: Knowledgebase

The China Factor in Telecom

"Why my phones (and other things) don't work right"

Most of the phone systems made today don't work great compared to the systems designed in the late 90's.

Sure, some have lots of features, but the way the features work range from annoying to "What kind of idiot designed this thing?"

Some of the commonly used features from the past just aren't there. Why would that be?

The answer is that the engineers designing the current crop of phone systems are new at this. It's like hiring a phone man out of high school, without being an apprentice for four years. He can do some of the stuff, but he's sure going to screw up a lot of stuff until he learns his job - and it's going to be painful for the Interconnect and the customer.

These new engineers are most likely in third world countries. They are educated in schools that make them memorize the facts, but who have no way of showing them real world application of the facts. They may live in homes with no electricity, no phone service, and no toilets, so they have no idea how the stuff they are being asked to design is supposed to work, or how it's used.

Are features that don't work as expected a problem? It is if the customer who bought the phone system saw a feature listed in the brochure or asked the salesman about it, but it either doesn't work (yet), or works in a totally different way than that feature has worked in the past - even on the same brand of phone system. Depending on how important that feature is to the customer, it could mean that the Interconnect doesn't get paid and takes the system back. A real nightmare for the Interconnect. The manufacturer is just going to tell the Interconnect, "Tough luck." Wait 'till the 2.84755847747 software release (that may never come).

Having third world engineers design this stuff is kind of like taking a smart guy like Henry Ford, dropping him right into 2010 with a time machine, and asking him to design a modern car. He'd have no chance, and his customers would be forced back into the past because of his lack of knowledge of all the pain the engineers went through to make cars more reliable (and also how cars are used on today's roads).

Americans are feeling pain from everything we buy today, not just phone systems. The TVs, DVD players, computers, monitors, cordless phones, and everything else sold today doesn't work as well, aren't repairable when they don't work well, and many are just plain unfriendly to use (there was no thought given to how someone would use it - just how fast and easy it is to get it on the market).

Microsoft's newer software, operating systems and hardware are really junk. It's all designed by a new crop of engineers and programmers who don't have a reference to the mistakes made by the guys who designed the older operating systems. Just like in phone systems, some features are gone. Why? The predominantly third world programmers working at Microsoft have no reference to the past, or the real world. Instead of building on past mistakes, they are making them all over again (really a management problem).

Here's an example of a cryptic message that I received when opening Outlook 2007, which wouldn't get any messages from our mail server (so I couldn't get my email) until I did this:

Message from Outlook 2007. Exactly what is a non-geek computer user supposed to do with this?

Should they look under their desk for an Offline Folder file?

Hard to believe that both the programmers and their bosses would write/approve software like this, but since they probably don't have electricity, Internet, or toilets in their homes, they don't know how computers are used by ordinary Americans.

You can be the world's smartest engineer but if you've been isolated from modern cultures, it would be hard to make use of your abilities. Experience is how we all learn.

We now have third world engineers, living in third world environments, controlling our day-to-day activities by designing the devices we're supposed to use here in America.

But hey, dependability is no longer an issue for most of us. There will be a new model out that will improve some of the problems before you're done paying for the old one on your credit card (or auto loan?) - and you'll probably get that new model. Things are specifically made not to last today, and we've all bought into that concept. We want the new stuff anyway, so if it breaks quickly who cares? The new models are generally a little cheaper than the previous version, which helps us rationalize putting it on our credit card again (and paying outrageous interest rates to the credit card companies, which means we're paying maybe an additional 20% (30%?) of the purchase price per year for these defective items).

30 years ago, anybody making junk like we have today would be out of business quickly (except the car companies?). "Made in Japan" was the trademark for junk. "Made in Taiwan" was next.

It's truly amazing that Americans put up with the sometimes horrible call quality of cellular and VoIP phones. If AT&T would have reverted to that kind of quality on land lines in 1980, we would have all stormed the phone company's offices. Congress would have gotten involved. For some reason, we put up with horrible quality phone calls today (AT&T's president says he's planning to disconnect all the copper lines because they're more trouble than they're worth to them... even though as a utility they are guaranteed to make a profit on them, and as a utility they've basically been given free land for poles and buried cable).

