Vilfredo Pareto, Mobile Apps

Vilfredo Pareto, an Italian economist, around 1906 coined the Pareto Principle, popularly referred to as the 80-20 rule, "the law of the vital few" or "the principle of factor sparsity." It states that, for many phenomena, 80 percent of the consequences stem from 20 percent of the causes. As applied to any sphere of business or life, it means that a disproportionate share of the results come from 20 percent of the decisions, actions, people, partners, employees or just about anything else you can think of. The rule should therefore apply to virtually any part of the Internet or communications business, because it applies in any business.

If one looks at what is being bought out of the Handango catalog of more than 190,000 titles, across mobile platforms, and aggregating apps by type, you can see that no single category dominates. You might initially conclude that Pareto doesn't apply to the purchase of mobile apps. A different presentation of sales data--ranking sales or discrete items by volume or revenue--would clear that matter up.

Still, there's an important business implication here. It always is true that a small number of drivers (applications) account for a disproportionate share of sales. It also is true that as much as 80 percent of the actual apps sold represent niches important enough to users that they pay money to get them.

So fashion your business around the relatively small number of high volume items, or around the huge number of small and smallish volume items. Either way, it works. You just can't build the same sort of company to chase niches as you would build to chase the high volume segments of the market, if you want to succeed.

You might also be surprised at where the niches are. Handango says that in 2006, the top two selling apps for BlackBerry were "Ringtone Megaplex" and "Ringphonic Lite." Ringtones in a segment dominated by business users. The top two titles bought by Palm OS users in 2006? Quite different. "Agendus Professional Edition" and "Treo Voice Dialing" were tops there.

Still, across every major operating system, "business and professional" apps were the top category, followed by "productivity", then "entertainment," "games," "travel," "utilities," "communications" and "multimedia."

Can You Survive the IP Shift?

A few of you are familiar with a story I’m fond of telling. Once upon a time my market research company started to get asked what would happen if Congress passed a new telecom act. This was 1994 and 1995. The truth was, we weren’t sure. To make a long story short I embarked on a personal research program to figure that out, and ultimately boiled my findings down to about a dozen bullet points.

Roughly at the same time, I started getting asked what the actual cost of a phone call was, and where that all would sort out. To make a long story short, I wound up with a concept I have called “near zero pricing” ever since. And, ever since, I have urged everyone to build their business models on that premise.

More recently, new questions are being asked. Many successful providers of voice-centric services are asking whether they can remain relevant, and prosper, in an IP world where so much value and revenue conceivably shifts to application providers, and is not captured by “network services” providers.

My off-the-cuff answer has been that “100 percent of those of us who survive this shift will be providing all sorts of Web services and applications beyond basic ability to make, store, forward and retrieve voice messages.”

The inevitable next question is “what are those things and what do I do to create and deliver them.” That’s an open question, but has to be operationalized, and soon.

There’s a third question I now am set upon deciphering: what does the communications business look like after wider IP transition allows latent demand to surface. Put another way, there are lots of problems end users have that we haven’t been able to profitably address with TDM solutions.

All that is about to change. We are going to witness the emergence of all sorts of market segments and niches that we now can serve profitably, and this will happen all over the place.

The issue is to discover precisely how the process will unfold, so we’ll know where to focus our time and money to capture this newly-visible demand.

Another observation is that network services providers no longer can do everything themselves, and they know it. “MetaSwitch is at the heart of this transition of our business,” says Sylvie Couture, Télébec’s chief technology officer, about the ways MetaSwitch provided extensive professional services, not simply “a switch platform” to the Quebec-based carrier.

Other infrastructure providers also offer evidence that such things as a complete redesign of the entire IP network often cannot be done as well by carriers themselves as by their supplier partners. This understanding needs to be extended further into the application development process.

Also, the idea that voice services are a commodity needs further and serious reexamination, because it probably isn’t true at any level except in the sense of raw transmission of bits.

Consider softphone technology, to use but one example. The issue isn’t whether soft clients replace physical phones, but how and why soft clients work for people. There are many applications, and many settings, where a soft client makes more sense than a physical hand set or desk set.

