Does Vonage Compete with Cable VoIP?

Vonage's fourth quarter results won't be released until next month, when you can bet observers will be scrutinizing the company's marginal cost of acquiring new customers, compared to the marginal revenue Vonage is able to eke out. Which isn't to say Vonage has yet lost its lead in the subscriber race, according to TeleGeography. For a large part of the community, the issue is Vonage's ability to outrun its burn rate. Also, at some level there's a sense that an independent provider can't survive in a mass market dominated by the likes of Comcast, Verizon and at&t. There's truth in the observation: oing toe-to-toe with cable or dominant telcos isn't wise. But that's possibly not the point. The notoriously difficult telecom industry also is a place where specialists always have been able to carve out sustainable businesses. They might not be on the scale of a Comcast, Verizon or at&t. But it's hard to explain away the survival, and in some cases, thriving business models put together by quite indpendent specialists of all sorts.

Many observers, including this one, have been pointing out for some time that stand-alone long distance isn't a viable business model. And though the rule might correct as far as it goes, there are salient exceptions. Skype, for example. Some mobile resellers, IP-based dial-around, smaller integrators, telecom agencies, some interconnect firms and competitive local exchange carriers, some fiber-based access providers, some hosting companies and ISPs are able to make money in an environment that says they can't.

Sure, Vonage is trying to beat the odds. Providing it can carve out a niche, it will. The issue is whether it can do that. Of late, Vonage chief strategist Jeffrey Citron has been arguing that Vonage has unexpectedly left the "early adopter" and "early majority" markets and begun to target the core of the mass market. One would have to argue that cable companies are doing exactly the same thing. But it doesn't feel right. Surely the typical cable customer isn't the same customer that Vonage continues to attract, even though both would say they are selling into the core of the mass market.

To be sure, I can't put my finger on precisely why the Vonage "mass market" customer is psychographically different fromt he typical "cable voice" customer. Citron points out, and we have no reason to doubt him, that the incremental customers Vonage now is picking up have demographics of any core mass market customer. There's little doubt, though the cable companies provide no evidence for the thinking, that the typical cable customer also has pretty "normal" demographics.

It just doesn't feel right. The demographics might be similar. But there is something about a typical Vonage customer that is distinct from a typical cable customer. They are, in other words, distinct segments of the mass market. I'd bet that Vonage customers are more likely the "traveling" or "untethered" sort of worker, for example. Neither can I believe the typical Vonage customer is the same age as a typical cable customer. Vonage customers, even the mass market customers Vonage now is getting, have to skew younger, and have to be more comfortable with technology, compared to the typical cable customer.

Cable customers, in other words, likely are a "segment" of the mass market, as are Vonage's customers. If that is true, then Vonage's efforts to add other features, such as Wi-Fi support, more mobile calling features and so forth, shoudl pay off. Vonage's customers have to be more venturesome where it comes to replacing traditional calling services, even if Vonage is said to be a simple "minute stealer" service.

Is Vonage a competitor to cable voice? Most might say "yes." I don't think so. I think both are appealing to distinct customer segments within a broad "demographic" that only appears to be the same. Demographics, in other words, don't tell the story. There still is something about the psychographics of the customer bases that is distinct.

100 Gig Ethernet Coming

As WAN backbones begin to move to 10 gig Ethernet pipes, scientists already are at work on 100 gig versions of Ethernet. Demand for 100 gigabit per second Ethernet is being driven by Iternet exchanges, Carriers and high-performance computing organziations and applications. "You’re also seeing a need when you look at what’s happening with personalized content, which includes video delivery such as YouTube, IPTV and HDTV," says John D’Ambrosia, chairman of the IEEE 802.3 Higher Speed Study Group and a scientist at Force10 Networks Inc. "There’s also video on demand.

"You do have 10G Ethernet already, and if you use link aggregation you can go higher," he says. "But bandwidth needs are quickly surpassing these bandwidth limits." That means we will see new optical transport, backplane and chip technologies.

So even if higher bandwidths are needed, why not just contatenate 10 gig waves? "Depending on who you to talk to, you’ll hear that two, four or eight links can be aggregated together before you have management and troubleshooting issues," says D'Ambrosia. "Also, those cables take up precious real estate, and you have power and cooling considerations." Aggregation also ties up ports that can't be used for anything else, such as bringing in additional revenue. Basically, scaling becomes an issue.

