Friday, September 30, 2005
...and read Richard Stastny's piece on his takeaways from VON, as well as his stinging assessment of Neustar and the GSM Association.
A mega-value reader attending an industry conference today tells me that a senior executive from a EuroTelco was asked about incumbent ROI in the age of free voice services, and apparently remarked in response that he was willing to bet that Skype wouldn't be around in two years' time. Attendees apparently struggled to interpret the statement, with some unavoidably coming to the conclusion that perhaps he hasn't heard about...
Given all the controversy surrounding the cable industry in the Netherlands, which has now escalated into a significant political issue, I am wondering how consumers and politicians will react to today's news of Liberty Global's acquisition of Cablecom in Switzerland for $2.185bn. I also wonder what Cablecom's decision to sell out just ahead of the IPO (and below the announced price range) says about market sentiment.
Thursday, September 29, 2005
This evening, sitting in front of the TV while digesting a wonderful meal, I saw an obviously high-dollar ad for Orange (a mega-value reader has kindly sent me the link), which portrayed a suitably stylish and attractive Scottish man (this was voiceover only - I'm sure the accent/language varies by target country just like shampoo and chocolate) meandering around a blacked-out New York City in 2003 and witnessing all manners of displays of human kindness, good humor, and wackiness during the sudden and alarming power outage which occurred there. While I applaud the artistic effort (it is a stunning ad), needless to say, judging from personal accounts I have heard, the actual event wasn't quite so much fun. More to the point, the message of the ad, stated at the end, is that amazing things can happen when you are disconnected. Am I crazy in thinking that it is counterproductive for a mobile operator to be telling its customers, no matter how beautifully, that there is life outside of mobile connectivity? Can you imagine Coca-Cola launching a campaign under the slogan "A day without Coke is like a day in Paradise?"
The folks at Citynet have posted an .mp3 of my presentation from Tuesday. Martin's was recorded as well, but apparently there was a technical glitch which means that only the second half remains, which is a shame, but still well worth a listen when it gets posted too. For anyone who was at VON Stockholm or Carriers World, it's probably familiar territory, minus the visual Powerpoint gags (though they've posted those as well). It's important to note that I was speaking to a diverse audience, some well-acquainted with my topic, others not. It's also important to note that I was trying to add a bit of humor to what was essentially a very downbeat assessment of telecom's prospects, so there are some tongue-in-cheek comments which should be taken as such.
UPDATE: Event moderator Guido van Nispen has posted an interview podcast which features me meandering like a lost goat, while Martin is his usual eloquent, lucid and focused self.
I guess one thing that will have to change under the eBay regime is that information flow will have to be a lot more disciplined. Still, for now the press releases seem to reach me (and whoever else is on the list) hours before appearing on the company website (don't get me wrong, I've always appreciated the advanced warning, but the SEC wouldn't like this). Today's release of Skype v.1.4 contains the following results from an independent survey commissioned by the company:
"According to the independent study, Skype is used once or several times a day by 76% of its callers, far surpassing the usage levels of traditional IM-based voice calling services. Callers also recognized Skype's leadership in sound quality - 72% of Skype users consider call quality to be good to excellent. Skype callers are more international, with 85% communicating with people living abroad. Skype's broad base of early adopters are eager to embrace new features, with 79% interested or very interested in receiving calls from landlines, and 73% interested or very interested in adopting call forwarding, key innovations unique to Skype."
Wednesday, September 28, 2005
Last night I had the immense pleasure of presenting alongside Martin Geddes at an event hosted by Citynet in Amsterdam (though using the Google IP VPN effortlessly - again from a Swisscom Eurospot - I am virtually in San Francisco). The audience was a diverse one: local politicians, telcos, consultants, journalists, and others variously involved in the increasingly complex and tense situation in this market.
This event came at an interesting time, two weeks ahead of the results of the Citynet tender process, and on the same day as national papers were splattered with stories about the industry regulator OPTA's apparent willingness to allow cable operators to cross-subsidize digital rollout with analogue subscription fees - which hasn't gone down very well with consumers already angry about cable pricing (as we have previously reported on many occasions). Today the competition authority NMa was reported to be satisfied that current cable tariffs are not excessive, though apparently this reflects a five year average figure - leaving some to question what the outcome would be if we looked only at the present situation. All this prompted a debate today in Parliament on cable pricing, and preliminary reports I have heard suggest that there is a growing political consensus to push for lower prices (recall that OPTA has identified a 19th relevant market, video, in addition to the 18 defined by the EU).
So all-in-all, it's an interesting time to be here. I'm impressed by the level of self-scrutiny and frankness I am hearing from various people I speak with, especially on issues such as whether the current function of the broadband market is sufficient to deliver the kind of services which will be integral to the future social reality of the country (aging population, strain on the social service and healthcare infrastructure [EUR275 per day to house an elderly person in a nursing home], necessity to foster new industries and economic activity [I heard one statement to the effect that the creative industries now account for 7% of economic output in Amsterdam]).
A lot of other countries are facing the same issues, but I don't hear the same level of discourse around the possibility of fundamentally changing direction - I guess because it's a scary issue. Then again, the present is pretty scary as well. In response to one question, I related my observation that KPN has halved its workforce over five years, becoming the acknowledged benchmark for others in the industry in terms of productivity measures like revenue or EBITDA per employee, yet the company has announced it needs to go 40% further. I don't think the audience had appreciated this fact from a non-Dutch perspective, and the implications for the rest of the industry: if the "best-in-class" target needs to get even more aggressive just to stabilize its cost base, what does that say about the longer term? I will be very curious to see the response elsewhere in Europe to what takes place here in the next couple of weeks.
I just noticed something strange about Google Secure Access. I'm at Den Haag Telecom, listening to a UPC presentation in Dutch, I have also been playing with the laptop. I noticed that when I go into my blog site through my Sitemeter tag (which necessitates log-in, which is how I know it's me when I check the IP address) it comes up as this, though last week in London it came up as collation.net. Both are underpinned by Cogent Communications' IP address, but I don't understand why apparently totally unrelated companies should turn up as my alias. Martin thinks it's something to do with errors in DNS reverse lookup. Has anyone else noticed this sort of thing happening?
Den Haag Telecom
Now in a church (I would say it's an appropriate choice for a telecom event) in Den Haag (The Hague) attending a crash course in Dutch known as Den Haag Telecom. This photo is of the alderman for ICT making introductory remarks. On the screen to the right is a screen displaying audience comments sent in via SMS. I have a hard time seeing this sort of event happening in the UK.
UPDATE: I thought the UPC presentation was pretty interesting, for a cableco (discussion of user generated content, long-tail issues, etc.). One thing which made me giggle was that it appears that Versatel's "Mediabrowser" is designed to look like a telephone keypad. Only a telco would arrange a menu for media to look like a telephone. I find this baffling.
New Amsterdam 2
Our moderator yesterday referred to this "Botel"'s offering as a quadruple play. I agree: what good is a digital lifestyle without plumbing.
Monday, September 26, 2005
Attention Skypewatchers (and eBay watchers trying to get to grips with this Skype thing), my observations from this morning show on-net minutes reported by Skype nearly reaching 52m in the past 24 hours, up from an average of 48.5m in the preceding seven days. This is the first time I have seen traffic above 50m minutes (subject to whatever flaws and distortions may be inherent in my data collection).
