Billions and Billions Served...

Sort of reminds you of the McDonald's signs: "X billions of burgers served." Looks like over the top Internet video is going that way as well, if forecasters at The Yankee Group are correct. Bandwidth demand is about to go bananas.

Surprise Success, Again

Voice SMS was launched in early 2005 under the name “Bubble Talk” by mobile operator Digi in Malaysia and within six months, more than 35 percent of Digi’s subscribers were using Bubble Talk and the other mobile operators in Malaysia were losing market share, says Brough Turner, NMS Communications SVP. If you're familiar with Pinger, voice SMS is a way to send a quick voice message to another mobile user.

The recipient gets an SMS message saying they've got a message and to go pick it up.
It's an intentionally nonsynchronous communications mode.

Multimedia Messaging Service can do the same thing, of course. But MMS hasn't gotten much traction, though this forecast by The Yankee Group certainly anticipates growth. Still, Voice SMS apparently has advantages. It works on any handset or network, requiring simple text and voice, which most handsets now have.

Users seem willing to use it even though it comes with price points 30 percent to 100 percent above those of text messages, says Turner. More than a dozen networks offer Voice SMS, mostly in Asia. Once again, we see surprise success, while the industry's standards-driven services (not that there's anything wrong with that) struggle.

At least so far, experience with voice SMS and MMS suggests that changing user behavior too much is a tough way to get people to do new things. Experimentation and surprise remains the order of the day. Listen more, talk less.

No More PBX: Bill Gates

Bill Gates, Microsoft chairman, in pointing out that software is becoming more advanced and capable every year for hosting multimedia content, notes that "every year we just move to more of a digital environment. We take away the older approaches." One of the changes Gates expects is the disappearance of the private branch exchange. "In voice telephony, you have a thing called a PBX. You won't have those anymore. You'll have a communications system that is using your Internet network and it's a far richer, more flexible software-drive system." That's not going to stop small businesses from buying them. But most haven't made firm choices so far, as this forecast from The Yankee Group might suggest.

Hot Media, Cool Media

In the past, some media have been described as "hot," meaning there is more emotional content. Video is "hot." Newspapers are "cool." As people start to multitask, there is a new meaning. Hot media require more active attention. Cool media are easier to deal with in the background. In this new context, TV is "cool," while talking and texting or instant messaging are "hot," in the sense of requiring fuller and more active attention. Music might be "cool," and in the background, while gaming is "hot", and requires active attention. Voice mail, being non real time, is cool. Talking now, that's hot. Web surfing is pretty "hot," as you have to pay attention.

It isn't yet immediately clear how this affects advertising potential. But it might be a clue that formerly "hot" media can become "cool" in a new context, while formerly "cool" media such as words can become quite "hot" in a new environment. Videoconferencing remains "hot" and telepresence maybe theoretically the hottest of all.

More Wi-Fi, 3G, for Enterprise Next 3 Years

Today there might be 11 million enterprise users of wide area wireless services, says The Yankee Group. Over the next 3 years, enterprises will equip more PCs with 3G and Wi-Fi. Hand held devices will tend to get Wi-Fi. More mobile phones will be dual mode, capable of connecting over cellular and Wi-Fi networks. And there will be more smart phones.

One of the issues is whether, or how much, devices such as the iPhone can wrest market share away from RIM's BlackBerry and other smart phone implementations. As important as the answer is for Apple and at&t, as well as Apple's rival handset manufacturers and carriers such as Verizon, lots of carriers in global markets are going to contend with Apple as well.

For some of us, there are other issues, such as how well, and in what user segments, devices such as the iPhone will penetrate professional and business markets, even if Apple never targets enterprise customer segments outside of the education, marketing and advertising verticals.

Strategy Differences Emerge...

Verizon Wireless, the No. 2 U.S. cellphone carrier, passed on the chance to be the exclusive distributor of the iPhone almost two years ago, balking at Apple's rich financial terms and other demands, says USA Today. Among other things, Apple wanted a percentage of the monthly cellphone fees, say over how and where iPhones could be sold and control of the relationship with iPhone customers, says Jim Gerace, a Verizon Wireless vice president. "We said no. We have nothing bad to say about the Apple iPhone. We just couldn't reach a deal that was mutually beneficial."

