Ruminations on Telecom and the Economy

Ch-ch-ch-ch-Changes

I have written previously about my personal favorite new voice application - voice messaging. Ztel now has a service they call the Personal Voice Assistant (PVA). I strongly encourage anyone interested in this space to review the demo to get a sense for the direction the VoIP value-add service market will take. And to think that the markets believe that voice is a mature segment ;)

Platform Emerging

Leaving aside the heartburn that the EU regulators are causing for Microsoft, I firmly believe that over time Microsoft will emerge as a dominant player in the VoIP arena. If one views voice as merely a feature tied into some other application, then Microsoft, as the dominant player in the applications space, will likely extend this domination into voice. IT vendors have been aligning to deliver integrated solutions to address the workflow requirements for cross-application integration(see the Microsoft-Siebel alliance for example).

It is clear that voice is an element of much of the workflow process the Microsoft-Siebel alliance seeks to address. Think about the workflow associated with claims processing for example, with myriad forms, database access needs, inbound and outbound customer contact and call centers. It will only bve a matter of time before voice is another element integrated in this type of solution.

Now, along comes a small comapny called Interactive Intelligence. These folks have the audacity to offer a free version of thier IP-PBX. I found this quote interesting.

"Most phone systems on the market take a hardware approach to their products. We are a software application that sits on Microsoft and is pre integrated into Microsoft Business Solutions on the company's network."

Also, the Company announced that they were offfering a free version of their software. Microsoft might find this application interesting.

Interactive Intelligence's EIC system runs on the Windows operating system and supports Microsoft Business Solutions applications, such as Great Plains, Solomon and MS CRM. "We are a good solution for a company that has a lot of Microsoft in their environment," says Peggy Gritt, director of product marketing.

Which got me thinking.....what if Microsoft decided that it wanted to provide IP-PBX software for free as an inducement to buy more productivity applications. Hey, Walmart can't be making much on those DVD's, but it sure does keep people coming back for more stuff form Walmart. Now, you don't think that Microsoft would want to leverage thier extensive platform to change the rules of telecom, do you?

UNE-P, Naked DSL and VoIP

Le me try to provide a simple and clear approach to a complicated issue: In 1996 the effort to provide competition in the local loop necessitated providing access to not only the network elements but also the service elements to provide local choice for dial-tone. In 2004, local choice in voice services can be provided by providing equal access to DSL. The competitor can create their own voice services by providing a piece of software that rides over the data pipe.

With the strong support of Intel and others, at some future date, a wireless last mile solution will become feasible. Until that time, the RBOC's and the cable companies control the only data access points to the consumer. The powers that be in DC should let the RBOC's keep their circuit switched network and ensure that voice competitors can get access to the data portion of their network. Qwest's recent offer of naked DSL provides a pointer to the direction this debate should take. And Dick Notebaert's willingness to wholesale this naked DSL indicates his understanding that his business should evolve to be that of a network wholesaler.

Today's WSJ editorial gets this issue all wrong. Perhaps someone (Jeff Pulver take note) should give the WSJ editorial staff a lesson in VoIP and the separation of the network form the application. And while you're at it, let them know that the RBOC's (save for the encouraging signals out of Qwest) are not exactly innovators.

Social communications networks

Geekzone.com has an interesting article today on an Australian company that has combined mobile phones with social networking in an application it calls Fonetango. Fonetango integrates buddy lists with contact lists and provides network based back-up and storage.

Now tie in VoIP with this service and one can begin to imagine the new market for social communications networks. Provided the attention that social networking applications are getting at industry gatherings such as PC Forum (see Big dogs talking social networks) one can imagine that in the mind of some creative venture investor, these two powerful trends will merge, creating an exciting new communications application.

IP Mobility: Now we're talking!

News.com has an interesting story this morning about the integration of VoIP and mobile networks. This quote caught my atention:

"My executives told me they think 'IP mobility' could be a $1 billion market in three to five years," Cisco CEO John Chambers said. "I challenged them to think of it in bigger terms."

