Although I don't normally fill blog space with "I read this interesting link and have nothing more to say", I think you should read this interesting link comparing (at the end) VoIP and e-mail. I have nothing more to say.
Starbucks. What a refuge. We were in New York last March, and it was a clear but cold day. The wind was a blowin' round the glitzy apartment blocks on the Upper East Side. My wife was six months pregnant, but doing well. We were in need of a place to park ourselves for a hot drink, and that means only one thing -- a quick worship at the alter of the Seattle beverage godess. A blast of warm air greets us as we duck in from the street. Whilst we pondered for a moment on the selection of cakes and drinks, a prim middle-aged lady slipped in behind us. She draped her ostentatious fake fur coat over a chair, and joined the queue behind us.
Once we had gathered our order, we settled on the two remaining empty seats -- at the same table as Mrs Coat (still in the coffee queue) had claimed a seat.
"Hey, those are taken!". Apparently I hadn't seen her imaginary invisible friend, so I just ignored her. When she sat down she glowered at me and insisted, "We just don't do things that way round here!". I didn't even respond -- it would be unseemly to point out that where I come from, tired pregnant women don't stand when there are empty seats around.
As everyone should know by now, Starbucks sees itself as the third place. Home, work, and elsewhere. It's the new public square, except it is half public and half private -- and as our New York experience shows, lacks the spaciousness of a square. But it is where people meet, make unexpected social interactions, and enjoy some produce that helps them through the rest of their day's journey. It's profitable, too.
So what do coffee and rude Manhattanites have to do with telecom?
Today, the telcos put the coffee shop in the middle of the road. You have to queue up in line to pass through a toll gate, at which you are offered a small cup of tepid, standardized instant coffee. But we're clearing away those obstructions -- bulldozed into the landfill of history. In an end-to-end world, the services the telco provides need to become the "third place". You have to want to make a side trip; and it has to add something towards your overall journey someplace else.
Today the music and IT industry is looking at an inverse peer-to-peer network: the metadata, rather than the content, is what is distributed. Technically interesting, crazy business idea, and not the subject of this essay. But this comment on Slashdot contains a worthwhile thought:
Imagine your ultimate stereo system. Don't be bashful -- if it's really the ultimate, it should include a music library containing every piece of music ever recorded, and a program which can use your past music preferences to suggest new pieces of music for you to listen to. It would be an incredibly mind-expanding device, and one which is technologically not far off - but the introduction of the personal music library will likely be delayed by a decade or more because of copyright problems.
This really contains two things: a universal music library, and a recommendation agent. The former is primarily content, and the latter is a service. Services can't be "Napsterized". Intermediary services are the new "third place" of the communications industry. Hosting the right list of links for me into the universal jukebox is a slice of the value chain. It isn't the end application. It just helps me on my journey.
The trick is going to be finding those "third place" applications: places where the end-to-end abstraction isn't enough on its own, and are conveniently close to the telecom road. For example, a network provider may have a natural advantage in directing you to WiFi access points, or where you might find better coverage nearby. This might be a lever into generally operating "find me the nearest..."-type businesses.
But time is running short. Having a natural advantage isn't the same as having a natural monopoly. And soon, the telcos might find that their seat has been taken for real.
Echoing the similar thoughts of many, Techdirt today talks about the VoIP bubble and the response of the US incumbents. The money quote:
Everyone seems to forget, of course, that BellSouth actually tried to offer VoIP for about a week a year ago and suddenly someone higher up freaked out and pulled the plug. While the big telcos claim they're jumping on the VoIP bandwagon, there's still going to be an internal struggle of cash cow vs. emerging technology. I'm not convinced that the telcos are prepared to cannibalize their own business yet.
Indeed. My personal view: the incumbents have no real commitment to VoIP roll-out, and the key motivator is to undermine those who try by pulling the bottom out of the VoIP market. The lack of spin-offs explicitly motivated to undermine the legacy business talks louder than a thousand press releases. Any VoIP upstart inside a legacy telco has to face a negative ROI according to traditional cost accounting; it requires "irrational" resource allocation to compete against other projects.
Expect also to see products that are deliberately short on service and performance that give VoIP a bad name -- this is a marketing struggle, not a technology battle, and anything goes.