Wainhouse Research surveyed enterprise end users and found that soft clients had already been purchased by 24 percent of respondents, while another 20 percent saw this as a future purchase. Obviously, there are some places where softphones make more sense than physical instruments.

In a completely superficial—but real—sense, if you can talk real-time through your PC, and you can get your voice mail there as well, and you're already comfortable using a Bluetooth headset, maybe you don't need a traditional phone.

The point is that if voice is not a commodity—and my contention is that IP is going to prove this is the case—then those who make the transition and prosper are those who can move adroitly to create voice services that aren’t commodities.

My guess is that every user of communications can point to ways that various modes of voice, on different devices, used at different times of day or week, to communicate with different people about different things, already exist. And we’ve just started to make the shift.

And my point is that these various modes of communicating are in fact not completely functional substitutes for the other modes. If they were commodities we wouldn’t bother using the various modes in different ways. Again, to use a crude example, mobile voice is not completely a functional equivalent for POTS. If it were, people wouldn’t be willing to pay so much more for the service, or use it as readily as they do.

POTS is a different product from some forms of over the top VoIP. Both are different from some forms of IM-based or soft client voice used on a PC platform. DIDs get used in different ways than they used to. People who use voice white lists and black lists are different from people who don’t know what the difference is.

Now, to answer some possible objections that might be forming, if voice is very much contextual, and not a commodity, then even when the “raw” cost of talking is very low, the value might be very high. Voice is not POTS. Voice is not simply mobile, or IM, or a soft client experience. Sometimes it is click to call. Sometimes it is enhanced with video. Sometimes it is synchronous. Sometimes it is asynchronous.

Sometimes it is a voice SMS. Sometimes it is a voice post on a Web site, rather than a text post. Sometimes it is integrated with podcasting. In the future it might be integrated with a video experience. Sometimes it flips from one device to another, mobile to fixed, or fixed to mobile. Sometimes it is personalized for friends and family. Other times it is screened and filtered for work.

At times it might be integrated with some sort of collaboration, such as review of some sort of document. It might be launched from inside an enterprise application, an email, an IM, a Word document or spreadsheet. At other times talking on a device recognizable as a phone is just fine, with no need for image or text support.

I stand by my contention: 100 percent of today’s voice practitioners who survive the IP shift will have found ways to unlock voice from the plain vanilla box it now is in. All of the survivors will have found ways to customize the voice experience for latent demand that is going to surface.

And 100 percent of those survivors will have found ways to use new IP-based tools to innovate faster than IMS or the core network protocols will permit. You want different answers? Ask different questions.

Sprint Nextel WiMAX Launches This Year

Sprint Nextel announced initial service launches in several markets by the end of 2007 and expects to reach 100 million people across the country by yearend 2008. Sprint has chosen Samsung for PC cards available in both single WiMAX mode and dual CDMA 1xEV DO/WiMAX mode for WiMAX service launch use. Additionally, Sprint has selected ZTE Corporation to supply multiple WiMAX 802.16e devices including PC cards in express and USB form factors as well as advanced modem solutions. Sprint Nextel also chose ZyXEL Communications for modem products.

WiMAX service areas for the 2008 launch include Chicago, Detroit, Grand Rapids, Indianapolis, Kansas City and Minneapolis. Samsung will develop Baltimore, Boston, Philadelphia, Providence and Washington D.C. Nokia will develop Austin, Dallas, Denver, Fort Worth, Portland, Salt Lake City, San Antonio and Seattle.

In large part, Sprint Nextel's early success will be determined by customer demand for high speed access services. In part that is because Sprint Nextel seems to be focusing its WiMAX effort on non-voice services supported by mobile data devices. The other reason is that sharing photos, Web content and ringtones, the leading 3G apps, can be provided on the existing network.

The Sprint WiMAX mobile broadband network will use the company’s 2.5GHz spectrum holdings, which cover 85 percent of the households in the top 100 U.S. markets.

The Only Question: Who Buys Vonage?