We don't know what deal Cingular struck with Apple. But there's a difference of opinion here about how far one can go in partnering with strong partners bringing assets into a relationship with a service provider. The cable industry decided sometime ago it couldn't partner too closely with Microsoft for advanced set-top boxes because customer control was at stake. at&t is making different decisions. Verizon seems to have taken the cable approach, at&t perhaps has taken a similar approach to its Yahoo! and Microsoft partnerships.

Some will say Verizon and the cable companies acted to maintain customer control. Others will argue at&t is taking a more open and collaborative approach. It isn't clear yet which is the better path, or whether either path will ultimately prove to be better than the other. It simply is worth noting a difference in perspective here. One approach offers more control, at the risk of less innovation. The other offers more innovation at the risk of losing at least some customer control.

Perhaps it is enough to note that The Yankee Group expects more purchased infotainment content to be supplied by "off deck" providers compared to the walled garden "on deck" interfaces used by mobile providers, over time. The same sort of process should be at work in just about all phases of wireline service provider offerings as well. Over time, more value will be contributed by partners, even as walled garden offerings controlled directly by service providers are created.

Leaning towards open and collaborative efforts, even at some risk, seems like a good idea.

Things Change...

Google is planning to share advertising revenues on its YouTube video sharing site with the individuals who submit the films, if they prove popular enough. Which is more evidence that Web forms of video are developing in the direction of "media," if not the legacy forms that have developed before. Where you find media, you find advertising.

Not That You Needed Any More Proof....

that "voice" often means mobile in fast growing and mature markets. For all the concern about voice prices going to "zero" or "near zero," the equally important observation is that "access" is growing in value. We'll have some work to do on the "montetizing" front, but access, not minutes, remains strategic.

APIs and Business Models

It is true that the mere existence of an app. program interface, by itself, dictate any one business model. But it strongly leans toward a model embracing third party app development. There's no reason an API has to dictate revenue models for partners that use and build APIs. But it leans towards the collaborative. So it appears telco executives are starting to lean in the direction of formal APIs for development of future services and revenues. Or so it would seem, as survey results begin to trickle in from a survey now being conducted by STL.

There seems pretty clear consensus that adding call and privacy features won't help much. Nor do other "real time" services get much support. That's odd, since video is a real time service, but the results probably don't focus on video as among the real time services respondents are thinking about.

This perception might also be wrong. There should be lots of ways to use APIs and third party development to create calling, privacy and other real time features that would not ordinarily be developed internally. If short message service or ring tones are any indication, telco executives aren't good at predicting what users want and will pay for in any case. So there isn't a terribly compelling reason to think they are right about the paltry returns from using APIs to speed up innovation in the classic calling business.

Trouble Ahead for Mobile Data ARPU?

"There are no more killer apps," warns The Yankee Group analyst Charles Moon, of mobile operators in the Asia and Pacific region. Short-messaging service (SMS), ringtones and—to a lesser extent—graphics and gaming have made huge contributions to mobile data revenue, he says.

"Yet since their introduction many years ago, nothing else has made a similar impact, despite ten- to twenty-fold improvements in wireless download speeds," says Moon. "All things being equal, data revenue will fail to offset the decline in voice," says Moon. "Our current forecast, based on present business models and current operator strategies, shows overall mobile data revenue growing at a relatively tepid 7% per year from 2006 to 2010."

Moon says mobile operators must embrace all-IP platforms such as mobile WiMAX. Walled garden strategies should be disgarded in favor of more openness to third party developers. Speed isn't the issue. Variety is, he maintains. And operators need to learn how to segment customers better.

Biggest Community on the Planet

So think about it: at&t says all members of its community, wireline or wireless, can call each other "on network," for free. Wireless users apparently must also reside within the wireline service territory, and also have a wireline account with at&t, but the implications still are huge.

We will leave for the moment the issue of whether this actually will work. If it works, at&t creates the world's biggest "friends and family" network. If Verizon and Qwest somehow wind up peered with at&t, most "callers" within the United States will be part of a single, peered network with free calling on the entire network.

