TC2's David Rohde on Telecom

About TC2
News and Analysis From the Enterprise User Viewpoint

Enterprise or “enterprise”? Level 3, TWT, and the fight to build a strong competitor

By Posted June 20, 2014

Will Level 3’s acquisition of TW Telecom be a roaring success or just another problem-riddled merger? You can see some of the tension in a comment thread at Telecom Ramblings that I helped kick off.

Some folks emphasize the clear fit of assets that constitutes one of the best matching up of jigsaw puzzle pieces in the U.S. telecom industry in some time. Others note the striking fact that TW Telecom has stayed away from the merger game for a long time and has been free been to do nothing but grow, invest and execute. They fear that this period comes to an end with Level 3’s embrace and the inevitable stress, uncertainty and culture clash that dogs almost every telecom industry merger (and, in some people’s view, Level 3’s acquisitions in particular).

I’ve noted the importance of the merged company’s continuing investments in capital expenditures largely along the TW Telecom model. As you can see at Telecom Ramblings, much of the defense of Level 3’s prospects after it absorbs TWT has to do with technicalities regarding Level 3’s ability to retire or refinance debt. Unfortunately, that’s not good enough, or shall we say it’s necessary but not sufficient.

In my time in telecom, merely the excessive focus by a carrier’s top executives on the success of Wall Street transactions almost always correlates with a belief that the carrier’s assets will “speak for themselves.” But that’s not how it works – a number of times on this blog I’ve used the term “everything has to go right” to describe what a competitive carrier usually has to do to get large enterprises’ core business.

That includes not just the acquisition or buildout of facilities-based networks but also a powerful sales executive or account team who can grasp the scope of an enterprise RFP and get things done on both prices and terms – and then can hand off the rollout or migration of services to a platform and/or support staff that scales up.

There’s a certain kind of “capital expenditure” involved in these things too, and it’s something that TWT has put some measure of effort into with its service delivery platform emphasizing dynamic capacity management of its Ethernet services. But the real test will come if a core of brand-name enterprises sign on to Level 3’s new local-to-global story with its now matched pair of acquisitions in TWT and Global Crossing.

Part of the difficulty here is that in the stock market, the Level 3/TWT merger has been viewed very favorably because it’s focused on the quote-unquote “enterprise” market. All that investment commentators really mean by that, however, is the business market as opposed to the wholesale market where one carrier sells to another. That’s great as far as it goes – the wholesale carrier market has seen its margins stripped to the bone – but the business market as a whole is not the same as the true enterprise market that we at TC2 and LB3 serve.

This test will now increasingly face Level 3 and TW Telecom and, for that matter, any other combination of facilities-based carriers in the very lively fiber-and-bandwidth market that is finally making U.S. metros something more than one dominant player and a pile of also-rans. It’s a key reason why we follow this metro fiber market so closely at TC2 and have all eyes on this transaction in particular.

You don’t want ASLAs – “Almost SLAs” – in your SIP Trunking deal

By Posted June 18, 2014

Major technology changeovers come with one great thing and one lousy thing in addition to the prospective cost savings.

The great thing is the natural ability to competitively bid since you’re starting fresh with a new service that neither your incumbent nor anyone else currently has installed with you. The bad thing is the fresh start that all these players think that they’re getting with your contract paper, and their tendency to propose new, and worse, terms and conditions than you had before.

We’ve previously noted that SIP Trunking providers love to propose circuit terms that attach to individual concurrent call paths, even though these rate elements aren’t even physical circuits. These Minimum Payment Periods (in AT&T jargon) and other circuit terms can keep you on a treadmill of contract non-expiration as the SIP service continually rolls out. More perniciously, they can also knock out milder circuit terms you may have negotiated on legacy services that retire more quickly or incur less than 100% liability if de-installed before the circuit term expires.

