Friday, July 28, 2006

Vacation Time - Back August 5

We all need a break, and I'm taking the first of two one-week family vacations starting tomorrow.

So, no blogging for me next week, but I hope to resume posting once we're back on August 5. Until then...

CallVantage Price Cut - The Other Shoe Drops on Vonage

Have been wanting to get around to this one, but it's been a very full week in advance of a vacation next week.

So, AT&T CallVantage finally dropped their price by $5 this week, and now, the other shoe, figuratively, has dropped on Vonage. Verizon started it recently, and now AT&T has followed suit to keep pace.

A few weeks back, I commented about this, wondering if/when AT&T would match Verizon's price cut to put even more pressure on Vonage. At least AT&T has had the goodness to let some time pass, while Verizon has gone after Vonage first with a price cut, and then the lawsuits!

It's not easy being a VoIP provider, at for the pureplays...

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SightSpeed 5.0 - Minor Update

Just a quick update/clarification to my posting yesterday about SightSpeed's latest release.

I incorrectly stated that SightSpeed currently supports remote access and viewing from your PVR. Colleague, Jim Courtney, has a very good post about SightSpeed and his chat with Peter Csathy, and clarified a few things that I'd like to share. Jim is far more tech savvy than me, and I'm glad we chatted earlier today.

Basically, Jim pointed out that SightSpeed 5.0 will only support live TV from your cable connection right now. It won't work off a set top box, which means you can only access analog channels - not digital.

Furthermore, it will only be able to interface with your PVR when Windows Vista launches, which may not be until next year. So, it's not quite the Slingbox killer that it may appear - at least for now.

I have no doubt these hurdles will be passed - SightSpeed's quality is too good, and they look to have lots of really smart people who can figure these things out.

So, thanks for the update Jim, and hopefully I've set the record straight!

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Convedia Acquired - Media Server Consolidation Next?

The VoIP infrastructure space continues to consolidate, with the latest news, which I found a bit surprising. Convedia has been acquired by RadiSys, a company not normally followed in this space, which is the main surprise element for me. RadiSys is leading vendor in embedded technologies, such as ATCA, but I'll stop there, as I don't follow that space very closely. Hat tip to Mark Evans with his late night post yesterday on the news. Good scoop!

In short, Convedia was acquired for $105 million, which sure looks good, considering how Netrake only went for $11 million to AudioCodes as recently as last week, and I commented about that in the context of how the session border controller market was consolidating. Netrake has raised WAY more money that Convedia, but didn't get nearly as much traction, so the math isn't hard to figure out here.

Convedia is a Terry Matthews company, so there must be some happy folks today over at Wesley Clover - his invesment management arm - including his son/EVP, Owen Matthews, who I just did a podcast with.

So, good news all around, and another validation that Canada is producing some real winners in the IP communications space. Congrats to Peter Briscoe and Grant Henderson! I've followed Convedia closely for many years, and have always admired them. Since evolving to become a media server company, they've maintained a singular focus to do nothing but this. That approach has really paid off as they've become the dominant player in this space, and now the payback has come. As it well should.

Just a quick comment on the news itself. The fit between the 2 companies isn't that evident, and it reminds me of Comverse's acquisition of NetCentrex in April. Very different businesses, but the strategy is sound. RadiSys is an embedded play, whereas Convedia is all about a hardware-based, purpose-built box. Where's the fit there? I suspect this has to do with the fact that so much of this space is becoming software based, and there is certainly a market opportunity for media servers here. To date, software-based media servers have not had much success, although SnowShore has continued to evolve this space under the Cantata umbrella. For Convedia, the embedded expertise of RadiSys may well provide a stronger base for them to develop a rich solution to complement their existing hardware-based product family.

Another key element would be the global market reach of RadiSys. Much like the Comverse deal, RadiSys can bring Convedia to a wider base of customers, especially for those looking for a strong IMS story. Also, both companies have a strong focus on Asia - RadiSys has a design center in China, and Convedia has done a great job of securing design wins with the major Asian vendors, which is critical for getting traction in that market.

So, the consolidation story continues. In the media server space, Convedia is gone now, both Excel and SnowShore are part of Cantata, and AudioCodes is itself becoming a consolidator, much like Tekelec. The only other pureplay that comes to mind, really, is IPUnity, and their Mereon product family. I'm sure the Convedia news is very much on their minds today...

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Thursday, July 27, 2006

Vonage and the Magic of Internet Marketing

Just a real short post about Internet marketing. Russell Shaw had a very interesting post yesterday about how Vonage is selecting banner ad locations based on key search phrases that would position their ads favorably.

Not much to add really, but Russell notes how the top 3 search terms used by Vonage are "Verizon + dsl", "AT&T", and "Sprint". The first 2 are expected, as these are by far the largest targets for new customers. So, people clicking on these terms are probably good candidates for phone service, and that's where Vonage wants to be. Makes sense. I'm sure this is all part of the game - and mandate - for them to lower their customer acquistion costs, so putting Internet economics to work is one way to do that.

One thing I will say is that if Vonage ever figures out how to do this, they'll probably be at the forefront of Internet marketing, and at the end of the day, that expertise may well be more valuable the their VoIP business!

Also wanted to amplify Russell's point about Sprint, and that's probably the most telling take-away of his posting. Well, Sprint really isn't in the residential VoIP market, but they do have lots of subscribers. I suppose, then, if Vonage starts feeding off their customers and signing them up for VoIP, Sprint-Nextel just might see them as a key driver of value and growth. Wouldn't that be a great way for Vonage to prime the pump to be an acquisition target for Sprint-Nextel? May not be such a bad idea.... thanks for the post, Russell - very interesting.

