Telepocalypse

Dial 1 for Anti-trust

There’s a lot of kerfuffle around about the possibility of lots of US VoIP/PSTN hybrid users having service cut off. This because they haven’t provided positive acknowledgement of the limits of VoIP phones for emergency service, as per an FCC mandate.

But is this really so hard?

“Before we can connect you call, federal regulations require your acknowledgement of the following message.”

“To acknowledge receipt of this message, at the tone please speak your name, and press the hash key. You will then be connected to the number you dialled.”

What could be better than using telephony technology to solve political schenanigans by the incumbents?

Or am I being hopelessly naive?

OPINION://Why Skype needs Google

It’s been hard to write this essay on Skype and Google, because the world is changing faster than I can put the words together. And whilst I’m happy with the general thrust of the argument, I’m sure much of the detail will be muddled. I hope you’ve got the patience to stick with it, and look forward to your feedback.

Putting together Skype and Google, whilst no match made in heaven, does have a lot of synergy. The Skype client, or something very like it, has the potential to re-invent telephony. (That, after all, is the point of the Stupid Network, not disintermediating legacy voice toll charges.) It just requires you to stop thinking of telephony as an application, and instead just see it as a feature of a bigger communications framework.

In my unhumble opinion, one of the biggest unsolved problems in “IP communications” (or whatever we call it) is how people and corporations interact and transact. To go buzzwordish, Skype is the seed from which the ultimate B2C or C2B multi-modal interactive transaction engine can be built. Google has the cash and commercial relationships to do it, but lacks the user base to grow it from. Skype is one quick way to access that user base; Google’s actions suggest they believe they can out-distribute and out-market Skype.

Google’s business model

Here’s Google’s situation. Google isn’t a search engine company; it brokers connections between people and corporations for profit. The media properties provide context for the relationships. Search is just one, albeit dominant. Orkut, despite its fizz-bang-pfizzzzzzaway, is sort of the social setworking equivalent of Skype’s on-net calling. It’s always going to be a free service, and just providers more contextual fodder. And so on through photos, books, maps, etc. — all just fodder for connection people and corporations for fun and profit.

I’m just doing a precis of what other observers have written, no new insights. Move along, please.

Note that broking of connections and relationships is more than just advertising. Google is more than adverts. Otherwise, why not just make all AdSense ads non-clickable? That’s what adverts are — calls to action without an integrated fulfillment mechanism. As such, “on-line advertising” is an oxymoron.

The e-commerce value chain

Google is competing in a long transaction value chain that looks something like this:

• Demand stimulation/market formation. Self-awareness of user need, awareness of market solution. The domain of traditional marketing.
• Capture attention. The user is presented with ads, and eventually sees a proposed solution to a problem the user has. In the user’s mind, the connection is ready to be made. In the olde world of directories, this is (i) finding the category of vendors who match your problem (often somehting that isn’t intuitive if you’re after something more complex than a taxi or flowers), and (ii) filtering on the locality/capability criteria you have. By the end of this stage the user feels “I am aware of a potentially relevant solution to my acknowledged problem”.
• Connection. The user clicks on a link. The connection is only one-way; the advertiser doesn’t know who the user is, or what they really want. An extended Yellow Pages advert is the analogue version of connection. The user is now engaged with a particular soltion provider and is paying attention to their message.
• Contact. The user and advertiser engage in bi-directional contact. The user presents some form of identity (e.g. gives a phone #, e-mail address, etc.). This is like calling the 800 number.
• Transact. The user’s requirements are codified, and a non-repudiable contract is formed to deliver some good or service.
• Settle. Payment is remitted. A third party like a bank or Paypal is normally involved.
• Fulfillment. The goods are despatched.
• Delivery. The goods arrive.

Google’s competitors aren’t search engines per se. Google is competing for transaction value chain slices against eBay, Amazon and even vertical search like Craigslist. Of course, chop off the search engine leg today, and the Google animal as a one-trick pony falls over. But Skype could equally be another leg on the Google animal.

Structuring transactions

Amazon and eBay have their own twists on transaction enablement. The former is pretty full-spectrum, with the web site recommendation engine doing the marketing on behalf of the product vendors, all the way to actual despatch of the goods — and even delivery for some digital goods. eBay integrates payment and settlement (Paypal), but is weak at the capture stage because you need to go there first to initiate a search. There’s no “did you know someone can solve this problem for you?” eBay sidebar as you browse around. On the other hand, eBay has memory of your identity and reputation; Google just delivers anonymous bodies to the shop door and disengages from the transaction entirely. That’s a strange way to treat customers, not even attempting to make an introduction. Impolite, at the very least.

Both eBay and Amazon are able to deal with a relatively narrow range of possible commercial transactions, huge as the volumes may be within that range. Simple stuff like “I want a red one” in Amazon and eBay means adding another SKU. Every nail is hit by the “add another inventory item” hammer. Whilst there are platform APIs, the ability to define new forms of interaction with the user are very constrained by the existing business processes and transactions.

So Google = totally unstructured transactions with no integation of user identity; eBay and Amazon = structured transactions, with limited flexibility, and some user identity (but isolated within their commerce island).

The future transactional user exterience

Fast-forward five or ten years. What sort of transaction and commerce experience do you expect to have? Picture yourself buying a vacation, talking to an agent. The agent is co-browsing with you; perhaps you would like this hotel? Or that one — it’s a bit nearer the beach, for just a little more money? You would never have to dictate basic personal data. The agent would know you are indeed who you claim to be. The agent might not, however, get any of your personal data, or even phone number. They can contact you, but your identitiy is opaque, and if they spam you later, you can cut them off easily.

More succintly put, this screen is a big space that screams “fill me with interactivity”:

(Yes, even test calls should be interactive…)

Goodbye IVR systems, hello rich media, up-sells, rapid navigation, and ease of use. The future of VoIP is more than cool icons and graphic design.

It isn’t hard to imagine more and richer scenarios of “beyond the traditional phone call”. And as Russell Beattie notes, we have the technology to do this right now by using extensible presence protocols. Why can’t the agent push a web form to me to view in my VoIP client?

Skype and Google: the yin and the yang

So, why Skype and Google? What do they have to offer to each other?

Skype’s weakness is that it is so PC-centric, and the PC is a lousy telephone. Check out the spoofish Engadget from 1985 page and scroll down to the old luggable mobile phones. We may laugh, but that’s about the size and shape of my laptop, which today is my primary communications device.

