November 2004 Archives

Those of us who report on high-tech in the developed world often take for granted the role technology can play in developing nations. I recently came across an interesting case study from UNRISD, a United Nations agency dedicated to studying the social aspects of developing nations; in this particular instance the report focused on information and communications technology and its role in the Western African nation of Senegal. While not directly related to my usual fare of VoIP and related next-gen telecom news, I thought I would share this case study in the hopes of generating some thinking on the function that technology in general, and communications technology specifically, might play in the development of third-world countries.

If you have any insight or story ideas or questions on this matter, feel free to post a comment (see below).

Introduction
The United Nations Research Institute for Social Development (UNRISD), a UN agency devoted to researching the social dimensions of contemporary problems affecting development, carried out an extensive overview of information and communication technology (ICT) in Senegal.

Senegal was chosen due to its position as a country struggling to recover from a serious economic crisis, yet has progressive policies aimed at promoting mass access to telephone and Internet technologies.

The goal of the research was to find out what recent changes in government control over the media mean for the development of independent radio and television, and to what extent can and does information and communication technology play in improving the climate for economic growth, social welfare and democracy in Senegal?

Challenges
The studies commissioned by UNRISD focused on the main sectors of Senegalese society: government, media and business, and services such as health and education. The findings reveal that despite progressive policies surrounding the development of a telecommunication infrastructure, the use of ICT in these major sectors have proved to be problematic under both state and private ownership.

One reason for this is that the government itself is not a vanguard user of computers. ICT use in health and large businesses is also limited, possibly due to problems with electricity supply and cost of Internet connection. Even the newly independent media companies, considered pioneers in their dissemination of uncensored information and use of mobile phones, make surprisingly little use of Internet-connected computers in their daily operations. Further, a culture of information control and a fear of viruses and hacking discourage more widespread use of the Internet.

Despite the seemingly inefficient use of access to the Internet, research does reveal an encouraging picture of Senegalese society as a whole. There has been an explosion of telephone use, and to a lesser extent Internet use, as well as strong interest in interaction with independent media. All these factors allow for the development of microenterprises, local languages, and of transparency, accountability and democracy in the country.

Policy Implications and Conclusions
In terms of development policy and practice, UNRISD research indicates that the “big players” in Senegal are not capable of providing the impetus that will transform Senegalese economy and society, or their relative position in the world economy.

The research also concludes that there is not just one “information society,” Senegal has proved this by adapting to the information age and on its own unique way. These dynamics need to be well understood before development funding is directed toward attempts to steer emerging trends in particular social or economic directions. Failure to do this can lead to public investment unwittingly building barriers and closing opportunities, rather than the contrary.

Citrix Systems, Inc., has announced that it has signed a definitive agreement to acquire Net6 Inc. The all-cash transaction is valued at approximately $50 million and is expected to close in Q4 of this year.

According to a press release announcing the acquisition, the Net6 deal gives Citrix:

• An SSL (Secure Sockets Layer) Access Gateway — a secure, always-on, single point-of-access that’s simple and cost-effective to deploy and is complementary to the existing Citrix access infrastructure portfolio;
• An Application Gateway and Voice Office Suite — proven products to tap the rapidly growing IP telephony and VoIP access markets; and,
• New competencies and domain experience in network appliances, application user interface transformation and VoIP technologies.

“This is an exciting day for Citrix customers and partners,” said Mark Templeton, president and CEO for Citrix. “This acquisition consolidates our leadership role in the access infrastructure market, simplifies access and access security, and gives us an opportunity to tap the potential of IP voice applications on IP telephones. With Net6, we’ll be able to provide a single point of access from any device to any IT resource over an SSL secure connection, providing on-demand access to both voice and data across virtually any screen size, device type and location.

“We’re making the last mile of computing secure, simple for users and adaptable to almost any access scenario. Only Citrix can do this.”