A huge "Kiitos" is in order to the Finnish mega-value reader who forwarded news of fast food chain Hesburger's extension into access-independent VoIP and web-based surveillance tools. This looks like yet another interesting case study in brand extension by a company entirely focused on delivering consumer experience. I have a hard time conceiving of a palatable food experience underpinned by logos like this, or this, but I could be wrong. One large T-Burger, please.
Friday, September 23, 2005
Today I had lunch with a Triple Platinum mega value reader who is also a friend and trusted source of information and ideas. Inevitably we started riffing on various angles for eBay and Skype. He said he didn't think I had been clear or strong enough in my earlier posts in stating a view which I did put in a note to clients, that the full $4.1bn on offer for Skype should be viewed not in terms of the business as it is today, but would be more appropriately viewed as an option on what it may become in a completely new context. The outcome depends not only on the kind of synergies which eBay believes it can generate, nor solely on the development of Skype's existing game plan, but also (and maybe mainly) on something new taking shape around the whole. Here's one idea that came out of this process, and some subsequent reflection on my part:
At the moment eBay facilitates the selling of physical goods, but not virtual ones. With a lot of "long-tail" decentralized media development taking place, there is a nascent market developing around the concept of hosting and distributing this content, in exchange for a cut of the action. Should this market grow to the level which I expect it very well could, there will be potentially millions of relatively low-cost independently-created download transactions each day, with commission revenues in play for whoever gets the model right. eBay takes its cut for hosting the content, and PayPal also gets an opportunity to be the payment mechanism. Where Skype sits within this picture is somewhat unclear, though its social aspects might generate some value for users (speak with the author now, join a forum to discuss what you have just seen). Additionally, if we take on board the idea of superdistribution as a part of this model, then Skype plays a big part as social network and distribution mechanism (via file transfer).
This idea could just as easily apply to other non-physical content such as software. PayPal is already the preferred payment mechanism for a number of independent software projects, some very well known and probably not in need of additional exposure, but countless others of which languish in obscurity. I presume that this approach could also apply to the various third party applications (or hardware) which may spring up around Skype in future, where the developers are seeking to monetize their creations. eBay takes a commission on the sale, PayPal transacts the deal, and Skype gains greater intensity of usage.
One down, 49 to go.
UPDATE: This intriguing post from Jaanus seems to confirm my suspicion that the roadmap is a work in progress. How long will this openness survive once inside an SEC-registered company?
UPDATE 2: A mega-value reader writes in with the following very interesting thoughts:
"I see it as a strategic move to position themselves as the manage presence provider for small businesses. Ebay already provides a transaction mechanism, shop front and email communication. For product-based business this is fine but service-based needs voice communication. Skype allows them to provide the voice communication service without investing significantly in infrastructure. Ebay is now the complete outsourcer of business processes for small businesses. It is further monetisation of the long tail. What I find most fascinating about Ebay is not the auction system, or everyone clearing out their garages, but all the micro-businesses that have sprung up. Many of these micro-businesses people make a reasonable living from, but none could exist without, Ebay and the services it offers. It won 't be long before these businesses will make up the bulk of sellers on Ebay. Skype only widens the possibilities. The joker in the pack is, of course, the consumer. Will the consumer want to hire a plumber through Ebay? I think they probably will. What would you prefer to do: hire a plumber from the Yellow Pages that you have no idea about, or hire a plumber through Ebay after reading reviews on the plumbers work? Integrating a search function into the Skype client for businesses suddenly gives the Skype user a Yellow Pages with reviews of businesses and a direct connection at a reasonable price."
UPDATE 3: Yet another Diamond Cluster charter member writes in to say that this is really all about creating a viable global standard for micropayments. I'm taken back to the Egypt section of Vodafone's presentation last week, wherein it was observed that only 500k people in that market have credit cards (and 72% of the population have monthly income below $160), though already 2m have used Vodafone's "minute balance transfer" facility. The internet may be creeping towards 20% adoption among total world population, but broadband is still only around 3% (and overwhelmingly concentrated in rich countries). Theoretically, there is a huge long-term demographic uplift coming the way of a reliable micropayments provider.
One of the many themes I find myself talking about more and more is brand extension with voice as a loss leader, and today we have another good example from electrical/electronics retailing giant Dixons in the UK (which owns PC World). Undercut the voice-dependent competition and sell lots of DECT phones, WiFi APs, routers, WiFi phones and other peripherals (like WiFi handsets later on). This cross-selling opportunity into the core product line has always been cited as the rationale for Best Buy selling Vonage in the US, but Dixons takes it a step further and doesn't have to give up any revenue share. There seems to be some mystery as to who is behind the service, so if anyone has any skinny on this issue, please let me know. One Diamond Cluster value reader in the industry observes:
"I normally hear from our guys when someone is setting up E1 lines and routers, but this totally slipped under the radar. Looks finally like VoIP is going to hit the high street in a big way..."
Looks like my comment on bandwidth at the end of this post may be partially wrong. A Diamond Cluster Emeritus value reader in Scandinavia, who uses the DU Meter (as do I) to monitor activity on his connection, comments that Google Secure Access appears to be having a positive effect on performance. When using a BitTorrent client, the upload speed registered in his DU Meter at times exceeds the nominal upload limit on his broadband account. I have also noticed what appear to be some higher-than-usual numbers, though nothing on this order.
Thursday, September 22, 2005
My presentation yesterday contained a piece on integration of voice and presence into other behaviors/applications (for obvious reasons), and I ended it with a crude PowerPoint mock-up of what I thought the user experience might look like in future. I followed this with a screen shot of Gush to show the audience that this sort of thing is already taking shape often in the hands of dedicated developers using open source components. Telecom people typically don't seem to be exposed to these sorts of things, as far as I can judge, which is why something like Skype can come out of nowhere and bite them on the backside. Today a Triple Platinum value reader alerts me to another interesting example, Zimbra. This looks like it's dying to have some presence and voice capabilities added.
UPDATE: A mega-value reader points out that I failed to post a link to the mash-ups done by the company already as good examples of where they are heading. These are very impressive, I agree, but I guess I really meant more in the sense of something native to the client, and based on open standards.
I made a bunch of posts on Google Secure Access yesterday, which have elicited responses from some readers like "it's not rocket science" and "all you've done is demonstrate how a VPN works." Let me clarify a couple of things.
At the time those posts were made, I had not seen any evidence of anyone else experiencing the same thing as me, i.e., downloading and using something which was publicly stated as being only available in one specific area thousands of miles from me. I was merely trying to present and validate my experience and elicit feedback.
It may not be rocket science, but the fact that it is Google is something which should interest and worry TelcoLand (and a lot of other people as well). I did a presentation yesterday where I made the case that in the wake of eBay-Skype and the other interesting developments of the summer, voice is no longer about a battle for minutes, but rather a battle for consumers' attention.
So, the first obvious point, and the one which really doesn't need saying, is that this is a datamining exercise related to its own advertising revenues. Considering that 98.8% of Google's revenue comes from advertising, that looks like a safe bet. And, maybe given the WiFi association, there's a location-based advertising element to it longer term. Also a safe bet. It is also clear from messages I have had that Secure Access also works fine on conventional desktop PCs, so the target gets much wider.
Secondly, as I tried to point out before, and Richard Stastny stated more clearly, this development puts GoogleTalk on a VPN, and what telco in its right mind is going to start indiscriminately blocking VPN traffic? Equally interesting to me yesterday was the thought that my Skype traffic was moving through GoogleLand. Why buy the company when you can swallow it? What kind of Skype user profiling is Google going to be able to do? Oh, and by the way, eBay has 65m users of marketplace services and 23m active PayPal accounts. I doubt those will be ignored in this exercise.