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SightSpeed 5.0 - Good as it Gets for Video Calling

Yesterday, SightSpeed launched its latest release, 5.0. This is a really interesting company, and I've blogged about them before. The main news is how SightSpeed now enables you to access your PVR content or home TV signal from any broadband connection. So, it's like Slingbox, but with no hardware. It's very neat, and certainly makes video much more interesting for people on the go.

I've tried it a few times, and the quality is really great. Both audio and video are crystal clear, and there are hardly any delays in the imaging. You can see the other party - and yourself if you like - pretty much in real time. It makes for a very engaging experience, and after a while you totally forget about being on camera. It's also fun because you can move the camera around any time and you just keep talking. I was on with Peter Csathy yesterday - their CEO - for over an hour, and we took turns giving each other mini-guided tours of our offices. We looked at photos of each other's kids, the view from our windows, what's on our bookshelves, etc. Inane stuff like that, but it really takes the communications experience to a whole other level.

It doesn't take much to start dreaming up all the cool, fun things you can do. Oh, and the best part - it's free! How neat is that? Now, of course, they want you sign up to the $4.95/month plan - if you can afford it. Then you can make 2 minute video clips. So, with that plan, I could be giving you my 2 minute video blog, and I could start my own little Rocketboom. And of course, once this becomes your habit, you really won't have much need to go back to Skype or other VoIM services. You can just use SightSpeed for voice, and of course, cheap long distance for PSTN calling, just like Skype.

Well, I don't have the $4.95 plan, so the next best thing is to show you a picture. My oldest son, Max, was around, so he used my Nokia N90 to take this shot of Peter in full screen mode during our call. You can see the webcam in the upper left of the screen, and down in the bottom right corner you can see my image. And if you look closely, you can see Max being captured on video taking a picture of all this. Got that?


Peter commented how it was interesting to see how Skype announced its video features - Skype for Mac - with the Mac OS yesterday. Coincidence? It's pretty clear to Peter that the big players have Sightspeed on their radar now, and from all accounts, they have some catching up to do.

For a technical review, Tom Keating is the go-to guy for this release. Otherwise, Andy Abramson has a good summary of blogosphere coverage on his blog.

Hat tip to Alec Saunders for "The Sightspeed Guy" and his video clip summarizing what's new in this release. A bit corny, but a very user-friendly way to hear the basic story, especially if you haven't seen the news release.

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Wednesday, July 26, 2006

Canadian IP Thought Leaders Series - Tom Flak, Soma Networks

On this week's podcast, I interviewed Tom Flak, SVP of Marketing and Product Strategy with Soma Networks.

Soma is a hybrid U.S./Canadian company, with HQ in San Francisco, but development centers here in Toronto and Ottawa. I've visited their Toronto facility a couple of times, and Soma has a good story that's largely untold.

They're a leading light in the WiMax space, and Tom provided a good perspective about the state of WiMax and some comparisons/contrasts with WiFi. All indicators points to 2007 being the year when WiMax becomes real, and Soma looks to figure in this in a nice way.

You can download the podcast here as well as learn more about Tom and the company.

FYI - no podcast next week - family vacation! We'll be going our Great White North road trip, and I'll be totally offline until early August.

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Monday, July 24, 2006

VoIP Peering - the State of the Nation

If you're interested in learning about the latest and greatest in the world of VoIP Peering, I'm hosting a webinar about this on Thursday. It's the first of a series of webinars I'll be hosting on a variety of IP topics.

To learn more and/or register, please visit my website, and I hope you can participate.

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Friday, July 21, 2006

Toronto's Muni WiFi Plans Delayed - Not as Easy as it Looks

Very interesting story that I happened to read in passing today about Toronto Hydro Telecom's muni WiFi plans.

Catherine McLean covers telecom for the Globe & Mail, and her stories usually only run in the business section. Well, this piece ran in the front section, so the paper deemed it a local news story rather than a business. That's interesting in itself, and it pays to read the whole newspaper - which I usually do! Otherwise, I would have missed it, and you probably would too, as I haven't seen anyone else pick up on this yet.

Toronto Hydro made a splash announcing their muni WiFi plans back in March, and it was not welcome news to Bell and Rogers, the dominant wireless carriers in Toronto. That's a story unto itself, and today's news at face value wasn't really dramatic - simply put, their launch was being delayed by 2 months. No big deal - delays in service launches happen all the time.

It's the reasons for the delay that you really gotta get your head around. Some would say "only in Canada", and there's some truth to that. And others would say that a public utility answers to a higher standard than a for-profit operator, and have a social obligation to do the right thing at all times. Which, of course, raises the bigger question about whether utlilities should even be in this business. I digress.

Forgive me if this sounds a bit like David Letterman's Top 10 list, but these are not the kinds of things you'd expect to see coming up at this stage of the game. Well, I only have 3 reasons, but still...

1. Health concerns about electromagnetic signals, especially from migraine sufferers. This is a legitimate issue, no doubt, but I don't think the plans would have gotten this far along without addressing such a basic issue. I haven't followed the U.S. experience with EM signals, but given all the muni WiFi projects in play already, I'd have to think they've gotten past this one a while ago.

Sidebar - one of the great things about the online version of the news is that they publish reader comments. There are some great comments in Catherine's article about this issue (and others) - worth a read.

2. Lack of authentication to prevent illegal activity. Again, in theory, this is a valid law enforcement concern. After all, WiFi is unlicensed spectrum, and initially, the knock against it was its lack of security. Toronto Hydro has expressed concern their service will be used by drug dealers and child porn traffickers - really. Very creepy for sure, but do you really need to make this a public issue? Again, one would think such a basic flaw would have been addressed early on, and not a month away from the scheduled launch date.

