Telepocalypse

Going Dutch

Had a good trip over to Holland as a guest of Citynet. Did a presentation together with James Enck to a mixed audience of local telco folks in Amsterdam. My message: apply the principles of the stupid network to voice telephony, and you'll find a world of untapped innovation and value. But IMS/NGN as the telco approach won't let them capture it, because it asks the wrong question. Rather than how stupid can we make the network?, they instead ask how much intelligence can we get away with?.

You can listen to a podcast of me and James being interviewed here.

James has already done a great summary of proceedings that evening, plus a write-up on the Den Haag Telecom event the next day where we were just passive observers. (Apologies for the lack of real-time blogging, I left my laptop charger at home...)

My take-aways: The telcos are still stuck in the "triple-play" fallacy where you just bundle up the old services rather than improve them or innovate in any meaningful way. The cablecos seem to be 'getting it' and about to embrace participatory "long tail" media. This could turn into a big story if they execute well. Vodafone wants to be a media company still -- I guess the parties are better and staff are prettier.

Anyhow, many thanks to the folks at the City of Amsterdam for inviting me over, it was a pleasure to be back in the Netherlands.

Brittle bones

I'll let you absorb this snippet from BBC News:

The crew of a fishing boat blocked emergency radio frequencies for hours as they watched an erotic film.

The crew of the Blyth-based Oceania accidentally left their radio switched to the emergency channel on Thursday as they were off the North East coast.

They then settled down to watch the film Crash on a TV which was next to the radio - not realising it was being broadcast over a 30-mile radius.

[...]

Humber Coastguard said it was lucky the incident happened during a quiet period and at night. A spokesman also said it was fortunate that sea conditions were relatively calm.

He said: "This should serve as a warning to others to be careful with their emergency radio switches."

The skipper of the Oceania, George Mair, said he had apologised for the error. He said he had inadvertently jammed a clock radio into the switch that opened the emergency radio channel.

You mean the emergency system is so brittle that one nudged switch takes out the whole thing! Lucky there's aren't any malevolent forces around these days that would want to disrupt radio networks on purpose.

I think Bob had something to say about this 19th-century radio technology...

Customer service, web style

Why does any e-commerce site ever expire your session when you're mid-way through?

Is the contents of your basket really such a secret thing that it has to be discarded in case someone else discovers what you like buying?

Are we short of disk space to store saved sessions?

If you're part-way through the checkout, can't we just store everything, and get you to re-authenticate yourself by re-entering just a few key details?

Can you imagine the security guards in the clohes store ripping your purchases out of your arms and escorting your out of the premises just because you lingered too long thinging what colour shirt to buy?

Stately progress

Techdirt gives an update on the progress of reforming the 1996 Telecom Act in the USA:

Now, the U.S. House of Representatives Energy and Commerce committee introduced their own thoughts on reforming the Telco Act of 1996. Again, this bill seems to have a lot of good ideas in it. It takes the states out of the process (which the states will hate), and gives the regulatory power to the feds. This is a good thing, in that it keeps providers from having to obey fifty different sets of laws in order to offer nationwide service.

I don't agree. One lesson from living in the European Union is that competition between regulatory dominions and tax laws is a good thing. Much as the eurocrats hate it, ideas like the flat tax would be stuck in academia if countries like Estonia hadn't got in there first and done it before it could be 'harmonised' away.

Fixed connectivity is, by definition, a local issue. I don't see why any supranational or federal rules need be made, beyond ensuring adequate ability of companies to compete across across state boundaries. You need local presence to create the local access network, and you shouldn't be surprised if you have to adhere to the local rulebook.

Far better to have many experiments in unbundling, municipal networking, etc. and see what really works. Why create a single point of failure in advancing your communications infrastructure by allowing lobbyists to buy laws to outlaw progress nationwide?

The only market that requires contiguous, "flat" regulation is mobile connectivity. Note I say connectivity, not telephony, which is an application. Here, the "50 sets of rules" problem becomes more of an issue; users physically move around between jurisdictions, and it's important that network architecture is uniform. You shouldn't, for example, need to block access to smut for just Utah customers whilst having to simultaneously support net neutrality rules for Californians standing next to them.

The applications are better off being subject to jurisdictional competition. Just as American companies like to incorporate in Delaware, and European ones in the UK and Luxembourg, we should allow application services to be governed by a jurisdiction of their choice. Regulatory rules come with costs and benefits, and it should be the end customer who gets to choose the right balance.

In the public interest

BT is getting broken up internally into different wholesale and retail divisions separated by Chinese walls. The newly announced blob of assets and people is the typographically-challenged openreach. This isolates the local loop into its own business unit.

It seems that openreach will not be allowed to tip:

* The undertakings now make it clearer that 'openreach' is expected to be the primary sales channel for its own products, and that it may only sell to communications providers, not to end-users. Similarly, the role of BT Wholesale has been clarified.

There's some doubt as to the effectiveness of this arrangement. But let's assume it works. I was wondering: what's the smallest unit of "communications provider" we're likely to see? This is an interesting question because it defines how close to the end user openreach can push itself. As far as I can tell, the answer is a municipality that creates a subsidiary legal entity for communications services. So maybe this could have an unintended consequence of strengthening muni networks?

Openreach could also produce a lot of tension inside BT, as it will possibly undermine the 21CN plans. Will openreach be able to divert traffic onto alternative closed IP networks for TV and gaming, plus the open public Internet? Will BT Wholesale be stiffed with the 21CN bill whilst openreach gathers rents from its access bottleneck? I think the metrics that determine the bonus payment of the head of openreach should be published for us all to see!

One last, semi-related, thought. Spectrum policy is supposed to operate in the public interest by allocating out the supposedly scarce airwaves in an optimal manner. Net campaigners want more unlicensed spectrum for a number of reasons, including municipal networks. But what if they also turned the tables round, and said: "OK, so we're going to have slices of spectrum reserved for particular uses. Let's carve out a slice for municipal networks alone." And look over there -- a juicy slice of public TV spectrum just about to come available! Heh, if openreach is about access, their regulatory lawyers could have rather a different outlook to the rest of BT's.

Will BT be able to finesse the regulatory assault with the parts acting in the interests of the whole, or has Ofcom just unleashed a round of insurgency and internal guerilla warfare? I watch with interest!

Proof by arm waving

What's wrong with video conferencing?