Thirdly consider how media consumption is changing. At a P2P conference I presented at last year, a Turner Networks executive made the point that what concerned traditional broadcasters about alternative distribution mechanisms was the lack of auditability, or the lack of confidence in auditability. His point was that, for all its failings, Nielsen data was still gospel for the advertisers in the States, and until there was an equally credible entity in the internet space, Old Media would move with caution. (There's also the small problem of copyright protection to consider - but they seem to think this can be cracked [but not the way you or I would use that term].) The music industry has reportedly been happy to pay for and learn from this sort of insight in the past, where it has been available. Imagine that capability on steroids, with Google as the stamp of approval. And if enough illegal file sharing starts moving through the VPN (which it may have some growing incentive to do), things are really going to get very interesting - the world's Darknet?
Equally vexing on a long-term view for the media world is how to understand and harness the phenomenon of decentralized media, especially user generated and distributed content. If your viewer/listener/reader's attention is being eroded by blogs, podcasts, mash-ups, and independently-produced content, how do you reinsinuate yourself into this equation? I would argue that Google could end up in a very advantageous position in this regard. Are you a broadcaster struggling to understand the dynamics of online gaming and how to react to/co-opt it? What about social networking communities? We have the data (you ain't seen nothing yet), but it'll cost ya. Nielsen//NetRatings, ComScore MediaMetrix, Hitwise, et al, all strive to fill this niche now (and probably make decent money in the process), but what about the future?
There are so many potential aspects to this that my mind is spinning, and will continue to do so. It's probably an overstatement to say that Google is preparing to swallow the internet, but I think this has the potential to shift a lot more power its way, and as such it's inevitably a loaded gun pointed at telco's head (and a few others).
UPDATE: Damien in Ireland goes the whole hog and asks how all this positions Google in dealing with labels/studios, and how the company may respond to the pressure it may inevitably encounter.
Consumer campaigners Ireland Offline have published a damning assessment of the state of the comms market in Ireland, citing inexplicable price differentials with the rest of Europe. What I find most interesting about this is the explicit linkage to wider economic and social development issues, just the sort of orientation which seems to underpin a number of the municipal fiber and wireless initiatives we're witnessing around the world. Speaking of which, I will be attending Den Haag Telecom next week (I am praying for a simultaneous interpreter), in a country where this issue seems to be very much in play and may result in some fairly findamental changes to the landscape.
UPDATE: A Double Platinum Club reader alerts me to this scathing Comreg-bashing site.
Gee, it works like a charm, and boots up faster than Skype on a stick. Just thought you ought to know.
UPDATE: A couple of people have asked, so just to be clear: I'm talking about launching it from a USB stick (as an alternative drive) onto a brand new PC. The first time I tried it I was prompted to log in, but this took no time at all (much faster than Skype in a comparable setting). The second time, I happened to be logged into Gmail already, so it opened up immediately and was already displaying presence information from my contacts list.
Wednesday, September 21, 2005
I performed this route trace on Hexillion's CentralOps. It shows a few hops from my current location (South London) across Level3 POPs in Dallas (apparently) to Cogent on the West Coast (Please click on this and subsequent images for greater clarity in my Flickr account - free stuff rocks).
Error message described in earlier post. The error had nothing to do with the VPN itself, but was related to my company's email server. However, the Google IP VPN was not shy about declaring its presence.
As promised, screen shots related to what I posted earlier today. This is how my Sitemeter account reported my own IP address today from a Swisscom hotspot in a London hotel. It looks the same when I use Secure Access from home.
Two mega-uber value readers write in with completely different experiences of Google's IP VPN. One, at VON in Boston, downloaded it but couldn't connect. The other, in Germany (ironically in Deutsche Telekom's headquarters in Bonn), downloaded and ran it in a public hotspot there with no problems.
UPDATE: I have subsequently heard from a few other mega-value readers that they are using it in various corners of Europe, and Om has gotten a lot of feedback confirming this thing is everywhere.
Well, I am back home now, on my own connection. I just repeated the exercise, pinging the blog, and the IP address which comes through in the Sitemeter is once again resolved as "Cogent Communications, San Francisco". It should read, "ntl.com" and "Lambeth, London." I have screen shots which I will try to post a bit later. I dropped this little tidbit into my presentation today at Carriers World as "breaking news", and there were some puzzled looks, as well as a few smiles. Then I asked them to consider that all of my internet traffic, including my Skype traffic (I assume), was being routed through a Google server in the US on an encrypted connection. Some heads nodded, some laughed uncomfortably. Mission accomplished, shock and awe. Toto, we're not in Kansas anymore, this isn't about WiFi.
I'm still here in London on the Secure Access product. I've had to reboot a couple of times due to completely unrelated issues (battery life, etc.), but have had no problem getting back on the IP VPN. A friend in Scandinavia has also downloaded the product and say he hasn't been able to use it. Maybe this is just a fluke unique to me, but it works nevertheless. If anyone has had similar experience to me, let me know.
Further validation. I just sent an email from my Gmail account, which failed to one participant. The failure report came from "Google IP VPN."
I love these industry-facing conferences, because the presenters are speaking to their peers/customers/suppliers and tend to tell it like it is. The opening presentation was from IDT and the presenter's summary point in the Q&A session was that there is no future for pure voice providers of any description. I think this is going to be a good day.
Just as some further proof that I am actually using Google Secure Access at a Swisscom hotspot in London, I went into my Sitemeter account (password protected) and then clicked into the blog itself. The effect of this is to of course register the IP address from which the blog was accessed, and also to see a clear referral from my Sitemeter account as validation. Then I went back into the Sitemeter account, and this is what I saw associated with my entry into the blogsite:
Domain Name collation.net
(Network) IP Address
(Cogent Communications) ISP
Cogent Communications Location
Continent : North America
Country : United States
State : California
City : San Francisco
Lat/Long : 37.7729, -122.5645 (Map)
So there we have it - I am technically in the Bay Area!
I'm now at the venue for Carriers' World in the Victoria Park Plaza Hotel, and am again connected to the Google Secure Access product through a Swisscom Eurospot hotspot. Hmmm... Looks like the definition of "Bay Area" is very broad.
Tuesday, September 20, 2005
In all the coverage of the Google Secure Access issue, everyone has pointed out that it can be downloaded at various hotspots in the Bay Area (as stated in the FAQ), but I have just downloaded and installed it from my sofa in London (application is 361KB in size, and was created on 2nd June 2005), and I am now connected. This is either a tremendous oversight on the part of developers (as if), or there is another, much bigger agenda at work here!
Kevin Werbach has a great post today on the possible shapes of things to come. I am going to deliver precisely the same message to around 200 telecom people tomorrow at Carriers' World in London (I will try to Torrentize the slides). Like Kevin, I'm not yet sure I know exactly what to make of all this or what it all means (and frankly I'm not totally convinced that the players driving change necessarily do either), but I agree it feels very big, very different. I'm curious to see the response from the audience, and also to get a feel for just what the awareness level is in TelcoLand of what appear to be some huge seismic shifts. Assuming the venue's WiFi access is up to it, I hope to blog the day.
