Vonage at&t Patent Settlement for $39 Million?

Vonage and at&t are discussing settling the patent infringement suit at&t has filed against Vonage for $39 million, to be paid over five years. In October, it settled with Sprint Nextel Corp. for $80 million. Vonage will settle with Verizon Communications Inc. for between $80 million and $120 million, depending on the outcome of a final court hearing.

As a result of all the patent settlements, Vonage's available cash has been reduced from $356 million to $194 million, a dip of $162 million, of 46 percent.

It isn't clear whether other VoIP providers might be liable as well. And if they are, it isn't clear Sprint, at&t and Verizon will really want to make an issue of the infringements. It wouldn't look good, for one thing. Sprint won't want to sue its own customers, the cable companies. And though th giants might be able to cripple just about all the remaining VoIP independents, the regulatory harm would outway any potential short term financial gains.

Telcos Practice "Strategic Indifference"

People who like the idea of rapid service and applications innovation typically are frustrated by the glacial speed at which network services operators move. In fact, the thought often arises that "pipes" companies, especially those dealing with actual "first mile" connections to actual users, are incapable of understanding threats to their business models.

Well, they do move slowly, compared with anything in the software world. There is no Moore's Law at work with construction, trenching, installing drop wires and network interfaces. Which explains the attractiveness of wireless alternatives.

That said, it also is true that incumbents do practice "strategic indifference." That is to say, they will seemingly ignore a threat such as VoIP, just as they seemingly ignored the advent of broadband access, in the form of Digital Subscriber Line and cable modem services.

You might not remember, but North American carriers were slow to understand mobility as well. As awareness grew, carriers simply bought the whole wireless industry.

The point is that the indifference is quite planned. If an innovation will harm current revenues, it makes business sense to plan to lose some market share and revenue rather than embrace the trend fully and lose even more money. Up to a point, incumbents will let attackers take share, on purpose.

If the innovation reaches a tipping point, where there are strategic drivers, incumbents simply pile on in a massive way. That's why the VoIP activity on the part of North American incumbents is so different from that of European carriers. In Europe, VoIP is past the tipping point, and incumbents must play. That point hasn't yet been reached in North America.

When the tipping point is reached, they'll move, and aggressively. But this is a matter of maximizing total revenue. If revenue is maximized by delaying VoIP, that's what carriers will do. If revenue is maximizing by making POTS more attractive, that's what they'll do.

Such carrier behavior is not "dumb." It is planned. In fact, other industries have been "dumb."

In fact, the music industry seems not to have understood the threat or the changes posed by digital media.

You can be quite sure the video industry has learned from that experience and is anything but complacent. No serious video executive takes user-generated content lightly. Everybody is taking steps to participate in a broader media landscape, though nobody yet knows how the business models will play out.

Of course, that also means nobody is going to sneak up on video incumbents. They know exactly where to look for opportunities and threats, and are doing so. IP video will not be a replay of VoIP, in terms of executive denial, simply because tipping points might be somewhat clearer, and because change in the video software space will not entail the massive capital spending carriers must yet contend with in migrating to a broadband, all-IP future.

Video contestants will move faster than you might think.

Mobile Web More Like TV?

WhatsOpen.com offers a Web application that shows users nearby stores and operating hours. That's the sort of thing that a mobile advertising strategy can build off of. It also suggests something else about the nature of mobile Web services optimized for handhelds.

To wit, given the greater difficulty of interacting with the device, compared to a PC, maybe large portions of the experience need to be more like linear TV, as heretical as that may seem. Push useful data to me. Not all the time because that kills battery performance. But sense when it is likely I am looking at the screen. Show me something interesting.

Combine Real Simple Syndication with streaming. Maybe not streaming video, maybe streaming text. Adjust the feed based on my location. People talk about the difference between a lean-back experience and a lean-forward experience. Maybe we need to work on a stand-up experience: screen-based information and entertainment adapted for a user that is standing up and moving.

What Android Must Do

"I think for the Google platform to really be a game-changer it's going to have to offer more than just an open-source operating system for a mobile phone," says Kay Johansson, MobiTV CEO. "It will have to create mobile Internet devices that happen to make phone calls."

If Google ever does decide to bid for 700 MHz spectrum, with or without other partners, the network will be shaped by that same requirement. In fact, Google might have an opportunity to consider a different approach to what a mobile network looks like. Such a network theoretically might provide broadband coverage anyplace people are walking, spottier coverage in other places. That was the original thinking behind the "Personal Communications Service" (PCS) spectrum that instead wound up being deployed as 2-GHz cellular instead.

That might wind up being what happens again. Today, it is the troubled muni Wi-Fi approach that most resembles the old PCS idea. The Fon, T-Mobile Hotspot or Boingo hotspot approach offers less coverage than the original PCS concept called for.