3. Infrastructure can't provide 24 hour service. Incredibly, they're just discovering now that most of the lighting poles - which host the WiFi transmitters - don't have round the clock power. Huh? You're just figuring this out NOW? Well, that one's going back to the drawing board....

This is happening in a city that had very serious aspirations to host the Olympics a few years back. I'm sure Bell and Rogers are smiling, but for all these concerns, they only expect a 2 month setback for their launch.

Oh, and one other thing. They're still planning on offering the service initially for free, after which users will have to pay. Pricing hasn't been announced, and I suspect that will be determined by market conditions when the free trial is up. Here's the BUT. To access the free service, you must have a cell phone. As the article explains, to authenticate the service you need a cell phone number. I don't quite get that, but the bottom line is that the free service is conditional on having something that really has nothing to do with WiFi. Canadians aren't as saturated will cell phone as Americans, and it's unlikely that many people will run out and sign up for a cell plan just to get free WiFi. Or maybe they will. I'll bet Richard Branson and Virgin Mobile will find a marketing angle here somehow! Maybe this will accelerate the rush to get dual mode phones in the market...

Bottom line - I'm being a bit tough on Toronto Hydro Telecom, especially since the U.S. market seems to be moving ahead pretty aggressively in this space. In fact, there was some big news today about AT&T getting into the muni WiFi market by partnering with MetroFi. To follow this story further, both Om Malik and Andy Abramson have good posts from earlier today.

I digress. That all said, the bottom line is that muni WiFi is NOT as easy as it looks. Toronto Hydro's problems are fixable, and I know there are many other problems with this technology, some of which nobody seems to be able to anticipate. And of course, nobody really knows if there's even a viable market or a business case, especially as mobile phones become more powerful. So, these are small steps along the way, and today's news really has the feel of a big science experiment that's just gone a little wrong. But certainly not off the tracks. At least let's hope so.

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Canadian IP Thought Leaders Series - Owen Matthews, NewHeights

This week's Pulvermedia Podcast Network pod was with Owen Matthews. He's the CEO of Ottawa-based NewHeights Software, as well as EVP of Wesley Clover, the investing arm of Sir Terry Matthews.

Owen shared his thoughts on the evolving area of advanced applications for enterprises, and how companies like his are developing solutions to help end users get the most out of the features available in their communications tools. SIP is a big part of this, and Owen talked how SIP has evolved from being something he didn't see being much help to something this is now quite relevant to what NewHeights is doing.

To download the podcast, click here. You can read more about Owen's background there as well.

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Gizmo Project, Part 2 - What About the Biz Model?

Yesterday, I posted about Gizmo's All Calls Free offering. Notice that I'm calling this an "offering" - not a "plan". It's an offering - you can take it or leave it.

I don't normally do follow-ons to my posts, but I am here. Yesterday I was rushed when writing my post, and overlooked what I think is a key angle to this story. It's been on my mind, and late yesterday I got an email from a reader who really brought the issue forward, so here we are.

As noted in yesterday's post, the blogosphere has this story well covered, so no need to get into the details. However, as my reader notes... what about the business model??? To paraphrase....

"Why are so many people in the VoIP sphere excited by business models with negative gross margin - eg todays offering by Gizmo. It costs money to terminate to PSTN. I must confess that I do not see what is so impressive about just buying something that costs money (pstn terminated minutes) and giving it away for free."

Well said! Some bloggers like Alec and Om (see previous posts for links) made passing references to the economics, but I think it gets lost in the buzz of having yet more free voice at our fingertips.

As mentioned yesterday, I hope only for success with Gizmo. Michael Robertson knows what he's doing, and obviously VoIP economics makes this possible. I also noted - as did Mark Evans - that it's one thing to attract a lot of interest and usage from those in the know, but getting mass market acceptance is quite another. On that level, I'm skeptical about where the pot of gold is. Skype has had plenty of time to upsell users to paid or premium services, but it hasn't happened in a big enough way for people to conclude that they've developed a viable business model built on free voice calling.

To come full circle, that's why I'm calling Gizmo an offering. It would be a plan if you had to pay for the calls, and as my reader notes, it still costs money to terminate to the PSTN. Sure, this may be just semantics, but still, it's easy to attract a lot of users to a free service. Sooner or later, you have to make money, though. And that takes volume - you need lots and lots of users. To me, that will be Gizmo's biggest challenge - growing this beyond the inner circle, and keeping things interesting long enough until they can find a way to make it pay.

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Thursday, July 20, 2006

Once Phone Calls Become Free - Then What?

The blogosphere has been quick to pick up on Andy Abramson's post about the latest from Michael Robertson's Gizmo Project.

Gizmo's All Calls Free offering went live today, and is yet another example of what happens when voice becomes a total commodity, and at this stage of the game isn't really much different than email - at least in Internet world, where voice is just another data application.

Michael Robertson is certainly an innovator and a disruptor, and his praises are not hard to come by, especially among the blogerati. A quick perusal of Andy's blog, Alec Saunders, Om Malik, and others - and you won't have to look far to learn all you want about what makes Gizmo special.

Basically, Gizmo works like Skype. It's peer-to-peer, and calls between Gizmo callers are free. The big difference is that Gizmo is SIP-based, whereas Skype's protocol is largely closed and proprietary. This has long been a big contention with Skype, as it cannot be easily integrated into the broader IM or VoIP world. Gizmo, on the other hand, feels they've built a better mousetrap since SIP can be far more broadly shared. In theory, this gives Gizmo the potential to be a universally used platform.

