Voice as a "Spice"

Consultant Thomas Howe describes the way voice can work in a new context by calling it the equivalent of "spice." In other words, it might often be the case that, within the context of an enterprise application, voice is a feature used to enhance a process, rather than a stand-alone function or application.

In that sense, click-to-call is an example. Most people would agree that is the case. What remains unclear, at least for service providers who will continue to make signficant revenue selling voice as a stand-alone service, is whether "spice" is a business for them, or not. In some cases, it will be; but in other cases it will not.

To the extent that spice can be an interesting revenue stream for service providers is whether they can figure out ways to combine traditional calling functions with enteprise application features that integrate "calling" with information relevant to the call, that is valuable to the enterprise and is worth paying for, from the corporation’s point of view.

Monetizing such "hard to replicate" data by combining it with voice is where telcos have a great opportunity to grow, says Howe. There are many areas where only telcos can deliver voice and have the information that will add value to the call, such as authentication, location, even availability.

The issue is that many other providers in the business ecosystem also have the ability to integrate such functions in new ways. Google and Apple, for example, may well be able to leverage "location" information without needing the assistance or permission of the service provider.

Still, it should be possible to create services that confirm a person is home to receive a delivery, or to assist in scheduling at-home or at-office appointments.

Identity authentication, more than simply location or "phone number" identity, might be useful for transactions as well.

How Will Global Telecom Revenue Sources Change Over the Next Two Years?

Looking at global telecom revenue sources over the next couple of years, some basic trends can be seen (click image for larger view).

Fixed network services other than broadband continue to decline.

Wireless revenues continue to grow, as does broadband access revenue.
Dial-up access revenue continues to decline.

Keep in mind that these are global, aggregate numbers, buoyed by huge broadband and especially wireless growth in developing regions. The patterns can be quite distinct in specific national markets.

In the U.S. market, it is conceivable that video and content revenues could be a somewhat significant factor over a decade-long time frame. Wireless growth will be highly susceptible to broadband and data services growth, balanced by a certain amount of "harvesting" of mobile voice revenue, which will decline, relative to broadband, over the decade.

It is worth noting that voice revenue trends have been through two fundamental cycles, with a third on the way. At one time, international long distance was the highest-margin product, followed by domestic long distance. That changed fundamentally between 1997 and 2007. Over that 10-year period, long distance, which represented nearly half of all revenue, was displaced by mobile voice services.

Since about 2000, fixed voice lines and revenue have been steadily declining, at least in the telecom service provider segment, with the cable segment able to grow the role of voice in overall revenue.

In the third change, mobile voice will follow a trend similar to that of long distance.

In each of the shifts already occurring, several things happened. Prices and profit margins steadily were compressed. And new competitors picked up significant share of the remaining business. In each of the three periods, the product has changed.

Between about 1997 and 2007, "long distance" became loosely coupled with local calling and local access. Long distance increasingly could be consumed "over the top," using prepaid calling cards or separate providers for "long distance" on a local line, for example.

Between 2000 and 2009, it became possible to use mobile phones to similarly displace both local and long distance calling, as well as to substitute mobility for fixed voice, while both over-the-top and IP-based calling options became available.

Over the next 10 years, both voice itself and long distance calling in the mobile and fixed realms likewise will be increasingly disaggregated and amenable to "over the top" consumption.

At the same time, the number of settings where voice is used likewise will disaggregate. Voice will be used as an embedded feature of many types of applications and experiences, using many types of terminals and featuring multiple revenue models.

Live Blog of Voice 2.0 Panel at PTC

Jonathan Rosenberg, chief technology strategist at Skype; Rodrigue Ullens, Voxbone CEO; Frank Fawzi, IntelePeer CEO and Mke James, Metaswitch Networks director of systems engineering kick around "Voice 2.0."

Voice 2.0: Beyond the Hype: Lots of ways people are using voice today, let’s look at changes. Gary Kim moderating discussions from Rodrigue, Mike, Frank, and Jonathan.

Jonathan: Voice 2.0 (see yesterday’s talk): it’s not voice anymore, it’s video. Voice is becoming integrated with other media, part of a broader communications experience. As voice and video permeates the web, everything fits together as interactive content experience with seamless integration.

Frank: interactive video being woven into experience. We’ve seen significant interest by enterprise carriers to enrich end-user experience, trying to reach audience by any means possible (clicking links, sms, etc.). It’s critical that you deliver quality as part of business process. We’ve seen minutes double, 4.5B end of 2008 to about 10B annualized run rate now, coming from all kinds of customers, uses, and sources.