My prediction is that in the short term this strategy of resistance to change will meet with some success. The initial entrants will be crushed because dropping the price of PSTN lines is a viable response to a VoIP PSTN clone. The average user isn't quite ready yet to roll their own telco service.
But the longer-term effect will be disastrous. The incumbents will fail to build end-to-end compatible business models in time: they need to find end-to-end-to-end businesses where the middleman adds value.
IBM and friends will trickle down enterprise VoIP into the middle market. Microsoft will drive integration with Exchange and demand for end-to-end IP real-time communications. The mega-ISPs will pick the winning bits out of Skype, Voicepulse, Vonage, Stealth, Free World Dialup, etc. into a "plug it in -- turn it on" consumer proposition. You can't drop the price of PSTN calls below zero and stay in business.
I guess it will be a sign of old age soon, behaving like this. You're sat there, chatting away on Skype. But you keep watching that damn elapsed call time clock running. And there's this little anxiety in the back of your mind that this call is going on a long time ... and we've just left it running while one of us goes to the loo ... and keeps running while I take a cell phone call ... and we haven't said much in the last few minutes, have we?
I think "metered communications anxiety disorder" might become the defining way of discerning us Gen-Xs and older. My parents still have trouble making transatlantic idle talk -- "surely this call must be costing you a lot?" I'm still stuck on "surely this call must be costing me something?". No it isn't.
Daughter, when I were a lad, we had to pay for every call and message. And she won't believe me...
According to CNet, "Broadband newbies pick price over speed". But the conclusion doesn't follow directly from the evidence presented -- rather than valuing low price, they may value other aspects of the service.
For many, it is the unglamorous freeing of their good old PSTN line from dial-up contention, or the need for a second (or third) line. Dial-up has proven attractive to a huge number of users. I've been trying to coax my parents off the trickled Internet over a year to no avail. Sad but true. So those that move to broadband don't so much value price over speed; rather, they value uninterrupted availability of all their communications devices, particularly the telephone.
It could equally be that high-end users highly value an unfiltered always-on connection, and that speed Why? Because they want to leave their IM client, networked game, Skype client, home web server all running. That's my brother's household. He's after low ping times for gaming, which his relatively crummy cable connection supplies in bucketloads. Downloading illicit MP3s and Linux distributions isn't the mainstay of their connectivity needs, so he doesn't necessarily pine for more bandwidth.
Speaking of which, perhaps the nature of P2P clients like KaZaA tells us why additional speed isn't valued more. Perhaps the upload speed of peers regulates rate at which data can be downloaded. At the same time, users can only track so many downloads. Since many KaZaA downloads fail, or don't deliver quite what was expected, people need to pay attention to what's happening, and remember the artists and albums they were after. The download pipe requirements max out at the (shared) upload speed of peers multiplied by the number of downloads you can juggle at once.
So if you're a cableco trying to sell faster pipes, maybe you need to slip your users a better peer-to-peer client to create the demand...
This excellent little article over at Emergic reminds us of a well-known economic concept called "co-ordination failure". In essence, it refers to the inability of a disparate group of actors to draw together a new value chain in a synchronized manner. It's easy to make an incremental improvement to an existing market, but hard to create a new market. In the example given, distribution of an innovative software product was an achilles heel of a business plan.
The same phenomenon has been seen in telecom. The genius of iMode was to see the co-ordination failure: the handsets, content providers, consumer education, distribution and billing/settlement all required co-ordination. You couldn't deploy a handset with a browser alone without solving all the other problems. WAP failed because (among other things) a co-ordination failure; the carriers assumed that the rest of the value chain would automatically coalesce around their technology choice.
It also (maybe) partly explains the subsequent underwhelming success of iMode elsewhere than Japan. Once the model had been proven there was no longer a co-ordination failure. Companies like 4thpass provided off-the-shelf over-the-air provisioning platforms. Openwave, Handspring and others created browsers. Portal, Wmode and Amdocs had billing and settlement platforms. And so on. (Of course, iMode failed to translate for other reasons -- such as the voice-centric nature of the USA, and the lack of integration with text messaging in Europe.)
The lesson is that even the approaches described in The Innovator's Solution are not enough on their own: you need to understand how innovation is adopted as well as what kind of innovation to have.
