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By Grand Central Station SunRocket declared Chapter 11

The US’s second-biggest VoIP carrier, SunRocket, is bankrupt. You wouldn’t have been very surprised, had you read this article on Telco2.0, or even this one from back in 2003.

Not so long ago, Google bought a small company called GrandCentral Technologies that provided a hosted SIP gateway - permitting its customers to route multiple PSTN/PLMN or carrier VoIP numbers, or SIP names, to a single inbox they can access from any Internet connection. What connects these two facts?

First up, companies like SunRocket and Vonage originally succeeded because they confiscated some of the traditional telcos’ economic rents. An economic rent is defined as a return which is entirely due to scarcity; you don’t do anything to get it. In the past, bandwidth was scarce and difficult, and bound tightly to the telco’s infrastructure of identification, billing, and authorisation. With the plummeting cost of moving bits over IP, the proportion of a telco’s profits which are attributable to artificial scarcity has greatly increased - as Li Mo, chief network architect at ZTE USA put it, “the network is so much simpler when you take out the charging mechanisms.”

With the arrival of IP, it became possible to separate addressing, identification, authorisation, and payment from any one particular network. Instead, you can now assemble functions horizontally across different companies. VoIP carriers do their own number allocation and billing, and use other people’s networks for access (but usually their own in the backbone, whether real or virtual). It’s what we call Voice & Messaging 2.0.

Using really cheap transport, and being willing to accept lower margins, providers of what we might call “bog-standard VoIP” were able to capture some of those rents. But the same principle applies to them, in so far as their business model depends on the difference between the price they charge an average customer per bit and the price they pay to their transit providers, less the cost of customer care. Somebody could always come along and undercut them, and they did; traditional carriers entering a price war with deep pockets, new VoIP providers, and software-based VoIP operations like Skype or Gizmo - who don’t carry their own bits and whose product is often free.

These companies rely for their money (where they actually make money, that is) on the sort of alternative value propositions you’ll find at Telco 2.0 - and especially in our Data Transport Systems project - on a regular basis - presence/availability control, integration with other applications, and premium interconnection with older systems. So what does this have to do with GrandCentral?

A fundamental problem with the end-to-end architecture is what happens when your end is off-line. For mobile devices, especially, this is a regular event. Applications shunted into “the cloud” are one thing, but they vanish between logins - and this is very important indeed with regard to telephony, due to the strong social expectation that calls are answered whenever possible. Therefore, you need some sort of a persistent presence in the network to catch messages, and either hold them for delivery (voicemail, e-mail) or reroute them to an end-point that can answer them.

This is essentially what GrandCentral offers. Another important function they provide is the ability to overlay other networks into a single point of contact. Even if you only want to receive calls over the Internet, you still need to cater for people who are using only PSTN/PLMN telephony, and for any old VoIP identities you may have hanging around. And you may want the option of routing them either to a SIP data call, or a traditional GSM voice or SMS session, in order to have more reliability.

Until (essentially) last year, you could do these things if you felt like setting up your own SIP server. Realistically, only organisations (and quite big ones) and hardcore geeks are going to do this. Since then, though, there has been a rash of start-up VoIP hosters. GrandCentral is the best known, but there are others. Their vital contribution is to slash the activation energy required to get started with serious VoIP; now you just need to sign up.

If you’d like to debate these issues with the great and the good of Voice & Messaging 2.0, details of the Telco 2.0 Digital Product Innovation Summit are here.

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