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IP PBX for small business
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Hi all We have
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beast321 Posted:
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tplink Posted:
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DWSupport Posted:
After recent
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peterlee Posted:
Had a call from a
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The Age of Telecom Alliances?

Vonage In Print News 
By Tom Nolle

Although the FCC passed its February 20th, 2003 order regarding Unbundled Network Elements (UNEs) some time ago, a swirl of controversy still exists. The order, which alters existing rules regarding UNEs, wasn't a victory for the Interexchange Carriers (IXCs), but nor was it a death blow, either. So what will happen now with the IXCs and the U.S. telecom market may depend on a new development-the formation of alliances.

UNE-Platform (UNE-P) has been a focus of IXC strategy for over a year. Shorn of its political sensationalism, UNE-P is an end-run around the FCC's stated wholesale pricing of RBOC services. Because the cost-based formula for unbundled element pricing (known as Total Element Long Run Incremental Cost, or TELRIC) creates a more substantial discount than the FCC's wholesale service-level pricing, the IXCs convinced some states to create an "unbundled element" consisting of every element in the service-a UNE-P.

While the FCC didn't strike the concept entirely in its February order, it did establish a set of guidelines that eradicated UNE-P immediately in larger enterprise service applications, and pretty much ensured its phase-out in at least the urban areas. Like it or not, the IXCs have to move off UNE-P.

What will they move to? Paying the RBOCs a higher price for the same stuff would certainly be possible and even logical, but IXCs and RBOCs have fought each other like the Hatfields and the McCoys. No logic here. Instead, there will be a rush by the IXCs to create alliances to build new service bundles to the customer.

But is bundling really the issue? The answer is yes, this is really all about bundling, not about "local exchange competition." The RBOCs have been securing permission to enter the long distance market in state after state, often securing a 40 percent market share upon entry. The IXCs want to keep the customers tied to them, so they create a "bundle" consisting of UNE-P-based RBOC local service and their own long distance service (MCI's "The Neighborhood" is a good example). The bundle is calculated to keep the customer tied to the IXC for six to nine months from the time when the RBOC first gains long distance approval. It's within this critical period-when the RBOC is the much-publicized new kid on the block-that the risk of customer defection is greatest.

This is where bundles and alliances really come into play. If the IXC allies with a competitive access carrier, they can create an even better bundle. Get the customer past that nine-month-maximum period after an RBOC enters the long distance market in a state, and your risk from the RBOC is no worse than your risk from other competitive IXCs-a risk the IXCs have faced all along.

For large enterprise customers, expect to see IXCs building alliances with the few big local access providers that have survived the burst of the dotcom bubble. ConEd in New York is a good example of a stable utility with a carrier division that's quietly providing high-speed access alternatives to Verizon. Might an IXC want to lease capacity from them instead of the local RBOC? Darn right it would.

For the residential customer, the "bundle" alliance of choice may be the cable company. Vonage, a voice-over-broadband player who recently engaged in a deal with Earthlink on DSL, is likely to be a prototype for deals between IXCs and cable broadband customers. Voice over broadband isn't perfect, but it's good enough for most users. Look for pricing of unlimited local and long distance services in the $40-per-month range.

An even more intriguing option is linking cable or DSL voice and wireless. Wireless voice services have held the line in revenues and profits better than wireline voice has. Some of the carriers are now even looking at linking wireless voice handsets and IEEE 802.11 hubs. The broadband connection to the home would carry voice to the hub, and then on to the subscriber's handset. If the subscriber wanders out of the house, the standard PCS network can pick up the phone, with a similar switch occurring when the customer moves into a public 802.11 hotspot.

Sprint and AT&T, both of which have wireless businesses, might find the 802.11 bundle most compelling, since it leverages a set of customer relationships they already possess. AT&T has always tried to present its mLife concept as a service in which "your mobile phone is your only phone," cutting the RBOC out of the deal completely. Since broadband wireless is still in the future, getting a broadband offering in their bundle will require wholesaling the connection from the RBOC competitor, or a cable alliance. Maybe AT&T dumped its broadband service too soon.

But then there's another type of alliance-the one between the carrier and the content industry.

Broadband Internet just isn't a killer application from a revenue perspective. The carriers are all hoping that some form of content networking-from interactive gaming to video delivery-will carry higher profit margins. If there was a really nice content application with, say, a 30 percent Return on Investment (ROI), the IXCs could afford to pay the RBOCs the higher FCC-set service wholesale prices for DSL access (which is the only option the February order would leave them), and get their profits not from DSL, but from what it delivers.

No single service or technology is going to be the clear winner in the new age of networking. If you want to see the future of networking clearly, watch how the players create their alliances even more closely than how they create their networks.

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