VON Canada - Final Thoughts

Gave myself a day to reflect on VON Canada, and on the whole, I'd have to say it was a success. For those who attended the inaugural VON Canada last year, I'm sure you'd agree it was improved on many fronts. The venue was more appropriate, the program was stronger, the exhibitor roster was healthy, the press coverage was better, and the attendance level was higher. While there was no hockey to distract our attention, the LinuxWorld/NetworkWorld conference ran parallel to the show in the same venue. It's hard to say how much cross-pollination took place, but there was a lot of IP happening in that venue this week.

There was a good variety of topics covered in the sessions, and much of it was familiar to VON regulars. So, while there wasn't much in the way of bleeding edge content or major announcements, there was plenty there for the audience, many of whom I suspect are new to VON.

As the show builds some history in Canada, I would hope - and expect -to see next year's show push the envelope a bit further. Of course, one must keep in mind that Canada is a good year behind the US in this market, so the strong buzz from Spring VON just passed is closer to what I would expect to see here in Canada in 2006.

With that said, I'd have to single out Ibrahim Gedeon's keynote as bringing a refreshing dose of candor to the realities faced by carriers as they migrate from circuit to packet. As the CTO of TELUS, he's been living nextgen for a long time, and provided some hard-nosed insight that you're not likely to hear from his RBOC peers.

As much as softswitches and gateways drive most of the nextgen spending by carriers, he's really moved on from this, saying that gateways are a commodity now, and he doesn't talk much about the switches any more. Of course, one could argue that not all gateways are commodities, but that's probably true for much of what's out there now. For gateways to evolve and maintain relevance as carriers move closer to being all IP, they will have to adopt more intelligence and function more as value-added edge devices. Essentially, they will need to support applications, as that will become the real driver for carriers with IP. That's really another topic, but there are some vendors squarely on that path today.

Ibrahim also put some context around SIP, which seems to be driving so much of IP these days. He feels SIP is great for what it does, but "it doesn't solve all my problems". Other protocols will inevitably emerge to fill these holes. Same for IMS - it's just too early to tell how definitive a solution this really will be.

The underlying message was his tacit acknowledgement that IP seems to be a perennial work in progress for carriers, which makes his job endlessly challenging. It would be easy to yearn for the relative stability of TDM, where the technologies had essentially been perfected, and you were familiar with the boundaries. With IP, he knows that new technologies will keep emerging, adding more complexity, and introducing new vendors that he'll have to evaluate and integrate into his ecosystem. I sure hope the vendors are listening!

Finally, I'd be remiss without commenting on the regulatory climate, which is so topical right now in Canada. In the Town Hall Meeting, Bell Canada's Lawson Hunter presented a strong case as to why the CRTC should maintain a consistent set of regulations for all operators in the VoIP market. In his prepared remarks, Lawson addressed two market myths which support the cableco view of VoIP, but also speak to the broader market.

First is the notion that voice should be treated differently than other applications that ride over the Internet. Why should VoIP be treated the same as landline telephony, while all other Internet applications such as email, IM, music or video are unregulated? The medium is really the message here, and it seems inconsistent to treat voice differently. I liked his analogy of a truck as a metaphor for the Internet. A truck is still a truck whether it carries logs or lawn mowers. Same for the Internet whether it's carrying data or voice.

His second contention is market power. All VoIP providers are concerned that the Canadian incumbents hold all the market power, and will extend this control to the VoIP market. Lawson argues that since VoIP is so new here, everyone is basically starting from zero, and there is no guarantee that the ILEC's market power will translate into market dominance for VoIP. That of course remains to be proven.

If one accepts his view that our incumbents do not hold market power in residential VoIP - which so far is true - then the regulators should follow precedent. They did not regulate incumbents differently from competing operators in other areas - long distance, wireless and Internet access - so why should it be any different for VoIP?

Whether you view Bell as the big bad bully trying to coerce the CRTC to favor their position - or as the progressive carrier who echoes some valid concerns for all ILECs, Lawson articulated some strong views that the audience needed to hear. He also provided broader context by outlining how his position of open competition is consistent with almost all other countries (Singapore excepted), and that this climate has supported healthy growth and abundant choice for consumers.

