Google Gears

At its developer conference, Google announced Google Gears, an open source technology for creating offline web applications. The new browser extension extends use of Web-based online applications into an offline mode. As an example. the Google Reader now allows offline reading of the top 2,000 items. Very cool.

Google also is gearing up to support creation of a single, open source way of enabling access to email and online calendars, for example, without access to the Web. Google Gears obviously also will allow developers to embed indexing and search functions into other applications.

Google Gears is another step towards making Web-based applications respond just about as well as offline, hard-disk-drive-based applications.

Nothing Stays the Same...

Alec Saunders, Iotum CEO, says "Skype hasn’t lost relevance for me. It just doesn’t work." Saunders had to uninstall the application because of some unpleasant interactions with his PC, he reports. He says he had similar issues with Gizmo and so now uses GoogleTalk or Jajah.

Likewise, Saunders notes that blogger Ken Camp points out that fewer people are using Skype today than a few months ago. It's almost an embarassment of riches. "There are now so many options for quality cheap calls that Skype isn't as exciting as it was when it first hit the market a few years ago," says Saunders.

Come to think of it, though I don't know I've had the technical issues Alec reports, Jajah has come up and Skype gets very little use of late. I also got pinged by MobiVox to remind me I haven't used Skype on my mobile, either. Nor have I been making use of my video email client, either.

Perhaps the point is that it is terribly difficult for any new feature or application to really punch through all the clutter and user interface issues one faces in a busy life. Even useful and low price tools have to contend with lots of other distractions.

Jajah gets DT

In the VoIP world, this has to count as a pretty big deal Deutsche Telekom is backing Web-enabled VoIP service Jajah, says Reuters reporter Eric Auchard. In a real sense, DT is backing a dial-around service that when used cuts DT's long distance revenue, especially higher-margin international calling.

Deutsche Telekom is embedding Jajah into its T-Online Web properties and that it expects to offer calling services to consumers and businesses in the future.

And T-Online Ventures, Telekom's venture capital unit, disclosed it is part of a third round of funding for Jajah. Intel Corp. recently invested in a $20 million investment round and has granted Jajah use of some of Intel's key VoIP patents.

Jajah is one of a new class of rivals that let callers simply call phone-to-phone, once they have signed up on the Web. Jangl, Jaxtr and Rebtel also use the Web-enabled approach or dial-around approaches.

What all these firms offer is a way to use VoIP to make cheaper calls on standard POTS phones. And any way one looks at the matter, that is going to be most of the market, most of the time.

Jajah has signed up more than twi million users and expects well over five million users by year-end. Germany is one of Jajah's five biggest markets after the United States and Britain. Other top markets are China and India, he said.

This is Helpful...

Verizon Wireless Data Service (EVDO)no longer forbids use of the access for VoIP. That's helpful. My provider (at&t) does not allow the use of its broadband service for VoIP.

That's helpful for would-be third party developers and for Verizon itself. No dominant service provider, no matter how well endowed and resourceful, ever will be able to develop its own walled garden offerings in great enough abundance to satisfy businesses and consumers who will want to buy new services and features.

BT, Sony Partner for Calls from PSP

British Telecom is enabling calling from Sony PSP game players. Wwners will be able to call traditional lines, cell phones or PCs. There are more than eight million PSP devices in the European market. Initially, users will have to place their calls from home or from the two thousand BT wireless hotspots.

Eventually the service will be launched worldwide in around hundred countries. The four-year deal between BT and Sony will support messaging and video calling as well.

This Will be a Test

There are rumors Google Talk may finally offer the ability to connect with public network telephone numbers, where up to this point it has stuck to an instant messaging model for individuals and a "click to call" mode for commercial users of its maps feature, for example.

So the issue is the range of business models Google might consider. It is possible that Google will go with an ad-supported model, where callers listen to a brief ad before being allowed to make a call. Which will provide an interesting test of user behavior. This sort of thing has been talked about for decades but never has gotten any serious traction. Can Google make it work?

After all, there are lots of alternatives. Buddies who don't mind headsets can be reached for free. Domestic calls from landlines or mobiles don't typically impose any incremental cost. If you want to do video with a buddy or associate Skype's video feature is getting some pretty serious use. If you pick the right VoIP provider the global numbers you frequently call are no much of an issue. And there is always Jajah-style Web-enabled dial around/callback for the cases you haven't already thought of.

So the issue is how much "inconvenience" a user will put up with to place a call whose cost is zero to pretty minimal in some cases.

