The Truth About VoIP - Page 2
Part 3 – by Jim McNally
Buy low, Sell high
In recent years, much new software has been driven by the Open Source Development community. The best known example is the Linux Operating System, which now runs 4 out of every 5 web sites on earth. Open Source grew out of the collaboration on the internet of software developers working together to create something, often for no other reason than to create it. Billions of developer hours for no more reason than individual recreation and achievement have created everything from games and computer operating systems to scientific and research oriented software to all the necessary VoIP software to put together your own phone company. The basic concept of Open Source is is that when you get the program you also get the source code, so you can see how it works, copy and modify it if you wish, and it's usually free. The Apache Web Server (which runs most of the Web sites in the world) is an Open Source project. So is the Firefox Web Browser, which has had a significant impact on Microsoft in the past few years. IBM and Oracle have made major commitments to Open Source as well. Many Open Source programs are used by large industries and the Federal Government.
So this stuff really works. And since you get the source code when you download it, you can figure out how to fix things or change things yourself, if you need to and you're a programmer. In the VoIP industry this has resulted in several projects developing all the software needed to build very sophisticated VoIP SoftSwitches on ordinary hardware (PCs and Servers) which rivals or exceeds the SoftSwitches from Cisco and BroadSoft. And it costs almost nothing.
So it is possible for a tech-savvy company to build their own commercial class SoftSwitch with Open Source software for pennies on the dollar compared to what Vonage did. (In all fairness, this VoIP Open Source software didn't exist when Vonage, etc. were starting up, so they never had the choice.) Level3 tells us most of their new VoIP customers are using Open Source soft-switches today.
SIP stands for Session Initiation Protocol. It is what most VoIP systems use to begin and end calls. (An interesting side note is that the VoIP call itself happens inside the VoIP phones or adapters at the customer end points; you really only need the VoIP provider to handle some of the setup of the call, and control the phone number itself. So we really only need a Trunk provider for connection to the old Phone System.) This can be handled by a complex Soft Switch, or by a simple SIP router. The SIP router can't do advanced features like Voice Mail and 3-way calling, but for Trunk Replacement we don't need that stuff anyway. We're going to handle those features (or the customer is) at the end user location instead. So a simple SIP router will let us sell and manage Trunks to end users or resellers. We have SIP routers which have been tested to handle 5000 call setups per second and 100,000 simultaneous calls, and run on under $1,500 PC Servers.
The last piece of this puzzle is the economics of VoIP service from someone like Level3. Earlier we stated that the price of Termination service from them is less than 1 cent per minute. It's actually more like half a cent per minute, but you have to buy a minimum of 1 million minutes per month to get that price. Vonage and the other providers have no problem with this – remember, the average business trunk uses 1100 minutes per month. So 1,000 business trunks will be 1,100,000 minutes per month. At $0.005 per minute that's only a $5,000 per month commitment.