Ooma, PhoneGnome

Ooma hopes it can make a business in the independent VoIP space without slugging it out with incumbents, cable companies, Vonage, Packet8 and others. Ooma uses peer-to-peer technology, it reminds me of nothing so much as PhoneGnome. A user can rely on broadband and Ooma, "cutting the cord," or can keep legacy POTS and integrate Ooma with a traditional landline (the easiest way to keep 911 service). All calls within the U.S. market are free, and off-network calls are billed at Skype-like rates.

Like PhoneGnome, the revenue model is "selling boxes," not recurring revenues from services. Ooma is betting that a $400 purchase of a base hub that functions like an analog terminal adapter will appeal more than a VoIP service account. Additional Ooma adapters can be bought to add service to other analog phones on other standard wall jacks.

Perhaps the longest-lasting impact, irrespective of what happens with Ooma, is the P2P approach it uses to create a network. As with all P2P networks, each end user's client becomes a node on the network to help terminate traffic. I don't know what technology platform Ooma uses. It seems logical that Session Initiation Protocol is not what Ooma is doing on the P2P side of its platform, but it seems SIP has to be there someplace for interface to the public network at some level. But David Beckemeyer seems best placed to noodle on that.

Alec Saunders (Iotum)asks an interesting question, however. Ooma says it will try to use member POTS access to essentially avoid paying termination charges. Presumably that means invoking user phone numbers in some way. If caller ID information cannot be spoofed from the POTS phone, but only from the trunk side of the network, does that mean a user's caller ID gets delivered even when it is just a transit node between a calling party and the called party? Details are scanty at this point so I'm not sure anybody outside Oomba knows the answer.

Or maybe there isn't even a problem. Presumably Ooma would try to "terminate" a call at a local Ooma "node" and then use the Ooma P2P to retransmit the bits using the public Internet to the terminating Ooma node with no need to deliver calling number ID information.

One wonders how much longer it will be until even Tier One service providers start to take a closer look at integrating P2P in some significant way with the existing public networks, especially as those networks are upgraded for IP Multimedia Subsystem and there's more broadband in the access network.

Not P2P as an "over the top" end user application. P2P as a part of the architecture of a managed network that simply uses multiple techniques to reach deeper into the environment sitting on the other side of the traditional "network termination" point. Making customers part of the network is starting to look like good business sense.

Lessons About Price from CLEC, DSL, VoIP

TeleGeography projects that nearly 30 million consumer VoIP lines will be in service across Europe by end of 2007, up from 6.5 million at the beginning of 2006. In France and some other countries, though growth is low, penetration is high. In others, penetration is low but growth high. Compare that to the U.S. market, where growth is slow and penetration relatively low.

So here's a drop-dead simple observation from what has happened in the U.S. market for new communication services: if you operate in a market with relatively affordable communications, then competing on "lower price" doesn't get you very far. If you compete in a market with expensive communications, "lower price" is just about all you need.

In markets where communications are affordable, blunting the attractiveness of the "lower price" platform, price still can be made to work if there are other attributes are emphasized, such as "pay the same price as you used to, but get free broadband."

"Pay the same price you used to, but get mobility." "Turn a variable cost into a fixed cost." "Make the whole cost more transparent." "Reduce real estate costs." "Work with people you actually know."

In the U.S. market, attackers have not yet succeeded when the incumbents decided they wanted to play; when lower prices were the primary marketing platform and the offering wasn't highly differentiated from what an incumbent offers.

"S*** Happens, Even to Cisco, at&t and Apple

Duke University's campus Wi-Fi network reported was being flooded by Apple iPhone MAC address requests, temporarily knocking out anywhere from a dozen to 30 wireless access points at a time. Turns out that isn't the case. It was a powering issue. Good news for Apple, as the iPhone isn't the culprit at all. Still, the outages are a reminder.

For those of you who continue to think communications infrastructure is easy, this is a reminder that "stuff happens," all the time, in unexpected ways, to the "dumb pipes" we all depend on. I just got a new Linksys Wi-Fi router to hook up to my Covad T1, for example, and though the install wizard was really nicely put together, the Linksys would not talk to the Cisco router.

It is supposed to be so easy there is no indication anywhere in any of the documentation about what Web site to go to, or what support number to call, in case installation failed, which it did, repeatedly. I finally realized I was going to require tech support so figured out where to get that from Linksys. The IM support system worked fast, and well. The connection is up. But not before reinstalling the software load.

I recall remarking to the Best Buy salesperson that I didn't have any questions, and wouldn't need any help, because I expected the hardware choice and install to be "drop dead simple." That clearly is the way Linksys designed the system, and I suspect it almost always works. Unfortunately, in this case we had to reinstall the software.

The Covad install took "longer than expected" because we were getting unexpected packet loss. To make a moderately long story short, it was a physical media failure on a short jumper in the network interface unit. Go figure. That's the last thing one would expect from new wiring.

The point is, even well designed consumer interface procedures, such that put together by Linksys, Cisco, Apple and Covad, will fail on occasion, for all sorts of apparently odd reasons. Nothing is always drop dead simple, even when well-designed processes nearly always have that intention and result.

