Submitted by acohill on Tue, 09/13/2005 - 07:40
The news outlets are all carrying the story of eBay paying $4 billion for Skype.
I do think Voice over IP telephony is going to replace analog phone service, and that the transition will happen faster than many think, but Skype is hardly workth $4 billion USD.
Here is the problem: The technology Skype has is nothing special. There are not only competing commercial products, but there are plenty of Open Source VoIP projects as well, like Gizmo. And Gizmo shows every sign of being a big hit.
So what will eBay get for it's money? Skype has some twenty or thirty million "users" of its free version, and a much smaller number of paying users. I put the word "users" in quotes because trying to count who actually uses free software is mostly a wild guess. The most popular way to do it is to count the number of downloads, which does not mean much. Many people download free software and never use it even once, or fire it up once or twice and then forget about it.
So eBay does not get a large base of established users, and even the smaller group of users that have paid to use Skype's ability to connect to the existing phone network is suspect--making one paid phone call makes you a "Skype" customer but does not translate automatically into a recurring revenue stream.
VoIP is the killer app for broadband, just as email was the killer app for dial up Internet service. Many people who otherwise would not bother upgrading their dial up connection will do so to save money on phone service. In many cases, the savings pay for the increased cost of the broadband connection.
So there is much interest in trying to capture the VoIP market. The Skype guys are really smart; they followed the now classic formula for establishing a new market and then selling high, before they a) run into competition, or b) actually have to provide a reasonable level of service.
The problem eBay has is that it's very easy to switch from one piece of VoIP software to the other. The second, and much bigger problem, is that there is no established standard for "Internet phone numbers." The free version of Skype works only with other Skype users, and you have to know their Skype number in advance. Ditto for other free VoIP services. And voice telephony is only useful if the people you want to call use the same software that you do.
If Open Source projects like Gizmo succeed in establishing a standard "phone number," eBay is out $4 billion. And Gizmo, or something like it, has a good shot at doing so. Once that happens, plain old telephone service (POTS) is free, and eBay is out of luck.
We're entering into a VoIP bubble. We'll see more big, outlandish deals for VoIP software. And most of them will amount to nothing.
Submitted by acohill on Wed, 08/31/2005 - 06:42
New Zealand Telecom has announced it will switch every phone in the country to the Internet-based VoIP system, starting in 2007. The company estimates it will take approximately five years to get every phone changed.
Voice over IP is moving rapidly, and the biggest benefit is reduced cost. A typical incumbent package of local and long distance calling in the U.S., using the old, 19th century phone system we currently have, cost between $40 and $50 on average. An equivalent VoIP package averages between $20 and $25. Savings are substantial for businesses with multiple phones. Another benefit is an increased set of services, like call forwarding and simultaneous ring, which are often included as part of the base package with VoIP offerings, but cost extra or are not available at all with the old 19th century phones.
Simultaneous ring is especially valuable for businesspeople who travel and/or have to be out of the office frequently. To set up the service, you enter two or more phone numbers (e.g. cellphone, home phone, etc.). Once the service is activated, when the primary phone number receives a call--typically your business phone number--all the phones you have listed will ring at the same time. The call is transferred to the first phone you pick up. It's a much more efficient version of call forwarding.
Submitted by acohill on Thu, 08/04/2005 - 08:57
While our FCC dithers about the best way to preserve legacy telephone and cable services, Singapore has pushed VoIP into the mainstream by creating a system for managing telephone numbers assigned to VoIP service providers. Singapore is not requiring VoIP providers to give subscribers access to emergency systems (911 services), but is offering incentives to those companies that do make the effort. This is much more sensible than the confusing and potentially punitive policy the FCC is trying to enforce.
And the FCC is not really the main problem. Our Congress just passed a huge roads appropriation bill, which is terrific. We're trying to fix our twentieth century highway system, while other countries are building twenty-first century highway systems.
Submitted by acohill on Thu, 07/21/2005 - 13:46
Voice over IP phone providers are trying to get their customers to acknowledge that they know their VoIP service may not work with 911. This is in response to an FCC ruling that requires all VoIP service providers to have 911 service working by July 29th or notify every customer that it does not.
