Feature Creep: We're Doing Something Wrong

Anybody familiar with the vast array of features available on a Class 5 switch or a private branch exchange can tell you that most buyers of such platforms never deploy most of the features. Of the features deployed, most end users never use them. The same appears to be true even of the more restricted features available on mobile phones. Most cell phone customers don't use the camera, email, or gaming options offered by their wireless providers, according a survey by JD Power and Associates. Most are satisfied when they can simply place a call efficiently.

Survey respondents said they use the speakerphone option more than any other, but only 26 per cent of respondents said they used this function. Only 19 per cent of people say they use the camera on their mobile and a mere 16 per cent opt to play games. True, behavior is changing. But after decades of exposure, most end users use but a handful of features available from their advanced phone switches. There's a lesson there.

iPhone Demand: Watch Behavior

Because what people are saying they might suggests no clear trend. It is clear that Demand for music enabled phones is growing. But iPod demand is distinct from phone demand. And iPhone prices are an issue. But the potential churn away from other carriers to at&t could be substantial.

More than 33% of all wireless phones now are music enabled, and market researcher Compete found music phones made up over 53% of all December cellphone shopping hits it tracked. There were just over 3 million total music phone shoppers in December, and almost as many iPod shoppers, with 2.7 million consumers evaluating iPods online.

But the market for combination iPod and cellphone devices isn't clear. Compete found that only 5% of all cellphone shoppers also evaluated an iPod in December, and only 3% viewed both a music phone and an iPod.

Of course, price is an issue. Even among the diehard segment of iPod shoppers who said they are very likely to buy an iPhone, only 6% said they would pay over $400. There's little question that the iPhone has achieved near instant name recognition, however.

A week after the historic announcement of the iPhone, Compete found that75% of iPod shoppers had already heard of the iPhone, and a healthy 20% said they would postpone their next cellphone purchase to wait for it. 20% also said they would postpone their next music player purchase.

The good news for Cingular is that 12% of iPod shoppers said they would be very likely to switch carriers to get the iPhone. The bad news is that of the people who are not willing to switch, over 30% cite Cingular’s service plan pricing, and another 35% cite Cingular’s coverage.

Of the people not likely to switch, almost 40% said they had no interest in purchasing a combination music player and phone, and over 55% said their current carrier has cellphones that meet their needs. And price will be a hurdle. Consumer oriented smartphones generally have sold in large volumes at a price point of about $200.

Still, we always have found that it makes more sense to pay attention to what people actually do, than to what they say they will do. And we'll have to wait six months to see what happens when iPhones actually go on sale.

Google, Avaya Aim at Enterprise

Avaya is supporting and joining the Google Enterprise Professional program to develop new capabilities for small businesses around Google's enterprise products. Under terms of the agreement, Avaya will develop, market and support offers that integrate Avaya's advanced communications solutions for small businesses with the new Google Apps Premier Edition, the subscription services solution for email, instant messaging, calendar and Web publishing services.

Examples of the open standards-based capabilities on which the solutions will focus include: enabling subscribers to easily share contact information, presence information and alerts; enabling a single in-box for voice mail, email, instant messages and fax messages; and enabling web calling over the Google Talk instant messaging service network. The companies' collaborative efforts will initially focus on Avaya IP Office, Avaya’s flagship IP telephony communications solution for small and mid-size businesses, with availability planned for fall 2007. Further solutions are expected to continue the emphasis on productivity-enhancing and cost-cutting capabilities for small and mid-sized companies.

The first integrated solution, which Avaya expects to deliver later this year, will be sold through Avaya's global network of resellers and distributors, providing customers with a single point of contact for sales, installation and support.

According to Google, Google Apps has been used until now by more than 100,000 small businesses and hundreds of universities. But not just small businesses.

“So much of business now relies on people being able to communicate and collaborate effectively,” says Gregory Simpson, CTO for General Electric Company. “GE is interested in evaluating Google Apps for the easy access it provides to a suite of web applications, and the way these applications can help people work together. Given its consumer experience, Google has a natural advantage in understanding how people interact together over the web.”

