VoIP and the Telecom Giants

I happened to sit next to an AT&T exec on the plane last night. He commented that "...two years ago I would tell customers that while VoIP is coming, it is still a long way off..." And what do you tell them now, I asked? "VoIP came."

It was interesting to speak with him about their VoIP experiments though. AT&T is still spending a lot of time worrying about priority packet routing and trying to focus on the highest quality possible on the voice connection. I observed that 8.5 million people find Skype acceptable (he had never heard of Skype) and that the wireless providers have trained us all to expect a little fuzziness on our voice connections... so won't businesses choose "good enough?"

He admitted that this scenario worried him...

Interesting VoIP statistics

These statistics were provided by Federal Communications Commission Chairman Michael Powell in a speech that he gave today at the National Association of Regulatory Commissioners. You can download the entire speech from here.

• 2 percent of US firms currently use some form of IP telephony, and this number is expected to grow to 19 percent by 2007
  
• 73 percent of wire line service providers and 31 percent of wireless operators either have implemented, or are testing packet telephony in their networks
  
• 50% of Internet households are interested in Internet Voice as a way of reducing monthly long-distance charges
  
• Starbucks offers its customers 19,000 ways to have coffee (ok, not about VoIP but interesting nonetheless...)
  
• The US is 11th in the world in broadband development
  

More on Skype

Great post on Skype from Lance Tracey. I love the quote from Federal Communications Commission Chairman Michael Powell:

"I knew it was over when I downloaded Skype. When the inventors of KaZaA are distributing for free a little program that you can use to talk to anybody else, and the quality is fantastic, and it’s free—it’s over. The world will change now inevitably.”

Still don't know what Skype is all about? Find out....

Skype

North American Bandwidth News has some really interesting comments on Skype. If you aren't familiar with Skype you should be. As you'll read in NA Bandwidth News -- "Skype is a large bulldozer for destroying and rebuilding the telecoms industrial complex..."

The perfect fractalized enterprise

I encountered a terrific example of a fractalized enterprise a few days ago. A friend has started a business that takes professional photos of children's sports events and then sells prints or other items (coffee mugs, mouse pads...) back to the parents. It combines his interest in photography with his daughter's passion for sports and parents seem to love the opportunity to purchase professional quality photos of their children.

What is really amazing to me about this business is how Bob uses technology to create a business that appears significantly bigger than the one person shop he really is. The Internet provides a mechanism for Bob to outsource every part of his business that isn't core. Here is the formula:

Web site hosting company: YahooDomains
E-Commerce Storefront: PhotoReflect (specializes in photography e-commerce)
3-4 photo processors, all available on the web (some are better at posters and prints, some are better at mugs and mouse pads...)
Accounting and CRM: Intuit
Receptionist and personal assistant: CallTrex (my own company)

Add in a few friends who enjoy being weekend photographers and are willing to work for $10 an hour and a local camera shop that rents high-end photography equipment (REALLY big lenses for those close up shots from across the field) and you have a complete business set up for almost nothing.

This is the kind of entreprenuerial engine that the Internet can enable. Bob focuses on his "Core" -- marketing and sales -- and he uses technology to martial a set of organizational fractals that come together to serve his "Context" and present a unified face to the end customer.

An interesting idea -- what about creating a set of "recipes" for people that would like to start their own businesses -- essentially a list of the organizational fractals needed to construct a given type of business?

Greenspan on Intellectual Property Rights

As usual, Federal Reserve Board Chairman Alan Greenspan is eloquent, his position is well thought out, and his timeliness is perfect. But in this instance Greenspan is commenting on Intellectual Property, not interest rates.

At the Stanford Institute for Economic Policy this past Friday, Greenspan delivered an address on the importance of protecting Intellectual Property Rights. The full text of his speech can be found here.

