Remarkable Calm Despite TeleBlend Snafus

Given all the challenges new VoIP provider TeleBlend has faced since deciding to make a major play as a continuity provider for former SunRocket customers, including at least one significant service outage in the first couple of weeks, there isn't much squawking by disaffected customers in the blogosphere. It's somewhat odd. For an operation that jump started itself fast, and then had to transition customers from another provider, there were bound to be transition problems. Billing issues here and there, administration portals not displaying real time data, password issues or adapter resets were almost certainly to be expected.

Having worked at start up operations where we had to support Cisco networking gear, Nortel phone systems and the circuits to support them, I know what it is like when all the systems are not fully baked. And, in fairness, there is simply no way TeleBlend was going to have its back office fully baked before stepping right into the customer support morass.

I'll be willing to bet, however, that I've encountered more software problems setting up a new Vista PC than most SunRocket customers have had getting their transitioned services to work.

Maybe customers are more unhappy than they appear to be expressing. If so, we'd like to hear about it. But we aren't hearing all that much. Which might simply mean most users might have encountered a glitch here and there, but that service for the most part is working the way it was before.

The adage we are fond of repeating is simply that customer satisfaction and loyalty do not correspond all that well for mass market communication services. Happy customers will desert. Conversely, it is well worth noting, somewhat unhappy customers will not necessarily churn. I wouldn't say I am happy having to use Vista. Neither would I say I am ditching Windows for a Mac, though I have been considering it for at least a year.

Maybe I'm just not hearing what is going on in SunRocket land. But I am neither surprised there have been porting and support issues, nor concerned TeleBlend will fail to get its operational processes in enough order to support the services and price points it has chosen. How much support can a user really expect for a $12.95 a month service? That's no slam on TeleBlend; just a recognition that price points that low will not allow for much support infrastructure.

Still, I have been surprised at the relative calm, despite all the difficulties.

Movie Download Business Won't Be That Easy

Until now, most consumers have been reluctant to purchase movie downloads. There are lots of reasons. It is a new behavior, and learning to do things in a different way takes time. There's little compelling reason to change current behaviors, either. Whatever else one might say, the ability to rent or buy movie material is not a pressing problem.

So Web downloads of the same material consumers easily can get is not a winning proposition for most people: it simply doesn't solve a big enough problem, or save enough time or money. Not when DVD retail, Netflix, Blockbuster rental channels, IPTV and video on demand are so easy to use, both absolutely and comparatively.

And so far, it would be hard to argue that paid movie content delivered over a Web connection for viewing on a standard TV actually saves either money or time.

Download-to-burn services offer a way to get around these limitations and might prove more appealing to consumers, says The Diffusion Group. But not for a while. The number of titles available for D2B services is extremely limited, and that won't be an easy problem to fix.

Not for any technical reason, but because movie content owners are acutely tuned to the distribution methods that net them the most money. And there's no way they'd take a chance on harming existing channels by aggressively deploying a new channel before they have some assurance that cannibalization is minimal and new markets can be created.

CinemaNow and Movielink, both of which offer who offer D2B services, have found uptake to be poor. The problem is pretty simple. Movie rentals and purchases are all about the content, and when the content can be had. Since the studios are cautious, the content D2B offers is widely available elsewhere, through the traditional channels.

While 49 percent of adult Internet users are to some extent familiar with online movie stores that offer downloads, less than five percent report having purchased a movie download.

Not surprisingly, those most interested in D2B services are also the heaviest DVD buyers. On average, D2B potential users purchase 55 percent more movies than users who say they won't, or probably won't use D2B services.

Price sensitivity for B2D services also is significant as well. Still, the biggest problem is simply that the hassle factor is too great, the content selection available elsewhere and the price or time savings minimal to non-existent. This is going to be a tough market to jumpstart.

Joost will provide a new test, of course. But it still is hard to see how the incremental value outweighs the hassle, at least for most consumers. Non-traditional content likely will be the more important factor, ultimately.

