According to El Reg shaves a quid off VoIP service, BT is already cutting the price of its VoIP plans:
BT's Broadband Voice product - which was launched in December - lets phone users make calls using a touch-tone telephone. [...] Now, though, BT has shaved a quid off the cost of its "Evening and Weekend Plan", which has been reduced from £6.50 to £5.50. Its "Anytime Plan" has also been reduced from £14.00 to £13.00 for all BT Broadband customers.
So, only another 13 price drops to go...
[Cultural lesson for all non-UK readers: a "quid" is slang for one pound sterling.]
VoIP plans have been in freefall in the US too (my Vonage bill has dropped over 60% since I started out.)
Marginal cost of VoIP call: zero. Barriers to entry: none. Market price: zero. VoIP telephony market: doesn't exist, except as an arbitrage of the dying PSTN.
Many readers are likely to be unaware of an impending change in the US in the way carriers settle for internetworking. The traditional solution has been for payments to be made to the party terminating the call by the party that initiated it (who is collecting the money from you for making the call). The future approach is called "bill and keep", where no such settlements are make. It certainly cuts down on a lot of bookkeeping, and eliminates the shenanigans to bypass the rules. Of course, some are inevitibly disadvantaged by any change to the status quo:
A much-anticipated industry proposal to eliminate access charges and move to a bill-and-keep accounting system calls for a four-year transition period that would begin in July 2005, according to telecom analyst Andy Regitsky, president of Regitsky & Associates.
...
Specifically, Regitsky noted that rural ILECs and state commissions would resist a bill-and-keep regime. Rural carriers depend heavily on access charges and would require significant changes to the universal-service funding program to remain revenue neutral—a task that would be "virtually impossible" for the FCC to accomplish when the subsidy fund is strained financially, Regitsky said.
So that'll keep the lawyers in work for a while.
There also will be significant network issues that have to be resolved, such as determining where calls are handed off and how to compensate a transporting carrier that neither originates nor terminates the call, Regitsky said.
Seems like the IT department and billing folks will be kept busy too.
I just dread to think how many working lives are currently being wasted arguing over how to divide up the carcass of a dying product. And as the Aral Sea of traditional telephony dries up, the lawyer sharks will occupy an every larger proportion of the revenue pool, fighting over the ever-diminishing puddles of money. I don't know who will make the last PSTN phone call and when, but I bet the revenue from it goes straight into the political favours system.
Somewhat paradoxically, the phone industry in the UK (and most of Europe) is heading in the direct opposite direction. The pattern there is that there is a high premium paid to terminate a call to a mobile network. So the lack of VoIP competition on wireless for the next few years means fat termination charges, and regulators breating down carrier necks to lower them. For wireline operators, it's more like "bill and keep nothing", as the wireless operators screw them over.
The name "internet" might drop a modest hint that there is a bit of internetworking going on elsewhere in the communications industry. There is no RFC titled "how to pay for interconnect", and with good reason. It's like another axis of the end-to-end principle. Not only should the network be dumb as possible, but it should say as little as possible about how to make dollars flow in the opposite direction to the bits. In that way capitalistic evolution ensures only feasible and sustainable interconnect settlement models emerge, at both the connectivity and application layers.
Is the end of the middle the end of the middleman? Sounds like a riddle, but whatever the question means the answer appears to be a clear "no".
We're all familiar with the concept of the dumb network killing off the value-add of the network operator. (As a by-product the ability to price discriminate network traffic and create artificial scarcity dries up. Cue trillion dollar loss of telco-related market cap.) But the fact that the network operator is no longer a middleman in your communications application doesn't mean nobody ever acts as a middleman. And to illustrate the point, the high priests of invective at "The Register": have supplied us with a neat example:
Sloppy businesses fingered by phone recording service
... the Registered Call service give punters the chance to record conversations with calls centres and other "customer help operatives" ...
To use the service, punters have to dial the Registered Call number before being connected to whichever business or organisation they are calling. Those receiving the call are played a short message informing them that their conversation is being taped. The calls cost 10p a minute, which is how the company makes its cash.
Once connected, calls are recorded and stored as tamper proof copies for six months.