The Canadian residential VoIP market has been holding its breath for too long, and Lawson's implicit message is that the CRTC needs to take a wider view of VoIP and what it means for Canada's future. The good news is that we now have a firm timeline, as their decision will be announced no later that May 12. I'm certain that an open market is the right way to go, but am less certain the CRTC will see it that way.

Skype This - Keeping It Real

As mentioned in my posting about Jeff's opening keynote, we're lucky have Niklas Zennstrom on hand to give us the latest state of the union on how Skype is evolving into a real business with real customers.

At VON Canada last year, Niklas told the world that Skype Out is coming, and since its launch last July, he now tells us they at 1.2 million Skype Out accounts, and handling 1.5 billion voice minutes monthly. Regardless of how many active, unique users there really are, there's no denying that Skype is on to something big here.

Niklas added they are adding 155,000 new users EVERY DAY. Sure, most of these will just do free calling, but for fun, let's put this in real world context. In the US, incumbents are now losing local access subs at a 4% annual rate, and that number will likely get bigger, not smaller. Well, in rough terms, that translates to losing about 10,000 subs a day. How big are all those RBOCs? What's Skype's market cap? What's wrong with this picture? I'll take Skype's story any day. And we're not even talking about the cool stuff, namely Skype In and Mobile OS.

To me, the bottom line is that Skype is showing some proof points about what matters most - transitioning users from free to paid. At this point, I don't this it really matters whether people are spending pennies or dollars with Skype. How much has Vonage spent to get a half a million subs? How much has Skype spent to get 1.2 million Skype Out users? This is a whole different business model, and we're only at the most basic level of revenue generation, and they're only touching the PSTN in a very small way.

Skype In is a whole other story, and to me, that's what will really make Skype a serious force for the telcos to consider. Currently, Skype In offers area codes in 8 countries - but not yet Canada. Later in the morning, Niklas held an extensive press conference, and my understanding is that nobody asked about Canada for Skype In. That strikes me as odd - that would have been one of my leading questions. Speaking with Niklas later about this, Canada is on the radar, but he wouldn't specify when Skype's G-8 will expand to include Canada. For now, we'll have to settle for US numbers, or exotic locales such as Poland or Hong Kong!

There's a lot of other good stuff going on with Skype, and Mark Evans has done a great job covering it - I urge you to see his recent postings.

Just wanted to add one other thing that really resonated with me. During his keynote, Niklas talked about how they've kept the business very honest - there's no marketing or hype or ads or viruses. Their growth has largely been viral, and he talked about keeping honest with their users. We talked more about this during a dinner meeting, and while this may seem quaint and idealistic, I think this is very much at the heart of what makes Skype so popular. It's very grass roots, but you don't get the pangs of guilt or feeling of being a bit of an outlaw as you might have with KaZaa. I don't feel the least bit guilty making free calls with Skype, and there is certainly that sense of being part of something that's good and cool.

And you know it's only going to get better. Niklas seems genuinely concerned about maintaining that trust, and not turning Skype into a commercial enterprise. Then it would be just like any other cheap voice service - and that's just not what Skype is about.

Footnote - Niklas was kind enough to indulge us with a photo. Below, in descending order is Niklas, myself, and my son Max - who is busy trying to get all his friends on Skype.


View image

Under Construction - Please Bear With Me...

Just a quick post to let you know my blog is very new, and it's not very feature-rich yet. By next week I'm hoping to add a links page and other things to keep you coming back!

In the meantime, direct comments are welcome, and feel free to email me directly - jon@jarnoldassociates.com

In my previous posting, I mentioned two blog sites that are good to follow in this space. Until my links section is up, I'd like to add a few more blogs that I'd urge you to follow for thought leadership is IP communications:

Jeff Pulver's Blog

Andy Abramson's Blog

Om Malik's Blog


Others will be added soon, so stay tuned.

Coffee Talk with Jeff Pulver - Shift Happens, Eh!

I really tried post this just after Jeff's keynote, but things have been go-go here all day. There is lots going on, which is a great sign for the market here. Better late than never...

Jeff had his usual keen insights about where VoIP is going, and he made some very good analogies to the real world. One is coffee, which Jeff is very big on! The main idea is that he prefers to patronize places like Starbucks and Second Cup - not so much because the coffee is better, but because he can walk out of there with the coffee exactly the way he likes it. Other places will add the cream and sugar for you, and you really don't have control over the "user experience". IP is just like that, and he would argue this is one of its great strengths - the power - and hence the appeal - lies with the user who controls the where, when, how, why, etc. of how he/she communicates.