Free Version of CommuniGate Pronto! Now Available

CommuniGate Systems has two new initiatives for free IP-based communications addressing consumers, SOHO and very small business uers. CommuniGate Systems is offering free versions of its Flash-based client Pronto! and the CommuniGate Pro Internet Communications platform.

CommuniGate’s new portal, www.TalktoIP.com, gives consumers a free live account of Pronto!, a flash based user interface that integrates e-mail, calendaring and secure IM in a single dashboard. Users can create their individual accounts @TalktoIP.com in just a few simple steps.

In addition, the CommuniGate Pro Community Edition is available for a complimentary download giving up to five users free full-service accounts installable on any computer or server inside their home or small business.

The product is compatible with any operating system—Windows XP, Windows Server Edition, Apple OSX, and Linux. The Community Edition allows small businesses and home users to enjoy the power of a carrier-grade technology through a simple and easy-to-manage package for e-mail, IM, and VoIP technologies for free, the company says.

I asked about Vista support and haven't heard back, yet. I suspect Vista support is not yet available, so though I would love to try it out, I will have to wait.

The Community Edition provides email, groupware, VoIP, IM(SIP/Simple & XMPP), a virtual PBX with free CG/PL application source code, conferencing server, voice mail and mobility support, the company says.

CommuniGate Pro Community Edition can be downloaded at www.communigate.com, or for the online live version visit www.talktoip.com to get a free account.

Global VoIP Keeps Chugging...

Worldwide VoIP service revenue jumped 66 percent to $15.8 billion in 2006 after more than doubling in 2005, and is expected to more than triple by 2010, says Infonetics Research. Worldwide revenue from residential hosted VoIP services jumped 68 percent between 2005 and 2006 while managed IP PBX service revenue grew 45 percent.

Hosted VoIP services continue to outpace managed IP PBX services by far, with residential services fueling the market, but the business segment is also growing, and will continue to, Infonetics says.

“Asia Pacific has been leading the VoIP services scene for a couple of years, with Japan’s SoftBank pioneering the service and taking a strong lead, but the EMEA and North America regions have gained some ground at the expense of Asia in the last two years. The Latin American-Caribbean region is also posting impressive growth and gaining share,” said Stéphane Téral, principal analyst at Infonetics Research and lead author of the report.

The number of worldwide residential/SOHO VoIP subscribers nearly doubled between 2005 and 2006, to 46.5 million, 46 percent of which are in the Asia Pacific region.

About 71 percent of worldwide VoIP service revenue came from residential/SOHO customers in 2006, 29 percent from business customers.

SoftBank is the world's largest VoIP service provider with 18 percent subscriber market share, followed in order by NTT, Vonage, France Télécom, and Time Warner Cable, Infonetics says.

FiOS Takes Share from Satellite, Overbuilders and Cable

An examination of wireline video subscriber patterns in 34 Massachusetts cities and towns after the introduction of Verizon Inc.’s FiOS TV reveals three key findings, according to analysts at OneTrak, a firm loaded with cable TV trade journalists I used to work with.

FiOS tends to capture at least 10 percent penetration by taking cable customers (mostly Comcast in the study area). If there is an overbuilder in the market, the hit can be larger than that (RCN being the case in point). And as many as 40 percent of FiOS TV subscribers could well be coming from DBS.

In most markets there will not be an overbuilder with any significant market share, so FiOS gains should easily top 10 percent.

Private Line, Ethernet Might be Complementary

One of the confounding thing about "public network" services and platforms is that although many new services logically should displace older services, quite often they do so only in part, acting mostly as a brake on the growth of the legacy services, but not displacing them.

Ethernet and IP, for example, "logically" should replace older private line services based on SONET, SDH or optical carrier. Ethernet offers vastly lower price-per-bit performance and is transparent to the connectionless nature of IP. SONET, SDH and optical carrier can be made to encapsulate IP packets, but at the risk of additional overhead, cost and payload efficiency.

