Why Isn't All Voice Free?

"When I wrote a story about various VoIP initiatives a decade ago, nearly every expert I spoke to spouted the same prediction: within 10 years, all phone calls will be free," says John Dvorak, PC magazine columnist. "The rationale behind the pronouncement was that the wires and systems used for phone calls will eventually be used to transfer data, just like everything else."

"You don't get charged for visiting a Web page, so why get charged for making a phone call, if both are essentially data?" he muses.

It's an old argument, but is akin to asking why a diamond, made of carbon, is worth more than a thimble's worth of oil, also made of carbon, or a tiny cube of apple.

The answer to the question of different incremental pricing or costs to use network features has little to do with the representation of symbols and everything to do with larger permissible business models mandated by government entities.

In a legal and regulatory sense, bits are never "just bits." Cable TV bits are regulated differently from voice bits that touch the "public phone network," while Internet bits are regulated differently from each of those other types of bits and from private network data.

Still, it is one thing to argue that use of communications or other bits may not impose an incremental cost to a user. That is not to say there are not specific costs associated with use of the bits. Google Voice might not charge an end user for completing a specific call. But there are actual costs, imposed by the regulatory regime. Google pays them, not the end user.

But that does not mean the call has no cost, only that the cost is indirectly paid.

As for why others, besides Skype, other instantt messaging-based call providers, have not moved more aggressively to offer various forms of "no incremental cost to offer" calling, financial interests are involved as they always are.

One might as well ask why no-incremental cost education, music, video, books or plane tickets are not available.

In 1977, for example, long distance calling represented about half of all U.S. telephone company revenue. By 2007, that was no longer true. Instead, wireless services had taken the place long distance once played in underpinning the whole business. That isn't to say long distance has dropped to insignificance. It remains important. It is to say that there must be some revenue model underpinning the business, and if it is not long distance or voice, it will be something else.

No, there is no mystery about why VoIP has not lead, over the last 10 years, to "universally-free" (no incremental cost to end user)  voice calls. Voice, though declining, remains a key underpinning of the carrier business model. Nor do government regulators permit "free to end user" calling between networks.

Google Voice might not charge a U.S. user for a U.S.-terminated call. But Google Voice is compensating the terminating networks for use of their networks. Google Voice envisions a different business model for domestic calling than "per minute" use of the network. Lack of end user charges does not mean "terminating minutes" do not carry costs.

That, in fact, is behind Google Voice's blocking of some numbers, in some high-cost exchanges. And those charges are radically higher. Some firms report that the high-cost termination charges are as much as 25 times higher than typical.

Do We Need to Rethink What We Think We Know About Consumer Behavior?

Though 2010 widely is expected to provide a recovery from the depths of the recent recession, questions logically remain about how consumers will behave in a recovery most expect will be extended.

A new study by consumer research firm Decitica suggests lasting effects that could shape consumer spending on any number of communications services, applications and devices.

"The effects of the Great Recession on consumer behavior are so profound that many of the assumptions underpinning consumer segmentation are no longer valid," says Dr. Val Srinivas, Principal at Decitica.

Among the key findings: "Price has become the dominant consideration in the purchase of all kinds of products." For this reason, Decitica predicts "a long uphill struggle by marketers to shift the focus away from price."

The recession has caused a profound, deep-rooted change in consumers' spending habits in favor a more restrained approach, Decitica says. Many have accepted this radical change as the "new normal," and not just a cyclical phenomenon.

American consumers have proven researchers wrong in the past. The issue is whether this time might be different. See full post at http://blogs.metaswitch.com/gk/.

How Strong a Recovery; What Impact on Communications and Technology?

Since 70 percent of U.S. economic activity is generated by consumers, consumer behavior will be key to the arrival of a sustained period of growth. Conversely, anything that imperils consumer spending will weaken, choke off or abort any recovery.

In the past, this hasn't been an especially tough question to answer. Historically, recessions and recoveries roughly conformed to the principle of the bigger the bust, the bigger the boom, and vice versa. That, in turn, was underpinned by the underlying robust health of the U.S. economy.