The PC is the ultimate chameleon device. USB makes the form factor and sensory aspects extensible. A general-purpose CPU, screen and keyboard cater for a huge variety of possible interactions. It is the best place for the primodial swamp of next-generation communications apps to quickly iterate, mate, spawn and die.

The PC is also Google’s home. Whilst both Skype and Google share an ambition to “go mobile”, it’s a long and fraught journey. Neither will make much impact in the short term.

Remember how Google’s delivery of customers to vendors is almost completely unstructured. This contrasted with eBay and Amazon where the marketplace is highly structured in advance. A phone call is also highly unstructured today. Google is naturally placed to capture this high-end of the market. Leave eBay to worry about highly commoditised simple transactions; Amazon to take the mid-market where more complex transactions exist. Google is particularly suited to retail of complex, niche, high-value goods and services.

It would be interesting to compare the average eBay sale, average Amazon sale, and average Google-brokered transaction.

So the attraction of Skype to Google is time to market. Rather than waste time repeating basic communications stuff, just buy into an existing technology and user base where most of the bugs have been ironed out. Why take on the execution risk of something outside your core domain?

The smart, interactive VoIP client is also a green field that is easier for Google to shape in its own image. Trying to interpose Google-mediated transactions into existing web sites is probably a non-starter.

There are serious challenges with integrating existing automated call handling systems, and a Google-Skype alliance would suggest some deep conversations with the Avayas and Nortels of the world. But if they won’t play along, jusy leapfrog them, and leave them marooned in the isolated archipelago of traditional telephony.

All that said, Skype needs Google a lot more than Google needs Skype.

Skype’s strategic quandries

Chris Drury suggests:

The Skype business plan is to:

1. build a huge captive island of users by leveraging the arbitrage value of free calling around the world, and
2. charge users to connect to other islands — PSTN, SMS, IM, email — and for premium services to be determined.

Well, kinda. Skype is off doing a whole raft of stuff.

There are three directions in which the Skype business model can develop:

• Down. They’re burning bizdev dollars on trying to sell connectivity with service, through things like SkypeZones. The upper layers of the stack get to support the lower ones — the ultimate “downsell”. But why get tangled in the turmoil of connectivity, where players are either gasping for air in commodity markets, or entrenched by political fiat and don’t need you?

• Across. Sell bridges from one application island to the next. But the biggest opportunity is passing them by — getting call termination revenue by using existing mobile numbers as SkypeIn numbers. Skype should be the landline displacement play of mobile operators, but isn’t. Another missed opportunity. What they also aren’t doing is working out ways of charging people other than the users for getting on and off the Skype island. That’s what Google does, and extraordinarily well.

• Up. Bridge to the invisible “finance” layer that floats above the application layer in the protocol stack. That’s what transaction integration does for you. Make the money wind blow harder across your island.

What you can’t do is stay on your island. There’s no money in telephony or IM within your island. Everyone can afford the ferry fare to leave.

Skype is both an extraordinary success and inspiration, as well as a frustration and disappointment. The Mongols may have swept across and subdued the civilised world on the back of a few horses, but that’s the exception rather than the rule. Most invasions require big resources and manpower. Skype’s limited resources are too diffused. Is a Skype toolbar really the biggest strategic imperative, something that cannot be done by a third party? An in-house video solution? Yet another web presence server?

I’ve seen this story before, and it doesn’t have a pretty ending. Informix thought that a faster, sleeker database would win. Oracle crushed Informix by building a better sales and distribution network. Microsoft out-distributed the world by bundling with PC sales. Goodbye Borland, Netscape, WordPerfect et al as tier-one players. Yeah, limp on for years, but don’t be a threat.

Telecom games are always won by the person with the stronger distribution strategy, not the biggest feature set. Skype is losing focus. When you’ve got really limited resources, you need exceptional alignment to strategy. Does Skype have a single product planning strategy professional on the staff? Anyone who can operate the tools of the trade? When you’re presented with such mind-boggling choices of which way to turn, no one mind can hope to capture and process it all.

Google has the dream distribution network between consumers and businesses that Skype needs. Google has massive resources, enough to absorb some mistakes. Skype should have sold out when they could. Maybe Google are releasing VoIP clients to just depress the price they have to pay. But it’s a dangerous game of chicken.

Looking forwards

Yahoo is a media company, and is unlikely to be the commerce bridge. eBay is a real threat to Google, and eBay buying Skype would be a setback for Google. It isn’t hard to see eBay aligning with, say, Ask Jeeves and using all the Interactive Corp. properties as seeds for an integrated search and transaction experience. Amazon is a similar story. Microsoft has execution problems of its own, but knows what’s at stake and has boundless cash and armies of developers to throw at it. Google’s aura of invincibility is largely hubris. They need to diversify up the transaction chain.

Five years from now is quite a long time. Remember we’re only celebrating 10 years of public e-commerce. I still believe that there will shortly be hundreds of millions of people making “phone calls” on the stupid network, doing things that were impossible on the old telecom network. But whether they’ll be doing it on Skype is becoming less likely. Skype needs someone with strategic discipline to whip things into shape. Stop duplicating what your developer program partners are doing. Stop anything that isn’t going to make you the best in the world at what you do, a market of one.

This is not a rehearsal

The prize is potentially very big. Think of the sort of commercial power Visa and the banks have today, and the huge profit they shake off as a result. They’re vulnerable as intermediaries in the new order. The stock prices during the .com boom for Amazon and eBay were only crazy in terms of timing, not magnitude. Some of the players need to grow up fast to meet the challenge.

UPDATE: Just to be explicit, the “down” strategy leads to a small pot of gold because nobody has much to share, “across” to a medium-sized one, and “up” to a sodding large one. Down is limited by the size of the connectivity market; across by the communications application market; up by the size of the economy as a whole.

New and improved!

I’m getting a lot of pre-VON media spam at the moment. If you want to catch my eye, here’s the rulez, folks.

I remember picking up a magazine — BYTE, I think — many years ago. On the cover was a headline screaming “20Mhz Monster 386 machines”, or something similar. (Many, many years ago. I’m older than I look.)