So this service is a trust intermediary to enable non-repudiation of telephone calls. Whilst I can easily record the conversation myself, to verify that it is a true recording of what actually was said requires another party to be involved.
This example also illustrates the fact that all trust interactions require four parties. The obvious two are the caller and the callee. The transaction itself requires a trusted verifier, as shown above. But, very subtly, the fourth party is a trusted introducer. So you reading this most esteemed journal, and the reputation (ahem) of The Register, makes you more likely to adopt this service than any random service provider that propositions you directly. [Hat tip to Ed Gerck of Network Manifold Associates for teaching me this.] In this case, there are more middlemen in the transaction than there are direct participants!
Hmmm, now if only I could find a way of extracting some cash out of you for this valuable introductory role... In fact, we've perfect prototypes for this trusted introducer as a business model in the Amazon Associate and Google AdSense programs. Now all we need to do is generalize it to every link and protocol and watch the Internet collapse in a frenzy of commercial link-whoring ...
The take-away is that if you want to have trusted communications, the end of the old middle is just the beginning for the new middlemen.
Tired of paying outrageous rates for text messages? Think that $1,000+ a megabyte is just a tad excessive? [$0.10 for 1/10 Kb = $1000 for 1 Mb.] Here's your answer, then:
smsBug provides for the worlds first secure SMS at a ridiculous price from your mobile phone.
smsBug is a free SMS Client application which is downloaded onto a Java-enabled mobile phone. In order to make use of this new and exciting application, your mobile phone must be GPRS-enabled and will make use of GPRS provided by your mobile operator.
smsBug leverages the power of the Internet to bring you an alternative route for sending SMS messages. You no longer need your mobile operator for the delivery of SMS messages. smsBug sends SMSs over GPRS through the Internet to the smsBug Portal, from where SMS messages can be sent to mobile networks worldwide.
Hat tip to Mobitopia for the pointer.
PS Has anyone else noticed that "disintermediation" has more syllables than "cut out the middleman"?
After the outstanding success of SMS, it feels like it ought to have been the next logical step. After all, who would have predicted that a simple text messaging interface to support engineering and customer support would have become a major craze and profit centre? Surely an even greater pot of gold must lie beyond the horizon once you make those messages more colourful, noisy, and marketroid friendly?
And thus was MMS (Multimedia Messaging Service) born. But it hasn't become a smash hit. People aren't sending untold billions of pictures and video clips to each other. They just hand their picture-filled handset round to their friends in the pub instead. The pot of gold was no easier to find than the end of the rainbow. Why is that?
In a sense, MMS is the pure antithesis of the end-to-end principle. Firstly break every message up into the constituent parts. Second, force users to categorise every part of the message as to what it contains by giving it a MIME type. Then make the network fully aware of the types of valid messages, and only allow those messages to be channeled via the carrier's own messaging gateway. Et voila! You can precision charge the user for the supposed value of everything that traverses your network. A different price based on message type, time, size, and destination.
For example, the price list from lousy UK 3G carrier three [PDF]:
[QUOTE]
*Charges for calls, fax and messaging outside any inclusive allowance for
your price plan*
| Text message | All UK mobiles | 10p |
| Photo message | UK mobiles | 25p |
| Video message | UK mobiles | 50p |
These prices do not apply to international calls and messages, calls made and received when abroad, premium rate calls and messages, directory service calls, calls to non-geographic numbers and special numbers. See page 19 for details of these charges.
Each text/photo/video message can accommodate 160 characters. Some handsets allow for more, these will be divided and sent in numerous messages (depending upon length).
[ENDQUOTE]
Wow. A pricing guru's wet dream. So what went wrong?
MMS is broken in many ways. The easiest one is that there's already a universally accepted multimedia store-and-forward system called email. It just happens to be free, unencumbered by obscure standards and patents, and detached from the telco-controlled numbering scheme (with it's paid-for membership). Clearly and awful technology to be avoided at all costs.
MIME types are too limiting. It just isn't possible to really encode enough meta information into the message. What's the MIME type for an urgent picture message? A rude video? The smart network can never have enough smarts to encompass all the unforseen richness of the world.