Tpad Gives Away SIP Addresses

Tpad now provides a unique incoming SIP number to every customer free of charge. All of which points out in a concrete way that while the cost to do such things is not "free," revenue models are not dependent on packaging cost elements in any linear fashion. Tpad has to cover it costs and make a profit, but the way it does so might be enhanced by doing some things in an unusual way and earning revenue someplace else.

"We believe that it is unfair to charge people just for a number to receive calls," says Steven Johns, Tpad marketing manager. Tpad also bills by the second, rather than rounding up to the next full minute.

GrandCentral and Gizmo Project Get Hitched

GrandCentral's unified communications service now is interoperable with SipPhone's Gizmo Project PC calling client. GrandCentral customers can now designate their free Gizmo Project profile ID, which appears like a 747 area code number in their Gizmo profile, as one of their destination numbers which will ring on their personal computers or select next generation Nokia dual mode Nseries mobile phone or Internet Tablet, whenever a call comes into their GrandCentral number.

This new GrandCentral feature also provides existing Gizmo users with the ability to receive calls for free directly from the traditional telephone network (PSTN) on their Gizmo enabled Nokia portable devices, Apple Macintosh and Windows PCs. Which eliminates at least one more direct inward dial number any user has to contend with.

Owners of Nokia dual mode N80-Internet Edition mobile phones, the Internet Tablet 770 or N series 800 Internet Tablet which access the Internet over Wi-Fi can also use versions of Gizmo Project on these handheld devices to receive calls without incurring any roaming charges or using any cellular minutes when connected to Wi-Fi networks.

Vonage to Try an "EarthLink"?

Vonage says it will start offering wireless services to subscribers during the second half of 2007, after announcing it would support dual mode phones working over Wi-Fi connections. The company also expects to announce new agreements to resell other carriers' broadband Internet access services, as well as new content deals later this year, sources say. That will make Vonage into something resembling an EarthLink.

Even residential video services, in some markets, might be offered. Though margin will be an issue, as it always is with resale, the moves will address the average revenue per unit problem Vonage has. Namely, its cost of acquiring a new customer is in line with what a cable company, at&t or Verizon would expect, but the monthly revenue is far below what those other providers typically get.

GigE at Desktop Taking Over

More than half of new Ethernet ports now being sold are gigE rather than 10/100 Mbps, says Jeff Fulton, Netgear network consultant. “Historically, 10Mb to 10/100 took place when the price per port for Fast Ethernet was $30," he says. "We are at that changeover now for 10/100 to GbE." The price for 10/100 has sunk to $10–$15 per port. The lower prices are fueling continuing Ethernet growth, says The Yankee Group.

The Dell'Oro Group says worldwide sales of optical transport equipment reached the highest level in five years during the fourth quarter of 2006. WDM system sales grew 42 percent year-over-year and accounted for all of the market increase.

Additionally, more than half of networking executives see the cost of wide area network facilities to be their primary concern this year. Also, 94 per cent of companies believe that they will need additional bandwidth than they are currently using over the next year, say researchers at the Aberdeen Group.

Access, Not WAN, is Bandwidth Issue

As always, the bandwidth choke point remains the access network. Local area network bandwidth is easy to upgrade. Long haul bandwidth also is not much of an issue, on most routes. The issue, for any service provider except a cable company or satellite company, is that replacments for linear TV will have to be delivered over the IP pipe, not a special purpose video delivery network. Multicast or broadcast networks are the best way to deliver linear TV. IP networks are a better way to deliver any sort of symmetrical service, but grossly inefficient for streaming content on a unicast basis. Access remains the choke point.

iPhone, at&t Deal Still is Significant

Big changes take time in the global communications industry, for good and not so good reasons. Still, it's important to recognize that Apple has succeeded where others have failed. It has wrested some significant degree of control away from normally powerful wireless carriers. But not in the way many disrupters prefer. As Apple tends to do, it demanded a great degree of creative control because that's the only way to ensure the sort of user experience it wants to provide. And the iPhone is no exception.

at&t agreed to leave its brand off the body of the phone. at&t also abandoned its usual insistence that phone makers carry its software for Web surfing, ringtones and other services. The deal also calls for Cingular to share with Apple a portion of the monthly revenues from subscribers, says the Wall Street Journal.