These same providers can pull the same sort of switcheroo in the critical area of SLAs. Over time most enterprises are able to obtain stronger SLAs on their existing services to provide more rigorous metrics or tighten up definitions to avoid debilitating carve-outs (such as averaging all events on all circuits over a full month or counting outages only from the time the user reports them). Putting in SIP Trunking gives providers the opportunity to “start all over” not only on the network metrics but also on the critical SLA measurement definitions – rarely to your benefit.

LB3’s Deb Boehling presented some of what she calls ASLAs – “Almost SLAs” – at the Negotiate Enterprise Communications Deals conference this spring in Washington, and she’ll have them again during the SIP Trunking sessions at the San Diego edition of the conference in September. Deb says that you have to watch the definitions of SLA application like a hawk in SIP Trunking because of the carriers’ tendency to throw very loose SLAs out to you on the first contract pass.

When a carrier sells you the centralized model of SIP Trunking, it may think it has a rationale to exclude “remote sites” from network performance guarantees, even when it’s the same provider for MPLS to these same remote sites. But of course the whole point of SIP Trunking is to aggregate voice traffic from remote sites, not to exclude it. And your remote site end-users are expecting voice to work exactly as well as it did before. To be worthwhile, your SIP Trunking and MPLS service levels have to take into account the end-to-end performance, obviously not excluding remote sites.

You may also find a sneaky exclusion for short calls of, for example, under 15 seconds. This speaks to the economics of determining the number of subscribed concurrent call paths. But here again, the point is that you are the one committing to (and paying for) a certain number of CCPs precisely to accommodate all of the type of voice traffic that occurs on your network. Excluding a fair number of the voice sessions that will actually occur – because of call length or another reason – basically gives the provider a free pass on SIP Trunking network performance.

Finally, the newness of SIP Trunking can tempt providers to give themselves an opt-out in the case of really bad performance – a type of trump card that says that SLAs apply only to subpar performance but not to terrible performance. One SIP ASLA that Deb presented in Washington literally read that in the case of a “Chronic Outage” such as a full hour without service in three consecutive months, the carrier could simply terminate the affected voice service with no liability to itself whatsoever.

ASLA avoidance is key to the SIP Trunking procurement and contracting process and indeed to the entire IP Transformation project experience that so many enterprises are now undergoing. I encourage you to come with us to San Diego on September 17-19 for this and much more guidance during this most interesting time in enterprise network management, carrier selection, and strategic planning.

Can Level 3 really afford to buy TW Telecom?

By Posted June 17, 2014

The most frequently asked question in the wake of Level 3’s announcement that it’s buying TW Telecom is whether Level 3 can possibly afford to make this acquisition.

The short answer: Yes, they can afford it. The longer answer is that this may not be quite the right question. For enterprise customers, the real question is whether Level 3 can maintain the ongoing capital investment that made TWT the prize it was in the first place. And that’s very much an open question.

The basic affordability issue arises because of Level 3’s notorious financial history and a set of acquisition numbers that paint a startling picture. Level 3 is acquiring TWT for just under $5.7 billion in cash and stock. Add TWT’s own debt, which Level 3 is assuming, and you get to a “real” deal price of $7.3 billion. Well, Level 3’s annual revenues are $6.3 billion, and its total debt before the acquisition is $8.4 billion.

See how these numbers cluster together? Buying someone else for an amount that’s similar to all of your annual revenues (not profits) and close to all the debt you already have is pretty scary-looking.

So how does Level 3 justify this? By engaging in a piece of financial “ratio analysis” that’s accepted among the type of investors who become Level 3 stockholders and bondholders.

Ambitious telecom carriers are considered to be financially viable if their total debt minus cash reserves is no more than 3 to 5 times a measure of the carrier’s operational cash flow that goes by the acronym EBITDA. (It doesn’t really matter what that stands for – Google it if you must but knowing the answer won’t simplify your life.) Level 3’s debt-to-EBITDA ratio has sometimes flown above this range but they’ve muscled it back down to 4.6. After the TWT acquisition it will actually drop to 4.5.

