SunRocket, Ooma, Verizon, Vodafone, at&t

So the VoIP blogging community is talking about almost nothing but Ooma this morning. But as I mentioned on my other blog (www.ipbusinessmag.com), focusing so much energy on SunRocket's travails, which was the other recent item everybody was talking about, though obviously of high interest, has almost no strategic implications for the broader communications industry. Rumors that first had Vodafone pondering buying Verizon, though almost certainly an investment banker's trial balloon, are something else.

Today Andy Abramson says his sources say it actually is at&t that is talking about buying Vodafone. Now that would be quite a deal. And while this particular rumor also could be the result of an investment banker's strategy, it does fit quite well what new at&t CEO Randall Stephenson has been saying about at&t. It is a "wireless company" that has no intentions of abandoning its grow by acquisition strategy.

Ooma is interesting. What happened to SunRocket also is a high interest event. But neither is going to have truly strategic direct implications for the global VoIP industry. Whatever one might say about the particularities of the U.S. VoIP industry, VoIP continues to grow on a global basis, almost mechanically.

Wireless increasingly is the way voice gets done. Social networking portals, instant messaging and enterprise apps also are emerging ways voice and communications gets done. All of that is a really big deal.

David Beckemeyer on Ooma

David Beckemeyer, Televolution CEO, is the one guy I think is in position to evaluate Ooma's business prospects. This is what he says: "As some may know, I have been aware of this effort and provided some early guidance for their project (VERY EARLY - I have not been involved for a LONG time).

They could have launched the idea on top of the PhoneGnome platform and been in market years ago, but they wanted to build hardware - that was a bigger driver than anything else (bigger than whether the business made any sense).

I give their stated vision/business plan no chance at all, for the exact reasons I told Ooma in 2004:

1. solving a problem (call costs) that is going away (already going to zero)

2. people won't open their wallet for a large upfront purchase, as shown by Tivo etc. and especially not for "phone stufff" which is perceived as should be cheap

3. regulatory troubles - like FON, you are asking users to violate their terms of use with their provider

4. privacy/legal/CALEA trouble - do I want to let people I don't know use my phone and get wiretapped using my number plotting their dastardly deeds?

Item 4 above is different than the Skype-like P2P in that with Ooma, you're letting people use a highly-regulated instrument, with a lot of technology and history in wiretapping (vs. my computer and encrypted sessions).

I believe they would still also have a caller-ID problem in that my calls will not be delivered with my number as the calling number, but that of the Ooma box owver who's line is making the call (or the box blocks caller ID on outgoings calls so people I know won't accept my calls because they won't see that it is me calling).

But again, we should not underestimate the impact of a lot of money and backers that probably will not have much patience. Ooma could evolve into something viable.

With the fact that PhoneGnome is now free and needs no software, basically users can get most their calls free with no investment and no hardware at all.

Ooma, PhoneGnome

Ooma hopes it can make a business in the independent VoIP space without slugging it out with incumbents, cable companies, Vonage, Packet8 and others. Ooma uses peer-to-peer technology, it reminds me of nothing so much as PhoneGnome. A user can rely on broadband and Ooma, "cutting the cord," or can keep legacy POTS and integrate Ooma with a traditional landline (the easiest way to keep 911 service). All calls within the U.S. market are free, and off-network calls are billed at Skype-like rates.

Like PhoneGnome, the revenue model is "selling boxes," not recurring revenues from services. Ooma is betting that a $400 purchase of a base hub that functions like an analog terminal adapter will appeal more than a VoIP service account. Additional Ooma adapters can be bought to add service to other analog phones on other standard wall jacks.

Perhaps the longest-lasting impact, irrespective of what happens with Ooma, is the P2P approach it uses to create a network. As with all P2P networks, each end user's client becomes a node on the network to help terminate traffic. I don't know what technology platform Ooma uses. It seems logical that Session Initiation Protocol is not what Ooma is doing on the P2P side of its platform, but it seems SIP has to be there someplace for interface to the public network at some level. But David Beckemeyer seems best placed to noodle on that.

Alec Saunders (Iotum)asks an interesting question, however. Ooma says it will try to use member POTS access to essentially avoid paying termination charges. Presumably that means invoking user phone numbers in some way. If caller ID information cannot be spoofed from the POTS phone, but only from the trunk side of the network, does that mean a user's caller ID gets delivered even when it is just a transit node between a calling party and the called party? Details are scanty at this point so I'm not sure anybody outside Oomba knows the answer.

Or maybe there isn't even a problem. Presumably Ooma would try to "terminate" a call at a local Ooma "node" and then use the Ooma P2P to retransmit the bits using the public Internet to the terminating Ooma node with no need to deliver calling number ID information.