I made a resolution. I would never, ever read another article that merely announced something was merely faster, bigger or cheaper. Such progress is taken for read — the background expectation of our technology-soaked society. So today’s PR spam announcing

Blahcorp is entering the VoIP space, by introducing a VoIP gateway on a single blade.

is an instant delete. Sorry. Now, if you’re explaining that this is an accelleration in the rate of change, or a new form of change, I’m interested. Otherwise, it’s duller than Bracknell on a wet November Sunday afternoon.

If you want to engage with bloggers, it’s useful to at least show some appreciation or understanding of why we write, what we write about, and what’s interesting to us. There are no deadlines or editors to please in the blogosphere. Traditional media needs to create copy, come what may. It needs to be polite, to not scare the advertisers. Punches need to be pulled.

I don’t need to write about anything, particularly your product. I want to write, however. Help me find relevant things to write about, and I will reward you by writing about them.

Here’s what I write about:

• Disintermediation of traditional revenue flows. Re-intermediation of data flows.
• Ways in which the stupid network is being used to do things that weren’t possible on the “Intelligent Network”, particularly with voice and presence.
• New classes of user, device or activity being enabled by IP communications.
• Changes in the economics of IP communications, particularly new ways of funding networks or paying for service.
• Anything crazy and challenging to established thought.

So, hopefully that’s saved some PR folks a hour of reading the archives.

Here’s another spectacularly inept PR effort. It’s so lame, it’s funny.

Martin,

Voice over Internet Protocol (VoIP) first emerged in the early 1990s as a way to conduct voice conversations over the Internet without incurring telephone charges. Today, the capacity, speed and reach of data networks are expanding much faster than traditional circuit-switched voice networks. Voice over packet solutions (such as VoIP) leverage those data network resources and contemporary packet-switching technologies to generate new revenue opportunities and cost savings for both competitive voice service providers and existing telecom carriers. The result is that telecom companies are frantically investing in VoIP infrastructure equipment…

It goes on and on from here. One massive paragraph, another hundred words or more to go. I’ve no idea what they’re selling. By now, I don’t care. Delete.

Here’s the recipe for success:

Martin, [Note: I’m “Dear Martin” to friends and family, not strangers. “Dear Mr Geddes”, maybe. False familiarity sucks.]

I see your wrote about X in article Y. Did you know that our new product, the Acme Whizzulator, enables users to make backwards phone calls, just as you suggested? You could never have done this with a traditional switch, and transforms telephony for all backwards-speaking users. Just plug it into your headset, and you’re off!

Do come and have a chat with our chief engineer, Keeg Onhcet, when you’re at VON, who can tell you more about our secret sauce. And keep up the blogging.

Really, it’s that simple. Is it so hard?

Quack, quack, quack, quack, oops

I’m writing a bit of an epic on Google and Skype at the moment, but as a break, here’s a small rant.

I was just doing a Technorati search, and I got:

Sorry, we couldn’t complete your search because we’re experiencing a high volume of requests right now. Please try again in a minute or add this search to your watchlist to track conversation.

Oh me, oh my. Game over. This is not Google-class search. (I can’t remember ever having a Google error. They’re carrier class, five-nines, etc.)

Why would I ever go back to Technorati when the competition is only a click away? Capacity planning isn’t such a dark art, you know. If you’re planning for big-time success, pay some tribute to Uncle Larry, buy yourself a nice grid server, hire my brother to install it. It scales, trust me, even if your wallet feels a bit thin afterwards.

PS - Technorati took my $5 in the early days promising a daily watchlist email. They didn’t deliver. Shame on them. Whatever they spent it on, it wasn’t a scaleable architecture.

Search me

Jeff Pulver is frustrated at the apparent port blocking antics in his London hotel. He looks forward to a day when he can screen his accommodation search to those who subscribe to the four Net Freedoms. Namely:

• Freedom to Access Content [of your choice]
• Freedom to Use Applications [of your choice]
• Freedom to Attach Personal Devices [of your choice]
• Freedom to Obtain Service Plan Information

From a UK residential perspective, the whole debate sometimes looks like a quaint parochial American thing. Isolation of the local loop bottleneck by the regulator has done wonders here. I have a choice of different access suppliers in my street, a choice of dozens of retail suppliers on BT’s wholesale DSL product, and a choice of several unbundled loop providers (with the number of choices increasing fast). Whilst the UK is not a connectivity nirvana, the only net freedom that counts is the last one — in making such complex choices.

For example, my ISP blocks ports 135-139. Do I care? Not at all. They’ve judged that the geek market they serve sees this as a security benefit, not an imposition. If I didn’t like it, I’d be off in a flash.

Anyone who thinks they can ravage the residential customer and get massive rents in the UK market by port blocking is just plain nuts. The answer to net freedom problems is, by default, competition. Indeed, in a competitive market, the first three “freedoms”, if externally imposed, are damaging. They prevent the healthy price discrimination that enables markets to extend downwards into sub-prime segments. Well-meaning regulation could esaily turn the Net into a middle-class ghetto. (Democratic needs for universal access to “speech” facilities are a different issue, and shouldn’t be bound up in this part of the debate over commercial terms.)

The above argument doesn’t necessarily apply to the market that Jeff is experiencing. Jeff wants a bed for the night, first and foremost. Connectivity is, even for the nerdiest of us, ancilliary (I hope). The problem is one of transaction costs and externalities. Why do we have consumer protection laws, for example? Why not just allow everyone to negotiate whatever terms they like?

There are search costs in finding a supplier of a hotel room or connectivity. In most markets the majority of suppliers offer basically similar commercial terms, even if the products and pricing vary enormously. Just look, for example, at the ease with which you can return unwanted goods to stores in the USA, even when no law mandates it.

Once you reach a certain supermajority offering the same terms, the minority then start to impose a search cost on the market. Do I need to check whether this contract stipulates that all legal proceedings must be initiated in Vanuatu on a Tuesday? We impose universal consumer rights to overcome co-ordination and search costs, particularly those where one party is imposing additional burdens on others.

In this case, the terms “broadband” and “Internet” for short-term access should be taken to imply the net freedoms. No exceptions or small print. You can’t disclaim the ability to sue for negligence in a contract. You can’t create your own definition of “Internet access”, in an Alice-in-Wonderland “it means whatever we choose”.

For peripatetic connectivity the search costs are particularly high. You need to physically travel about to experience the connectivity on offer. You move often. Therefore it is reasonable to apply ex ante regulation on this sub-market.

