<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt">Alex<br />
<br />
Well said. <br />
<br />
<div id="divSignature">Bryant <br />
<br />
<span style="font-family: tahoma,arial,sans-serif; font-size: 10pt;"><hr width="100%" size="2" align="center" />
<b>From</b>: "Alex Balashov" <abalashov@evaristesys.com><br />
<b>Sent</b>: Wednesday, December 28, 2011 1:12 AM<br />
<b>To</b>: asterisk-biz@lists.digium.com<br />
<b>Subject</b>: Re: [asterisk-biz] VoipJet went bye bye?</span><br />
<br />
P.S. In a scenario that combines (1) the price race to the bottom <br />
that's part of the commoditisation cycle that US PSTN termination is <br />
undergoing for some time now, (2) a variable, destination-dependent <br />
cost structure, and (3) now exposure to LNP risk for secondary and <br />
tertiary providers increasingly thrown into the mix (as Tier 1s shift <br />
the risk to their customers through terminating LATA/OCN-oriented <br />
billing instead of destination prefix billing), it is fallacious to <br />
assume that profit is being made on all calls, or even most calls.<br />
<br />
While from a commonsensical point of view, it certainly stands to <br />
reason that a rational, profit-seeking entity would sell everything <br />
offered above cost, in this market the downward pricing pressure is <br />
simply too aggressive. If you mark up everything, you can't offer <br />
attractively competitive prices, and it's become a marketing <br />
requirement to offer rock-bottom prices because the competitors are <br />
doing it. This causes business models to rely on increasingly complex <br />
statistical gambles and actuarial-style forecasts. Essentially, they <br />
make bets about the composition of your traffic and the relative <br />
profitability of different segments, and the bet is that the <br />
high-margin calls will offset the loss-makers. That's why they want <br />
to see your CDRs when they sign up - so the parameters of that bet can <br />
be refined.<br />
<br />
The folks good at this are the ones still making money. The ones who <br />
are bad at it usually get desperate and start offering "unbeatable" <br />
predatory prices, figuring that adding more customers is more <br />
important than realising short-term profit. The underlying theory <br />
there is that the cost structure will improve in the near future, so <br />
what's most important is to get the business and get the traffic onto <br />
the network -- optimising it to make money is just details. Also, <br />
remember that many VoIP companies are priming for an acquisition, and <br />
in that sense, it's no different than web 2.0 (or 1.0) companies that <br />
give away free products with no business model, because as far as <br />
they're concerned, "eyeballs" are where their valuation comes from; <br />
what the acquirer chooses to do with the customer base and <br />
infrastructure is for the acquirer to decide after the founders have <br />
been paid off.<br />
<br />
-- <br />
Alex Balashov - Principal<br />
Evariste Systems LLC<br />
260 Peachtree Street NW<br />
Suite 2200<br />
Atlanta, GA 30303<br />
Tel: +1-678-954-0670<br />
Fax: +1-404-961-1892<br />
Web: http://www.evaristesys.com/<br />
<br />
--<br />
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