Everybody Hopes to Cross the Chasm…

You probably are familiar with the notion of “eras” of technology, including the certifiably historical observation that the market leaders in the era of mainframe computing were not the leaders of the minicomputer market that followed.

The leaders of the minicomputer business were not the leaders of the era of personal computing. And just about everybody now agrees we are in transition to another era of “Web,” “network based” or some other distributed form of computing architecture.

Then look at “moving pictures.” There was the era of “three big national networks.” Then there was cable. Now something else may be stirring. Then look at advertising. First there was only “local” media. Then we had “mass media.” Then media began to fragment. And now we have Google and search. Personal video recorders. Web portals.

Information technology used to follow a predictable pattern. Invention in the universities. Then diffusion to money center banks, then to enterprises, then to service providers. Now it is more like university invention, diffusion to consumers, then to service providers and lastly to enterprises, says Cisco General Manager Dan Scheinman.

The point is that every incumbent wants to cross the chasm and lead the next era. History argues against it. Which begs the obvious question. Will the leaders of today’s business be the leaders of tomorrow’s business?

To be sure, incumbents are spending like they want to succeed in the next era. Paul Silverstein,Credit Suisse analyst, points out that U.S. telecom capital spending this year will exceed spending of the boom year of 2000. Analysts at other firms say the same thing: telecom capex is at extremely robust levels.

WalMart is creating a video download site. Not because they expect to make so much money at it, but because they cannot afford to have the name “Apple iVideo” come to mind when any consumer decides they want to buy video content and download it.

Comcast would not be investing in user generated video and download to PC capabilities if it though its linear video model was safe. Neither would studios be so anxious to embrace digital delivery is they thought the current distribution model had secure legs.

In fact, the global IT industry would not be in such a headlong rush to secure a dominant place in the consumer electronics industry if business IT was still seen as the global driver of growth.

Then there’s the voice business. By 2010, 95 percent of enterprises will have integrated communications into their business apps, says Dar Shaw, Microsoft director. So think about that. Enterprise drives the bulk of carrier profit, and close to half the gross revenues for most tier one service providers.

And in a few short years, applications themselves will originate and terminate voice and text communications. Video won’t be far behind. Aside from data connections on both fixed and mobile networks, how much former communications will have shifted to some applications-based origination and termination?

And as Dan Creed, CopperCom executive says: “The only web-based service not available online for your telco customers are your own voice services.”

All of which points out a huge challenge for service providers used to selling “voice” as a recurring service: if any service—including voice—is available on any device, any time and anywhere, how is that to be done?

One hears a great deal of fear and loathing about Google and other application providers. In fact, lots of telco executives fear Google more than any cable company. Google and Yahoo! are the competition. Those are the trusted brands for the younger generation.

And while every service provider ought to be developing new applications running on any device, on any network, at any time, there’s a sheer limit to how much innovation any single provider can generate.

Look at it another way. In an era where application development and innovation gets easier and easier every day, the “gate” or “barrier” to innovation is human ingenuity. There are fewer and fewer regulatory, technological or market structure barriers.

So how many of the world’s supply of ingenious and talented human beings work at your enterprise? How many of the smart and clever people work in your whole industry segment?

You know the answer. Most of the creative, smart, talented people, with an actual grasp of what they really want to do, work and live someplace else.

Nobody will get very far on their own internal resources. And that means carriers and service providers have to find ways to open up what they do and work with all those other people. “Fighting Google” leads to a death spiral.

And that inevitably means loosely-coupled services that embrace the Web, even if those services cross over and interoperate with fixed and wireless networks. A smart service provider might create a couple, or maybe even as many as 10 interesting and rewarding applications.

No service provider is going to create scores to hundreds of services so interesting people will pay money for them. In fact, so long as large service providers insist they must concentrate on new services bought by “70 percent of their customer base,” we can almost predict they will develop but a few successful apps.

Think about the last couple of decades. What apps are bought and used by “70 percent” of tier one service provider customers? Wireless voice and voice mail. Throw in broadband access. SMS. Mobile data. Forget about 70 percent. How about 30 percent? And that’s being charitable.

Service providers need to learn to innovate “at Google speed,” as John Lazar, MetaSwitch CEO, puts it. That doesn’t mean the innovation will be mostly home grown. It mostly will come from external developers, and mostly from Web-based sources.

So fighting “Google” won’t work. “Not invented here” is a death wish.

BT Readies for a Custom World

It's easy to be critical of large scale corporate reorganizations. Not many seem to produce measurable results. So BT's new reorganization into two primary business units, BT Design and BT Operate, might not ultimately provide all BT now hopes it will. But you can't fault the company for pushing really hard to create a more unified way of creating new services. Because of the old "silo" or "bucket" form of organization, many telcos and software firms find they have warring business units fighting solve customer problems in different ways. BT would like to avoid that.

The point is that development of new services in many cases requires interworking of applications and features across networks and devices, especially the networks and devices any single provider operates. So the new organization aims to coordinate IP product development and deployment across BT's four businesses: retail, wholesale, global services, and Openreach.