Net freedoms are just means to ends, not ends in themselves.

UPDATE: …and just on cue, here’s what you get when you have a competetive access market. Deep packet inspection? No problem, as long as it isn’t being forced on you or done without disclosure.

Premium audio

Was just reviewing the premium services offered for paying members of last.fm music service.

It contains a few nuggets that, suitably re-interpreted, could point the way that the future of — for want of a better term — “telephony” networks will take. (Or at least once telephony is an embedded feature in every other application…)

Here goes…

What features will I get?

Extra features for upgraded accounts include the following:

Updated Username Bullets. Usernames are prefixed with a coloured bullet denoting their status.

Aha! Presence is a chargeable feature. (Music isn’t.)

What are your friends/neighbours listening to?

Tee hee! More presence!

See what your friends are listening to on one page.

Great for keeping up with the latest and greatest tunes your friends and neighbours are listening to.

Yep. Presence. It’ll cost ya.

More Radio Options.

username’s radio. Play songs from one specific profile only, such as your own. The best way to explore somebody’s music taste.

Social networking!

loved tracks radio. Want to just get the sure fire hits? Listen to anyone’s Loved Tracks, the cream of the crop of someone’s or your profile. Positively no more need for radio DJs.

Personalisation!

personal tag radio. You tagged your music, and now want to listen to one of your tags? This is for you. Get organising that profile. And then check out what other people have tagged.

Social networking and personalisation!

All your upgraded radio modes also become available for non-upgraded users, so you can shout about your music taste, and everybody can listen to your Über-radio.

Hmmm - kind of social networking meets gifting. Maybe one day the kids will get their pocket money by spending time talking to grandma…

Recent Visitors displayed on your Profile Page. People who have recently visited your profile page are listed in your sidebar. This is a fun way to keep track of who is checking you out ;)

Yup, more social networking.

Guaranteed Streaming Slot. Our radio servers can get overloaded during peak times. As a subscriber you’ll still be able to connect - we will kick out a normal user to give you a slot. This is class war!

QoS. At least they’re brutally frank about it.

Discovery Mode for the radio. Got all excited about the above? Switch on Discovery Mode in the Player and we will only play you stuff you have never listened to before. How is that for discovering new music? Same tag, new music!

Hmmm — just a hint of social networking — but with a twist of lemon.

No Ads. NO ADS! Don’t really need to explain this one … Oh, and if you subscribe ads are removed for anyone viewing your page, not just you.

Attention protection. This is now officially a telco marketing feature.

Jump the Web Request Queue. Due to increasing popularity sometimes the website gets slow. As a subscriber our loadbalancing software puts you at the front of the queue and you get faster response time from the website.

More QoS.

Anyone who thinks that there’s no innovation left in voice service, err, hasn’t been to one of Martin and the crew’s consulting workshops :)

And remember: these folks give away the music, but charge for social contact. Exactly the oppostive of your IPTV triple-play push.

Going, going, gone

Got this offer in my inbox last week:

Stay in touch for even less with BT Communicator Offers

As a BT Communicator user, you’re part of an ever growing community of over 1.5 million people. [I think they mean they’ve foisted 1.5m bundled downloads with Yahoo!’s IM client, regardless of whether you use it or not.]

With BT Communicator’s discounted call rates to 35 international destinations, it’s never been cheaper to stay in touch with friends and family – wherever they are.

New low international call rates with BT Communicator

* No call charges to Australia for up to an hour** until September 30th 2005
* Calls to the USA and Canada lasting up to an hour** now capped at only 25p until March 30th 2006 or just 1.5p per minute
* Calls to South Africa, Zambia and Zimbabwe lasting up to an hour** now capped at £1.50 until November 30th 2005 or just 5p per minute
* Rates to selected EU destinations starting at 2p per minute

Now, those rates may be 100% more expensive than Skype’s, but that’s not the point. The standard BT daytime rate to the USA is an eye-watering 15p/minute, or about US$0.25. So to compete with the VoIP alternative, they’ve just reduced their prices by 90%.

See those little asterisks? Curious as to the terms? Here’s the kicker:

You must be an existing BT PSTN residential customer.

Which means you must pay £10.50 a month to have a standard BT landline, whether you want it or not.

To the extent that people value emergency service, back-up connectivity, and PSTN call quality, they’ll keep on paying. And that’s bad news for Skype. Because there’s not a whole lot stopping BT from dropping their prices further and further; sacrifice the PSTN application revenue to capture the sticky connectivity revenue. They’ve got an army of lawyers and accouuntants who can doubtless justify pretty much any pricing structure as being cost-based, when costs are now largely a figment of the interconnect contract and unrelated to any real network costs.

Skype’s only way out is to deploy the stupid network to its utmost: increase the nummber of features compared to PSTN telephony, and fast. Their client is still years ahead of the clunky BT/Yahoo offering in all other respects.

This last week I’ve used both SkypeOut and BT Communicator. Both were disappointing. The call I made on SkypeOut had terrible audio quality. The DTMF tones didn’t work with the IVR system I was calling. So whilst Skype represents “free Internet telephony that just works”, it has a downside of being “cheap PSTN telephony that works only sometimes”.

BT was barely better when calling the same number. The audio quality was good — BT’s client seems to be a consistent winner on this one. But the DTMF tones still didn’t work. That meant I couldn’t complete the transaction. A failure is a failure is a failure. Doesn’t matter how.

The BT experience, as well as Skype’s normally excellent on-net audio, tell us that this isn’t a problem that has to wait for some central telco QoS solution like IMS. It’s entirely happening inside my PC and their gateways. It’s within Skype and BT’s control to fix it.

It seems to be time for the VoIP/PSTN providers to stop competing on price and start competing on customer experience.

Fancy a picture of my ear?

Was reading this old Pulver article on the relative failure (to date) of video IM and videoconferencing to capture the public imagination. Some interesting comments below the article.

I like the “show and tell” concept of mobile telephony, mixing voice and video. With the sprouting of many phones with dual cameras, I can’t help but think: why do none of them have the second camera along the front/left edge, so you can share what you see while you speak? Or am I missing something obvious?

Filtered out

Just an open musing about media consumption patterns. My infonutrition has changed radically in recent times.

Firstly, my browsing pattern could be characterised as “bimodal”: graze mode and discover mode. You could think of this as “I don’t know what I want” and “I know what I want” modes.