There's been a lot of coverage today of the Google WiFi VPN story, and Om is on it (seems his whole GoogleNet hypothesis is shaping up very nicely). Beyond the obvious apparent benefits of security in public hotspots and driving as much traffic through Google servers as possible, I wonder if this also doesn't relate in some way to all the hoopla that Verso has been making. In other words, maybe this is a way to ensure the integrity of Google service-related traffic (the massive amounts of voice, video and data referred to in the post) in a future era of "rogue service" traffic degradation by carriers. The IP Media Monitor article linked to in Om's post closes with the observation, "But the last-mile is, as always, the problem." Maybe this is their response, not to the bandwidth issues, but to user experience issues.
UPDATE: The ever-excellent Richard Stastny seems to think I'm on the right track, and states it more clearly in this post.
I hope readers remember Mr. T. It increasingly looks like GIPS is firmly entrenched in the A-Team of picks-and-shovels beneficiaries of this whole IP meltdown. Today the company formally teams up with Pingtel and On2 to create a developers' kit, which is apparently behind the new AOL service, and also announced Earthlink's Vling as the latest wideband convert, though I think the latter announcement was a bit of a no-brainer given Google Talk's federation plans with Vling, previously announced.
The keynote at my high school graduation was delivered by the late Kemmons Wilson, founder of Holiday Inn. I was ever-so-slightly hungover at the time, and seem to remember it as a long string of aphorisms, but I'm sure there was more to it than that. One thing I do remember clearly was a statement that, if you threw a frog in boiling water, it would jump out. However, if you put it in a pot of cold water and then heated it gradually, the frog would happily sit there, its body temperature adjusting until it was too late. I don't know if this bit of homespun Memphis biology is strictly true, but I always assumed his point was about being wary of complacency and self-delusion.
I usually don't reveal much about the traffic I see coming through the site, but I note a growing number of investment bank URLs and IP addresses wandering through, and in fact staying a while sometimes (thanks guys, that's gratifying, I guess). More interestingly and somewhat amusingly, I am getting hits from Google searches for Nimcat Networks, out of a variety of EuroTelcos. I'm also seeing a lot more hits from queries about Skype users and usage, some of which also appear to be coming from TelcoLand worldwide. I expect there might be a few hits this afternoon from the term "AOL"...
Apologies to those not resident in the UK, but the title is a reference to Sky's near-ubiquitous "What do you want to watch?" marketing campaign, which seems to be moving into high gear again. As for the more cutting edge aspects of video distribution, across the pond, Gary Lerhaupt has been hard at work once again, now introducing PEP (Prodigem Enclosure Puller), a piece of code for automatically yanking enclosures out of RSS feeds and creating Torrent files for them in Prodigem. What's more, he's linked PEP up to the popular videos feed on del.icio.us to create and seed torrents of this content, making a sort of "people's PVR," in the sense that what turns up there will reflect in more-or-less real time the current state of popular interest. Bet the TV industry would like to be able to do that...
Monday, September 19, 2005
Back at the Vodafone investor day, asked by an analyst whether Vodafone would use IMS to block/degrade VoIP services, CTO Thomas Geitner just said that he doesn't believe this is a technologically sustainable idea, and that we should just accept VoIP as inevitable and get on with business, ensuring that the native network offering (my phrasing) is price-competitive. I thought I heard a sharp intake of breath from across the stage at this point, but I could be wrong. Another bulge bracket analyst has asked about legal issues surrounding VoIP blocking, and Mr. Geitner replied that one can't build a business case around such a concept. I guess we can leave that to the Verso's of the world.
Watching this Vodafone event today, I was intrigued by the section on Egypt within the Other Subsidiaries session, which was presented as a case study of how a company can innovate (micro-top-ups, credit balance transfers) to suit the local market and drive growth. At the end of the Q&A section, Arun Sarin himself asked a question about Egypt and what it means to Vodafone, presumably because none of the analysts took the bait (or somebody missed a cue). Sounds to me like the company is making a case for a successful track record in true emerging markets. Vodafone is talking about Asia and C/E Europe, but my personal bet would be Millicom, which has an entirely complementary footprint. This company today nearly doubled its population under coverage in Africa with an acquisition in the D.R. Congo, and ironically, Millicom at one point in history was the single largest shareholder in Vodafone, but sold out way too early.
Well, runaway VoIP M&A continues today. I've written many times about Nimcat Networks, and today the company has been acquired by Avaya for C$46m. Avaya will over the next 12 months incorporate nimX into its IP telephony offerings, and I guess the pressure is now on Cisco and Nortel to have a serious look at Popular Telephony.
I posted last week on an apparently coincidental (;-]) doubling in invitations to Gmail as a possible support tactic for Google Talk, and put out an offer for Gmail accounts. I had a few takers, but today I notice that Gmail has replenished my number of invites again, back to 100. That's either a lot of new friends for me, or it's 260GB of free storage.
In Arun Sarin's opening remarks just now at the Vodafone meeting, the last slide was a discussion of disruptive technology issues from Vodafone's perspective (VoIP, WiMAX and the foray of global internet brands into Vodafone's mobile content patch). Two years ago this would have been a non-issue, but after the events of the past few weeks we are clearly living in an age where IR/PR handlers wouldn't dare send an executive into the ring without a clear company position. I'm not sure I agree with their take on things, such as rates of change. It's also interesting to hear Vodafone's ardent commitment to mobile/3G ("no distraction/conflict of interest from stagnating fixed business") followed by a statement that consumers want services, not technologies.
Speaking of rates of change, my ongoing tally of Skype minutes, shows that over the past week since Meg and Niklas tied the knot, daily minutes have averaged 47.3m minutes, versus 44.1m in the week before the deal. As I have said before, I still don't understand why daily traffic isn't higher given the growth in the user base, but certainly relative to historical levels, something is happening. Imagine what happens when we start seeing SkypeBay ads on network television!
There's bids, and then there's bids
Just stepping out now to get the octuple espresso required to ensure I maintain consciousness throughout the Vodafone webcast, I was handed this free newspaper, which shouts that Carphone Warehouse's CEO has confirmed a GBP350m bid. Certainly eye-catching, but read the short article and one finds that he said CW would be crazy not to consider a bid. Other sources expect a value of as much as GBP350m. Still, such a move would transform CW's position in both the WLR and broadband markets in the UK.
The streets of London are virtually deserted, as everyone heads off to Fall VON, which this year is being held in Fenway Park due to overwhelming popular demand (just kidding, wish I were there, and hope everyone has a great time!). I'm here in a decidedly grey (and far from deserted) London, covering the Vodafone Investor Day today (can you sense the enthusiasm in my keystrokes?), and speaking at Carriers' World on Wednesday.
Anyway, on Saturday, I had the dubious pleasure of wandering around Wandsworth, South London, while my daughter attended a birthday party. Passing in front of the Southside shopping center, I saw this portable marketing point for NOW, the rebranded Netvigator service from PCCW (also a recycled brand from the Bubble era - remember PCCW's Network of the World?), which runs on IP Wireless' TD-CDMA solution.
Staff seemed to be doing a pretty brisk volume of enquiries, and were friendly and knowledgeable (this in itself was refreshing). The company is promising account activation within 24 hours, and pricing is relatively attractive at GBP18 for the 1Mbps product, GBP14 for 512k, and GBP10 for 256k. Additionally, the fact that they are marketing in Wandsworth is a pretty good indication that they are confident enough to move coverage into much denser areas than where they started out. Wandsworth is also a relatively affluent demographic, but one where I assume household broadband penetration is already quite high. My one nagging doubt is whether this time next year 1Mbps will really be "broadband" in the context of the UK market, and whether the price/throughput ratio will be compelling enough to convince people to churn off DSL or cable.