The next way it is broken is that the sending and receiving of MMS messages is dominated by the client built into the handset. Even if APIs appear in J2ME, BREW, Symbian and every other handset OS, vendors have to aim to the lowest common denominator. Additionally, they are afraid of liability if their app gets stuck in an infinite loop of sending MMS messages at 50 cents a pop. Thus your moblog service by default wants you to send a plain vanilla multipart MMS message using the supplied handset client. MMS actively discourages the development of highly useable purpose-built client applications. The single network gateway for messages gets coupled to a single user interface for messaging. The only thing worse than a smart network with a smart edge is a smart network with a dumb and inflexible edge.
But those are both really small fry. The biggie is that it confuses content with communication. Content tends to be one-way -- unicast, multicast or broadcast. Communication is interactive -- two way, many round trips, many actors, multisynchronous. But if you're charging a first-class fare for every one-way trip, the communication becomes unaffordable. And the richer the message, and the more valuable and compelling the user need, the more likely you are to need to engage in communication, not just content distribution.
The complete absence of messaging types in SMS ("just a string of characters, ma'am") meant that users layered their own communications protocols on top. "QUOTE IBM" gets "IBM 84.28 Mkt Close 7/16/04". "R U OK MUM?" gets "GR8!". The price was low enough that nobody cared too much. You could re-purpose it to meet most needs. If you'll excuse the computer science pun, every message is untyped. Thousands of de-facto applications have been created on the semi-dumb transport mechanism. The triumph of SMS was that it did a very simple thing very well.
Any richer media application typically involves a series of requests and responses. Post weblog entry ... entry posted OK ... view weblog entry ... edit weblog entry to correct spelling ... repost weblog entry ... entry posted OK. The pleasure of sending a simple picture message comes as much from seeing or hearing the reaction of the recipient as the act of sending itself. Searching for an apartment or a used car while out on the road isn't a fire-and-forget affair.
The two sides of the equation -- request and response -- don't necessarily have the same value. A request from me to E*Trade for a stock quote has no value to me. Only the response has value to me. A query from my picture messaging store asking if I really meant to delete every picture has more value than the response I send. So there's already a double-charging element forcing each transit via a toll-gated messaging system.
Even worse, multiple requests and responses in a conversational interaction don't scale linearly in value. If I want a graph of the IBM stock price, for the last year, expressed in pounds sterling, the price of the request shouldn't depend on whether I ask that as one question or through three steps (symbol, time and currency). And the cost shouldn't depend on whether the response is sent as a single yearly chart or divided quarterly.
Let's illustrate with a real example. A true compelling human need that might have real money attached to its fulfillment. One that demands sight, sound, color and text. How about getting laid on a Friday night? That'll do nicely. You want to browse a dating site for your perfect weekend rendezvous. You've got half an hour to kill on the train home from work. Now, do you see yourself prefering a dedicated application that lets you flip quickly through photos and descriptions, and flirt with others online (since there's integrated presence)? Maybe engage in some anonymous voice messaging? Or do want to use MMS and be charged for every time you hit the SEND button? It's no competition.
So MMS is, from the user's perspective, inferior in almost every way to a good old TCP/IP connection from a made-for-the-job handset application to an arbitrary Internet server. MMS lacks flexibility, straightjackets you into a single user interface regardless of the application, and costs way too much to do anything of value with it. Technically broken, philosophically broken and economically broken. It deserves to fail.
UPDATE: More here.
Two related links I'd like to share with you. Both illustrate another viewpoint on the end-to-end principle.
From my brother comes this irridescent infomation opal:
VoIP hackers gut Caller ID
Hackers have discovered that implementation quirks in Voice over IP make it easy to spoof Caller ID, and to unmask blocked numbers. They can make their phone calls appear to be from any number they want, and even pierce the veil of Caller ID blocking to unmask an anonymous phoner's unlisted number.
... [Caller ID in the PSTN] relies on telephone equipment at both ends of the call being trusted: the phone switch providing you with dial tone promises not to lie about your number to other switches, and the switch on the receiving end promises not to reveal your number if you've asked that it be blocked.
