Internet Telephony Magazine April 2006 Publisher’s Outlook

The following is a portion of my April 2006 Internet Telephony Magazine Publisher’s Outlook:

There is Enough Broadband Competition

I get the general sense that our government believes we already have enough broadband competition. I think that the FCC believes service providers should be allowed to charge anyone and everyone who uses their pipes whatever they need in order to pay for the maintenance and further build-out of their networks.

We have witnessed the slow dissolution of the CLEC market in the past years; we have seen the slow and steady decrease of ILECs; and we have just about reassembled the former AT&T.

Many taking this side of the argument will point out that cable and VoIP companies are generating sufficient competition along with wireless, broadband over power line, and satellite.

In the late nineties, we thought the market would be best served with thousands of CLECs serving customers. That was the environment the government set up. Now it seems that the FCC is happy with just a handful of strong competitors.

Many have seen me quoted in such newspapers as The New York Times as a proponent of net neutrality, but let’s face it, the lobbyists with the Ferraris work for the phone companies.

In addition, it is fairly obvious that current FCC Chairman, Kevin Martin, has little or no interest in net neutrality. The chairman is well connected with the Bush administration, which pretty much cements the fact that net neutrality arguments are a big waste of time. You may as well use the effort for a worthy cause, like donating time to a charity or helping underprivileged children, because from where I sit, Chairman Martin’s mind is pretty much made up.

This, of course, is just one person’s opinion – but I have heard the chairman speak and have been researching the matter for quite some time.

Ours is a country based on freedom, which we spread around the world. But we will soon lose some of this freedom – at least on the Internet. We may not be able to use applications, like Skype, without paying extra for them; still, this would be better than the situation in China, for example, where the practice (using Skype) has been banned or, to put it nicely, "put on hold." Furthermore, unless service providers get an extra fee, videos streamed on the Internet may not be of very high quality. In general, we can expect service providers to provide inferior Internet service unless they are paid a premium by the customer, the content provider, or both.

Once we accept these certainties, the question becomes how to make money in such a new world. If you think the model of charging $15 per month for VoIP and raking in cash is the future of your VoIP company, you may as well plan to start passing out the pink slips by New Year’s Eve.

This concept won’t work; the only way to differentiate yourself is to provide different offerings. Explore higher quality VoIP, surround sound VoIP, stereophonic VoIP, videophones, collaboration products, dual mode phones, and so on. You can partner with anti-spam or security companies to offer a bundle of secure voice and Web surfing.

The one thing you need to stop doing is going head-to-head with Vonage. This is a nice business model, but can’t last forever. Survey your customers. Hold focus groups. What do your customers want? Do everything you can to figure out where the money will be tomorrow.

Here is a simple idea worth hundreds of millions, in my opinion. Offer a wake up service hosted by celebrities. How many teenagers would pay $.25 per day to be woken up by Justin Timberlake or Britney Spears? How about a service that wakes you with an MMS message containing a Paris Hilton photo? You can even choose the rating.

Design an AJAX-based application to allow full call control and a toolbar that sits in IE and Outlook. Make your services stickier and stickier.

Explore enhanced 911, where any calls to 911 are recorded and sent via e-mail to loved ones. Integrate 911 with video cameras in the home, so emergency workers can see what is happening, in case those three digits are dialed.

Get creative. If one more service provider tells me they are better than Vonage because they are cheaper, I may scream. If you have to price lower than Vonage to make sales, you have a cheap phone service, and customers don’t want a cheap phone service to carry their 911 calls. As I have asked before, would you rather have the ambulance taking you to the hospital made by Honda or Yugo? Which would you send your kids in?

  • pkp646
    March 28, 2006 at 6:10 pm

    I don’t share your general pessimism about the future of VoiPs considering popular opinions to net neutrality. The simple fact is that these companies are new and innovative and will likely prosper more from limited government intervention and the free market it will allow. Besides, the Verizons and AT&Ts of the world aren’t going to, and the FCC wouldn’t allow them, to block content. Sure, it might cost more, but it will still prove to be a flourishing business.

  • oldhats
    March 28, 2006 at 7:26 pm

    pkp–i agree that this legislation would do more harm than good. government regulation is almost always bad for innovation in business, imho.

  • Paulaner01
    March 28, 2006 at 8:09 pm

    You name all these services and ideas that the consumer will love, but I’m not sure how government of all things can ensure that these innovations and technologies will thrive. On the contrary – regulation will stifle this stuff. We’re doing just fine without the government, and with the speed of progress we’ll do even better if we keep it out until there’s an actual problem.

  • John Rice
    March 28, 2006 at 9:55 pm

    The fear mongering that has become part the Net Neutrality debate is disheartening. From Rich’s description of the situation, if Net Neutrality fails to pass the Internet’s popular sites are going to shut down. Now, I don’t know where I fall on the whole neutrality issue, but don’t assume we can’t see through the scare tactics. This is classic “fear drives favor” politics. Let’s rise above the fray have an honest debate about the issue at hand. Should we cede to the Federal Government the authority to decide what internet technologies are available to the public? From our past experiences with placing the government in charge of functions of the free market the easy answer is no. However, let’s see how this all plays out. If there is need for added regulation, then fine, move forward with it. But at this time, when there are no documented abuses, why on earth would we put another law on the books that we don’t necessarily need. It seems to me that our elected officials have bigger issues that need their attention.

  • Rich Tehrani
    March 29, 2006 at 7:14 pm

    For many years government regulators allowed AT&T to increase prices as long as service quality increased. While I too am a hands-off business government advocate there are areas such as child labor laws where the government rightfully stepped in.
    If the government can force a monopoly to increase service levels in exchange for the ability to increase revenue the government can allow the AT&T shopping spree on one condition. The US must have the best broadband access per dollar in the world.
    In other words if Japan has the most cost-effective Internet access in the world we must do better.
    The problem with waiting for the system to break before we fix it is the fact that we will scare away the investment community and put a dark cloud over the communications sector. I have seen enough telecom clouds, can we please keep the sun shining for a few more years??

  • pkp646
    April 5, 2006 at 1:27 am

    Rich- No one is going to argue that everything the government has ever done with commerce is a bad thing, but it seems pretty clear that they have done the right thing up to this point by staying away from regulating the internet. In the end, it’s the belief that it will continue to be in the best interest of the consumer, and yes the businesses too, if the government continues in that fashion.

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