Why? Because TWT contributes enough additional operational cash flow (about half a billion a year’s worth) and because Level 3 thinks the merged companies will create enough operational “synergies” which, when added together, will just slightly offset the extra debt load when the ratio is calculated.

Level 3 has lots of experience making this sort of case. Its 2011 acquisition of Global Crossing was justified financially in almost exactly the same way. Level 3 is even mimicking its pattern of debt-raising to pay for these acquisitions – with Global Crossing it sold new bonds maturing in 2019 and 2020, and with TW Telecom it’s proposing to sell bonds maturing in 2021, 2022 and beyond.

The problem from a customer standpoint is that “synergies” don’t put fiber in the ground, capital expenditures do. And the absolute level of total debt matters regardless of fancy ratios because interest payments have to be made on all of it.

Level 3 has already been paying the price for this in different kinds of calculations that matter to network reach even if they don’t appear in Wall Street PowerPoints. When I spoke about carrier financials at our Negotiate Enterprise Communications Deals conference in Washington this spring, I showed a chart listing what percentage of revenues (all dollars taken in, no exceptions or asterisks) each of 10 carriers spends on capex. For any carrier, wireline or wireless, domestic or international, this figure really should be at least 15%. Last among the 10 carriers was Level 3, at 12.0% – a reflection of the amount of revenues it has to siphon off to interest payments (and recently to a shareholder buyback program meant to goose its stock price).

Guess who was No. 2. Right you are – TW Telecom at 32.1%, just behind Zayo Group, another fiber-and-bandwidth specialist at 33.6%. It’s not magic how TWT got to the top spot on Telecom Ramblings’ carefully followed list of CLEC building entrances in the U.S., or how it got to No. 3 (behind only AT&T and Verizon) in Vertical Systems Group’s U.S. Carrier Ethernet Leaderboard. It was by spending investment dollars on the network, especially the crucial “last mile.”

Yesterday I noted how TW Telecom has learned that the key to its metro-network momentum is less a static map of their current on-net buildings and more the increasing ability to promise each additional pierced building as the buildout continues – a kind of “network effect” of its own. No matter how much Level 3 promises Wall Street in terms of “synergies” and how cleverly it bargains with junk-bond investors to get them to buy new issues due in a future decade, the company needs to keep this TWT approach uppermost in mind. Level 3 will have to increase its level of capex to revenues to 15% and beyond to have the play in the large enterprise market it says it wants to knock heads with AT&T and Verizon.

Perhaps they’ll get there by the time I present at the next edition of Negotiate Enterprise Communications Deals in San Diego in September. If not, the first few months after the Level 3/TW Telecom merger closes in the fourth quarter will tell the tale.

Level 3 buys TW Telecom; integration, last-mile momentum key challenges

By Posted June 16, 2014

In one of the most significant consolidations of second-tier carriers in several years, Level 3 today announced that it is buying TW Telecom for $5.7 billion. The move fulfills the desire of key institutional investors who had installed themselves at TWT last year and pushed for a sale.

For the enterprise market, the merger transfers a treasure trove of last-mile assets – 21,000 building entrances and counting – into Level 3’s hands. TW Telecom is the leader among CLECs in building entrances nationwide, and it’s the No. 3 Ethernet access provider, behind only AT&T and Verizon, in Vertical Systems Group’s U.S. Ethernet Leaderboard.

Despite its metro fiber assets, TWT’s relative lack of prominence in large enterprise deals has owed to its lagging approach to SIP Trunking compared to Level 3 and XO, and its lack of a large ILEC territory to leverage compared to CenturyLink. Thus the Level 3 / TWT deal appears to marry two carriers with complementary strengths:

  • A carrier with a large enterprise focus (Level 3) and a carrier that’s been more successful with medium-sized businesses (TWT).
  • A carrier famous for national intercity transport (Level 3) and a carrier whose focus has been heavily in the metro and last mile (TWT).
  • A gunslinger that’s had a brush with insolvency but stormed out of the gate on IP Transformation services (Level 3) and a conservative supplier that’s missed some next-generation hinge points but is about to reward its shareholders for their prudence (TWT).

