Today’s obligatory entry should be NYT story entitled “A Debate on Web Phone Service” that appeared yesterday. Almost everybody who pays attention to VoIP related issues have commented on it. I have nothing new to add. Since this story has received such a wide circulation, I feel it is appropriate to repeat myself.
The story points out that the cost differential between PSTN and VoIP can be attributed to differences in the regulatory regimes. So if the regulators make the same then this advantage goes away. With this advantage taken away, how to overcome the market inertia? It is not clear.
It also says that startup costs are low for new entrants. It does not address whether this advantage is linear or tapers off as the network is widely and densely deployed. One of the advantages of VoIP over PSTN is that VoIP does not require geographical density. By this I mean, it costs the same to support 1000 users spread over 10 different sites or one single site. So a new entrant using VoIP will require lower capex. But I suspect that this cost advantage will diminish as the customer base grows.
It is time to stop saying that packet switching is more efficient than circuit switching. These days straight PCM is the preferred codec. With 10 ms sampling rate and 60% activity level, a packet has 80 bytes of payload. With 40 bytes of overhead and 60% activity level, the required bandwidth is comparable to a standard call. Any way is this the era of cheap, infinite bandwidth. So why does this contribute to the cost structure. Don’t get me wrong; there are operational benefits like degraded, but usable service vs total shutdown during overload condition. But that is another matter.
Before we address how to regulate VoIP and IP network access, we have to look at PSTN regulation structure. Even though PSTN is looked at as a voice network, I suggest that it is a converged network. (Huh?! It carries voice, fax and data (however clumsily).) But most of the regulations do not distinguish the applications; but focus only on the fact that a call used the “tele” network (I want to avoid phone in the name of the network). There are certain rules that are application specific. For example, there are rules regarding recording a voice call; but by definition there are record of fax calls. So PSTN could be viewed as made up of a transport network and an application component. Analogously, in IP domain, certain regulations could be placed on IP access and others on VoIP. For example, universal access does not apply to VoIP, an application; instead it is appropriate to levy it against access provider.
Posted by aswath at January 6, 2004 12:31 AM