We put up with poor quality cellular calls for the convenience of not being tied to our desks. Like the US manufacturers making poor quality stuff in China, the cell companies do have the choice of giving us more bandwidth and increasing the number of cell sites, but that would cost us all more money and limit the number of conversations that could be carried on the limited cellular frequencies available. Nobody wants to see that dreaded "System Busy" when they're trying to make a call, so they cram more calls into the limited bandwidth.

All I do all day is talk on the phone, taking a lot of incoming calls. The call quality is so bad that I don't want to talk to the caller on about 20% of the calls (I take these calls on real AT&T copper POTS lines). This is somewhat better than two years ago, where the percentage of bad sounding calls was about 40%. Cellular and VoIP calls are getting better.

One of the most amazing products of the last few years is "the bundle." People do totally stupid things to save a little money on a bundle, even if the stuff in the bundle works badly.

I'm in a unique position to hear from both homeowners and companies who have switched to "the bundle" for their Internet, TV, and phone. We make stuff that helps interface phone equipment with strange phone lines.

To make their phones or alarm system work with "the bundle," they're willing to go to expensive extremes. Spending a thousand dollars to buy equipment to make the fake phone lines in "the bundle" work on their telephone equipment seems insane to me. I tell people that, but they think I'm crazy (probably true).

The devices that are used to provide the fake phone lines were designed by third world engineers with no experience in telephony. What's more, most of them think of the US as a third world with a bunch of stupid suckers buying the junk they make. We have to change our 100-year-old standards to theirs (I was told this by Chinese engineers, who were quite serious).

Telephone lines in other countries are similar, but not the same as we've had for the better part of a century here. Engineers and their bosses at the companies who make the equipment that cable, TV and phone companies use to provide the fake phone lines don't really care. They'll force the junk that's not designed for use in the US down our throats as long as it's cheap enough. They know the cable and phone companies selling the bundles are stupid enough to buy their hardware (they don't have a "Bell Labs" to do testing, or even a real telephony engineer working for them), and that they'll shove it down the throats of their customers. They're only stinkin' subscribers (us).

The cable, TV and phone companies don't have the resources to design something that works, so they don't have any choice. Much different from the days where Bell Labs, basically a bunch of geeky engineers, had to put their seal of approval on everything that the Bell System offered to their subscribers (most independent phone companies bought stuff licensed from Western Electric).

Even though almost all of Bell Labs work is public knowledge, it's totally ignored today (even though we still have the same analog ears and mouths that we did in Bell Lab's heyday). Again, the third world engineers and managers don't look to the past for engineering knowledge, so they make way more mistakes than should be made in a world with a hundred years of experience using phones.

The reality is that the subscriber can un-bundle their phone lines from the TV and Internet, but they just won't hear of it. For them, that $10 a month or whatever savings is way better than saving $1,000 on stuff to make the fake phone lines work with their equipment. It's like we're all programmed to live on the bleeding edge, no matter how much it hurts us (or costs us in the long run).

Note that there are some new residential and business subdivisions which are only served by fiber. AT&T and other phone companies have stopped putting in copper, so in the newest areas homeowners and businesses have no choice but to try to make their phone stuff work with the boxes that convert fiber to fake phone lines. Having fiber to your door sounds good, but in reality, if you have fiber to your door your only choice is to use fake phone lines designed by third world engineers, that only work with some telephone equipment - not all. Moving is your only fix to some problems.

OK, so you have a fake phone line. You even know the shortcomings. What kind of idiot would put their fire alarm system on a fake phone line that is likely to go down from time to time, and that will be dead when the battery backup runs down when the power is out? I don't know, but seemingly sane people talk to me about doing it all the time.

An even more amazing piece of third world technology is the Magic Jack. "Free" phone calls must be very alluring. I constantly get calls from people trying to connect their phone equipment to a Magic Jack (or multiple Magic Jacks for a multi-line system). Rather than treating it like the cute little toy it is, they're trying to depend on it like they would a real phone line, including hooking up their alarm system to it. Seemingly sane people buy over $200 worth of equipment to try to make the thing work with their phone equipment (the voice quality often stinks anyway).

Big companies, working with China, have just plain dumbed down Americans - who will seemingly do anything to save a buck (including spending $1,000). I guess it's obvious by the number of crooked lobbyists in Washington, but we're all being used by big business. Since there are no more honest big businesses, as can be seen by the mess wall street has created for the last couple of years, we have no choice but to buy our stuff from crooks (this extends to food products that can poison us or our pets and livestock, as well as electronic stuff).