Real growth in the four quarters following postwar recessions averaged 6.6 percent and 4.3 percent over the following five years.

Those figures are substantially above what economists seem to be calling for at the moment. The current recession has lasted a record seven quarters and has been marked by a near-record average gross domestic product decline of 1.8 percent per quarter.

All of that would, by historical standards, lead to a prediction of a powerful and sustained recovery. Yet forecasts of a two-percent recovery in growth are only one-fourth as strong as postwar experience suggests.

That suggests economists believe something has changed. We can argue about what the changes might be, and what is causing them. But this is not a political issue. As a simple matter of hope for America to get back to work, the anemic growth forecast is worrisome.

As someone who historically has tracked new technology and communications, as well as a citizen who wants the best for his country, it must be said: this does not bode well for our nation, our children or faster deployment of all sorts of interesting and useful tools people can use to enrich their lives and their work.

We might disagree from time to time about what should be done. That isn't the point. Clearly, something rather important is happening; something that defies historical precedent.

Perhaps the economists are wrong. They have been wrong in the past. I hope they are wrong about this. I continue to believe in the power of technology to make a huge difference in peoples' lives, and to fuel robust economic growth, which is, first and foremost, the way we are able to increase wealth and spread it around. I hope, for our nation's sake, that this continues to be true.

For that reason, I really hope the economists are dead wrong about the recovery rate. If not, we have some serious soul searching to do. Perhaps we have been dead wrong about some of our core beliefs.

"People Don't Like Ads" Yes and No

Surveys for decades have shown that "consumers don't like ads." But there's a big caveat. People always say they don't like ads when those ads are interruptions of some desired experience.

But sometimes ads are part of the desired experience. If you are an outdoors enthusiast, ads about gear you can use outdoors are very interesting. If you are a runner, ads about shoes, clothing, nutrition and events are very interesting.

If you are a surfer, ads about surfboards are very interesting.

So it comes as absolutely no surprise that 38 percent of respondents to a Parks Associates survey say they do not want to receive ads for any reaon. About 37 percent of respondents say they are neutral about ads and 25 percent are open to getting them.

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The study also confirms the notion that people will not mind getting ads when those messages are personally relevant, timely and valuable. To be sure, 18 percent of respondents say they don't mind seeing personally relevant ads, with 39 percent reporting they are indifferent and 43 percent not interested.

The problem with surveys, though, is that they sometimes cannot capture the complexity of consumer attitudes. Just about any survey will show that people dislike ads. But if asked whether they would rather pay money to gain access to desired content, for example, or get that same access for free, in exchange for the presence of ads, most people say they'll accept the ads.

Targeting and value make the difference. If the ads are relevant, they are unobjectionable, for the most part. If the user gets something in exchange for receipt of the ads, and the ads also are relevant, surveys show people are accepting, if not entirely happy all the time.

Twitter: "What's Happening," Not "What are You Doing?"

Twitter has made a refreshing, helpful and important change in the basic question our tweeting bird friend asks us.

"What are you doing?" had been the question. The new question is "What's Happening?" That makes more sense to me, corresponds to the way I use the service, and I suspect will deepen and extend the use of tweets as a broadcast, one-to-many information service.

"The fundamentally open model of Twitter created a new kind of information network and it has long outgrown the concept of personal status updates," says Twitter founder Biz Stone. "Twitter helps you share and discover what's happening now among all the things, people and events you care about."

What's interesting here is an important, if subtle shift from "you" to "the world around you." That isn't to say people will stop posting about where they are, random musing or what they are doing, as people.

It is to say that Twitter now is poised to become a more important "news" or "media" format, as it already has been becoming.  I like it.

Another Broadband Stimulus Delay

The National Telecommunications and Information Administration told the U.S. House and Senate Appropriations Committees it will start awarding grants in February 2010, another slip from the revised timetable of December 2009.

The first round of grants was supposed to be issued in June 2009. All during the year, telecom suppliers who are thought to benefit from the program have been asked about when the funding would show up in company activity. Now we know the answer: not until 2010 and probably 2011.