The former is when you just idly flick through blogs and news posts, much as you would browse book spines in a bookshop.

I rarely start any such grazing journey at traditional big media news sites. I use the blogosphere as my filter. If it hasn’t been linked to, it probably isn’t that interesting. I know where the strongest distillate is to be found in the blogosphere. And for any story, there may be multiple reports and angles from the mainstream media; I want to only read the best. Have a negative opinion after reading an online article? Blog it, save 100 other people some effort.

My RSS reader is my field for grazing. Anything that doesn’t fit that model generally gets rejected. The only exception is a site like BBC News, which has a specific information architecture for the rapid viewing of news stories and accompanying images. So if you aren’t adding value with your information architecture, and aren’t integrating transactions in with content, why bother having a web site at all other than to get crawled by Google?

Naturally, anyone who hides their content behind a big pay wall, or does something stupid like embed session IDs in the URL, effectively ceases to exist to he blogosphere. It’s the archives that should be free to read, not the new stuff! And paying readers to mass-market content should be able to embed blog links that are free for their readers to follow.

The discovery mode is when I see something that interests me and I want to find out more. “I wonder if…” Increasingly I note that online forums contain many of the best answers. Although we have Google for the Web, and Technorati for the blogosphere, we don’t have an effective forasphere search tool. Part of the problem is forum posts don’t link to each other, making it harder to discern where authority lies, and nullifying PageRank-type algorithms. (If blogs are microcontent, are forums nanocontent?)

Sorry, no deep and meaningful conclusions. Just a straight brain to keyboard thought dump.

A friend in need

Carl Ford from Pulver.com sends me a note saying how they’re building a wiki database on the global IP communications industry at Global IP Alliance.

Any readers from the UK are invited to review and comment on the UK page.

Either comment directly by registering on the wiki or email carl directly.

Book review: Open Gardens

My beach reading last week was Open Gardens: The innovator’s guide to the mobile data industry by Ajit Jaokar and Tony Fish, two experienced figures in the industry. They have a website to support and sell the book.

Who it’s for: Anyone building or financing the creation of mobile data applications.

What it’s about: Everything you need to know about getting an application to market and having more than an icecream in Hell’s chance of making money.

What I liked: Comprehensive scope and business awareness. The bits about application trends (from content-centric towards contact-centric) and the insights into the operator mindset are worth the cover price alone. I grinned reading the tales of how the different parts of a mobile operator think differently (network, biz dev/marketing, developer program) and frequently clash. Some great checklists. The whole thing is built on hard experience, so an ounce of practical wisdom is worth a ton of theory.

What I disliked: Totally data-centric, and rather neglects the interation with voice. Doesn’t explicitly bring out the likely impacts of social networking, presence. Somewhat weak and wishful at the end in proposing new unified intermediaty layer to reduce costs of application development and distribution. A few sections (like on m-commerce and payments) could have done with being fleshed out by a topic expert. Needed an editor.

Gripes: Good typography and an index shouldn’t be such a stretch, even for a boutique publication.

Verdict: Strongly recommended to target audience, but only of passing interest to the lay reader with a general interest in technology and telecom. There’s still a more general book to be written about the economics of closed and open technology ecosystems.

I think I’ve got all the sand out of the spine now.

OPINION://Utilitarian or totalitarian?

As a fellow free-market libertarian, and also a telecom blogger, I ought to be in agreement with Russell Roberts’s critique of municipal “socialist” telecom networks.

Yet I’d like to offer, if not a contrary view, at least a different perspective on muni networks. I believe there are good and bad reasons to build them. But dismissal is not an option.

Yes, there’s a clear transfer payment in favour of people who are unwilling to pay the current market-clearing price of a broadband connection. This is a net loss of utility to society, since the taxpayers whose money was confiscated had other, more pleasant, ways of spending this money in mind.

But there are also reasons to consider the free flow of information via telecom networks as a special and unique case. Information goods may not always conform to classical economic models, such as rivalrous consumption.

Let’s take the market economics first.

The most important and unusual feature of telecom networks is that much of their value is option value — the ability to cater for unknown applications. E-mail, the Web, P2P, podcasting — none were there at the birth of the Internet. (Search for “End to end principle” and “Rise of the Stupid Network” for more data.) Unfortunately, the desire to price discriminate by a commercial supplier also serves to destroy option value, by limiting messages exchanged to those forms for which a tariff has been devised. The act of price discriminating network traffic and billing is also horiffically expensive. However, the desire to price discriminate is overwhelming, because of the billion-fold difference in value of different traffic types.

Telecom networks potentially generate huge consumer suplus. There is also an elemet of merely co-ordinated self-supply in a muni network. You do no harm by fixing your own blocked sink rather than calling a plumber. By engaging a general contractor, a locality effectlvely self-supplies itself (“unplugs its own data sink”), and retains the full consumer suplus. Again, because of the nature of networks, this isn’t something users can do unilaterally.

There may be a co-ordination problem that corporations find hard to overcome. Most communications are geographicaly local, but there’s little point in buying a videophone if insufficient of your friends and family across town — some of whom are in poorer households and districs — have one first. The natural unit of purchase of a telecom network may be greater than the single household, by the very nature of being a network.

Those poorer households are hard to cross-subsidise via market means, because the applications, where most of the money is spent, are separated from the connectivity. It’s so far proven impossible to make the cross-subsidies between different connectivity buyers and application users work in an effective and fair manner, particularly when users are on different networks. The coordination and transaction costs are too high. (Would a universal service type of outcome arise from a pure market operation? It’s debateable — at the very least, it’s uncertain.)

Another co-ordination problem is a whole district can’t easily sign up to a single network provider at once. The network provider has to engage in house-by-house sale. This is extremely expensive. A municipal network eliminates this transaction cost at a stroke.

There is also evidence that communications infrastructure generates new business and economic activity. This value is not captured by a traditional network operator (e.g. Google’s billions of revenue do nothing for SBC or Comcast). But if the general public is the network owner, their interests do align. There is real evidence that the net gains from any form of increased data connectivity are large (see this for example). It is unproven, although not unreasonable, to hope that a forced municipal network will indeed have this effect. Unlike most infrastructure white-elephants, the almost infinite flexibility of a telecom network significantly lowers the risk of such a public enterprise.