Like it or not, we're all being controlled by big business, and the big businesses are constantly getting bigger through mergers and acquisitions (note that the AT&T breakup has now pretty much been undone).


Electronic phone systems first appeared in the 1970s. They were a mess. The key systems primarily came from Japan - not known at the time for quality anything. Not lots of features, and the features that were there sometimes didn't work right. The systems crashed often.

The Carterphone decision resulted in a mandate to the phone company to let the customer hook up whatever they wanted to the phone lines, through a "protective coupler" at $10 a month. That was the beginning of the end of the Bell System, who strove for dependability - not innovation.

The first electronic/mechanical systems had an electronic warbler for the ringer, instead of a bell. This one feature sold a lot of phone systems, where the company could prove to visitors that they were on top - just by their visitors hearing the phones ring in the office.

The Bell System originally had nothing to compete with Japan. Their phone systems were very reliable, while Japan's weren't. When Western Electric came out with the first electronic/mechanical key system, the Comkey 416 was pretty reliable (which I believe it was licensed from a small company), probably because it didn't offer a lot of features and there wasn't much to break. That technology and the design of those phones (ivory with wood grain faceplates) were later expanded to include large key systems, the Horizon small to medium sized electronic PBX, and the large Dimension PBX.

After working mainly on 1A2 key systems, which were incredibly simple and hardly ever broke (light bulbs and dials here and there), my first foray into stored program electronic phone systems was a real eye opener. As a phone man, instead of being a hero and everybody liking to see me walking down the hall at their company, it was "Oh, the phone man is here again."

The worst was when I was on a weekend callout in 1980 or so and went on an emergency call at a large hospital in Indiana that was totally down. It had Stromberg's first big digital PBX, the DBX, which had just been cutover. I checked with the operator, who asked me to go up to the mental ward first. So, after making sure the switch was still there in the phone room, I went up and rang the bell to the locked ward (locked for both in and out). The nurses let me in, and then spent 10 minutes telling me how none of the phones work, they feel extremely unsafe, and their only communications with the outside world is a walkie-talkie that a security guard left with them (the patients, many of whom were restrained, did look pretty scary).

I checked all the phones, and sure enough they were all dead. I told them I had to go down to the switch to see what was wrong, and they told me they wouldn't let me out until I had their phones working. These ladies were serious.

I managed to assure them I would get their phones working before I left, and I did, but the DBX software was very unstable at that point, so it was likely to crash at almost any time. That's that state of almost any new technology, and early adopters are usually up for living with that - but obviously a hospital shouldn't be an early adopter, and GDCC (General Dynamics Communications Company) should have never sold the system to them.

World Book, the encyclopedia publisher, had the same system at the same time. It went down often, but it didn't have the same impact as at a hospital. As an Interconnect, it's our responsibility to sell the customer the appropriate technology - not just make a sale. It only makes sense for a customer to be an early adopter when they can handle the pain (and have a prescription for Valium?).

For some prospects, their old phone system may still be their best choice. There are lots of ways of adding new technologies onto legacy phone systems that will preserve overall dependability, but salesmen make the customer think they would be throwing their money down the drain. Essentially no salesmen cares about dependability - they care about the sale and commission of whatever they've got to sell today.

In the 70s there were a lot of electronic/mechanical phone systems that were the "hybrids" of their day - electronic control with some type of relays for the voice switching. The electro-mechanical systems in the 70s primarily suffered from dissimilar metals on the card edge connectors between the switch and the circuit boards. That was an era where a pink pencil eraser and a burnishing tool fixed almost everything. Resetting the whole system was uncommon. Most were fairly dependable (but certainly not all of them).


In the phone business, the 80s were a time of learning. Phone systems slowly became more reliable.

This was a decade with less innovation than refinement, which was good for the customers who bought the newer model phone systems.

After the breakup of the Bell System, more time was spent figuring out the business model than innovating. It was a very new world for both phone companies and the subscribers, who could now go out and buy almost any kind of phone stuff they wanted.

Japan was getting much better at manufacturing reliable telephone systems towards the end of the decade. The engineers had a lot of experience under their belts.