The usual answer is that we don't have our makeup on straight and pick our noses during conference calls, and don't want this stuff broadcast and recorded.

I think the answer is simpler. There's nothing to point at!

Without having something to gesticulate at -- other participants, a diagram, the window -- you're left limp and lifeless. So perhaps there's a Superman-style blue backdrop screen type of technology that can re-insert those elements.

Whatever it is, it'll have to be pretty clever to do it.

Lost in space

Richard Stastny ponders one of the mysteries of voice telephony: given Microsoft holds such a strong hand, how come they haven't come to dominate consumer real-time communications. Or in Richard's own words:

There is only one big question mark: Microsoft. Basically nobody understands why MS is not able to really play a role here: they have the [Real Time Communicator], they had the MS messenger, they have direct access to enterprises via MS Exchange, they have the Active Directory, but they do not seem to be able to get these assets on track. Maybe voice communication is incompatible with MS, as it was with daddy IBM.

Here's my thought. They made a mistake with .NET. They saw it as another technology platform, as with Windows. What they also needed was an operational API platform, with billing, meta-directory/federated ID, provisioning, profile, etc. Call it "MSN.NET". It would have learned from the Passport fisaco, and would be very inclusive of third party services. If necessary, it would just be a bootstrap to discover whoever was hosting your digital identities, or doing your billing.

Windows XP should have been the distribution mechanism to ensure ubiquity of adoption.

There are scattered elements of this around, but eBay-Skype is now much closer to the prize than anyone else outside the mobile carriers. Billing is the crux for obvious reasons. But the mobile carriers are getting lost in IMS land, when they should be opening up their network and business platforms with Parlay-like technology and gathering a developer community.

With all the sad media tales of Microsoft's stagnation around its 30th birthday celebrations, it would be nice to have more than one good news story of highly customer-valued innovation from Redmond.

Are an alpha-blended user interface, faster boot-up and slicker printer handling really the most urgent and pressing problem of Windows users? Or the tying together of their data islands and making their personal communications richer and more productive?

It smacks of a missed opportunity resulting from "train track" linear thinking: because technology platforms made us rich last time, more technology platforms are needed to keep making us richer. They aren't capable of directional change at the structural level. This isn't a new problem, and many forests have been felled to print the Harvard Business Reviews and business books to document the phenomenon across many industries.

Their recent re-org bundles the "operational" MSN back in with "static" Windows and Office. It's too early to say whether the result will be an improvement in their strategic direction, but I can't say I'm too hopeful.

A disaster not in waiting

At VON today I was on a panel about how the communications industry can better deal with disasters like Katrina.

What if New Orleans was a poor city on the Bay of Bengal, and not the Gulf of Mexico. A typhoon rips through it. How many people die? A lot more than in Louisiana and Mississippi.

Morbid as the thought experiment may be, it tells us that Katrina wasn't nearly as bad as it could have been. What went right? A whole load of people had reliable electricity, watched their TVs, got in their cars, are drove out. A distributed response based on central information.

You need to differentiate between an emergency and a disaster. In an emergency, a distributed piece of information calls for a central response. A disaster, the converse. Those best informed are in the field; those best equipped, in the field. The best disaster response system is the one in your hand when the disaster strikes.

This is a bit of a good news/bad news story. Just by making a better everyday communications system, we make a better disaster response system.

But the changes needed to make things better are politically painful and resistent by incumbent powers. Not just portable numbers, but user-owned ones; cheap municipal networks that encourage universal adoption; and spectrum liberalisation.

Imagine for a moment that the expressway out of New Orleans was a toll road, and they had been turning people back who didn't have the change ready. There would be a physical and political riot!

But silently create an artificial inflation of the costs of wireless technology, and you have the same effect. People can't afford the service, they flee, get cut off from their telephony service. The industry is reduced to after-the-event patches over the gaping communications wound.

I suspect that central committees will determine we need more central response systems, and weaken the economy by taxing everyone hard to pay for it. The exact opposite of the medicine a "network edge" response would dictate.

Sorry I can't offer a more upbeat assessment.

It Means Something?

I couldn't resist going to the session on IMS, the telecom industry's purported salvation.

As might be expected, I've expressed some strong opinions on IMS previously. I'm always open to learn more and refine those opinions. Yesterday there was a good, educative session once you stripped away the slideware.

For those unfamiliar with IMS, the basic story is this: The old phone network has a media component that reaches your phone's microphone and speaker, and a signalling part that you can't touch (and they screw you hard when you need it to do something for you). The Internet is an IP network that just shifts bits around and doesn't differentiate signal and media; you are in complete control. IMS is an IP network technology that re-introduces a "control plane" for signal and "user plane" for media. Bandwidth and sessions are centrally controlled and managed.

The panel was nicely constructed with analyst (IDC), vendor (Lucent, Intel) and operator (Sprint x2) views.

There's still a lot of strangeness out there. Push-to-talk was given as a great example of an IMS application. But PTT isn't quite real-time; there's no QoS requirement that IMS will fix. If the radio link can't hack it, re-arranging the packets inside an IMS box won't make any difference.

IDC declared: "Equipment providers need to make equipment truly interoperable for IMS to be a success". You can view this statement in one of two ways. One view says that carriers will demand a choice of vendors and low levels of lock-in. More nuanced is the possibility that services will need to inter-operate across multiple carriers. Could the mobile operators define a universal Voice2.0 application and foist it on everyone via control of distribution channels, just as with MMS? Sounds unlikely. Like SMS, Voice1.0 is a minimalist application that is good enough for a massive swathe of users. Richer apps are likely to have narrower, more targeted user bases.

IMS is a double-edged sword to carriers. On the one hand, they get a chance to compete against 3rd party applications that are eroding their revenue base. This competition doesn't need to be 'fair'. For example, they might only offer the connectivity fast enough for TV and videoconferencing as part of an IMS bundle, not as an Internet service. That raises the barrier to entry because it'll be painful and expensive to build and deploy IMS apps compared to pure Internet ones. This will all feel quite reassuring to telcos, no doubt.

But the curse is that your supposedly differentiating application is now limited in scope to your connectivity customer base. If you have an application that has any form of network effect, you've got a problem. The Internet giants will have ten or a hundred times as many users as you. And increasingly as social networking features get integrated into IP communications, your network operator island looks rather cramped.