The only drawback is that Skype has the brand and the huge user base, while Gizmo is hardly known outside the IP world. Today's news is a step along the way to change that, as they're now offering free calling among Gizmo users to some 60 countries - on either a PC or any phone. So, they've one-upped Skype's free North America calling deal to a more global footprint. Of course you have to sign up with Gizmo to do this - just as you would with Skype or any other service.

So, on paper, it's a great deal - but the world has to know about it. Those in the know will be all over this, but the trick is getting everyone else on board.

A couple of years ago, Ed Cespedes, the CEO of Voiceglo, was presenting at an investor conference in NY. He was boldly proclaiming that with VoIP, voice will be a race to zero. That's always stuck with me (not that he was the first to say it, but his timing was very good), especially since Jeff Citron had already done his Vonage pitch earlier in the morning! Hah. Anyhow, I'm with Ed, and here we are - free voice.

So, now what? There are a million ways to answer that one for sure. All I can say is - good for Gizmo! - and I hope they get a gazillion people using it. I'm sure the telcos - as well as the VoIP pureplays trying to do the same thing, but charging $25 or so a month - won't be thrilled. It's just another curve ball in the ever-changing VoIP landscape.

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Wednesday, July 19, 2006

Session Border Control Market Really Hurting

Just wanted to comment quickly on this space. I've been close to the session border controller (SBC) market from the beginning, and still feel an affinity for the vendors. It's not an established or clearly defined market segment, but we more or less know who the players are. There have been a couple of recent body blows to this space, and it's not getting a lot of attention from bloggers. So, for the record, I just want to draw attention to what's going on, as I believe it has wider implications for both vendors and the financial community.

Most recently - Monday - Juniper announced it was withdrawing its SBC offerings, which are based on their acquisiton of Kagoor last March. This was a well-received exit, as Kagoor got a decent valuation, and Juniper got a solution to give them a leg up on Cisco. Things were looking good for the other SBC vendors with similar exit aspirations.

Then we had Netrake's paltry acquisition by AudioCodes last week. Netrake had raised some $70 million, but wasn't coming up with the big wins to justify this kind of investment. Looks like the VCs had had enough, and AudioCodes probably got a good deal. They're continuing along the consolidation path, and if you ask me, are on their way to being in a league with Sonus, which not too many nextgen vendors get to. Tekelec also comes to mind - also via acquisition. In the present climate, it's becoming the norm for vendors to get big or go home. It's getting more difficult to remain small and independent, especially if you have aspirations of selling to Tier 2 carriers or higher.

Netrake may not have had much choice in taking the AudioCodes offer, and while it spares them a possibly worse fate, it's got to be cause for concern among those left standing in the SBC space. Way back, Jasomi got taken out by Ditech for a fairly small payout, and Netrake did not fare much better (but at least Jasomi was self funded, and nobody lost any money). And there's Newport Networks, who went public in the UK. They raised a lot of money - without any customers or revenues to speak of. Their valuation has gone down significantly since then (much worse than Vonage), and I really don't see things changing in a big way there.

So, on that level, the Netrake deal is a continuation of a scary trend that basically says the market doesn't value this space a whole lot. At the end of day, there's something to be said for exiting early like Kagoor. Translation - get out while the going's good.

That said - I still think the SBC segment has merit on its own, but it's looking like there may only be room for a couple of players. When I was at Frost & Sullivan, I wrote a report on this space when it was just getting hot, and concluded that the market for standalones would peak and then go down as exits and acquisitions occurred - and when vendors start integrating SBC functionality into other network elements. As it turns out - that's exactly what Juniper is doing with Kagoor. As I recall, my conclusions were not well received, at least by some vendors who felt the market had much more life in it. Well, I'd have to say those conclusions turned out to be very true - and if memory serves, a good year or two earlier than I had predicted. If I was Frost & Sullivan, I'd be thinking about re-issuing that report with an update!

So, this one-two knockout punch of Netrake and Kagoor basiclly leaves us with two strong SBC pureplays - Acme and NexTone. Yes, there are several other vendors who now offer SBC solutions and/or functionality, like MetaSwitch, Tekelec and Quintum - but these are not pureplays - SBC is not central to their business.

Acme and NextTone look to be the long-term winners in this space, which validates that there's room for both an integrated big box platform - Acme, and a dis-integrated solution like NexTone's. Both are doing well, and have fairly different customer sets. NexTone got a nice funding round last year, and look to be in good shape financially for some time to come. Acme, on the other hand, has not taken any rounds for almost 3 years, and have been able to sustain themselves nicely from organic growth.

Of the two, Acme should be the most worried in the wake of the Netrake and Kagoor news. The low valuation for Netrake can't be good news for Acme's recently announced IPO, especially with Vonage's dark cloud hanging over the IPO landscape for anyone in the IP communications space. That said, Acme is a healthier company, and deserves a successful IPO. I hope they get it, but geez, early in the game this market was an Acme vs. Netrake story for the Tier 1s. Clearly Acme is coming out on top, and for their sake, let's hope the market sees them in the same light.

In the name of transparency, I must state that NexTone is a current client of mine. However, they're not the only company I'm saying nice things about!

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Nortel/Microsoft Deal - Who Needs Who?

The Nortel/Microsoft story certainly made news yesterday, and it opens up a lot of possibilities for both companies.

In terms of what the deal means, I'm going to steer you to Alec Saunders's post from earlier this morning. Alec spent a lot of years in Redmond, and knows the company well, and I largely agree with his assessment, which is a thumbs up.

In short, Nortel doesn't have many partner options left, especially after Siemens made their deal with Nokia. So, they either team up with Cisco and "bulk up" like the other vendors, or try to stay in the game and compete as another big vendor. They have stated a preference to go it alone, but it's hard to see how they can really continue on this path. The remaining choices seem to come down to partnering with a handset vendor like Motorola (not going to happen), an IT company/systems integrator (like IBM), or a software company (like Microsoft). There are other options as well, like Huawei or Juniper, but it's all moot now. Of all these scenarios, I'd say they made the best choice.