By 1990, most of the phone systems were pretty stable, and a lot of reliable features had been added. Voice mail was still terrible (and expensive).

In 1990 digital phone systems became popular... that is the voice was digitized. Earlier electronic systems had analog voice, and digital control of the phones. At the time, each of the manufacturers came out with a very expensive "executive" phone with an RS-232 (serial) connector on it, which supposedly would let the customer network all the computers in the office through their new digital phone system (I never saw a single office do that). This was a time where most Ethernet was coax, and CAT3 twisted pair was the new thing (no CAT5 yet).

In the early 90s, most Interconnect salesmen told their prospects that they were an idiot if they bought an analog phone system. Their investment would be obsolete when they bought it - because they couldn't network their computers. Today's salesmen have modified that pitch slightly, saying that if they don't buy a VoIP phone system, it's already obsolete.

The engineers who designed the systems in the 90s were primarily the guys who designed the older analog electronic systems or were working for the guys who designed the older systems. They looked at past failures in the field, figured out how to fix them, and designed the next system so it was more dependable than the last (they tried not to fix the older systems too well, so there was a reason for companies to upgrade).

Ameritech Building

In the 1990s I had this picture (above) of the Ameritech Headquarters (now just another AT&T building) on the front page of our catalog, offering a discount if someone could guess what this building was when placing an order. The multiple choices included the palace of a foreign country.

At the time, I was writing a column in the now defunct Mart (Telecom Mart) magazine. Actually, almost all telecom magazines are now defunct, or are soon to be. I would occasionally say less than flattering things about Ameritech, who as a fairly new unregulated company cared less about subscribers than the old, regulated phone company - who didn't care at all... because they didn't have to (Lily Tomlin).

To get back at me, they had someone in translations break the hunt between our first line and the rest of our hunt group. Took them about a day to fix it. That was actually pretty effective at shutting me up.


By 2000, phone systems were great. Salesmen had been telling customers that they had better upgrade that old phone system that was working fine, because the sky might fall at midnight on 1/1/2000 (Y2K). Almost everybody bought new systems approaching 2000. The world was a wonderful place for an Interconnect, and any computer related company. All because of a date.

Voice mail had pretty much been perfected. Phone repair men were like the Maytag repairmen. Most of the service calls were to check on dead phone lines and report them to the phone company.

Then came the end of the Internet bubble. All the computers had been replaced for Y2K, all the phone systems had been replaced for Y2K, and the money stopped flowing.

Management of nearly all the companies were looking for ways to survive, much less prosper. If you need to make more money the choices are: Lower your overhead, lower your cost of goods, raise your prices, or sell more stuff at the same margin (or any combination).

Holy cow! "If we move production to China, make our stuff out of the cheapest components possible, and use the cheapest engineers we can find, we also get rid of all the overhead of needing desks and a place to work for all these expensive Americans sitting out there. We're saved!"

Almost all of the experienced engineers were put out to pasture. Who needed those old fogies anyway?

Since the early 2000s, it's Deja vu all over again. Just like in the 1970s, engineers are designing stuff from scratch without the knowledge of problems and solutions of previous generations.

Third world engineers are pretty cocky. They think they know everything, and that any idiot could design phone stuff with this 100-year-old technology.

It turned out that the digital part, all 1s and 0s, was pretty easy. Interfacing to the millions of analog phones and phone lines (each of which look somewhat different electronically speaking), was very difficult to do without experience to draw on (US telecom engineers had incredible experience, since we've been using basically the same phone lines for over 100 years).

Unlike digital, which is just 1 and 0 (on and off), analog has lots of stuff in-between - like 0.00001, 0.00002, etc. We're all being screwed because of the lack of experience of people designing the stuff we buy today.

We're actually paying for the Chinese to gain experience. Meanwhile, there are few US engineering students, so the future is plain to see.... and it's not pretty for us.

China was at the right place at the right time when the Internet Bubble burst. If it had been ten years earlier in the history of China, they just couldn't have handled the incredible requests US corporations threw at them. Since the US transferred all their engineering know-how (and most production equipment) to China before getting rid of the American engineers, the Chinese did pretty well removing the US as a viable place to engineer/manufacture stuff. It gets less viable every day.