Gmail Attachments: 20 MB

Google's Gmail now allows sending of 20 megabytes worth of attachments. Of course, few mail providers will accept a such a big message, so it's safe to send messages bigger than 10 MB to other Gmail accounts, to Yahoo Mail Plus or to other premium accounts. And perhaps that's the idea: get people to use GMail because the large attachments are easier to handle.

Alltel Taken Private: That's Not the Issue

TPG Capital and Goldman Sachs' private equity unit are acquiring the fifth-largest U.S. wireless provider, Alltel Corp., for about $27.5 billion (chart by Chetan Sharma). The deal is the largest ever buyout in the telecom sector. One wonders just how far private equity firms can go before regulators become concerned. Wireless and cable companies are less likely to raise scrutiny.

But what if BCE, one of Canada's largest telephone companies, is taken private? At what point does the loss of public transparency become an issue for companies that, like it or not, are seen very much as having national interest implications. Not to mention social obligations not generally shared by cable or wireless providers. All the more reason to get a deal done now, fast, before such questions start getting asked, I suppose.

Google Steps Up Business Effort

Google and Salesforce.com are in talks about an alliance that conceivably could result in a new Web-based offering that integrates some of Google's online services such as email and instant-messaging with those of Salesforce.com, according to Wall Street Journal reporter Vauhini Vara.

Google also is launching a Google Apps Partner Edition, which will let other Internet companies build Google's online word-processing, spreadsheet and email services into their own products. Google Apps Partner Edition has both a free service and a package that includes phone support as well as additional branding and advertising options for a monthly fee.

The proposed alliance neatly illustrates a couple of overarching themes we see these days. Business information technology is changing because of robust consumer technologies built around the Web. As that happens in the enterprise market, value threatens to shift even further away from hardware, premises solutions or access and transport, and up into the "cloud."

And though it is a very odd thought for anybody who has been around enterprise IT or communications for a while, ad-supported services aimed at business users are coming. Premium and enhanced features will be sold for a fee. But lots of smaller businesses might find they can get along just fine with the ad-supported versions.

Over the top managed services providers will like that. Some infrastructure providers , ISPs, competitive local exchange carriers, resellers, cable companies, VARs or phone dealers won't like it so well.

"Classic" Isn't What it Used to Be...

Nokia is introducing what it calls a "classic" mobile phone, aimed at consumers and companies who appreciate simplicity and value for money."

"We recognize that a sizable number of people just want a mobile phone to stay in touch on their own terms," says John Barry, Nokia director. Apparently, "classic" isn't what it used to be.

The Nokia 3109 classic features email with attachments and synchronizes calendars and to-do lists with personal computers through its USB connection. The memory is expandable to 2 Gigabytes with a microSD memory card.

The Nokia 3109 classic is expected to be available in the second quarter of 2007 at an estimated retail price of EUR 140, excluding taxes and subsidies

The Nokia 3109 classic also features an integrated handsfree speaker, music player, UAB and Bluetooth connectivity plus an organizer with calendar, to-do list and notes.

"Staying in touch" now requires email, attachments, access to one's calendar, a music player and syncing with a PC, in addition to voice.

3G Shows Long Tail

In a way, global mobile experience shows the "long tail," Pareto principle or "80/20 rule" (80 percent of the results come from 20 percent of the services and features) already applies. Consider third generation (3G) networks. Every mobile operator has one, or is building one.

More than 74 percent of Japan's 97 million-plus subscribers were signed up for 3G services at the end of April, for example, so adoption of the platform isn't the issue.

But operators are still struggling to find the "killer app." Today's stock answer is "content." So far, however, no universally accepted "killer app" has emerged. Users are still mostly just using their phones to make voice calls and send text messages.

"As of now, it's difficult to pinpoint the killer service for 3G networks," said Lee Bang-hyung, Chief Operating Officer at SK Telecom Co Ltd. In fact, says Peter Erskine, the chief executive and chairman of Telefonica O2 Europe, agreed: "Text is the big standout."

That isn't to say a highly-used app won't be found. It is to point out that there will not be very many new applications nearly every user has to have. In the mass market, cable TV, mobile phones, videogame players, DVD players, iPods, TVs, PCs and phone lines are among the communications-related services and products that lie at the head of the usage curve. Almost everybody has them and uses them.

After these, usage begins to drop off pretty quickly. Fax machines and ATAs (or network interfaces) are lesser-used products that lie in the middle of the curve. PhoneGnome boxes, Jajah and mobile video today are things way out on the tail. If you randomly ask people on the street whether they use any of them, the expected answer would be "no."

