FORD: VoIP, Intercarrier compensation and parsing the Embarq petition

Doug Mohney — Thu, 30 Oct 2008 11:25:23 -0400

By Carl Ford

When it comes to voice and landline regulatory reform, the FCC has several petitions and actions going on simultaneously. It's easy to lump them all together, but they deal with different aspects of what it means to provide voice service. Embarq's recent petition has everything to do with intercarrier compensation.

As you know, in the history of telecom, long distance subsidized the cost of the local loop with termination charges to local terminating carriers. Before VoIP came along, the rates for these settlements were put in place. They had much more to do with regulatory objectives than real costs, both on the local loop side and on the interoffice, interLATA, International side.

The FCC had done excellent work at one point, harmonizing the International settlements rates, and many local rate plans benefited as well. It is one of the key reasons bucket of minutes pricing is available on all phones services.

Today's issue is that traffic rates for local and state termination have stayed stagnant since before the VoIP revolution. The termination charges with these local tariff rates are out of sync with the market realities today.

Whenever there is an anomaly like this, the opportunity exists for arbitrage. The traffic that is terminating into these local carriers represent more than the volume that VoIP traffic represents and includes traffic from wireless and wireline services. However, often the traffic origination is not known since it is coming based on clearinghouse and competitive carrier relations and may be deliberately masked for competitive reasons.

The Embarq petition wants all traffic to be terminated at the rates that were set before the advantages of fiber, VoIP and competition came into being. And the rate has no relevance to cost. In fact, the cost of per-minute billing systems is often considered not worth the hassle, especially if bucket of minutes pricing is applied.

The hope would be that a cohesive nationwide rate would apply based on real costs. Major carriers are advocating bill and keep and/or a nationwide rate that is in keeping with the overall market and their experience of cost recovery.

If the Embarq petition is allowed to stand, competition may again be reduced by the cost prohibitive nature of compliance with per-minute billing being applied to all carriers. Of course, the legacy carriers have these systems so the status quo will get to stay that way. The more things change, the more you get the same old POTS.

Like you, regulators see the services that "quack like a duck" and want to apply the standard rules. The issue is that the revocation of the enhanced service provider exemption lumps everything that is displayed as telecom. And given how many jurisdictions are looking for someone to tax, it is going to become burdensome.

As change comes upon us at the national level, we need to make sure that the change in pricing is not being subverted by our lack of attention.

Carl Ford is Strategic Adviser and Community Developer for FierceMarkets. His words of wisdom can be found at www.carlford.net

Living with VoIP in the Middle East

Doug Mohney — Wed, 02 Jul 2008 11:48:19 -0400

IP telephony has been bad news for many Middle Eastern carriers, but regional operators also stand to gain from the technology, says CommsMEA reporting from VoIP World 2008 in Dubai.

With pent up demand for cheaper international calls and growing regulatory reform the across the region, the Middle East and Africa present a huge opportunity for VoIP. It doesn't hurt that there are over 130 million consumers using VoIP and international VoIP minutes already account for 21 percent of total international minutes in 2006. By 2010, VoIP minutes are expected to exceed circuit switched minutes.

Fuelling optimism in the Middle Eastern market is the rapid growth in Internet users and telephony competitive environments in Bahrain, Jordan, Turkey, Palestine and Algeria. Over the past two-and-a-half years, VoIP has captured 60 percent of the international minutes in the Bahrain market and about 40 percent of the revenues.

VoIP services offer immediate costs savings as compared to legacy technology, says one carrier, allowing incumbent operators to mitigate potential losses in a fully competitive market. Savings comes from less labor and decreased capital expenditures to maintain legacy hardware. On the other hand, a transition to VoIP can be painful for an incumbent carrier that may lose both market share and revenues. Staff reductions can also cause problems with unions.

For more:
- Living with VoIP in the Middle East by CommsMEA

Related articles:
Net2Phone drops prices, gets credit for breaking Kuwait VoIP blockade
Cape Verde, South Africa Advance VoIP

Regulatory Reform

FORD: VoIP, Intercarrier compensation and parsing the Embarq petition

Living with VoIP in the Middle East