A Breakthrough Month in IP Communications

Skype, Google, Verizon, Vonage and Other Happenings
Please enjoy the March 2007 Publisher’s Outlook from Internet Telephony Magazine:
The last few weeks have been among the most newsworthy in IP communications since this magazine’s first issue in February 1998. If you have any doubts about the VoIP market’s strength and power, consider that Skype has recently petitioned the FCC for something amazing. They want to apply the Carterphone rules to the wireless industry. These are the same rules that were applied to break up the AT&T monopoly on devices, allowing anyone to make products for the AT&T network — as long as these products did not harm the network.
Innovations like the fax machine and vibrant competition in the handset market ensued. It is tough to imagine what the world would be like if we still had only a few phone models to choose from — provided by a single manufacturer.
Obviously the Carterphone ruling was 100% in the best interest of consumers.
Now Skype is hoping the FCC will apply this ruling to the wireless industry.
It is absolutely obvious that such a ruling applied to the wireless market would be great for consumers. On GSM networks in the US there is already some flexibility allowed via the use of SIM cards but in the case of Sprint and Verizon the networks are as closed as closed gets. Moreover, Verizon has crippled Bluetooth functions of devices, forcing customers to rely on the network or a data cable for certain data transfers to devices.
But then again, if I want to buy my own device, I can if I choose to operate on a GSM network. The way GSM providers get around this open market is by subsidizing handsets which are locked to keep customers hooked to a specific carrier.
Of course if you want a way around this you can purchase a pay-as-you-go calling plan.
So if you look at the matter carefully, there actually is openness and competition in the wireless market. I wouldn’t call it vibrant device competition but there is definitely competition.
Besides, many wireless gadgets such as Windows Mobile devices based on the popular Microsoft operating system allow you to have a Skype client installed today. So again here are more signs of competition.
Perhaps the most problematic argument against Skype is the recent AT&T/Apple iPhone relationship which forced the will of Steve Jobs on AT&T Wireless. You see, AT&T wanted to sell this device so badly they gave up full control of the iPhone’s development, branding and distribution channel.
What this shows is that the network operator is actually less powerful than Steve Jobs!
So my take on this Carterphone situation is that consumers will be helped if the FCC forces operators to allow outside devices to run on their networks. The flipside is, Verizon Wireless and Sprint could be in terrible trouble if they don’t have completely open devices to compete with the iPhone.
Consumers are already lining up to take numbers for the chance to buy an iPhone and jump from their current operators. Talk about a major spike in churn. Apple’s iPhone will cause more churn than any other device since the Motorola RAZR. Operators will be absolutely forced to offer best-of-breed devices on their networks or perish.
In fact, in my confidential discussions with equipment manufacturers they believe operators will now be forced to stop crippling their devices and user interfaces.
So I believe FCC Chairman Kevin Martin and company can probably choose to let the wireless carriers do business as usual because it seems the free markets will ensure Carterphone principles will soon be applied to the US wireless market.
Google Applications
Google has been quietly building and acquiring many of the components needed to compete against Microsoft Office. But instead of software, the company has focused on providing hosted applications based on AJAX. This technology allows web-based applications to behave more like desktop software. While a typical web page needs to continuously redraw the entire page, AJAX applications allow drag-and-drop functionality and only sections of a page to be redrawn at a time.
This past week the search leader made a big splash by packaging a number of AJAX-based applications together into Google Applications Premiere Edition at a cost of $50/year/user. This compares to a street price of between $150-$200 for the latest Microsoft Office.
At first glance Google’s new offering amounts to a poor value as the average version of Office will last you about three years and offer superior functionality and access to applications Google doesn’t have competing offerings for, such as PowerPoint and Visio.
Google realizes this and subsequently ups the ante by offering as part of this package Gmail storage per user of 10 GB, APIs to integrate into your current applications, online support and 24/7 assistance including a call center. In addition, there are 3rd party applications and services available.
Having used the Google word processor and spreadsheet applications provided in this offering I can’t help but wonder why they are so stripped down. MS Word for example offers limitless features for line spacing while Google’s offering does not. Then again Google’s word processing application allows you to insert images, tables and links. In addition it allows easier collaboration as the documents are stored centrally.
In my opinion, a small business is still far better off with Microsoft’s Office but the benefits of going with Google include easier collaboration and less worry about doing backups as Google handles this for you.
In fact, using Google’s applications could save serious money on storage and servers, making life that much easier for small businesses.