In the mobile data services revenue bucket, service providers are eager to show rising average revenue per user in things other than short message service (text messaging). Those revenues are growing. From what we can tell, an awful lot of that revenue is coming from data cards and BlackBerry-driven data plans. So the growing, non-texting data revenues are for email and Web access, not content, music or other newer services.

What that tells us is that mobile email is emerging as a "head of the tail," popular service. Mobile broadband is shifting a bit closer to the middle of the curve. Some observers are hopeful that "watching TV on a mobile" will become a killer app. Perhaps. But we wouldn't be surprised if mobile email winds up being a bigger revenue driver. Or even mobile PC access, for that matter.

Our experience with 3G so far suggests the long tail operates in telecom as one would expect: Very few killer apps and lots and lots of things important to some people, some times. A few blockbusters, lots of niches, in other words.

BT Gets Monkeys Off Back

In 2001, BT had just three problems, says Sir Christopher Bland, BT Chairman. "Get the banks off our back, get the newspapers off our back, and get the politicians off our back." Bland says the monkeys are gone. To wit, the almost £30 billion debt situation has been dealt with. The issue of whether BT could grow revenues in a climate of declining traditional access lines has been answered. And while not everybody is completely reassured, BT has shown success at transforming itself from a "boring utility" to a company growing software and information technology businesses.

That isn't to say BT has succeeded wildly with all its initiatives. So far, there is little to show in the fixed-mobile convergence and personal TV areas, for example.

Where BT really has succeeded are network IT services and broadband. Over the last five years, network IT services have grown with the compound annual growth rate of almost 20 percent, at £4.4 billion, as BT's largest single stream or revenue, exceeding those of other calls or lines.

And broadband is the defining new service of the decade, having grown seven fold.

BT has grown its earnings before interest, taxes and depreciation for five consecutive quarters, with a nine-quarter improving trend.

The impressive thing is that mobility is such a slight factor. For most other tier one providers, mobility is the main story. BT has grown without mobile revenues to speak of. Certainly not on the scale of broadband and IT services. Maybe new monkeys are going to jump on. But at least the old olds are gone.

"The Network is the Computer"

Unfortunately, some of us can remember John Gage, Sun Microsystems co-founder saying this in 1984 or so. Nearly a quarter of a century later, we still haven't fully gotten there. With the rise of peer to peer technologies, many will offer we won't need to go there. Oddly enough, and for all sorts of reasons, network-centric computing is starting to look a lot like the older client-server model many thought we were morphing beyond.

Users don't care about that, of course. What they care about is how their lives change for the better. And there now is no question but that this new age of "computing architecture" is changing things. We would argue it is for the better, though the outcome is open.

We used to talk about "the network as the computer." Today, we talk about Web 2.0, which uses the networked computing platform and adds social elements (Dion Hinchcliffe produced the graphic). In some ways, "the network as the computer" will change at least some of the methods we employ to discover and retrieve video, audio and other content.

In the enterprise space, it might simply mean the ability to access centralized databases with a Web browser as the front end. At least at first. Later, more collaborative modes will develop, where end users collectively create value and knowledge of usefulness for enterprises. The analogy is Amazon and eBay, where much of the value of the service is created by users.

Still, there are clear portents. There's salesforce.com, Google Docs & Spreadsheets and Amazon's Elastic Compute Cloud, all of which deliver computing resources and applications on a hosted basis.

What changes here is much more than the way we use computational resources. Networked computing changes what we can do with computational resources. And those new ways are going to serioiusly shake business models across media and communications.

Google Wants The Best Answer

"Back in 2001, Eric asked for a brainstorm of a few "splashy" ideas in search," says Marissa Mayer, Google VP. "I made a few mockups, one of which was for "universal search," she says. "It was a sample search results page for Britney Spears that, in addition to web results, also had news, images, and groups results right on the same page."

"Even then, we could see that people could easily become overwhelmed with the number of different search tools available on Google, let alone those that would be created over the next few years," Meyer says. "This proliferation of tools, while useful, has outgrown the old model of search," says Meyer. "We want to help you find the very best answer, even if you don't know where to look."

That mockup and early observations were the motivation behind the universal search effort Google expects will break down silos of information that exist on the Web. Google's vision for universal search is to ultimately search across all its content sources, compare and rank all the information in real time, and deliver a single, integrated set of search results that offers users precisely what they are looking for. Google already is incorporating information from a variety of previously separate sources – including videos, images, news, maps, books, and websites – into a single set of results.