Pundits used to kick around the idea of "who will buy Vonage?". We are going to find out. With the noise around patent infringement no help, the stock price has dropped to the $3 level. So Vonage's life as an independent company is drawing to a close. Now, to be sure, Vonage executives probably always assumed they would be acquired, someday. That it would be such a "distress" sale probably wasn't comtemplated, at least not initially. No cable company is going to touch it, so that leaves telecom segment players as the only conceivable "network service" buyers. It isn't so clear what value Vonage might represent to application providers. I haven't done the math yet, but at $3 a share, buying the company probably gets close to "customer acquisition cost" for at least some potential buyers with a srategic need for wireline VoIP customer base and associated platform elements. In any event, we are going to find out.

HDTV Bandwidth Planning

One of the thorniest questions faced by all access providers is how much bandwidth will be required to support high definition and other forms of TV. Operationally, the discussion tends to turn on how many simultaneous HDTV streams might be required. The thinking in some quarters is that only a single HDTV stream and one or two standard definition streams will have to be supported concurrently.

SureWest Communications is planning to support multistream high definition DVRs and that will require additional bandwidth, says Bill DeMuth, SureWest Communications CTO. "We are already experiencing about 1.5 HD TVs per home so that is two streams, and if you want to watch one and record two streams it can easily lead to three to four streams of HD being delivered at the same time.

EarthLink Introduces Wi-Fi Phone

And it's attractive in the way an iPod is. No mistake, no doubt. About what one would expect from a company that has consumer marketing in its genes.

The phone is manufactured by Accton Technology Corporation and currently is in beta use at the company’s municipal wireless network in Anaheim, Calif.

EarthLink has no illusions about the difficulty of moving its business model forward, after beginning life as a dial-up Internet access provider. Still, it has a better shot than most who began business life that way, and already has done better than many would-be VoIP providers.

It always will be tough to compete with the cable and telephone companies, so you have to appreciate EarthLink's grittiness, toughness and marketing savvy. As they say, "thumbs up" for the phone design.

PhoneGnome Adds Gtalk, MSN, Yahoo!

The PhoneGnome free calling community now includes GoogleTalk (Gtalk), MSN Messenger, and Yahoo! users. PhoneGnome users can now also place free VoIP calls to users on GoogleTalk (Gtalk), MSN Messenger, and Yahoo!

These destinations can be entered in the ‘Quick Call’ box or added to a users' on-line Contacts and called with click-to-dial or by dialing the assigned speed dial code directly on your phone (for PhoneGnome box owners).

The PhoneGnome free calling community now includes:
* All PhoneGnome members, whether web-only, PC, or box, all over the world
* SIPphone/Gizmo Project
* Free World Dialup
* EarthLink MindSpring (formerly Vling)
* Hundreds of additional VoIP services reachable via SIPbroker
* Any SIP user, anywhere in the world (including Asterisk PBXes
* Millions of numbers reachable free through our private peering relationships
* ISN/ITAD numbers (freenum.org)
* GoogleTalk (Gtalk)
* MSN/Live Messenger
* Yahoo! Messenger
* PhoneGnome box users can even use a regular phone as a Skype phone.

"Each day, we get one step closer to pure Internet free calls to everyone," says David Beckemeyer, Televolution CEO.

Application Optimized Phones

Danger. BlackBerry, iPhone. Someday soon, Google phone. Just a few illustrations of the development of application optimized phones. Not application specific, as they are multiple function devices. Rather, optimized for a particular set of functions, with voice as a lowest common denominator

"Some of the time the engineers are dedicated to developing a mobile phone," Google executive Isabel Aguilera is quoted as saying on the Spanish-news Web site Noticias.com.

Simeon Simeonov, Polaris Venture Partners partner, has been told the Google Phone will be a BlackBerry-like device running C++ at the core with an operating system bootstrap, or loading program, and optimized Java, and that it would offer VoIP.

Rumors also link Google and Samsung as partners developing a phone, code-named "Switch." Google and Samsung announced a partnership in January to bundle mobile versions of Google Search, Google Maps and Gmail on certain Samsung phones.

Google has on its payroll Andy Rubin, the founder of handheld device maker Danger who later started Android, a mobile-software maker that Google bought in 2005. Google also acquired mobile-applications company Reqwireless and secretly acquired a company called Skia, whose first product is a portable graphics engine that renders 2D graphics on handhelds.

Verizon Dangles Bait. Will Fish Bite?

