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Given a flexibility relative to Class 4 and 5 switches, softswitch solutions can offer just as many of the necessary features that the PSTN switches
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Rose, Frank. Wired Magazine, September, 2001. Available online at www.wired.com/wired/ archive/9.09/docomo.html.
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Features and Applications: It s the Infrastructure, Stupid!
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Table 10-4 Comparison of i-Mode and leading U.S. service providers in terms of revenues per employee
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Company i-Mode Qwest WorldCom Gross annual revenue per employee $216 million ($39 billion with 180 employees) $295,000 ($18 billion with 61,000 employees)
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$229,000 ($14 billion with 61,000 employees), approximately one one-thousandth of i-Mode
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Source: 2001 revenue figures for respective firms
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offer. Given the ease of writing and deploying new features relative to legacy networks, it is possible that softswitch solutions potentially offer more than 3,500 features. Imagine an application that is web based and hosted on a small business server. A variety of service providers could provide their subscribers with access to that application and charge the subscriber for its use. Revenues for that application are shared between the service provider, the creator of the application, and the business that hosted and maintained the application. This economic model, given what could be potentially a low barrier to entry, could spur rapid growth in new and innovative features hosted on application servers located anywhere on an IP network, generating significant revenue for software writers and the service providers that made them available to subscribers. Such a firm would not necessarily have to generate $39 billion in annual revenues with 180 employees such as i-Mode, but any fraction of that equation could prove to be a very lucrative business model. Let a thousand flowers bloom; let a hundred schools of thought contend.
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Source: Softswitch Architecture for VoIP
CHAPTER
Softswitch Economics
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Softswitch Economics
11
A Previous Example of Disruptive Technology in the Long-Distance Industry
The converging market demands greater flexibility in switching equipment. In order to take advantage of market opportunities, a service operator must be able to enter and exit markets with a degree of ease. This chapter will detail how softswitch is cheaper to purchase and operate (in terms of rental space and power draw) and is smaller in footprint (size and shape) than Class 4 or 5. The low cost of Voice over IP (VoIP) technology and operations relative to legacy circuit switches is one reason why softswitch can be considered a disruptive technology. The reasons for the success of VoIP gateway switches in the longdistance bypass market were that the switches were cheaper and smaller, thus enabling service providers to enter and exit markets with relative ease. Leasing a transpacific Internet Protocol (IP) circuit was much cheaper than leasing a point-to-point Time Division Multiplexing (TDM) circuit. For approximately a $100,000 investment (assuming the operator bought the equipment outright), a long-distance bypass operator could compete (though not to scale) with mainstream service providers such as AT&T and Cable and Wireless. Bypass is defined as the provision of telephone service without using the local exchange or toll network of a regulated telephone utility.1 In this case, the operators were bypassing the International Message Telephone System (IMTS), which is largely circuit-switched and not regulated by any one government. Rather it is largely governed by a set of interlocking agreements among international carriers who in turn have correspondent relationships with domestic carriers. Some of those carriers are government owned and are known as Post, Telegraph, and Telephone (PTT) organizations. Others are privately owned. Specifically, the VoIP operators were bypassing the international carriers. The international carriers charged a high rate per minute for international calls. In addition to charging for their own services, they had to pass on what are known as settlements to their interconnecting carriers, in this case U.S.-based carriers who in turn passed the international settlement charges on to the caller. Monies raised via these charges went to governments at the terminating end of the call. By bypassing the IMTS, the VoIP
New York State Public Service Commission. A Glossary of Terms Used by Utilities and Their Regulators. February, 2001. www.dps.state.ny.us/glossary.html.
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