Thinking up Swiss-stereotype titles is difficult, but anyway, Swisscom has released the findings of a survey into television viewing in the Swiss market, and how it fits in with consumers' broader media consumption. The findings seem very consistent with the countless surveys coming out of the US, despite some rather striking differences between French and German speakers.
Friday, September 16, 2005
Interesting observation from a Diamond Cluster megavalue reader involved in the mobile arena, which comes the same day as this article from the Economist:
"There is so much going on in this space, it's almost exciting - although maybe too exciting for the fixed telecom industry, but then again at least they have some obvious options for going forward. On the other hand, the mobile industry seems like a 60 year-old kid, i.e., a young body driven by an old mind - and hence is consistently stuck between being a young sexy innovative upstart and a solid responsible pensioner. A lack of identity is the real problem for these guys - fixed or mobile, voice or data, innovator or incumbent, bitpipe or shop front.
Over in Paris, Rodrigo has an interesting post on Yahoo!'s rumored interest in badboys Iliad. Iliad has also been right at the top of my list of consolidation candidates in the IP-mutual-annihilation game of the incumbents. I agree it is both the most attractive and most likely target in France, but a move by Yahoo! into actually owning access (not only customers but a growing infrastructure base) would truly mark a new direction, though the story he links to cites the MD of Yahoo! France. Bloomberg, however, today ran a story detailing insider selling by Iliad execs in the past week (maybe this was before talks began, maybe there are no talks yet). Anyway, it's an intriguing thought.
Thursday, September 15, 2005
There's obviously a chronic shortage of Danish translators out there, but clearly the homebrew summary alone is enough for some to understand the implications. However, I think my eyes need testing. My screen says that TDC is up nearly 7% today on news that there are perhaps multiple bidders lining up. To bid or not to bid, that is the question... (No offense, Chicken Man)
Last year I wrote a partly tongue-in-cheek piece about incumbent responses to innovation at the edge. Today a mega-value reader has alerted me to this announcement from Verso, which seems to point to attempts to institute just such a policy. If it actually works, I guess we're entering an era of product offerings like:
"Turbo DSL - EUR25 per month - add on unlimited usage for an extra EUR10. Just EUR10 more per month gets you our Crystal Clear Quality Guarantee package, so you use all the parasitic crap you want with peace of mind."
Verso's stock closed up 20% on the news.
UPDATE: An observant Platinum Circle reader chimes in with the following pithy interpretation:
"I note that the Verso announcement refers to 'non-service effecting technology'. Since 'effect' as a verb means 'to produce as a result; bring into existence' or 'to bring about', and 'non-service' means 'the absence of service', their technology is, apparently, one which brings about the absence of services."
A Diamond Cluster mega-value reader writes in with a personal slant on SkypeBay as one who makes money on eBay currently in B2B transactions:
"I am an eBay 'power seller'. I have my own store with 100 items listed for sale on average. The price range is from $100 to $2500 per item. I get 2 or 3 emails per week and almost always these relate to a product series detail which I forget to include in the description.
The thing I LOVE about eBay is that I have NO hassles in selling an item. If I describe it carefully, somebody will buy it and I am not bothered. I sell the item, get the money, and ship with no human interaction, which I enjoy.
Sometimes I do get email and they ask me to lower my price. I think you will see that much more with voice service added. It will also be easier to get around eBay's fees when you have direct contact. Last month was a little slow, and I still sent them $351 for their commission."
Wednesday, September 14, 2005
No one ever said this foray into voice was going to be easy. I had a long conversation on Google Talk with a friend this morning, and just as we were about to end the call, we lost our connection, and I saw my friend being displayed as "offline." He also saw me as "offline," though in fact we were both online and re-established contact via Gmail. Very strange. This friend is also a Skype user, and Skype now shows him as "away," while Google Talk still indicates "offline." I know he is genuinely away, so I'll have to check later whether he left GT running or not. Has anyone else noticed anything funny?
I'm a big fan of Bridgeport Networks, but for some reason didn't receive the release about the trial with China Unicom. Anyway, good going guys - now stand up and shout about it!
I've just noticed that the number of Gmail invites in my account has doubled, to a rather unwieldy number. I presume this is related to the Google Talk beta (i.e., more Gmail users, more converts to Google Talk). If there's anyone left out there who doesn't have a Gmail/Google Talk account already, ping me and I'll pass one along to you.
UPDATE: Another interesting development comes my way, courtesy of Poynter. According to this article, those with access to a US mobile phone can now register online for a Gmail account activation code, which is distributed via SMS. This would seem to be further evidence of an attempt to accelerate uptake of Gmail, and I presume Google Talk.
Tuesday, September 13, 2005
As the members of Spinal Tap said at Elvis' grave, "Too much f*cking perspective." I'm not sure precisely what prompted this particular Diamond Cluster mega-value reader to chime in with the amazing anecdote below, but many thanks to him in any event for allowing me to publish it. I imagine it is a combination of the SkypeBay deal, my post chastizing telcos in its aftermath, and perhaps, at the margin, my earlier post soliciting experiences of telco victims. Whatever the motivations, read it and weep...
It was the summer of 1997, AOL had only just released something called an Instant Messaging client four weeks previously. eBay was 18 months old, and XML was an acronym that would not mean anything for at least half a year.
Eight members of UUNET's European strategy team sat in an office in London's King Street, a stone's throw from the Bank of England. They chatted cheerfully and shook hands enthusiastically, as many of them had not met face-to-face since their respective start-ups were acquired by UUNET the previous year, creating the worlds largest ISP. The sun shone brightly through the inadequate vertical blinds. The occupants positioned themselves so as not to catch the odd stray ray of light, but it was impossible.
The meeting was scheduled to start at 11.00am, with attendees from all the major European operating companies of the time, UK, France, Germany, Belgium, the Netherlands. Talk turned to their new pay-master, WorldCom. Bernie Ebbers had acquired UUNET as part of the MFS transaction six months previously. How would the company change? Would this mean huge cost benefits for the UUNET business, given WorldCom's extensive international fiber network? Would we finally have the budget to do that TV advertising we'd always talked about? The WorldCom side of the company had been invited, but did not return phone calls or emails by the time of the meeting. They sent no delegate. Perhaps they were leaving us to sort this one out - in any case the future looked very exciting.
The meeting would decide the European VOIP strategy of the world's largest ISP.
Under considerable pressure from Cisco, engineers had rigged up a test network for their new VOIP technology. It was clumsy and expensive by present day standards, but the verdict from engineering was that basically it worked pretty well, and they felt confident in dealing with any latency and bandwidth demands. As the last participant arrived, sandwiches were brought in, and the meeting finally got underway. It was 11.45am. A mobile phone rang - it belonged to one of the two UK delegates.
The conversation went like this:
"Hello, [name], this is [name], I am the VP Europe for WorldCom"
"Yes, I know who you are, what can I do for you?"
"This VOIP meeting you are having today, I've just seen the Email"
"Yes, we're just about to get started actually. I'm sorry nobody from WorldCom made it, but we..."
"Look, voice customers are our customers, not yours, so any new product for them or talk of migration, it's going to come from the WorldCom side, got it?"