Arnold Kling notes today in the Washington Times how the FCC is being guided into a pro-market stance by it's chairman, Michael Powell. The genius of Powell is humility in the face of complexity: the market knows more than any individual player, including the regulator.
As I have said before, the job of regulation is to make the market work, and to fix the externalities where market failure occurs.
One can't help wonder if there is a lesson here for telco regulators everywhere. What would have happened if instead of market-fixing access regulations and enforced shring of last-mile connectivity, the market had been allowed to operate properly? The assumption has always been that the last mile is a natural monopoly. But the build-out of cable, fiber and fixed wireless networks belies this. How much sooner could true access competition have arrived if the regulation approach had been less interventionist?
The key would have been to prevent dominant incumbents abusing existing market power. The most likely scenario would have been local price drops whenever a new entrant attempted to build out new networks. Abuse of wayleaves is another plausible way in which incumbents could prevent physical access.
This is all quite reminiscent of the bus wars that followed deregulation of public transport in the UK by the Thatcher government. Failure to impose intelligent regulation resulted in large dominant players such as Stagecoach pushing out smaller plays. They did this through flooding certain routes with service, timing busses to arrive just ahead of the competition to scoop up waiting passengers, and give-away pricing. Of course, once competition was crushed, services eroded rapidly and fares skyrocketed.
The easiest way to deal with discriminatory pricing is to apply a little game theory. What if you passed a rule that said that you had to maintain services and prices unchanged following the entry of a new competitor for a fixed period (e.g. 3 years)? Incumbents would then be incentivized to not extract monopoly rents. During that period of competition with a new entrant, they would only be able to compete by improving service quality. Overpricing would be punished because new entrants would have an extremely stable business environment in which to become established. Everyone would come out a winner. Perhaps Michael Powell would like to give the market an opportunity to prove itself rather than be second-guessed by well-meaning bureaucrats?
Our esteemed friends at The Register are reporting on how a hoax email caused large numbers of people to flood the switchboard of their local police.
This illustrates a phenomenon of "media bleed", where the attributes of one medium overflow to pollute or enhance another. In this case, the anonymous nature of email has bypassed the anti-abuse features of the PSTN.
Microsoft's Athena project seeks to hook PCs into the PSTN as your communications hub. This could have some interesting consequences. What if the next round of Slammer-style worms co-ordinate to take down the PSTN? The smart network with dumb endpoints previously relied on a smart human picking up the phone before a call could be made. But a smart network with smart endpoints could prove a lethal combination, because the smart network was never built with suitable protection from mass-scale autodialling. PBXs have survived through security-by-obscurity and diversity of the infrastructure. Only a small number of phreakers have taken the time to hack them, and there are so many models and configurations it's too hard to build an effective worm. Plus the voice communications network itself is too weak for effective worm self-replication. Windows + PSTN changes all that.
The irony of 9/11 style events is to highlight the all-or-nothing nature of the PSTN. The capacity of the PSTN in New York was reduced, and the users effectively achieved a distributed denial of service attack on themselves via the limited spectrum and switching resources. On a pure packet network the voice codec would have adapted downwards; calls would have become shortened to the bare minimum necessary to communicate. After that, it would have degraded to high-latency push-to-talk or IM applications. Finally, it would have only offered pure store-and-forward such as email. But the abaility to communicate would automatically have scaled with the capacity of the network.
So the second-strike capability of the Internet to withstand nuclear attack isn't necessarily just about preserving network connecivity. It's about preserving application connectivity. And despite the boasting of five-9s reliability of the traditional telcos, then push comes to shove the PSTN is increasingly failing to live up to the task.
CNET is reporting how Microsoft is setting up a "club" for users on AT&T Wireless of an MS-powered Motorola smartphone. AT&T are being used for all those messy, capital intensive businesses here: network buildout, customer acquisition, billing and care.
You don't need to be a genius at business strategy to see the Redmond play here. Build up a useful user base, and have marketing access to them, with or without the carrier's permission. Then float on the rising IP tide: sell these people nicer IM clients (tied into MSN, naturally); sell them an enhanced push-to-talk client (would Sir care for a Passport account?); and then onto wireless VoIP somewhere later in the decade. Just wait for networks to get better and Moore's law to take care of smartphone handset costs.