In another break with standard practice, the iPhone will have an exclusive retail network: The partners are making it available only through Cingular and Apple stores, as well as both companies' Web sites. The deal points the way to how service providers can balance control and freedom, vertical integration and horizontal innovation.

Cingular executives were willing to cede control to Mr. Jobs for the privilege of being the exclusive U.S. provider of one of the most highly anticipated consumer electronics devices in years, and to deny rivals a chance to do the same. Considering the number of music-capable mobile phones now being sold, a wise move.

Not many companies will have the bargaining power to do the same, but it will be better for mobile providers if they can learn to do this on a wider scale. Some things have to be controlled, for technical reasons. Some things have to be controlled for user experience reasons. But not everything has to--or should be--controlled by the carrier.

There's Always an Elephant in the Room

That's not a problem if it is your elephant. Vodafone CEO Arun Sarin warns his mobile compatriots that “as an industry it takes us a long time to get things done; we need to move faster otherwise others will eat our lunch." Forgetting for the moment about Microsoft, Google or the likes of Skype, what about WiMAX, which sometimes is seen as a comeptitive business platform, and sometimes just a platform?

"WiMAX is now a serious contender for mobile broadband," he thinks, positioning WiMAX as a platform any mobile provider can adopt, as Sprint Nextel already has done. Others might see WiMAX as a competing business platform that will be used by attackers to assault the legacy mobile providers, whatever technology they may use for fourth generation networks.

Nobody seems to disagree about the need, though. “If we don’t build our broadband networks we will have this opportunity taken away from us,” Sarin says. For some time Vodafone has distanced itself from the "3G or WiMAX" debate, in part because it seems to be thinking it will have to adopt WiMAX as its fourth generation network standard.

Vodafone subsidiary SFR in France may already have begun WiMAX testing. Vodafone network partner MTC-Vodafone recently won a license for WiMAX spectrum in Bahrain. The company also is expected to bid on WiMAX licenses to be auctioned in Egypt and Saudi Arabia in the coming months.

Vodafone acquired a WiMAX license in Greece last year, and is deploying a network in Malta. The company also has been testing WiMAX in New Zealand, and in South Africa.

Sarin notes that less than 10 percent of Vodafone revenues are derived from 3G services. The implication, it seems to us, is that 3G has proven to be not much more than a "wideband" niche between narrowband and broadband. Sort of like the analogy of narrowband voice (64 kbps); basic rate ISDN (up to 128 kbps) and "true" broadband in the megabit per second range.

So if legacy mobile carriers adopt WiMAX, how much sense does it make to track WiMAX deployment separately from wireless provider 4G? Really, the issue is not WiMAX. The issue is whether WiMAX can provide the platform for a competitive challenge to dominant wireless providers, because the early notion had been that WiMAX would open up another access alternative. But it won't if the dominant service providers simply offer it themselves.

There's an elephant in the room. The question is, whose elephant is it?

Global Capex Up, Video Drives It

Overall, North American telecom companies are projected to spend $70 billion on new infrastructure this year, down from the $110 billion they spent in 2000, up 67 percent from their 2003, says Infonetics Research. Global spending on new telecom gear is expected to rise to $240 billion in 2008, up 19 percent from 2005. Video is part of the reason.

While sending 100,000 emails costs a telecom company around 20 cents, transmitting 100,000 low-resolution videos costs around $15, and sending 100,000 high-definition movies costs around $10,800, says Infonetics Research.

Compared to Vonage...

Rightly or wrongly, Vonage's key marketing metrics get compared to those of cable or telco companies. Vonage's cost of acquiring a customer, its churn rate and average revenue per customer each month always are pointed to as issues. Well, compared to the best run telcos, that's true. Consider Telus, which operates largely in Western Canada. It has average revenue per unit of $64.50. Vonage is in the twenties. It has churn of 1.33 percent a month. Vonage's churn is double that. Acquisition cost is $436 a customr, which in about what Vonage spends. The issue is that Vonage's ARPU is less than half of what Telus gets, and Vonage keeps a customer half as long as Telus.