"Well, at the moment we're just testing the technology...we..."
"I (WorldCom) own the revenue line for voice, so I (WorldCom) own the customers, not you. You are Internet, we are voice, OK?"
"There is to be no more work carried out on this VOIP stuff until we (WorldCom) decide, and we (WorldCom) will be managing it, OK?"
"OK, you've made that clear."
Conversation ends. The attendees have this relayed to them in silence, and there is much head shaking. I reflect for a moment... it seems this "being bought out for billions by a traditional telco" isn't going to be all good. With little else to discuss, the lunch is eaten at a relaxing pace, and the delegates shuffle off with plenty of time for shopping before catching their flights home.
WorldCom (now MCI) launched its VOIP product in Europe in Mid 2004, seven years after that phone call.
Well, if nothing else, I think Skype has shown us what single-minded self-promotion can achieve, if it's backed up by some substance. I'm a little less single-minded, and would never ask anyone for anywhere near $4bn, but I guess a little self-promotion now and again doesn't hurt.
I was recently honored to be asked to write a guest article for the always impressive Muniwireless. I chose to focus on the interesting case study which is Fabchannel - it may not be a wireless story, but it brings together muni open networks, incumbents, visionaries and music labels, and can be found here.
Secondly, next Wednesday I will be presenting at Carriers World in London. I agreed to this event so long ago that the topic I am supposed to be speaking about seems almost absurd following the events of this torrid summer in the VoIP world, and I am very relieved that I missed the organizers' deadline for summary papers. I'll just turn up and do what I can do, which is probably to antagonize, depress and maybe even amuse, a room full of telco people. Perhaps I should take a leaf from the Marx Brothers playbook and charge a special fee for not showing up...
Morgan Stanley held a lunch today in London for eBay and Skype, and eBay kindly placed the webcast here, and I'm listening to it now. Punchy introduction from Mary Meeker by phone from China, who uses the term "killer app." Niklas sounds a lot more comfortable and fluid than on yesterday's call. He just said that following the announcement of the deal yesterday, Skype had 1,000 downloads per minute, a new record. (You can check that for yourself in the Share Skype statistics RSS feeds, for now at least. My observation shows 48m minutes yesterday, which is likely a record as far as my data shows.) It sounds to me like both Meg Whitman's and Rajiv Dutta's explanations of deal rationale are also a lot better this time around. Both executives have alluded to having worked with Niklas and Janus for months ahead of the deal, which makes me wonder what was really going on with some of the other buzz around potential deals. As I expected, the questions turn out to be interesting this time, because the audience is fund managers rather than analysts. The first one from the floor is on weakness of traffic trends (wonder where that came from?), and seems to be an awkward moment. Anyway, as I said traffic is up in the past few days, though it still looks low to me versus historic levels, despite the fact that the user base has grown so quickly. I still don't understand this.
The seemingly tireless innovation powerhouse which is Prodigem has opened its API to developers. Founder Gary Lerhaupt's introductory email includes the following:
"If you are web developer familiar with any one of the number of blogging and content management systems in existence, we'd love to see you run with the API and start spinning out the ideas."
I agree with him, "this is some serious stuff."
This is a cool release from Nielsen//NetRatings, suggesting that 10% of all US internet users have an account with an online image hosting service and that the growth is being driven by blogs - principally among teen segments ("Hi, I'm Jimmy and this is a blog about me. Here's a picture of my XBox."). These Nielsen releases always end with some depressing stats on internet impressions for the top ten online advertisers, and there we see Vonage predictably at No. 3, with an estimated cash outlay of $14.1m in the month of August, that's 40% above the estimate for Dell. Ch-ching!
My sense about what we've seen from the "attack from cyberspace" crowd in the voice market over the past three months is that it is partially driven by strategic planning, and partially by a near-paranoid need to match each other, whether anyone is really sure where they're collectively heading or not. I didn't think it was at all outlandish that NewsCorp might have taken an interest in Skype, and similarly I'm wondering where Amazon sits in all of this. It's a player of sorts in search, and its proposition is also theoretically built around some social principles (recommendations, wish lists, and the like). Meanwhile, I guess if you're a key facilitator of this lemming-like race into voice, such as GIPS, you've gotta be loving life right about now. Every day brings some new adopter of wideband codecs.
Stepping into the breach left by the Danish Competition Authority, the folks at Citynet have put a Danish translator on the case, and posted their own summary on the site, and I'm hoping that the project extends to the full report eventually. Cash-rich utilities in search of diversification opportunities plan a EUR1.3bn outlay to connect one-third of the households in Denmark. In the case of cooperative utilities, the fiber connection might be given in lieu of a cash dividend to owners. Fiber as an alternative currency! I like it, and am planning to immigrate immediately. Seriously, TDC has underperformed the sector by 1% over the past week since this story trickled out, which seems like a pretty muted reaction to a fiber assault on a large part of what is already Europe's toughest market.
Last week I was on the phone with a hedge fund manager in New York, who happened to mention in passing that the telecom sector analyst team at a certain bulge/quasi-bulge bracket broker has been staging a series of client conference calls with some A-list bloggers from the VoIP/broadband space. I hope the guests got a nice lunch out of it. Seriously though, I see this as a vindication of some stuff I said last year with regard to the increasing mindshare of bloggers among investors, and the awkward positioning of traditional analyst roles within this new environment. Hats off to the "mystery" analyst team for having the foresight to tap into this shift, and also for acknowledging quality when they see it.
Monday, September 12, 2005
I come to praise Skype, not to bury it.
On a morning in early September 2003, I turned up at my office, switched on my PC and began checking news items and emails, just like on any other morning. In one email newsletter I subscribed to at the time, the pioneering IP Pulse, I found a link to this CNET article on Skype, detailing its launch a week earlier. This was an earth-shattering revelation to me at the time.
I had been in contact with Jeff Pulver for nearly a year, and had also developed a nice relationship with the folks at Vonage, and had written notes (one called "VoiPulverized") and presentations for clients discussing the impending changes headed Europe's way, and how telecom would never be the same. I had also recently done a lot of background research on P2P (KaZaA in particular) in expectation of a voice angle emerging, and in the preceding summer had published a note called "IM = Incumbent Marginalization," focusing on the early steps by MSN, Yahoo!, Apple and AOL to bring voice to the fore in their IM offerings.
As a result of these various activities, I had begun to articulate to clients a view of the future in which telcoland would suffer an "attack from cyberspace," in which the varying agendas of global internet players would move to incorporate/co-opt voice to meet their own goals, which almost certainly would have little to do with selling voice in the traditional sense (which seems to be coming to fruition before our very eyes). In short, given where I was professionally and philosophically at the time, the arrival of Skype on the scene was nothing short of a Godsend.
Understandably, having luckily seen something perfect wander right into the crosshairs of my evolving sector view, I wasted no time in putting out a quick email blast to clients under the recently established title of "EuroTelcoblog," and bashed out a leader piece devoted to Skype for our upcoming global sector monthly. This latter piece (the first of its kind from the brokers, as far as I am aware) included some fairly apocalyptic statements, to the effect that, for the incumbents at least, the arrival of Skype was akin to a meteor plummeting towards earth, and an even bolder statement that Skype's debut would turn out to have been the single most significant event in the sector in 2003. I'm still rather proud of this assessment, though I think my sales force at the time thought I was having a breakdown of some sort.