I'm looking forward to seeing the carriers sweat when MSN users magically seem to be able to make unmetered phone calls to each other. At each stage, people pay a bit more Gates tax for the device and it's OS. In return they get free service over IP, bypassing the carrier's toll booth. And the carrier gets all the cost of increased usage of its all-you-can-eat wireless data plan.
Microsoft needs a plan to replace the inevitible decline in growth of Windows and Office revenues. As has been noted elsewhere, horizontal moves into related platforms (phones, XBox, interactive TV, embedded, etc.) have failed to turn a profit. But sucking the remaining profit pool out of the trillion dollar telco industry just by turning out some nifty software sure looks like a juicy target. They have the patience. Do any of the carriers have the guile to deal with the threat?
UPDATE: Similar thoughts over at Techdirt.
What if your mail client, silently and in the background, fetched every URL that appeared in a spam message? Indeed, what if it did it a hundred times? And everyone else's did the same? The bandwidth costs of spammers would go through the roof. Oh, and your modem attached to your PC would autodial any free 800-style numbers, to drain the spammer's business further.
I guess the fatal flaw is that you can't be certain each URL or phone number is the spammer's. So just like the inclusion of random standard innocent texts in spam to defeat Bayesian filters, spammers would start to include random third party links and numbers, making the social cost unacceptable.
Oh well.
UPDATE: And another fatal flaw is that spammers have taken to using hijacked PCs etc. as the front ends to their web sites. At least the idea isn't as stupid as Microsoft's, which is to pose computationally expensive mathematical problems to mail servers before accepting a message (causing excessive CPU cost). All that does is kill every mailing list on the planet.
PS - See my original essay on the true solution to spam here...
Over at ContentBiz is a nice article on why even virtual goods cause merchant loss when credit card fraud occurs. In a nutshell:
Now, there is a telco lesson in this. Telcos traditionally aggregate billable events at the micropayment level. They have recently been extending this into medium-sized content purchases. In a world where much service is subscription-based all-you-can-eat, is the hundred million dollar telco billing system as much a dinosaur as the switched telephone call?
Well, perhaps not. Because a telco bill is part of a relationship. It's going steady with your girlfriend -- maybe even taking up residence together. This compares to the one-night stand of a credit card, or the sleeping with whores of paper cash. A new level of trust occurs, and friction is taken out of the relationship. You don't need to buy two bottles of wine and a nice meal before consumating a transaction.
You've got something to lose if the relationship fails. You may have to buy a new phone. Re-provision a whole bunch of services. Tell everyone a new phone number.
So small payments for virtual services may still be most efficiently laundered through an intermediary with whom you have a strong relationship. You don't need to ask for ID from each other every time you meet. The social costs of validating the true holder of a credit card number are too high for the economic value of a small transaction.
And above all, every virtual service has to be delivered over a very non-virtual pipe, which is almost universally paid for by the recipient. The access provider is the natural intermediary. Hence I see services like BT Click and Buy as having a bright future, even in an end-to-end world.
Reading today about the efforts to impose net neutrality, I was struck by the following thoughts.
Firstly, I see neutrality as working on two planes: what, and who. You can't discriminate on what is being said on the network. (You can argue whether illegal behavior should be excluded from this definition -- it's a secondary issue.) This includes both technical restrictions (port and IP filters; redirection) and well as policy restrictions via contract. The who portion says you can't selectively choose your customers. You have to take all comers. I would even include distinctions such as personal vs. business use as falling within these definitions. If the access proider wishes to price discriminate among market players, they would have to do it within the framework of neutrality. This could be through bandwidth caps, or connection speed -- anything that is neutral between applications and people. Throttling of service, of worsening jitter after a certain bandwidth usage, would not be permitted: they discriminate against certain classes of application, like IP television or VoIP.
Now, with this definition, I propose that net neutrality can be achieved through market means. You just need to only offer common carrier protection against lawsuits to neutral network providers. Once you start to discriminate, you have to take responsibility for what rides over your pipes.
This should help to avoid the outrageous examples of free speech repression such as this, and encourage self-hosted self-expression. Indeed, an attempt to sue a net neutral ISP in an attempt to get end-user content removed should itself be punishable.
