This is the first of what I hope to be a series of occasional interviews with the “people who matter”: those that are disrupting, being disrupted, or might control the speed of that disruption. Dmitry was kind enough to give me an hour one Friday evening for me to try to probe a bit more deeply into Popular Telephony and the – legendary or mythical? – Peerio peer-to-peer telephony product.
Some basics to put the conversation in context. Popular Telephony is the company. Peerio is both the product and a technology. The technology manages the storage and interconnection of peer-to-peer nodes on a network. Think of how Java Beans provided a standard set of APIs and execution environment to single-node computing, and generalise to P2P. In particular, Peerio’s design assumes no central servers. Storage is distributed. All management and trust functions assume distributed nodes and data. The technology is being embedded in phones, and VoIP is the first commercial application being deployed on top of the basic Peerio technology.
Popular Telephony is also promoting GNUP. This is client software that runs on Peerio nodes and performs two functions. Firstly, it includes various media gateways that run on the client to bridge different communications systems (e.g. PSTN gateway, Peerio, SIP, Skype). Secondly, it’s a distributed directory service that can also be used as the “holy grail” single point of contact by extending the PSTN numbering space; someone calls your GNUP number, and it gets patched through to your Skype service.
If it works, and if the customers buy it, then the scope for disruption via a fully distributed telephony system can hardly be overstated. If Skype was subversive, this is positively treacherous as far as legacy telcos are concerned.
Many of you will want to know: is it real, and can they deliver? Well, this isn’t a product review. You’ll have to pay someone to do due diligence! My goal is to explore the potential significance of the technology, and test its boundaries and plausibility. I'm assuming the technology works as advertised.
The format I’m using for these interviews is to reproduce a lightly edited, but largely verbatim, copy of the transcript. I’ll post up some commentary and analysis at a later date. Podcasts? I don’t like the sound of my own voice, and although I recorded this one (just for note taking), the technology sucked. Maybe one day.
Read, share and enjoy!
Telepocalypse: Willie Sutton was a famous bank robber who was once asked “Why do you rob banks?”, to which he said: “Well, that’s where the money is.” So a softball question for you first is which markets are you going after and why?
Dmitry Goroshevsky: Enterprise, and the answer is exactly what Willie Sutton said.
T: Enterprise is a very big world; different geographies, different parts of the enterprise. How have you honed your focus?
DG: Is Microsoft Office going after any particular segment of the market?
T: So you’re saying everyone needs to talk just like everyone needs to write, yes?
DG: Yes, if you take into account Peerio is about more than just communications.
T: You’re pretty busy at the moment in Asia [forming alliances]. What drove you towards Asia?
DG: A significant market. Strategically positioning ourselves equally in three markets: Europe, USA and Asia. Asia is the second market we went to. Asia is a known early adopter in the cutting-edge technology market, particularly Japan. Somebody told me Japan accounts for 70% of the new technology markets in the world. We have a cutting-edge technology breakthrough, and we see the Japanese are ready to adopt these kinds of revolutionary concepts.
T: The users don’t care if it is P2P or whatever; they just want to communicate. They don’t care what the network architecture is...
DG: ...Not necessarily true. There is an awareness what is behind, and particularly in the enterprise market where they want to know what’s going on in their network. And when we’re talking about the Japanese, they want to know how it works.
T: What unfilled customer need would you say the Peerio technology satisfies?
DG: It’s like asking what need does the first commercial airplane fulfil. You could do it the old way, in cars, trains and ships. It’s just faster, better and cheaper. It’s the way we will communicate in the future. In the next 30 years we will have computers that, according to Hans Moravec, will be as powerful as a human brain. These computers will cost less than $1000. So, imagine: we will have a Fibre To The Home network with these powerful computers. How can this be served by a central device? If you apply common logic it’s just impossible, because the server side will need to mirror the storage and processing capacity of the edge.
T: So you’re anticipating the arrival of diseconomies of scale of centralised computing?
DG: It’s impossible, not difficult. The network will crash!
T: So the purpose of Peerio is not just to do something that’s 99% cheaper, but to do something a centralised architecture will never achieve?
DG: Exactly. Cheapness just happens to be one characteristic of it, but it isn’t the whole vision behind it. What we’re saying is that “serverless” is the only approach we will ultimately have.
T: So isn’t Popular Telephony really a distributed database or distributed computing company masquerading as a VoIP play?
DG: [laughs] We’re not masqueraders – we’re telling everyone who asks the right questions. We’re doing VoIP because it can drive revenue to us, and it’s a fast-growing market. But are you going to only do VoIP – NO! It’s about communications. It’s a network.
T: So what do you see as the expansion of the communications space that you’ll fill? What’s your roadmap?
DG: We have a roadmap, but I can’t talk about that or the specifics. We’re trying to shorten the time between the announcement and the availability of the product. I can tell you the internal goal is to release a new application every month. No promises!
T: You’re aiming at an enterprise telco manager audience. But doesn’t your product put them out of a job? They no longer have an empire of people managing complex PBXs and session border controllers any more.