A couple of weeks later, I was working at home one afternoon when I got a call on my mobile from an upbeat-sounding American who identified himself as Howard Hartenbaum of Draper-Richards, and who characterized himself as the VC point man on the Skype project. We had a lot to talk about, both being American ex-pats in Europe, and both having Japan experience, including language. So the conversation was fluid and pretty easygoing, but the central point was (I'm paraphrasing here), "I have here a copy of the note you wrote on Skype, and it's great. I particularly like the reference to Skype being like a meteor headed for earth." I asked if Niklas Zennstrom had seen it, and the response was that indeed he (Niklas) had forwarded it to virtually everyone he knew on the planet. I expressed an interest in meeting him, and Howard said that should be do-able.
A few days later, I received a fairly terse email from Niklas, proposing a meeting, which opened with the line, "I understand you have written a note about our company." This, in particular, I loved, of course because I knew the real story. Not wanting to risk embarrassing him, I duly went through the motions of attaching a copy of the note to my response email, and proposed a meeting at our offices in London. A few days later he appeared at our offices, dressed rather scruffily in black from head to toe, initially confirming my preconceptions of an iconoclast internet terrorist (to my relief). However, during our ensuing 90-minute meeting, I found him to be very forthcoming, enthusiastic, and dryly humorous, and I sensed, from the subtext of our conversation, both a sense of inspiration and frustration at his experiences at Tele2, and also a need to overcome the stigma of the anticlimax which was KaZaA. In short, at the end of the meeting I felt I had not met an iconoclast internet terrorist, but rather a highly intelligent capitalist, with a desire to be acknowledged as a successful innovator and disruptor of cozy economic cartels.
I felt like we got on well in that first meeting, and had a couple of interesting lunches subsequently where we debated the issues facing the telecom industry. What really impressed me about Niklas, and flattered me personally, was that he always seemed to have his antennae switched on in these one-on-one meetings, and was as keen to hear my views as he was to share Skype's own thinking. Despite what was lambasted in the blogosphere as Skype Dogma and Skype Hype (i.e., the growing sense that Skype was merely trotting out its marketing message at every opportunity), and whatever the true nature of Skype politics towards standards and open source, I found him to be invariably gracious and open-minded. He was also typically forthcoming with operational data, such as the top 20 Skype countries data which he kindly supplied on a couple of occasions.
Sadly, I expect that things will change under eBay - access more limited, information much more guarded, and perhaps innovation more ruthlessly targeted towards larger corporate goals. Love Skype or hate it, I think we have to be honest with ourselves and acknowledge that this company, whatever its shortcomings, gave telecom the tremendous kick-up-the-ass it so richly deserved, and also scared the crap out of the internet/IM players, forcing them to up their game. The result should hopefully be a period of intense innovation in voice and presence applications, in which SkypeBay will no doubt play an important role.
For my part, Skype was one of the principal ingredients which helped to make this blog whatever it is today (hard to define, except that it is definitely not an economic route to early retirement in the Seychelles), and I can happily say that it has brought me into contact with a wide range of interesting people whom I would certainly not have had the pleasure of knowing otherwise. Though a bit melancholy at today's news, I am basically happy, and extend my thanks and congratulations to the Skype team and everyone who contributed to my Skype-related posts along the way. What a short, strange trip it's been.
To the collective group of telcos who consistently adopted an adversarial stance towards Skype, or dismissed it as heretical or ridiculous, I think you have really and truly blown it by not taking out Skype yourselves at some earlier stage in its development. We can debate the valuation eBay has tabled (it does look steep at $2000 per paying sub, assuming the full earn-out is paid), but the fact remains that Skype offered the ultimate opportunity in virtual footprint/brand expansion, and it's interesting that among all the mooted bidders for Skype (some of them apparently highly unlikely on first glance, like eBay itself), there was not one single incumbent telco ever mentioned. As my friend and sometimes partner in crime, Martin, once said, "Company X hasn't realized that it has two choices - dominate or die."
The EuroTelcos in particular seem to prefer buying network assets in adjacent markets, or taking out pesky players in core mobile markets, rather than waking up to the real long-term direction of voice communication - which is in presence, identity/relationships, and integration with other applications/activities. As a friend recently said of Google Talk, "These people are restoring innovation to communication in a way that the telcos never could/would, and also in a way which never occurred to the 'traditional' VoIP players." In my view, Skype accelerated this process by creating a sense of urgency, even crisis. No doubt the telcos will probably laugh at eBay, but I can't help but feel that this situation is a shameful reflection of the shortsightedness of telcoland. And to anyone who thinks that this somehow offers a respite from the Skype threat as the business is realigned to feed eBay, I would counter that in today's conference call there seemed to be a clear commitment on the part of eBay to Skype's existing standalone business - but this time backed by eBay's marketing muscle and budget. Anyway, it's over and done, unless of course eBay places Skype for auction on its own site.
It's official, and I have to admit to feeling more than a bit crestfallen. Tracking the rise of Skype was one of my principal reasons for initiating the email blasts which evolved into this bloglet, and now it's going to be part of something bigger, but hopefully equally interesting. In any event, genuine congratulations to all the Skype team for creating something deemed worthy of a takeout at a minimum of 43x current year revenues - and for giving us something wonderful in the meantime. (I guess this might explain why Niklas blanked my recent request for an updated breakdown of top 20 Skype countries - he was otherwise engaged.)
Interesting facts in the press release - $60m in revenues anticipated in 2005, $200m in 2006, long term EBIT margins of 20 - 25% expected. It's also interesting to see the statement that Skype's penetration of markets like Japan can actually help drive takeup of eBay, which has traditionally been weak there. I wonder how the Skype developer ecosphere is going to react/change in the wake of this, and how information flow is going to change. How does the commercial and regulatory agenda of a large SEC-registered company jibe with the relatively free and open tone of the Skyposphere? Will the KPIs updated through Share Skype disappear? Will the formidable Skype PR machine adopt a lower profile?
UPDATE: There are some fantastic comments appearing on Share Skype, which actually bring up some interesting issues. This one points out that there is a risk that closer contact between eBay users might facilitate transactions outside of eBay, and this one begs the question about interconnection with standards-based services. The latter really does have a point - if pay-per-call is part of the future revenue model, then I presume the net should be as wide as possible (as it appears Google seems to understand already). Peering fabrics such as XConnect become highly attractive in such a scenario.
UPDATE 2: The mutual-respect-fest conference call now underway contains some interesting tidbits - 48% of Skype revenues generated in Europe, 25% of Skype users are business users, 1.9bn product searches on eBay, 30% of bidding on eBay occurs in the last two hours of listings (suggesting the immediacy of contact angle is indeed significant), eBay users exchange 5m emails per day at present, Skype capex in 2006 estimated at $2m. Very interesting to me that Skype investors and management took the earn-out over a total upfront payment - they are clearly very confident.
UPDATE 3: Niklas had the last word on the call: "It's been a pleasure." I'm sure it has!
UPDATE 4: A Triple Platinum value reader notes that in the presentation material from the call yesterday, Skype alluded to the North America traffic stats from June which I thought I had rubbished here. Arguably, for eBay it's not necessarily about minutes, but it was interesting to hear none of the "approved analysts" on the call question this. Overall I was unimpressed with the quality of questioning I heard relating to Skype, but I guess this goes back to the old sector silo approach to stock coverage among the brokers.