I'm sure this is not a wholly original thought, but a quick Google search doesn't seem to find anyone else pushing it.
And, just in time, the next thing I look at after writing today's mega entry is an article on protecting the user's attention. This time, it's about keeping your business life away from evenings and weekends, and your personal life accessible at the right times. Only interrupt me with stuff that's important.
This cries out for a communications service provider. "Nobody ever replies to John's urgent weekend emails so this probably isn't important." Requires a middleman to aggregate data over multiple users, and act as your agent. And you would probably end up buying some bundled access with the same service. The goal of a next-generation telco is to enable high-value communications. You do this by assembling a portfolio of relevant services and access, which satisfies the bulk of your communications needs. No, this isn't a walled garden, and doesn't violate end-to-end. It's a flower patch in a field -- you can go anywhere, but an attractive offering has been assembled for you. In a way, it's the Principle of Good Enough in action. I could assemble the best-of-breed access and services myself, but I can't be arsed.
Remember: you are not a typical customer, and nor am I. We are outliers in the market place. AOL continues to exists for a reason.
Thanks to those of you who commented on my essay last week on applying The Goal to telecom. I think some misunderstanding (my fault) occurs around what is meant by "telco". I'm very much of the same sort of opinion as David Gurle, head of collaboration services for Reuters, who in a September interview with C|Net News.com says:
Then where is IM going? Will it remain a service with millions of loyal users and no way to make money off them? The biggest observation I've had in the last two or three months is that IM is the perfect disruptive technology to telecom providers. [...] In a sense they are the future local exchange carriers. That will create the connectivity requirements. The more value-added services on these respective networks, the more there will be a need for connectivity because it will become essential for people's lives.
You're saying that AOL, MSN and Yahoo will become phone companies?
Yes. I'm saying that Microsoft, AOL and Yahoo will become the equivalent of phone companies of the future, and with a reach that will go beyond their reach today. That reach will be global and without boundaries. With phone carriers, they can only go where the wire goes.
Can they make money like the phone companies? I think the next thing that will happen is they will bundle their value-added communications services with the Internet access businesses. [...]
So the communications hubs of the future are the uber-ISPs. I'm already taking it for granted that end-to-end IP is an extinction-level event for hard-wired vertically integrated telcos. The assets of the telcos will go into the bankruptcy laundromat. (Unless of course, like the airlines, the government steps in and a taxpayer expense endlessly bails out incumbents and keeps out prospective foreign competition.)
Funnily enough, what comes out of the wash at first glance looks remarkably like what went in. Some of the brand names may be familiar, because the bankruptcy machine keeps brand colors bright and fresh-smelling. But deeper investigation reveals huge differences. People will buy transport from their ISP because they want to, not because they have to. Not all transport is created equal, and the ISP will tailor the performance, availability, ubiquity and price of their transport offering to the service bundle being provided. Convenience of purchase matters.
For instance, will my TV-over-IP service work with my DSL connection? Does my remote data archive system fit in my bandwidth cap? Does my wireless transport have the coverage I need for the places I go? Vertical integration may occur, just at the retail rather than the application level. (Layer 8 of the ISO stack!)
Going back to our airline analogy from before, we're entering the era of the package holiday. We're at about the equvalent of 1970 in terms of the airline industry. Buying your own transport and service separately is possible, but pricey and time-consuming. Travel agents arose to take some friction out of the market. Look at the mess of regulation and incompatible standards. Apparently simple issues like roaming between WiFi networks will probably remain thorns for years to come. Eventually (after a decade or two) the purchasers will mature, and the equivalent of the low-cost airline will emerge for transport. This could, for example, be a result of mesh networking. By then consumers will understand what they need and what they give up by not adopting a full-service product. Eventually more people demand private, secure pipes (the private jet) and QoS (the business-class seat), although these will not be mass-market products.
So Yahoo!, AOL and MSN are the communications travel agents of our age. They're the ones who take our money, even if they don't provide all the elements of the service. Eventually they too will be disintermediated. Every centralized function slowly gets pushed to the edge. But not for a long time, and ultimately anything that relies on a contract needs centralized hooks into the analog world of governments, courts and lawyers. The average user doesn't have the sophistication to ask how many redundant transatlantic circuits the connectivity service offers, yet.