In principle, the new approach means that searches on a single key word or phrase will return unified results that might previously have required separate searches in "Web," "news," "video," "image," "people" and "maps" engines.

Google also is deploying a new technical infrastructure that will enable the search engine to handle the computationally intensive tasks required to produce universal search results and releasing the first stage of an upgraded ranking mechanism that automatically and objectively compares different types of information.

New dynamically generated navigation links have been added above the search results to suggest additional information that is relevant to a user's query. For example, a search for "python" will now generate links to Google Blog Search™, Google Book Search™, Google Groups™, and Google Code™, to let the user know there is additional information on his or her query in each of those areas.

As a result, users can find a wider array of information on their topic, including data types they might not have initially considered.

Google's homepage and a number of applications have also been updated with a new navigation bar to provide easier access to popular Google products. Now, instead of having links above the Google.com homepage search box, users will see a navigation bar on the top left side of the page with various Google search properties and popular products including Gmail™, Google Calendar™, Google Docs & Spreadsheets, and Picasa Web Albums.

Google also announced a new experimental version of its popular search service called Google Experimental, available on Google Labs. This new test site provides users an opportunity to try out some of the latest search experiments and innovations and provide Google with feedback.

One of the first experiments to be featured on the site enables users to view their search results on a map or timeline. For instance, when someone searches for "Albert Einstein" on Google Experimental, they can choose to view the search results on a map that shows locations mentioned within web pages about Albert Einstein or on a timeline that illustrates the history of Albert Einstein's life.

Skype 2.6 for Mac Now Available

Skype has released Skype for Mac 2.6, the latest version of its communication software for Mac users. For the first time, Mac users will be able to enjoy a new Skype feature before it's available to Windows users.

Specifically, Mac 2.6 offers a new call-transfer feature that is exclusive to the Mac platform. Users can now select More > Call Transfer to transfer an ongoing call to another Skype user on their contact list. It is obvious how this will appeal to small business users, especially lone eagles and remote personnel.

Beyond the exclusive call-transfer feature, Skype for Mac 2.6 incorporates a number of nice Skype features that were previously only available on other platforms.

Mac users now can join public chats. There is a chat typing indicator. Skype Prime offers the ability to call a premium-service provider and pay for their advice and knowledge with Skype credit.

Automatic updates are automatically pushed to end users and DTMF tones for automatic answering services are available during Skype-to-Skype calls.

Past Early Adopters?

Wal-Mart is offering Skype certified hardware in 1,800 of its stores throughout the United States, including headsets, webcams and handsets, as well as the first prepaid cards for Skype available in the U.S. Either Skype and Wal-Mart think Skype is way past the early adopter phase, or else both believe early adopters shop at Wal-Mart. We think the latter might be closer to the truth.

"Free is Going to Win..."

The paid video download market is ultimately a dead end, argues Forrester Research analyst James McQuivey. "Free is going to win."

Online video sites that sell shows and movies such as Apple Inc.'s iTunes will likely peak this year as more programming is made available on free outlets supported by advertising. Sales of movies and television shows are expected to almost triple to $279 million in 2007 from an estimated $98 million last year.

"In the video space, iTunes is just a temporary flash while consumers wait for better ways to get video. They're already coming," says McQuivey, who says the paid download video market a "dead end."

That's certainly the developing conventional wisdom, but might not be entirely accurate. Most video watched today is partly ad supported, and partly subscription based. U.S. Cable TV revenues of $74.7 billion include $33.6 billion of basic cable (ad-supported channels) and $6.5 billion in commercial-free premium channels. Cable advertising is about $5 billion annually. So for linear video, ad support is crucial for most channels.

But "pay to own" or "pay to watch" models also are well established. The "pay to own" market includes $16 billion of annual movie and DVD sales. The "pay to watch" segment includes $8 billion in rental revenue. None of that is likely to change simply because a new distribution method is added to the legacy mix. In other words, "pay per view" or "on demand" always has been a smaller portion of overall video consumption.

So the conventional wisdom probably is right: ad support will drive most online video viewing. But not all. There still will be some appetite for downloading to own, just as people now watch ad-supported video and buy DVDs.

Need Engineers? Buy a Company

Google buys a start-up once every few days, or around one a week, says Google CEO Eric Schmidt. "In the past, we would buy businesses in lieu of (hiring) engineers." That's why they call it "Google speed."