Companies who initially resisted the shift to third world resources quickly realized that their stuff was overpriced. So overpriced against the Chinese stuff that they were going to be out of business quickly if they didn't get on the bandwagon. Even if their US made systems did work better than Chinese junk, the American consumer didn't seem to care.

Prices that Americans paid for the Chinese stuff didn't drop right away. Americans were paying the same prices for the Chinese stuff as American stuff, so the American companies could make nice profits while selling a lot less. When the economy improved here, and consumers started buying more stuff again, prices started to come down because the companies could now make their profits on volume, instead of lowering their overhead.

The companies who decided to switch manufacturing to China to prop up their stock prices are about to be in deep stuff - and so are you. In order to switch manufacturing to China, they had to basically give the Chinese factories all of the technology, intellectual property and trade secrets so they could make the stuff. The result is that those same factories are making knock-offs (counterfeiting) the big company's products, or they've given the information to their cousin's factory down the street, who's knocking it off. This applies to software, hardware, and even seemingly crazy stuff like Nike shoes and Ugg Boots (they only counterfeit it because we're stupid enough to pay too much for branded merchandise - which may or may not be better quality than stuff from Biggie Mart).

The newest trend in counterfeiting is to counterfeit cheaper stuff that's sold in high volume, which they sell for just under what you'd pay for the genuine article, so we think we're getting a deal - and not a counterfeit. The days of counterfeiting Rolex watches and Versace handbags are about over. The crooks in China make a lot more money counterfeiting cheaper stuff, including the food we eat and the medicines we take (not just Viagra).

The attraction of buying a new phone system (or whatever Chinese technology) for a fraction of what their old one cost was just too alluring. That's until the thing didn't work right at cutover, didn't work right months after cutover, and were so limited compared to their old phone systems that the company had to change the way they did business to match how their new cheap whizz-bang phone system worked.

The features seemed to be called the same thing, but they didn't work the same. Or maybe the features were going to be implemented in a later software release? Either way, that first wave of Chinese phone systems were pretty bad. Ten years later, and the systems are still pretty bad - but not as bad as they were. Experience helps.

It wasn't just telecom. Every industry had to move engineering, production, and support to a third world country. Everything that's happened in the US in the past decade was driven by large US corporations needing to make more profit each quarter, so their stock prices stayed up. If it didn't make sense to do something in the long run, it didn't matter. Guys who run publicly traded corporations are driven by only one thing - keep the stock price high this quarter. If they don't, they lose their jobs (and huge salaries and bonuses).

The guys who run public companies have been forced into prostitution. They do things that sane people know are wrong and wouldn't do, in exchange for a lot of money and power (lots of examples over the last couple of years, including all the companies the government bailed out).

A good example is Dell, the computer maker. The management made a deal with Intel to use Intel CPUs and chipsets exclusively, and not buy from their competitor AMD. Intel paid Dell kickbacks for not using AMD. Dell started out getting 10% of their income from Intel in 2003, which went to 76% of their income in 2007! The very illegal part is that when they reported their numbers every quarter, the company looked like it was making all this money from computer sales, not the kickbacks (Dell reported the kickbacks as profits on PC sales, but they weren't). Anybody who bought Dell stock during this period was bamboozled into thinking that the company was making money, but they weren't - at least not selling PCs. Lots of people lost lots of money owning Dell stock because of the deception (Dell paid the government $100 million to settle the charges).

We've all spent the last bunch of years living with the results of this kind of mindless drive for a higher stock price. China has played the primary role in this insanity. The stock market has nothing to do with the true value of a company, it's just gambling... and you don't know the true stats of the "teams" you’re gambling on.

And now back to phones...

Keep in mind that I'm a phone man, and that I can have any kind of phone system in our office that I want. We have a Modkey 32 analog system from the 1980s that I took in trade, with Modkey 32 (12 line) phones. It's never broken (we do have a spare KSU just in-case, and it's always been on a battery backup), and it does everything we need. We don't use an automated attendant or voicemail - just real live people to talk to customers. We do have a 1980s Takacom (Japanese) Call Sequencer in-front of the system to answer the lines and tell us which one is the next one to answer, that has also never broken (and has also been on a battery backup). The 1980s Call Sequencer also gives us a report each day of the number of total calls, calls lost off hold, average hold time and average talk time. Just like the newest phone systems or ACDs.