A mega-uber value reader writes in to alert me to something I missed last month. United Internet's H1 results release may not have made mention of specific VoIP user numbers (I estimated 420k), but the press release from its retail internet arm, 1&1, did (albeit in German only), revealing more than 500k subs. That's about a 40% take rate on voice among its DSL subscribers. I believe the rate for Freenet might be higher, due to its earlier and higher profile launch. We might be looking at 1m users on just these two networks alone.
UPDATE: A Gold Circle value reader responds urging me to check the wording (my German is rubbish) - the company claims to have connected 500k numbers, not subscribers. He continues:
"In the absence of naked DSL they provide an IAD to connect both VOIP and landlines and then register their customers' landline numbers. A typical residential subscriber ordering DSL these days already has an ISDN line which comes with 3 to 10 numbers. They then chip in another 4 numbers per subscriber. Makes a total 7 to 14 numbers per subscriber."
A mega-super value reader with greater facility at Danish than I possess (that's not hard to achieve), comments on the Danish Competition Authority's fiber report (which the agency curiously apparently did not imagine would generate demand for an English version[!]). While I continue to long for a full translation, for now I make do with his takeaways from the report, which seem to provide more grist to the mill of fiber activists:
"Average cost per month for FTTH (dark fiber only) = EUR 12.80
LRIC copper accessline of TDC = EUR 11.27
Rent of unbundled copper line for competitor of TDC = EUR 9.00
(For the sake of clarity, the above is drawn from the report, the below is derived from the reader's understanding of the report.)
If you assume two fibers (one for IP, one for TV because analog overlay is a very user friendly, cheap and high quality way to transport broadcast signals, especially HDTV) then it reduces to:
EUR 9.00 for IP fiber
EUR 4.00 for TV fiber
Plus we have to consider the lower maintenance costs of fiber over copper."
UPDATE: Another gigavalue reader points me towards the Ireland Offline Committee forums, where a member has had a crack at a short summary of the report.
Thursday, September 08, 2005
I wonder if this time next month we'll be able to buy SkypeOut minutes on EBay, or maybe use Anything Points to purchase a SkypeIn number? Seriously, though, I am pondering what the angle is for EBay if the story is true. Is it merely to be an added facility for the community, either as an add-in for the users' "About Me" pages, or in the chat rooms? I doubt it. As I have speculated before, my suspicion is that there is a content superdistribution strategy involved here (funny that this press release also appeared from Skype today). Must digest this further.
Wednesday, September 07, 2005
Just by-the-by, I've been using Google Talk and it sounds as good as any Skype call I have ever made. I have encountered a little jitter now and again, but during one 90-minute call, the quality was consistently good throughout.
UPDATE AT 3:55 pm: There I was singing Google's praises, but now Gmail seems to be suffering some major outage. I've been getting server error messages for nearly two hours now.
UPDATE 2: Several people have asked, so I will clarify - the outage was in Gmail only - Google Talk continued to function beautifully.
Tuesday, September 06, 2005
A Platinum Circle reader points me toward a report released today by Konkurrencestyrelsen, the Danish competition authority, which I am told offers a green light to FTTx projects proposed by utility companies. It's all in Danish, but I hope there is a team of translators working around the clock to produce an English version ASAP, because the report looks like it contains some really interesting background information. As the sector's best performer recently on the back of speculation of an impending private equity bid, this must make painful reading for TDC management and investors.
Cycling to work this morning I listened to a harrowing account of the scenes in New Orleans by a N.O.P.D. officer who has been deeply involved in rescue operations. It added a completely different and highly personal dimension to the story - and was all the more poignant because the subject was both victim and savior.
It started me thinking about the amazing work of the great Studs Terkel, who allowed otherwise anonymous people to tell their stories for posterity - often these were stories of those who had found themselves caught up inextricably in events much larger than themselves. Then I started thinking that, while it's greatly entertaining to sit here and observe the disruption of Mother Telco as an abstract event, there is a very real disruptive aspect of this process in people's lives. The smug industry rhetoric (which I have heard time and again) is that standards of living rise as a result of greater efficiency, and that innovation creates jobs to replace those lost in legacy industries - not a message often heard crossing the lips of a former Detroit auto worker now stocking shelves at WalMart.
So, EuroTelcoblog takes on a new aspect today, in addition to the familiar items of technological and commercial disruptophilia (which will continue, never fear). If you're a former EuroTelco employee, fallen prey to "strategic reorganization," "structural realignment," or worst of all, an "excellence program" (how demoralizing to be marked as "un-excellent" and escorted from the building), I want to hear your story. Even moreso if you were some of the low-hanging fruit in Eastern European telcos controlled by larger Western European telcos with difficulty cutting back in the home market. As always, I will treat your input in the manner which you specify.
Monday, September 05, 2005
Catching up on emails and the blog roll, I see that over in Barcelona, Yannick has pulled together a very interesting post on Google's possible true motivations for getting into voice. He's drawn some interesting historic parallels which I have not appreciated until now.
As for the question he asks me in another post, I think it's safe to say that a substantial move by municipalities to alternative infrastructure would have material financial impacts, though I have to say that, based on how telcos report financials, it's almost impossible to answer with any precision. BT's Global Services unit, for example, has landed a few municipal contracts, some of which have not had disclosed values. Even where values are disclosed, the projects often involve a lot more than just voice, so I'm not sure how instructive these would be. The UK business telephony access and calls market is worth around GBP4bn per year, and BT has around 40% of business call volumes and 80% of business access lines. We can make various estimates about what proportion of the business market is accounted for by municipal/local governments, but I think in any case widespread migration must be of tremendous concern, moreso for other "integrated" operators who have relied on their mobile networks to recoup lost traffic on the fixed net (BT has not had this luxury). On a more concrete level, Andy points to the case of Athens Airport, where 100 employees reportedly generate savings of EUR163k per annum through (presumably Spectralink?) WiFi handsets. That implies savings of c.$2000 per employee per annum - i.e., money not going to the telco.
Enfants terribles Iliad are up to it again, taking out Altitude Telecom's WiMAX activities, the only national 3.5GHz license issued to date. Having just spent a week in rural France watching our affluent and tech-savvy hosts suffer through a dial-up lifestyle due to a 10km loop length, I know there's at least one taker. As ex-pats, I'd bet they'd be avid Skypers as well.
If there is any common thread to the the Microsoft and Google forays into voice, it would appear to be closer integration of IM/voice with existing email/calendar functions (as Andy has rightly highlighted). Today Skype and TOM.com take their relationship one step further with an equity JV (Skype a minority partner at 49%) geared toward marketing a slim-line version of Skype to China, with closer integration with TOM.com's portal content.
I should stop going away on holiday. Every time I do there is either a major natural disaster or some major industry news. This time there were both. Just my luck that, having speculated so much about Google's intentions in the voice market, the Google Talk announcement came while I was away. Still, it's a very interesting one (Jabber, federation projects with Vling and Sipphone, and a Gmail message notifier within Google Talk - how long will it be before this is all tied nicely together with Blogger, Picasa, et al?). Microsoft then countered with Teleo. Skype opened up and made a fascinating announcement with E-Plus. E-Plus is, of course, KPN on the offensive in Germany, getting into bed with the enemy in an effort to improve its market position (interesting that there is apparently no release from KPN). Does this mean we can expect T-Mobile Netherlands to strike a similar deal? I tend to doubt that this is the sort of deal any legacy telco would be eager to replicate on its home turf. When one does, we will know the tide has truly turned.