Bye Bye Walled Garden

Whatever else it may do, the iPhone probably has killed any hopes mobile carriers might have harbored that they could create and control musice downloading walled gardens. Alltel, for example, is launching Jump Music , free of digital rights management and supporting side loading, so users can upload music they already own into their handsets.

Jump Music allows transfer of existing owned music to phones including the LG AX8600, MOTOKRZR K1m, MOTORAZR V3m, The Wafer by Samsung and the aforementioned u520. We also note that Sprint Nextel has realized the market price for a song is 99 cents, not $2.99.

Wholesale Poised for More Growth?

Business end users have, for as long as I can remember, had the ability to create their own voice services as an application. We call that a phone system. What's new these days is that there are more ways enterprises of all sorts can create their own voice services. And some of those same mechanisms can be used by consumers as well. Click to talk from a web site is one example. Instant messaging integrated with Session Initiation Protocol is another example. Voice-enabled gaming is another good example.

My assumption is that calling remains most useful when any telephone number can be called, without the constraints of who is in one's community or directory, uses a compatible client or device. And that means there is a growing business for wholesale providers of voice capabilities including, but not limited to, termination services. Which leads one to wonder whether the wholesale portion of industry revenues might be poised for even more growth. How could it be otherwise?

And might that be the case even though sales of traditional products appear to be falling? At least that's what The Yankee Group suggests is happening. The problem with tracking wholesale revenues is that the category tends to include all sorts of things. Access fees paid for termination provide a good example. What is difficult to capture are wholesale sales of services to retail providers of wireless, wireline termination and orgination, whether those entities are service or application providers or large enterprises that repackage voice termination as a feature.

That especially is true when an application provider basically needs to buy only dedicated Internet access or other bandwidth in order to make the voice application available to a wholesale customer. One wonders whether falling prices are not more than balanced by increased usage, even for legacy services, to say nothing of harder to measure IP-based wholesale.

Vonage Preps Workaround

Vonage thinks it has found a workaround that avoids any of the claimed Verizon patent infringements and plans to begin implementing them shortly, says Jeffrey Citron, Vonage interim CEO says. Vonage's new technology can be installed through software downloads and shouldn't be costly to deploy, Citron says.

Joost Raises $45 Million...

From Index Ventures, Sequoia Capital, Li Ka Shing Foundation, CBS Corporation and Viacom. Viacom and CBS have also signed content deals with Joost. At launch, Joost had secured programming from CBS, Sony, Turner and Warner Brothers, as well as sports coverage of the National Hockey League and Indy car racing. The free-to-view service is funded by advertising from Coca-Cola, Nike and others.

Skype for Salesforce.com AppExchange

Skype now has been optimized for the Salesforce.com AppExchange. That means Skype can be integrated with Salesforce on-demand customer relationship management applications.

Lightspeed Capex Goes Way Up...

It used to be said that Lightspeed, at&t's fiber-thinner upgrade, was far better than FiOS, Verizon's fiber to home upgrade, because Lightspeed would require just a third of the capital. Well, guess again. at&t just revised its capital spending upwards, so that Lightspeed will cost about half of what FiOS requires.

You might argue, and many will, that half the capex still is an advantage. If it works, yes. If it scales, yes. If it offers competitive advantages over cable, yes. But keep in mind that cable isn't standing still, in the access or services areas.

Lightspeed capex now will increase from $4.6B to $6.5 billion, at&t says. at&t also says the scope of the project is being reduced from 19 million to 18 million homes.

The 41 percent increase perhaps indicates that things are not going as planned, in the transport area as well as the software area. New copper wire might be one thing. Reconditioned wire is another.

To be sure, there are scenarios one can imagine where the fiber to node approach still makes sense. Rural markets come to mind. What a provider has to do to meet conceivable demand in such markets, and the cost to do so, arguably are distinct from what at&t or Verizon must do in their core metro markets. Still, it does remain my view that Verizon has taken the wiser course.

Don't Assume Users Want All Ths Technology

No wonder adoption of VoIP and other new services by U.S. consumers has been so bifurcated: users are bifurcated, according to a new survey by the Pew Internet & American Life Project. Significant audiences exist for heavy use of the latest Web 2.0 innovations, ranging from social networking, blogs and wikis through user generated video. But there's also a much larger audience that makes relatively limited use of mobile communications, computers and the Internet. Most significantly of all, there is significant sentiment in all usage segments--heavy users, moderate users and lighter users--that all the connectivity is at best a mixed blessing.

