[asterisk-biz] VoipJet went bye bye?

[Bryant Zimmerman]

Alex


Well said. 


Bryant 

----------------------------------------

From: "Alex Balashov" <abalashov at evaristesys.com>

Sent: Wednesday, December 28, 2011 1:12 AM

To: asterisk-biz at lists.digium.com

Subject: Re: [asterisk-biz] VoipJet went bye bye?


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/


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