I'd argue with the headline. A better one might be "PSTN identity scheme proves hopelessly insecure, incapable of transition into decentralized communications era". The real lesson, though, is a corollary to the end-to-end principle. It is not just the application smarts you don't want to embed in the network. You also must decentralize the trust model too. (So you mustn't rely on network nodes being predictably dumb and free from malice.)
Transitive trust doesn't socially scale beyond your village. If Alice trusts Bob, and Bob trusts Charlie, then Alice may choose to trust Charlie. If Charlie misbehaves, and Charlie is a close neighbor of Alice, then Alice can tell all of Charlie's friends what a stinking rotter he is. But if instead of Charlie it's Mr Chang from China [no offense to Chinese readers intended], Alice can complain as much as she likes, Mr Chang's friends aren't listening.
Our next gleaming semi-precious lump of infocrystal comes courtesy of /.:
Appeals Circuit Ruling: ISPs Can Read E-Mail
The US Court of Appeals for the First Circuit (covering Massachusetts, Maine, New Hampshire, and Rhode Island) has ruled that e-mail providers are not violating the law by reading users' e-mail without the user's consent. The decision finds that the Wiretap Act does not cover interception of communications where the communications are being stored, not transmitted.
So, not only should you not trust the network to transmit your packets unmolested, you shouldn't even trust the network to keep your data private.
So perhaps the end-to-end principle needs some refinement. Not only is it imperative that the application layer exists at the edges and the middle is dumb transport. It is also imperative that the network edges actively collaborate to prevent the middle from being anything other than dumb transport.
From the excellent EuroTelcoBlog, a piece on Peerio, an enterprise-focused peer-to-peer telephony technology provider:
Peerio claims that it eliminates around 80% of hardware and maintenance expenses associated with corporate PBXs, and can reduce the total cost of ownership of corporate telephony over ten years by 99.75%, compared with conventional centralized systems.
Oops! There goes another smart network industry segment. Although I doubt the demise of the proprietary and expensive PBX will be widely mourned.
Audience rhetorical question: If you had to wake up in the morning and revel in the smell of burning business models, would the smell be acrid or sweet?
Having recently read Cory Doctorow's polemic to Microsoft on DRM, I'd like to offer a few more examples of why DRM is pissing in the drinking fountain of telecom.
First, The Register on CD copy protection:
In April last year Macrovision announced that it has taken a license for Microsoft’s Data Session Toolkit which meant that working with Macrovision’s content protection the Toolkit will allow copies of downloaded files to be made on slave, tethered devices but each one needs to be authenticated using the original PC that downloaded it.
Now, Microsoft may think this is a Good Thing, selling lots of MS locked-in DRM technology. But wait a minute. At some point they want everyone this side of Mars to upgrade to Longhorn. And your digital rights are tethered to your old PC. Which is probably a bit too underpowered for Longhorn. So you'll need a new PC. Will you take the risk of upgrading and hoping all your licenses still work? Many won't.
Same thinking for mobile phones. The carriers in the short term may dislike subsidies to shift handsets and would like longer replacement cycles. But in the longer term you need uptake of new handsets to take advantage of new data services. Will your digital rights locker offer seamless transition? Will consumers keep buying ringtones and music downloads if they find the have to dump their whole investment when they switch carriers? Have you just killed their interest in your business? Have you just zapped their trust in you just when you want to enter the mobile payments space and need to be seen as solid as a bank?
As consumers get savvy to DRM, they'll start to see that the terms and conditions aren't like the click-through licenses of most software. There's real bite, and you'll find yourself repaying to use the same content that you thought you had bought for life. That means DRM will increase the transaction costs for content. Will playing this track use up some of my allowance? Will I get an error message if I try to watch this video on my laptop after waiting 30 minutes for it to download? The same mental transaction costs problem exists for micropayments, as has been well documented by Clay Shirky.
Ultimately, telecom is about communications, not media. DRM inhibits communications. That's the opposite of what you're after. If we'd had DRM before the Internet became widely available, telcos would have sold a lot less dial-up and broadband, and the industry would have even more unlit fiber than it does today.
How many future broadband and FTTH sales will be lost because you can't share a few moments of a good TV show with your granny over the Internet?