Next, there is the practical issue of a market forming over rights of way for new facilities-based entrants. Early phone networks involved massive looms of wire down the street from multiple providers. Planning laws, zoning and access restrictions prevent a proper market forming in this bottleneck.

Finally, there are internal public costs of service delivery. A municiapl network enables those local services to be delivered at potentially lower cost. This is particularly true when access is universal and non-digital service delivery channels can be eliminated.

There is also a non-market side to this. The operation of our democracy requires ideas to flow freely. The increasing dominance of digital media may displace traditional analog alternatives. (When did you last go on a protest march? Read a political pamphlet?) The current experience in Canada with Telus, cutting off access to union web sites that offended it, suggests that allowing a tiny handful of corporations to control this access is potentially dangerous.

Lastly, the invisible nature of information goods and rights of way emprically seems to lead to markets in them more easily being manipulated via political means and regulatory capture. The public don’t feel the pain of loss of the services they never got the experience, or the low prices they never saw advertised. The endless pleading and lobbying of telcos worldwide should be a warning signal of a market out of balance.

The trick is, of course, in balancing all these softer issues against the harder deadweight loss of a tax-backed transfer payment. But just because competition is good, it doesn’t mean that co-operation (if sometimes coercive) is automatically worse.

Confirming the above

Following on from my essay, I think Murdoch’s purchase of myspace.com is very shrewd. Now he gets it, certainly following his recent lament on Media Corp.’s earlier Net illiteracy. What’s the biggest, most-established community-forming .com out there on the block at an affordable price? We’ll buy that one. If he follows through and executes well, his competitors should be very scared. James Enck has often lamented, for example, the unidirection nature of Sky TV’s broadcast network in a conversational era. Now you can see where the backchannel is coming from. I’m impressed at his adaptability. The customers want a sense of meaning in life through participatory media? Then that’s what we’ll sell them!

One last anecdote. I once watched a presentation by the founder of popular pre-teen/teen site Habbo Hotel. It’s a strange but immensely popular 3D chat cum semi-structured virtual reality. Paraphrasing inaccurately, he said one depressed, overweight, spotty, teenage girl said that it was the first time she felt she could truly be who she really was without being judged just by her appearance.

Cathartic or confirmatory? I’ll let you be the judge.

OPINION://Killer media

Just got back from experiencing a particularly unpleasant, ugly and amoral Hollywood movie.

Whilst in eyes-closed Zen-like meditative mood half-way through, I joined a few dots in my brain. Here’s a few not-so-random quotes from around the blogosphere:

Abundance has brought beautiful things to our lives, but that bevy of material goods has not necessarily made us happier. The paradox of prosperity is that while living standards have risen steadily decade after decade, personal, family, and life satisfaction haven’t budged. That’s why more people – liberated by prosperity but not fulfilled by it – are resolving the paradox by searching for meaning.

— Daniel Pink via Evelyn Rodriguez.

Live to Work and Work to Live

The social context of the relationship between workers and employers will shift from a livelihood basis to one that focuses on enhancing the quality of life for the individual. This trend will cause a broad redefinition of the implied social contract between individuals and organizations that has been relatively unchanged for over a century.

— The ReFormation of Work at The Future of Work Weblog

Microsoft should be trying to make it easier to use their technologies and to find new applications. Instead they are acting as if it is more important to limit the customers choices in order to preserve the obscellescent business model of Tellywood.

— Bob Frankston summarising Microsoft vs Customers and Itself.

Where’s the link? Well, let’s start from the beginning again.

I found the movie offended my inner values. It’s not the casual violence, the bad dialogue, the gloss. It was the lack of a core thing of beauty, of humanity — or the knowing negation or absence of such to highlight its true value. After all, there have been extremely good previous movies about professional assassins whose characters were violent and immoral, but where the director’s message was profoundly moral and human. This movie wasn’t nihilistic, it was just of no value.

I’m not well-read when it comes to media gurus, so I may be retreading over ground that greater minds have already mapped. But my feeling is that media and communications experiences can be broadly defined against two categories: cathartic and confirmatory.

Cathartic experiences are about escapism. They numb you to your real life. Playing hours of Tetris does this. Watching junk TV. You know the story. This movie was definitely cathartic.

Confirmatory experiences revive your sense of being. They don’t hide reality, they re-inforce it. They confirm your humanity. If you find a movie about killing depressing, it’s because it is depressing.

Confirmatory experiences appear to my eye to contribute to a search for meaning and purpose in life, and to help fulfil a desire for transcendence. We’re intensely social creatures, and the most intense confirmatory experiences tend to replicate the “tribal fireplace gathering” model — we talk, we eat, we gaze at the stars, we wonder, we hope for tomorrow.

Some media can follow a dual role between catharsis and confirmation. Watching a TV program along with millions of fellow simultaneous viewers may initially be cathartic, but the shared experience and next-day office chat is confirmatory. Playing Doom all day is cathartic; a sophisticated Warcraft avatar working in collaboration with other people towards shared goals is at least partly confirmatory. It’s like taking a drug to give you a different perspective on reality — separation of ego from your physical self and implantation into another body.

This stuff matters in the business world, even if we hate speaking in these terms. Billions and billions of dollars are being spent on networks and services that transform the mediascape. Broadcast TV fades in importance; “Me-TV” rises. Tools like Skype allow for new forms of social interaction, such as the family conference call.

I can’t beat Hugh Macleod’s eternal wisdom here:

THE MARKET FOR SOMETHING TO BELIEVE IN IS INFINITE.

— The Hughtrain Manifesto

People by their actions are showing an inclination for more human, meaningful, indeed spiritual experiences. And it’s no contradiction in them paying to get them at times. The market for confirmatory experiences appears to be growing faster than that for cathartic ones. Or at the very least, you need to know your market and adjust your product accordingly. Just because you supply “tele-vision” doesn’t mean you’re at all delivering the same confirmatory experience via on-demand IPTV as you did on broadcast.

I don’t think the designers of these new media products have given much thought to the deeper needs of their customers. It’s still almost impossible to, say, virtually meet up with other people after a TV show that you found exceptionally good (or objectionable) and create a confirmatory experience out of it. If communities dominate brands is true, it’s saddening to see how few media companies make community formation an easy and rewarding experience.

I guess this is all old news to Cluetrainers, although perhaps they drew their scope too narrowly; it’s not just markets that are conversations, it’s the whole of life. And judging by today’s experience — to uses Bob’s phraseology — Tellywood’s cathartic product isn’t just an obsolete business model. It’s an obsolete business.

