wholesale cost of IP bandwidth versus phone circuits

Share your views, news, tips and articles about VoIP
Post Reply
satphoneguy
Posts: 131
Joined: Tue Oct 23, 2007 12:54 pm

wholesale cost of IP bandwidth versus phone circuits

Post by satphoneguy » Sun Dec 23, 2007 4:17 pm

in the past couple months i have registered and experimented with some developerplatforms for IVR and other telecom services. the free developer accounts gennerally inculde a limited amount for free service. i have noticed that these enterprise level services charge(or debit in the case of the free version) based on traffic per minute whether PSTN or SIP. or even offer outbound PSTN access for free accounts but charge for SIP access. also i have participated in a few beta trials of VOIP services that have offered SIP dialing/termination at launch but during the beta testing only terminated and allowed in dialing to/from the PSTN. it brings up the question in my mind. with the the dramitic decrease in cost for termination to the PSTN(i am thinking US and euro landlines) in the last couple years. what type of capacity is cheaper?

i understand that it is definatetly cheaper to build and deploy a VOIP network. but is it any cheaper in the commodity wholesale cost end to send calls VOIP versus PSTN? my other theory is that a lot of enterprises(in the IVR/enterprise services industry) have excess POTS/ISDN capacity but less excess IP bandwidth.

spg

btw. for anyone interested the free developer trials that i have participated in are: voxeo, tellme, ribbit(only for two days) and the beta trial of tringme/tringphone

Aaron
Site Admin
Posts: 4652
Joined: Thu Jul 12, 2007 12:13 am

Re: wholesale cost of IP bandwidth versus phone circuits

Post by Aaron » Mon Dec 24, 2007 12:23 am

satphoneguy wrote:it brings up the question in my mind. with the the dramitic decrease in cost for termination to the PSTN(i am thinking US and euro landlines) in the last couple years. what type of capacity is cheaper?

i understand that it is definatetly cheaper to build and deploy a VOIP network. but is it any cheaper in the commodity wholesale cost end to send calls VOIP versus PSTN? my other theory is that a lot of enterprises(in the IVR/enterprise services industry) have excess POTS/ISDN capacity but less excess IP bandwidth.
Our bill for PSTN call termination is 20 times our bill for IP bandwidth so the answer is PSTN termination is still a lot more expensive.

A few figures from the provider World that might help illustrate:

- IP bandwidth is priced between €10 to €50 per Mbps/month. And if you're a new provider only requiring 1Mbps it's not inconceivable that you could get stung for €200 per month for 1 Mbps!

- Line rental on an E1 with 30 PSTN circuits is around €250 per month. Since an E1 is 2 Mbps you can see already it's costing more than VoIP. Although you do get 30 calls out of an E1 whereas you would probably only get 20 or so VoIP calls on 2 Mbps.

- There are not too many PSTN destinations that can be terminated for less than €0.01 per minute even at wholesale rates.

IP bandwidth is cheaper because there is stacks of competition. For the PSTN the floor on the costs is always going to be set by the PSTN incumbent. You have to terminate the traffic on the incumbent's network so you are at their mercy.

Regards,

Aaron

satphoneguy
Posts: 131
Joined: Tue Oct 23, 2007 12:54 pm

Re: wholesale cost of IP bandwidth versus phone circuits

Post by satphoneguy » Mon Dec 24, 2007 1:48 am

Aaron wrote:
satphoneguy wrote:it brings up the question in my mind. with the the dramitic decrease in cost for termination to the PSTN(i am thinking US and euro landlines) in the last couple years. what type of capacity is cheaper?

i understand that it is definatetly cheaper to build and deploy a VOIP network. but is it any cheaper in the commodity wholesale cost end to send calls VOIP versus PSTN? my other theory is that a lot of enterprises(in the IVR/enterprise services industry) have excess POTS/ISDN capacity but less excess IP bandwidth.
Our bill for PSTN call termination is 20 times our bill for IP bandwidth so the answer is PSTN termination is still a lot more expensive.

