February 06, 2006
OPINION://The Penultimate Word in Telephony
So, here’s the first half of my deck from my closing keynote at O’Reilly’s rather good Emerging Telephony conference. I’ve rendered it as a blog post, rather than the usual boring Powerpoint download. Unfortunately, it screws up the font formatting a bit when you save slides as images, so blame Bill, not me. I’m also skipping a few linking slides which are better turned into text for reading. Plus as a reader-only bonus, I’ll explain some of the material in more depth here than I was able to in 15 minutes up on stage.
So, the usual quick intro. This is me.
I’m older and uglier than I look. This blog is a badly behaved two year old. Started as a bit of a joke when I was at Sprint, which got out of hand (getting quoted in Business Week and Forbes), before turning into a career as a freeloader, sorry, freelancer. So you’ve been warned. Blogging is hazardous to conventional career development.
Down to business. I’ve been doing work for some large and publicity-shy folk in the mobile space. They want some guidance on the future of telephony. Together with the folk at Skype Journal, we devised some reports and workshops around that. This presentation includes a few of the highlights of that thinking.
The first step in re-imagining telephony is to work out where we are. Decompose the current telephony product into the bits where economic activity takes place. So people pay for social networking services, directory services, telemarketer filtering, and so on. If someone is paying for it, then there’s a user need and value proposition behind it. That need may be filled in a different way in future.
When we’re running a workshop, we get the teams to note down some of the user pain with the current approach. For example, calling a freephone (“800”) type number means dictating your name and address to someone who doesn’t understand your accent, and then reading out your credit card number plus security code to someone you’ve never met and don’t necessarily trust. It’s not a triumphant user experience. Likewise, the telecom industry treats call detail records as a form of digital efflent to be incinerated at the first opportunity. All the feedback from the call is manual. The system does nothing to update your contacts, arrange your next meeting, revise your social network, etc.
Now we take each of the activities in turn and recover what the abstract value proposition is, the ultimate user value proposition, as well as a snappy summary. So, the first one is “get a device and get connected”. The abstract activity is distribution, and the Ultimate Distribution Experience™ could be:
“I can easily acquire the system and join in. It is available for use wherever and whenever I want it.”
This can be somewhat inaccurately precised to the Powerpoint-friendly phrase “Always available, everywhere”.
Rinse and repeat for the other steps in traditional telephony. Skip a few details that only people willing to pay for consultancy will see, and you get eight “value axes” on which to describe the communications experience of different telephony-alike systems. Whip out MS Excel, dig out the charting wizard, and get mapping:
Now, suppose you can score the different systems on a 0-10 scale. By definition, the Ultimate Experience scores 10/10 on all value axes.
A quick aside. Not every axis has the same weight to each user. And the linearity of the axes is hard to determine. Sometimes going from 0 to 1 is the big step. But sometimes not; there may be network effects in play. Plus there’s something akin to the lump of labour fallacy from economics. Instead of labor, the fallacy is that there is a fixed or bounded amount of possible value to be created. For example, given the amusement possibilities of 2006, saving you a minute of your time is much more valuable than it was in 1906; and in 2106 you’ll need to penetrate a thicket of smart machines to interrupt anyone’s relaxation. The same “save a minute” becomes more valuable over time because of the value effects of substitute activities.
Now, a bunch of folk have done a lot of work to enable the public to have access to free telephony using an open SIP-based network. We’ve seen this before, although we don’t always have the language to deal with it:
- HTTP protocol (open standard) and the Web (open network of servers and browser clients — any client can connect to any server).
- SMTP protocol (open standard) and email (open network of relays, where anyone can send email to anyone else, multitudinous exceptions acknowledged).
This open SIP network doesn’t have a name like the Web. So we’ll call it (punningly) the Vob.
I think even the most ardent of Vob promoters would have to admit it’s not been a hit with the public. Despite widescale broadband adoption, SIP phones are not flying off the shelves of Best Buy as I type. Only SIP devices tethered to closed networks are selling. The reason is simple: the Vob doesn’t meet the needs of user. Note that price isn’t on the spider diagram. That’s because price (money) is something you take away from the user, in return for the value proposition you deliver. Price isn’t value; it’s some orthogonal axis. You don’t re-invent telephony’s value proposition just by playing with the price.
The only thing the Vob delivers on well is comprehension (aka audio quality). You can deploy a wideband audio codec. As for everything else, it’s a bit crap. No reflection on those who tried: the problem of building the Vob just turned out to be much harder than email and hypertext.
A word of caution. Everyone who scores these communications systems gets different answers. Please, don’t write in arguing with the minutae of the scores. I’ll ignore you. Really, I will. The overall picture tends to stay the same, even as the details vary. Plus there’s a load of detail on how high the bar is set for the Ultimate Experience that isn’t in the slides with their crude and rude axis labels.
(Free anecdote interlude: a crowd at a nameless mobile handset vendor thought that current GSM mobile telephony scores 9/10 for the ultimate audio quality and comprehension axis. I think they need to get out more…)
In contrast, the PSTN sweeps out a pretty impressive amount of space. The area inside the yellow line represents maybe a few hundred billion dollars a year. (Telecom is supposed to be $1.2tn a year as a whole, so if mobile is half of that, and PSTN is maybe 80% of landline revenue, etc.) And the good news for O’Reilly ETel attendees is not just that Powerpoint does great animated slide builds, but also that the space between the PSTN and the Ultimate Experience is likely to be worth mucho wonga. Expect many more ETels as the stupid network finally unleashed innovation on the parched ideas desert of voice communications.
So, to wrap up this post, a comparison of the landline PSTN with mobile telephony and VoIP’s poster boy, Skype. Two take-aways. Firstly, mobile telephony more-or-less envelops the value proposition of fixed telephony. Hence we see mobile substitution and loss of landlines. The gap between the two? Oh, just another few hundred billion dollars.
And Skype? Well, it exceeds the PSTN and mobile operators in several respects. Maybe $4.2bn wasn’t so mad after all. But look at the “transactions” axis. You can’t call many businessed on Skype. They aren’t creating a “next generation 800 number” experience. Yet eBay with Paypal is a transaction company. They face a tough challenge in upping the score on that axis.
So, the 10-hour time jump has caught up with me. California to Lithuania as fast as possible: two very contrasting places. Time for bed. More on the Last Word in Telephony another time.
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Service and network reasoning is OK with me and not worth reacting. But there's also a strong marketing issue here and its already evident in mobile Voice: the terminal used or its "gadgetry". Its appeal to consumers for gaming, taking pictures, playing MP3's and its capability of storing all your contact information is strengthened by its design as "nice to have". Nice to have and to use, including showing off (think about the Italians with their headstart on mobile gadgetry). PC's are less of a gadget but are a given to youngsters as my two sons. MSN or Skype are just easy to use (my sons use MSN or with online gaming the specific chat facility). And still normal phones too. Skype is just the catalyst to get things moving in voice, not the final outcome. And free calls is about costs per call, everybody somehow pays for the network either in access fees or otherwise. But it is not always directly linked, just as we pay for the roads, but not always on a metered basis.
As original "Bellhead" I intend to contribute on telephone service developments more in the future. "I'll be back"