In fact, as IP-based broadband services proliferate over wired and wireless networks, one logically expects that older connection-oriented transport protocols will wither. But nothing in public networking ever seems to work so linearly. Oddly enough, as real time apps start to drive broadband services, connection-oriented transport has appeal, as that's what such protocols were created to do.

Over the past several years there also has been much emphasis on the role of wireless backhaul in driving new demand for private line capacity. Which might strike you as odd, given the relatively small percentage of total private line sales that particular application represents. Of course, there are other forces at work.

Though it clearly is broadband demand that is driving wireless backhaul demand, that demand is spread across traditional private line, Ethernet over copper and optical connections.

"Private line emulation" over optical or metallic media, for example, often makes sense. So does encapsulation of connection-oriented traffic inside a connectionless transport. Though "converged networks" are the future, today it often makes sense to add high capacity connectionless bandwidth for 3G and 4G services, but leave the connection-oriented voice on a separate logical network.

"Private line" sales can grow even as IP bandwidth grows in the backhaul application because a huge existing voice revenue stream has to be supported as incremental broadband apps using IP are layered on. Still, wireless backhaul is a fraction of total private line sales.

So why the buzz? Volume. A single sale to a wireless network provider can involve thousands of sites. A service provider obviously can make a lot more money selling one customer thousands of T1s or hundreds of optical carrier or Ethernet links, rather than thousands of customers single T1s.

Then there is the matter of urgency: wireless carriers have an immediate need that won't wait, and have to put up hundreds to thousands of links at a time. Wireless backhaul is really important to sellers because a handful of buyers represent such enormous volume.

NEC Acquires Sphere Communications

NEC is acquiring Sphere Communications, the latest in a series of consolidations affecting the business phone system market. Mitel and Inter-Tel, as well as Lucent and Alcatel earlier announced mergers. One has to expect more mergers involving companies specializing in small and mid-sized business phone systems, as Cisco and Microsoft are going to muscle their way into the SME segment of the market.

Though managed and hosted services are growing, SMEs still overwhelmingly seem to prefer premises-based solutions, say researchers at Infonetics.

As more voice features and applications are integrated with existing business processes, and as unified communications starts to be seen as the "function" voice is a part of, we can expect similar sorts of ripples throughout the current ecosystem supporting voice services for the SME segment. The ability to design and support a network running voice and communications applications as well as other business apps will become more important in the value added reseller space, as an obvious example.

Channel partners who can handle the "desktop" side of the premises demarc will gain at the expense of partners who only can work on the trunk side of an interface. And more of the value will derive from applications support rather than infrastructure support.

Enterprise VoIP: Not Sexy, Just Growing

Integration of voice with business apps might be the next wave of growth for IP-based voice. But for that to happen, basic VoIP calling has to be ubiquitous. Presence and unified messaging don't make sense until the basic voice platform has taken hold. And that is precisely what is happening in the enterprise space. Give a lot of credit to Cisco for pushing the business in the IP direction. Soon, we'll likely have to credit Microsoft as well for pushing the notion of what "voice" services are in the direction of unified communications. Voice really is becoming an application on the network.

More Online than Print by 2011

Online advertising sales will overtake print advertising by 2011, according to Veronis Suhler Stevenson. VSS forecasts annual online advertising growth of more than 21 percent, reaching $62 billion in 2011, compared to print advertising's forecasted $60B.

TV ad revenues will still hold the top spot at a predicted $80B in 2011. "The path of online advertising and newspaper advertising is a continuation of what we’ve been observing for many years, but it is finally getting to the point where the lines will cross," says VSS's James Rutherfurd.

The study notes that in 2007, the amount of time spent reading online will overtake time spent reading newspapers for the first time. Overall media use was down 0.5 percent in 2006 to 3,530 hours per person, while workplace media usage jumped 3.2 percent to 260 hours per employee per year.