I've participated in a few Microsoft things recently, so they've been in my thoughts quite a bit. The only thing I'd like to add to Alec's comments is to raise the question about who really needs who in this story. At face value, obviously Nortel needs Microsoft more. Aside from settling on a clear growth strategy, shareholders need to see Nortel making moves that give them confidence. In many ways, Microsoft fits the bill here, and it's often said that in the PBX world, the sooner the vendors realize they're in the software business and not the hardware business, the better their chances of survival will be.

That said, I'd like to look at the other side of the coin and note that despite Microsoft's size and market power, they have some bigger picture challenges ahead of them. The rise of browser-based platforms/Web 2.0 is presenting a genuine alternative to software-based platforms. The same, of course, goes for open source, which is disruptive on so many fronts. Last week, I was on a briefing for Windows Live, which is basically a browser-based version of Windows. It's pretty neat, and am sure is positioned to give Google, et al a good run for their money.

Then one has to consider the hardware side of the equation. The PC industry isn't doing so well, and even Dell is running into trouble. IBM made a great move to get out of the PC business with Lenovo, but were savvy enough to keep 20% just in case. And of course, IBM has been an early champion of open source, and one could argue they are closer to the leading edge of where operating systems are going than Microsoft. We all know that Microsoft has been late to the party with voice, and in the enterprise market, the move with Nortel makes sense in this regard. Nortel's voice legacy is really unmatched, so they bring a lot to the table with Microsoft.

So, despite the difference in size between these companies, my take is that both need each other in a big way.

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Tuesday, July 18, 2006

Vonage Canada - the Anti-Bundle

Vonage Canada hosted an analyst briefing this morning in Toronto to update us on how things are going - to the extent they can. Being a public company, there is a visible sense of frustration that they have a good story to tell, but aren't able to say much on the record.

Their CEO, Bill Rainey, and VP of Marketing, Joe Parent did the talking, and despite all the gloom and doom around their parent, they did have some positive messages to share.

Not surprisingly, there were no subscriber stats, but they did say that their headcount has ramped up to 120 now, and anticipate hitting 200 by year end. Much of that is for their call center, which is based in their head office just outside the city. With Toronto being so cosmopolitan, it wasn't surprising to hear their agents can handle calls in 16 languages. I have no idea how many languages Vonage U.S. can support, but I would't be surprised if it's less. Still, that's a lot of languages, and it speaks to me as a commitment to serving customers, especially for a company that's not even 2 years old.

Other takeaways of note.....

- Out of competitive necessity, Vonage Canada seems to have developed a clear positioning strategy - if you can't be the biggest, you can still be the best. That works for me. As I profess, small can be beautiful, and no matter what the big guys do, Vonage can still be the best at what they do if they maintain their focus. So, what will they be the best at? Simple - as Bill explained, "best of breed" phone service. For Vonage Canada, it's all about choice - let the consumer pick the service that's best for them, and for Vonage to get their business, they need a strong value proposition. This has a very populist ring to it, and on this level, Vonage will find its following, being the "champion for the consumer and small business". Someone has to stand up to the ILECs and provide choice, and they see themselves as the ones to carry that mantle. Of course there are others doing the same, but this was Vonage's show, so we're hearing their story. Nobody will begrudge the message if they believe in competition, right?

- To succeed as best of breed, Vonage has to compete with the bundle. They can't truly do that, so they're taking the 7 Up approach of being the "anti-bundle" - like being the Uncola - remember that? Bill distinguished between and IP bundle and a billing bundle, and there is merit to this. He sees the Triple Play type bundle being created by the operators to suit their needs, built around efficiencies in billing. It's not a natural combination that consumers are crying out for. Consumers will save some money, but Bill argues that carriers will become complacent and innovation will suffer. Yup - I can see that happening. Instead, Vonage Canada will focus on the IP bundle - bundling what comes naturally to customers - the V Phone, their soft phone, their WiFI phone, etc. Their bundle is all built around voice services - which is what people go to Vonage for. Not TV, and not broadband. That's how they will make the value proposition strong. Just do voice, do it really well, and give the customer value. No doubt it's tough to compete against the alluring convenience of the Triple Play, and Vonage has to work with what is available to them. Ultimately, I'm sure there's room for both approaches, so for Vonage, it's all about execution, and making that IP bundle really attractive and accessible.

- Joe Parent did a nice job outlining the challenge of competing in Canada. It's hard enough going up against incumbents who have so much market power for subscribers. On top of that, however, many of their competitors also control media assets like television stations, newspapers, radio stations and web portals. To a large extent, Vonage Canada is shut out from these channels, which are vital advertising outlets for reaching their target market. It was noted that Vonage U.S. advertises heavily on MSN, but in Canada, MSN partners with Bell Sympatico - and as such, are shut out from advertising on Canada's largest Internet portal. So, say what you want about Vonage's heavy spending on marketing to acquire customers. Nothing new there, and really, it's a cost of doing business - and it must come down over time to be sustainable. That aside, Joe's comments provides a greater appreciation of the realities of competing in Canada. All the money in the world doesn't change the fact that they have limited options for mass marketing to attract customers. So, by definition, they have to be that much more creative to either find or create routes to market. Somehow, I don't think Vonage U.S. would be approaching 2 million subs if they had to compete in this environment. Of course, this isn't just a Vonage problem - it holds for all the other VoIP pureplays fighting for business up here. On that level, this perspective gives one pause for thought about bigger issues like media concentration and what the definition of market power really means in Canada.