The problem? It's darned hard to get some customers to acknowledge stuff like this. The FCC has not told VoIP companies what to do if a customer refuses to acknowledge they have received a notice, and some companies are being advised that they will have to cut off service.
Apparently the FCC has refused to provide any clarification, instead insisting that the companies have to make repeated efforts to notify, and must have documentation (like an acknowledgement email) that a customer knows 911 may not work.
Submitted by acohill on Fri, 07/15/2005 - 09:39
Project Gizmo is a new Voice over IP application that seeks to challenge Skype, one of the best known free/fee Internet telephone applications. Project Gizmo is likely to win over the long run because the software is designed on an open source model that allows users to place calls to other voice software that uses the emerging SIP standard. Skype, by comparison, uses a proprietary protocol--you can only call other Skype users for free.
Both services charge a small fee of a few cents a minute to make connections to the "old" telephone network. The Gizmo software is available for both Windows and the Mac.
The big picture here is that traditional telephony is dead, dead, dead. One of the reasons the phone companies have resisted providing better broadband connections to users is their dread fear of losing telephone revenue. Cheap, fast fiber connections would encourage customers to quit paying for overpriced landline service and switch to VoIP.
The crazy thing is that this is already happening. The smart thing would be for the phone companies to simply compete--with better VoIP service. But instead, they are pouring hundreds of millions of dollars into lobbying efforts to keep the U.S. 16th in the world in broadband connectivity.
Submitted by acohill on Thu, 04/14/2005 - 08:15
This CNN story demonstrates perfectly why the telcos are terrified of cheap community broadband. The story highlights a businessman who cut his $800/month business phone bill by 80% and is able to give better service to his customers at the same time--cheaper and better with VoIP. And he now has an extra $640/month to plow back into the business itself.
The article is worth a read just to get an insight into how VoIP is fundamentally changing businesses for the better. Startup VoIP companies like like BroadVoice, SunRocket and VoicePulse are adding millions of subscribers a year, and many of them are businesses that want to save money and offer better services to customers--bottom line economic development.
What is your community doing to make sure every business in your area knows about the advantages of VoIP and how to get it? Are your economic developers holding short courses and seminars on the topic? And what is your community strategy to get affordable broadband, which you have to have to use VoIP?
Submitted by acohill on Fri, 04/08/2005 - 08:10
AOL has decided to jump into the VoIP marketplace. It might just save the company, which has been bleeding customers for the past couple of years as people switch to broadband.
AOL has an advantage over many of the other VoIP providers; the company is going to integrate voice calls with their Instant Messenger (IM) service. It's a good idea, since you can check to see, via IM, if someone is in the office and wants to take a call. I know it's a good idea because Apple has offered this service on every Mac for free for the past two years. Apple's service, called iChat, is still much more advanced because iChat also supports video calls, and the new version coming out later this month will support video conference calls with up to four people.
But AOL has lots of customers who are likely to try their service out, and the increased revenue per customer could get the company back on track.
Submitted by acohill on Mon, 03/28/2005 - 10:04
The FBI wants to increase the cost of Voice over IP. The VoIP news article has a set of excellent questions that someone ought to be asking the FBI as they seek to extend existing wiretap requirements to VoIP companies. Not only will it increase the cost of commercial VoIP software by requiring those firms to install wiretap backdoors in their systems, the whole exercise is absurd. Here's why.
So what's really going on? Occam's Razor may be useful here (the simplest explanation is probably the correct one). Recall that this is the same FBI that just spend $170 million of our tax dollars on a "Virtual Case File" system that does not work. In other words, the FBI has neither good in-house technology advice nor do they seem capable of buying it. Like many other Federal government agencies, when the FBI wants technology, they run to the beltway bandits--the big consulting firms that inhabit the D.C. area, who have a built in conflict of interest when asked by those same agencies to both design and build systems.
Submitted by acohill on Wed, 03/23/2005 - 08:53
The state of Texas has sued Voice over IP provider Vonage for not explaining to customers that 911 does not work over its service. In fact, 911 does not work over any VoIP service reliably, and the problem is likely to begin slowing the acceptance of VoIP.