Mike: Traditional voice now dull and boring, now it’s about software and applications. Voice embedded in PC, more integration with TV. No one carrier is everything to everyone, need support for 3rd parties to develop.

Rodrigue: Internet-based company with Internet-based business model, voice as part of it. Not a fight between AT&T and Google, is an ecosystem of business models in global market. Enterprises are next opportunity (IT direct, management and apps), mentality of using certain apps is going to change. Telcos can afford their business model is by staff and host switching, engineers, need to embrace new opportunities.

Gary: What strikes me about this panel is that panelists will benefit from creative applications and capability. This is clearly a good thing. What advice would you offer others in the ecosystem? No way to fight this, many new ways to drive revenue. Frank: We talk with carriers about opportunities to reach their end users, deal with hundreds of millions of phone number in their registry. How do you think about creating opportunities to expand embedded voice, lower cost of communications, increase applicability of voice in new ways? Expansion and connectivity between voice and multimodal technologies? (15 times more likely to convert with human interaction).

Gary: Rich voice? Jonathan: what makes voice sales more effective is the real people. All this technology is about replicating face to face interactions. It’s not just the words, it’s the nuances, facial expression, the reasons we get on airplanes. Voice is lowest level, video is next step closer to experience of sitting next to each other. As quality gets higher, you get increasing value of return.

Gary: implications of infrastructure with regard to partners? Mike: Sometimes we need to get out of the way and allow the end points to negotiate.

Gary: voice has always been cloud-based, but now there’s more to the cloud. Frank: communications as a service, using (common) links to access cloud. Slight distinction: now all we need to do is enable an IP pipe. Jonathan: leveraging the IP model, worldwide network model. Allows new service providers to offer new services. Voice was regional, now you can reach anywhere in the world. Rodrigue: one of the ways of providing voice over other apps: use hardware, open source, infrastructure where costs are declining and redundancy is scalable. Mike: agreeing, legacy connectivity enables… Rodrigue: lots of affordable solutions available today. Jonathan: a lot of cloud service providers develop locally, value is in software.

Question: What drives this Voice 2.0 development? Suggested application stores, is there community and/or clearinghouse function, who is gatekeeper? Jonathan: There is no one answer. One interesting area is the web and different web apps, distribution channel is the browser. Other: mobile apps, e.g., iPhone and Apple App store. Frank: types of folks that we work with, we’re not opening an app store, working with communities of interest who may want to add voice as a feature to enrich their end user experience. Mike: many models of distribution including the web, branded carriers and app stores; other carriers distribute through their own channels.

Gary: regarding voice as an app: abilty of smartest guys to be surprised. For example, Apple may not have expected App Store to be as big as they are. Now others are building app stores. Rodrigue: takes several months or years to create new products, while on the web you can launch, analyze, relaunch. Innovation can be brought online on behalf of their users.

Gary: executives express concern about protecting their brand. How to make use of developer community? Jonathan: on the web, if you want to see how things work, try it, collect results, improve or add new features. That new model of massive “learn as you go” is a hallmark of success of the web. Voice 2.0 is about embracing the benefits of the web, contrast with traditional telecom models (long time to roll out new features, compared to adding IM to Facebook).

Gary: US telecom industry replaced 50% of their revenue model in the 1990s. I’m calling for them to replace 50% over next 10 years. (You’ve done it.) Jonathan: it comes down to embracing the developers, doesn’t give up value to user. Windows: huge group of 3rd party developers. Devices and networks open up, carriers become portals, to become operating system of voice 2.0. Frank: wireline revenue disappeared, new technologies can displace existing revenue models. Wireless can help, uses for voice increase abundance of opportunities (scalable networks).

Question: Future of mobile environment: Jonathan: hoping for open environment where providers like us can add value-added services. It’s one of the next frontiers: getting quality up is a big challenge and growth opportunity.

Gary: experience is limited where networks are not robust (really cooking). Jonathan: capacity changes the equation.

Question: how do you tackle voice 2.0, what are trends? Rodrigue: identifier (phone number) from voice calls enable new innovation. Jonathan: enterprises are seeing vast deployment in IP communications (video, presence, IM), but landlocked inside of enterprise. Need to create new generation of peering technologies, security, etc. Cisco just announced product that’s focused on this problem, using phone numbers as identifiers (VIPER), peering.