Vonage Enhances Visual Voicemail

Vonage's enhanced Vonage Visual Voicemail now is available, and strikes me as more than visual voicemail, though there is not an elegant way to describe the feature. It is a premium service that transcribes voicemail into email. Most visual voicemail features put a message into a user email inbox, but do not provide transcription into text.

Voicemail transcripts can be sent to up to five email addresses at the same time, and to a user mobile phone using text messaging. The service costs $0.25 for each transcribed voicemail (plus applicable network fees for wireless text messages).

Some observers have been suggesting that Vonage do more in the "rich features" area and stop flogging the "lower price" angle for some time, so they will see this as a step in the right direction. I don't know offhand how long a voice message can be, but there are times when it might be really handy to have a transcript. Lists of things come to mind. Street addresses and phone numbers. Driving directions.

Google Phone Again?

Speculation about Google getting into the mobile phone space have been circulating all year. Most recently, the Wall Street Journal reported that Google has "invested hundreds of millions" into cellular phone development, and that the project goes far and beyond current incarnations of Google products on today's mobile handsets. So what is Google up to?

It isn't necessarily that complicated. Google might be simply be trying to show existing and would-be device manufacturers what can be done. Google doesn't necessarily have to be thinking about becoming a device manufacturer or "service" provider.

Google already has moved to put Google Search, Gmail and Maps onto phones. Google might be trying to illustrate, concretely, what a device can do, and look like, if unencumbered by all sorts of walled garden software. Call it a Google-optimized mobile Web approach, if you like. An approach that offers opportunity to exploit advertising revenues. If Google can get serious traction, it not only creates an important beach head in the mobile ad space, but also helps create the mobile version of the broadband Internet.

Ad-supported communications are a possibility, but not the only possibility. The "open" whole Web framework plays to Google's strengths. That might be the more important objective.

Expect to see Google pushing hard not only to get its software on more clients but to get users accustomed to behaving the same way with the mobile Web as they now do with the tethered Web. After all, the whole point of targeted advertising is to reach people where they are.

Three times as many mobiles are in use as landlines, and landlines don't offer much upside in the advertising space.

Voice is Not a Commodity

New communication modes complement, rather than substitute for, older modes, says Stefana Broadbent, who leads the User Observatory at Swisscom. That ought to lead service providers to think in different ways about the "commodity" nature of voice, for example, since it does not appear that voice and new forms of communication, though widely used, are consumed in ways that make them functional substitutes. And if they are not substitutes, neither are they commodities.

Different modes are viewed as best for some sorts of communications, and get usedthat way, she essentially argues. And while you'd expect wired voice, mobile, email, text messaging (short message service) and instant messaging to be key modes, you might not expect blogging to be a communications mode, though Broadbent says blogging is, in fact, a form of communications, not media.

So what are the key user perceptions of appropriateness (Broadbent studied consumers, not enterprises)? Wired phones are for "public" communications and intended to communicate lots of information that is of general use to all members of a family, for example.

Mobile voice, on the other hand, is a personal channel. About 80 percent of calls from any user's handset are with just four other people, Broadbent finds. Mobiles are used for regular communication with best friends and family.

SMS is seen as more intimate channel, oddly enough with more perceived "emotional capability" than voice. SMS gets used only with best friends and family and "grooming" messages ("thank you", "I love you") represent about half of the messages. SMS is seen as a way to keep relationships alive. More than 50 percent of all grooming communications happen through SMS.

Email is used as an administrative channel to get tasks accomplished and share attachments such as photos with networks of friends or social groups. Email also gets used for communications of an "impersonal" nature (contacting retailers, for example).

Instant messaging tends to be a multitasking medium, with a live channel opened in the background while a user does other things. People just step in and out of conversations.

Blogging is a "networking channel," used in place of email in many cases and a way to extend the total number of "friends" one can interact with, as it allows one-to-many communications much more simply than email.