Avaya Teams with Google
If there is one area in which Avaya has differentiated itself these past years, it is in its developer program. The company has been far ahead of all other larger communications players as it realizes that an ecosystem of partners is the best way to add value to corporations.
It is for this reason we shouldn’t be surprised to hear the company has decided to integrate its phone systems with the latest paid software offering from Google. Although Avaya’s integration news doesn’t disclose all of its details, we can hope for things like toolbars in Google applications, allowing single-click calling. In addition, I hope for the ability to have full call control from Google’s programs and screen pops when incoming calls arrive.
In a way this sort of integration makes sense for Avaya as the company is probably not thrilled with the Microsoft/Nortel partnership and sees this announcement as a way to counter the move made by the Redmond/Canadian duo.
It will be a number of years before Google gains any serious Office application market share in my opinion but still this is a very smart move for Avaya.
Verizon Takes on Vonage in Court
In June of 2006 Verizon presented Vonage with a lawsuit saying it has infringed on seven of its patents. At the time Vonage argued it had developed its technology itself and when using outside technology, did license it properly. In the latter half of February 2007, the two companies ended up in court presenting open arguments.
In a nutshell, Verizon has a slew of broad patents making it difficult for virtually any company to provide competing VoIP service. Based on discussions I have had with experts, some if not all of these patents should perhaps never have been granted.
This gets us to the patent system in America and why it is so easy to acquire patents. Over the years in telecom I have seen companies develop amazing technologies and many of these companies do not apply for patents on their innovations. Instead, a much larger company applies for patents on the same innovations many years later and receives them.
Simply stated, the patents in the US are awarded much too easily without the USPTO doing enough due diligence. So the courts and shareholders spend billions and billions of dollars each year to defend against patents on innovations the patent holders did not create.
Now I am not targeting any companies in particular here but I do think the USPTO can be improved. I wish the government would spend significant resources on hiring more experts at the USPTO so we would avoid these problems.
Additionally, now that so many companies have amassed broad patent portfolios the small player in virtually any market is in trouble if they too do not have an arsenal of patents they can cross-license in order to avoid a lawsuit.
So instead of preaching a culture of innovation in the U.S., we are promoting a culture of patent hoarding and lawsuits. This is obviously not in the best interest of consumers by any means and this problem should be addressed at the highest levels of our government.
Getting back to the Verizon/Vonage lawsuit I believe the FCC should not have allowed as much telecom consolidation as they have. For the last 25 years or so I have been in this business, telecom companies have proven they are not good at innovating. Creating a handful of large telecom companies is very obviously not in the consumer’s best interest if these companies use this power to sue smaller VoIP players into oblivion.
In addition the hidden benefit of a big telecom mergers is even larger patent portfolios allowing companies to use the legal system as a decisive competitive weapon.
Vonage is responsible for a tremendous amount of innovation in the telecom market. We need to protect companies like Vonage to ensure more telecom and technology innovations are launched in the market.
Sure we want a strong counterbalance to cable companies and this is a great reason to allow telecom consolidation, but potentially eliminating thousands of VoIP players overnight is a nightmare scenario for consumers worldwide!
Of course, this lawsuit may not amount to much but at the end of the day we need the FCC to weigh all options before allowing merger after merger. Using a patent portfolio to eliminate competition is a lose/lose for consumers.
The Apple/Cisco dispute over the iPhone name is now over and most people believe Apple got the better of Cisco. Others say it is a win/win as both companies will use the iPhone name and the two companies have announced that they will cooperate to provide some degree of interoperability. If Apple’s iPhone takes off this could put Cisco in an enviable situation. But many say Apple doesn’t adhere to agreements made in such negotiations. Time will tell.
Speaking of Development
The VoIP Developer show now in its fourth year has become the Communications Developer Conference to more accurately describe the scope of the event. As concepts like SOA, VoIP, video, open source, SIP, IMS and wireless evolve, there needs to be a single place for the world’s telecom developers to congregate to learn how to develop applications and devices for the next generation of users.
Moreover, at this event there will be more of an emphasis on learning about ecosystems, allowing developers to take advantage of strong partners such as Skype, Digium and Avaya.
This show has held in August for a few years and it has now moved to May 15-17, 2007 in Santa Clara, CA. If you are a developer in the communications space you must be there and if you know of any communications developers please alert them to this conference and the earlier than usual date.

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