About 31 percent of U.S. consumers are heavy users of technology and communications products, though eight percent of users in the "heavy use" group are not thrilled about being so heavily connected. So mark about 23 percent of U.S. technology users as "heavy and happy" users.

About 20 percent of users are "middle of the road," using both mobile phones, the Internet and PCs. But again, only half find all the technology a blessing. Nearly half of all U.S. consumers, though, only occasionally use mobile and Internet technologies. About 26 percent of U.S. consumers are relatively indifferent to information and communications technologies including mobile phones, PCs and the Internet.

In each of the three main "intensity of use" groups (heavy, middle of road and light users), there is significant dissatisfaction with use of technology. Add up all the dissatisfied users, in all usage intensity groups, and fully 44 percent of U.S. consumers really aren't happy with all the connectivity in their lives.

Contrary to "conventional wisdom," most people are not heavy users of most of the newest technology. Some who are heavy users aren't happy users. Nearly half of users don't even use their mobile phones, PCs or the Internet all that much. And fully half of the "middle of the road" users think all the connectivity is something of a problem, not a solution.

Add it all up and about 23 percent of all users are "heavy" communications and information technology users, and think that is a good thing. Everybody else is a moderate, light or non-user. About 44 percent of all users actually refuse to use new technology, or use it and find it creates problems as well as solving them.

Everybody Hopes to Cross the Chasm…

You probably are familiar with the notion of “eras” of technology, including the certifiably historical observation that the market leaders in the era of mainframe computing were not the leaders of the minicomputer market that followed.

The leaders of the minicomputer business were not the leaders of the era of personal computing. And just about everybody now agrees we are in transition to another era of “Web,” “network based” or some other distributed form of computing architecture.

Then look at “moving pictures.” There was the era of “three big national networks.” Then there was cable. Now something else may be stirring. Then look at advertising. First there was only “local” media. Then we had “mass media.” Then media began to fragment. And now we have Google and search. Personal video recorders. Web portals.

Information technology used to follow a predictable pattern. Invention in the universities. Then diffusion to money center banks, then to enterprises, then to service providers. Now it is more like university invention, diffusion to consumers, then to service providers and lastly to enterprises, says Cisco General Manager Dan Scheinman.

The point is that every incumbent wants to cross the chasm and lead the next era. History argues against it. Which begs the obvious question. Will the leaders of today’s business be the leaders of tomorrow’s business?

To be sure, incumbents are spending like they want to succeed in the next era. Paul Silverstein,Credit Suisse analyst, points out that U.S. telecom capital spending this year will exceed spending of the boom year of 2000. Analysts at other firms say the same thing: telecom capex is at extremely robust levels.

WalMart is creating a video download site. Not because they expect to make so much money at it, but because they cannot afford to have the name “Apple iVideo” come to mind when any consumer decides they want to buy video content and download it.

Comcast would not be investing in user generated video and download to PC capabilities if it though its linear video model was safe. Neither would studios be so anxious to embrace digital delivery is they thought the current distribution model had secure legs.

In fact, the global IT industry would not be in such a headlong rush to secure a dominant place in the consumer electronics industry if business IT was still seen as the global driver of growth.

Then there’s the voice business. By 2010, 95 percent of enterprises will have integrated communications into their business apps, says Dar Shaw, Microsoft director. So think about that. Enterprise drives the bulk of carrier profit, and close to half the gross revenues for most tier one service providers.

And in a few short years, applications themselves will originate and terminate voice and text communications. Video won’t be far behind. Aside from data connections on both fixed and mobile networks, how much former communications will have shifted to some applications-based origination and termination?

And as Dan Creed, CopperCom executive says: “The only web-based service not available online for your telco customers are your own voice services.”

All of which points out a huge challenge for service providers used to selling “voice” as a recurring service: if any service—including voice—is available on any device, any time and anywhere, how is that to be done?

One hears a great deal of fear and loathing about Google and other application providers. In fact, lots of telco executives fear Google more than any cable company. Google and Yahoo! are the competition. Those are the trusted brands for the younger generation.

And while every service provider ought to be developing new applications running on any device, on any network, at any time, there’s a sheer limit to how much innovation any single provider can generate.

Look at it another way. In an era where application development and innovation gets easier and easier every day, the “gate” or “barrier” to innovation is human ingenuity. There are fewer and fewer regulatory, technological or market structure barriers.

So how many of the world’s supply of ingenious and talented human beings work at your enterprise? How many of the smart and clever people work in your whole industry segment?