One wonders how much longer it will be until even Tier One service providers start to take a closer look at integrating P2P in some significant way with the existing public networks, especially as those networks are upgraded for IP Multimedia Subsystem and there's more broadband in the access network.

Not P2P as an "over the top" end user application. P2P as a part of the architecture of a managed network that simply uses multiple techniques to reach deeper into the environment sitting on the other side of the traditional "network termination" point. Making customers part of the network is starting to look like good business sense.

Lessons About Price from CLEC, DSL, VoIP

TeleGeography projects that nearly 30 million consumer VoIP lines will be in service across Europe by end of 2007, up from 6.5 million at the beginning of 2006. In France and some other countries, though growth is low, penetration is high. In others, penetration is low but growth high. Compare that to the U.S. market, where growth is slow and penetration relatively low.

So here's a drop-dead simple observation from what has happened in the U.S. market for new communication services: if you operate in a market with relatively affordable communications, then competing on "lower price" doesn't get you very far. If you compete in a market with expensive communications, "lower price" is just about all you need.

In markets where communications are affordable, blunting the attractiveness of the "lower price" platform, price still can be made to work if there are other attributes are emphasized, such as "pay the same price as you used to, but get free broadband."

"Pay the same price you used to, but get mobility." "Turn a variable cost into a fixed cost." "Make the whole cost more transparent." "Reduce real estate costs." "Work with people you actually know."

In the U.S. market, attackers have not yet succeeded when the incumbents decided they wanted to play; when lower prices were the primary marketing platform and the offering wasn't highly differentiated from what an incumbent offers.

"S*** Happens, Even to Cisco, at&t and Apple

Duke University's campus Wi-Fi network reported was being flooded by Apple iPhone MAC address requests, temporarily knocking out anywhere from a dozen to 30 wireless access points at a time. Turns out that isn't the case. It was a powering issue. Good news for Apple, as the iPhone isn't the culprit at all. Still, the outages are a reminder.

For those of you who continue to think communications infrastructure is easy, this is a reminder that "stuff happens," all the time, in unexpected ways, to the "dumb pipes" we all depend on. I just got a new Linksys Wi-Fi router to hook up to my Covad T1, for example, and though the install wizard was really nicely put together, the Linksys would not talk to the Cisco router.

It is supposed to be so easy there is no indication anywhere in any of the documentation about what Web site to go to, or what support number to call, in case installation failed, which it did, repeatedly. I finally realized I was going to require tech support so figured out where to get that from Linksys. The IM support system worked fast, and well. The connection is up. But not before reinstalling the software load.

I recall remarking to the Best Buy salesperson that I didn't have any questions, and wouldn't need any help, because I expected the hardware choice and install to be "drop dead simple." That clearly is the way Linksys designed the system, and I suspect it almost always works. Unfortunately, in this case we had to reinstall the software.

The Covad install took "longer than expected" because we were getting unexpected packet loss. To make a moderately long story short, it was a physical media failure on a short jumper in the network interface unit. Go figure. That's the last thing one would expect from new wiring.

The point is, even well designed consumer interface procedures, such that put together by Linksys, Cisco, Apple and Covad, will fail on occasion, for all sorts of apparently odd reasons. Nothing is always drop dead simple, even when well-designed processes nearly always have that intention and result.

Just because we use "dumb pipes" to some extent does not mean the networks are not occasionally "surly" and prone to failure. Far from it.

Unified Communications Stll a Tough Sell...

...at least for many smaller and mid-sized businesses, say researchers at In-Stat. Of course, that's a good thing for newly-emerging providers (can you say Microsoft?). Some providers of IP business phone systems might also appreciate the perhaps longer window of usefulness for their systems as well. Independent suppliers of unified communications platforms might feel "conflicted." Slower adoption means less robust sales now, but also means most of the market remains untapped.

Worldwide unified messaging and unified messaging-capable client shipments will reach nearly 19.5 million in 2011, say researchers at In-Stat, while traditional voice mail port shipments will shrink to zero by the end of 2009.

DoCoMo 4G: 300 Mbps to your Mobile

NTT DoCoMo is about to embark on an ambitious project that provides cellphone users the ability to achieve speeds of up to 300 Mbps on their handsets by the time 2009 rolls around. That, plus at&t's new positioning as a wireless company with landline assets, plus the fact that global "voice account" installed base and growth are killing landlines, has to be disquieting for lots of us who grew up on the wireline side of the business. Wireless is going to keep changing things more than some might like.

SunRocket post mortem

Chris Koehncke, a former SunRocket excutive now back at BroadSoft, has this to say about what went wrong at SunRocket (I'm not so convinced the customer acquisition strategy was necessarily so doomed to failure, but more on that later): "It appears that SunRocket was indeed acquired and with it the vast majority of the remaining employees unceremoniously laid off sans a small group of 15-20 of the folks necessary to keep the network alive. SunRocket network suppliers were notified late Friday so they wouldn't turn them off.