Will the marriage work? Much depends on Level 3’s understanding of what exactly makes the TW Telecom footprint so valuable.

TWT’s accelerating buildout to key business locations – now spread across almost 80 metro areas – gives it a less-minuscule chance than other competitive carriers at finding a match between their on-net capabilities and a given enterprise’s locations when it prices out a demand set. But TWT considers its real last-mile advantage to be the multiplier effect it gains in promising new buildouts when it wins bids – what carriers call “success-based capex.”

TWT considers itself more likely to justify success-based capex because it’s likely to have fiber and building entrances already reasonably nearby. For other carriers the cost to build out to a key enterprise location is higher from scratch. Thus, the more that TWT builds out the more it believes it can continue to do so.

An especially big test of this will come when Level 3, fattened up with TWT’s metro assets, proposes Ethernet access in large, far-flung enterprise bids. If it trips up on special construction the way AT&T often has, then users are likely to pull back from the idea of throwing their key transport requirements to Level 3.

And Level 3 will have some hurdles to cross in this process. Helped by short-term interest rates near zero, it’s been a wizard at pushing off debtholders from near-term maturities to bonds due in 2019, 2020 and 2021. But it still has a total of $8.4 billion in debt and is adding another $1.6 billion in assuming TW Telecom’s debt. In fact, this is Level 3’s second consecutive major acquisition in which it’s adding to its debt, following its previous acquisition of Global Crossing. Level 3 also has to do a lot better job in integrating TW Telecom than with its last major domestic enterprise acquisition, that of Broadwing in 2007.

Top execs of Level 3 now insist they’re on top of merger challenges, with constant feedback directly from enterprise users. This is a big one to watch play out, especially for enterprises ditching the old T1/T3 paradigm for all-Ethernet access or even end-to-end all-Ethernet WANs. I’ll have more on this deal throughout the week.

Rebranding Sprint as T-Mobile: Will it soothe regulators and please customers?

By Posted June 13, 2014

CNBC’s David Faber today reported that Sprint is planning to ditch its own brand name in favor of “T-Mobile” if the impending merger proposal between the two U.S. carriers goes through. In fact, the two carriers will probably make a big deal of the name change as part of their advocacy for the merger before the FCC and the Justice Department.

T-Mobile is simply fresher, cooler, and perceptually more pro-consumer than Sprint. Regulators are likely to be disillusioned with Sprint since their rejection of the 2011 AT&T/T-Mobile merger was meant to protect Sprint and impel it to aggressive competitive moves as much as if not more so than T-Mobile. I bet that Masayoshi Son, CEO of Sprint’s 80% owner SoftBank, already knows that.

The fact that it’s really SoftBank/Sprint that’s preparing to swallow up T-Mobile US, regardless of what anybody decides to call themselves going forward, is something that will create fascinating tension in the merger regulatory battle to come.

CNBC’s Faber also said that the break-up fee owed by Sprint to T-Mobile in case U.S. regulators say “no way” to the merger will be on the order of $2 billion, not the $1 billion previously reported by major media outlets. Like the change in branding, the size of the break-up fee confirms my previous read of the situation. But now think about the amazing ramp-up in risk that these two developments imply for Sprint.

Imagine if Sprint announces that it’s ditching its own brand name and then has to take it back and fork over $2 billion in cash and spectrum to T-Mobile if the U.S. government quashes the deal. In all likelihood this risk profile explains why a formal announcement of the merger is still a ways off, possibly not until mid-summer.