I'm seeing the promises of IMS as being great for feature deployment as being hollow. IMS is a Voice1.0 proposition -- cheaper, but not better. A juicy qute from the floor:

What can I do with Fortran that I can't do with Assember? Nothing. But we can write programs easier and quicker in Fortran. But the major beneficiary of IMS is the carrier, not the user.

Sprint was honest in saying IMS was enterprise-driven, a means of verticals like healthcare creating secure networks. You won't see the Fortune 100 leading innovation in personal communications. And they won't be held hostage to paying usurious application tolls by carriers. They're used to buying dumb pipes, and IMS will be held to its promise of separating service and connectivity. Just a new form of mentally deficient pipe, rather than dumb pipe.

Even then, I suspect Microsoft might have a few things to say about carriers offering "enterprise instant messaging" as a service. Why stick a carrier SIP proxy between your Microsoft messaging servers? Redmondites don't like being reintermediated.

IMS makes sense from the carrier perspective in consolidating the existing services they have into one architecture. Whether that justifies rip'n'replace on fully depreciated equipment and re-training everyone, I'm less sure. The mobile installed user base is huge, but IMS will grow up as a technology just as the access networks like Flarion, WiMax and WiFi come to obsolete the need for connectivity rationing technology like IMS.

There is the promise of seamless provisioning across multiple networks. But you have to ask yourself whether a vertically integrated, complex architecture such as IMS is really the solution. Isn't this a fairly simple identitiy and authorisation federation problem largely solved by existing IT technology? Why not offer a simpler layered approach?

A good moderator question was what was the litmus test of whether you had 'true IMS'. The best response, from Intel, was "if you can change you app server without changing your session server in just a week, then you have IMS." Perhaps all IMS is about is the telecom industry discovering the difference between a web server and application server, just as the whole server business is being ripped out of their hands. A decade or two late, but never mind...

Another classic was the usual question: WHERE'S THE APPS? Specifically, what are the services a 15 year-old will want from IMS? The Ericsson response was such a classic (and representative) waffle on this that it deserves to be reproduced in full:

It's all about their methods of communications -- they drive the envelope. Everyone comes back to gaming, but I see them spending time collaborating more. We need to shorten the distance between us in a more natural and personal way. These kids would like to communicate more effecively with voice, sight, sound -- as many of the senses as we can technically do. The challenge of IP multimedia is to see if we can adapt to this. Be able to replicate these solutions re-usably. Presence and availability, to see if they're ready for a chat session, one that can give them video, voice and chat at the same time. Important thing is for them to have those choices. It's got to be brainless, easy to use, add new value. Today they can chat, get on their video cameras on the Internet.

Err, so, remind me again ... where's the value-add of IMS? What new services does it enable?

Just to make sure, I visited the booth of IMS vendor Brooktrout. Nice demo of a game running on a PDA via IMS, but try to get out of them what IMS does for the user experience and nobody can tell me. The only user benefit again is back to that 'seamless provisioning'. But Boingo does that today on WiFi across a zillion networks without IMS.

To add some more data points on IMS, I went to Hassan Ahmed's IMS presentation. He is the CEO of Sonus Networks, and IMS vendor. His core message:

"It's about empowering consumers. IM, chat, email, phone. They want to be able to seamlessly go between these services. Today's networks don't support that ability."

What! I've been doing almost nothing but seamlessly moving between them, and folks at MSN, Yahoo!, AOL and Skype have been busy making that experience on the Internet pretty slick. There's just no credibility to the story that IMS is fixing something that is totally broken. At best, a minor quality improvement at great expense in limited circumstances.

Hassan sees a transition from Long distance/POTS/Moble -> VoIP -> IMS; vertical integration -> converged networks -> converged services. But we can integrate services without IMS, and millions of VoIP users talk without it. QoS problems inside the edge device or customer network aren't solved by IMS.

Why is nobody calling the bluff on this? The game is over, it's dumbpipeville all round. A few small vertical niches with extreme security and performance needs are all that parts that require anything more.

Having see the WiFi and videoconferencing snafus the previous day, I was wondering. Would IMS have made things better. Perhaps. But the real value of IMS isn't the technology, but the values and attitudes of telcos. IMS should really be It Mustn't Stop. The telco attitudes to scalability, availability, and performance still retain value, even if the delivery technology doesn't.

To wrap up, here is a grin-aloud quote from a Sprint rep:

"IMS separates signalling from bearer channel, not money from wallet."

I think they're on to something, there. Don't you?

Sorted

A tiny observation -- a noticeable change in my media consumption patterns. I changed my settings in my Bloglines RSS reader to sort by number of unread articles, rather than alphabetically. Now I tend to nibble my way up from low-bandwidth sites to ones that post more frequently. I don't get bogged down in one feed so often. This expands my diversity of reading, because someone who posts once a month tends to get some attention, rather than being lost in the list.

OPINION://One freedom

I suspect the ideas in this essay will be popular in the same way as herpes -- exposure will be unwelcome, yet infection will be widespread.

Both Jeff Pulver and Nicklas Zennstrom in their VON conference keynotes today have made calls for Net Neutrality regulations to ensure a "level playing field". They aren't alone in these requests. Beware what you ask for. You might just get it -- and regret it.

I've written previously about the "Four Freedoms" that came out of the Powell-era FCC, and tangentially about their possible negative effects. Time to elaborate.

The four freedoms could colloquially and oversimplistically be re-phrased as "nobody block IP address ranges", "nobody blocks ports", "you can attach anything you like to the network", and "you know exactly what you're paying for". At first look, these look like laudable consumer protection aims. But only the last one is guaranteed to achieve consumer benefit.

The FCC's four freedoms were articulated in an unusual regulatory environment. The unbundling regime in the US had essentially failed, politically and economically. This was due to many factors I won't go into here. But the failure cannot be doubted. Almost all the new entrants died, and the survivors are small and sickly. You only need look at countries like Japan, France and the UK to see what happens when unbundling succeeds. The FCC therefore needed alternative means to protect consumer interests, and limiting price discrimination is a post hoc means of limiting the consumer loss under monopoly or duopoly supply.

However, the FCC lacked specific direction or empowerment to "keep the Internet open". There's no "Internet Non-Discrimination Act of 1999". Just a long case history of common cariage rules which only applied in spirit rather than de jure, and a general mandate to ensure fair competition.

