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Sell Short, SBC. Why? *

November 16, 2004

I used to Series 7 registered, but that lapsed many years ago. So this is not investment advice, but a story about open source plus VOIP and the massive disruption that will ensue. Or maybe it’s just a story about a start-up too cheap to pay $75 per line for telephone and voicemail service.

When I read about VOIP, I think, yeah, yeah, Vonage. That will be rough on the Baby Bells but you still need a DSL line. And home users will probably keep their PSTN line as it’s price competitive. Big businesses optimize their telecommunication costs anyway. So it will be bad for SBC, but they will still have small/medium business and most of the home. Well, read on!

Like any start-up we needed a DSL line. To get DSL the valley, SBC makes you buy a voice line for an extra $15 a month. Unless, of course, you want to use the voice line, then every call costs extra. If you want an unlimited voice line with voicemail, it is $75 a month, per line.

So you look at Vonage at their peers, but the business plans are $40 – $50 a month, per line. And if you want true business features like automated attendant and forward-able voicemail, it’s lots more (but less than SBC would charge). So we soldiered on for 4 months with my 10 year old GE answering machine attached to the voice line, using our cell phones for all outgoing calls, least we incur usurious SBC per minute charges. But as we near our corporate launch, this must change.

And then we found Asterisk. By “we” of course I mean my co-founder who does the real work. Asterisk is an open source Linux-based PBX, that is feature equivalent to six figure PBX systems. Like RedHat they sell compiled bundles for a few hundred dollars. But, again, we are a start-up, so my co-founder made Debian recognize the card (Asterisk requires a $100 card for PSTN phone or use of a $60 internet phone) he installed in our beige box PC. Then he configured Asterisk to talk to a couple VOIP termination providers, which is as easy as providing your static IP address. The ones that charge even take PayPal. The most time consuming aspect of setup was going through the configuration screens as there are so, so many features.

Now we have every conceivable telephony feature (ok, no RSS enclosure feed for voicemail, but it’s open source – we could add it). Look at a small/medium business telephony features list – we have that and much more.

And the cost? Free. In coming calls? Free. Outgoing calls? $0.013 per minute to the US. Unless we are contacting another Asterisk installation, then? Free (talk about network effects!). So our global telecommunication costs – about $10 a month for VIOP, $15 to SBC for a voice line we don’t use, $50 for DSL to an ISP (who pays something to SBC for using their lines). Instead of $75 per line, SBC gets about $40 total.

So Open Source disrupts the equipment providers, and VOIP plus Open Source disrupts the service providers.

Now, recent struggles aside, Intel has a habit of making markets. So what if WiMAX works as billed?

SBC gets nothing.

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