Google Buying Skype?

So the latest rumor is that Google is trying to buy Skype. While the move makes a certain sense, this might be a trial balloon of the sort often floated by investment bankers eager to get some deal fees.

Mobile Carriers Will Dominate VoIP

Who will massively introduce mobile VoIP? Mobile carriers themselves, says Dean Bubley, Disruptive Analysis president. In fact, some 250 million VoIP over mobile accounts will be in service by 2012, he argues. Conversely, dual-mode mobile devices that work both on wireless networks and Wi-Fi will have been eclipsed, he argues. As for independent providers of VoIP over third generation mobile networks, get ready for something of the same thing that has happened to Vonage, he essentially argues.

In other words, as the mobile carriers increasingly move to provider VoIP as an alternative to legacy Time Division Multiplex services, it will increasingly be tough for independents to make a go of it, much as competition from cable has squeezed Vonage and other independents in the U.S. market.

Independents don have a window of opportunity, though, since the majors haven't yet moved.

Though some will find the analysis disturbing, Bubley's predictions fit well with the past history of technology innovations in the global telecom industry. That is to say, innovations at first are brought to market by upstarts. At some point, it becomes crucial for the majors to adopt, and they do.

Bubley's analysis rests on a couple of simple assumptions. Since mobile carriers are migrating to all-IP networks, voice necessarily will be in the form of VoIP. Either that, or keep running a parallel TDM voice network. The coming IP networks also will operate in more bandwidth-efficient mode than a circuit-switched network, possibly in the range of 100 percent to 200 percent, he argues. Given demands for more data bandwidth, that will be compelling.

Then there's the attraction of IP-enabled features not possible with TDM. Also, mobile providers will want to collapse multiple networks and switching fabrics. Just as wireline networks are moving to IP Multimedia Subsystems, so wireless operators, who initially were the impetus for the creation of IMS, will do so. And that means IP-based voice.

Demand is Going to Grow for "Unconverged" Experiences

Maybe some of you already agree that "Swiss Army knife" mobile platforms have to make compromises. And one of the compromises is ease of use. There's just so much complexity a user can put up with before the alternative--a simpler device--starts to make sense. And we are getting there.

Sure, you have to carry multiple devices. But think about it: most of us already do that, and as nice as one device would be, choosing between a notebook and a mobile phone or email device is too tough a choice. I carry two or three communications devices everywhere, if on the move. And then an iPod Shuffle for music. For short periods of time I will make do with either an email device or a smart phone in the pocket. But the other devices are there.

If an airplane is involved; if I am going to be "out of town," two is the minimum number of devices, and I usually carry three. Yes, it is a hassle. But so is restriction to one device. So far at least, three is the irreducible number.

And there might be a consumer backlash coming even from the ranks of users who don't have to "run and gun" with heavy text entry. Universal McCann's European office has surveyed 10,000 Internet users in 21 countries and found that demand for a convergent device such as the iPhone is actually pretty low, at least in the U.K. market.

About 41 percent of the 500 Britons surveyed expressed an interest in owning a converged mobile handset, on par with France and South Korea. Interest in Japan, Taiwan, the U.S. market and Germany was even lower, with only 27 percent of Japanese respondents expressing an interest. Now, those are significant numbers for Apple, to be sure.

The interest was greatest in Mexico at 79 percent and similarly high in other developing markets, including Brazil and Malaysia at 72 percent and India at 70 percent. The point is that these are markets where the smart phone will be the PC. The irreducible number there is one.

In the U.K. market, most people already own a mobile phone and one or more of the devices that the iPhone could replace, with 24 percent of respondents owning five or more devices. For example, 82 percent of Britons own a mobile phone and 48 percent own an MP3 player, the research suggests.

There is demand for new services. Some 48 percent said they would like iPod video capabilities on their mobile phone.

About 43 percent said they wanted wireless Internet capability and 28 percent want audio-only iPod functionality.

Convergence is in many ways a compromise driven by financial limitations, not aspiration. In the markets where multiple devices are affordable, the vast majority would prefer that.

Up to a point, multiple features are important. It's a simple example, but the 5-megapixel camera on a Nokia N95 is way better than no camera or a 2-megapixel camera on a BlackBerry.

The point is that there is a limit to how much complexity and how many trade-offs a user is going to put up with to have "just one device."

And then there are the cultural issue. I think we are reaching a point where "always connected" has to be balanced. "Real," as opposed to "digital" life is going to start looking really attractive at some point. I think the move already has begun.

"Unconverged," indeed "not digital, not connected" pursuits are going to be seen as more interesting, as the pendulum starts to swing back. When "connected" starts to become a burden, people will "unconnect." When "convergence" starts to become too complex, with too many trade-offs, people will "uncoverge." Just watch.

What Google Wants

Confused about what Google really wants in the mobility space, and in particular what it wants from the 700 MHz spectrum auctions? The simple answer is that Google is for mobile what the Internet was to telecom service providers: an alternate communications medium whose value does not hinge on access, but on applications.

Wireless service providers will fight Google without quarter for the same reason they learned to loathe the Internet: it is difficult for them to extract revenue when value lies in applications not dependent on recurring payments for access.

That doesn't mean Verizon and at&t, in particular, won't try to make a business out of it. After all, despite the margins, despite the gross revenue implications, both are fierce competitors in the broadband access business. But the tack will be to stop it if possible, slow it where possible, but adapt if necessary.

But Google is not the only force pushing against the old order. iPhone, for example, seems to be the first of any number of approaches to thinking about what a mobile handset is, what an operating system is, what a platform is and where value can be extracted in the ecosystem.

