Greg sent me this newsletter by David Isenberg.
The newsletter is reprinted in full below. I'm going to sign up to the mailing list. Isenberg's original claim-to-fame is because of writing The Rise of the Stupid Network. In short, to nicely go along with this newsletter, the network is dumb transport with smart(er) endpoints, and telcos are likely going to be going away.
Isenberg also talks about RSS -- it's not a fad, it's not going away, start using it now. He's got a blog too, but no RSS feed (he's using Blogger). Hopefully that will change soon. Big blue RSS icon. Can't miss it unless you are looking for a small orange XML icon.
CONTENTS The Story Under the VoIP Story Destroy My Business Model? Yawn. isen.blog and The SMART Letter Conferences on my Calendar Copyright Notice, Administrivia --- The Story Under the VoIP Story by David S. Isenberg These days there's a flurry of newspaper stories about VoIP (Voice over Internet Protocol) every few days, as if VoIP is going to save the telecommunications industry -- or maybe the entire tech investment sector. The stocks of Net2Phone and VocalTec and DeltaThree are surging. Today Verizon's going to do it. Yesterday, Time Warner telecom announced expansion of recent VoIP trials to all 18 million customers. Last week Qwest announced VoIP in Minnesota. But the larger story is not "new life for the telecom sector." Quite the opposite. Because while VoIP will probably be good in the long run for the tech sector as a whole, VoIP will hasten the end of telephony-classic. The mainstream press gets the "VoIP cheaper" angle. Many stories note that a VoIP package at $39.95 a month is cheaper than the ILEC's comparable $59.95 plan. They report correctly that this is due to the unregulated nature of the Internet (escape from universal service contributions, etc.) and to competitive pricing on bundles of feature like caller ID, call waiting, et cetera, with formerly fat margins. They often cite the greater efficiency of IP over circuit-oriented protocols (but tend to overblow the technology advantage). Sometimes the mainstream press gets little pieces of the "VoIP better" angle, too. Recent VoIP stories acknowledge that enterprises can consolidate voice and data on one network, and that moves, adds and changes can be done more easily under VoIP. A recent Wall Street Journal story (December 9, 2003) even suggested a future Time Warner integration of VoIP with Instant Messaging, but it failed to follow with what that's good for, and what it replaces. Further, most stories don't mention that VoIP over cable or DSL can support multiple "lines", multiple numbers, and multiple simultaneous calls per household with no new wiring. Nor do they explore the implications of plugging your U.S. landline number into a DSL or Cable connection Japan or Mexico. These little blind spots are symptoms of not grasping the larger story -- the destruction of the telcos. Sometimes the mainstream press pays lip service to "the potential threat to local phone companies," but usually this is cast as a battle of telco versus cableco. The biggest story still eludes the media: The telco business model -- that is, the delivery of my app (voice) over my net (switched circuits) for one integrated monthly price -- is going away. The reason is that VoIP makes voice just another application on the Internet. VoIP stories that focus on the clash between telcos and cablecos fail to grasp the importance of Vonage, Packet8, Galaxy Internet Services, MyBroadLine, VoicePulse and Addaline, VoIP services -- applications, really, because they work just fine, no matter whose connection service they use. And even as these are halfway steps because they interface with the switched telephone network via gateways, so do they provide the means for pure Internet calling that bypasses the old network -- and the old business model -- altogether. Meanwhile in Estonia, Ross Mayfield reports http://tinyurl.com/ynwt that Skype, an Internet telephony application that doesn't even share a numbering plan with conventional telephony has hit the tipping point. Even doctors are using it to communicate with patients (while U.S. doctors don't even use email). Ross reports that because Skype's "mode of use differs it is gaining a different culture of use." The future is not evenly distributed. Nor is mobile service sacred. Today it is based on a conventional, vertically integrated, circuit-switched model. Tomorrow it will go the way of the wireless Internet. If the telcos are to survive, they will have to choose whether they're going to sell "my app over anybody's net," or "anybody's app over my net." That is, in the age of the Internet, a company can be an application provider or a connectivity provider. One company will not want to do both. An app provider will want to use anybody's network. Imagine, for example, VoIP that works on DSL but not WiFi. Apps want to treat all networks the same. Conversely, a connectivity provider will want to carry everybody's traffic. Customers will not want to access some Internet apps over one ISP's connection and other apps over another's. I suppose that it is *possible* for one company to do both apps and connections, but if so, one half will need to treat the other half's competitors as customers. What clear-thinking company would want to do that? Telcos are already in trouble. Voice revenues are the lifeblood of a telco. In 2002, telcos lost about 4% of voice-grade lines every year. The shift to VoIP, especially to Vonage-type services, that is, services that can connect to the Internet via any connection, will reduce the need for conventional lines further. The telcos could switch to data, but even as their data service sales grow, they're finding it hard to make a profit on data. In mature mobile markets, every user who wants service has it and revenues per user are flattening out; the shift to VoIP is only a matter of time. Martin Geddes examines the shift from a different angle in his aptly named blog, Telepocalypse http://tinyurl.com/yne4. Geddes figures that if a hypothetical