In fact, the only reason one would logically want to build a new network on anything other than macrocells, incorporating Wi-Fi in some way, is that it might be possible to get a network up and running faster than if a traditional macrocell approach is used. One already would begin with fairly ubiquitous coverage in homes and offices and a reasonable hotspot overlay. Macrocell coverage probably still would be needed for outdoor coverage.

Still, an ad-driven business model ultimately could be quite do-able if one generally assumed in-home and at-office coverage, with fairly dense coverage in downtown cores and shopping malls, augmented by lighter coverage other places. There are some drawbacks, especially when the device is used in phone mode, since coverage would tend to be the reverse of what they now encounter. That is to say, indoor coverage would be better than outdoor coverage.

The point is that if the exercise is to build an optimal mobile Web network, one might have different choices. One of the bigger advantages would come from crafting a network that could be built at far-less capital intensity than a typical 3G mobile network. That would fit with the general theme of creating less-expensive handsets and service as well, so ads would produce a healthy revenue model. It's just a thought.

Jajah Launches Ad-Supported Calling

Jajah is launching an in-call advertising platform that turns the inventory of the world's telephone calls into an advertising market place. The idea is to insert messages into the "ringing" stream, which is user dead time, rather than into the conversation stream, which most people will find is intrusive, even if a user is interested in defraying the cost of a call.

"We spend more time on the phone than consuming all other types of media, TV, reading papers and radio included," says Roman Scharf, Jajah co-founder. "Phones haven't been considered as a viable channel yet. We are going to change that."

"In tests over the past months we have identified a method to overlay advertising content on phone calls in a way that users find acceptable," he says.

Whereas in-call advertising would normally interrupt a call and disturb the caller, Jajah simply overlays the messages above the ring tone right before the call starts. "Businesses get guaranteed caller attention, whilst at the same time not alienating the consumer with intrusive messages that break the rhythm of a telephone call," says Scharf.

Think of it as the phone inventory equivalent of Google AdWords, says Daniel Mattes, Jahah co-founder.

The opt-in solution, available soon, will give users who agree to hear ads monthly credit to their accounts.

"In a next step we will allow telecommunications partners to use our platform to monetize their inventory as well", says Trevor Healy, Jajah's CEO.

Small, local companies can target their messages to the local Jajah users.

Jajah also has partnered with Oridian Online Media Solutions, Ltd., the largest privately-owned advertising network, to gain access to a base of business advertisers.

HP Enables Web Services for Mobile Carriers

Illustrating the future direction of mobile and some wired services as well, Hewlett-Packard has unveiled a Service Delivery Platform (SDP) 2.0 to help wireless service providers take advantage of third party applications. SDP 2.0 allows multiple services to communicate with underlying wireless or wired networks, third-party applications, and Web 2.0-based mashups.

Operators can offer converged services that blend telecom, Web, and IT resources, such as music, video, and business services that personalize content delivery.

"The business problem for operators is that many of the services they deliver today come from third parties," says Peter Dragunas, HP Communications, Media and Entertainment group VP.

Basically, SDP 2.0 takes telecommunications assets and turns them into Web services.

If you think carriers won't be developing most of the revenue-generating new services that are coming, then it is imperative that carrier platforms easily integrate Web services. HP's platform helps them do that. What's important here is the signal about direction.

Symbian Disses Google

Google faces challenges in the mobile device business to be sure. Microsoft and Symbian have made abundantly clear their views on how tough it is to break into the market and how far Google is behind. But perhaps the dismissals are a sign of how great the concern is?

Google's attempt to create a widely-used Linux-based mobile phone operating system is "a bit like the common cold," says John Forsyth, Symbian VP, in an interview with the BBC. "It keeps coming round and then we go back to business."

"About every three months this year there has been a mobile Linux initiative of some sort launched," he says.

Symbian's recent financial results show it sold 20.4 million smartphone software licenses in the last quarter of 2007 and since the company was launched nine years ago more than 165 million phones have been shipped using its platform."Search and a mobile phone platform are completely different things," Forsyth argues.
"It's costly, arduous and at times a deeply unsexy job of supporting customers day by day in launching phones."

Forsyth also questioned whether developers would flock to the system. "You have to have a lot of zeroes in your sales figures before a developer gets out of bed," he argues. A phone that can't be sold until next year "is not one that is going to ignite developers," he says.

Nokia, a major driver of Symbian device sales, is more circumspect. "We are always open to discussion and debate on that. We were not ready to make any commitment to it or discuss it at the time," says Simon Ainslie, Nokia UK managing director. "We are having ongoing discussions with Google."