As Skype and UK cellphone operator 3 reportedly are working on a new mobile handset that promises to "make Internet calls mobile," rumors continue to swirl about a possible Gphone or Google phone. Nokia is rolling out N95 series devices that also raise the question of where the leverage lies: operating system, user interface, handset, application or extended application ecosystem.

It’s an important question. Remember back when people seriously thought the browser would somehow translate into “ownership” of the user? That largely proved incorrect.

But operating system ownership has proven a more durable lock on value and customer ownership. Facebook might be showing the power of the platform. But the iPhone seems to suggest the power of the device itself. In short, getting the answer right might confer genuinely significant leverage in the mobile business.

Much of the impetus for thinking about such things comes on the heels of rumors about a Google phone, Google mobile operating system or mobile platform. While the thrusts are not mutually exclusive, the strategic approach Google takes conceivably could redefine much of the existing mobile business.

The difficulty of pinning down the likely thrust is difficult, as Google has to be working on a number of aspects, all at the same time. It must create a mobile interface to the Internet while supporting voice services not significantly inferior to those handsets offer today.

That means Google has to convert the Internet experience for the phone and create or enable a suite of related applications and applets that all work smoothly together and share data.

Then it has to create awareness of some mobile features users didn’t know they wanted, such as location-aware services and features.

All of that means an Internet-connected device supporting voice, instant messaging, Web browsing, search, document storage, retrieval and creation, email, storing and playing entertainment. The applications must blend “knowing you are available” to “knowing where you are.”

Google has to do all that and also make the PC and mobile experiences similar and intuitive. And after all that is done, has to create a business process for supporting all of that with an advertising revenue model.

Of course, Nokia, Apple, Microsoft and Samsung—among others—will try to do the same thing, at some point. Unless it can be done, Microsoft will have a tough time making 25 per cent of its revenues, or about $14 billion, from advertising in the relatively near future, as it says it will.

The issue, perhaps, is how many of these sorts of things have to be handled by the handset. How “skinny” can the device be and still provide a reasonable user experience?

And how much does an actual handset matter, if a widely-distributed reference model can be propagated? Still, as Apple has proved time and again, a tightly-coupled hardware and software approach can yield outsized results in the user experience area.

Many argue that Google will want to avoid getting entangled in the consumer electronics business. True enough. Others make the same argument about any possible plans to bid for its own spectrum.

But Google executives have said mobile offers Google the biggest possible opportunities. If that is true, stretching into unfamiliar areas might be the best way to dominate the new business.

It’s just an opinion, but an “operating system” approach offers the least risk but the least reward. Devices and the ecosystem are much more risky, but offer greater reward. And since Google is sure to encounter resistance from the established wireless carriers, owning its own network might be the only way to get rapid adoption.

So that’s what Google is up to: creating a mobile broadband version of the open Internet.

EarthLink Wants to Sell Municipal Wi-Fi Assets

EarthLink is considering "strategic alternatives" for its municipal Wi-Fi business, says Associated Press, a phrase that generally means it is for sale.

EarthLink originally had hoped it might be able to come up with a revised business plan that relied on additional investment by partners, including the municipalities that wanted the networks in the first place.

The company "decided that making significant further investments in this business could be inconsistent with our objective of maximizing shareholder value," says Rolla Huff, EarthLink CEO.

Enterprises Can't Block User Mobile Phone Choices

As most enterprises struggle to get a grip on mobility costs and strategy, users continue to impose their own desires for devices that better integrate their jobs and personal lives, says Zeus Kerravala, Yankee Group analyst. They will use what they find most useful in both settings regardless of any corporate efforts to slow or block adoption.

Enterprises were not able to stop users from bringing consumer messaging and VoIP applications into the office, and mobile devices won't prove any different, despite general IT executive opposition.

According to Yankee's latest research, at least 45 percent of all enterprise workers operate outside of the traditional office setting at least part of the time.

If consumer-driven mobile systems offer workers better performance and more robust applications than the devices endorsed by their employers, they will use them, Kerravala says.

Google Riding Global Wave

As much speculation as there has been about a possible Google bid for 700 MHz spectrum, there now are new reasons to think Google is deadly serious, and that provide new strategic reasons to win the auction, not just to bid for tactical reasons.

A U.N. telecom meeting has decided to give mobile service providers access to similar bandwidth currently reserved for terrestrial television broadcasts, making mobile Internet access a major new wireless feature globally by 2015.

Google simply would be early in the new business if it acquires and then operates a mobile Internet service. Significantly, global data roaming will be much easier as the new rules on spectrum use will rely heavily on common frequencies in diverse regions, meaning handsets will be able to interoperate. That promises higher sales volumes and hence lower costs, on both the infrastructure and handset fronts.

Consumers in the United States are to gain access to at least some of the spectrum in question by 2009, but it will take an additional six years before those in Europe, Africa, China, Russia and much of the Middle East will have the same access.

A U.S. government auction of key 700 MHz spectrum 698 megahertz to 806 megahertz range)is scheduled for February.

The same frequencies will be available for mobile services throughout the Americas, India, Japan, Korea and a number of other Asian countries, while the rest of the world will initially use only the 790 megahertz to 862 megahertz range.

Unlike many recent spectrum auctions, which essentially resulted in more bandwidth to support legacy services, most observers think the new spectrum largely will be used for IP-based Web applications and data.

Despite the challenges and risks, Google might want to move more aggressively given the new global implications.