Another key theme was that "shift happens". The open nature of IP makes all kinds of disruption possible, and as this market finds its legs, Jeff encourages vendors to be bold, and not focus on cheaper voice solutions or replication of the PSTN. Similarly, regulators should not stifle innovation - they should embrace it.

This led to Jeff's big question - where is the Steve Jobs of VoIP? We're certainly at the point now where this type of breakthrough visionary would make his/her mark, and transform VoIP from a hobby/techhie technology to something that's must-have and cool.

Well, Jeff's position is that person is in our midst - and literally, here with us now. And that person is Niklas Zennstrom of Skype. We're very lucky to have Niklas return to Canada, which is a "safe haven" for him. For a change, Canada gets something the US can't have, and I think it's a great coup for Jeff to have Niklas at the show. My next posting, btw, is my take on what Niklas had to say during his keynote yesterday.

Jeff used the apt analogy of spreadsheets to put some context around this. Which generation of spreadsheets is Skype most like - VisiCalc, Lotus 123, or MS Excel? He says Lotus 123, and I think that's the right answer. It's early days, but Skype has clearly brought ease of use to VoIP, and is reaching a substantive audience now. Not quite mainstream like Excel, but way beyond VisiCalc. So, this begs the question, of course - who will be the Excel of VoIP? Microsoft? Not likely, but you never know.

Skype is just one great example of how "shift happens", and really is the beauty of IP. Anyone can come along and create totally new, disruptive businesses and applications, like Skype or Asterisk. And that's what's happening now. Jeff summed this up nicely by pointing out how this is a key difference between open and closed systems, and simply put, so far, VoIP is an open chapter, with many more chapters to be written.

PERSONAL CODA...
With all the buzz around the show, I realize this post is late to market. I urge you to follow two other fellow bloggers who are tracking the show on a more timely basis, and are great reads as well.

Mark Evans of the Financial Post

Alec Saunders, CEO of Iotum Corp.

VON Canada Kickoff on TV

Voice on the Net Canada starts tomorrow here in Toronto, and to help spread the word, Jeff Pulver appeared on ROB TV this morning (11:15am to be exact).

ROB TV is comparable to FNN in the US, and is widely watched by the Canadian financial community. I spent the morning with Jeff, and thankfully, he remembered to talk about the show during his segment! We had a similar segment last year for the initial VON Canada, but he never mentioned it then.

The segment runs about 6 minutes, and Jeff does a great job defining the key issues, and is not shy on his views of what's working and not working in the Canadian market.

Stay tuned, as I'll be blogging throughout the show on the latest IP developments in Canada.

VON and VoIP in Canada

Next week, the second Voice on the Net Canada conference is running here in Toronto. Some of you know that the show can't be called VON Canada, which would be consistent with the other VON shows Jeff holds in several markets now. In Canada, the acronym VON is already taken by the Victoria Order of Nurses. Now you know!

The show will be bigger and better than last year, and it reflects the healthy interest the market has in learning more about VoIP.

In support of the show, the Wednesday Globe and Mail ran an insert about VoIP. This is Canada's leading national daily, so it reaches a wide business audience. The insert addresses various aspects of the Canadian VoIP market, and hopefully you'll find this a good read.

It's too difficult to display content formatted for broadsheet, but these pdfs are a handy way to see what the readers see.

Download file

Download file

AOL - Can ISPs Compete With VoIP ? - Less Worried Now

Before getting to today's news about AOL, I just wanted to say I'm less worried now about the Red Sox. What a difference one day makes, and the season is only 3 games old. I won't comment all that often on baseball, but just needed some closure from my Tuesday posting. For Sox fans, there is nothing sweeter than knocking Rivera out of a game, esp when he came in with a lead - and in Yankee Stadium.

I won't dwell on this any further, but to me the game was a bit like watching VoIP chipping away at PSTN - one batter at a time. I'll leave it at that for now.

On to AOL. The launch of their Internet Phone Service has been widely covered, and I just wanted to add some brief thoughts to the mix.