IP Mobility, linking the intelligence of the mobile endpoint with the flexibility of the VoIP architecture, will provide a strong engine for future growth and differentiation for the wirelss operators. I have long believed that the mobile operators should be the ones to integrate VoIP offerings. Forget Vonage, if Verizon Wireless offered a VoIP service (over my DSL or cable modem) that integrates with my wireless device, enabling me to synchronize my phone book (on my phone and via outlook on my desktop) I would sign up right away. And with the integration with at home VoIP with my mobile phone, I would be less likely to churn from Verizon when Cingular comes up with a better pricing plan. Now, add in further market segmentation (such as calling plans for the Indian, Chinese and Hispanic markets coupled with web-based information and native language help desks) I'm confident there will plenty of opportunities for carrier differentiation. And a lot more to get excited about in Telecom.

Collaboration Software and VoIP

More signposts that there are exciting new life forms developing from the VoIP ecosystem. Clay Shirky comments in Many-to-Many a weblog on social software, that voice conferencing as we know it is quite cumbersome and ripe for innovation. Establishing multiparty communications channels should be a whole lot more user friendly and dynamic.

Now that the FCC has established a clear unregulated framework around pc-to-pc communication with the Pulver decision we can expect to see a new wave of voice features embedded in collaboration and social network applications.

I continue to believe that the value in VoIP will largely be captured by the applications developers. I believe that the integrated network operators (meaning companies that develop, manage and integrate data trasport with applications) will find it very challenging to match the feature set and perfromance of the pure applications developers. Its only logical that we move to a market structure which separates data transport and applications. Techies like to talk about the OSI Model and the protocol stack.

Another way to think about this issue of market structure is to look at the market for electricity. Imagine a world in which the electric utilities were the dominant providers of appliances. Afterall, one way to think about an appliance is an application of electrical power. So if data (broadband) is like electricity (a subject upon which I will expand on in another post), then should we look to the utilities (RBOC's and Cable Companies) to create and control the applications (VoIP for example) as well? Seems to me that we need a regulatory policy and market structure which promotes ubiquitous, low cost data transport and an open application platform.

Now, if data transport is cheap and ubiquitous, and applications were unbundled from the network, then the existing integrated network operators (RBOC-which integrates voice and cable which integrates video programming) would find there core franchises threatened. Now think about why Comcast wants to acquire Disney. Seems to me they see this future unfolding and want to hedge their bets with more control of the application (video programming). Does anyone still belive that the integrated cable model is not vulnerable? Afterall, Brian Roberts is certainly one smart guy. He may just be seeing this shift a bit ahead of the rest of the investing pack.

Wifi, Open Networks and My Children

Someday we will be able to harness the wireless networks in our homes, neighborhoods and larger communities to continuously communicate with those we love. Communicating will likely be more seamless than "placing a call" in the way we do it today. It will be more like a regular connection which we can utilize at any time. One can get a sense for this by using the push to talk feature on mobile phones.

Wifi, open applications platforms and ubiquitous, low cost VoIP networks will take us there. Just take a look at Vocera, one of my favorite innovators in the voice market. Forbes online has an interesting story about Vocera. As always, the key to success is harnessing the technology to solve a real point of pain for the customer. In this instance, the point of pain is the relatively poor state of communication within the health care system.

For me, I look forward to the time when my children all have a Vocera-like communicators. I'll always be able to see how they are and let them know I'm thinking about them. I remain convinced that there is a great deal to be excited about with regard to new voice applications. I long for industry leaders to start painting a positive picture of the future of communicating. From my perspective, if one pays attention to the signposts, there's a great deal to be excited about.

Talk About Intelligent Endpoints

Geekzone reports today that Seimens and Skype are partnering to embed the Skype VoIP application with Seimens phones. As David Isenberg pointed out in The Rise of the Stupid Network intelligence will increasingly be pushed out to the edge of the network (and endpoints). We are beginning to see the true disruptive power of VoIP.

Can you say Dell. I can imagine Dell leveraging their powerful platform to distrubute VoIP communications devices.

And you know who else has a pretty good installed base of endpoints, Microsoft. VoIP will rock the incumbents. If you thought the last few years were volitile, wait to see what VoIP will do to the communications landscape.