Differentiating Downloaded Music

It migh be argued that downloaded music is a commodity. A song is a song. But broadcast radio, though skewed to large national audiences, does have specific formats that appeal to specific demographics. Then there are "talk" formats, "language" formats, "subject" formats. Then there's XM and Sirius, that slice and dice the domographics into much more granular listening segments. That being the case, whys shouldn't every form of Internet-centered media also be capable of segmentation? Keep in mind that segmentation can occur on any number of levels. Type of content, method of delivery, geographic focus, device support, storage, navigation and other elements of a user experience can be targeted.

So it is that Ruckus Network, which distributes movies and music online to colleges nationwide, now is attempting to exploit a college niche by expanding its ad-supported music download service to any user with a valid university email account.

The Herndon, Va.-based company aims to boost the rolls of college students who use its service to woo more advertisers seeking to market to young audiences. The company adopted the ad-supported business model about a year ago.

Previously, Ruckus' service was only available to students at universities that had entered into agreements with the company.

Students outside Ruckus' network of affiliated universities will not be able to download movies, but will have access to Ruckus' more than 2.1 million tracks, which they can download to their computer for free. To transfer audio files to a portable music player, however, users must pay either $5 a month or $19.99 per semester.

Previously, students at universities without an agreement with Ruckus had to pay $5.99 a month to download music from the service and couldn't move the tracks from their computer.

Infinite Storage, Bandwidth, CPU Power

In a world with infinite storage, bandwidth, and CPU power, Google could offer instant end user access to "all applications," CEO Eric Schmidt has said. "Everything can be stored and accessed from anywhere, on any device." Everything can be stored in the cloud. "Every experience and application can be customized for each user." All of which might be reason enough for Google to build a huge, private Internet. It could be "100 times better" than anything else, offering a programmable, executable, reliable experience.

50% Margins on iPhone?

Apple phone is expected to cost $600. Cingular (at&t) won't be allowed to discount it. The cost to manufacture an 8 Gbyte iPhone is estimated to be about $280. As iTunes exists to sell iPods, so now mobile service exists to sell iPhones. True, as Steve Ballmer, Microsoft CEO points out, iPhone doesn't have a keypad, so text entry might be a bit of a chore. Still, this device is going to get lots of attention, and sales, from professionals, engineers and other people who just think it is the coolest phone on the market.

Why Security Always Tops Enterprise Objections...

to new IP-based services and platforms. Flaws in Web apps boosted bug counts for 2006 by more than a third over the previous year, according to data from four major databases tracking security and bugs: the Computer Emergency Response Team Coordination Center (CERT/CC), National Vulnerability Database, Open-Source Vulnerability Database and Symantec Vulnerability Database.

Counting both public sources and private submissions directly to the CERT Coordination Center, the group logged 8,064 vulnerabilities last year, an increase of 35 per cent over the number of flaws reported in 2005.

The three other major flaw databases, the National Vulnerability Database, the Open-Source Vulnerability Database, and the Symantec Vulnerability Database, recorded jumps anywhere from 20 to 35 per cent in 2006 compared to 2005. OSVDB estimates at least 20 per cent more vulnerabilities logged in 2006 compared to 2005.

Google's New Data Center

Google is opening a $600 million data center in Lenoir, N.C., matching the size of the similar facility Google is building in The Dalles, Ore. During the second and third quarters last year, Google's capital expenditures were more than $1.2 billion. Some experts believe dominance on the Internet could eventually be determined by the size and efficiency of huge data centers. Microsoft and Yahoo are both building facilities in Washington state, up the Columbia River from Google's. Microsoft also will build a $550 million data center in Austin, Tex.

Google also has leased enough wide area network dark fiber to rival that of many carriers. All of which will stand Google in good stead as video drives Internet traffic way beyond anything engineers have designed for, or that ISPs can afford to support, truth be told. Where a typical end user now generates between one and three gigabytes of traffic a month, video downloading could drive demand to one to three gigabytes a day. That 30 times increase, an order of magnitude and then some, is going to crush many ISPs, whose business models simply won't allow them to buy additional IP transit in that quantity.

So Google conceivably could emerge as quite a savior. Basically, peering with Google, on whatever terms Google might require, might be the key to survival. Interesting, indeed.