On the other hand, Vonage's costs of doing business are lower as well. Also, keep in mind that Telus is, by some measures, among the best-performing service providers in the world, and its fourth quarter 2006 results confirm that. On average, Telus keeps a customer more than six years. It is aided mightly in that regard by its wireless performance. So far, Telus and other leading wireless providers are turning in the best churn performance for virtually any consumer application one can think of.

Directionally Positive

North American fiber to home numbers still are small, but the direction is positive, says the Fiber to Home Council. The markets don't like the magnitude of investment, but telcos don't have much choice but to bet the farm.

Managerial prowess will prove important, but this bet will pay off. If IP-delivered video really does take off, in both the enterprise and consumer spaces, private networks have to be part of the solution.

And private networks will result in more revenue for access providers. To the extend that public networks are involved, it isn't clear that "all you can eat" plans can survive. Users will have to pay more for consumed bandwidth. That doesn't mean current pricing metrics necessarily are affected. But applications that chew up 1,000 times more bandwidth than voice will have to be provided at retail prices that reflect those levels of consumption. New networks will be built, no doubt.

Serious Moolah

The typical Fortune 500 company spends 3.6 percent of revenues on network services, gear and assets. Last year, more than $327 billion. The largest recurring cost is wide area network transport costs. Any wonder why enterprises are looking to switch that function to Ethernet?

EarthLink Wins Houston Wi-Fi

The City of Houston has selected EarthLink to deploy a large municipal Wi-Fi network covering 600 square miles. The network will be one of the largest in the U.S. and it will primarily serve urban and suburban sections of Metropolitan Houston. Another massive Wi-Fi rollout, in Michigan, is planned to serve urban and suburban regions as well as rural sections.

In winning the Houston contract, EarthLink adds to its list of municipal customers that include Philadelphia and New Orleans. Similar Wi-Fi deals with San Francisco and Pasadena are pending.

It remains to be seen how lucrative EarthLink's networks are. The deal also calls for the service to be made available for up to 40,000 low-income residents at $10 or less a month. There will continue to be pressure to keep the service affordable, though it may be possible to develop premium services or even advertising at some point, as The Yankee Group suggests.

And while cable companies and telcos will see this as compeitition, there may be ways even they will benefit, if some amount of traffic is offloaded from their own networks, much as offloading cellular network traffic to home broadband networks can help, even if there is a danger of some revenue cannibalization.

Cingular TV Broadcasts Start Later This Year

AT&T's Cingular Wireless unit will use the QualComm MediaFLO network to broadcast TV programs to cell phones in about 30 U.S. metro markets starting in late 2007. AT&T is QualComm's second customer for the service after Verizon. MediaFLO has arrangements in place to provide TV content from CBS, Fox and Comedy Central. It is also planning to provide information services like live stock quotes and sports scores. Nobody knows yet how popular this sort of thing will be. But it will have a couple advantages, such as not strangling the public Internet with multicast video.

Google Warns

New Internet TV services such as Joost and YouTube may bring the global network to its knees, at least one Google executive has said publicly.

At some level, of course, statements that "the Web infrastructure, and even Google's doesn't scale,” as Vincent Dureau, Google's head of TV technology says, are simple observations about the best effort nature of the Internet. It wasn’t designed for real time services. Unlike the global telecom networks, the Internet wasn’t built expressly incorporating quality of service measures.

At some level, Google saying today’s Internet is “not going to offer the quality of service that consumers expect” is simply an observation about the way the Internet now works, unaided by priority-enhancing measures or further raw bandwidth upgrades.

Google in Europe appears to be offering to work together with cable operators to combine video search and tailored advertising with the cable network access networks, which are, by design, closed and quality controlled.

That should have come as quite a comforting perspective for cable operators who have reason to feat the emergence of over the top video. At while there is great truth in what Dureau says, it may not, strictly speaking be completely true of all IP networks. Private networks can be created to ensure quality video delivery, even if will be difficult to ensure that the public network supports video using “best effort” delivery.

Compared to a voice-centric network, a video-capable network must support sustained throughput two orders of magnitude or 1,000 times greater than required for voice. That is not to say the Internet will not support video. It just might not be completely satisfactory as a means of delivering real time video. Downloaded video won’t be as big an issue.