Which changes he competitive landscape prety dramatically, don't you think? Whatever version of Metcalfe's Law you subscribe to (the value of the network increases as the square of the number of nodes, the value of the network increases less than that, or more than that), this is a huge deal.

Consider that a global, tier one carrier calls its customer base a "community." Consider that the deal essentially eliminates the distinction between TDM and IP calling. Consider that the deal could put a huge damper on POTS line defections in territory, and somewhat complicates the "lower price" positioning of most VoIP offerings. at&t just has made the value of an in-region POTS line much more valuable.

A Significant Move, Architecturally Speaking

Comcast says it is testing switched digital video. Cablevision already added SDV capability and Time Warner has been saying it would likely be necessary. All of this is important because the historic argument made by the cable industry is that its hybrid fiber coax, hybrid analog and digital delivery network was the right way to approach access networks. The argument has been that telco fiber to the home networks were a needlessly expensive way to provide broadband services, and a particularly expensive way to deliver digital video. The latest move by Cablevision and the testing by Comcast and Time Warner suggest that the telcos might have been right all along.

That's a huge shift in thinking, and should cause at least some skeptics to rethink their positions. To wit, as cable moves to SDV over an HFC network, it becomes essentially the same network at&t says it is building. And there are two ways to look at matters. One can argue that at&t's approach is good enough to compete with cable. One can argue that telco-style SDV was the right approach all along, and cable has had to acknowledge that fact. Or one can argue that a full-bore FTTH network is a better choice, where it can be done, because it is a way to leapfrog the bandwidth limitations of any HFC network, either of the cable or at&t varieties.

Or, put it this way: is an optical Ethernet network, all the way to the customer premises, the best wireline platform for launching all sorts of new IP services, including, but not limited to video. And if that is the case, is there not strategic value for the network operator that builds such a network? And if that is the case, maybe some people should cut Verizon a bit of slack....

Cbeyond, Geek Squad

In many ways, Cbeyond sells VoIP like cable companies sell digital voice. The focus is on drop dead simplicity and maximum ease of use, with all the messy technological details hidden. There's a deliberate effort to avoid introducing new technology into a customer's world in a visible way. Think "it just works." There are other businesses out there with similar approaches. Among the most customer-friendly technology support efforts one sees out there in the consumer world is the Geek Squad. Like the office superstores of the world, it just is something small businesses will turn to for predictable, approachable service. So don't be surprised when Geek Squad starts selling Cbeyond services.

SunRocket Launches Asia Pacific Plan

SunRocket now offers a calling plan that drops rates to Asia Pacific locations including China, Japan, Hong Kong and Vietnam to as little as one cent per minute. The annual $199 Asia Pacific Edition features per-minute calling rates well below traditional phone service offerings and as much as 90 percent less than other major VoIP providers, SunRocket says.

The Asia Pacific Edition reduces international rates to $.01 per minute on all calls (landline and cell) to China, Singapore and Hong Kong; and on landline calls to Taiwan, Malaysia and South Korea. Landline rates fall to $.02 per minute for Japan; while SunRocket's rate on all calls to Vietnam is cut nearly in half to $.10 per minute.

Not All Calls are the Same

There are no market studies on how people use phones, says Manuel Wexler, CopperCom CTO. So one can argue that "not all calls are the same," he says. "You might want to be paid for taking a telemarketing call." In other cases, you just want to block some calls. Others are really important. "So maybe all phone calls aren't the same," Wexler says. "I haven't seen a study where people attach value to a minute of talking."

Skype calling arguably is used differently than mobile, inbound differently from outbound, IM differently from SMS, video differently from voice-only, voice-only differently from multimedia sessions. Users have different preferences for one mail box or multiple mailboxes, one device or several, soft client versus ATA-based calling.

Cable sells voice as part of a bundle. Vonage customers probably are different, he maintains. Vonage sells VoIP. Cable sells voice, but not VoIP. "Right now telcos sell two sizes of voice: consumer and enterprise," he says. There's "not much segmentation."