Net6’s Application Gateway and Voice Office Application Suite deliver productivity applications to users of IP telephones and mobile devices. The Net6 Voice Office Application Suite enables enterprises to further leverage their IP telephony investment and increase workforce productivity by delivering converged applications to the screens and speakers of IP telephones. The Application Gateway delivers applications to users of IP telephones from leading IP PBX vendors including Avaya, Cisco, Mitel, NEC, Nortel Networks and Siemens.

Templeton said the combination of Citrix and Net6 technologies will enable the creation of an unrivaled end-to-end access infrastructure system that converges voice, data and applications. The combined technologies could support several different types of user scenarios. For example:

• The Ultimate Mobile Office: A notebook, desktop or tablet PC user could incorporate a soft phone, local applications, on-demand collaborative applications and services on a desktop and use them regardless of physical location;

• The Virtual Organization: A branch office or call center user could use a desktop or thin client terminal with soft phone support, access to terminal emulator applications and other hosted applications, customer relationship manager applications and e-mail.

With the SSL Access Gateway serving as a single entry point, these services and resources can be accessed securely by a wide range of devices including IP phones and soft phones, simply and cost-efficiently.

“Businesses today are trying to manage access to their IT resources across several dimensions,” said Templeton. “They have to factor in all the different network scenarios, such as wired or wireless, trusted or untrusted, public or private; the type of devices being used, such as IP phones, PDAs or notebooks, managed or unmanaged, trusted or untrusted.

“It is a complex problem that, until now, has been solved with various tactical and ad-hoc solutions. Our new approach, which regards voice as a data type, will enable a common, single gateway to accommodate application, data and voice application access needs simply and cost effectively.”

Under terms of the definitive agreement, Citrix will acquire Net6 for approximately $50 million, payable in cash. Assuming the transaction closes as expected, the transaction will result in approximately a $1 to $3 million expense charge for in-process research and development in the fourth quarter, which equates to approximately $0.01 per share.

The acquisition is expected to close during the fourth quarter of 2004. Net6 will continue to operate in San Jose, Calif., led by Murli Thirumale reporting to Mark Templeton.

A just-released report from Dell'Oro Group tells us that VoIP continues to gain ground in the enterprise PBX market. According to the Dell’Oro report, the number of VoIP lines shipped in Q3 04 grew to more than 2.1 million. These numbers represent a 14 percent increase quarter-over-quarter and a 39 percent increase over the same quarter last year. Traditional (non-IP) lines gained only four percent to 9.6 million, as VoIP is increasingly supplanting traditional lines in businesses. The third quarter also saw total PBX line shipments up six percent quarter-over-quarter.

According to Steve Raab, Director of IP Telephony Research at Dell’Oro Group, “Currently one in five lines shipping is VoIP. Considering the total installed base of PBX lines, cumulative VoIP shipments represent two percent of lines in use today, indicating that while VoIP has gained some market acceptance, obviously much of the opportunity in this market transition is still to come.”

Dell’Oro also ranked the top six vendors by total worldwide PBX lines shipped. Nortel ranked first overall, with a 12% quarter on quarter growth surge. The rest of the group is as follows (growth percentage in parentheses):

Avaya (17%)
Siemens (9%)
Alcatel (-4%)
NEC (30%)
Cisco (8%)

While two percent may seem like an insignificant number, it should be noted that the VoIP industry is relatively young, and any gains against traditional TDM-based PBX market share are encouraging. The past few years have been quite a roller-coaster ride, and the fact that enterprises are choosing VoIP at faster rates than traditional solutions speaks volumes about an industry that only now accelerating on its trip “up the hockey stick.”

Today the Federal Communications Commission voted in favor of declaring Vonage’s form of IP-to-PSTN communications an interstate service, asserting their sole jurisdiction over its Internet-based service, and precluding individual States from levying taxes, fees or restrictions on the services provided by Vonage.

According to Vonage CEO Jeffrey A. Citron, “This forward-thinking decision from the FCC assures that competition from VoIP is here to stay. Now we can focus our resources exclusively on building an even better service — rolling out E-911 for all our subscribers, innovating new features and new devices for VoIP, and expanding aggressively around the globe. Because the FCC has acknowledged the reality of the Internet — which knows no state boundaries and no borders — more people will enjoy the benefits of Internet phone service.”