The four freedoms are therefore a stick and carrot with which to encourage "good behaviour" from network operators. Mess with these, and we might not be so kind to you on other things dear to your heart. Really mess with these, and we might kick the regulatory rule-making apparatus into operation, and see how far we can push the existing mandates we have.

Now for the big, ugly, hairy danger for Net activists.

You need to understand the context of the FCC and these "freedoms". First, they're nothing about freedom! That choice of wording just makes for good karma and strong rhetoric. They aren't the result of any legislated socio-political freedom agenda. They exist solely to discourage or inhibit price discrimination and anti-competitive behavior.

Price discrimination is the practise of charging different people different amounts for the same or similar goods. Taking airlines as the canonical example, different contract terms can be used to offer the same seat at different prices. A fully-flexible ticket costs more than a non-changeable one. Versioning of the product into, say, business and economy class also separates out those wishing to travel from A to B in comfort (or at someone else's expense) from those wishing to be more frugal.

Classical market economics doesn't see price discrimination as either "good" or "bad". The effect varies between competetive and uncompetetive markets. In the latter, it just serves as a transfer from consumers to producers, as nobody gets away with paying less than the full value they receive. Where substantial competition exists, some consumers will naturally pay more as a result of being caught out by price discrimination, but on average prices fall and low-end consumers benefit particularly substantially.

So it's a good thing when some telco offers a $10/month DSL wholesale product that can authenticate the device and only works with your VoIP phone and not a PC. It enables new classes of low-end consumers participate in the market.

The first three "freedoms" are all means of price discrimination. You can restrict which service providers, services and capacilities the user can access. Yet they can also be used as anti-competitive weapons by powerful incumbents. Blocking of the Skype domain IP address range or preventing access to rival e-mail service providers. The trick is differentiating which is which.

Still this doesn't provide a case for outlawing such practices from the outset. Device-based discrimination could only seriously be an issue in a vertically integrated industry where devices and networks came from the same people. This isn't what we see today, even in wireless. Port blocking is a nuisance, but is little more than a hump in the road, not a roadblock. IP address range blocking is probably a better candidate for investigation.

The Net Freedoms can never be a substitute for real competition -- or for a total re-alignment of network owner and user interests, such as that achieved with municipal, community or user-built networks. All you achieve instead is a whack-a-mole of price discrimination methods. Next month we'll be declaring dynamic IP address assignment an unreasonable encroachment on your "freedom" to host a server. The following month will be full of empassioned rhetoric on the evils of Net connections with unacceptable jitter. Or asymmetry. Or early termination fees. Or rules on which TCP flags are acceptable. Or, or, or.

We're also eliminating the possibility of finding out if the Chicago economists are right. Maybe we should allow pricing signals of monopoly profits to be sent at full volume -- to encourage new entrants. Regulation merely entrenches the status quo.

Discouraging price discrimination is also dangerous from a theoretical economic standpoint. We can differentiate the "social welfare" the provider offers (the gross benefit of the product) and the net benefit (social welfare less price charged). Inhibiting price discrimination may cause the provider to lower social welfare and serve only narrow market segments to enhace profits. Is this really what you want?

Finally, Adam Thierer warns us against some further unintended consequences of Net Neutrality regulations. eBay is a big campaigner for regulation, but what's sauce for the goose...

But let’s look at the flipside of the equation and think about the future. If the [Net Neutrality] rules could be used by eBay against various [broadband service providers], could it not be the case that others might seek to use the [Net Neutrality] regs against eBay at some point in the future? After all, the "net" in net neutrality refers to networks and eBay has two major networks now—an amazing auction service and a VoIP service.

In a networked economy the prizes are bigger, but the winners in each field of endeavour fewer. Are we in danger of outlawing big prizes in the name of egalitarian poverty? Why put up risk capital if the prize can be confiscated?

You can argue for common carriage regulations in the name of democracy and free speech; but to treat it as a right seems madness.

You can argue for them on the basis of network economics, but you the onus is on you to demonstrate that this produces a sustainable business outcome to support the network, doesn't dissuade investment, or unfairly overcharge or undercharge classes of users.

You can argue that a priori rules are needed to prevent anti-competitive action. But then wouldn't you need to restrict the neutrality rules to only cases where the connectivity provider actually has a competing application service? If Madison River had only offered raw, pure DSL connections, should they still have had their wrists slapped?

You can argue that we need better truth in labelling laws on Internet connectivity. That's the fourth freedom. Go ahead! But don't invent more "freedoms" and pretend they're inseparable.

You can change the game. Argue for policies that truly encourage multi-modal competition. Argue for policies that re-structure the ownership model. Good luck -- I wish you well.

Or you can stop complaining.

VON: Disaster relief appeal

This is a special VON appeal on behalf of all victims of the PSTN communications disaster.

Have you ever missed a call because someone rang you on the wrong number? Found it hard to keep track of people's phone numbers? Keep forgetting to call on family birthdays? Disappeared into a vortex of voicemail tag? Been called back twice by someone who dialled the wrong number and just wanted to make sure they entered it in right?

(cue soft music)

So today we are launching a special appeal on behalf of all frustrated telecommunications users. Users that live in the real world, with real everyday communications problems...

The real world

We have travelled afar to scour a strange place where new treatments for the affliction of frustratia telefonica are being developed. A clinical, strange world. Almost, indeed, a fantasy world...

Fantasy world

So I'd like you to join me in supporting this special appeal on behalf of all communications users. Let us together join the search for the missing features. Let us solve the problems that ordinary people find in their daily lives when trying to keep in touch.

(cue cresendo, violins, sotto voce, view of presenter)

Just always, always, remember the suffering users.

(cue Skype logo, flash up Paypal account details to which to send donations.)

OK, that was a bit of fun. You might think my criticism of the PSTN somewhat harsh, but from the user's perspective I doubt it achieves "one nine" reliability, forget 99.999%. Consider how many impulses to communicate are successfully acted upon and executed fully first time. I'm going to be wondering the halls and talks at VON with one question in my mind for vendors: how does your stuff improve the lot of users? The point of this stupid network was better and new communications tools. Is the industry rising to the challenge?

PS -- After I drafted this wee critique on the introspective nature of the industry, the WiFi in the halls failed and Niklas Zennstrom's talk was a technological tour de failure. So I was tempted to re-cast the "disaster relief appeal" a bit more spitefully, but I'll be nice for once.