Verizon is dangling financial bait in front of returning or new customers. Consumers who have chosen to use cable phones, computer phones or wireless phones for their primary lines can now add the reliability and security of a Verizon landline to their household for $9.99 a month for a year. Win back programs are a staple of the competitive communications business, so the mere fact of a win back offer isn't surprising. Even the promotional price, though quite promotional, is unheard of.

The key element here is that Verizon is signaling that it has had enough of competitor poaching, and is prepared to halt the erosion, even at the price of destroying its POTS line margins. The prize now is shifting to lines in service. Broadband may be foundational, but a customer relationship is key to upselling other services. If that is POTS, so be it. The worse thing at this point is stranded assets, not margin off a POTS line, necessarily.

Google, TV Spectrum Auction, GooglePhone

I will say in advance that this is merely a speculation, but look at some of the possible events headed our way, along with a rumor gaining more credence. The rumor is that Google has 100 people working on some sort of Google phone. Then there is the matter of what happens in 2009 when the analog TV broadcast system is shut down, and a block of really valuable spectrum, at frequencies that penetrate walls quite nicely, are available for some other use.

Google is among companies that "really doesn't want to be a communications service provider," and there are good reasons for that being its actual position. But things change. What if wireless service providers "pull a Viacom" and play hardball on approving use of the Google phone, much less actively pushing it. What if Google finds it has no really good choices for ramping up its presence in mobile search, presence and location?

There's all that truly wonderful spectrum being vacated by the TV broadcasters. They will fight to keep it, of course. They'll talk about how they can compete with cable and telcos and satellite broadcasters by switching to digital TV in the same spectrum. Just as obviously, other economic interests who would be in a position to gain from rights to use that spectrum will actively oppose any such notion.

But that's precisely where Google's rumored phone, along with its business need to move into mobile search, location and presence, might prompt a change of thinking about being a communications service provider. Of course, it also will consider partnering with others who really like running networks, to reduce its investment profile.

But there's the speculation. There might be times when application providers, despite their desire to avoid being in the networks business, simply can't get their primary mission accomplished without moving in that direction. Google has been dabbling in Wi-Fi access networks and investing heavily in data centers and backbone transmission. It might not be Google's first choice, but all that juicy spectrum is going to affect the thinking of all sorts of players out there, across the communications, media and electronics industries.

In Google's case, the value of owning spectrum and a network, along or with friendly others, is the opportunity to dramatically propel user dwell time with Google Docs & Spreadsheets, search, maps, Gmail and GoogleTalk. And since a mobile phone that doesn't connect to the public network isn't quite so useful, it will do that as well.

Comcast Adding 200,000 Voice Accounts a Month

Comcast is selling 50,000 wireline accounts a week, says Comcast CEO Brian Roberts. That’s 200,000 lines a month, or as much as 2.4 million lines a year. That’s just Comcast. Time Warner, Cox Communications, Cablevision Systems and other cable companies are adding more lines on top of that.

So wireline attrition does not necessarily benefit wireless companies as much as some might suspect or predict. Some analysts think 40 percent of all U.S. consumers will be “wireless only” in five years, for example.

In some Comcast markets, for example, including Philadelphia and the Washington markets, Comcast is selling 25 times more units of phone services than it is units of video, says Roberts.

Big Ditch or Small Puddle?

One's attitude towards any access net choice depends in large part on what one thinks one faces. If one believes that the path to the future is largely a matter of small steps, then an incremental approach to access bandwidth makes sense. If, on the other hand, one anticipates disruption, then a bolder choice might be better. Yes, the risk is magnified when a discontinuous access choice is made. But there is great risk if one believes one is going to have to jump a big ditch as well. If you are going to make it, you need to get a good running start and then stake everything on making the leap in a single move.

That's something of the background in all cable or telco considerations about bandwidth upgrades, compounded by the fact that mobile access has to be part of the solution. The point is, jumping a big ditch might require a bolder investment in advance of the leap. If you don't think a leap is required, incrementalism might work. Either way, one bets the business, though, so neither decision is without huge risk.

It is clear that the addressable revenue buckets are bigger than they used to be, there's more competition than there used to be, and markets are less predictable than ever. So the most flexible network has an advantage.

