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.

This Might be Good for Vonage

In a decision issued April 30, the U.S. Supreme Court reinvigorated the "obviousness test" used to determine whether a patent should be issued. Ruling in the case of KSR v. Teleflex, the Court found that the US Court of Appeals for the Federal Circuit, which handles patent appeals, had not been using a stringent-enough standard to determine whether a patent was infringing.

At issue in KSR v. Teleflex is a gas pedal manufactured by KSR. The pedal has an electronic sensor that automatically adjusts its height to the height of the driver. Teleflex claimed that KSR's products infringed on a patent it held. KSR said that Teleflex's patent combining a sensor and a gas pedal was one that failed the obviousness test, and as such, should not have been granted.

Since 1952, legislation has mandated that an invention can not be patented if a "person having ordinary skill in the art" would consider it obvious. Many observers think Verizon's patents are overly broad. Basic mechanisms for connecting calls between the public switched telephone network and IP networks might be a similar sort of thing.

KSR argued that the US Patent and Trademark Office should have denied Teleflex's patent, as it only combines components performing functions they were previously known to do.

The Supreme Court ruled that the Federal Circuit had failed to apply the obviousness test. "The results of ordinary innovation are not the subject of exclusive rights under the patent laws," Justice Anthony Kennedy wrote for the Court. "Were it otherwise, patents might stifle rather than promote the progress of useful arts."

The Supreme Court also said that the Federal Circuit's conception of a patent's obviousness was too narrow. "The Circuit first erred in holding that courts and patent examiners should look only to the problem the patentee was trying to solve," according to Justice Kennedy's opinion. "Second, the appeals court erred in assuming that a person of ordinary skill in the art attempting to solve a problem will be led only to those prior art elements designed to solve the same problem."

So Teleflex's patent has been invalidated and more importantly, the Federal Circuit will now have to pay closer attention to a patent's obviousness. That may be good news for Vonage.

EarthLink Not So Sure About Muni Wi-Fi

EarthLink says it is studying the financial performance of its municipal wireless Internet networks in four cities--Philadelphia, New Orleans and California's Anaheim and Milpitas--before deciding how to move forward with similar Wi-Fi networks elsewhere.

While more cities are expressing interest in striking deals with the company, EarthLink is "not yet able to establish that comfort level" that the investments are really profitable, says Kevin Dotts, EarthLink's chief financial officer.

That's sort of the whole problem with Wi-Fi. It is a fabulously useful local access tool. It just never is quite so clear that it is a business, or a good business. Indoors is one story. Outdoors is quite another. As useful as Wi-Fi is indoors, muni Wi-Fi suffers in that respect. Sure, handhelds capable of doing something useful with outdoor Wi-Fi are getting to be more common. But they aren't yet real common. And I don't know about you, but I never use my notebook outdoors. My mobiles don't have Wi-Fi access. And I'm not really interested in downloading music to my iPods using Wi-Fi. Other people might want to do these things. The issue is whether there are enough of them.

It's Hard to Do Any Better Than This

Verizon added more than a million new wireless customers in the first quarter, outpacing at&t. And its churn remains astonishingly low. Millions of households move every year, and the propensity to move is much much higher for younger mobile users, who might arguably represent the highest churn demographic. A household churn rate of just one percent a month (people moving) would still generate 900,000 switchers in a quarter. Of course, mobile providers have one advantage wireline providers do not. When somebody moves out of state, the mobile account doesn't necessarily have to change. The landline voice, broadband access and video account might well have to. So wireline services always face an uphill battle to get churn down to just one percent a month.

It's All About ARPU and Churn

How bundling is good, or whether bundling is good for customers might be debated. There isn't much question about whether it is good for service providers. "When you look at consumer customers from a bundled standpoint, customers that are stand-alone voice customers have ARPUs in the low $40 range," says at&t CFO Rick Lindner. "As they begin to bundle and as we move them upwards to a full-quad bundle where they have got voice, data, video and wireless from us, all of a sudden that customer moves to a $250, $260 kind of monthly customer"

"At the same time, the churn rates are cut by two thirds when you move from that stand-alone voice customer to a full-quad bundled customer," he says.

At the end of the day, this is about supplier push more than end user demand. It isn't the "bundle" users want, it's the monetary savings. Innovations will occur, neverthless. So in the end, bundles will lead to something besides higher ARPU for providers.