He does not offer a specific remedy (as he did in the case of Social Security earlier in the week) but instead sensibly asks a set of questions:

If our objective is to maximize economic growth, are we striking the right balance in our protection of intellectual property rights? Are the protections sufficiently broad to encourage innovation but not so broad as to shut down follow-on innovation? Are such protections so vague that they produce uncertainties that raise risk premiums and the cost of capital? How appropriate is our current system--developed for a world in which physical assets predominated--for an economy in which value increasingly is embodied in ideas rather than tangible capital?

One thing that both sides in this debate are likely to agree on (at least privately) -- currently Congress, with the Digital Millenium Act for example, is primarily taking into account the interests of lobbyists, and not thoughtfully addressing the economic issues that Mr. Greenspan articulated. Hopefully his speech will spark a broader debate on these issues.

Revolutionize the PTO

Just about anyone who has had to deal with the US Patent & Trademark Office will readily agree that a major overhaul of this part of our government is needed, preferably as soon as possible. A significant portion of our economy is dependent on the principals of intellectual property protection and the PTO owns all of the passageways into these strange lands. With a wave of a pen fortunes are made and lost when a patent office action grants an idea the status of property, or takes it away.

The debate continues to rage (not least within this blog) regarding the merits of different types of patents, and the merits in particular of software patents. But both sides of this argument can probably see that the PTO as currently configured is in no condition to render intelligent judgements on a consistent basis as to the patentability of various software innovations.

At dinner with a friend last night, I heard the (not uncommon) story of receiving an official PTO office action memorandum, rejecting all claims for a filed patent due to the existence of "prior art" -- which is to say, someone else patented the idea first. However, upon review of the cited prior patent, the only conclusion a reasonably trained computer scientist could come to was that the rejected patent application and the prior patent both used the word "meta data" a few too many times and otherwise were not at all similar.

A Revolutionary Suggestion
In thinking about how he had arrived at this state, and whether the Patent office personnel were merely using a word search on prior patents to reject claims, my friend made an interesting observation: the business community as a whole has a vested interest in blocking the issuance of bad patents (that is, patents for ideas that are not, in fact, innovative), the business community has the resources and the knowledge to properly investigate a patent claim and uncover prior art -- why not have an open review process for patent claims?

This would radically change the role of the patent office from one of research to one of adjudication. Patent officers would have to determine whether or not the counter claims that competing businesses raise against a patent's issuance were accurate. But this role of adjudication would at least remove the patent official from the now almost impossible job of coming up with the potential prior art themselves.

The Fractalized Enterprise

Paul Kapustka notes in his most recent networking pipeline blog that small business is where we should be looking for growth in IT purchasing. As Paul points out, it is much more difficult for journalists and market analysts to pay attention to the behavior of small businesses -- but we all need to become better at understanding small business as a key underlying economic trend.

If Geoffrey Moore is right, the Internet is accelerating a movement toward what you could call the Fractalized Enterprise. Geoffrey explains his "core vs. context" concept as follows:

Activities that support ... differentiation are core to our businesses. Everything else we do, by contrast, is context -- that is, work that has to get done but cannot improve our valuation.

The interesting thing about the Internet is that it creates the opportunity to outsource context seamlessly. Every business can appear to be a big business, can have endless resources to handle customer support, sales, product development, marketing -- all by weaving together a team of disparate entities (organizational fractals) that cooperate together to create an enterprise.

That is the future -- small businesses, often sole proprietors, working together, mediated by IT, creating, marketing, distrubuting the brands, products, and ideas that we all consume. Much more powerful than corporations.

Of course our technology, government regulations, and personal dispositions must all continue to evolve for this to fully fractalize.

I love this product...

We purchased the squeezebox from Slim Devices and absolutely love it! This is exactly the kind of innovative product that WiFi is screaming for...

Within minutes I was able to connect this tiny box to my stereo and to my home wireless network. The box finds a computer on my network running server software provided by Slim Devices and I am immediately able to play any MP3 in my collection, over my home network and on the stereo in the living room.

Oh, and any device connected to the network with a web browser can control the jukebox...

Who wants a computer in the living room? Who needs extra wires around the stereo? One little box, using WiFi to connect my stereo to my home network and I am done. Can it get better than this?