And networks wear out, no less than shoes, clothing or tires. They must be replaced periodically in any case, and every network encounters natural break points, where an incremental upgrade in performance is not possible. The issue is where that point now lies.

Vyyo 3 GHz: Bigger Pipes for Cable

Even back in 2005, before the YouTube, user generated video wave hit, cable operators were thinking the amount of bandwith they would be delivering in linear fashion would shrink, while on demand services would grow. Over the top Internet video only magnifies the trend. So it is no surprise that cable operators are looking at any number of ways to boost bandwidth without ripping up their hybrid fiber coax plants and going fiber to the home. After all, the consistent cable refrain is that FTTH is way too expense and HFC is much better.

Cablers are looking at signal compression and decoding, upgrades to 1 GHz bandwidth, creating smaller fiber-served neighborhoods, converting to all digital signal formats or overlaying new electronics on the existing plant to make use of non-traditional frquencies. Vyyo is one of the suppliers of an overlay system, and says it can boost downstream bandwidth by about double, and upstream bandwidth by 10 times, for something on the order of $125 investment for every home passed by the cable network.

That's the good news. The bad news is that every time an engineer adds an active element, serially connected to another active element in a network, reliability necessarily takes a hit. So the good news is that the Vyyo overlay dramatically increases bandwidth, at the cost of reduced network reliability.

If the 3 GHz Spectrum Overlay adds six elements in series on each fiber leg, then the reduced reliability can be calculated by multiplying the reliability of each single device (a number less than one)by the reliabilities of each of the other devices, to get the impact on system reliability. Obviously, multiplying numbers less than one by other numbers less than one can only go in one direction: down.

If one assumes a reliability of 100 percent--a device or system that never fails--you understand why telecom engineers are so fixated on 99.999 percent reliability for the entire network. Never mind that the goal is virtually impossible to meet for some services, as the terminal devices have reliabilities low enough to drop end-to-end performance below the targeted "five nines."

But that's why there is such emphasis on the telecom world on passive optical access networks. Telco outside plant technicians and engineers know just how labor intensive a system can be when it has many active elements in it. For the cablers, perhaps the overlay tradeoff is worth making. But it will come at a price beyond the capital investment, in the form of reduced network reliability. That's just the physics and math.

SIP Trunking, Even if You Have no SIP

Global IP Solutions has introduced Interoffice Voice Trunking, offering enterprise customers free, high-quality voice over their internal networks. And get this: IVT can be used even where an enterprise has TDM phone systems in place, using a gateway that converts TDM to SIP signals.

GIPS claims high-quality voice can be transmitted this way over any network, including the the public Internet. GIPS Solutions' products are fully compatible with the IP PBXs from Cisco, 3Com and Avaya as well as any other H.323 compatible PBX, including circuit switched telephone equipment. IVT runs on any Windows 2000 or XP server, which enables companies to extend the useful life of legacy hardware and also supports any broadband Internet connection.

Presence, Location, Existence

Google in 2005 filed a patent application regarding "a computer-implemented method of providing text entry assistance data, comprising: receiving at a system location information associated with a user; receiving at the system information indicative of predictive textual outcomes; generating dictionary data using the location information; and providing the dictionary data to a remote device." The concept might be looked at as a location-based communications service. It is more, we'd argue.

"Presence," the ability of a computer system to detect your present willingness and ability to communicate. "Location-based" services promise to tie your present location to your lifestyle and preferences. Google's patent goes slightly further. It would make possible not only location-variable messaging and communications, but time of day or day of week personalization as well. The system theoretically could alter the results of any active or passive "search" function based on your past history, time of day, day of week and actual location.

And, of course, it makes most sense for some sort of mobile device. "Presence" solves many problems related to the effectiveness and efficiency of communications. "Location-aware" features may help solve some additional problems (I'm hungry or thirsty. Where can I get something to eat?). Google's system could theoretically contextualize even one's life experience (If you hurry, you can catch an earlier flight; those size 4 pink Crocs you wanted for the granddaughter are for sale, or maybe even on sale, at the store one block ahead. You will want to ship them home and there's a FedEx Kinkos another block ahead).