134 Part I • Information Technology
Indiana, have long dominated the traditional market
for voice communication. They sell network services
through a variety of channels, based on business size.
ILECs sell IP-enabled PBXs from manufacturers
such as Nortel, Avaya and Cisco. Generally, the
ILECs sell equipment, referred to as customer prem-
ise equipment (CPE), in order to enable their network
sales and maintain an account presence. The systems
they sell are generally proprietary implementations
of VoIP and generally cost $1,500 to $2,000 a station,
with “right-to-use” fees for additional software appli-
cations. ILECs offer better pricing for Internet access
T1s than for T1s used for voice communication.- Competitive Local Exchange Carriers (CLECs):
These firms offer competitive data connectivity for
businesses to access the Internet or buy dedicated
point-to-point data connectivity in fractional as well
as full T1s. Some CLECs implement a hosted VoIP
solution using a Cisco platform, though none in the
Indianapolis marketplace. Others are reselling the
services offered by the national providers described
previously. Generally, the infrastructure required to
implement a VoIP solution using Cisco is reported to
be too expensive to be profitable for most CLECs,
and we have learned that the margin available for
reselling the national hosted offerings was also not
attractive. In addition, most CLECs are not comfort-
able with selling and servicing voice solutions—they
are data providers. Both eGix (www.egix.com) and
Ultimate Medium (www.ultimatemedium.com) have
attempted to sell hosted VoIP solutions in the greater
Indianapolis marketplace. Management understands
that Ultimate Medium has withdrawn these services.
Management believes Ultimate Medium represents
an attractive partnering opportunity for VoIP2.biz
rather than an effective direct competitor.- Cable Companies:The companies are preparing to
enter the VoIP marketplace, beginning with residen-
tial service. BrightHouse launched a residential
offering at year-end 2005. They plan to offer a busi-
ness service in the future, but as most businesses are
not cabled and linked to the existing cable network, a
significant capital expense would have to be incurred
by the cable company or the customer in order for
cable to be an effective alternative. - Internet Service Providers (ISPs):ISPs see VoIP
services as an attractive service extension, particularly
for residential customers. Clearly, AOL, MSN, and
other national ISPs should soon be rolling out residen-
tial VoIP services. ISPs that service business customers
have long searched for an additional value-added serv-
ice they could offer in addition to Internet access. With
VoIP, an ISP could add a profitable service. To date,
few local business-oriented ISPs have implemented a
VoIP business strategy. Management expects wireless
ISPs would also be interested in adding VoIP services. - Interconnects and PBX VARs:VARs and intercon-
nects have traditionally provided a competitive alterna-
tive to the ILECs for smaller firms, usually at a lower
cost point. Many of these firms sell systems from
existing PBX manufacturers, such as Nortel, Avaya,
and Siemens. Rarely have they had the data expertise
Manufacturer Model Avg Cost per User (List)–5 Year TCO Analysis
25 50 75 100 200
3COM NBX $ 578 $ 533 $ 505 $ 470 $ 474
with Maintenance $ 1,127 $ 1,039 $ 985 $ 917 $ 924
Alcatel Omni PCX Enterprise $ 1,000 $ 900 $ 875 $ 850 $ 800
with Maintenance $ 1,950 $ 1,755 $ 1,706 $ 1,658 $ 1,560
Avaya IP Office 403 & Definity Multivantage $ 1,094 $ 909 $ 855 $ 800 $ 750
with Maintenance $ 2,133 $ 1,733 $ 1,667 $ 1,560 $ 1,463
Cisco CallManager $ 1,112 $ 918 $ 900 $ 899 $ 650
with Maintenance $ 2,168 $ 1,790 $ 1,755 $ 1,734 $ 1,268
Mitel 3300 ICP $ 1,020 $ 720 $ 620 $ 560 $ 547
with Maintenance $ 1,989 $ 1,404 $ 1,209 $ 1,092 $ 1,067
Nortel BCM $ 1,170 $ 1,040 $ 885 $ 800 $ 750
with Maintenance $ 2,282 $ 2,028 $ 1,726 $ 1,560 $ 1,463
Target VoIP2.biz $ 280 $ 120
with Maintenance $ 500 $ 320