Android Creates Instant Developer Community

One of the big problems a communications service provider faces is how to leverage the creativity of the Web and apps community to drive service innovation which carriers frankly are ill equipped to undertake. Android basically solves that problem. Developers respond to big opportunities and that is what Android now represents: a chance to develop apps for mobile operators representing 40-some-odd percent of the U.S. mobile population, virtually all of China, one of the fastest-growing global markets, plus the two dominant providers in the trendy Japanese market plus Spain, Germany and Italy, just for starters.

That's an instant and massive developer community at a time when every major communications service provider needs such a developer community allied to it. Google may well disrupt. It also is going to help carriers move ahead on the innovation front in a way impossible on their own.

To the extent that most innovations and applications are going to come from the independent developer community--not from the carriers--this is a very big deal indeed.

That isn't to underplay the role played by developers working for Microsoft or Symbian, either. It's just that leveraging the Linux community adds even more intellectual capital, and capital that heretofore hadn't been deployed to enrich mobile Web apps.

Will Android Disrupt PCs?

Though most of the speculation about Android's impact concerns what might happen with mobile apps on mobile devices, mobile Web, mobile carriers and device manufacturers, there are other angles. Let's assume lots of apps start to get developed around Android. Then assume people really do start spending lots more time with Web apps of various types on their hand held devices, even if today that does not seem to be common.

Once those apps are written, will they start to port to PCs? After all, any app well-enough written to run on a mobile with severe display and input capabilities, compared to a PC, might be fun to use even on a PC that suffers from none of those limitations. Basically, anything Android runs can appear as a widget on a desktop or laptop. Widgets are fun. They are personal. They are customized. They are easy to add and delete. They don't require lots of thinking, processing or storage.

Of course, that might have really serious implications for PC operating systems. In a new way, we might see yet another iteration of the thin client approach to applications. In essence, that is what software as a service is all about. Android just might change the paradigm for PCs, since it essentially will assume services are in the cloud. It will take a while before we can determine whether this is realistic or not.

Google has argued Android and its ecosystem might lead to ad-supported devices. Might it also someday lead to a resurgence of interest in thin client PCs? Microsoft will hope not. But network-centric participants in the communications and entertainment industries might see new possibilities.

Photo by Andy Voss at the BroadSoft Connections conference. Can you figure out why I think thin client and mobile Web access seems promising, even when multiple mobile smart and feature phones are in the quiver? I have an office and a desk. I just don't use them, even when able to use the "office." A nice view of the animals and the vegetation is much better, so long as I have power and wireless access of one sort or another.

Google Issues: att and Verizon

Google hopes to do to the mobile market what it has helped do to the traditional Internet: bring people closer to content. At an important level, that means Web apps surfing on a mobile should have a consistent, if not identical experience, as the same operation on a notebook or desktop PC.

In that regard, Google is engaged in a genuine coopetition: it needs legacy carriers as partners even as it competes with them. And every potential partner knows that what is good for Google might not be good for anybody else.

Google already has jumpstarted its effort in a big way, picking up China Telecom, NTT and KDDI, plus Sprint and T-Mobile in the U.S. market, T-Mobile Deutschland, Telefonica in Spain and Telecom Italia right at the gate. That gives Google carrier agreements Apple and Microsoft never got that fast. And Google's operating system and platform now are global from the get-go.

That means the carrier blockade is broken. Verizon and at&t might or might not join up with the Android effort. But they no longer can stop it.

Of course, Google will proceed on multiple fronts. It won't get where it wants by forcing everybody to use Android. So it will work with carriers when it can, or work around them if it has to. From a stategic perspective, Google wants its apps and experiences on every device, if possible, with or without Android.

Which means some accommodation with at&t and Verizon is possible, indeed likely, at some point. If Android gets traction at Sprint and T-Mobile, not to mention elsewhere, neither of the two largest providers will want to be frozen out of the action.

And that will be true even if Google ultimately emerges as part of a bidding group, perhaps even a winning group, in the 700 MHz spectrum. There are lots of stakeholders who gain if a robust mobile Web experience can be created. Not the least of which are firmware, chip and software providers from the legacy PC space (Microsoft being the salient exception, as it already is a major and growing mobile OS and application provider.

We should preclude nothing at this point, in terms of Google becoming an owner, at least in part, of a major broadband network; producing its own branded devices; getting "top of the deck" exposure on other devices and operating systems or other as-yet-to-be-developed ways.

Google is determined to be a force in mobile and it has lots of ways to proceed, simultaneously. If its gets what it wants, it won't need its own network, devices or apps. Others will do those things. If Google doesn't get what it wants from others, then it will have to consider creating those capabilities itself. Either way, Google in the game for good.