In fact, Gartner Group analysts estimate that 60 pecent of the Internet traffic that is uploaded from computers is peer-to-peer traffic, mostly from consumers swapping films and TV shows.

Wireless Access Substitution?

At a recent carrier event hosted by Denver-based carrier neutral co-location provider Comfluent, an independent provider of Ethernet access in the Rocky Mountain region was musing about how he would be able to compete with the likes of Qwest in the enterprise space, not to mention Time Warner Telecom. One of his particular worries was wireless substitution in the Ethernet access domain.

So Brough Turner notes that DoCoMo, in an experiement, has squeezed about 50 bits into one Hertz of free space bandwidth, albeit at the cost of 100 MHz of spectrum in an unused and very high frequency. The best modulation techniques out there commercialy for mass applications run at about 50 bits per Hertz (the symbolic information conveyed by the oscillation time of a single radio wave in one second). Impressive.

But there are issues. That much continuous spectrum is going to be hard to find in North America or Europe. And when found, it will be at very high frequencies. And the problem with very high frequencies is signal attenuation. Signals won't go very far. Nor will they penetrate tree leaves or walls very well at all. So while useful for mobile, outdoor or short-range indoor distribution, really high modulation techniques won't rival optical Ethernet.

A single optical wavelength replicates the bandwidth of the entire radio frequency, plus all the optical frequencies, and every wavelength can replicate the same frequency again. Every fiber can replicate all of the bandwidth provided by all the multiplexed waves. There's just no way free space is going to keep pace with that.

One Internet or Several?

An issue clearly emerging in the wireless business is its need to figure out a way to unify the "wireline accessed" Internet and the "wireless accessed" Internet, including the latest generation of participatory Web 2.0 applications, says The Yankee Group analyst Matthew Hatton. Of course, that is going to raise a question mobile operators might not want to answer. The question is transparent access to such apps on the same basis users would have if they were using their fixed connections.

That's an issue because mobile historically has been among the most walled of walled gardens. Of course, there was a time when AOL's controlled experience seemed to be "the Internet" for lots of users, and we can see how that all turned out. This isn't going to be an easy tension to overcome, though there's no question it must be surmounted if a seamless Web experience, transparent to devices and networks, is to be obtained.

Web Channel Grows

Large cable firms and telcos appear to be getting some traction in the Web channel, says The Yankee Group. That's significant for a couple reasons. For some customers and products, nothing beats the Web as a sales vehicle. There also is growing evidence that customers who order using Web channels churn less, at least in part because they have done more research into the products they are buying, and especially may be more knowledgeable about technology products.

Bye Bye Fiber to Node, Analyst Says

AT&T will alter the strategy on its broadband network upgrade within the next 12 to 18 months, shifting to a fiber-to-home design, says market research firm Pike & Fischer. Keep in mind that this is a separate issue from how well U-verse might be working.

Unless AT&T makes that investment, the U-verse service will not keep up with the cable industry's improvements in bandwidth and functionality, says Tim McElgunn, Pike & Fischer chief analyst.

"Pair bonding and compression, AT&T's current response to its network's bandwidth limitations, will not change copper to glass and will not provide AT&T with a long-term solution, in our opinion," says McElgunn.

Fiber to the node retains a cost advantage over fiber to the home, but costs continue to decline, and there's an overriding strategic consideration here. Sooner rather than later, FTTN will find itself unable to compete in a superior way with similar cable operator Hybrid Fiber Coax network designs, which FTTN essentially is, except for modulation techniques.

YouTube iTunes?

Ted Wallingford suggests iTunes go YouTube in its embrace of user generated content. That would be a bit of a switch for Apple, whose approach to innovation historically has involved working with legacy players rather than attacking them, and there is at least some reason to think powerful content companies still are ambivalent about YouTube.

Link

Style Counts

Mobile phones are the most widely sold consumer electronics product in the world. By some estimates more than 600 million handsets are sold every year. That's five times the number of TVs or personal computers sold annually. And every successful producer of consumer electronics will tell you that "style" counts as much as "price." So maybe industry executives ought to focus a bit more on the details of the devices as much as the pricing and packaging of their services plans. Fair enough?