Significantly, says Broadbent, the new forms are not substitutional. Each new channel slowly redefines the uses of older media, and uses are very sophisticated about the strengths and weaknesses of each form. SMS gets used with people one knows very well because they have the context to decipher very short and cryptic messages.

A key takeaway from Broadbent's research is that though "price" is a factor in just about any purchase, communications are about other things as well, providing some space to innovate on the value front to create new levels of comfort with "price."

700 MHz Rules: More Impact than Carterfone

Though some might really have preferred mandatory wholesale rules for a portion of the 700 MHz spectrum, the "Carterfone" style "any compliant device can be attached to the network" provision will have much more impact than did Carterfone. Carterfone lead to widespread use of modems on the public network, initially by business customers who did not have to "ask permission" to do so. Consumers initially could "buy and own" their own phones instead of renting them from the phone company.

We also might credit the rise of much of the Interconnect and business phone system business to Carterfone.

Then, because modems could be used, we can further say that Carterfone helped pave the way for creation of the Internet itself. First dial-up access, then broadband access, became possible because of Carterfone. Because of broadband the visual and now semantic Web developed. These are significant effects, indeed.

But the 700 MHz spectrum should ultimately have more impact. We assume the C block will be assembled into a national network. We assume a high-quality, low-latency core, with short access "tails," and full mobility across the whole network.

The near-term impact will be significant. Device manufacturers will benefit, since they simply have to build equipment that complies with the technical specs. Users will benefit since they can use any handsets they choose. But there will be more impact, fairly shortly.

Because the new network will be based on IP (as well as Ethernet), there will be ways to provide VoIP, even if network operators try to wall off all voice services in the traditional walled garden. Technological cleverness will take care of that problem.

That is going to create a potential new "offer leader" in wireless. And recall that AT&T's "Digital One Rate" completely reshaped industry-wide packaging and pricing, not simply some of AT&T's offerings. The C block network potentially lays the framework for a service provider with some scale to reshape consumer expectations of what things should cost and how they should be packaged.

More significantly, the C block network potentially allows a provider some latitude to redefine the customer experience as well, creating new expectations of what media "should" be available, how they should work together and what the "right" price is for such capabilities.

We can't really predict what other developments might occur. I don't think one would have extrapolated the creation of the World Wide Web or VoIP from Carterfone. I don't think it is yet possible to extrapolate from the wireless equivalent of Carterfone, either.

But this is a bigger deal than most people assume. It just will take a while before the wider ramifications are seen. And by the time it happens, nobody will remember a relatively "small" regulatory decision.

No Wholesale? No Surprise

To almost nobody's surprise, the 700 MHz auction will not have a mandatory wholesale provision. We might argue that a robust "third" or "fourth" or "fifth" pipe would result. What is harder to argue is that any such pipe provider would be able to make the investments required, operate its network at a high level of quality and still return the required returns to investors.

Other wireless infrastructure initiatives highlight the problem. After reporting a $16.3 million second-quarter loss last week, EarthLink reiterated that it was reassessing its municipal wireless business. Revenue is the issue.

"Until we're confident that we can build new networks and get an acceptable return, we will delay any further new buildouts," CEO Rolla Huff said.

EarthLink has been one of the biggest builders of city wireless networks, with projects built or in the works in 13 municipalities around the U.S., according to its Web site.

The problem with wholesale access business models is simply that it is so difficult to earn an adequate return. In a competitive market, a provider needs both significant penetration and reasonable margin (40 percent is a common threshold). Wholesale makes that tough.

Video Behavior Changes After FTTH

This will not come as any great surprise, but the three top applications customers use when they get fiber to the home service are watching full-length video, online gaming and video on demand. If one looks at the top four activities, video represents three of four applications. Of the top seven apps, five are video apps. So suggests a survey conducted by the Fiber to the Home Council.