Why hasn't anyone produced a WiFi baby monitor? WiFi walkie talkies for kids? And I am not talking about analog over unregulated bandwidth -- I am talking VoIP over WiFi. The technology is all there... Let me know if you have heard of other innovative products using WiFi.

The VoIP debate on interconnecting

A recent C Net Article reports on the FCC judgement that "pure VoIP" is no different from email or any other IP based application and thus should not be subject to federal regulation regarding telephone services.

However the FCC has left open the question of what happens when VoIP services interface with the PSTN (public switched telephone network). Perhaps then they should be regulated?

This issue is a red herring. Anyone who connects a VoIP service to the PSTN pays an interconnect charge -- in California at least $10 a month for a single phone line or a lot more for a T1 PRI bringing 23 lines in on one circuit. So the regulation is available at the interchange point... how do you make the argument that the regulation should then extend to other parts of the VoIP network if a "pure VoIP" network has no such regulation?

And how do you keep the "pure VoIP" networks from interconnecting to the blended networks?

This is a meager attempt by the phone companies to at least create some FUD for operators like Vonage while they line up legal arguments and lobbying dollars to slow down VoIP, which, left unchecked, will destroy their current business models.

Amazon Honor System

I really enjoy writing this blog, and I believe there are folks out there that enjoy reading... So I have decided to try out the "Amazon Honor System" -- a way of making voluntary donations to web publishers you'd like to support. My commitment to you is that the more donations I receive, the more time I will spend on my blog - bringing you ideas, information, analysis, and ponderings on life, technology and philosophy.

I'd love your comments -- positive or negative -- on this voluntary support system, since I am just trying it out for the first time.

The economics of VoIP

I spoke with two companies last week that are in the long distance VoIP telephony business and it made me start thinking about the economics of VoIP telephony. My conclusion -- it really doesn't take that much money or work! We should all build our own long distance companies.

Here is some back of the envelope economics:

Variable Costs

There are three kinds of variable costs -- bandwidth, co-location facilities, and the cost of the T1 PRI from the phone company, allowing you to interconnect with the PSTN (public switched telephone network -- the analog stuff).

Bandwidth will cost you about .0001 cents per minute.

Co-location space works out to be about .00004 a minute

Finally the monthly fee for the local T1/PRI is about .00035 per minute

Total cost at maximum efficiency for your VoIP telephone network -- approximately .0005 per minute

No one can reach maximum efficiency -- but if you assume a bell curve for utilization against the capacity you need to build the variable cost is still less than .001 per minute of talk time. There is a minimum scale you have to be at to get to this rate... about 7 million minutes a month.

Now that is a lot of time on the phone, and one person isn't going to talk that much. A good comparison point -- common nationwide long distance deals are available for about $0.05 a minute.

To get to that price you'd need to use your VoIP circuit at least 70,000 minutes a month... 2333 per day... 97 minutes per hour... If you think about the average customer as having 2 hours of long distance calls a week, this is less than 150 customers for your phone service... of course they all have to want to call the same single destination if you only install one circuit...

Equipment and software

You will need a little bit of hardware for this exercise

First you need to get Linux based Intel machines. You can get solid machines for $2,000.

Then you need to download and install Asterisk -- an open source hybrid TDM/VoIP PBX.

You'll also need a card for each PCs to manage the T1 PRIs -- A company called Digium sells cards for Asterisk at $1500 each.

And you'll need at least one of these machines on each end of your connection.

$8,000 in capital investment to be a phone company.

Of course there is your time, or the time of a technician that you hire.

Still, if you could build a clientele between two points -- say India and the US -- you could probably offer them $0.02 a minute phone service and make a solid profit. And save your customers an enormous amount.

The traditional phone companies have to be worried.

Mac vs. PC (but no viruses...)