Traditional landline voice service gives 911 operators direct access to a telephone company database that ties a phone number to a specific street address. This is relatively foolproof because landlines, by definition, only go to one location. But VoIP phone numbers are completely portable. While traveling, I can make calls on my "home" VoIP phone number from my laptop, thousands of miles from the address of record my VoIP provider has for me. So it's not just an accounting or database issue.
VoIP breaks the current 911 system, which was designed for a different day and age. What is likely is that regulators (like the state of Texas) will try to "fix" the problem with awkward legal requirements that don't really solve the problem, and will likely retard the diffusion of the new technology.
Instead, we need a new 911 system. One approach would be to see if GPS (Global Positioning System) technology can be used. GPS chips are becoming relatively cheap, and it's easy to imagine a handheld phone that always knows where it is, using GPS.
This is not farfetched because marine radios have been able to do this for years. A cheap handhelp VHF marine radio can be purchased with a GPS interface that allows the radio to send a distress signal with the exact location of the boat. The technology works and it saves lives.
Submitted by acohill on Fri, 03/18/2005 - 11:33
VoIP Weekly reports that 40% of international phone calls are now carried by VoIP services, up from 2-3% in 2000. The article also states that VoIP has killed the calling card market. College kids have been a key demographic for that market, and apparently tech savvy youth are very comfortable using free services like FreeWorld Dialup and Skype to make phone calls. It's also a boon for parents of college kids who may have been buying some of those calling cards. The article also expects the wireline (traditional) phone industry to see a 40% drop in revenue by 2008 as more and more customers move to VoIP services.
Submitted by acohill on Tue, 03/01/2005 - 08:13
Costa Rica's countrywide telephone monopoly is trying to make it a crime to make a Voice over IP telephone call. From the article:
"One Costa Rican official of an agency seeking to promote the Central American country's software industry said last week that ICE's proposal would be "disastrous" to the country's efforts to grow its software development and outsourcing businesses."
That's exactly right, and applies equally to any region of the U.S. trying to encourage the growth of Knowledge Economy businesses. The telecoms really need to face up to the fact that they are no longer in the telephony business--they are in the data transport business, and they need to start acting that way. If they accepted the notion that they are selling bandwidth, not dialtone (or TV programming, for that matter), and upgraded their systems to support the demand for bandwidth, they would find that they could make pretty good money doing that.
But pigs may fly first.
Submitted by acohill on Wed, 02/23/2005 - 07:52
Esme Vos at MuniWireless reports that Arizona has been testing VoIP via wireless on highways, and that telephone calls have been made successfully at speeds of 80 MPH. The effort uses equipment from a company called RoamAD. The mesh network system is able to hand off the signal from one cell to another without losing the telephone call.
I've been following mesh networks for some time, and I think the technology, which is inexpensive and ideal for covering large areas with a WiFi blanket, is poised to catch on.
One of the weak points in the incumbent opposition to municipal wireless networks is the fact that a WiFi blanket is likely to emerge as a key public safety technology. On top of that, community-regional WiFi blankets are going to save taxpayer dollars. Laptops are already common in patrol cars. But imagine if a police officer, at the scene of an accident, could not only videotape the scene, but transmit it in realtime to a server back at the police station, where it could be archived, along with all the paperwork, which would also be transmitted in realtime from the scene.
Drunk driving enforcement could use the same systems, archiving roadside sobriety tests as evidence for a court trial. Fire, rescue, and paramedic teams could also use 24/7 realtime network access to improve response times and save lives.
And if a community is provisioning a wireless network, why not design it so citizens can use it as well?
As always, I think that communities ought to be making the infrastructure investments (duct, towers, tower sites, colocation facilities) and issue RFPs to the private sector to provision and manage the network. That way communities get what they need while creating private sector jobs. Why would you want to do it any other way?
Submitted by acohill on Fri, 02/18/2005 - 09:25
Motorola has announced that it will build a GSM cellphone (the European standard now being introduced in the U.S.) that is also "Skype ready." This means if you are in a WiFi hotspot, you can make calls for free via the Internet. Not in a hotspot? Then the phone uses the old cellphone system.