The only unfolding issue is how a complex set of relationships unfolds. Those who want Google to disrupt less will find that their own actions can help tip Google one way or the other. The same holds true for those who might want Google to disrupt more. If they are willing to commit their own capital, they can nudge Google in that direction.

And keep in mind: major technological innovations tend to achieve less in the near term than most think, but far more in the long term than observers expect.

Good News for Sprint

It's a good thing for Sprint that it is working with Google on a Gphone probably available next year. It might not help with Nextel churn, but it will increase Sprint's attractiveness as a provider of CDMA-based Web devices, which is what I believe the new category will shake out to be. Sprint long has prided itself as a provider of advanced mobile data services so this was almost a "must."

It will be a very tough choice, but I still think Sprint has to proceed with the WiMAX rollout and think seriously about divesting Nextel if that is what it takes. Nextel used to lead the industry in ARPU by quite some measure, but the delta is pretty small, and declining. If that was the reason for the buy, I'm not sure it makes much sense anymore. WiMAX is a better strategic use of capital, and Sprint already is working with Google on that front, in terms of optimizing Web application performance. Well, Google apps at least. But those are some of the more important Web apps overall.

As someone who uses services and devices from at&t, Verizon, T-Mobile and Sprint, Sprint has for some time been on the "switch these two phones to somebody else" list. Right now, the issue is simply that the old plan we use is so cheap, relative to the others, that we put up with the service.

But Sprint's devices are the lightest-used of all the other services, so it is a reasonable trade-off. Also, my wife is such a light user that she doesn't care about features other than "calling." I won't buy phones that don't use SIMs. Data cards suffer from no such criteria, which explains Verizon. Still, I can't see using four providers in 12 months time.

But that's just me. Being part of the Google ecosystem is a good thing for Sprint.

Google Says "No Phone" Right Now

Andy Rubin, Google Director of Mobile Platforms says Google is not announcing today a Gphone. Google has announced the Open Handset Alliance and Android.

Android is an open and comprehensive platform for mobile devices. It includes an operating system, user-interface and applications.

The Open Handset Alliance consists of more than 30 technology and mobile leaders including Motorola, Qualcomm, HTC, Sprint and T-Mobile.

The phones will also be available through the world’s largest mobile operator, China Telecom, with 332 million subscribers in China, and the leading carriers in Japan, NTT DoCoMo and KDDI, as well as T-Mobile in Germany, Telecom Italia in Italy and Telefónica in Spain.

"We recognize that many among the multitude of mobile users around the world do not and may never have an Android-based phone," says Rubin. So Google will work to ensure that its services are independent of device or even platform. "For this reason, Android will complement, but not replace, our longstanding mobile strategy of developing useful and compelling mobile services and driving adoption of these products through partnerships with handset manufacturers and mobile operators around the world."

The software developer kit is expected in about a week. Phones built on Android will be available in the second half of 2008.

Global Broadband Access Prices

Average prices in October 2007, according to the Organization for Economic Cooperation and Development. In the U.S. market, speeds keep going up and prices down.

Charter Communications, for example, will be upgrading speeds in most of its markets over the next three-to-four months. Charter's 3 Mbps tier will be bumped to 5 Mbps, the 5 Mbps service will be upgraded to 10 Mbps service and the company's 10 Mbps tier will be boosted to 16 Mbps downstream and 2 Mbps upstream. Prices apparently will vary by market.

Verizon in October launched a new tier of symmetric internet access service over its FiOS network that increases upstream and downstream speed up to 20 Mbps.

Why Google Will Be a Mobile Force

Google is poised to charge the mobile Web applications for a very simple reason. Mobile advertising is an ad-supported medium it hasn't yet begun to dominate. Second, Google dominates Web applications, period, according to Net Applications.

And if you believe the mobile Web will be THE Web for billions of users, and an increasingly useful adjunct to PC-based Web apps for billions more, Google has to play.

Google and Sprint

We might know by the end of the day what the relationships are, but Sprint Nextel's fate hangs on just a couple things right now. It has to fix its customer service problems and has hired 4,500 people to get that done. Assuming that stops being a problem, it has to decide what to do about protecting its base business while dealing with its WiMAX network. Right now Sprint runs two separate physical networks and WiMAX makes three. Then there are the logical networks for voice and data. Plus back office systems that are in the process of unification, but not all there yet.

More immediately, if it can get a deal with Google, and push the device really hard, it has a chance to stop the excessive customer churn that prevents it from dealing with the WiMAX issue effectively. Google devices might help Sprint with churn, giving Sprint time to repair its customer service reputation and plot a reasonable future for WiMAX.

Most of the churn seems to come from the Nextel side of the house in any case. Is it so crazy to consider divesting Nextel and proceeding with WiMAX?