[asterisk-biz] VoipJet went bye bye?

[Alex Balashov]

P.S.  In a scenario that combines (1) the price race to the bottom 
that's part of the commoditisation cycle that US PSTN termination is 
undergoing for some time now, (2) a variable, destination-dependent 
cost structure, and (3) now exposure to LNP risk for secondary and 
tertiary providers increasingly thrown into the mix (as Tier 1s shift 
the risk to their customers through terminating LATA/OCN-oriented 
billing instead of destination prefix billing), it is fallacious to 
assume that profit is being made on all calls, or even most calls.

While from a commonsensical point of view, it certainly stands to 
reason that a rational, profit-seeking entity would sell everything 
offered above cost, in this market the downward pricing pressure is 
simply too aggressive.  If you mark up everything, you can't offer 
attractively competitive prices, and it's become a marketing 
requirement to offer rock-bottom prices because the competitors are 
doing it.  This causes business models to rely on increasingly complex 
statistical gambles and actuarial-style forecasts.  Essentially, they 
make bets about the composition of your traffic and the relative 
profitability of different segments, and the bet is that the 
high-margin calls will offset the loss-makers.  That's why they want 
to see your CDRs when they sign up - so the parameters of that bet can 
be refined.

The folks good at this are the ones still making money.  The ones who 
are bad at it usually get desperate and start offering "unbeatable" 
predatory prices, figuring that adding more customers is more 
important than realising short-term profit.  The underlying theory 
there is that the cost structure will improve in the near future, so 
what's most important is to get the business and get the traffic onto 
the network -- optimising it to make money is just details.  Also, 
remember that many VoIP companies are priming for an acquisition, and 
in that sense, it's no different than web 2.0 (or 1.0) companies that 
give away free products with no business model, because as far as 
they're concerned, "eyeballs" are where their valuation comes from; 
what the acquirer chooses to do with the customer base and 
infrastructure is for the acquirer to decide after the founders have 
been paid off.

-- 
Alex Balashov - Principal
Evariste Systems LLC
260 Peachtree Street NW
Suite 2200
Atlanta, GA 30303
Tel: +1-678-954-0670
Fax: +1-404-961-1892
Web: http://www.evaristesys.com/