Danish pastry

Like James, I also read the summary of what's going on with the mega Danish FTTH deployment.

A few thoughts:

• The risk profile of laying glass pipes is one that matches a "utility" company, not a "telco" (whatever that means these days). This activity creates value for shareholders of the electric company because it creates a broader basket of similar-risk activities. This lowers overall investment risk whilst maintaining the general risk and return profile they expect.

• The core competencies of a utility are maintenance of holes in the ground, negotiating wayleaves, buying upstream wholesale "supply" (power generation/Net connection/reservoirs) and simple recurring billing. Sending people on expensive jaunts to standards committees to invent NGN technology isn't on the list.

• Delivering electrons, H2O molecules and photons via pipes all look like remarkably similar businesses. It reminds me of the master-stroke of Centrica a decade ago. They are a divestitiure of British Gas, and run (among other tings) the home appliance service business. Vans chock full of parts roll around to houses and fix broken boilers, paid for mostly through insurance. They shocked the market by buying the Automobile Association, a breakdown group. What on earth do cars and gas boilers have in common? Yet it was a great success! Why? Because the AA is a business that filled vans with spare parts that roamed around fixing broken-down cars, paid for by insurance.

Future success in network operation will probably come from doing the sort of supply-side tricks Dell mastered in the PC business. Bring all the supply chain into one tightly co-ordinated lean delivery system. And eliminate most of the marketing and distribution costs.

Doesn't look much like a telco of today, I'm afraid.

Insecure smart networks (part 237)

More worries about single-hop security deficiencies in the Net:

Evil Twin is new threat to Wi-FI users. It refers to the use of malicious servers that pose as genuine ones and try to extract sensitive information such as credit card numbers and bank details. [...]

The malicious server [I think they mean 'access point'] interferes with the signals sent to the wireless users. The users are tricked into logging in to the fake server.

Securing single links is a perpetual waste of time. A minor increase in attack cost. You're only as secure as the least upstanding sysadmin in the telco data centre. Of course, no telco employees ever have drug problems, gambling debts, mental illness, or general moral breakdown. They certainly don't have criminal friends of relatives.

Get yourself a VPN at the very least, and don't do business over unencrypted, unauthenticated links unless you really, really have to.

Gee, twenty years on, and we're still learning that the best place for security is at the edges, not in the network. WiFi would have been a better standard in some ways if security had been left out entirely, and the false sense of privacy eliminated.

UPDATE: And yes, I eat my own dog food. Have my own VPN server, and use SSH tunnels as a fallback. When on the road, all rabbits go down the VPN hole. As for the general insecurity of email and web browsing, I can't fix that, although at least stuff is going via my home ISP. I use Skype whenever possible in place of phone, server-based IM and FTP/email -- at least there's a hope of it being secure. And my laptop hard drive has a boot password, too.

Good news, bad news

Last useless thought for the day.

I've been given media credentials for the VON conference (thanks, Jeff). But I'm overwhelmed by the amount of PR invites.

Conferences are, above all, a social gathering. Information passing in sessions is increasingly secondary, since the Web, podcasts and RSS have transformed our ability to assemble our own media feeds and be as much "in the know" as many a journalist.

It would be great to see VON evolve into an "eat your own dogfood" event where it's a showcase for networked social and personal communications. What would happen if you "Skype-enabled" VON? (Or for the SIP-heads, Xten and FWD...)

So some constructive suggestions/ideas.

All attendees get to register their interests. The system does a first-level filter and match on these to vendors. Ideally, you do some bizdev-type deal with networks like LinkedIn and Ryze to see which friends and friends-of-friends are around. More social lubricant in the conversation engine. Maybe freeform tags describing attendees and exhibitor interests, rather than fixed menus, have some play here?

Media attendees don't have their main email address revealed; they get a temporary private address that PR mail gets forwarded to. They know there will be an end to their mailbox trauma! Same for all attendees, maybe.

Move away from e-mail; create RSS feeds, add meta-data to the invites; create an on-line conference calendar. Be able to tick off the sessions you want to attend, the meetings you want to go to.

Trackback, commentary etc. for every event should be automatically assembled. Much value comes from speakers; ever more comes from the feedback of others that confirms or debunks what they say. We're past the era of speaker-worship where we all go to bask in the glowing thoughs of self-anointed industry leaders. (And I'm a speaker and self-promoted, so I should know.)

Backchannels are great, but should be unobtrusive. Hey, even Skype has bookmarked chat sessions - you could just set one up for each session. Where do we go for the "conversation"?

Make the after-the-event retention of business contact info quick and simple. A few clicks on the speakers you want to touch base with, and their details are in your Outlook address book, the actions in your to-do list.

PR companies need to re-invent themselves, and quick. I just can't believe how bad some of the pitches I'm getting are. You're a company I've never heard of with a mystery launch of a product you won't talk about, and you expect me to turn up to dispel my unbearable suspense? Nice try. At the moment they're inhibiting the conversation between me and their client. Something's got to change.

The whole idea of a zillion scheduled meetings and one-on-one pitches isn't really scaling well. Somehow we need to lubricate the rendezvous process too. Be able to flag "I'm available now", get linked up with someone who has something of interest to say.

This was just a stream-of-consciousness set of ideas, and no doubt some are duds. I've seen some small-scale conferences re-invent the interaction experience using backchannels, wikis, videocasts, and live music. The difficulty is how to make this work for a hundred or a thousand times as many people. I can't think of anyone better equipped to rise to the challenge than the pulvermedia team.

Whither DNS?

Second useless, disconnected, time-wasting thought of the day.

The Domain Name System is often though of as an integral part of the Internet. Without it, how can you ever locate anything?

Well, quite easily, thank you very much.

DNS is used implicitly for many services, such as web browsing. It also includes explicit extensions for a few applications such as e-mail. (I'm talking here about DNS the system, not DNS the technology that can be re-purposed to things like ENUM.)

But the most notable thing about DNS is its receding importance.

Firstly, we're spending more and more time finding things via search. I bookmark things much less than I used to. I don't type domain names in very often. The standard approach is to Google the approximately right term. If the Google link was a hard-wired IP address or some other naming/indirection system, nobody would really care. AOLers have been bypassing DNS with keywords for years.