DG: [rhetorical voice] Did it ever happen before? Have we ever had new technology come and eliminate thousands of jobs? Not really, it always creates more than it eliminates.
T: But they’re not the same people. The PC revolution kicked off with people in the accounts department wanting a spreadsheet and buying a PC on discretionary spending allowances of senior managers.
T: What’s the purchasing model for Peerio? Will people be able to pop down to Costco, buy a 10-pack of Peerio phones and plug them in, and not have to worry about the telco manager?
DG: Absolutely! But we believe we will open a whole new market for serverless applications on top of serverless networks. That market can potentially be a multibillion dollar market.
T: Again, what you’re really deploying is a grid fabric, and you happen to be trojaning it inside a phone.
DG: Grid is not a good word because it’s a different architecture, but yes. But we are deploying a serverless network on which we believe you can deploy any type of networking application. Some applications we won’t even have thought of right now.
T: What barriers to adoption are there? Is someone buying the first Peerio-powered device a bit like the first person who bought a fax machine? There’s this beautiful future we can paint where everyone has these devices, but how do we get from here to there?
DG: Because it’s cheaper and better. It has features and functionality you cannot buy for this money, or sometimes for any money, on the traditional systems. Siemens have talked for years about new applications on top of their PBX systems. They claim “you’re paying even more for my PBX, but it gives you the productivity”. I can tell you that on top of Peerio this “productivity” is just a joke. And it costs 95% less. For me, it’s a very easy answer. There may be some psychological barriers, but not really technological.
T: Let’s talk about those psychological barriers for a moment. If there weren’t any barriers then a year from now you’ll be a multibillionaire and every enterprise in the world will have thrown out all its phones and installed Peerio and fired every telco manager. There clearly are barriers and friction: where does it come from?
DG: We have psychological barriers for anything unknown; that’s our nature. But we also have a drive to adopt new things called “progress”, and that’s also in our nature. There will be people stuck in the previous universe; there always will be, and always are. There are also people who can clearly see the advantages, including the cost and functional advantages.
T: If your product is two orders of magnitude cheaper than what’s out there today, will you be looking to distribute it via standard retail channels, or will you need an expensive sales force to you out and persuade people to buy 10,000 of these phones for their enterprise?
DG: No, we want to do what Microsoft did with different kinds of channels and distribution mechanisms. They’ll be cheap because they don’t need to be expensive. We will have a Dell type of marketplace on our website. You there, pick you phones, select a gateway (or if you don’t need a gateway, GNUP), it’s shipped to you overnight via FedEx, and there you go – a telephony system.
T: Is the gateway your secret server?
DG: No, we can do it with or without a gateway. With Peerio you don’t need an expensive gateway, because Peerio provides the redundancy. You don’t need any special form factors or fancy boxes. Peerio provides the five-9s reliability, even if you just store it in your shoe box.
T: Should users be worried about the Peerio tax,? This is like the Microsoft Windows tax, which is because of the very strong network effect of Windows. You get very high margins compared to the cost. Once everyone has a Peerio phone, is there a danger of being dinged down the road by the Peerio tax?
DG: I believe in capitalism as a system, and market forces. I don’t like Windows and don’t use it myself, but that’s not because it costs $100. It’s because it’s worse than MacOS X that I’m using. Windows was adopted by all these users not because somebody imposed it on them. It actually was the best system around. It was the cheapest system around. As long as it was right, it happened. That’s what created Microsoft, and there’s nothing wrong with that. But if Microsoft try to impose anything, user have Linux and Apple. The market will determine our revenue. If we’re good enough and ahead of everybody else, why should people be paying us. It’s only a fraction of the fee they’re paying to the Siemens, Avayas, Nortels and Ciscos of this world. Why worry about our domination if the market is already dominated by five players, who are making enormous amounts of money today?
T: Enterprises are like islands, looking to be joined up. How will people use Peerio between enterprises? What’s required?
DG: Either as a configuration issue, or on top of a bigger Peerio network, for example GNUP. Enterprises create their own Peerio networks. You can create as many networks as you like.
T: How do you peer Peerio networks?
DG: You need a device joining the two networks which is identified by a special identifier. So you just need the rights to access the network via a special identifier.
T: These special devices, are they like supernodes [a Skype construct] inside the enterprise?
DG: It’s just any device that runs the Peerio software. Telephone set, Wi-Fi phone, PDA or computer. It needs to be connected to IP and the Peerio service needs to exist on the IP network. Thousands of Peerio networks can run on the same IP network concurrently, and you will join the one you have an identifier for.
T: So what’s the user experience? I’m at XYZ Corp., and I want to speak to my supplier at ABC Corp.; how does it work?
