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.

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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?

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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.