The Truth About VoIP
or What Vonage doesn't want you to know
Part 3 – by Jim McNally
Trunks vs. Hosted Seats
The next thing to look at is the two types of products that are sold by companies like Vonage. These reflect two customer groups who have widely divergent needs.
As we saw previously, a Trunk is the name given to a phone “connection” through which calls can be made. But it actually has a somewhat different meaning in the VoIP industry, which is very important to us.
In the old-time phone network, a trunk is a “physical” connection which can carry a call. It can be a one-way or two-way trunk (inbound only, outbound only, both send and receive.) It can have a DID number associated with it or, in some cases, not. But in all cases, this type of trunk connects from a Central Office (CO) to another CO or to a customer's phone system. Normal phone lines that just plug into a phone are not called trunks, they are called POTS lines (stands for Plain Old Telephone Service – see, there is a sense of humor somewhere in the phone company – at least on the engineering side...) Trunks almost always carry more traffic than POTS lines, but have less features. For instance, if you have 5 trunks coming in to your office (as in our example in the earlier parts of this article) you wouldn't want call waiting or voice mail on the first 4 trunks in the hunt group, otherwise after the first line was tied up, the next call would go to voice mail instead of ringing the second line. So phone lines with features like voice mail that are handled at the CO are usually POTS lines; trunks are used when advanced features are handled locally at the customer site.
VoIP separates these two classes of connections the same way. All-inclusive, lots-of-features VoIP lines are called Hosted Seats (because the features are “hosted” on the provider's switch, and presented to the customer's “seat” where all they need is a dumb phone.) “Lines” which just connect to the outside world when the features are performed on-site by customer equipment are called Trunks. Hosted Seats are usually sold to individuals or small companies who don't or can't invest in the equipment and technology (and the learning curve) to host the features themselves. Trunks are sold to users with existing phone systems (PBX's ) or who want to run their own local VoIP phone systems. Trunk Replacement is a niche market where older phone company trunks are replaced with VoIP trunks. This is done with an IAD as we discussed previously.
Most VoIP providers concentrate on selling Hosted Seats. They have several reasons for doing this: There's a bigger pool of customers (predominantly residential); They maintain control of the features and the technology ( with one phone adapter from Vonage you can still only make one call at a time even though VoIP allows you to make many – the adapter has only one phone port in it); And they can better justify their initial capital expense in the equipment they bought. That last one needs some clarification.
Until recently, to set yourself up to be a VoIP provider like Vonage, you needed to buy a VoIP SoftSwitch – a large piece of equipment which works between the customers and Level3 (or other huge VoIP network providers). These mostly are brought from Cisco, BroadSoft and the like and can cost millions of dollars. In the residential market Hosted Seats predominate, so most providers don't bother to sell Trunks at all: all those fancy features give them additional reasons to get you to switch to their service. They already invested in the SoftSwitch; why sell something that doesn't need their fancy piece of equipment? Some providers do sell Trunk Replacements, but they charge almost the same amount for them as they do for the Hosted Seats. So the market for Trunks is either underserved, or consists of companies like C-beyond who do Trunk Replacement with all their own equipment (again as we discussed in the end of Part I).
Recently, there has emerged a need for Trunk only service for customers as diverse as VoIP Resellers who want to sell phone systems to their customers and run the local hardware themselves to sophisticated businesses whose IT department can run their own VoIP SoftSwitch, to the single nerd techie who just thinks having a trunk (rather than a hosted seat) would be cool. It is possible to find providers who will sell Trunks in small numbers, but it's not easy.
The Truth About VoIP - Three part article series
The Truth About VoIP - Part 1
The Truth About VoIP - Part 2
The Truth About VoIP - Part 3