DNS is also getting stiff competition from other namespaces. We don't use DNS to locate people; increasingly we use handles from private IM services like MSN, Skype, AOL, etc.

We don't use DNS to locate ideas. We've gone tag-mad instead.

We don't use DNS to locate places. We just cut'n'paste the URL from Google Maps or Mapquest.

DNS plays a small role in all of these, as a bootstrap mechanism. There's still a skype.com to get the software, or a google.com to prefix the location. But the bootstrap locations could equally be baked into your browser, just like the crypto keys for setting up secure connections are.

This was really brought home to me recently when my DNS service at home suffered a glitch from my useless ADSL router malfunctioning again. (Westell Versalink 327W -- don't buy it: confusing UI, bad documentation, lacks the functions you need.) I didn't notice for a while, because Skype doesn't need DNS to operate, and a green Skype icon means the network is up. My home network server had the only DNS lookup that mattered (my ISP's mail server) happily cached away, and could have easily been hard-coded. It was only when I went to the Web that I came unstuck.

A great deal of 'Internet governance' effort is expended on DNS. But you have to ask yourself - is it really part and parcel of the Internet? Haven't we learned anything about separating connectivity from application services? Do none of the other namespaces deserve 'governance'?

The danger is that DNS will be treated as a panacea, and will continue to be pressganged into more functions for which it is ill-suited. Problems at other layers get neglected.

For example, if you could reliably locate an IP address, a lot of emergency service issues get much easier. Many security problems with the Internet could be addressed by tightening up the semantics and process of IP address assignment. Why doesn't an access service provider ever get an opportunity to assert anything about who, what and where you are? Yes, privacy is an issue; but if you're a good actor, it can be to your benefit for your ISP to vouch for your location, identity and trustworthiness.

As always, you have to remember that the Internet is just a prototype Stupid Network that escaped from the lab one night and spread out of control before the results were in. Now we've got the results, and it's time to go back and fix some of the problems -- before someone less benevolent does it for you.

A thin thought

A totally non-actionable, useless, pie-in-the-sky thought.

Old fashioned desk phones are a bit like thin-client web terminals. A limited set of UI functions are communicated to a central, smart server. Management costs are minimised as a result.

The stupid network wants to invert all of this, and make the edges smart. When the telephony application is in a state of rapid flux, replacing a $100 device with a new, smarter $100 device is much less intimidating than risking the upgrade of a $10,000 PBX in the hope you've picked the right feature set. We've taken to using $1000 laptop PCs as telephones to get the functions we desire, because they're more adaptable, and the change can be done with free or cheap software upgrades.

But there's that little niggling issue of manageability of heterogenous distributed network devices. So I just wonder ... could the idea of a "thin client" smartphone be feasible? Say you want a desk telephony device that can display Skype buddy presence, for example. Is the device itself the best place to put the Skype-specific application logic? Or is a device with a few softkeys, and a stripped-down web browser or Flash-type interface a better bet, interfacing to a server of some kind out there in the cloud?

There's an unresolveable tension here. The stupid network is adaptable to change, and small incremental change at the edge is quicker than large change in the core; but change costs money, and co-ordinated change managed centrally can reap economies of scale. So as the level of uncertainty drops about what customers want out of Voice 2.0 over the next 5 or 10 years, expect to see the architecture shift accordingly.

Sold to mwhitman, a member from San Francisco

A most valued reader (i.e. my brother -- my mum is the other reader) points me to a colleague's friend's blog busy referring to my previous entry. So to complete the nepotistic circle of cliquedom, I'll point you back to the other side of the echo chamber. It's one of the more succinct observations of what the Skype-eBay thing is about:

Google is now going to have to play an uphill battle. That battle was made conspicously apparent when Google released GoogleTalk. Why does Google continue to insist on invitations to grow it's Gmail accounts? Why is the only other registration mechanism is to use a mobile phone? I take it that Google understands the value of tying one's digital identity with something tangible in real world. That is you have a Gmail account because of your real world contacts or your ownership of a mobile phone.

Interestingly enough, it is eBay that has the enviable position of providing digital identities with true value. eBay's reputation system is without competition. A seller's ability to command a premium bid is affected by his reputation. Buyers without established reputations are sometimes barred from bidding. Paypal's verified attaches a real bank account to an identity. When one attaches a credit card to an identity, the address becomes verified and adds additional reputation for a buyer.

This is an elaboration of Stuart's allusion to the digital identity imperative of eBay and Skype:

Skype and eBay profiles: A huge winner in this area is possible. eBay will provide just one form of reputation data. Caller ID solutions are not far behind.

I gave a talk about 18 months ago one why the real asset of a telco was the data in its customer database, and not the network. Nice to see the real world catching up.

One shouldn't ignore the international aspects of this deal. It's easy to be parochially US or Euro centric, as Jonathan Boutelle notes:

This also means that in many emerging markets no one has heard of eBay, and eBay has no effective way to reach these markets other than expensive late-stage acquisitions.

Owning Skype will make eBay immediately relevant to millions of Pakistanis, South Africans, and Georgians. It gives them a way to reach customers and drive marketplace adoption in every country on earth.

The only way an eBay-Skype hookup can justify the price paid is if eBay infects Skype with transactional functionality. Skype has to burst out of a pure C2C voice play as there's not enough money in it to support big-league financial expectations. There are many break-out points, but B2C/C2B communications strikes me as the easiest to mine for gold.

Telepocalyptic prediction #1: We'll see a "merchant edition" of Skype within 12 months, and this will be indirectly a paid-for service to eBay sellers. Skype becomes the "PBX for micro businesses", and it's the seed from which eBay can grow a bigger assault on the moribund PSTN application, particularly the 800 number market. The economic driver will be increased conversion rates, larger transaction sizes, lower transaction defect rates (e.g. wrong address), and increased up-sell during closure. Only an advanced multi-modal client can achieve these things.

Telepocalyptic prediction #2: Within 18 months, Skype will be giving away ougoing PSTN calling to places with low call termination charges, in exchange for people adopting the Skype/eBay identity and proffering personal data. eBay needs to grow Skype as fast as possible to keep as much calling on-net as it can. There comes a point when your network effect means you can suddenly drop the price for a wide range of vital services to zero (think: search, browsers) in order to support an adjacent business.