The "telco" I'm referring to is closer to what today we regard as an ISP. Bear in mind that an ISP is not the same as an access provider. Access will probably cease to be a retail business, and will become a wholesale business. The goal of a wholesaler is to fill the capacity of the fiber or spectrum. That's not the business I'm referring to by "telco" in the new world. By telco, I meant the retail face of the communications business. I guess we need some new vocabulary. Wholesale transport is "data haulage". We don't pay separately for the transport when we buy goods from the supermarket -- it's bundled into the cost of service. Tomorrow's telco is probably better referred to as a "personal communications retailer". Not very snappy, better suggestions invited. The words "service" and "access" are verboten, mind you.
Today's telcos are more complex beasts that it appears at first glance. There is a value chain in telecom that comprises more than just transport and service. Discrete elements include provisioning, billing, identity issuance, abuse management, customer service, equipment retail, content retail, and routing/directories (e.g. ENUM). Each of these is up for grabs. There is no reason to vertically integrate these well-defined elements. The integration and transaction costs have fallen too far.
The idea that the connectivity wholesale provider will engage in none of these is as unlikely as today's telco remaining in all of them. Some incumbents will be particularly good at small slices of the value chain above raw transport, and will keep hold of those pieces. But most functions will move into the ISP business. So it is perfectly reasonable for a next-generation "telco" to have a communications-centric Goal, because that company is in the service retail business, not underlying network connectivity business. The majority of usage will come from a modest pool of dominant applications. The power law will apply. A huge tail of niche interest, reachable from Internet access point, will fill up the rest, and for that you'll rely on your raw transport to get to it on a best-effort basis.
Deals like SBC Yahoo!, BT Yahoo! and Verizon/MSN are very much the way of the future. Each of these may have slightly different allocations of the value chain between the connectivity wholesaler and the service retailer. The smart incumbent will re-allocate the value chain voluntarity, before circumstances force a move. Earthlink has the right model, just they arrived in the market too early and had to pay too high a price for wholesale connectivity. Their leading the anti-spam and non-pop-ups approach shows they align with the goal I outlined.
The wireless side of wholesale transport will be slower to occur. Today's wireless networks vary between hopeless to useless at delivering IP-based real-time applications. Sometimes this is for technical reasons (e.g. high latency, lack of multicast support). Often it is for hard-to-resolve business issues (e.g. chicken-and-egg between handsets and networks for introducing new technology -- this needs a large intermediary integrating the value chain and committing to simultaneous orders of network and handset equipment; or roaming on WiFi).
So, to respond to some specific comments:
"We do a terrible job of protecting the user from unwanted communications"
Depending on who "We" are, and assuming you mean the operator of the network, that's because it is not the network operator's job to.
As I was saying, this is the job of the communications services retailer, not connectivity wholesaler. A super-smart traditional telco might morph to be such an entity.
Cliff notes that telcos are today service providers:
I don't know of a single Telco that acts as if being a Network Operator is their only job. Telcos sell loads of services, and make most of their money doing it.
The critical thing to see here is that it is not a binary dumb pipe vs. service provider. There are many parts to delivering a service. The question is not whether the access provider will retain any of them, but how many are naturally aligned with the job of access wholesale and retail.
As David Anderson points out:
Martin's point here is that when carriers start to focus on their true goals and make investments congruent with those goals, we'll start towards a much more user friendly telecommunications service. A service aligned with subscribers goals will surely survive attack from insurgents - and hence the "telepocalypse" might be avoided.
I just wouldn't put my money on it, based on my experience of working in the industry. But it's fun to imagine what today's telcos could do to rescue themselves. It makes for an interesting day job too, if somewhat of an unhill battle. (Bear in mind the British tendency for understatement, here.)
In both your phone call and spam examples, (and if you know what spam is in some absolute "agreed by all sense," you're doing much better than most), it is only the end user who can decide.
Not at all. Whilst Bayesian filters at the end points are great for personalized spam control, the ISP and access provider are uniquely positioned to examine patterns of abuse usage that cover multiple users. Furthemore, they are greatly advantaged in being able to punish outbound abusive/interruptive activity, by disconnecting access service. Some activities are naturally "end-to-end-to-end". End-to-end doesn't mean the extinction of all intermediary roles. For instance, Visa are still needed to clear credit card purchases on the Internet.