Officially (to the extent that an unannounced deal can be said to have “official” information), Sprint and T-Mobile still have to do more due diligence on each other, and SoftBank is still lining up financing for the likely $32 billion-plus acquisition. Realistically, though, Mr. Son knows that he can’t go into a formal U.S. merger proceeding with what so many people perceive as such a low chance of approval, given the 2011 AT&T merger rejection and the fact that Sprint and T-Mobile still compete for the same customers.

Priority One for Mr. Son is almost certainly to keep working on the “storyline” of the merger proposal before announcing it. That story (or spin) involves a claim that it’s really T-Mobile that’s set to compete harder but needs additional spectrum and investment dollars to go up against the big bad Verizon and AT&T. It also probably involves a set of merger conditions that speak in some way to the FCC’s other current regulatory priorities, such as rural broadband coverage (not exactly something T-Mobile is known for) and the ongoing net neutrality issue.

If it takes another few weeks for Mr. Son to get the signal that he’s making political progress, he’s probably willing to invest the time before pulling the trigger on the merger deal. Because once it’s proposed, SoftBank and Sprint had better be in a position to win. If they lose, it’ll be much harder for Sprint to recover than it was for AT&T. After all, AT&T would never propose to give up its name.

Legere-led “Sprint” (or whatever) faces political before market challenges

By Posted June 11, 2014

Encountering widespread skepticism that it can get its impending Sprint/T-Mobile merger proposal past the regulators, SoftBank is now clearly planning to spin the deal as something other than No. 3 taking over No. 4.

The merger proposal will look a lot more like upstart No. 4 bulking up for the mobile broadband competition wars of the rest of the decade. And if spinning it that way means throwing No. 3 Sprint under the bus – CEO, marketing strategy, maybe even the company name itself – so be it.

It’s now evident that starchy Sprint CEO Dan Hesse will be stepping aside to let the merged company be run by T-Mobile circus ringleader John Legere. Fig-leaf rationales such as the fact that Hesse, at 60, is four years older than Legere will serve just fine. In fact, SoftBank CEO/Sprint Chairman Masayoshi Son has grown disillusioned with the company he bought last year for $21.6 billion. Paying 50% more for a smaller company, as SoftBank and T-Mobile majority owner Deutsche Telekom have basically agreed to, indicates Son’s preference for Legere’s freewheeling style and jealousy of T-Mobile’s nearly 2 million added postpaid consumer subscribers under its Uncarrier initiatives.

Just as important is the possible political momentum that T-Mobile’s image represents. Both the FCC and the Justice Department are loathe to see the recent perception of a mobile price war disappear under the weight of an anticompetitive merger.

Exchanging CEOs going forward ranks as one of two particularly spicy issues in merger conversations between SoftBank and Deutsche Telekom that I’ve mentioned. The other is the actual name of the merged company – or at least the brand name it plans to use.

Sprint has already been closing retail stores in an era where Verizon, AT&T, Apple and big box electronics stores have been killing off Radio Shack. Dropping the Sprint brand in favor of T-Mobile itself would help explain why the pro-merger Legere has felt so free to tell customers to #SprintLikeHell and so ready to say that Sprint’s current “Framily” advertising campaign is #FruckedUp. If he’s not going to be running a company that’s actually called Sprint, what does he care?

Perhaps Mr. Son only has himself to blame for parodies of the Framily deal of up to 10 lines in a friends-and-family type circle. SoftBank originally insisted on Sprint dropping its previous advertising campaign in favor of Framily, which is an adaptation of an “ongoing story line” type of advertising campaign by SoftBank Japan. Unfortunately, Framily has now jumped the shark with a hamster character who appears to be no match for AT&T’s much more straightforward Lily the Salesgirl.

SoftBank has enough problems trying to turn around the U.S. government on its obvious reluctance to approve a deal that would reduce the number of national wireless carriers from four to three. Sprint has already thrown out one wireless broadband network in a “rip and replace” project that has uprooted customers and chewed up capex dollars that were wasted in the past. Throwing Sprint’s hamster under the bus along with its CEO, marketing strategy and possibly even its name is little more price to pay to get the merger deal that SoftBank is about to formally propose and clearly desperately wants.