I find myself under constant pressure to return to Windows. I love my Mac. But Microsoft's monopoly power really has a way of making a guy sweat. First it was that Siebel CRM OnDemand application that only works on MS Windows. Then it was WebEx that I was unable to use from my Mac. And everyday I visit web sites that have Javascript errors from my Mac. Even though I am using the latest, greatest version of MS Internet Explorer from Microsoft on my Mac! I would switch to Safari as my web browser, but other sites simply say they don't even recognize the Safari browser...

But no viruses...

One of the things that has made me happy I am on the Mac is that I am not subject to the regular waves of viruses afflicting my colleagues on Windows. Think about it -- a Mac virus simply wouldn't work! There just aren't enough Macs out there to enable a virus to spread. It would get out maybe 2, maybe 3 generations from the origination point, and would find that all of the machines it was connected to were PCs... Now I suppose someone could go to the trouble to write a virus that worked on both PCs and Macs... But why bother when 95% of the time your virus will spread based just on running on PCs.

And isn't this an argument for not having a single operating system in the world? Just like with mono-agriculture, we suffer more damage, more quickly, when a pest infests our mono-operating system world.

Keiretsu Forum...

So if you were an ex-CEO of Levi's... or an heir to the Schwab fortune... or have found your way into a few million dollars in the dot com boom... where would you go to find some interesting private investments? Today I spent my morning at the Keiretsu Forum -- self described as being about Great Association with Quality Deal Flow and watched the moneyed of Silicon Valley give the thumbs up or thumbs down on 5 early stage companies.

By their own admission, the section most members visit on their website is the "event calendar" -- including ski trips, golf outings, and trips to Hawaii... but the presentations today were all business with both self-made millionares and inheritors weighing in on the pros and cons of businesses that ran the gamut -- life sciences, software, financial services, even a new packaging concept.

It was a refreshing reminder of the dynamic form of capitalism alive in our country. A "swarm" of investors that self-organize and fund companies. The "K-Forum," as everyone calls it there, just creates a venue for the investors to see qualified deals. Investors make their own individual decisions to jump in.

Joining is easy -- have $1 million in liquid assets (that makes you an accredited investor) and give Randy Williams, K-Forum Founder, $1,000 a year. Oh, and there is a 2-3 month waiting list...

Lest you think that the $1 million rule is a way of keeping the club exclusive -- this is actually an SEC rule intended to protect less sophisticated investors from bad investments.

Reed Hundt on VoIP

An excellent interview by Paul Kapustka for Networking Pipeline -- Reed Hundt former chairman of the FCC...

Here is one thoughtful quote from Reed on regulation of VoIP:

So that's a huge regulatory issue. If the regulators say, "well, we sort of want to regulate VoIP," my view is: Be suspicious, be wary, be alarmed, be worried. Because what they should say is, we have no more business interfering with the flow of bits that are voice than we do with the bits that are the picture you sent to somebody to see if you can persuade her to go have a drink with you because you were connected by Match.com. That's personal, and the voice call also ought to be personal.

So many people saying such sensible things about VoIP regulation (or non-regulation)... Where are the big, bad phone companies to insure that their investments are protected?

I am a VoIP believer

I have to admit that I have been hanging back from the VoIP banquet table because of my misplaced concern about voice quality. Well this week I set up phone numbers for myself through VoicePulse in both New Haven and in New York City... and they work great!! I am now a Believer and am jumping in with both feet.

One other lurking concern was about the possibility of government regulation. I was heartened by these comments by FCC head Michael Powell:

"It is not a telephone service; it is a voice application, completely indistinguishable from any other kind of application that can run on an IP network. If you're going to say to me that voice over IP is something that needs regulation, then you're going to have to explain to me why e-mail isn't also, or streaming video or instant messaging is not also..."

Remarkably intelligent comments coming from a government official!

The full article is available on News.com

All this euphoria makes me want to become a VoIP long distance telephone company. Heck, I think we should ALL become long distance telephone companies! I was tired of doing business with SBC anyway...

Microsoft wins again...

Why use a platform independent technology to deliver your application to customers and then tie your implementation exclusively to a single platform? This is exactly what Siebel has done with their CRM OnDemand product.