Thus it is the job of the network to deliver as cheaply and easily as possible, leaving money in the recipients hands to purchase services/products to do what protection they decide they need.
Yes, but much of that will still be purchased from the access provder. The cost will be much lower than today, because the possibility of buying transport and service independently exists. Just like number portability sucks (undeserved) profit from telcos today, because the possibility of moving exists. For another example, a socially scalable version of Skype that physically rings something in your house needs a hook into the analog world to punish misuse. That will cost money. Skype will not always be free, because that part of the value chain inherently links into the analog world and costs money. Just like the freeness of e-mail is an illusion; the infrastructure cost is bundled with access and the time and expense of spam management is not zero.
... let's be really careful when we talk about messing with the middle of the network. The Internet became the success that it is today because it is an end-to-end network.
Retaining intermediary roles is not the same as violating end-to-end. Assembling a bundle of communications services and access means (including user equipment) that meets customer needs is a valid goal. Increasing the number and value of user communications is a way of expressing that goal. The occasional smart service provider may even get to own their own network(s) and not have to pay middleman wholesale fees. But that will be the exception, not the rule.
In an any-service-over-any-network world, where the network is general purpose and carries everything, the provider of connectivity has no advantage whatsoever in the sale of services, and no mandate to sell 'em.
This is true is (i) the utopian world of cheap ubiquitous IP networks suitable for any reasonable purpose exists (it doesn't, and won't for a long time), and (ii) the value chain and profit pool comprises only access and service (it doesn't). Access providers and service retailers retain some natural advantages. Sometimes, indeed (horror!) vertical integration with the network is needed. For instance, Nextel's Direct Connect service required vertical integration with the network. The technology of the day simply didn't support an IP version. Even today, VoIP equivalents from Sprint and Verizon offer superior functionality (a function of IP) with lower performance (a side-effect of lack of integration with the lower layers of the network). It isn't invalid to seek to fulfil user needs that are at the edge of what technology can provide.
David Anderson writes: "Imagine you lived in an area with a lot of toll roads like Chicago or Washington DC and 9 out of every 10 cars on your sluggish commute was a "spam" car using bandwidth and not paying the toll."
Let's consider why [the road congestion analogy] is inappropriate...
To me, the bandwidth that matters is that of the user. And that is, for practical purposes, fixed. My Goal is to maximize the user's communications bandwidth. The size of the network pipe isn't the issue. Plus, the Korean experience of throwing bandwidth at everyone just shows that abuse scales at the same speed. Korea is a top DDoS source because so many people have 100 megabit broadband at home and insecure Windows machines. You still need intermediaries to police the system in an end-to-end world.
What if I want to buy the ability to send/get messages at any amount, without being charged per message or bundle ? Is that impossible ? Will no one sell me that service ?
That's what an all-you-can-eat bundle offers. The bundle size is really the statistical average use, not infinity.
I summary, I see the telco industry (after some bankruptcy recycling) fragmenting into the value chain components. Access is a wholesale component. There are more than two components in the value chain. The application service is only a fragment of the chain. Some parts of the value chain, but not all, will remain with access providers. There will be good economic reason for this. It does not violate the end-to-end principle. Most of the rest will be picked up by resurgent ISPs, who will become the user-facing retail side of the industry. (So you'll have someone new to hate for poor service.) The goal for the retailer of communications is (say it one more time...):
To maximize the number and value of user communications events, whilst simultaneously protecting the user?s attention from unwanted interruption.
This will all happen much earlier on the wireline side, because technology constraints on wireless make the end-to-end approach temporarily impractical for many user-valued but demanding applications. On the other hand, that places wireless network operators in a much better position to dig themselves out of the hole by aligning to the new goal before the end-to-end network kills them. Plus Nokia and Sony will probably waste a few billion trying to muscle into the networked service space, slowing things down for a while.
As if to echo my point on VoIP regulation, The Register today has a report from the UK on broadband regulation. Is essence both articles state that the thing that needs regulation isn't the service (and certainly not through some distorting government-imposed fees or enforced product functionality). Instead, the consumer needs clear and unambiguous presentation of what they are buying. Diversity is good, and honesty in retailing communications services is essential to picking the right product for you out of that diversity.