . . and I like
that. I mean, as traffic-pumpers go, he's "doing it right out front and nobody is going to have anything to get pissed off about." So, brother, if you're reading this, you need to know I've got nothing but mad respect for the way play your game--and that's no joke. But
(and you just knew there was a "but" coming), this is a story--contained in a court case--that I've never seen reported, and it's an enduring testament to Dave Erickson's stone cold, "bad-ass"-ness, but it's a story that readers have got to hear to believe. At this point, Dave will probably disagree with every characterization I make . . . but that's part of why I'm going to be what I am, and there's not going to be anything to apologize about
OK, so on with the story. Let's say you think there's a good way around the FCC's Farmers and Merchants Order
, where the Commission found in favor of Qwest in a complaint against a local exchange carrier ("LEC") that specific revenue-sharing contracts between the LEC and conference calling companies, did not constitute the provision of switched access services, where calls are terminated to an end-user premise, consistent with the LEC's tariff on file with the Commission. So, that order means nothing to you--maybe you've got some cool creative tariff attorney and some inventive new traffic pumping scheme. Fair enough; so far, so good, but
here's the big question: if you're a free conference calling company, looking to set up shop in a high cost area with a cool, new tariff, or traffic-pumping plan, have you ever thought about how you'd actually do it
Continue reading Pssst! Wanna Buy Some Minutes?
October 13, 2009 3:41 PM
Well . . . not really, at least not quite yet, but this is where the Commission is heading--whether they know it, or like it, or not. If the FCC does know where they're heading (and I don't think they do), they can't be too thrilled, because they also don't know how to make it stop. Wait, what am I talking about?
Last Friday, October 9th, on the Friday afternoon before the Columbus Day weekend, the Commission's Wireline Competition Bureau sent a letter to Google, asking some questions about the Google Voice service. The questions aren't that tough for Google to "slip", in the sense that the questions won't get the "real" story out--the most we could probably learn is that Google itself just might receive ultra-low priced, even "free", inputs from its carrier partner(s), and Google might have some deniability about knowing how their "free" service is paid for. But the answers should give the Commission some clues to pursue the whole story--which they won't get until they send out questions to Google's carrier partner(s), and the FCC does ask Google to identify its carrier partner(s) in the last question.
Notably, the Google letter is found on the Wireline Competition Bureau's home page, and not the FCC's main home page. However, with no apparent sense of awareness, or irony, the entire FCC voted an Order and Notice of Proposed Rulemaking on the very same date (that was on the main home page) designed to agree with a coalition of smaller LECs seeking to "amend [the Commission's] rules to permit an incumbent LEC ETC with declining numbers of access lines to use a higher DEM weighting factor in performing jurisdictional separations and calculating LSS. We believe that public policy supports doing so." (See paragraph 13, citations omitted). Effectively, the FCC has recognized that the number of companies actually paying access is declining, and decided that the best solution is to raise rates for the few companies that actually own up to providing a telecommunications service. Why does this matter?
In August when the FCC sent its original letters to Apple, AT&T, and Google, I really didn't think the letters could possibly turn out well for Google. I also noted that I preferred to think the purpose of the letters were for the FCC to "declare Google Voice to be a wireless information service, and then apply this definition to the wired broadband network in solving the classification of VoIP to eliminate this nasty obstacle to the creation of the national broadband plan." I've since become skeptical that this Commission has any appetite--or understanding of the necessity--for reforming intercarrier compensation (and universal service) before undertaking any discretionary projects. I don't think the FCC wants to classify VoIP service at all, but at this point, it just seems that circumstances won't allow this luxury.
I recently noted, that Traffic Pumping and "Magic-Jacking"© cannot continue to exist, while the number of "access paying" telecommunications carriers dwindles. Yeah, that's right, I'm copyrighting the term "magic-jacking" to refer to the practice of an "over-the-top" VoIP provider (i.e., no LEC facilities) "stimulating" terminating and originating 8YY "access" revenues (for which the switchless VoIP provider appears to have no right to charge) by offering a "free" two-legged calling service in which the first "leg" goes to a mechanical relay point--usually in a higher-than-RBOC interstate location. Meanwhile, the "magic-jacker" blocks termination to locations where termination costs are greater than the "terminating" access being charged to the IXC for "completing" the call to the relay point. Google Voice, Magic Jack, and Skype are all prominent examples of alleged "magic-jackers." SpeakEasy has recently declared that it is joining their ranks.
Continue reading FCC Last Friday: "Someone's $0.00 Has Got to Go(?)!"
October 13, 2009 1:30 PM
I know I said in a previous post that I've done this subject to death and resolved to write on some new stuff
. I still mean to do this . . . and start exercising, drop a few pounds, cure cancer, become a ninja (well, you get the drift--a lot of stuff that isn't happening anytime soon). But, I haven't posted anything in a couple of weeks--totally wasting all the "good will" I got from Harold Feld
when he was nice enough to mention me on his blog
in a post
a couple weeks ago. Around the same time, I also was lucky enough to get a referral
from Rob Powell
in his TelecomRamblings blog
But, while I, personally, wasn't posting a lot (I wrote a few comments on the post Harold cited to), Harold's readers really juiced up the dialogue through their comments on the post that he cited in his blog
. The comments--really a lot more than the blog itself--have turned into a pretty robust discourse on the issue of "traffic pumping" and "access avoiding." The "two Daves"--Erickson and Frankel--who are on opposite sides of this debate at the Commission, both contributed a lot of good and thoughtful material. Do yourself a favor, and take a few minutes to read the commentary HERE
; it would be a shame if the only people to see this discussion are the people leaving comments. Thanks to everyone on both sides of the debate (most of the commenters) that took the time to write such thoughtful comments.