My main concern is that we are always able to answer calls as quickly as possible. If you've called us, you know that we answer the phones quickly, have screen pops so we know who you are (software integrated into our in-house POS system, and not dependent on the type of phone system we use), we take your order, and get you off the line quickly. The daily reports from our 1980s Call Sequencer tells us that the average call is under four minutes, and there are very few times where all lines are busy (we can add or subtract real AT&T POTS lines based on that report).

Even though I wouldn't go to all VoIP phone lines, we've actually used VoIP for almost a decade. First for making outgoing calls (mainly to our vendors). Then to transfer callers outside the old phone system to almost anywhere, using Centrex off-premise transfer. The calls are transferred to a VoIP phone system that has all the new whiz-bang features - that are pretty darned handy. With my cell phone and Verizon broadband card for my laptop, I get calls and take orders from almost anywhere in the US.

We currently use an Asterisk system for the whizz-bang features. It's not very dependable compared to our Modkey 32 (it goes down once a month or so for one reason or another), but as long as we can answer calls and take orders no matter what on our old Modkey 32, the rest of the whiz-bang VoIP features are not that important to me. If they're down for a while, we'll survive.

I personally would buy almost any digital phone system from around 2000. I'd be hard pressed to buy anything older or newer, mainly because incoming calls are how we make our living. If incoming calls weren't important, and our customers weren't buying stuff that they needed yesterday to get a job done, I probably wouldn't care much about the phone system. If we had multiple offices where callers needed to be transferred often, I'd abandon my quest for perfection and go all VoIP.


For Interconnects, there's been a real downside to the dependability of all those phone systems we sold for Y2K. In many cases, our recurring revenue has plummeted. Since the beginning of the Interconnect business, recurring revenue and MACs have kept Interconnects in business during the slow part of the business cycle.

In the last few years when the time came to renew their maintenance contract, a lot of customers saved money by not renewing. They hadn't seen a phone man in three years so who needs the maintenance contract?

Of course, for a lot of them Murphy came knocking two days after their maintenance contract expired - and it cost them big bucks for T&M repairs.

Even worse, a lot of customers dropped their maintenance contract, and used phones from employees they've laid off over the last ten years to replace defective ones. When they run out of spare phones, and something happens to the system itself that requires a repair, they are shocked when they have to cough up a lot of money all at one time for these repairs.

At that point, they're more likely to buy a new system, if they can afford to buy or get approved for a lease. Not a given in today's economy.

By contrast, the largest Interconnect companies in the US, Black Box and Mitel (who bought Intertel), survived and/or prospered by their 'take no prisoners' approach to getting their customers to renew their maintenance contracts.

A lot of the Interconnects today are run by phone men who don't have that same killer instinct, or who have salesmen to scare and hound their customers into signing. The last year or two has been especially hard for Interconnects without recurring revenue.

Recurring revenue is absolutely needed so the Interconnect can have at least one of every system component for every system they service as spares, so they can get a customer who's down back up quickly. The recurring revenue is also needed so the Interconnect can have enough technicians to respond to emergencies in a reasonable time.

What's going to happen to all that recurring revenue at Black Box and Mitel in the next few years? I don't know. The probability is that they'll sell new systems to those old customers and continue on with maintenance contracts. Depending on how the economy goes, the customer may be willing to spend more to have a big company servicing their phone system, even though the smaller Interconnect can probably do it better and certainly cheaper?

If those big Interconnects lose sales of replacement phone systems, those companies might be in for a rough ride. Mitel has always had a rough ride anyway. Now that they're a public company with a bunch of stockholders on their backs, look for their ride to be a lot rougher!

An even bigger problem looming for Interconnects is that many new systems require yearly licensing. While this recurring revenue is great for both the Interconnect and manufacturer, and it's not optional like a maintenance contract, it's a shock to the small and mid-sized customers who aren't used to paying licensing fees.

I personally would probably not buy a system that requires a yearly licensing fee, but I may not have a choice in the future. In the old days, you'd buy the KSU, enough trunk cards for the CO lines, enough station cards for the phones (digital and analog), and the digital phones themselves. The stuff wasn't cheap. The phone system manufacturer made their money selling hardware, and more hardware for add-ons and repairs later.