Skype is a popular free VoIP service that was founded by two of the originators of popular peer to peer services including Altnet and Kazaa. Skype to Skype calls are free, and the company charges for calls made to the old telephone network (i.e. what most of us use).
It's not clear exactly what the future is for services like Skype. The company's software is proprietary, so they control their user base, unlike some other Open Source VoIP services like Free Word Dialup. Skype is popular right now because they have a more finished product that is easy to install and use. Some of the Open Source software is a bit rough around the edges.
I'll stand by my prediction that telephony as a business is dead, dead, dead. In the future, voice calls will be like email--we'll all have it and use it heavily, and it won't cost us a dime to call anyone, anywhere in the world.
Business opportunity: voice and video calls to the moon and to Mars will cost money for a while because of limited bandwidth. Real time calls to the moon will be just barely possible; the latency will make for a slight delay, but it will be manageable. Real time calls to Mars will not be convenient, as the latency will make it very difficult to have a conversation fluidly. According to my calculations, the latency to Mars will vary between about 4 minutes and 20 minutes, depending on the relative positions of the earth and Mars.
You might ask, "What happens to the phone companies?" The phone companies have to recognize that their only option is to think of themselves as access providers rather than service providers. And they are lumbering in that direction, albeit very slowly. The acquisition of AT&T and MCI by local dialtone companies gives the latter the long haul circuits to better serve the access market.
Submitted by acohill on Tue, 02/15/2005 - 18:52
Om Malik reports on news from law professor Larry Lessig that some VoIP services may be blocked or degraded on some of the incumbent networks. I predicted this many months ago--that the monopoly infrastructure carriers would eventually block VoIP because it competes with their own "antique" phone systems.
Congress and the FCC have generally been friendly toward to VoIP phone service, so expect this to become a huge political issue. The phone companies have the most to lose--namely their entire business, but the cable companies also want to sell telephone service. These dinosaurs will pour billions, if they have to, into the pockets of legislators to get laws that let them keep their monopoly control of their infrastructure, and by extension, monopoly control of the communities that they serve.
This is going to get very ugly. Communities can begin to innoculate themselves from this infection by making prudent investments in telecom. It's the only way to break the monopolies.
Submitted by acohill on Fri, 02/11/2005 - 12:28
Many of the VoIP services like Skype and iChat use "softphones," which means the phone is really a program on your computer. You still need a headset of somekind, but the whole set up is a bit clumsy compared to the time-tested "telephone" interface we've been using for, oh, a hundred years or so.
Engadget has an article on an inexpensive (about $45) VoIP phone that actually looks and acts like a phone. The neat thing is that you don't plug it in the wall, you plug it into a USB port on your computer.
The only problem I have with this is that it ties the phone to your computer. A more practical solution is the adapter box that some outfits like Vonage sell. It plugs into your Ethernet jack (your whole house is wired for Ethernet, isn't it?), and any standard phone plugs into the box. So you can have the phone anywhere you have Ethernet access...even WiFi access.
Submitted by acohill on Fri, 01/28/2005 - 10:39
Cnet has a story about how businesses are grabbing onto Skype, the free telephone service that works over the Internet.
We're just at the beginning of the biggest change in telecommunications since voice telephone service became available 100 years ago.
One of the ways Skype is being used is by business travelers. Roaming charges, lack of cell coverage, and different standards for phones often makes it difficult to call back to the main office easily or without great expense.
If the home office staff and the business traveler have Skype accounts, all the busines traveler has to do is find a broadband connection (sometimes easier now than cellphone coverage) and make a call. Anywhere in the world.
The telephone companies are terrified of this. They don't really want broadband to get out to their customer base too quickly, because it will just accelerate the loss of their analog voice service cash cow.
What's next? In the next year or two, expect an incumbent telephone or cable provider to block certain kinds of services from traveling over their network. That's right, they can block Skype, Vonage, or any other kind of voice call if they think it is competing with their own services.
Just one more reason for community ownership of part of the network.
