Skype needs to open up
The 12 million people connected to Skype (as self reported) represents a decent number of people or almost nothing depending on how you look at it. It is a good size audience for any application, but it remains trivial relative to the number of people in the world. Imagine if the web browser (Skype is really just a communication browser) launched in 1991 without an ability to support 3rd party applications? There would be no world wide web as we know it today. The prospect for world wide communication requires a similar development that Skype is missing an opportunity to enable. FWD seeks to enable a world wide web like phenomena by preserving geography and usage independent communication. Anyone with an open standard SIP device can interconnect with FWD just as anyone with a TCP protocol stack enabled PC can attach to the Internet. We are working on an easy mechanism for 3rd parties to deploy applications accessible to FWD connected devices. VoIP remains a mere onramp to the telephone network today, but we believe there exists a promise of much more in enabling a new communication ecosystem.
More on SIP Internet not equal TCP Internet
The "Internet" as a phenomena presently means interconnecting computers. End users use computers to access the Internet and providers deliver content/applications via platforms based on computers. The adoption of cell phones as mobile platforms for accessing the Internet largely emulates the fixed broadband experience.
Virtually all of the traffic on the Internet revolves around file transfers enabled by the TCP part of TCP/IP. Session initiation protocol (SIP) enables functionality entirely distinct from the file transfer process associated with TCP. The "sessions" set up between two devices allow the real-time transfer of content (e.g. voice or video or anything else).
The exploration of applications of the Internet made possible by TCP has covered significant terrain since the web browser arrived in 1991. The exploration of applications made possible by SIP have barely begun, but we are already thwarted by the dependence on using devices (i.e. computers) optimized for TCP. Things get a lot more interesting as the number of SIP based communication devices attached to the Internet grows.
There exist a decent number of SIP devices in circulation (TI reports shipping 450mn ports over 5 years), but almost all the devices remain behind a PBX in an enterprise environment or locked to a single service provider as in the case of Vonage. Creating a scenario where all SIP devices can address each other directly via the Internet would make things a lot more interesting. It would provide a base of devices sufficient to motivate 3rd parties to create new applications.
Times Up for Minutes
Renting communication infrastructure (i.e. selling minutes of use) generates a total of $500 billion in revenue for the regional telecom incumbents AT&T, Verizon, NTT, Telefonica, France Telecom, and Deutsche Telekom. Building global computing infrastructure generates similarly large numbers for infotech companies, but telecom and infotech operate at opposite ends of the rent versus buy spectrum. End users tend to pay usage (i.e. rental) fees for communication and own their computing infrastructure. The differences between rent and buy transactions account for much of the difference between the two industries.
The dominance of rental transactions in telecom represents an anomaly, because people prefer ownership over renting in most circumstances. Two times the number of people buy rather than lease homes and automobiles. DVD sales exceed rental revenues by a similar ratio. Taxis represent an efficient solution for transportation, but nearly everyone purchases a car and leaves it idle in their driveway most of the time. Purchases are motivated by an effort to maximize options. Renting arises as a last resort where there exists no other option. The difficulty of owning a automobile in New York City leaves many residents dependent on taxis. Owning usually cost less than renting over the long term, but people frequently can not afford to buy.
The adversarial nature of the landlord tenant relationship explains a lot about the behavior of telephone companies. The pursuit of profit demands maximizing rent and minimizing expenses. Landlords and telco's do not invest except where there exists a competitive imperative. Landlords and telco's neglect basic maintenance until tenants complain vigorously or threaten to leave. Landlords and telco's require contracts and create other obstacles making it difficult for tenants to move to another provider. In the case purchase transactions and infotech, creating demand for new products requires an R&D investment sufficient to make earlier products obsolete and deliver better value than competing offers.
The telcos work very hard to preserve a (non)competitive environment allowing them to rent the same product to all customers. The average teenager gets the same voice quality and reliability as the CEO of IBM. The variety of cell phones owes to the fact end users purchase the handset. The strategy offers economies of scale that maximize operating margins, but it weighs heavily against the demand necessary to sustain growth. End users limited to a rental transaction and a single service option seek to meet no more than basic needs. Demand for infotech products can go significantly beyond basic needs given the value of having a reserve against future and unexpected needs or simply a prestige factor.
Most infotech companies miss the artificial nature of the communication rental status quo and presume telecom incumbents as their only channel to end users. Applying marketing and R&D resources to address pent up demand for end user ownership of communication infrastructure represents a better strategy the emerging infocom industry. The collective resources of the infotech industry would go a long way toward overcoming obstacles to community based wireless and fiber deployments. Cisco might look to enable functionality that makes a Linksys VoIP handset interesting on its own in terms of applications and content without a connection to the telephone network.
The loss of policy battles in the 1980's prevent AT&T from keeping end users in rental mode for telephones and inside wiring. The Internet provides new ownership options for end users as VoIP does not depend on the elaborate switching and database infrastructure otherwise known as the telephone network. A generic Internet connection and SIP registration provide a mechanism to connect any two VoIP devices anywhere in the world. The way forward requires building new communication ecosystem as there exists little prospect for improvement in the landlord tenant relationship.
Can VoIP survive without the telephone network?
Free World Dialup's move to paid membership and decision to avoid dependence on the telephone network left some people wondering whether we were foresaking oxygen in the air we breathe. The reaction illustrates the reason for the move, in that more than a decade into the "revolution", VoIP remains little more than an access mechanism for the telephone network. Some VoIP applications do not bother with revenue, but, otherwise, they all pursue a revenue model based on charging for access to the telephone network. The question remains whether VoIP can survive without the telephone network.
The possibility of non-telephone network applications seems most likely in the area of entertainment related applications and content. The number of end points and network effect makes the telephone network unbeatable for "telephone calls". However, the telephone call does not exhaust all forms of communication and existing communication does not exhaust all demand. VoIP does not even need to displace the existing uses of the telephone network. The applications of the telephone network exist in the context of per minute charges, dialing telephone numbers, and relatively low quality audio (relative to face to face communication). Changing one or more of these dimensions changes the types of possible applications.
VoIP will find traction in areas of communication not already served via other means. FWD's decision to avoid any connection with the telephone network allows us to eliminate usage and geography based charges and restore an true Internet like experience to VoIP. The world wide web offered very little in 1991 except global termination. The relatively modest early content attracted additional audience and the additional audience attracted more content. The elimination of usage based charges really got things going and the same process can play out with VoIP.
Open standard SIP based VoIP offers the same promise as TCP based web browsing. The entire world wide web emerges from the file transfer mechanism enabled by TCP. SIP offers a mechanism to create real-time communication "sessions". Applying the creative energies of people toward utilizing sessions will produce an entirely different communication ecosystem. This build-it-and-they-will-come-argument remains unsatisfying for many people, but there exist no alternative. We really don't know any more about the future applications of VoIP than we knew about any of the other applications of the Internet that emerged over the years. The paid membership model allows FWD to put action to our conviction.