The expectation is that it will be much easier and quicker to create and launch new products. It also is expected to generate significant cost savings, which BT will outline alongside next month's financial results.

BT Openreach's position as a provider of highly regulated broadband and phone products to BT's rivals remains unchanged. But the other three BT divisions - retail, wholesale and its global services IT unit - will become focused sales and marketing units. When the units want to create new products they will call on BT Design and the installation will be run by BT Operate.

The changes acknowledge the firm's increasing reliance on software and IP services by creating a new strategy unit to oversee the existing retail, global services, wholesale, and Openreach divisions as well. As CEO of group strategy and operations, Andy Green will be responsible for better coordinating new products and services across the divisions through two new business units.

In part, the new organizational architecture might have drawn inspiration from the success of BT's Global Services unit, which has been operating more as a system integrator of late, with the need to customize solutions for virtually every customer. So the expectation seems to be that a similar organization will benefit development of products aimed at mass markets, small business customers, other carriers and wholesale customers as well.

At the same time, the older organization wasn't so successful at creating and marketing new services, and BT isn't the only tier one carrier to find this a recent problem. Deutsche Telekom, to cite just one example, had to shut down its fixed mobile convergence service for lack of demand.

In fact, despite rather massive publicity, three flagship BT products—BT Fusion, BT Movio and BT Vision—have scant customer penetration to show for their efforts. BT Fusion, the fixed wireless convergence product, had just 40,000 customers 15 months after launch.

Similarly, BT Movio, the company's flagship mobile TV product has failed to make an impact in the market. Virgin Mobile, the sole licensee

of the product, disclosed in January 2007 that customer numbers remained painfully low. Limited choice of handsets seems to be an issue. Also, there is a standards issue. The European mobile industry might adopt a rival digital video broadcasting handheld (DVB-H), means other U.K. mobile operators are reluctant to embrace the service.

BT Vision, the company's IPTV service, hasn't done better. BT says it signed up just 2,400 non-BT-employee customers in four months.

Recent experience in the U.S. market reinforces the notion that it will be devilishly hard to create new services with the particular

attributes buyers want. Just about everybody in the VoIP business who has really pushed hard at bringing new features to market reports weak adoption of really new services. About the only thing that consistently works, in the mass market or small business segment, is POTS replacement. In some cases, it appears that something as elemental as "handset choice" is enough to doom a service.

Is it not abundantly clear already that the handset business requires lots of choice, rapid replenishing of models and features, and other attributes more commonly thought essential in the fashion business, where product lines are renewed every quarter? In other words, carriers cannot bring an "industrial" model to a mass market which already has shifted to the "fashion" model.

BT hopes its new focus will bring some of that needed speed and creativity to its product development efforts.

Call Your Mom, It's Free

Skype users can call their mothers, or anybody with a telephone number, all day on Mother's Day, May 13. So call your mom.

Google: Mobile, Mobile, Mobile

Nobody outside Google seems to know precisely what Google is up to in the wireless domain, aside from deals to preload Google on mobile handsets. Maybe it has developed a Google phone, as a proof of concept, but has to plans to bring it to market. It certainly is working on software that allows users without PC access to use Google applications.

Google clearly is up to something. When Eric Schmidt, Google Chief Executive, was asked about intriguing technologies, he answered, "mobile, mobile, mobile."

Another Run at Yahoo?

It looks like Microsoft is pondering another run at acquiring Yahoo! It would rank as the largest acquisition Microsoft ever has made, at about $50 billion, and observers question how easy it might be to meld the two cultures. Still, the speculation points out how important it is for Microsoft to catch up with Google in the advertising-supported business model arena. There's a clear logic, despite the difficulties. Microsoft admits it was late to "get" the Internet. It hasn't punched through to the top in the portal space. It is an also ran in search.

For those of you who follow technology industry history, you know the leaders in any era of computing have not lead the next era. The mainframe leaders did not lead during the minicomputer era and those leaders fell as the PC era took shape. The issue is who leads when the next era, for which we don't have a universally accepted name, but might be called the "network" era of computing.

History is against Microsoft and Cisco, though both are striving mightily to cross the chasm of era leadership. Cisco tells the better story, in that regard.

3G Data is About Moving Photos

The single most important 3G mobile data application is sending photos from one mobile to other users.

U.K. Mobile Calls Drop for the First Time

U.K.mobile phone call volumes have dropped for the first time in 10 years, according to the annual JD Power survey. The survey, of nearly 3,000 U.K. mobile phone users, found that prepaid customers are making an average of 10 calls a week, falling from 14 last year, for example.

Contract customers average 27, down from 35 in 2006, but those customers are now sending 46 text messages every week, up from 32.
Wider adoption of text messaging for communications now is having the same effect on mobile call volumes as email has had on voice communications. Worse, from a mobile provider perspective, is that as text replaces voice, revenues are dropping.

Prepaid customers now spend an average of £12.35 per month, down from £19.29 last year, and even contract customers have seen a 20 per cent drop in their bill (from £40.44 to £32.45).