This is a big deal for the VoIP industry. With the FCC keeping the States at bay, IP telephony providers will be able to innovate and grow, all the while free of regulations that would otherwise serve as a chokehold on this nascent industry. It further serves to underline that VoIP is indeed a different animal than traditional TDM-based telecom.

According to TMC columnist and Swidler Berlin Shereff Friedman Partner William Wilhelm, today's ruling is significant.

"The FCC today unambiguously declared VoIP services like Vonage's to be interstate in nature and preempted state utility regulation. This decision is a significant step forward in ensuring that the Internet and Internet applications do not have to bear the burden of complying with 50 different State utility regulations."

When reached for comment, Neal Shact, industry expert and CEO of Communitech said, "This is big step in the right direction. VoIP is a technology that is not restricted by geographical borders. It is going to be hard enough for the federal government to handle appropriately without needlessly subjecting it to 50 additional bureaucracies. This ruling puts the responsibility for nurturing this young industry where it belongs."

Today, the FCC is expected to issue a ruling that VoIP phone services, such as those offered by Vonage, should be free from State regulations. The key here is that States would not be able to levy taxes, fees or restrictions on the new technology.

William Wilhelm, partner in the legal firm Swidler Berlin Shereff Friedman, LLP had this to say when asked to comment on today’s pending ruling.

“Currently it appears as if the FCC will hold that states are preempted from regulating Vonage based upon a finding that the service is "interstate in nature". As a result, the states will no longer be able to subject VoIP and Internet applications to a patchwork quilt of state utility regulations. The decision reaffirms the FCC's commitment to competition, innovation and an Internet free of inappropriate regulations.”

The ruling is expected to be a boon to the young VoIP industry, which while enjoying a measure of growth, still has some distance to go to maturity.

Neal Shact, CEO of CommuniTech and an expert on the VoIP industry said, “These regulatory rulings have far reaching consequences. The FCC is keenly aware of the issues of nurturing an emerging VoIP industry here and that over regulating it, with states issues, taxes and CALEA can easily push the industry overseas, beyond the reach of our government.”

I'm cautiously optimistic in advance of today's statements from the FCC, but to all eyes it appears that the FCC will tell the States to keep their hands off VoIP. TMC will have much more on the events going on at the FCC today. Stay tuned.

According to a report from the Yankee Group alternative VoIP providers are set to lose 47% market share to MSOs and IXCs/ILECs by the end of 2005.

The report, titled Fighting Goliath: Can Alternative VoIP Providers Survive?, paints a rather bleak picture for alternative VoIP providers. As cable MSOs and incumbent local providers look to VoIP as a long-term strategy, the early-to-market leaders stand to lose ground in the race to offer VoIP services.

"While alternative VoIP providers such as Vonage and many of the Vonage-like providers have a first-to-market advantage, their lead will be short-lived," says Kate Griffin, Consumer Technologies & Services senior analyst. "In 2003, a number of these companies, dominated by Vonage, introduced VoIP phone service to consumers. At the end of 2003, these small startups comprised nearly 66% of the local residential VoIP market. Vonage dominated the market with more than 90% of all the subscribers in the alternative VoIP provider segment, or 61% of the local residential VoIP market."

"However, alternative VoIP providers lose market share every day to the major players. MSOs, IXCs and ILECs are joining the VoIP game, and their available resources dwarf even the largest of the alternative VoIP providers. The local VoIP market is already crowded with more than a dozen players vying for local consumers," says Griffin.

While the report conjures up a dim future for alternatve carriers, the fact remains that consumers can still be enticed with plans that offer innovative, unique features. By constantly evolving and offering new and exciting services, alternative providers can maintain some level of self-preservation. Still many of the early entrants into the VoIP service provider space will fall prey to the behemoths who are just starting to ramp up their VoIP business lines. In the end, I hope that a number of smaller, more nimble players will be able to execute a strategy that allows them to remain a viable choice for consumers.

This bleak report might be just the wake up call that these smaller innovators need to ramp up their offerings and cement customer relationships while they still can.