Thursday, December 15, 2005

Old year, new new thing

I have been struggling for the last few days with year-end deadlines and other chores, and have fallen woefully behind in blog-reading, company announcements, posting, and everything else. This is a catch-up post, sort of a Christmas basket, if you like.

Firstly, a housekeeping note. Someone wrote in this week with the following after my short post on Yahoo!'s launch:

"Ordinarily I love reading your blog, but when are you going to do some serious modelling on the VoIP business case? This stuff about Singapore is not up to it. We heard it all in 1997 at the ITU Asia Telecom show. Even you can figure out that's nearly 10 years ago! You should be VERY much more critical. There is no business case for VoIP - not now, not ever, NEVER!"

I thought that by using phrases like "IP as a blunt weapon of mutual annihilation" and "IP-fuelled deflationary spiral" with great regularity over the past two years, I had by now conveyed the view that I don't exactly think many people are going to get rich out of VoIP services - with some obvious exceptions (and here I would also include regulatory lawyers, hockey-stick-adoption-curve industry forecasters, industry trade publications and particularly conference organizers - when will we see the first perpetual itinerant VoIP conference on a cruise ship? 2006 could be the year!).

To be sure, there are today some successful businesses in the VoIP space, which wouldn't exist if the legacy pricing structures of the PSTN didn't give them something to arbitrage against. That's fine for as long as it lasts. However, some time ago I stopped even talking to clients in terms of VoIP as a business model per-se. These days I talk about it (I think for very obvious reasons) as a means to an end, and that end is gaining and maintaining a share of consumers' attention, which can then be directed to something else that generates serious money. I very much doubt that Yahoo! has any expectation of making a significant amount of money from its voice offering. I think it's more likely that we should view it as an element of "AAC," or Attention Acquisition Cost. I didn't think I needed to spell this out, but there we have it.

While on the issue of Yahoo!, I see that Andy has been doing some interesting musing on a wireless strategy, and this matches up nicely with some other developments this week which started me thinking. A lengthy and valuable chat and brainstorming session with Platinum Club charter member mega-value reader Thomas Anglero then put all the pieces into place. So here's a bold prediction for 2006, and it goes something like this...

I haven't really seen any commentary on this yet, but GIPS came forward this week with two new iterations of the Voice Engine - one for Symbian 9 and the other for Windows Mobile 5.0. Each is compatible with previous OS generations (7 and 8 for Symbian and 2003/04 for Windows Mobile), which opens up some interesting possibilities for lower end-user price points and a wider range of devices. This has been in the pipeline for a while, but it's particularly pertinent as we head into the new year. For one thing, it's pretty clear that Nokia is going to launch a staggering range of 3G devices over the next 12 months (and that something like half of the new models will also have WiFi).

It is also safe to assume that capacity utilization on European 3G networks is pretty abysmal at present, as the proportion of 3G customers to total subscriber base for companies like Vodafone and Orange is only 1 - 6%, depending on the country. As these exceptionally expensive assets sit built out to their statutory requirements and largely dormant, is there not perhaps a rationale for getting investors off your back and generating some wholesale revenues in the short term, by becoming an enabler of a flat-rate, data-only 3G MVNO?

The incumbent mobile players will have to take their own services this way anyway eventually, but not before there's no other choice, which means there's no particular rush - why not let someone else take the pain of working out the kinks, and if they become a successful franchise then acquire them, as TDC did with Telmore in 2G (and turned it into an exportable model)? For the newcomers, you've got yer wideband codec (with encryption in this latest version) to plug into a softphone on the mobile OS of your choice, global IP-to-PSTN termination should be pretty cheap (take a look at this Michael Robertson post where he claims his termination cost in the US is 1/2 cent), throw in some voice peering (this issue is going to be a big story in 2006), and you've got something truly compelling for the consumer. For the access-independent VoIP crowd, as well as perhaps the cable guys, this looks like a logical extension of what you've already got in place. My feeling is that what we see come out of IPMobile in Japan will be very much along these lines, and I also suspect that someone in Europe is bound to break ranks at some point in 2006.

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