You know the answer. Most of the creative, smart, talented people, with an actual grasp of what they really want to do, work and live someplace else.

Nobody will get very far on their own internal resources. And that means carriers and service providers have to find ways to open up what they do and work with all those other people. “Fighting Google” leads to a death spiral.

And that inevitably means loosely-coupled services that embrace the Web, even if those services cross over and interoperate with fixed and wireless networks. A smart service provider might create a couple, or maybe even as many as 10 interesting and rewarding applications.

No service provider is going to create scores to hundreds of services so interesting people will pay money for them. In fact, so long as large service providers insist they must concentrate on new services bought by “70 percent of their customer base,” we can almost predict they will develop but a few successful apps.

Think about the last couple of decades. What apps are bought and used by “70 percent” of tier one service provider customers? Wireless voice and voice mail. Throw in broadband access. SMS. Mobile data. Forget about 70 percent. How about 30 percent? And that’s being charitable.

Service providers need to learn to innovate “at Google speed,” as John Lazar, MetaSwitch CEO, puts it. That doesn’t mean the innovation will be mostly home grown. It mostly will come from external developers, and mostly from Web-based sources.

So fighting “Google” won’t work. “Not invented here” is a death wish.

BT Readies for a Custom World

It's easy to be critical of large scale corporate reorganizations. Not many seem to produce measurable results. So BT's new reorganization into two primary business units, BT Design and BT Operate, might not ultimately provide all BT now hopes it will. But you can't fault the company for pushing really hard to create a more unified way of creating new services. Because of the old "silo" or "bucket" form of organization, many telcos and software firms find they have warring business units fighting solve customer problems in different ways. BT would like to avoid that.

The point is that development of new services in many cases requires interworking of applications and features across networks and devices, especially the networks and devices any single provider operates. So the new organization aims to coordinate IP product development and deployment across BT's four businesses: retail, wholesale, global services, and Openreach.

The expectation is that it will be much easier and quicker to create and launch new products. It also is expected to generate significant cost savings, which BT will outline alongside next month's financial results.

BT Openreach's position as a provider of highly regulated broadband and phone products to BT's rivals remains unchanged. But the other three BT divisions - retail, wholesale and its global services IT unit - will become focused sales and marketing units. When the units want to create new products they will call on BT Design and the installation will be run by BT Operate.

The changes acknowledge the firm's increasing reliance on software and IP services by creating a new strategy unit to oversee the existing retail, global services, wholesale, and Openreach divisions as well. As CEO of group strategy and operations, Andy Green will be responsible for better coordinating new products and services across the divisions through two new business units.

In part, the new organizational architecture might have drawn inspiration from the success of BT's Global Services unit, which has been operating more as a system integrator of late, with the need to customize solutions for virtually every customer. So the expectation seems to be that a similar organization will benefit development of products aimed at mass markets, small business customers, other carriers and wholesale customers as well.

At the same time, the older organization wasn't so successful at creating and marketing new services, and BT isn't the only tier one carrier to find this a recent problem. Deutsche Telekom, to cite just one example, had to shut down its fixed mobile convergence service for lack of demand.

In fact, despite rather massive publicity, three flagship BT products—BT Fusion, BT Movio and BT Vision—have scant customer penetration to show for their efforts. BT Fusion, the fixed wireless convergence product, had just 40,000 customers 15 months after launch.

Similarly, BT Movio, the company's flagship mobile TV product has failed to make an impact in the market. Virgin Mobile, the sole licensee

of the product, disclosed in January 2007 that customer numbers remained painfully low. Limited choice of handsets seems to be an issue. Also, there is a standards issue. The European mobile industry might adopt a rival digital video broadcasting handheld (DVB-H), means other U.K. mobile operators are reluctant to embrace the service.

BT Vision, the company's IPTV service, hasn't done better. BT says it signed up just 2,400 non-BT-employee customers in four months.

Recent experience in the U.S. market reinforces the notion that it will be devilishly hard to create new services with the particular

attributes buyers want. Just about everybody in the VoIP business who has really pushed hard at bringing new features to market reports weak adoption of really new services. About the only thing that consistently works, in the mass market or small business segment, is POTS replacement. In some cases, it appears that something as elemental as "handset choice" is enough to doom a service.

Is it not abundantly clear already that the handset business requires lots of choice, rapid replenishing of models and features, and other attributes more commonly thought essential in the fashion business, where product lines are renewed every quarter? In other words, carriers cannot bring an "industrial" model to a mass market which already has shifted to the "fashion" model.