With 200k subscribers and say a $40m revenue base, if they simply stop marketing, give crappy customer support and run it on a shoestring -- it's a nice little pocket business. Playing in the fringes.

In hindsight, it was kinda of crazy to spend $200+ to acquire a customer whose annual spend was only $200+. Hard to outrun the economics. The hopes, of course, was that if you reached a decent size, people would come to you and you could reduce your marketing costs. Vonage certainly hasn't seen this, so SunRocket wasn't going to be much better.

Customer service cost also can eat you alive. Anytime you call for customer service, figure it's costing that company between $0.75 and $1.00 PER MINUTE to talk to you. For a typical 10 minute call that's $8-10. Call twice in a month and for a SunRocket $17 a month revenue, they lost money on you. It's also amazing the number of people who buy cheap are also the same group who complain constantly. They want it all and they're willing to bitch about it.

Sprint's decision to whack 1000 customers who were constantly calling customer support (I suspect their initial list had 10k names on it) is wise. Perhaps, SunRocket simply should not have had telephony support at all and just offered email support.

Some folks have just crappy internet service and SunRocket was never going to fix that. Perhaps after 3 customer support calls, SunRocket should have pro-actively canceled the customer's account. Why keep a customer that will never be happy?

Perhaps rather than being a nationwide telephone service, SunRocket should have focused on a specific region or vertical consumer group. Better targeting their marketing spend and creating a reputation in a specific niche.

VC's are an inpatient lot. They give a start-up money and urge them to spend it as fast as possible and grow as quickly as they can. In doing that, the start-up makes mistakes, does stupid things, hires the wrong people, it's a wild ride for sure. VC's don't mind failures, that's the business they're in, but if it's going to fail, they want it fail fast so they can move on to the next hot idea. SunRocket had to build a complete telephone company literally overnight with hundreds of moving parts so it's not surprising mistakes were made.

The genesis of the idea of SunRocket is still valid, create something different that people will be loyal to and ultimately becomes virally marketed. But by buying off the shelf VoIP and traditional telecom products the ability to differentiate the service, other than with a pricing model, was nil. You can't buy innovation in a catalog."

Discovering Business Models

The problem with discovering business models is that what works for some does not work for all. Back in 1998 and 1999 the stock answer provided by just about any competitive local exchange carrier executive essentially was that the firm in question would get "one percent of a $250 billion market."

These days people ask how Facebook, messaging, collaboration, video or other portals will make any money. The most popular answer is some variant of the old CLEC standby. U.S. advertising currently is about a $153 billion a year business. Portal X will get one percent of that.

Look, it clearly works for four companies: Google, AOL, Yahoo! and MSN. The "four horsemen" get about 60 percent of all Internet advertising. It isn't going to work for most application, communications or portal providers, just as it never worked for most CLECs.

The biggest two "CLECs"--the former AT&T and WorldCom/MCI--threw in the towel in defeat. And those two had more than 40 percent of all "CLEC" revenues between them.

So people assume that fast-growing and useful sites such as Facebook will find some way to make money besides traditional advertising. And there is precedent for such discovery.

Google was equally clueless about its business model, but managed to discover one.
So just because a company has no idea how it will make money, doesn't mean it will not discover a means.

On the other hand, that doesn't mean it ALWAYS will find the answer. And though I'd have to say I am fairly confident Facebook will discover a model, as Google did, that doesn't mean thousands of other sites will be so lucky. Thousands of sites obviously cannot use the Internet advertising model, even if it is fast growing, because most fo the rewards will go a relative handful of companies.

More Enterprise Moves for Google

Google now is any tier one communications service provider's biggest fear, stated or unstated, and it mostly is stated. So Google's acquisition of Postini won't help clam any such fears. Google gains instant access to Postini’s client base of more than 35,000 businesses including many large businesses.

Postini will help Google further refine its "software as a service" architecture for critical business applications, moving Google further into the business services and software space.

Postini has offered managed email security services to corporate customers since 1999.

Jangl to Voice Enable Facebook

Jangl is getting ready to announce Phonebook for Facebook, which puts calling and voicemail right in a user profile and inbox on Facebook. The new feature will allow Facebook members who both have the application to call each other, visually manage voice mail messages in the Facebook inbox and show a current online presence. Voice is becoming an application available within a user's current context.

Lights Out for SunRocket?

SunRocket appears to be refusing to accept new customers. Try calling the call center to sign up. Vonage apparently has offered to buy SunRocket for no cash, simply to provide continuity of service. No word on any response from SunRocket. A couple more bidders, said to be undercapitalized themselves, also are poking around. Not a happy day, at all.