First is the simple fact that ISPs represent a third option for getting VoIP. Most homes get the service from either a telco or a cableco. In this context, I'd put virtual operators like Vonage in the telco category since they're essentially offering telephone service - they don't offer video, and they don't offer broadband. That said, of these three types of providers, I would argue that a savvy ISP is the best positioned in terms of understanding how consumers use the Internet, and where it fits in their communications spectrum. In theory, AOL should be miles ahead of the RBOCs, MSOs and IXCs on this count. Of course, one could quickly throw cold water over that simply by saying AOL has been bleeding dial up subscribers for years and has not done a good job of bringing them to broadband.

So, of course, AOL needs VoIP to stem this tide. And what better reason is there to adopt broadband than VoIP? One could also argue that AT&T does not set a good precedent, as they have little to show for all their marketing and brand clout, with little more than 50,000 VoIP subscribers. That said, however, AOL has a much larger subscriber base to work with than AT&T, even if roughly 80% are dial up. With roughly 23 million total subscribers, AOL's customer base is on par with the RBOCs and MSOs, and way ahead in terms of broadband subscribers, at about 5 million. I'll take 5 million broadband subscribers any day as a base to work with - it's theirs to lose, so to speak.

Let's not forget AOL's huge IM community - again, something that the RBOCs and MSOs don't have. This is another key piece in the puzzle for how the Internet generation communicates. Again, I would argue that the DNA is there within AOL's subscriber universe for them to understand and create the kind of user experience that VoIP is built for. Early reports indicate they have done so in terms of a service that is easy to use and feature rich. They also have precedent on their side. Much of their dial up success was built around an easy to use, intuitive service. For those customers who have stayed with them moving to broadband, there should be comfort in continuing with this formula for VoIP.

To protect their vulnerable subscriber base, they have had to come to market with a competitive offering. They seem to have done this attractive pricing, LNP and E911. Under the hood, they have taken the best of breed approach by partnering with Level 3 and Sonus.

Being based in Canada, it's worth noting that AOL Canada followed the same path, partnering with Allstream when they launched their TotalTalk VoIP service in December last year. That said, AOL knows their forte - branding and a big customer base - it's just good strategy to outsource the rest.

Of course, you need to be an AOL member, so it's bit like cable and telecom that way. The sweet spot will clearly be with current subscribers, with the hope that VoIP drives more of their dial up subs to broadband. I suspect they will have a harder time attracting new subscribers from outside the AOL fold, but that would appear to be a secondary priority at this time.

Time will tell, of course, how well this strategy plays out. One thing is certain - the VoIP market will not stand still.Verizon just launched their lower priced service, VoiceWing 500, which is another step towards lowering the price bar for VoIP. The other IM players, such as MSN and Yahoo, will of course be watching closely, and VoIP is no doubt in the mix there. And of course, the VoIP pure plays will have to keep pace, especially if they have a lot of overlap with AOL subscribers.

My Red Sox - Already Worried - VoIP Too

Slow news day in VoIP-land, unless you're following things at NCTA. Jeff's blog entry yesterday had a good summary of Jonathan Askin's thoughts, as well as a writeup from Light Reading about his presentation there.

Actually, Jonathan's issues are consistent with other recent developments that are worrisome - more so than my early season anxiety over my beloved Sox. Here in Canada, the CRTC just required VoIP providers to have 911 compliance within 90 days, especially for fixed line service. The recent Bell South situation around naked DSL doesn't bode well for the virtual broadband voice operators.

These are all indicators that regulators and service providers are looking at VoIP through the narrow lens of being a replacement telephony service. Sure, it can do that, but the IP community of course sees a much broader picture. What's really needed is a paradigm shift in thinking, but if the market power remains in the hands of the incumbents and MSOs, it's going to be hard to see how this is going to happen.

The VoIP startups who are driving the innovation lack market power, and we may have to look elsewhere to make such a shift happen. The combination of market power and innovation is hard to find in telecom as we know it. I think we're more likely to see that combination emerge from wireless carriers, or if we step a bit further out, possibly the IM world or peer to peer. Otherwise, all we might get is POTS on steriods. Sorry, but I couldn't resist that unsettling segue into baseball.....

Ok, here's what I really wanted to say today. I don't think I'm alone among followers of the Nation who live and die by every pitch, and read meaning into every half-swing or bobbled ball.

It's only two games into the season, but some early warning signs are already there to keep fans like me up at night. The true mark of a Sox fan is reading doom into every little thing. Not recommended!