A few figures from the provider World that might help illustrate:

- IP bandwidth is priced between €10 to €50 per Mbps/month. And if you're a new provider only requiring 1Mbps it's not inconceivable that you could get stung for €200 per month for 1 Mbps!

- Line rental on an E1 with 30 PSTN circuits is around €250 per month. Since an E1 is 2 Mbps you can see already it's costing more than VoIP. Although you do get 30 calls out of an E1 whereas you would probably only get 20 or so VoIP calls on 2 Mbps.

- There are not too many PSTN destinations that can be terminated for less than €0.01 per minute even at wholesale rates.

IP bandwidth is cheaper because there is stacks of competition. For the PSTN the floor on the costs is always going to be set by the PSTN incumbent. You have to terminate the traffic on the incumbent's network so you are at their mercy.

Regards,

Aaron
this is basically what I have always thought and leaves me with a couple theories on the bussiness models of some companies. one they may have unused lines(ISDN or TDM) in the USA with monthly or annual toll free termination already purchased and no intention of cutting them off at this point. also i wonder how much has to do with not wanting to set a precedent in the industry that could corelate to charging lower retail when trafic is terminated one way or the other.

Aaron
Site Admin
Posts: 4652
Joined: Thu Jul 12, 2007 12:13 am

Re: wholesale cost of IP bandwidth versus phone circuits

Post by Aaron » Mon Dec 24, 2007 2:05 am

satphoneguy wrote:also i wonder how much has to do with not wanting to set a precedent in the industry that could corelate to charging lower retail when trafic is terminated one way or the other.
If I understand you correctly on this point you're talking about a telco charging you differently depending on whether they terminate your call to a PSTN network or to an IP network. An example would be when ENUM is used. You place a call your telco looks up the number in ENUM if it's not there it goes to the PSTN if it is there it goes to a SIP endpoint.

Obviously the business model of your telco comes into play and they may be more than happy to bill you the same for both calls even though their termination costs are different. The other big angle that shouldn't be overlooked is telco billing systems. This is highly speciailised software that is going to be very expensive to upgrade. Since the billing software only ever ahd to bill a call based on the B Number (the number you dialled) now it would have to also take into account the B Number and whether it was found in ENUM or not. Conceptually not that difficult but as it's an expensive software change to reduce a telco's revenue it's probably not top of their list.

Regards,

Aaron

satphoneguy
Posts: 131
Joined: Tue Oct 23, 2007 12:54 pm

Re: wholesale cost of IP bandwidth versus phone circuits

Post by satphoneguy » Mon Dec 24, 2007 5:11 am

Aaron wrote:
satphoneguy wrote:also i wonder how much has to do with not wanting to set a precedent in the industry that could corelate to charging lower retail when trafic is terminated one way or the other.
If I understand you correctly on this point you're talking about a telco charging you differently depending on whether they terminate your call to a PSTN network or to an IP network. An example would be when ENUM is used. You place a call your telco looks up the number in ENUM if it's not there it goes to the PSTN if it is there it goes to a SIP endpoint.

Obviously the business model of your telco comes into play and they may be more than happy to bill you the same for both calls even though their termination costs are different. The other big angle that shouldn't be overlooked is telco billing systems. This is highly speciailised software that is going to be very expensive to upgrade. Since the billing software only ever ahd to bill a call based on the B Number (the number you dialled) now it would have to also take into account the B Number and whether it was found in ENUM or not. Conceptually not that difficult but as it's an expensive software change to reduce a telco's revenue it's probably not top of their list.

Regards,

Aaron
i am actually talking about a couple of commercial services that provide free accounts to developers for testing/development puposes and give away free PSTN termination for that purposes. but they do not offer SIP termination on free accounts but they do on paid(same fees as PSTN). so comes my theory that they may have unused PSTN lines but limited amount of IP capacity. or that they just do not want to offer any type of 'free voip' and set a precedent that could lead to lower retail revenua down the road.

Post Reply