UPDATE: Want more evidence? Biggest blockbusters of recent years: Star Wars, Lord of the Rings, The Matrix. Common thread? A quest for meaning in each one.

UPDATE: One last thoughht. Cinemas don’t make money — just enough to survive. The one we went to is part of a big mall complex. Footfall through the shops is what counts. Lessons for other media distribution methods?

An optional question

Many of you will have heard of the famous Black-Scholes equation for the pricing of financial options. The basic idea is that an option contract to buy a thing at some future date at a fixed price has some potential premium over the current price of the asset because it may allow you to buy at a discount some day (i.e. the strike price is below the market price on the day the option is exercised). Black-Scholes lets you calculate this premium.

A stupid network is like an infinite sequence of discrete options to communicate between connected parties. At the finest granularity, every frame or packet contains a message from a pool of possible messages. A stupid network makes that pool of possible messages larger by deferring optimisation for any particular message type. (For example, IMS networks pre-optimise on SIP, which would exclude a more bandwidth-efficient signalling protocol such as IAX — which could be a problem for wireless devices.) The assumptions for a “stupid” network is that networks have considerable longevity, there is high uncertainty about the future returns of different “messages”, and high initial cost — otherwise we could just build more and more application-optimised networks. These respectively map onto “low interest rate”, “big standard deviation in returns” and “high current stock price” in Black-Scholes, maybe perhaps, if I interpret things correctly.

I’m wondering if any network economists or general econometricians out there have done the work to adapt and extend Black-Scholes to model communications networks from an option theory viewpoint. If any of you know the answer, I’m curious to find out what they discovered.

As someone with a degree in mathematics, I would regard the problem as “non-trivial”, and definitely well beyond my aptitude.

Naturally, the option price may be somewhat different for the owner and user of the network, depending on how good the owner is at price discrimination (i.e. manipulating the strike price) — something the “stupid” network is notoriously poor at. There could be some interesting consequences for muni network advocates. Spreading superfast broadband to people who won’t today pay for it at market-clearing prices is a way of foisting options to communicate onto the economy, with the hope that someone will invent crazy new applications to redeem them. Perhaps there’s a sounder theoretical basis for muni networks yet to be explored?

Kudos

There’s a bit of a “blogs I like” meme circling the blogosphere right now, so I’m going to throw in one or two I find worthy reading that other people might not have heard of. These are the kind of sources that give me the ideas for articles here — they educate rather than merely inform. Yes, there’s a list of many of the usual telecom suspects whose every outpouring I devour religiously. These are extra.

• On Demand Media. Seems to be anonymous. Everything is pin-sharp analysis of the emerging IPTV/Internet TV arena. Early days, but promising.

• Ascription is an Anathema to any Enthusiasm. Ben Hyde knows his technology and economics. It’s a nutritious combinaton.

• winterspeak by Zimran Ahmed. More technology-meets-economics.

• we make money not art. About every tenth entry is an example of a presence-enabled contraption, even though they don’t label them that way. Lots of fun.

• Bubblegeneration. (A recent read - hat tip: Thiyagarajan) Great combination of strategic insight into economic change wrought by new technology.

I’d recommend everyone to go out and assemble a daily diet of “out of my area” stuff beyond the technology ghetto. Just sample from time to time. Blogs like the [non]billable hour in law (this is awesome!). Search out the other vertical blogs for aviation, pharma, etc. Go find the equivalent “deep analysis” blogs in horizontal functions like marketing, HR etc. Then top off your daily diet with Arts & Letters Daily — a neatly packaged daily dose of cultural education.

Uncompetitive intelligence

Have just read Richard Stastny’s comprehensive recount of the goings-on around ENUM at the IETF meeting in Paris. I can’t but help feel that, despite the good intentions, some decidedly anti-competitive actions are going on here by the carriers.

In essence, the telcos are keeping control over a numbering business that is being run as a cartel that keeps out non-POTS VoIP applications, and discourages new POTS entrants. And since there is (today) no defensible service element in “VoIP service” other than the trivial routing function, the erection of artificial barriers to enable rent-seeking is priority #1, #2 and #3 in telcoland.

The importance of phone numbers is too easily dismissed in a world of email addresses, Skype IDs and IM buddies. Numbers work across all alphabets and typefaces, are relatively unambiguous, are easily entered and displayed on restricted UIs, and can easily be conveyed verbally and in print. We have a system for mnemonic mapping to letters where necessary. Competing global numbering schemes are unlikely to emerge, because of potential for namespace confusion (although local versions such as SMS short codes do sprout up). Numbering is serious business, if somewhat obscure and technocratic. Despite their sometimes confusing split semantics as “naming” and “routing” objects, they need not be casually dismissed as an obsolete anachronism of the pre-IP world.

The technical problem any ENUM system solves is the conversion of a phone number to any other form of URL (and back again). The specific business problem that Carrier ENUM purports to solve is one of trust. If the user is empowered to create records in the routing table for IP communications, you face two problems. Does the user really own/control the ID that they are mapping from? And do they own the one that they are mapping to?

The puchase of the voice service acts as the “trust anchor” — if we gave you the phone number and VoIP URL, the mapping must be correct.

Yet in doing this Carrier ENUM denies you any possibility of asserting ownership over your phone number independently of purchasing an overpriced “voice service”. It’s a bit like you only being able to buy domain names in conjunction with getting an email account at AOL or MSN. If you happened to want to use your email address (think: “phone number”) in some crazy new-fangled service like instant messaging (think: VoIP), you’ve got a problem. Oh, sure, you can do it in various numbering range ghettos that aren’t routed by half the world (and are charged at random rates by the other half). It’s like Microsoft’s support for Apple — sure, we like competition, as long as it knows its place.

With domain names, I can obtain clear ownership. I get to set a record for my domain that says who I’m empowering to manage the domain’s details for me. In other words, someone thought through the various roles of ownership, assignment, management, operation, etc. in advance. They made a reasonable stab at creating a system that separated them. With hindsight we know it’s not perfect and involves excessive expense, but it’s quite good.

What you would really like to be able to do is enter someone’s phone number in Skype, call them, and if they’re using a Skype-enabled device you get an ecrypted, wideband audio Skype call. But we can’t do that easily today because I could claim to have your phone number, and calls to you would come to me.