There's clear upside, as well. Tired of selling voice minutes or bandwidth forever-decreasing retail prices? Then stop selling commodities. The point is that the ability to talk is just part of the value of a mobile handset, as we would all agree. There's all the text, camera, Web access, faceplate customization, ringtones and other personalization angles.

The mobile phone is a consumer electronics product, not a "telecom" product. So fashion is important. Looks are important. Image is important, and not just for the super trendy younger users executives normally assume are the only people who care about the details of their devices. Lots of people care about those things, because most people care about the little details of their highly-used consumer electronics products.

I suppose it isn't necessary to dwell further on the iPhone, huh?

Site Temporarily Unavailable

Probably not the best way to run a video download service such as Wal-Mart has launched.

Wal-Mart's beta service includes more than 3,000 movie and TV titles for view on PCs, laptops and portable media players. All the major studios are on board and new movie releases will be available for video download on the day of the DVD release. The price for new movies ranges from $12.88 to $19.88. Catalog titles cost $7.50. TV shows cost $1.96 per episode.

Wal-Mart allows customers to purchase the physical DVD and have the option of downloading the same title for a small additional price to use on portable devices and PCs. Among the likely results are further deals by studios with other services such as iTunes.

He said other studios have been reluctant to participate due to fear of a Wal-Mart reprisal. The chain represents a large percentage of Hollywood's multi-billion dollar DVD business. If a studio agreed to sell movies on iTunes at a price too low for Wal-Mart's taste, that studio might suddenly find its movies removed from Wal-Mart's shelves.

Wal-Mart's video download service doesn't work with Firefox version 2.0.0.1...aside from not working at all on any browser.

The Business Case for Fiber Just Got Better

According to TVover.net, Verizon customers in West Virginia have suffered outages because thieves now are after copper, and telecom cables contain lots of copper. The most recent copper cable theft occurred at the end of January, when a twenty-foot-long section of cable was stolen, causing an outage which affected not only residential customers but also the emergency departments in the area. Verizon has lost a significant amount of money responding to the thefts. This used to be a problem confined to developing countries.

The upshot, however, is a potential uptick in costs to maintain copper plant, plus financial penalties for violating service level agreements, plus increased customer churn.

More iPhone Ripples

Though there has been speculation about the ultimate impact the iPhone will have on the wireless business, one effect is undeniable. Other phone makers are going to have to respond, pushing device development in a new direction. Samsung Electronics Co., for example, has unveiled a new mobile phone that features some of the sleek design and functions of the iPhone.

The Ultra Smart F700 operates using a touch screen and also runs a version of the Mac OS X operating system. The phone also features a slide-out key pad as well.

Wireless Incumbents Will Claw Back

Over the next five years, incumbent mobile service providers will start to reclaim lost market share to virtual operators, in large part because advanced features is growing and low cost calling simply isn't enough reason to go with a virtual operator, says Juniper Research. In fact, Juniper predicts the trend will occur in both developed and less developed mobile markets.

Even in the hot mobile space, demand for simple, low cost calling is declining while use of, and demand for, advanced features is growing. At the same time, basic calling needs increasingly can be met other ways. So the issue, as it always is, is a complex assessment of "value for money."

At one point, the equation was simpler. No-frills voice services delivered what was perceived as lots of value for less money. The value equation now is much more complex, including text, Web access, personalization, dual-mode operation, even the style and feel of a handset, and Apple's iPhone is the best current example of that.

Users these days now have a more complex, richer set of inputs that form the value mobile communications represents. Fashion, for example, now is an important facet of the value.

So though the trend has lagged similar developments in the wireline space, new value requirements are bubbling up in the wireless space as well, with obvious implications for providers of no frills services.

Mobile Over the Top

BridgePort Networks, Oberthur Card Systems and CounterPath Solutions have announced commercial availability of MobileSTICK, a USB stick-based way to provide mobile calling and texting "over the top" from any broadband connection.

MobileSTICK launches a PC softphone, secured by a SIM card that uses the existing mobile phone number to make and receive phone calls, SMS and multimedia (MMS) messages. The user’s existing mobile remains active and continues to utilize its existing SIM.