Intercarrier compensation--especially the battle between the "free" services
--is going to be something that you'll hear a lot more about over the next several months, so bear with me, but I promise you'll really understand a hard subject if you do.
September 24, 2009 3:31 PM
[Note: I want to clarify from the outset what I mean by "intercarrier compensation." Used generically, the term "intercarrier compensation" can refer to any charges between carriers for handling traffic. Accepting another carrier's traffic can (but doesn't need to) involve two functions: 1) the charge to transport traffic from the point of interconnection to the last aggregation/switching point in the terminating carrier's network, and 2) the cost to "terminate" (switch and deliver) that traffic to its destination. In the world of exchange access, there are many carriers and carrier combinations that can usually transport traffic to the terminating carrier's last point of aggregation. Said differently, there is a vibrant and competitive market for wholesale transport, so in our context "intercarrier compensation" will only be used to refer to the "pure" terminating function--from the last point of switching on the terminating carrier's network."]
Intercarrier compensation is, perhaps, the most un-understood (not mis-understood), and urgent, telecom policy issue requiring the Commission's attention. But, I've kind of done it to death, so I'll try to make this my last "pure" post on this subject. Nonetheless, the Commission's persistent refusal to solve the obvious problems with the design of the intercarrier compensation system make this an issue that pervades, pollutes, and corrupts almost every subsequent telecommunications policy initiative; and, unless corrected, the National Broadband Plan will be no exception.
The subject of intercarrier compensation is devilishly complicated to understand, but the correct policy--the answer, the "way", the "tao"--is beautiful in its intellectual simplicity. The "tao"--as always--is comprised of the "yin" and the "yang." So, rather than skipping (or Skype-ing) to the tao, it is more enlightening to work backwards, and introduce the yin and the yang of intercarrier compensation, why they must exist in proportion, what can happen when they go out of proportion, and then come to the policy solution that will best promote harmony. In the last post, we discussed the internal tension between certain "free" services. These "free" services are all the result of attempts to exploit quirks in the intercarrier compensation system--a system that places different prices on the same function (traffic termination) based entirely on how that traffic is classified. What was not discussed was how these internal tensions can coexist within one carrier.
Continue reading The Tao of Intercarrier Compensation
August 26, 2009 11:49 AM
With apologies to Bud Light, and their fabulous "Real Men of Genius" radio ads, TeleComSense will, on occasion, try to honor those innovators in the communications industry, which devote so much ingenuity and effort to produce little-to-negative consumer welfare. If you're not familiar with the Bud Light ads, they are, quite simply, the best radio ads, period--just click on the link above, and get ready for tons of simple-minded, yet clever (in a simple-minded kind of way) entertainment. The format is always the same: a guy with a deep, booming voice offers a tongue-in-cheek "salute" to the frequently inexplicable, generally trivial, and always humorous, occupations, products, hobbies, or other segments of our "market-driven" society, while a cheesy '80s sound chorus will chime in with additional fanfare. [Warning: if the "market" is your "religion", you might find these commercials quite blasphemous].
Unfortunately, the Bud Light crew beat me to one communications industry example--"Mr. Dishonest Cable TV Hooker Upper", but here are the "lyrics" to this tribute. The words in parentheses contain the singing parts.
Bud Light Presents Real Men of Genius
(Real Men of Genius)
Today, we salute you, Mr. Dishonest Cable TV Hooker Upper
(Mr. Dishonest Cable TV Hooker Upper)
On any given day, sometime between nine and four thirty,
you arrive ready to bring us the world and,.
for an extra twenty, you will bring us porn.
(naughty, naughty boy)
Hey, you've already got the van and the jumpsuit,
why not get into criminal activity?
(Just a naughty boy)
Afterall, what are they gonna do, throw you in cable jail?
( I don't think so)
So, crack open an ice cold budlight, Manhandler of the scrambler,
because isn't it about time someone hooked you up?
(Mr. Dishonest Cable TV Hooker Upper)
OK, here's a little background on our first TeleComSense "Real Industry Innovator"--the much-maligned "traffic pumper." A "traffic pumper", or "access stimulator" is a LEC that finds a way to maximize the amount of traffic (minutes) that it can terminate at the highest switched access terminating rates (usually the rates allowed in the most rural areas). But here's the trick, the "traffic pumper" does it without ever completing one additional call to a human in that service area. While "access charges" existed, in one form or another, prior to the AT&T divestiture in 1984, it should be noted that access charges became much more visible at the time of the AT&T divestiture, and were designed to enable long distance competition while continuing to compensate the newly-divested Bell Operating Companies and independent telephone companies for long distance calls made over their local networks. In effect, access charges provided a way to maintain the longstanding cross-subsidization of "basic local exchange service," by "long distance service" in a market with multiple long distance providers.
Continue reading Here's To You, Mr. Traffic-Pumper, Access-Stimulator Telecom Guy!