Hank Levine- LB3 Law

Hank Levine- LB3 Law | August 28, 2011 |


AT&T Demands Control Over Its Customers' Deployment of SIP Trunking

AT&T Demands Control Over Its Customers' Deployment of SIP Trunking The carrier seems to be trying to protect a legacy business and extract extra profits from captive customers.

The carrier seems to be trying to protect a legacy business and extract extra profits from captive customers.

AT&T is making a concerted effort to control its ILEC customers' migration to SIP trunking, which AT&T and everyone else in the industry agrees is now the most cost-effective way for enterprises to buy local (and sometimes LD) voice services. There is no legitimate business or technical justification for this--AT&T is just trying to protect a legacy business and extract extra profits from captive customers.

This article briefly explains SIP trunking and the advantages that are leading enterprises to move from traditional voice services to the new platform. It also describes how and why AT&T is trying to control when its customers make that move and discusses what AT&T's efforts tell us about the state of telecom competition and the credibility of AT&T's public embrace of moving from legacy voice to IP-based networks. Finally, it offers concrete suggestions for enterprise customers who do not want to give AT&T the power to increase their costs or control the timing and direction of their telecom strategy.

What SIP Trunking is and How it Threatens AT&T
SIP trunking isn't really trunking, and there is no such thing as a SIP trunk in the physical sense. SIP--Session Initiation Protocol--is a protocol for establishing, modifying and terminating telephone calls, video connections and other communication sessions over IP-based networks. It's basically a way to do business-grade VoIP.

Legacy Plain Old Telephone Service ("POTS") offered over the public switched telephone network ("PSTN") uses physical circuits (individual copper pairs or dedicated T1s) to connect a customer to its service provider. When a user implements SIP trunking, its voice calls ride its dedicated Internet or MPLS access connections. Internal ("on-net") calls are routed directly to their destinations over the Customer's wide area network, and external calls enter the public network through SIP-based connections to the PSTN installed at customer data centers or within a carrier's IP-based network. In the process, users shed cost because adding the capacity required to carry voice calls to a broadband pipe is a lot cheaper than buying a slew of PBX trunks or thousands of Centrex lines, and when you route internal calls over your MPLS network they become basically free.

SIP trunking is a big deal. It has been around for at least 4-5 years, but in the last 18 months it has taken off in a classic example of the "hockey stick" adoption profile common with new technology. As of mid-2011, we rarely see a major voice services RFP that doesn't contemplate migration to SIP trunking. There are two reasons for this. First, while local POTS prices have been flat for decades, migrating to SIP promises immediate savings--typically 25-35%--and SIP moves, adds and changes are very cheap because they are software-based. Second, call quality and features have advanced to the point where a SIP trunk and an IP-capable switch can do everything that a PBX or Centrex can, at a far lower cost.

As a result, everyone now agrees that SIP is the platform of choice for voice communications. "Everyone" includes AT&T, which calls SIP "the way of the future" and says that it

"kicks the benefits of IP networks and VoIP up a notch. With voice and data converged on one network, you can maximize unused capacity, help curb equipment costs and simplify management. You can quickly allocate bandwidth to adapt voice services to changing business demands--and do so without the time and expense associated with adding expensive transport lines."

AT&T has also confirmed that SIP "can reduce access costs, improve bandwidth utilization and bring down operational expenses." Enterprises using SIP "can save a significant amount of money by converging their voice and data networks, particularly if they’re covering multiple locations."

But the kind words can't hide the reality that SIP trunking is a threat to AT&T and other incumbent local exchange carriers (ILECs) because it cannibalizes local service revenues. It also nullifies their territorial advantages in local services, creating an opening for smaller carriers with good MPLS networks such as Sprint, Qwest, XO, tw telecom and Level 3. According to AT&T, land-based PSTN service revenues (for all carriers) fell from $180 billion in 2000 to $130 billion in 2007. This figure is probably close to $100 billion today, but even that isn't peanuts--and a lot of it goes to AT&T.

Although Verizon faces the same threat, it does not resist SIP trunking. Indeed, Verizon has pretty much embraced the technology--perhaps reasoning that if the local wireline business is going to be lunch, VZ itself should cannibalize it rather than let some other vendor devour its business. This strategy recognizes and leverages the principle that if you own the IP connection, you own the relationship. Regardless of its reasons, VZ's SIP offering is straightforward in terms of structure, capability and pricing.

AT&T has been a lot more Bell-headed. Notwithstanding articles like those quoted above, it seems to have been dragged kicking and screaming into the SIP world. Last December, TC2’s David Rohde blogged that, "AT&T is the classic battleship that doesn’t turn on a dime, and it prefers that its customers don’t do so either.... [It] has legacy voice business to harvest and wind down in an orderly manner ."

So AT&T was (and is) behind, though it is hardly out of contention. AT&T was not first-to-market with frame relay or MPLS either, but over time still ended up dominating the markets for those services. Apparently, however, mere neglect has not been enough to stem the advancing tide of enterprise SIP deployments.


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