25 Startup Commandments: Great Stuff!

1. Your idea isn't new. Pick an idea; at least 50 other people have thought of it. Get over your stunning brilliance and realize that execution matters more.

2. Stealth startups suck. You're not working on the Manhattan Project, Einstein. Get something out as quickly as possible and promote the hell out of it.

3. If you don't have scaling problems, you're not growing fast enough.

4. If you're successful, people will try to take advantage of you. Hope that you're in that position, and hope that you're smart enough to not fall for it.

5. People will tell you they know more than you do. If that's really the case, you shouldn't be doing your startup.

6. Your competition will inflate their numbers. Take any startup traffic number and slash it in half. At least.

7. Perfection is the enemy of good enough. Leonardo could paint the Mona Lisa only once. You, Bob Ross, can push a bug release every 5 minutes because you were at least smart enough to do a web app.

8. The size of your startup is not a reflection of your manhood. More employees does not make you more of a man (or woman as the case may be).

9. You don't need business development people. If you're successful, companies will come to you. The deals will still be distractions and not worth doing, but at least you're not spending any effort trying to get them.

10. You have to be wrong in the head to start a company. But we have all the fun.

11. Starting a company will teach you what it's like to be a manic depressive. They, at least, can take medication.

12. Your startup isn't succeeding? You have two options: go home with your tail between your legs or do something about it. What's it going to be?

13. If you don't pay attention to your competition, they will turn out to be geniuses and will crush you. If you do pay attention to them, they will turn out to be idiots and you will have wasted your time. Which would you prefer?

14. Startups are not a democracy. Want a democracy? Go run for class president, Bueller.

15. You're doing a web app, right? This isn't the 1980s. Your crummy, half-assed web app will still be more successful than your competitor's most polished software application.

+10 More Startup Commandments

1. You will have at least one catastrophe every three months.

2. Outsource effectively, or be effectively outsourced.

3. Do you thrive on stress and ambiguity? You'd better.

4. The best way to get outside funding is to be successful already. Stupid but true. But you, cheapskate, don't need money, right?

5. People will think your idea sucks. They're even probably right. The only way to prove them wrong is to succeed.

6. A startup will require your complete attention and devotion. Thought your first love in High School was clingy? You can't take out a restraining order on your startup.

7. Being an entrepreneur requires a healthy amount of ignorance. Note I did not say stupidity.

8. Your software sucks. So what. Everyone else's does also, and re-architecting is the kiss of death for a startup. Startups are no place for architecture astronauts.

9. You do have a public API, right?

10. Abject Terror. Overwhelming Joy. Monstrous Greed. Embrace and harness these emotions you must.

Provided by Mark Fletcher, http://www.startupping.com/

Business IM Use at 26 Percent

AOL’s third survey of instant messaging use shows IM in the workplace has grown. About 26 percent of surveyed businesspeople say they use IM at work.

At-work IM users now send IMs to communicate with colleagues (58 percent), to get answers and make business decisions (49 percent) and even to interact with clients or customers (28 percent). Twelve percent have used IM at work to avoid a difficult in-person conversation, AOL says.

Business and at-work users say they use IM because it “enables me to keep up with family and friends (47 percent). IM also “helps me to stay in touch with people I normally wouldn't be in regular contact with (43 percent).

About 38 percent say IM “helps me to get more done each business day.” About a quarter say IM is useful because it “enables me to check in on my children, providing peace of mind.”

For working moms and dads, IM’s impact is higher than the national average. In fact, 83 percent say that their day-to-day business lives have benefited from instant messaging, AOL says.

Some 11 percent say IM enhances productivity enough that they “leave the office earlier.”

Among those who use instant messaging for business purposes, 13 percent say they have their IM screen name printed on their business card, while six percent say they write it on the business cards they exchange. About 26 percent of polled New Yorkers have their IM screen names printed on their business cards.

Open Network for 700 MHz?

It isn't clear whether the proposal will survive the inevitable challenges from established carriers who won't like the idea, but Federal Communications Commission Chairman Kevin Martin is said to be ready to propose an unusually "open" license for valuable 700 MHz spectrum being vacated by TV stations as they go digital.

Under Martin's proposal, mobile services in these airwaves would have to use of any compliant device and any application, with no restrictions, so long as the application is legal and doesn't harm the network.

As a platform for innovation, the new network would rival the Internet itself, moving far beyond "unlocked" phones and resembling nothing so much as a mobile version of the Internet, where any device can access any service.

Google would love it. So would most developers. So would Apple. A network of that sort basically obviates the walled garden approach the mobile industry has taken, and resembles the way any PC can access anybody or any application able to get onto the Internet.