As Yannick Laclau notes, the telcos will respond with their own scorched earth policy of offering PSTN service for free in conjunction with Internet access. As he later observes, this is fatal for the PSTN disintermediators:

The internet players are deflating voice to support their applications-layer businesses in commerce, content, and advertising; the telcos are deflating voice to support their growing broadband access business.

The losers in this will be folks who only make money selling voice. Top of mind in this category is Vonage, SunRocket, Packet8, VoiceGlo, GossipTel, and the other pure VoIP guys. Skype, I felt, was dangerously headed in this category until today's rescue by eBay.

Many of the telcos unloaded their directory businesses in a fit of panic to raise some cash during the downturn. This will now look foolishly short-sighted as local search becomes the hottest part of the telco value chain. Expect to see the most "e-enabled" local search providers being snapped up by Google, eBay and Amazon. (I'm not brave enough to make specific predictions! Apart from anything, I've not been tracking the space closely -- go read Om and Andy for the detail.) This local directory business will be particularly critical to integrating "voice-centric" small businesses like plumbers, take-away restaurants, etc. rather than the web-centric ones that are the traditional eBay fodder.

The collective loss of the directory businesses will also weaken the ITU cartel's ability to dissuade the listing of non-PSTN contact identifiers.

Ultimately, though, I can't beat Stuart's pithy cluetrained comment:

A marketplace is nothing without conversations.

Whether the messages over Skypenet are worth the crate of gold that was offered, I'm skeptical, but the strategic fit is certainly there. We definitely live in interesting times.

eBay and Skype: Back to basics

Two weeks ago, I explained how Google needed Skype to move Google up the value chain from when an advert is clicked. I noted that eBay was Google's real competition for connecting consumers to merchants, and eBay has a structured transaction environment. They don't just do the search, they also help complete the transaction, including payment.

So, a fortnight later, and eBay buys Skype. What does it mean?

Companies like Dell, eBay, Google, etc. got big by thinking big. They picked a unique business model, and drove it to completion without losing focus. To understand this transaction, you need to look for where the big prizes are.

The obvious one is the wrong one. Google and eBay are already in the business of generating sales leads. The Skype community, for all its size and vibrancy, is not being bought because they can be pitched to and turned into eBay users. Or if it is, this story will have a nasty ending where all the heroes get bumped off and the princess just grows old and ugly.

There are two conveniently located stones under which to look: transaction revenue, and the freefone number business.

Banking is big, slow, cartel-like and lacking in innovation. eBay is unbundling part of the transaction chain using Paypal, and re-intermediating the settlement process. Remember that Paypal is largely a virtual payment mechanism, used to front other payment services. Communications services are a natural generator of the small transactions that Paypal thrives on due to its low comission fee structure compared to credit cards. Skype and Paypal also have an international footprint, leaving many parochial banks struggling to offer a competing product. They fit together nicely.

This is classic Innovator's Dilemma stuff. Eat your way up into the big boys' businesses by starting with the small stuff.

So the first big prize is to suck some of the profit out of the banking payments system. This is a big pool, and Skype is just a small straw. That makes the eBay/Skype transaction interesting, but not critically important.

Guess what? Telecom is big, slow, cartel-like and lacking in innovation. And it has some big prizes ready for snatching. Almost all of current retail VoIP plays are abount disintermediating high end-user toll charges. It's a massive race to the bottom, where you get your monthly talk time by cropping three coupons off your Shreddies packet.

There are other puddles of money in telecom, though. One is the 800 number revenue bucket. I don't have the figures to hand, but this isn't a small deal. And because Skype is a child of the "stupid network", it can evolve quickly to integrate new transaction-supporting functionality making the profit pool bigger.

I suspect that eBay's ambition is to become the mediator of 800-number style interactions between consumers and merchants. The www.ebay.com web site is their text distribution channel, and Skype is the audio one. Each will have different sets of merchants, buyers and transaction structures. So don't look for "eBay" functionality to appear in Skype, because they're addressing strategically similar but functionally different needs.

One last thought. If you're a telco, now is a great time to cross your chest and start saying your Hail Marys. Someone with deep pockets is about to give away telephony to support their adjacent transaction business. Browsers are free -- as long as enough people tip Bill G., search is free -- as long as enough people leave a few cents in Larry, Sergey and Eric's pension plan. And telephony will be free -- as long as you click the "pay here" button on your Skype-powered eBay telephony device often enough.

PS - eBay still hideously overpaid given the size of the effort needed to claim the prizes.

Surprise!

I was recently asked what about the Internet in the last 10 years surprised me most, and what surprise I anticipate in the next 10 years.

In millions of homes around the world are little WiFi boxes that you can turn over, and each says underneath "Made by Linksys, a Cisco company. San Jose, USA."

So the big surprise in the last 10 years is that you can go to almost any town in the developed world, walk around a bit, and find free fast connectivity to the rest of the world. I couldn't possibly have guessed that.

And the surprise for 2015? There will be the same little WiFi-like boxes in millions of homes and businesses. Ten times faster, ten times cheaper. But underneath they'll say "Made by Cisco, a Huawei Technologies company. Shenzhen, China."

Do be evil

So, Skype is teaming up with E-Plus to offer a "bundled" mobile data plan.

The obvious question many have asked is how will E-Plus stop you from using rivals to Skype? What does this do technically behing the co-marketing facade? Couldn't I just download and use Skype anyway?

But turn this all inside out for a moment. What if your Skype client only worked on the E-Plus network when roaming in Germany? Or in other words, it simply refused to work on the competition? Sorry, your IP address is drawn from a block we don't support.

Unlikely, you say -- I'd just use something else. But would you? Could you really get all your buddies to switch?

Skype is following a multi-pronged "out-distributute the competition" strategy, bundling with connectivity service and edge devices. Will SkypeNet be reaching the parts that other providers cannot reach?

Profit buster?

Russell Buckley muses:

Analyst firm, In-Stat, forecasts that global shipments of mobile phones with wi-fi will hit 13.5 million in 2007, leap to 52.8 million in 2008, and surge to 136 million by 2010. [...] But obviously, in comparison to the 2 billion phones in circulation, it's not going to be a big problem in lost revenues for operators in the next 5 years.

That assumes that something like the Google paradigm-busting scenario doesn't happen, of course.

OK, here's how you paradigm-bust. Almost every stage of the telephone call experience is broken after a century of statis. Up-front, for example, you have social networking (find people to call), and directory service (know how to call them).