So the obvious impact includes enhanced ability for mobile operators to displace even more landline traffic, without building a network. Tangential benefits include creating a new revenue stream and offloading traffic from atmospheric to wired networks, conceivably helping reduce new capital investment

Almost as a side benefit, MobilSTICK provides a sort of "one number" feature for some portion of a user's calling and communicating.

Over the Top, Everywhere

One reason virtually every service provider now worries about "over the top" apps that compete with carrier vertically bundled applications is that every customer segment now has access to over the top services. In the consumer market there are independent VoIP, video, IM and portal-based applications disassociated with any particular carrier. In the small and medium business space there are hosted PBX, managed security and business VoIP offerings. In the enterprise there are managed services put together by large system integrators. Note also that Cisco has become one of the largest managed service providers. On other fronts there is growing pressure to unlock mobile phones so any device can be used on any network (GSM, CDMA or Wi-Fi). That's not to say we have reached the end of all vertically-bundled apps. It is simply to note that horizontal, unbundled apps grow with each passing day. And that the ability to customize, in the business space, and personalize, in the consumer space, increasingly becomes a primary value add.

Monetizing "Bring Your Own Access"

Fon, the sharing network of consumer end user Wi-Fi access points, is intriguing for lots of reasons. For one thing, it represents a new twist on building an access network. At the heart of matters, end users pay for some forms of access (cable modem or Digital Subscriber Line, for example)and create some forms of access (in-home Wi-Fi)and then contribute their access assets toward a network. Fon also is interesting because like lots of other developments in Web services, "nobody owns it" or "plans it." Each single Wi-Fi point can be withdrawn from the network at any time and Fon basically is given rights to use, but does not itself "own" any of the access points.

Equally interesting is how a business model can be constructed around the created network.

Separately, BT has been building its own Wi-Fi network to support a mobile element for its fixed broadband and voice services, without buying any spectrum. That also is a novel approach. So rumors that BT wants to ink a deal with Fon for access to hotspots in the U.K. market are significant because it would create a revenue model for Fon. It also would move a tier one carrier further down the road of novelty. Carriers routinely buy capacity from other carriers. But up to this point, how many have purchased capacity from end users, aggregated voluntarily into makeshift networks?

Wi-Fi arguably fills a niche between nailed-up (optical, cable modem and DSL) bandwidth and fully-mobile forms of broadband access. Fon and BT might just suggest a niche revenue model as well.

No Way Do You Have Enough Bandwidth!

So how will service providers realize they haven't got enough access bandwidth? Their customers will start calling them to complain. Not very scientific, perhaps. But most service providers will find themselves running as fast as they can to keep up with levels of demand that simply stagger the imagination. "We are on a path to providing 30 Mbps to every home," says Canby Telecom president Keith Galitz. "Our current capex budget calls for that." Now, remember than Canby Telecom has just 11,000 access lines in service.

"10 gigabits per second is going to be the speed in your network to handle unicast digital video," says Charlie Cano, ETEX engineering manager. ETEX has 17,152 access lines in service. And what if a particular service provider has to face a cable competitor with DOCSIS 3.0 channel bonding? "Then you need to plan for 50 Mbps over the next 12 months, and as much as 100 Mbps beyond that," argues Steve Ulrich, Cisco Systems consulting engineer.

Still think Verizon is wrong about fiber to the home? Equally to the point for service providers serving business customers: think T1s are going to cut it?

No Such Things As "Average"

The issue with "averages" is that they often obscure more than they illustrate. Look at demand for enhanced mobile features, for example, as this Yankee Group chart suggests. There are lots of features, interesting to lots of users, but no one app that really distinquishes itself from the others because "everybody" wants it. There are lots of potential ways to personalize usage; to create services tailored to lots of different user groups; to add value and create revenue. "Average" user? Fuhgedaboutit.

Expensive Zero Sum?

Comcast is boosting its capital spending by about 20 percent for 2007, a move that has at least some investors upset. The thinking is that cable plant now is supposed to be "future proof."

Still, Comcast Chairman Brian Roberts says “we can capture market share now” if Comcast invests. Roberts is right about that. But there's a longer term issue. At some point, bundling, Triple and Quad Plays will result in lower average revenue per unit, and are fundamentally a zero sum game. Contestants can trade share, but can't grow the market if that's all they do. They pretty much know that.