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Friday, July 14, 2006

Bloggers Carry Weight - SightSpeed Thinks So

I don't have an efficient way to track my media citings, and I know I don't catch them all. Google Alert is one way I do this - it may not find everything, but it often turns up things I would never come across otherwise.

One of these turned up today, and is worth noting here on my blog. SightSpeed is a vendor I have blogged about - this week in fact - and the company has picked up on this. That's nice of them to notice, but more importantly is how they are citing blog postings as part of their media coverage.

So, when you go to their website, in the Press section, there are tabs for Press Releases, Industry Awards, and Blog Highlights. You gotta like that! Once there, you can scroll through recent blog postings from all kinds of people, and they were nice enough include my post as well. Thanks!

I'm sure other websites are doing this too, and it's another validation that blogs are being taken more seriously, and are seen as credible sources, even though they tend to be more opinion-based than fact-based. I take that as good news for bloggers, and kudos to SightSpeed for viewing blogs on this level. Hopefully more companies will do the same - just like Web 2.0, the Internet is going bring about Marketing 2.0, where blogs are very much part the mix.

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Thursday, July 13, 2006

Microsoft Windows Live Event - Highlights

Last night, I attended a friendly meet and greet hosted by Microsoft in downtown Toronto. The venue was the funky, artist-friendly Gladstone Hotel, which used to be a major focal point when the trains stopped there way back when. The train tracks are still in use, but a lot has changed since! The hotel was run down for ages, but some smart money came along, and they've updated the place, and it's now become one of Toronto's hippest spots. Lucky us. Lots of black, and artsy types, but when you get by that, the space for Microsoft's event was bright and cheery, and a very like-minded crowd.

Kudos to local tech PR firm, High Road Communications for doing such a nice job. Don't get me wrong - I'm a fan of Microsoft, but this is a venue I would associate more with Skype or Google. So, if part of the plan was to make Microsoft more in tune/in touch with the developer community, this was a great way to do that.

The event was part of their Windows Live Update buzz, and the formal briefing takes place on Friday by teleconference. Last night was all about Phil Holden, who I haven't met before, but is a key advocate for Windows Live. From what I could tell, it was was blogger crowd, and I'm sure many are active in the BarCamp scene (especially David Crow), which colleagues like Alec Saunders are.

Not much to say about the event itself. I got to meet Phil, and seem to have become fast friends with David Crow, who has an interesting wireless startup going, among other things. The time was well spent for sure, and I'm looking forward to the Windows Live update call on Friday.

Here are some photos, again, off my Nokia N90.


Phil Holden/me; Phil's red shoes!


David Crow/me


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Wednesday, July 12, 2006

Bell Globemedia Set to Acquire CHUM

Just a quick item that may become fact in an hour or so. Bell Globemedia looks to be acquiring CHUM, and the news should come down later today.

This media convergence business sure is interesting. Bell Globemedia is basically the content arm of BCE, parent of Bell Canada. Technically, BCE owns roughly 2/3 of them - that's good enough for me. They own a lot of properties, including the Globe & Mail, the CTV television network (21 stations), and tons of specialty/digital channels.

CHUM has quite a legacy of its own - 33 radio stations, and lots of local TV stations and specialty channels. Most importantly, they pretty much defined cool TV for the youth market, especially the MTV crowd. If anyone knows how to build audiences with the youth market and the vast array of lifestyle niche markets that cable TV seems to be invented for, it's CHUM. On that point alone, Bell will be in a much stronger position to attract and keep the youth market in the fold, especially once IPTV comes along. Smart move if you ask me.

On paper, this is a relatively small deal for BCE, but it sure bulks up their content and distribution arms. This would make for one impressive force, and is another example how the big stay big. I don't know if this will raise any regulatory issues in terms of concentration of media ownership, much like what seems to be happening in the US.

Recently, I've been lauding Telus for its recent moves to stay ahead of Bell, and they all make sense. So, here we go, a day after Telus announces its Toronto office tower plans, Bell ups the ante by going after what is arguably the most desirable independent media/content property available. I'm not sure what Telus will have to do to keep pace in this department, so the ball falls back in their court - once again. The consolidation of our communications sector continues...

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Canadian IP Thought Leaders Podcast - Dilshan De Silva, Espial

This week's podcast on the Pulvermedia Podcasting Network was with Dilshan De Silva, Marketing Director for Espial. This yet another Ottawa-based company, and Espial is a leading vendor providing middleware for IPTV. They've been at it a while, and are providing IPTV solutions for the likes of Siemens, Scientific Atlanta and Thomson.

On the podcast, we talked about where IPTV is going, and how companies like Espial are enabling a more dynamic user experience. Dilshan also addressed some of the technical issues IPTV still needs to address as well as the merits of DSL as a last mile solution. You can download the podcast here, as well as read more about Dilshan.

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Tuesday, July 11, 2006

Consolidation - Not Unique to Telecom - Filene's Sold

This is a short, semi-sentimental posting, but it connects to telecom in a small way. I just read today that the Filene's department store - currently owned by giant Federated Department Stores - is being sold to a real estate trust. Any New Englander knows all about Filene's, and their Filene's Basement has been an institution forever, setting the tone for all the factory outlet/off-price stores that have become so commonplace now. I also understand that Marshall Fields is going the same route, and that store has the same significance for anyone living in the Chicago area.

Canada has gone through a similar purging of old-line department store names upon which our retail sector has been built for many generations - Eatons, Simpsons and now the Bay. Not much left up here any more in terms of home-grown retailers, which is really too bad.