DG: Firstly, Peerio has replaced your enterprise PBX. You have your own Peerio network. Your enterprise might have hundreds of sites, but they are configured to act as one Peerio network. You will have a numbering plan proprietary to your enterprise across all locations. To call outside there are three different ways. The example you picked it the most esoteric. Firstly you can use any PSTN gateway you own. Or you can use GNUP to ask other service providers that interconnect networks to get you out. [Popular Telephony have an alliance with Stealth – Ed] This delivers the Peerio identifier, which isn’t the same as the number on the local network. If it’s the same – which is what Skype is trying to do for the enterprise, and I don’t understand – it’s one network everyone needs to be connected to. That gives you problems with security and reliability.
T: So Skype’s problem is a lack of private namespaces?
DG: Exactly. In our system you run your own Peerio network, and join other Peerio networks as a special administration task. You authorise a handset to join another network, from which it receives an identifier, and it can receive calls from the other network. It’s modular. So just as an example, if you have another company that you work with a lot, you can create another set of numbers you use just to communicate between your two companies.
T: We’ve talked about calling within an enterprise, and federating enterprises. The PSTN lets anyone talk to anyone else.
DG: That’s why we created GNUP, to allow you to interconnect.
T: What’s stopping someone using a GNUP number to send out telephone spam and not be traceable in any way?
DG: What’s stopping them today? The Peerio network is completely manageable and traceable. We can provide a special authorisation number for the authorities if they want to trace a number. The reason for that isn’t spam; it’s the terrorist threat. From my perspective that’s way more important than spam. Peerio is completely manageable, unlike some others. Although completely distributed, with no servers, with the right administrator authority you can have CDRs and malicious call trace and all the PBX features. If a government agency like the FBI formally asks us for an authorisation code to trace a malicious call, spam or terrorist threat, we will provide them with the special administration number to trace calls. The network is completely aware of the needs of the government and law enforcement. I don’t have a problem with people knowing this; the Peerio system isn’t there for people to be untraceable and do whatever they want [anonymously] in terms of law enforcement. Inside the enterprise, nobody can trace it except the system administrator. We are providing full ACD [Automated Call Distribution] capability to monitor and supervise calls.
T: GNUP provides a distributed directory capability. Is this a viable stand-alone business, or are you only in the directory business to enable the basic Peerio technology service? Is there a business model for directories?
DG: We sell Peerio. That’s our business. It’s an enabling technology. It includes a database in which you can store anything you want, including directory services. So an independent developer can come to us, buy the Peerio SDK for $1500 (or whatever) and do whatever he wants to, including a directory service. But there’s no business model for [directories] and in particular we aren’t charging any money for residential offerings like GNUP.
T: Do you think there is anything from the PSTN model that will still require charges [in VoIP]?
DG: No.
T: Should a system that is resistant to spam and abuse be charged for?
DG: The application developer can do whatever he likes. If he wants to charge for incoming calls, he will do it. The difference is we don’t take anything from the end user. We don’t have any of our business model based on the price someone is paying over the GNUP network to somebody else.
T: Do you think there will be one VoIP architecture that will bind all enterprises and consumers, or do you think we’ll see a fragmented world where for B2B people use Peerio, B2C is PSTN and C2C they use Skype?
DG: Speculation; Commander Data would say “Not sufficient information”.
T: Too early to tell, or question not meaningful?
DG: Question is pretty meaningful, and it’s too early to tell. The answer you’ll get from people to that question will more depend on what they like to hear and do. My futuristic view? There will be no PSTN, and also no other centralised-based services. Basically, nobody except Peerio has a valid model – today. But that of course doesn’t mean that there will be only Peerio. But it will be serverless only, otherwise it just won’t work.
T: So would you see ENUM, as a centralised phenomenon, as a dead-end?
DG: Of course! Same logic; devices at the edge are becoming more powerful and intelligent. The numbering plan is just a small piece of what they will demand. Why would you create such an infrastructure of huge machines to process this data on behalf of extremely powerful machines at the edge? You just cannot do that. Or at least you can, but it’s absurd. If you can do it without [centralised servers] why would you do it with?
T: But isn’t some of the data, like who does this IP address really belong to, centrally owned? If there’s value in that data, won’t they seek a central point of control?
DG: They are nothing to do with each other. Peerio provides you with full control without the centralised architecture.
T: But if the data is centrally owned, and a dip is not too expensive, and the connectivity is really powerful, who cares whether the other node is “centralised” or just a remote peer?
DG: The architecture won’t hold.
T: You’re betting that the volume of transactions will exceed what any centralised architecture can support.
DG: Of course.
T: We see the Oracle’s of the world out building their massive grid servers, with each server having tens of processors. Is this the diplodocus of the dinosaur era: really big, really hungry, and about to be really dead?
DG: Right. The scalability of today’s databases and transaction servers is an issue. Why won’t we solve this with a serverless approach? You just install Peerio on servers running transactions.
T: If your distributed storage technology is so good, why are you focused on telephony? Why not sell the technology into some other distribution channel? Why not sell it to Sun and get them to re-invent their business. [Yes, I get the irony - Ed]
DG: Just a question of time, effort, money and focus. Yes, we’re starting with telephony. Can’t do everything at once!
T: Thank you for your time.
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