Voice: Value Add Features

So, I have had a long standing point of view that voice remains an under-exploited applications market. If we have learned anything over the last decade, it is this: Give people more flexibility around communicating and they will communicate more often. E-mail, Instant Messaging, Chat, Mobile Phones, Blackberry's, Push-to-Talk. Each one of these is about communicating, person to person, person to group.

Now, my personal favorite new voice application is voice messaging. I have long envisioned a service, much like a buddy list, that would enable a user to send a voice message to not only an individual, but a group. So, say I am the soccer coach and the game has been moved from 1pm to 3pm, from field A to field C. Instead of calling around to all the parents, or beginning the team phone tree, the coach simply records the message on his mobile phone and sends the message to the Soccer team phone buddy list. Seems like a nice value-add feature from my perspective. And remember, consumers spend more than $10 billion today of enhanced voice services such as voice mail and caller ID. My guess is that people would pay for such services.

Today, it appears that Nextel is further demonstrating its lead in continuing to push the envelope on differentiated voice features. Today's New.com story Nextel announces a new product called NextelMail. From today's report:

Nextel also intends to soon introduce NextMail, a wireless e-mail service that lets people attach sound recordings so anyone can listen to them using a personal computer, Barry West, chief technology officer at the company, said at the conference. "It's pretty cool. We are just getting it to market."

I firmly believe there is fertile ground for additional value-add voice applications. What we need is an open platform and a set of common standards to unleash the creativity of the world's applications developers. This is the great lesson of the Internet. Instant messaging was not popularized by AT&T. Think of the entrepreneurial group of developers at Mirabilis (ICQ) in Israel who really unleashed what remains one of the most succussful consumer communicatiosn applications of our time, instant messaging. Lets hope that the promise of VoIP is not to replicate the feature set of standard telephony. Instead, lets hope that VoIp provides an open voice applications platform that lets 1,000 Mirabilis' bloom.

LTCM, Greenspan and Jobs

I just finished re-reading "When Genius Failed" by Roger Lowenstein. To simplify the story, the smart fellows from LTCM had a firm belief in the concept of spreads reverting to their historical mean. They searched the global capital markets for opportunities where the spread between two securities deviated from historical ranges. The traders would then sell the rich security and buy the cheap security, believing that over time, the spread would revert to the historical range and the differential would narrow. Two things ultimately went against this strategy: 1. The Russian debt default (which caused a series of correlated market panics), and 2. A very high degree of leverage applied against these trades (which reduced the time frame in which LTCM had for the trades to workout). These twin forces, along with some opportunistic piling on by Wall Street, combined to lead to the collapse of LTCM.

An interesting thought struck me after finishing the book. Namely, I was wondering if Mr Greenspan was essentially running the same leveraged trade as LTCM. In the instance of Greenspan, he continues to pump liquidity into the market with the belief that, as in the past, this will translate into both job growth and more importantly income growth. And in the face of this trade, consumers are leveraging up on their side of the trade. So, what if Mr Greenspans historical context is wrong. What if the headwinds this economy is facing are more structural, than cyclical in nature. The skeptic might want to take a look at a recent paper on the contribution of structural reform to the current jobless recovery.

In the face of the high degree of leverage the consumer has accumulated during this economic slowdown, with the January increase in revolving debt growing at an 8.6% annual rate, the consumer has very little time to wait out this liquidity/jobs trade.

And the negative structural singposts continue to add up. From this weekends Barrons:

"Be afraid, be very afraid: The following quote is from a piece by political reporter Charlie Cook, who writes a weekly e-mail column for the National Journal. I came across it posted in a Weblog cited on tech pundit David Farber's "Interesting People" mailing list. Anyway, here's what Cook wrote: "In December, the CEO of a California-based high-tech firm told me that 'there is no amount of overtime that we will not pay, there is no level of temporary services that we will not use, there is no level of outsourcing or offshoring that we will not do, in order to prevent us from having to hire one new, permanent worker in the U.S.'" Now that's scary."

Scary indeed. One has to wonder whether Greenspan's actions will prove to reveal a similarly flawed genius. Time will tell.