A lot of this speaks to the passing of an era where the local general department store was the dominant form of retail - and so much more. This type of consolidation is happening of course in the telecom sector - and other industries - and it makes you wonder what the fate of our old-line RBOCs will be. Clearly, they have to re-invent themselves - in ways that Filene's and Marshall Fields could not.

The markets are very different of course, but in both cases, where choices exist, consumers vote with their feet and their wallets. Much of what works in retail works in telecom - convenience, quality, ease of doing business, choice, customer service, etc. I'd like to think that the RBOC strategy guys are smart enough to look outside their industry to see how the big players adapt in other sectors. I sure would be.

Telus - Putting Down Roots in Bell's Back Yard

This is really a plain Jane news item from yesterday, but I've been on a roll lately talking about the Canadian market, so why stop a good thing.

In short, Telus just announced plans to build a serious office presence in downtown Toronto. These things are always strategic in nature, and the location is no coincidence. Their new building is adjacent to the Air Canada Center (home of the NHL Leafs and NBA Raptors), and across the way is Rogers Center (home of the Blue Jays). Yes, that Rogers - Rogers Wireless, Rogers Cable, etc. And of course, they're in spitting distance of BCE Place, Bell's crown jewel in our financial district. It's hard to tell from the photo, but they just might be blocking BCE Place's view of the lake. And, on a practical note, the building is next to Union Station, the main terminus for all the suburbanites pouring into the financial district every day to work. The Globe & Mail article has more details, including an artist's rendering of the new building.

This actually is the third recent announcement about Telus putting down roots in Eastern Canada, which is Bell territory through and through. On June 29, they announced a groundbreaking in downtown Ottawa for their local employees, right by our Parliament Buildings. And on July 4, they announced a Montreal call center facility.

Well, I guess you do what you can to say you've arrived. Bell may have Inukshuk as a pipeline to compete in Western Canada, which Telus cannot really counter straight up. So, you do other things, and nothing says more about being serious in going after a market than investing locally to support your people. Certainly a strong message with these announcements.

So long as their wireless growth continues to drive growth and keep their share price strong, Telus is in a good position to make moves like this. For the sake of keeping the market competitive, and keeping consumers well-served, let's hope this translates into new business. We know Bell will get its share out West, and now let's see what Telus can do in the East.

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Monday, July 10, 2006

SightSpeed - Taking Place Shifting to Another Level

SightSpeed is an interesting company that I've become familiar with through Andy Abramson, who does PR and advisory work for them. They're doing industry-leading work in the area of PC-based video calling, and their upcoming release is going to take it much further with place shifting for TV. This sounds very promising, and for anyone who has been following Slingbox, it's hard not to get excited about the possibilities here.

I haven't experienced this first-hand yet, but am planning to next week. Until then, you'll have to get the scoop from uber-blogger cum Internet entrepreneur, Om Malik. Om has the story and he posted about it to his blog earlier today. As noted on his post, look for a more detailed analysis in the next day or so.

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Vonage - New Twist on Patent Litigation - Part 1

This is a 3 part post about a story I hope you'll enjoy.

Part 1 is the basic story itself, which came out this morning.

Part 2 is a guest blog posting from my son, Max, about a related story that ties in nicely to today's Vonage story.

Part 3 is a link to my appearance this afternoon on ROB TV talking about the Vonage story.

Ok, so here's Part 1. It's pretty short.

Today, there was news of Vonage acquiring Digital Packet Licensing Inc. The story was not widely followed and I saw very little coverage on it until late today. I talked about it earlier today with a few people, and appeared on ROB TV this afternoon to comment on it (see Part 3 for the link).

Basically, Vonage seems to have pulled an interesting defensive move by acquiring a company who has been suing Verizon (and Sprint) over the same patent infringement issues Verizon is going after Vonage about. How about that?

So, in effect, Vonage is counter-suing Verizon since they now own the company that is suing Verizon. I'm not a patent expert, but it could be a smart bargaining chip to make this thing go away, especially with more suits coming. In fact, another suit came forward today from Klausner Technologies about a voicemail patent infringement. It's not easy being Vonage....

If you want to continue the thread, I invite you continue to Part 2...

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Vonage - New Twist on Patent Litigation - Part 2

Welcome to Part 2! By now, you should know the basic Vonage story this series of posts is built around.

Part 2 is a bit different, but there's an interesting connection here.

This afternoon I appeared on ROB TV here in Toronto to comment on the story. No big deal, but here's the twist. It's summer, and my oldest son, Max, was around and came along with me to the studio. My entourage, so to speak!

I wanted to share a couple of things that came from his being there. First, while I was in the studio, Max snapped a photo of me and the host, Pat Bolland with the other part of my entourage, the Nokia N90.

So, that's what it looks like when you're on TV.....


Ok, that's the fun stuff. For the rest, I'm going to let Max do the talking - this is his second guest posting on my blog, and I sure hope he does more of these. Take it away, Max....

"While waiting for my dad to make his appearance on ROB TV, I was looking through a magazine on one of the tables in the studio lobby, when a Vonage ad caught my eye. I began to look at it, when I realized that the product being advertised, was an idea that I had 2 years ago when I was first introduced to internet telephony. It was a USB device the size of a flash drive with an dual optical microphone/headset port that could be universally connected to any computer containing your account information (I.e. how many minutes you have left, your address book, etc.) and VOIP software, for immediate launch and use upon connection, without any downloads being necessary.