-First, the winning streak is over. After winning the last 8 games of 2004, the Sox are winless. Opening day actually looked a bit like the last time they lost - the Fenway Massacre of Game 3 - of course, to the same Yankees. Matsui was unstoppable that game - he's hitting the Sox pretty good now too.

- Sox fans see omens in everything and are always wondering "what if". Well "what if" Millar's second inning shot on opening day landed in the seats instead of Matsui's glove (give him credit - great catch!)? Sox up 2-0 early - getting off on the right foot. Sure, they did score that inning, but a homer says it with authority, esp with the Big Unit pitching. It's a game of inches, but that homer take-away sure resonated with me.

- Yesterday's game was more like what we expect between these teams. Great baseball, back and forth. Again, our hopes are lifted when Varitek ties the game with a homer off Rivera in the 9th. We have his number, and now we're back on track. And of course, the nemesis - Foulke giving up another late homer - walk-off winner to Mr. Clutch, Jeter. Tough way to lose, and now we're on the verge of being swept. Yankees must be feeling pretty good, and they know how fragile the Sox psyche is - let's not go there.

- Manny has yet to get a hit. Same for Renteria, going back to his groundout that ended the season last year. This will change, but still, a bit worrisome!

- Last year the Sox owned the Yankees in the beginning of the season, and it helped them stay on top until their inevitable June swoon. Different story so far - just have to be a little concerned.

- If it's any consolation, Pedro lost his opener in true Red Sox fashion. He was his usual dominant self, but the Mets couldn't hold the lead in the end. Very familiar story. That feels a little better now.

Canada - ILECs Testing the CRTC

The Canadian market is just starting to get its VoIP legs, but our regulator, the CRTC, has been slow to make up its mind on what to do with VoIP. Our big ILECs - Bell and TELUS - are used to getting their way, but that's not what's happening as we continue to hang in this void. I made some reference to this in my posting about Vonage, but the following links illuminate the situation a bit more.

Last week, TELUS contended that Shaw was not playing fair with the recent launch of Digital Voice VoIP service to their cable subscribers.

While TELUS's move was defensive, Bell's move last week was offensive, and more proactive in terms of pushing the envelope with the CRTC. I spoke to Charlotte Wolter of New Telephony about this, and here's her take on the situation.


The U.S. tends to regionalize in terms of North/South, but in Canada, it's East/West. TELUS and Shaw are head-to-head in the West, while Bell is up against Videotron and Rogers in the East. In both cases, the regulatory issues are front and center. They are symptomatic of the differing approaches taken to VoIP by the CRTC and the FCC. In true Canadian fashion, we seem to know what VoIP is not, but nobody can define what VoIP is.

I have no doubt other situations will soon arise to challenge the CRTC, and if that's what it takes to get a clear resolution on VoIP, then so be it.

Of course, it will be very interesting to see how the CRTC responds, and I'll keep you posted. Sure would be great to have things settled in time for Voice on the Net Canada, but I'm not holding my breath.

Personal Housekeeping/Earlier VoIP Articles

Am really encouraged by all the positive comments I've been getting on my blog, both here and via direct email. An especially big thanks to guru Andy Abramson who was kind enough to link me to his well read and highly regarded blog, VoIP Watch.

As soon as I can, I'll be adding a Links section, and his link will be there for sure. And of course, it doesn't hurt having Jeff put the word out on his blog, and adding my blog to his links. Thanks Jeff!

I'm still in catch up mode, and soon I'll be posting in a more timely manner. As a personal matter of good housekeeping, I'd just like to share some VoIP articles of mine with the blogging community that were written while at Frost & Sullivan. I'm also including a recent profile on the use of IP among small businesses in Canada that I was extensively quoted in. For those of you who don't know me, these will give you a good idea of what my recent views on VoIP have been.

These pieces are all in the public domain, so feel free to share them with others. I have a much more extensive profile of public domain media citings, and feel free to contact me to see more.

Globe and Mail - use of IP among small businesses in Canada

Telecommunications Magazine - RBOC VoIP migration update

Telecommunications Magazine - Residential VoIP Outlook

CNET News - op-ed piece on residential VoIP - "I Want My VoIP" - watch for the sequel, coming soon!


Going forward, I'll also provide a regular log of my media citings and articles, so stay tuned.