Directory service is broken, and badly. For example, go look at BT's white pages search. You can look up phone numbers, but you can't edit your details, add on extra means of contacting you. BT could be making revenue off collecting this data, and syndicating it to third parties with user consent. BT's directory group is stuck in the mindset of the 800-page printed phone book, soggily dumped outside your door once a year. We're in an interactive read-write era folks! Why can't I append my picture to my directory entry, if I want to? Why can't BT's directory offer opaque telephony, where you can contact me -- but you don't get to know my number? Why can't BT offer a "telemarketer" line to Martin, where it's two pounds a minute to call, and we split the revenue? Anyone willing to pay might have something I'm interested in!

OK, back to Google and paradigm-busting. The US market for telephony is unusual in that it has a flat numbering space and "normal" termination charges for mobiles. So what should Google do? Offer a VoIP client which gives free calling to all US numbers. (I hope the prospectus for the Vonage IPO has a really detailed "risks" section -- it'll probably be about as long as a phone directory, too.) Google makes the money on processing your personal data.

For example, who you call, for how long, and who calls you back all creates an implicit social network. For those in the know, this spells M-O-N-E-Y. How much more effective are ads when they're targeted at groups of people, not just individuals? We're about to find out, maybe.

Think big, think disruptive, win big.

Speaking about content

Many, many years had passed since I last went into a music store. My back-catalogue of CDs together with a subscription to the Rhapsody streaming music service had sufficed for my needs. But Rhapsody has many gaps. So I went in to see if my updated "long tail" musical tastes could be catered for.

I recently got totally hooked onto modern dance and trance music. I've always had a taste for electronica, particularly tip-top downtempo and trip-hop delights. House music struck me as sugary mind candy, and dance music seemed, well, boring and repetetive.

Digging into the genre in retrospect, after the wheat and chaff are pre-sorted, brings up some tasty bites.

Scanning the stacks in the store, I found two things.

Firstly, none of the albums I was interested in were there. Oh, there might have been a divider with the artist name, but not the album I wanted.

Secondly, it's totally impossible to know what Digital Rights Management (DRM) crapware might be applied to any CD you're buying. There are some vague allusions in small print on the back of some CDs to the existence of DRM. But you can't buy with any confidence. No labelling scheme of any merit.

So I did a bit of searching online, and found I can download the ones I'm interested in DRM-free in high-quality audio formats from Audio Lunchbox. (Usability hint to them: a question mark may be a valid character in an album name, but it isn't for a Windows directory name. Fix it.) I'm very happy with my purchase, than you very much.

But I still wasted a pile of time looking. And I mean wasted. Dead time, not recoverable. The cost of any goods comes from two parts. The money cost, and the non-money cost. (I think I'm on firm ground, here, logic-wise.) To the extent that the non-money cost represents search or time costs, it's a total waste. Don't believe me? Just look here.

No wonder CD sales are drooping. If you're interested in DRM-free music, or even just music that will be compatible with your devices, you've got high search costs. The retailers have done nothing to mitigate them.

Now we get to the telecom bit. The cellcos are lining up to flog you overpriced tunes to play on your phone that you've probably already paid for via other means.

With Apple and iTunes, you don't need to look at the Ts&Cs to know two things in advance, based on every product Apple have ever made:

• Everything will work together as seamlessly as possible.
• It'll be more closed than the swimming pool in Gitmo.

Unfortunately for cellcos trying to retail content, their brands tend to stand for two things:

• It'll be really expensive.
• Nothing will interoperate without great pain and labour.

These brand values will collide in an unpleasant explosion of user distress. Users will start to have to face the cost of inquiring what content will work where. Even the Apple brand won't be able to overcome the cellco stupidity. Whether or not the iPhone lets you play iTunes you already bought doesn't matter; because it's tainted with a "we're stupid and voraciously greedy" brand, you're going to have to check it out first.

In other words, DRM and lack of format interoperability will make non-money costs of purchase skyrocket. This reduces the pool of money left in the user's budget. The market will shrink as a result.

Ironically, guides to DRM issued by the EFF with pointers to DRM-free suppliers will partially offset the search costs of comparing DRM systems. As such, they make DRM more, not less, atractive.

The industry faces a prisoner's dilemma, where collectively the players are unable to co-ordinate themselves to the optimal level of openness. I suspect the only way out is regulation. Just like we have "fit for the purpose" rules for normal consumer purchases, we may have to set minimum levels of impediment for DRM and lower search costs by imposing labelling rules.

Don't call me, I'll call you

Whilst perusing my daily feeds, I see Kim Cameron bring up the following idea:

When I was in Britain earlier this summer, I met Toby Stevens. How should I describe him? Can we invent the category of privacy entrepreneur?

Was trying out the Skype 1.4 beta today, with auto-forwarding. You know, Skype is now in a position to re-intermediate the mobile and other carriers (for a fee!). If your cellular carrier doesn't "get it" and see that there's a demand for innovation in voice features (like enhanced privacy), you just hand out your Skype number instead and have it intelligently forwarded.

Only want to be called on your mobile at certain times of day, or when you're not in a meeting, or when you're at your keyboard with a certain presence status? Then just set up your forwarding accordingly.

The current forwarding mechanism is just a binary on/off, but it doesn't take a genius to see how extensions could play into this.

So Skype Inc. is indeed a form of privacy entrepreneurialism. Roll up! Roll up! Come here to buy your missing telecom privacy features!

Now all Skype has to do is find a way to remunerate developers whose extensions lead to more billable minutes and up-sell to premium features. Unless of course they like pissing in their own pond and killing the little developer fishes...

Now here's a really evil thought. Want to upset the incumbent telecom players with some progressive regulation? Then force a separation of connectivity and service markets upon them. Allow users to port their number to a service provider like Skype, but still allow termination to your mobile device. Finally make numbers logical addresses associated with service, not physical addresses associated with routing and connectivity. Add a dash of wholesale pricing rules, stir in some termination rate sauce, and serve with gusto. Et voila! A competitive market in advanced telephony service emerges, unconstrained by the low level of competition in connectivity.

And we didn't even need to buy a single IMS box...

Unfortunately, the implementation will be really messy with all sorts of craziness because even things like a 3G data card needs to be assigned a telephone number to be accepted by the provisioning system. Doh! But where there's a political will, there's a technical way.