Sprint’s play for T-Mobile: $32 billion plus a barrel full of risks

By Posted June 6, 2014

Japan’s SoftBank, the majority owner of Sprint, can cross off one of two major tasks in its drive to buy T-Mobile and merge it into Sprint.

Done: the basic financial terms of the deal to buy out Deutsche Telekom’s majority stake in T-Mobile US. Not done: convincing U.S. regulators this is all a good idea. Arguably the second task is going to be much harder than the first.

At midweek all of the world’s major financial media reported that Sprint (really meaning SoftBank) and T-Mobile (really meaning DT) have a deal. Sprint is going to offer $40 a share, half in cash and half in Sprint stock, for a deal value of $32 billion. T-Mobile will receive a break-up fee of “at least” $1 billion if the deal doesn’t go through – meaning if the regulators say no.

My bet is that when formally announced, this break-up fee will be well north of $1 billion. In the run-up to these discussions, SoftBank CEO Masayoshi Son was reported to be pounding the table that he would never agree to any such fee. Too bad for Mr. Son that DT holds the upper hand given T-Mobile’s branding momentum in the U.S. and SoftBank’s apparent lack of a Plan B for Sprint other than buying T-Mobile.

T-Mobile really feasted on its break-up fee from AT&T after the failed AT&T/T-Mobile merger caper in 2011. AT&T forked over billions in cash and spectrum, some of which has helped T-Mobile achieve its relevant position in the market today, at least among consumers.

And no sane owner of T-Mobile would agree to such a deal without substantial breakup provisions when some observers give the inevitable Sprint/T-Mobile merger proposal little chance of getting U.S. approval. Exhibit A for this skepticism: T-Mobile stock is currently trading under $34 a share, nowhere near the $40 a share deal price.

The Wall Street Journal reported several of the new lobbying angles that SoftBank and Sprint believe they can try. But some seem dodgier than others.

Obviously around the world not every market requires four rather than three national carriers to compose a competitive wireless market. But the U.S. has some unique characteristics in an era of increasing intolerance for any broadband wireless coverage gaps as people travel.

Sprint and T-Mobile are apparently going to make much of the horse-trading over the rules for the 2015 wireless “incentive auction” that will focus on the low-band, high propagation 600MHz spectrum that is especially key for outlying areas. The rhetorical challenge: Does joining forces augment or detract from the argument these players are making that they need a leg up vs. Verizon and AT&T lest the Big 2 hog all the new spectrum for themselves? Neither case is completely evident.

Another challenge Mr. Son faces is to continue to avoid the bull-in-a-china-shop image that he’s presented in the past. London’s Financial Times today is reminding readers of Mr. Son’s past raucous personal behavior in Japanese acquisition and regulatory fights. If they reoccur, some of these actions will undoubtedly remind U.S. government officials with long memories of Bernie Ebbers’ sense of entitlement when his WorldCom struck a takeover deal for Sprint in 1999 – a deal that crashed and burned at the FCC and the Justice Department.

Already the very public merger speculation has had one deleterious effect – the sinking of Sprint’s wireline business down a black hole. On Wednesday, the New York Times’ merger reporters lumped Sprint and T-Mobile together vs. the Big 2 as “two smaller companies which each have about 50 million subscribers and only provide wireless service.”

Actually, Sprint reported $770 million in wireline revenues in the first quarter of 2014 alone. But in my experience, many people confuse Sprint’s 2006 spinoff of its local exchange carrier territories into a separate carrier called Embarq – which was subsequently acquired by CenturyLink – for a sale of all of its wireline business. Even before SoftBank came on the scene, Sprint’s top management did nothing to reinforce the fact that the company still sells MPLS, SIP Trunking and other services to the business market, no matter how hard Sprint product managers and account managers (many of whom are now leaving the company) tried to keep the story alive.