Bundling will help some contestants. But it is no recipe for growth. Incumbents know that as well. At some point, at least some disruptors will find it is in their own financial interests to partner, on some level, with some incumbents. That will be good for disruptors, and essential for incumbents.

Still, it's worth remembering that Verizon, at&t, Comcast and others are going to have to invest in their delivery platforms. Investors won't like it. But the investments ultimately will pay off if the incumbents can figure out ways to work with disruptors instead of trying to invent everything themselves. We think they know that too.

If contestants stop at "bundling" they all lose, ultimately. Growing new markets is key to winning over the long term, and we can't see this happening anyway other than working with disruptors. Otherwise a very expensive zero sum game is the logical outcome. And that's not good for users, in either professional, personal or other elements of life.

Shift Happens

Over the next 3 years, businesses are going to shift much of their network buying towards VoIP and away from traditional long distance, says The Yankee Group. Businesses will continue to replace traditional PBXs with IP PBXs, continue to adopt wide area forms of Ethernet, continue to buy more bandwidth, and start moving to integrate fixed and mobile forms of voice within their enterprises.

This is What Worries Me About IMS...

David Beckemeyer points out all he's done to create an authoring platform. So what happens if developers don't show up? Says David:

"PhoneGnome has offered a free API for almost a year now. But where are the innovators? We even offered to provide a free PhoneGnome box to those publishing apps to the User Contributed Library.

People say they want this stuff. They can talk the talk, but can they walk the walk?

PhoneGnome has offered an open platform for any PSTN termination service or origination service since day one (since July 2005!). But so far, who plays? PhoneGnome has one excellent partner offering unlimited plans, Vocal-net, but where are rest? Why do none of the PSTN termination providers out there want to actually sell their services? What do they have to lose in adding another distribution channel for their service? There are literally dozens, if not hundreds, of SIP PSTN termination services out there and yet none of them are interested in partnering with PhoneGnome to offer their service to the quickly growing base of PhoneGnome subscribers (both web-based and those with the PhoneGnome box). Many of these services have actively refused to participate. What are they thinking? What are they afraid of? You don't get a rational answer when you ask them. It's like they run their businesses with their heart and ego instead of their head.

Furthermore, PhoneGnome offers a platform for introducing thrid-party innovations to any phone subscriber in the world with a broadband Internet connection. Quoting Simon Torrence of STL in the UK, publisher of Telco2.0: "PhoneGnome is to fixed lines what WiFi handsets are to mobile.... For much less than the cost of an IMS deployment, you can hand out PhoneGnomes, and build a platform business with far more features than could ever be deployed in IMS, and deploy them within weeks, not years."

The iotum folks were the first to embrace this platform. As a result, an enhanced call-screening service based on their "relevance engine" technology is available to anyone in North America with phone service and broadband Internet. Tellme Networks have come to the table with a very cool and innovative "Tellme DialTone 2.0" Technology Trial. But where are the rest? You could be selling your Voice 2.0 service worldwide today.

We keep hearing that it's time to sell on features rather than price but we see little evidence that anybody is really doing that. That link, by the way, references an article that only deals with boring Voice 1.0 "features" like call waiting and such. Admittedly, even PhoneGnome messaging (the generic retail product, at least) is still focused on price ("Free worldwide calling, your way"). But if we really believe the future is in the service innovations, and I do believe that, then it's time to put our actions where our words are.

So don't complain that these platforms don't exist. It's here, available now, and open to anyone with the ideas. The platform for Voice 2.0 innovation is here. Now, where are all the service providers?"

Some Days Ya Gotta Keep Perspective...

Your problems are not so important. What you did today was not so important. What will you do tomorrow? Probably not that important. But some people did important things today. Yesterday. Last month. Last year. Some people have been doing so for a while. Among them, 20-year-old Lance Cpl. John M. Holmason, and nine other Marines with F Company, 2nd Battalion, 7th Marine Regiment, 1st Marine Division, in Fallujah. For my son Dylan, off soon to the Naval Academy, these are your guys. I know you won't let them down.