Aswath Weblog

If you define YahooBB! as the "carrier" in your example, can you provide some examples of companies you would define as "carriers" in the US case? What are examples of some of the companies (or types of companies) that you see as having the advantage over the independents?

Secondly, given that you say "of course there is per minute charge for calls terminating to PSTN," then my question is what else does "the basic phone service" included in the YahooBB! "carrier fee" offer? What else can I do with it, besides terminate calls to the PSTN?

Yahoo!Phone offers unlimited calls to other Yahoo!Phone subscribers. Sorry, I do not know what other phone features are available. Their combined ATA/modem has a failover to PSTN capability.

Probably I should have used the phrase "facilities-based providers" rather than "carriers". For example, when AT&T offers its VoIP service to their DSL subscribers, it is a carrier; whereas wrt to Cox Cable customer they are not a carrier. The rationale is that it is more difficult to acquire a new customer than enrolling an existing customer to a new service. This is especially true if the facilites provider includes ATA as part of the modem as Yahoo!BB has done in Japan.

Aswath

Now I'm even more confused and your definition seems even more arbitrary. Feel free to correct me if I'm wrong, but doesn't YahooBB! lease DSL lines from incumbent NTT Corp? What makes them "facilities-based"?

I also don't understand how AT&T can be considered "facilities-based" while Cox cannot. They both hold significant facilities assets. What is different about the assets/facilities of AT&T vs. those of Cox?

I would also point out that people said the same thing about Internet service in 1995, claiming that only "facilities based" services, such as AT&T, PSI, and UUnet could create competitive end-user services. In reality, none of these companies hold large market share and all were severely trounced by independents (not facilities based), such as AOL, MSN, and EarthLink.

Looks like my use of phrases like "carrier" and "facilites-based" is more confusing. Let me try differently: Since an ISP can bundle VoIP service much cheaper than an ASP (no customer acquisition cost; the customer has already expressed preference etc.), I feel that ISP will be more successful than an ASP. That is why I said that AT&T will be successful with their VoIP offering to their DSL customers, but will find it difficult to sell it to Cox cable modem customers. (I didn't say Cox is not facilities-based; what I said was, wrt a Cox customer AT&T is not facilites-based; labored and confusing usage probably). The basic idea is that ISPs will bundle VoIP, like email and charge extra only for PSTN connectivity. That is how Yahoo!BB has 3 million VoIP subscribers. If I were Yahoo!BB DSL subscriber, why will I signup for another VoIP service? At least that is my thinking. Hope this clarifies my point.

Ok. That makes sense. Thanks for clearing it up.

In that case, I agree and it really seems to all come down to value. The ISP bundle would have a leg up on convenience, so a competitor's offer would have to be significantly better to get people to use it (the two phone bills hurdle). Of course, if the ISP offers horrible service, then the bar is not very high for the independents. :-)

Interesting discussion, being a small "independant" in the enhanced ip voice/messaging world, my biggest advantage is to be able to peddle my wares through many different channel partners, and provide (in some cases) functionality that isn't available through large telco's - personalized services etc. This way ASP's are able to eliminate the cost of acquiring a new customer, and can pass the additional revenue onto the channel partner. Personally I feel the whole model is based around revenue, and if ASP's can provide the same or very close to; the revenue that an ISP can expect by developing and owning their own solutions, without the CCE, why wouldn't they?

Yes, in the scenario you describe, it is possible for an ISP to partner with an ASP when the service is in a nascent stage. Once the market viability of that service is established, I am of the opinion that the ISP will prefer to go alone. That is the case for VoIP.