Tuesday, March 30, 2004

Daiwa EuroTelcoblog No. 27, Friday 5th March, 2004 - Vonage goes to the mall/Darknets + voice = ?/ICQ goes social (original email blast 2:29 PM Friday, 5th March, 2004)

A few additional data points and developments to close out the week:

Vonage goes to the mall

Vonage has today formally announced the conclusion of a marketing deal with US electronics retailing giant Circuit City, which will carry Vonage products in all 600 of its superstore locations, as well as online via www.circuitcity.com. This is a significantly larger deal than either of Vonage's previous arrangements with Radio Shack and Best Buy, and we think it really takes Vonage into the mainstream of American retailing. We have previously maintained that landing US deals of significant size, such as this one, would probably serve the company well as it prepares for an imminent European launch. We can only speculate as to what sort of retail partnerships might be in the pipeline related to the UK launch, but given that BT's own "Broadband Voice" product is available only online, we think a high-street presence would be a significant competitive advantage.

Darknets + voice = ?

Back in our sector report of 30th January, we spent some time pondering the potential impacts on traditional voice of "darknets", i.e., highly-encrypted, self-provisioned P2P communications networks. We discussed packages such as WINW, which aims to provide a compact and straightforward application to allow the creation of precisely such networks. WINW is an ongoing independent project initially inspired by W.A.S.T.E., the abortive P2P package released and immediately withdrawn last year by AOL subsidiary Nullsoft, and is primarily focused on instant messaging, file sharing, and collaboration between a defined group of member users. The W.A.S.T.E. project itself has been taken up by another group of developers (https://sourceforge.net/projects/waste/) who launched Version 1.4 alpha 2 release last month. W.A.S.T.E. is similarly focused on IM and file-sharing, and we understand that the level of encryption is a healthy 1024 bits.

Beyond the concept of creating an invitation-only communications network that is effectively invisible to the outside world, the thing that interests us about both of these developments, is that neither of the project developers had originally envisaged including a voice component. The last time we checked this was still the case with WINW, though it seems to be an issue of interest longer-term. In the case of W.A.S.T.E., the project coordinator told us this week that such an addition would be quite possible if another developer were interested in getting involved in coding a voice module.

We might be going out on a limb here, but if things progress in the manner which we suspect they will, then we have to entertain the idea that at some future date the telcos may confront not just VOIP as a commercial/competitive phenomenon, but also a plethora of self-provisioned mini-Skypes (we think each W.A.S.T.E. user group could accomodate around 50 users). However, unlike the rather more obvious agendas of commercial VOIP competitors, these mini-Skypes would have no revenue model and no agenda other than providing secure, private and reliable communication between friends, for free.

ICQ goes social

One other bit of harmless speculation we raised in our January report was that social networking groups could be modified to include other forms of interaction/communication, and that this might pose some hard issues for telcos longer term, if it channeled users' time and voice communication patterns away from the PSTN/mobile or other content which they were seeking to promote. This week brought the interesting revelation that instant messaging platform ICQ is taking the concept on board, but in reverse. ICQ has launched ICQ Universe (http://universe.icq.com/universe/welcome/1,,,00.html) which employs the degrees-of-separation principle in an IM environment, and employs standard social-networking features such as photos, character descriptions and testimonials.

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