Today, you can connect dozens of CO lines that come from the Internet to a VoIP phone system - not copper from phone company pairs. It's the same hardware for four VoIP CO lines as it is for forty. How are the manufacturers going to stay in business if they don't license you through software for a particular number of CO lines? Need more lines, you just get the licenses to activate them in your system. I would prefer a one-time license to do that, but because recurring revenue is so important to the survival of a phone system manufacturer today, most systems are probably going to end up with some type of term period where the license expires.

Station licensing works the same way. If the phone system supports standard SIP phones, the same phone system hardware works for four or four hundred phones. Some manufacturers are trying to license their phones, as well as "station ports" in the system.

What happens if the manufacturer goes belly up? If the phones will work with any standard SIP system, and keep working without licensing, you just need to replace the system itself. If not, your customer is screwed, and you look like a jerk for selling that junk to them.

So far, the only companies I know of implementing phone system licensing over the Internet are hosted VoIP (phone system) providers, where when the phone is plugged in or the system is booted it goes out on the Internet to the hosted system providers web site for authorization to run.

A friend who's a computer programmer, who's been using Microsoft's Visual Basic for years and is totally fed up with Microsoft sent me a link to an alternative programming language to VB. In checking it out, it was obvious that they check their web server to make sure you are authorized to install the program, when installing it. That's fine for most software, where if it dies one day you just stop using it and buy something else.

There is probably a 100% chance that the company selling this programming language will go out of business at some point. Less likely that Microsoft will go out of business, but Microsoft has already said they were turning off their DRM servers for some of the music they've sold, so it will be impossible to play that tune on a new PC after 2011, even if you still have the file on your computer. If DRM is involved you don't own something, you rent it.

If my friend had written programs for other companies using that language, and he at some point bought a new computer after the company selling the software went out of business (and their DRM server was no longer available), he would never be able to install that software because his new computer would never be authorized to run it. At that point, he'd better hope his old computer never breaks.

It will be interesting to see if any phone system manufacturers move to DRM for licensing. I guess that model is already being used by hosted PBXs, but the hosted PBX companies generally don't lock the business phones they sell so they can't be reprogrammed and used on another hosted system. On the other hand, if your phone number is from a hosted PBX provider, or you did something stupid and ported your phone numbers to them, that might put you out of business (at least for a while) if they go out of business.

As an Interconnect, this is going to be a tough time since you'll end up being the bad guy from time to time. You've got to sell something, and it's all pretty bad right now. Five years from now, we'll all probably be riding high without a worry in the world, when the third world engineers figure out what they're doing, and the economy has improved.

Until then, it's critical to avoid being the bad guy as much as possible. The easiest way to do that is to put yourself in the customer's position, and make sure every cutover goes smoothly. The main thing the customer remembers is how the cutover went on their new phone system, no matter what you do to fix it later, which definitely affects referrals.

For Interconnects, a factor just as big as China is today's IT guy at the customer. Most business owners figure a phone system has wires and uses electricity, so the IT guy should be able to handle it. The IT guys don't know anything about phone systems, and no matter how much they want to learn they aren't given the time to learn it and don't have the exposure to the problems that someone who works on phone systems everyday has. Like the Chinese engineers, the IT guys are being told to do stuff without training, and there's nobody experienced to ask about it. The boss is paying them, so they have to do it.

The IT guy is going to go for the geekiest solution, just because that's what he's comfortable with. The geekiest solutions are normally the most expensive and not necessarily dependable. Companies like Cisco are using their relationships with IT guys to sell them a phone system and making big bucks doing it. Since the responsibility for the phone systems and phone lines has been forced on the IT guy, the Interconnect has little chance of selling those companies anything... or using their expertise to solve problems. Those companies have become DIYers, spending a lot more money than if they had gone to an Interconnect - and stayed off the bleeding edge.

The Chinese consumer, as well as consumers in other third world countries, don't actually know what quality is. They have no basis of comparison to what they're buying today. Their standard of living will slowly improve (with us paying for it), while the standard of living of the US consumer will slowly go down to meet those of the third world. It will eventually all be the same worldwide (except in the poorest countries).

In the end, the Chinese will win. They have a secret weapon that is 100% effective against Americans. Every single American who knows what quality is and desires it, will be dead soon enough. China has been there a long time. They can wait us out.