I’m totally guessing, but I assume that the PhoneGnome device (which bridges PSTN and VoIP calling) has some patented secret provisioning sauce to tackle this problem. The device, I suppose, places a free PSTN out-call and uses caller ID to associate the SIP address and PSTN number. (Self-provisioning would allow you to fib too easily.) But it doesn’t scale well unless we all buy one; and an $119 device is kind of expensive if all you want to do is prove you are the owner of a phone number so you can use it in an IP service like Skype.

Carrier ENUM makes me feel a bit queasy, because there’s no need to be a “carrier” to do VoIP or ENUM. If the VoIP application is independent of transport, will I be able to declare myself to be a carrier, obtain numbers, and participate in Carrier ENUM? Methinks not, and that smells bad. (I also suspect Carrier ENUM is great for perpetuating the dependence on SIP proxies and smart networks a-la IMS, and preventing P2P connections. You can bet the technical rules will subtly stop any domestic IP connection from being classed as “carrier grade” and allowed to participate in Carrier ENUM as a peer.)

So is the only alternative the unattainable nirvana of User ENUM, where the plebs seize control? Not necessarily, but we could take some baby steps along the way.

If I were a regulator, I’d be looking to unbundle the phone number trust function.

Luckily, we’ve already got a model for it, at least in the UK. If you want to port your wholesale DSL line from one company to another, the requestor must receive an authorisation code issued by the incumbent. And the incumbent must authenticate the user when they request the code.

Break apart this mechanism, and it provides me a way of requesting codes, and third parties using them to authenticate my ownership, but without actually completing a number port.

This only works for the phone number (“E164 number” in telcospeak). If I wanted to map it to my Skype ID, I still need a similar mechanism to assert ownership of that ID. This strikes me as a problem easily solved with today’s digital ID technology ;)

It would not be unreasonable for a “virtual VoIP network operator” like Skype to charge you for access to this trusted directory function. Particularly if the receipient was a POTS (or POTS-on-IP) competitior that wants to disintermediate the Skype network while still allowing the use of Skype IDs! (There’s an business model struggling to emerge in every VoIP operator…) Given the near-zero barrier to market entry, let the market find a price, I say.

Since numbers are also de-provisioned and re-cycled, invalidating the truth of ownership, there needs to be a mechanism to publish these events. This is non-trivial. But even if we don’t solve this problem at all, the system seems stronger than the contract-based alernative of DUNDi, where the user unilaterally asserts truth in identifier ownership, and post hoc regulation deals with miscreants. At least we got the records right up front, even if they age badly.

This solution may be a turkey. I’ve no idea. But there are plenty of other possibilities lined up. For example, I could port control of my number to Skype, but retain the actual voice service somewhere else. If DNS can separate out the ownership, registration and operation roles, so can numbering. Part of the problem is being presented with a false dichotomy of Carrier vs. User ENUM. Another part is ENUM accepts the legacy world of phone numbers on the carrier’s terms - such as accepting only the management roles that existed in the old world. It may seem pragmatic now, but we’ll regret it later as new features take decades to reach “numbered” devices via the numbering cartel.

A deeper part of the problem is the assumption that we want a single, monolothic POTS application — that calling any phone number should make a single device “ring” and be answered. The idea you would place a bell in your house and remotely allow anyone in the world to activate it day or night will seem truly quaint to our grandchildren. ENUM focuses tightly on legacy phone numbers and their messed-up meanings, rather than offering a general frameworks for inter-service interoperability. Is ENUM a good answer to a bad question?

Anyhow, let’s disaggregate the functions behind the Carrier ENUM curtain. Let multiple domain-specific registries and directories emerge, re-combining the elements in new and useful ways. Let them be safe in the knowledge that the records in their directories have at least some kernel of truth to them. Let some competition into places that don’t know what competition and innovation are.

Neither a borrower, nor a lender be

If Skype did implement a payment API, they would suffer from legal problems. That’s because the process of receiving money deposits that can be exchanged for arbitrary goods and services is called ‘banking’. As you can imagine, there’s a bit of a regulatory barrier to entry into this industry!

At the moment that restricts cellular and VoIP operators to offer only third-party payment for information services directly consumed on the phone or PC. So at the very least the operator needs to be aware of the different regulations in each place, and filter the payment options to suitably approved partners and products.

Companies like Vodafone are busy lobbying to have some of the banking regulations eased for low-value deposits and payments. Skype could be an accidental beneficiary of Vodafone’s lobbying prowess.

In the meantime, all personal communications services will polarize to one of two price points: free and expensive. The middle ground will be untenable as the cost of legal and regulatory compliance is too high, and each service needs to fund its own payment solution.

Personal presence

She walks in and sees me with my headset on.

“Are you on a call?”, she asks.

As it happens, I’m not. But maybe my headset needs an LED on top to show if I’m on a call, listening to music, or just inert!

A rotten apple?

Cory Doctorow is in a panic that Apple may add “trusted computing” features to the next generation of Apple OS and hardware. He thinks he’ll abandon their platform if this DRM technology is deployed.

I don’t agree with this position. It’s like arguing that 3,4-methylenedioxymethamphetamine is an evil molecule. It isn’t. There aren’t evil compounds or techologies; only evil uses and abuses. Outlawing certain molecules, rather than opting for more subtle social regulation, has not had a good record of success. Likewise, entirely avoiding technologies that have potential for abuse just cuts you off from their benefit. And a smaller pool of people enjoying the benefits just increases the strength of the abuser, since their behavior now looks relatively less abhorrent and more normal.

Many of Cory’s objections can be managed by a simple OS feaure. At installation time, an application should only have “write” access to DRM-like features if you explicitly say so. And any content you create yourself should always be accessible — and decryptable — by you. I would suggest that the freedom fighters campaign for Apple to include user-empowring features.

We probably do need to update retail laws to make it clearer what you are buying in a device or software application. The act of “ownership” becomes rather fuzzy when your actions may be limited by the remote control of a third party. A normal retail sale represents a complete transfer of ownership, and software just isn’t conforming well to that model. But if the terms are clear, and the customers buy into it, that’s nobody else’s business to interfere with.

The potential positive uses of DRM technology are many. I want my content protected just as much as the media company wants to control its content. I want my PC secured from unwanted intrusion. The technology isn’t going to go away. It’s better to embrace, influence and improve it.