telephone company with revenues of US$25 billion per year is to survive a Gartner Group prediction that the last circuit-switched call will be made in year 2020, then this hypothetical telco would have to find (and sustain) US$600 million in new business for 17 years, through 2020. Total U.S. telecom revenues are about US$300 billion per year, so using Geddes' calculation the U.S. telecom sector would need to find US$7 billion in new business every year. This is only plausible under the most extreme of scenarios. More likely, the U.S. telecom sector will shrink by US$7 billion each year. Other mature markets will shrink accordingly. This, then, is the story under the VoIP story that the mainstream press is missing -- the telephone companies as we know them are, barring some extremely regressive shenannigans, on their way out. This departure will not be linear or smooth -- nothing that big and well established disappears without a struggle, or without unintended consequences. But the telcos won't cross this chasm by sauntering out over the edge at their accustomed pace, and they don't have the innovative muscle to make the jump. ------- Destroy my Business Model? Yawn. by David S. Isenberg Back in 1998, Tom Petzinger's Wall Street Journal write-up of my attempts to convince AT&T to change her obsolete ways http://tinyurl.com/yf3r set my phone a ringing for weeks. In contrast, an October 9, 2003 Wall Street Journal front page story on VoIP http://tinyurl.com/yf6p, which quoted me saying that VoIP, "destroys the incumbent telephone-company business model," created no detectable inbound activity on 1-888-isen-com. I wonder why I'm not besieged by worried telco execs trying to understand why I said that. Maybe they already know the problem and they're evolving as fast as they can. Or maybe I'm obviously wrong, or obviously uninsightful. Maybe. But I have an alternative interpretation. I think that telco corporate culture doesn't value discussing business models. That was my experience at AT&T anyway. I have two guesses about why: Guess #1: Maybe telco execs don't talk about business models for the same reason that fish don't talk about water. They were handed an established business model at the beginning of their career. It was, literally, a given. Guess #2: Maybe, like sex, talking about business models is just not a polite thing to do in certain circles. If so, we'd expect telco execs to talk about it in private, with anxiety-releasing humor and myth in lieu of fact. In either case, there is something deeply unsettling about discussing anything identified with you that's about to fail. However, telco execs who can learn new job skills (Guess #1) or overcome cultural shibboleths (Guess #2) -- who can muster what it takes to examine their business model and its alternatives squarely -- are more likely to survive. Those who don't won't. ------- isen.blog and The SMART Letter by David S. Isenberg I've started a weblog. It is called isen.blog. It lives at http://isen.com/blog. Many of the readers of The SMART Letter have found isen.blog. But there are still people, telecom-literate people, who don't know what a weblog (blog) is yet. Blogs are a winner app, not a fad. By analogy, at a recent FCC event, Kevin Werbach showed 3 Venn diagrams depicting data, telephony, wireless, broadcast, etc. In diagram #1 data was shown as a little circle inside a bigger circle called "telecom." In diagram #2 the data circle was outside the telecom circle, showing the results of the FCC's Computer Inquiry, which decided that data was an "enhanced service." In diagram #3 the data circle was so big that the circles for broadcast, cable and wireless were inside it. As late as 2001 an ILEC exec was marveling at how long the data "fad" had lasted. Blogs will do that too. Start reading the blogs. Read isen.blog. But don't stop there. Follow some links. One of the best collections of other people's blogs is David Weinberger's "Joho the Blog" at http://hyperorg.com/blogger. Another fabulous blog, by a woman who writes like she's sitting in your living room looking into your eyes, is http://riverbendblog.com. RSS makes blogging even more powerful. What's that? Here's a really simple summary; RSS is a way to track changes on a website without going there and saying, "Oh, yeah, seen all this before," or, conversely, "Gosh, that looks new." I won't explain anymore; you don't need to know. But you should experience RSS. My RSS experience comes from the FeedDemon RSS reader. It is a little program that runs inside my PC. You can download and install it at http://feeddemon.com. There are other RSS readers besides FeedDemon, but I found FeedDemon fall-off-a-log easy to install and use. No instructions necessary. Do it now. But please remember to come back and read the rest of this SMART Letter. And the future of The SMART Letter? It provides a less instant, perhaps more thoughtful, more permanent venue for my writing than isen.blog. I'd like to keep doing it. Despite the write-now tug of the blog. If I write them both, will readers read both? ------- CONFERENCES ON MY CALENDAR January 27-28, 2004, Bedfont Lakes, Middlesex, UK. Access to Broadband Campaign: Revolution at the Edge. Second annual meeting. I'll be the first keynote speaker. My friends and colleagues Peter Cochrane and Dewayne Hendricks will participate too. http://www.abcampaign.org.uk/ March 12-16, 2004, Austin TX. Wireless Futures (A conference within the South by SouthWest multi-palooza). Don't know much about this yet, but from the list of invitees, it's going to be good. http://wirelessfuture.org ------- COPYRIGHT NOTICE: Redistribution of this document, or any part of it, is permitted for non-commercial purposes, provided that the two lines below are reproduced with it: Copyright 2003 by David S. Isenberg isen@isen.com -- http://isen.com/ -- 1-888-isen-com ------- [To join the SMART List, click on http://isen.com/SMARTreqScript.html and fill in the form. The goal is to create a relationship, so I know something about why you're reading the SMART List.]