Just because we use "dumb pipes" to some extent does not mean the networks are not occasionally "surly" and prone to failure. Far from it.

Unified Communications Stll a Tough Sell...

...at least for many smaller and mid-sized businesses, say researchers at In-Stat. Of course, that's a good thing for newly-emerging providers (can you say Microsoft?). Some providers of IP business phone systems might also appreciate the perhaps longer window of usefulness for their systems as well. Independent suppliers of unified communications platforms might feel "conflicted." Slower adoption means less robust sales now, but also means most of the market remains untapped.

Worldwide unified messaging and unified messaging-capable client shipments will reach nearly 19.5 million in 2011, say researchers at In-Stat, while traditional voice mail port shipments will shrink to zero by the end of 2009.

DoCoMo 4G: 300 Mbps to your Mobile

NTT DoCoMo is about to embark on an ambitious project that provides cellphone users the ability to achieve speeds of up to 300 Mbps on their handsets by the time 2009 rolls around. That, plus at&t's new positioning as a wireless company with landline assets, plus the fact that global "voice account" installed base and growth are killing landlines, has to be disquieting for lots of us who grew up on the wireline side of the business. Wireless is going to keep changing things more than some might like.

SunRocket post mortem

Chris Koehncke, a former SunRocket excutive now back at BroadSoft, has this to say about what went wrong at SunRocket (I'm not so convinced the customer acquisition strategy was necessarily so doomed to failure, but more on that later): "It appears that SunRocket was indeed acquired and with it the vast majority of the remaining employees unceremoniously laid off sans a small group of 15-20 of the folks necessary to keep the network alive. SunRocket network suppliers were notified late Friday so they wouldn't turn them off.

With 200k subscribers and say a $40m revenue base, if they simply stop marketing, give crappy customer support and run it on a shoestring -- it's a nice little pocket business. Playing in the fringes.

In hindsight, it was kinda of crazy to spend $200+ to acquire a customer whose annual spend was only $200+. Hard to outrun the economics. The hopes, of course, was that if you reached a decent size, people would come to you and you could reduce your marketing costs. Vonage certainly hasn't seen this, so SunRocket wasn't going to be much better.

Customer service cost also can eat you alive. Anytime you call for customer service, figure it's costing that company between $0.75 and $1.00 PER MINUTE to talk to you. For a typical 10 minute call that's $8-10. Call twice in a month and for a SunRocket $17 a month revenue, they lost money on you. It's also amazing the number of people who buy cheap are also the same group who complain constantly. They want it all and they're willing to bitch about it.

Sprint's decision to whack 1000 customers who were constantly calling customer support (I suspect their initial list had 10k names on it) is wise. Perhaps, SunRocket simply should not have had telephony support at all and just offered email support.

Some folks have just crappy internet service and SunRocket was never going to fix that. Perhaps after 3 customer support calls, SunRocket should have pro-actively canceled the customer's account. Why keep a customer that will never be happy?

Perhaps rather than being a nationwide telephone service, SunRocket should have focused on a specific region or vertical consumer group. Better targeting their marketing spend and creating a reputation in a specific niche.

VC's are an inpatient lot. They give a start-up money and urge them to spend it as fast as possible and grow as quickly as they can. In doing that, the start-up makes mistakes, does stupid things, hires the wrong people, it's a wild ride for sure. VC's don't mind failures, that's the business they're in, but if it's going to fail, they want it fail fast so they can move on to the next hot idea. SunRocket had to build a complete telephone company literally overnight with hundreds of moving parts so it's not surprising mistakes were made.

The genesis of the idea of SunRocket is still valid, create something different that people will be loyal to and ultimately becomes virally marketed. But by buying off the shelf VoIP and traditional telecom products the ability to differentiate the service, other than with a pricing model, was nil. You can't buy innovation in a catalog."

Discovering Business Models

The problem with discovering business models is that what works for some does not work for all. Back in 1998 and 1999 the stock answer provided by just about any competitive local exchange carrier executive essentially was that the firm in question would get "one percent of a $250 billion market."

These days people ask how Facebook, messaging, collaboration, video or other portals will make any money. The most popular answer is some variant of the old CLEC standby. U.S. advertising currently is about a $153 billion a year business. Portal X will get one percent of that.

Look, it clearly works for four companies: Google, AOL, Yahoo! and MSN. The "four horsemen" get about 60 percent of all Internet advertising. It isn't going to work for most application, communications or portal providers, just as it never worked for most CLECs.

The biggest two "CLECs"--the former AT&T and WorldCom/MCI--threw in the towel in defeat. And those two had more than 40 percent of all "CLEC" revenues between them.

So people assume that fast-growing and useful sites such as Facebook will find some way to make money besides traditional advertising. And there is precedent for such discovery.

Google was equally clueless about its business model, but managed to discover one.
So just because a company has no idea how it will make money, doesn't mean it will not discover a means.

On the other hand, that doesn't mean it ALWAYS will find the answer. And though I'd have to say I am fairly confident Facebook will discover a model, as Google did, that doesn't mean thousands of other sites will be so lucky. Thousands of sites obviously cannot use the Internet advertising model, even if it is fast growing, because most fo the rewards will go a relative handful of companies.