The best thing SoftBank can probably do is to take heed of the five things that need to happen for a Sprint/T-Mobile merger to succeed in the marketplace and parallel these arguments in its merger advocacy in Washington. The stakes are now very high. T-Mobile will at least get substantial compensation if the merger is formally proposed and then falls through. What SoftBank and Sprint will be left with in terms of market momentum and public image if the merger is presented to regulators and then denied is far less clear.

Does SIP have to adapt, or do old apps and behaviors have to die?

By Posted June 4, 2014

If I want to fax you something over SIP Trunking, will it work?

Maybe that’s the wrong question. Perhaps I should be asking: If we’re well into the era of SIP Trunking, why are you asking me to fax anything?

Figuring out the right question is at the heart of a debate about the speed of transition from TDM to all-IP. It’s a given that E-911 requirements are a major issue in SIP Trunking. But other “phone line” applications that seem better suited to the PSTN than VoIP today probably won’t stop or slow the transition to all-IP networks.

Fax has trouble over SIP because, even if you choose the right compression codec, the slightest latency and jitter messes things up. On-hold call music also requires the right codec or it won’t be heard.

And the use of auto-dialers by telemarketers really fouls things up. To keep up with the short call length and the constant hang-ups that make the resulting average call length even shorter, the user has to increase the number of concurrent call paths so much that SIP Trunking becomes uneconomic. Or the carrier itself has to unreasonably expend bandwidth, which is one reason some carriers simply disallow auto-dialers on their SIP service.

But what if 95% or more of faxes have been replaced by other methods of doing things, such as scanning documents into PDFs and emailing them? And what if the world is better off without auto-dialers entirely? (Sorry, politicians and questionable “charities.”) Can we just say to these users, “too bad, move on”? Perhaps the same passage of time that brought SIP Trunking to the forefront may have changed many consumer and business behaviors.

Not everyone thinks it’s that simple. Our friend Gary Audin, in bringing up some of these issues recently, reminds us that cultural assumptions aren’t the same everywhere. Maybe the banking and real estate industries in the U.S. no longer rely on fax for transactions, Gary says, but they do in Japan and China. No ability to fax, no SIP Trunking. I might add that even if you can get fax to work over SIP, there are also interoperability issues with the T.38 Fax over IP standard across national borders.

Then again, SIP Trunking is far from ready for prime time in the Asia-Pacific region anyway. Many countries also impose substantial legal restrictions against the carriage of VoIP by non-licensed carriers. Unlike data services, voice is generally a local or national service, so adoption in one country does not need to affect adoption in a different country or region.

You still have to deal with the U.S. momentum for SIP Trunking. And since the big U.S. carriers are aching to stop supporting the PSTN, a shakeout in user behavior across entire end-user bases – not just among younger demographics or strategic business units – is possible.

A balance is probably what’s required. Certain outbound telemarketing practices may go out the window to keep SIP Trunking moving. But any serious SIP Trunking provider must still support classic inbound features such as announcement and agent call-routing routines.

Remember that traditional phone lines became the medium of transmission for certain things simply because they were available. It’s hard to picture now in an era when ILECs are losing lots of residential primary landlines, but for many years in the 1990s and early 2000s, carriers were making hay with second, third and fourth POTS lines into people’s houses because of the stereotypical “teenager who wants their own Internet access line.” Imagine that now! Now it’s broadband Internet access and net neutrality that have become the hot-button issues.

Here’s betting that for all the important work on extending SIP Trunking so that it supports key features, there will be some necessary changes in user behavior to keep the IP Transition on track. Don’t assume that you can let up in your IP Transition plans just because issues like this crop up. In the U.S., I can’t see AT&T or Verizon changing their intention to dump the traditional landline network within this decade just because people can’t fax stuff. You almost certainly can’t slow down your IP Transformation project planning for that reason either.