Joe Weinman: concern for stability, scalability and reliability (911 and safety-critical apps), what strategies for innovation of massive disruptions, dilemma of brand protection vs innovation? Frank: point where scalability, robustness and quality becomes critical, need to have a high quality services, how does that apply on telco level, how to you move a large organization into disruptive model without affecting customers, mission critical services, and existing revenue streams? It’s more challenging. Jonathan: questions that presumption: reliability can be obtained, available; data is more critical than voice link going down. IP pipe needs to be always up. Rodrigue: difference between telco and app provider: telco provides infrastructure, everything is redundant, critical lines. Have a different business, e.g. BT and Ribbit, play at another layer (other business units). Frank: you guys are providing the infrastructure, reliabilty from traditional means; disruption does not take away responsibility of network providers. Joe: Mixing apples and oranges. Access is a critical issue, but at application layer testing becomes a brand protection mechanism. Mike: in some places, telcos are tied by regulatory bodies, services like Skype do not replace 911. Frank: we’re all capable of creating opportunities for ourselves. Gary: would be interesting to do a study about when we think things will break, all critical apps are IP based. We rely on the connection, not our hardware or software that can be fixed by rebooting. Interesting what human beings are becoming accustomed to. Frank: we’re willing to accept certain things, like quality of wireless compared to wired.

Ifbyphone Buys Cloudvox to Support Development of New Apps

Ifbyphone, provider of Web-based  voice and phone applications especially for call center type applications, announced today that it has acquired Cloudvox to give its customers the tools they need to build their own open-source, customized phone applications to fit their business needs.

The deal gives Ifbyphone an open applictions programming interface it can use to provides Web developers (even less experienced ones) with all the pieces they need to build working Web-based telephony services.

At the same time, Ifbyphone will still equip them with the technology they need to deploy and scale their newly-built applications.

Developers can build web telephony services to work with any existing software, whether it uses Python, Ruby, PHP, Java, C# or HTTP. They can still build on all the features they need to control every phase of a call with only a few clicks of a mouse — and without adding any new equipment or infrastructure, Ifbyphone says.

The move is an example of the growing importance of end-user created and customer applications in the business and organization segment of the market.

Good News for VoIP, Bad News for Wired Telecom Providers

"VoIP" was the "industry of the decade," according to IBISWorld, which says the industry earned that accolade because of its 1,655 percent growth rate between 2000 and 2009. IBISWorld notes that VoIP, as a new industry, only began to earn any revenue in 2002, so it is starting from a "zero" base.

Wireless telecommunications ranked eighth for industries of the 2000 to 2009 period, posting revenue growth of 183 percent.

IBISWorld also predicts VoIP will show the most revenue growth in the coming decade as well, growing 150 percent between 2010 and 2019.

The bad news for the 2010 to 2019 period is that wired telecommunicatons carriers will show negative 52 percent revenue growth. Telecommunications resellers likewise will show negative 26 percent revenue growth over that same period.

Voice Peering Drivers and Strategies: 7-Part Video

Gary Kim, Editor-in-Chief, IP Business
Carlos Da Silva, Americas Marketing Director, France Telecom
Paul A. Woelk, Sr Manager, Access Strategy, Sprint
Heather Olson, Regional Manager, Telecom Italia Sparkle
Rodrigue Ullens, Co-founder & CEO, Voxbone

click "Related Article" at the bottom of this post to launch the first video segment. Also, if you have the bandwidth, select "Watch in HD." It's better.

Telcos and Web Communications: Who Wins?

Attention might not be the basis for every revenue model, but it clearly underpins most media businesses. It might underpin other businesses as well, including communications.

So note changes in how and where people in France are spending their "communications" time. Since 2000, attention and time spent have been shifting towards Web-based applications and pursuits, and away from telephone-based communications. To be more precise, 53 percent of "communications" or more might be said to originate in some Web related activity, not a classic "pick up the phone" activity.

Time isn't exactly money, so attention and usage do not translate immediately into revenue. But attention sooner or later will create the possibility of revenue. And if this sort of shift in how people communicate continues, revenue opportunities and potential inevitably will shift.

That doesn't mean revenue-generating endpoints such as mobile phones, other communicating devices or "access" services will stop proliferating. It simply is to point out that when so much communications activity originates in Web-based things, whether enterprise or consumer driven, something new will happen, revenue-wise. It has to.