Former AT&T exec Tom Evslin lucidly notes many of potential features that VoIP could introduce that would never appear on the PSTN. The success of a stupid network solution is about feature innovation, not low cost.
I think he's got one third of the picture right, but it needs the other two thirds to put it in context.
I wonder if we'll see three waves to the adoption of VoIP. The first is predicated on price and arbitrage. Vonage falls squarely into this category. The second wave is on features that really can't be done on the PSTN. Skype has a foot in both these camps. The third is social; people buy the device or service not because of intrinsic value of the features, but because of what it says about you. It's like not having e-mail. In 1996 you could reasonably have argued whether you needed it. In 2005 it means you're hopelessly out of touch, desperately poor, or purposefully eccentric.
The difference between the feature adopters and the social adopters maps roughly onto Geoffrey Moore's early majority and late majority. The late majority buy in not because they see the benefit, but the costs of not joining start to increase.
An example of social adoption might be radio call-ins; not having a wideband audio codec marks you out as a connectivity second-class citizen. People who sound good will, rightly or wrongly, be assumed to have more valuable opinions. It's the radio equivalent of body language.
So that's the fuller benefit picture -- it's more than just features. But we haven't really looked at the cost side. This is often neglected. People will adopt VoIP in large numbers when the benefits exceed the costs. So what are the costs? Nobody wants to talk about this because the dirty little secret of VoIP is that it can be expensive.
The "free postage and packing" for your voice packets that the Internet provides tends to make people think VoIP is free. That's only true if you narrow your view to the marginal money cost of the conversation. But most of the cost isn't associated with the call per se. First you buy smart hardware, and have to learn the new system. As long as the market is in rapid flux there's significant risk you're learning a dud technology. Then when it comes to the call itself there are mental costs; does this recipient have VoIP? Which client? Which version -- oh, and does the Mac version they have support this voicemail feature? Will your Siemens IP phone interoperate with my Panasonic one? Will my privacy be protected? Will I have to tell everyone my new contact address?
So the whole transaction cost of a VoIP call is way more than just the bit haulage. Admittedly the new features from VoIP are dropping the transaction costs of some calls. I find it much easier to co-ordinate establishing a conversation using voice messaging, IM and presence built into a tool like Skype. The "cost" of a successful interaction on Skype is lower than playing PSTN telephone tag.
Skype's integrated proprietary architecture, and focus on usability, can be thought of as a way of minimising transaction costs. That "no spyware" tag on their front page is important in lowering the investigation costs of the prospective user. You also don't have to worry about interoperability of different flavours of Skype. (Their rejection of an open SIP architecture was a rational one.) The "total cost of ownership" of Skype is low. Your mum can install it without you being there to help. You don't even need to be aware of the NAT are firewall issues, let alone solve them yourself.
The familiarity of the PSTN gives it very low mental transaction costs. The user hardware is also pretty damn cheap. Where competition and (de)regulation work, prices are low. Its extraordinary tenacity in the face of the IP onslaught is testament to its success in lowering total cost, despite high headline call charges.
The achilles heel might be voice spam, which increases the cost of ownership of a PSTN phone. Smart, automated and malicious edge nodes weren't anticipated in the PSTN design. We're all trustworthy telcos, and the users can't do much harm to each other with the dumb devices. Bridging the Internet to the PSTN ruptures its trust model. It's a sudden environmental change of the type maladaptive disosaurs dread.
Should this get to be a big problem, IP telephony will be adopted more rapidly by the masses; but not because of new IP features but because of a changing cost-benefit equation compared to the PSTN substitute. Diverse and distributed IP telephony will offer more means of resisting spam than the PSTN monoculure. It's the parasites, predators and diseases that drive rapid evolution. We didn't sprout ears and eyes because it was cool, but because it helped our small furry ancestors avoid getting eaten.
The summary is that new forms of IP telephony will be adopted for richer reasons than just features, and the adoption is driven by a more complex cost-benefit landscape, which includes the changing true costs of participating in the PSTN (previously down, tomorrow up).
Posted by Martin Geddes at 12:32 PMTrackBack URL for this entry:
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