Despite having built the application to run in a web browser, the technology that should allow vendors to break their dependence on Microsoft, the Siebel folks have tied their implementation to an MS Windows specific implementation of Internet Explorer. That's right, even using Microsoft's version of Internet Explorer for Mac OS X you cannot run Siebel's CRM OnDemand application.

And forget about any non-IE browsers.

Understandably, 95% of the world uses Microsoft, so vendors should support their Windows customers. But it isn't that hard to make a browser based application work on non-Windows platforms. And if you don't care about supporting non-Windows customers, why use a browser based application anyway? A much better user experience is available by building a native Windows application.

Siebel is not alone. I have found that more and more web sites that I visit are Mac unfriendly. Recently I upgraded to IE 5.2.3 (the most recent release for Mac) and discovered that Macromedia's Flash Player has stopped working. Whether deliberate or not, Microsoft is succeeding in balkanizing the Internet -- diverging their browser (even on their OS) from the marketplace. Given the economics, most companies will chose to invest in Windows specific solutions. The Microsoft monopoly wins again.

Fair Disclosure -- Prior relationship to Salesforce.com

I have received some questions regarding my relationships to either Salesforce or Siebel and in the interest of pursuing a blogger code of ethics, let me be clear -- I have known Marc Benioff for some time, while at Borland I was the principal contact between Borland and Salesforce.com, and I did attend a 49ers game in the Salesforce.com corporate box. I have never received any such invitations from Siebel.

I personally do not believe that this clouds my reporting here on this blog, but now you can decide for yourself given my disclosure.

By the way, I did finally get a password and logon to Siebel CRM OnDemand -- after sending an email reminder to them yesterday. However I am not able to logon due to a Javascript error that I get when accessing their system. I have contacted their customer support organization and am awaiting their reply.

And when I signed up for the Salesforce.com trial (which worked flawlessly and immediately) it was through their website - not through my relationships to executives at their company.

Are We Losing the Robot Race?

Pik which, when launched in October 1957 by the Soviet Union, excited our nation to respond with a technology crash program of its own, we have no equivalent Space Race response to the frequent announcements from Japan of its growing prowess in robot manufacturing.

The latest news, that Sony has built a full-size humanoid jogging robot is just the latest in a series of firsts from Japanese mega-conglomerates. For some time now Honda's Asimo and Sony's Qrios have been entertaining conference attendees with dance routines.

Many have argued that humanoid shaped robots are not particularly useful by comparison to industrial robots where most US researchers have focused. Solving the complicated problems of making a machine move like a human being doesn't help with any of the heavy industrial problems for which most robots are utilized.

This narrow view of robots ignores the basic premise that Honda and Sony are successfully focused on -- that everything in our world is designed to accomodate a human frame and human hands. If robots are going to play a useful role in an everyday human world, they will have to move and look something like human beings.

Robot manufacturing will be one of the 21st centuries biggest industries. As the world's largest economy we ignore this market at our own peril.

Siebel CRM OnDemand update

Its nice to have a blog that people read. Thank you to whomever let IBM/Siebel know that I was frustrated -- suddenly a "CRM OnDemand Solution Specialist" contacted me from IBM. She was very friendly and she has set me up with a trial account that begins on Monday. It appears to be a manual process...

Suggestions to those of you at Siebel and IBM who may be reading this:

1) Automate your process for issuing a trial account -- when I register to try your software, your service should be "on demand"

2) Have your salesperson contact me to offer to help after I have a trial account not as a barrier to my getting a trial account. Use that contact as an opportunity to find out something about how I intend to use the product.

3) I got the impression that you hope that people who sign up for the "trial" will begin actually using the service and entering real data. Why would I do that? If, like Salesforce, you had a lightweight version for free I might, and then you might hook me and I'd want to upgrade to a pay version. But as it is I know that my trial will end in 30 days so I will play with your product so that I can learn about how it compares to your competitor but I will not be so foolish as to really use the product and then have my data go away in 30 days.

I look forward to receiving my userid and password on Monday...