BT hopes its new focus will bring some of that needed speed and creativity to its product development efforts.

Call Your Mom, It's Free

Skype users can call their mothers, or anybody with a telephone number, all day on Mother's Day, May 13. So call your mom.

Google: Mobile, Mobile, Mobile

Nobody outside Google seems to know precisely what Google is up to in the wireless domain, aside from deals to preload Google on mobile handsets. Maybe it has developed a Google phone, as a proof of concept, but has to plans to bring it to market. It certainly is working on software that allows users without PC access to use Google applications.

Google clearly is up to something. When Eric Schmidt, Google Chief Executive, was asked about intriguing technologies, he answered, "mobile, mobile, mobile."

Another Run at Yahoo?

It looks like Microsoft is pondering another run at acquiring Yahoo! It would rank as the largest acquisition Microsoft ever has made, at about $50 billion, and observers question how easy it might be to meld the two cultures. Still, the speculation points out how important it is for Microsoft to catch up with Google in the advertising-supported business model arena. There's a clear logic, despite the difficulties. Microsoft admits it was late to "get" the Internet. It hasn't punched through to the top in the portal space. It is an also ran in search.

For those of you who follow technology industry history, you know the leaders in any era of computing have not lead the next era. The mainframe leaders did not lead during the minicomputer era and those leaders fell as the PC era took shape. The issue is who leads when the next era, for which we don't have a universally accepted name, but might be called the "network" era of computing.

History is against Microsoft and Cisco, though both are striving mightily to cross the chasm of era leadership. Cisco tells the better story, in that regard.

3G Data is About Moving Photos

The single most important 3G mobile data application is sending photos from one mobile to other users.

U.K. Mobile Calls Drop for the First Time

U.K.mobile phone call volumes have dropped for the first time in 10 years, according to the annual JD Power survey. The survey, of nearly 3,000 U.K. mobile phone users, found that prepaid customers are making an average of 10 calls a week, falling from 14 last year, for example.

Contract customers average 27, down from 35 in 2006, but those customers are now sending 46 text messages every week, up from 32.
Wider adoption of text messaging for communications now is having the same effect on mobile call volumes as email has had on voice communications. Worse, from a mobile provider perspective, is that as text replaces voice, revenues are dropping.

Prepaid customers now spend an average of £12.35 per month, down from £19.29 last year, and even contract customers have seen a 20 per cent drop in their bill (from £40.44 to £32.45).

It's All About the Handset

Features and form factor are the primary motivators of American consumer phone purchases, with flip-phones continuing as a favored phone type, says The NPD Group. But brand was the third most important reason.

“With few exceptions, buyers have ranked these two criteria highest (roughly 40 percent) over the past seven quarters,” says Ross Rubin, director of industry analysis for The NPD Group.

Age can play a role as well in the purchase of a handset. Buyers 18 to 24 chose “it’s a cool phone” as their top motivator for buying a handset during the past year. Those 25 to 44 most often chose “had the capabilities I wanted.” And consumers 45 and older, chose “flip phone / can be closed” as their top criterion for purchase.

The youngest buyers seek a device that reeks of “cool” (design is key, but the phone has to deliver on functionality, too). Young to middle-aged buyers want a wide range of capabilities. Getting just the right combination is the trick.

For people just past middle age and the older crowd, a solid flip phone with basic capabilities will do, though the brand is still important, says NPD. Judging by those responses, Apple's iPhone has a shot at serious traction, as it seems to hit on all the key criteria for buyers below age 45.

Harris Interactive recently took found that 47 percent of respondents were aware of the product and a full 17 percent expressed interest in purchasing it, which makes for a pretty loud buzz from consumers for a product that isn’t yet available.

Perhaps a more interesting question to ask is when U.S. adults would buy this product. Of those expressing interest to purchase, nine percent say they would buy at product launch and another eight percent would buy before their current wireless service contract expired. About 17 percent say they would wait for their current wireless contract to expire before purchasing and 25 percent would purchase it - when their existing wireless carrier offers the iPhone. Finally, a full 40 percent of buyers intend to wait for the price to come down.

Survey results show the hottest iPhone feature was its large storage capacity (37%). This is followed by iPhone quad band worldwide capabilities (36%) and its easy to use/drop dead cool user interface (31%). Overall, high powered multi-functional mobile devices like the iPhone have strong appeal (or Apple-al) to about 31 percent of the marketplace.