The delay presumably means grants or loans issued by the Rural Utilities Service might also slip into next year. Both programs have experienced delays, perhaps inevitably, given the huge increase in workload.

The NTIA and the Rural Utilities Service say they have received roughly 2,200 applications for the $4 billion worth of grants available for broadband projects in the United States that is available in the first round of funding.

The applications ask for total of about $28 billion in broadband projects, or seven times the total funds available.

The $4 billion in grants currently available to applicants is just the first part of the $7.2 billion that the government has allotted to fund broadband infrastructure investment over the next two years.

Of that money, $4.7 billion has been given to the NTIA to award grants for projects that will build out broadband infrastructure in un-served or under-served areas; to deliver broadband capabilities for public safety agencies; and to stimulate broadband demand through training and education.

The remaining $2.5 billion in broadband stimulus money has been allotted to the Department of Agriculture to make loans to companies building out broadband infrastructure in rural areas.

Barnes & Noble Runs Out of E-Book Readers, Demand Stronger than Forecast

Barnes & Noble says it has run out of available stock of the new Nook e-book reader. Customers who ordger now won't get it until the week of Jan. 4, 2010. "Preorders have exceeded our expectations," said Barnes & Noble spokeswoman Mary Ellen Keating. The company says its $259 e-book reader "continues to be the fastest-selling product at Barnes & Noble.

That has been true for Amazon's Kindle, as well, which is the leading e-book reader at the moment. Analysts have been ratcheting up their sales forecasts over the past two years as consumers exceed earlier forecasts.

Apple, meanwhile, is rumored to be preparing a tablet style device that could double as an e-book reader, and, rumor suggests, will be available early in 2010.

So there is lots of "action" in the e-book reader space, interesting for what it implies about the future economics and distribution formats to be used by the publishing and news industries, the sustainability of "single-purpose" mobile device markets over time, contrasted with "multi-purpose devices," and the associated impact on mobile service provider business models.

There doesn't seem to be much question that distribution of print content now is at the beginning of a change that music already has gone through, and that video also is undergoing. Book distributors and publishers have to be wondering whether this is all such a good thing for them.

From an end user standpoint, one of the interesting angles is whether the e-book reader remains a stand-alone, single-purpose device or whether it ultimately becomes a feature of a multi-purpose device. The answer obviously has huge ramifications for smartphone, netbook and e-book providers.

There is no single historical pattern here. TV displays, home audio systems, microwave ovens and landline phones generally have remained single-purpose devices. The iPod has been a single-purpose device, but the "touch" and now the iPhone might be changing that situation.

Smartphones are multi-purpose devices. Portable navigation devices traditionally have been single-purpose devices, but the Motorola Droid is challenging that notion.

Apple's rumored tablet would be an attempt to provider a multi-function device, and that probably is the form factor necessary for such a convergence. Though people have speculated on smartphones becoming e-book readers, the challenges of form factor (small enough to fit in purse or pocket, light enough to use as a phone, plus large enough screen size to read) seem rather implausible in a single device.

Besides Amazon and Barnes & Noble, other companies offering e-readers include Japan's Sony, Britain's Interead, and Dutch company IREX Technologies.

Forrester Research estimates that three million e-readers will be sold in the United States this year, up from a previous forecast of two million units.

Forrester said it expected 900,000 units to be sold in the upcoming holiday season alone and for e-reader sales to double to six million units in 2010, bringing cumulative sales to 10 million units.

Citi analyst Mark Mahaney thinks Amazon will sell 1.5 million Kindles in 2009, up from his previous estimate of one million. Mahaney thinks Amazon will sell 2.7 million Kindles in 2010.

“Book applications for smartphones have the potential to become a bridge to other devices such as tablet readers and netbooks,” said Mr. Weiner. “Apple, for example, could migrate the more than 500 book applications in the iTunes store to a tablet device and Google, which recently announced a browser-based e-reader, could offer applications for Android-based devices of various form factors,” he says.