Submitted by acohill on Mon, 01/24/2005 - 09:38
What in the world is Google up to? Sitting on a huge pile of cash, with more coming in every month from the successful Google AdWords service, one has to wonder if the company would be content.
This article from the Times in the UK suggests Google has something big up it's sleeve, with a possible foray into a worldwide Voice over IP phone service.
The article speculates that Google may be buying up some of the substantial over-capacity in dark fiber that has been laying around unused since the dot-com crash, on the theory that the firm may be planning a high performance, global phone network that offers free phone service.
Since there is no free lunch, the only mystery is how it would get paid for. The phone service could be tied to some kind of advertising model, where the softphone that runs on your computer might display ads.
It will be interesting to see how this turns out. If I were one of the Bell phone companies, I'd be worried...very worried.
Submitted by acohill on Wed, 12/22/2004 - 11:03
Esme Vos at MuniWireless thinks that the real reason behind Verizon's fevered opposition of community wireless in Philadelphia is that Verizon is terrified of cheap VoIP over WiFi.
I'm inclined to agree. I've been saying for a while that the whole cellular marketplace is in deep trouble. The cellular companies are frantically trying to lash overpriced and relatively low bandwidth (a few hundred kilobits) data services onto a system never designed to deliver data (just like they are frantically trying to squeeze more data onto legacy copper systems). Meanwhile, WiFi already delivers megabit data services effortlessly, and VoIP works pretty well in a well-designed WiFi network.
Why would you settle for inadequate and expensive cellular if cheap WiFi services are available throughout your area?
Like the problem that the cable and phone companies face with their outdated copper systems, the cellular companies face the same discontinuity with cellular--how do make the jump (i.e. copper to fiber, cellular to WiFi) without losing your customer base and your investments in the old system?
A company that understands competition and has a corporate culture of competition would figure that problem out and be determined to compete. But the phone companies have decided that rather than reform their own outdated corporate culture, they'll simply make it illegal for communities to chart their own future.
What's the root problem here? It's lawmakers who are not adequately informed about the community and economic development issues at stake. Which is why I've always said broadband is not a technology issue, it's an education issue. Communities and regions need to make sure their elected leaders are educated on these issues.
Want to get started? It's easy. Organize a local "Take a lawmaker to lunch" program and have a rotating group of folks who are well-versed with the issues take lawmakers to lunch once a month. In a year, I guarantee you will have had a significant impact.
Submitted by acohill on Wed, 12/22/2004 - 10:25
Sun Rocket, a Voice over IP company, has the VoIP universe abuzz with their ambitious business plans to expand from 3 to 50 metropolitan markets in 2005, and the company says they intend to be a player in 300 metro markets in the United States. Particularly interesting is their flat rate annual fee--for $199 a year ($16.58 a month), you get flat rate, unlimited, nationwide calling.
If you ever wanted a reason to justify some modest community investments in broadband infrastructure, how about cutting the average phone bill from somewhere well above $50/month (local, long distance, taxes) to about $17/month.
Do the math. How much capital would that unleash in your community and region to spend on other things, like business expansion, more goods and services from local companies, and new jobs?
And if you decide to sit back and let the cable company and phone company re-monopolize broadband in your community, how long do you think they will play fair and let competitors offer services like this over their infrastructure? A community-managed, broadband transport infrastructure keeps the playing field level and fair and gives businesses and residential service users real choice.
Submitted by acohill on Fri, 11/12/2004 - 11:50
The FCC released another ruling on VoIP. The Federal Communications Commission has barred states from imposing telecom regulations on Voice over IP telephony providers.
This is additional good news for businesses and consumers who are saving money by using VoIP services (estimated to be well over 4 million customers). State and local taxes on telephone services with no local infrastructure or presence is simply taxation without representation in another form, and revenue-hungry governments ought to keep their hands off VoIP. Taxing things like that just makes the state or locality less competitive globally and retards economic development.
Unfortunately, the FCC has still not ruled on whether VoIP is an information service or a telephone service. If it is considered a telephone service, VoIP would be subject to the no longer relevant telephone regulation of the last century. But so far, the FCC rulings on VoIP have all been in the right direction.
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