It didn�t take me very long at all to notice that this was my idea. I said �Hey, dad� you remember in 2004 when we met Niklas Zennstrom? I showed him this idea!�. While recalling what happened during that time, he stated that, yes, indeed, I did show him some ideas for VOIP ideas that he vaguely remembered, and said that this was one of them. At this time, I had several emotions running through my head such as �wow� the next big breakthrough in VOIP technology was technically made by me?�, �Could Zennstrom have taken this idea and sold it to Jeff Citron for Vonage?�, �will any of my other ideas have a breakthrough like this?�. Upon all this happening, we were called into the studio, and we further discussed this on the way back to the house, where we decided that this would be a good blogging topic, and would go especially well with an idea copyright infringement occurring with Vonage.

Thanks for reading!"

Max Arnold

For reference, Max is talking about the V Phone that Vonage recently launched - here's the press release, photo below...


Most of you don't know Max, but he's my 13 year old son, and someone should hire this guy quick. As he mentioned above, not only did he think of this idea and share it with Niklas Zennstrom 2 years ago, but he also figured out how today's Vonage story has strong parallels to his idea that became the V Phone. I'm impressed.

So, for the patent lawyers out there, if any of you think there's a way for Max to get some true due for his ideas, he'll be happy to strike a deal with you! And just in case you think he's pulling your leg, he really is one of the few kids in North America who have met Niklas personally - more than once. Kevin Delaney, too, and he's in town here with us - I think they need to get together...

Niklas, Max, and Jon 002.jpg

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Vonage - New Twist on Patent Litigation - Part 3

If you've made it this far, then there's not much to say. This afternoon, I was on ROB TV commenting about the Vonage story discussed in Part 1.

The interview runs about 5 minutes, and you can view it here for the next 7 days. After that, they take it off the website.

To view the link, scroll down to the 1:50 pm time slot for today, July 10. I'm the guest on Pat Bolland's show. Enjoy!

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Friday, July 7, 2006

Telus Launches Mobile Radio - More Canadian Disruption

Late yesterday, Telus announced a deal with XM Radio to offer a subscription service of streaming radio - the first offering of its kind in Canada.

And now, the rest of the story. First off, this is pretty neat in itself, although you really have to wonder who needs to listen to radio over their telephone? Well, of course we're talking satellite radio - not everyday AM or FM - and this is just another distribution channel for a subscription service. So, presuming you're a fan of commercial-free, specialized programming, this adds a cool factor to your mobile experience. They're offering a 20 channel package of stations for $15/month, delivered using streaming audio, and it's part of a bigger push for Telus's new brand, Spark, which is their suite of multimedia applications to run over the latest and greatest (and expensive) handsets.

You have to give Telus credit for taking the lead with some innovative services to make mobile fun and cool. On the home front, I wanted to note this, as Telus is typically ahead of the other Canadian service providers when it comes to new services, for both the consumer and business markets. And mobile radio is a wireless application, another example of what Telus is doing to improve its competitive position in the mobility market, which really is the driver of their growth - and stock price.

On a broader front, SprintNextel has been doing the same with Sirius since last September. I don't know what the uptake has been with it, but their 20 channel package was launched at a much lower price point - $6.95/mo. Verizon Wireless's V Cast service has streaming video and music downloads, but no satellite radio. So, it's fair to say that Telus is ahead of the pack in North America, and is another example of the good things that continue to come out of Canada in the telecom space. No doubt Rogers and Bell will follow suit, and I'm sure they're making deals as we speak with Sirius - but Telus is first to market.

It doesn't come cheap though, as you have to get handsets that support streaming media - either an LG or Samsung - both costing $349.99, or $99.99 with a 3 year plan. So, add $15 a month, and you're looking at a not-so-small outlay to have the luxury of cutting out commercials.

I really don't know how successful this offering will be, but it's part of the early growth of multimedia mobility, where the last thing you use your phone for is to make a call. For all the money people spend on their wireless plans, I just have to wonder how much time they'll really want to devote using their phone to listen to the radio. By now, just about everyone has an iPod, but I guess the appeal will lie in all those specialty channels.

I also wanted to mention that Telus is working with mspot, who optimizes multimedia content for streaming over wireless networks. They also do Sprint's service with Sirius. I'm noting this because the day this news came out, I was visiting the offices of QuickPlay Media here in Toronto, who are very much in this space. I've been commenting about them recently, and they're doing very good work. Their focus is a bit different, mainly on streaming shorter content as opposed to continuous feeds like radio or movies. In fact, they are doing video for Telus's Spark service.

I wanted to mention this, as this space is rapidly evolving, and there are different offerings for different markets. While mspot is doing music streaming, QuickPlay is focusing on the spoken word. So, instead of working with Telus for radio, they've partnered with RIM to offer short form audio streaming that is relevant to the typical Blackberry subscriber - news, financial reports, sports, etc. It's pretty neat - saw it for myself yesterday. Go Canada!

Keeping the Canadian thread going, I just wanted to cite Mark Goldberg's post on the Telus/XM news. He adds some good insight about the regulatory aspects of delivering IP content over wireless networks.

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Thursday, July 6, 2006

Canadian IP Thought Leaders Podcast - Sean Wise, Wise Mentor Capital

This week's podcast was with Sean Wise, of Wise Mentor Capital. Sean is one of the most connected people helping startups become successful in Canada, and he knows the landscape as well as anyone. He wears a lot of hats, and wears them very well.

We talked about what he's seeing in the telecom startup space from both sides of the table, and for anyone interested in knowing why this is a good time to be a startup, you'll find this most useful. Also, Sean's website and blog are great resources for startups, and once you drop in for visit, you'll see that he's not hard to find.

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Wednesday, July 5, 2006

Bell Launches Optimax - It's a Bird, It's a Plane - But It's Not IPTV

At 9am today, Bell Canada had an analyst call to tell us about their new fiber service to deliver higher speed to Sympatico broadband subscribers. Unfortunately, the invite was too short notice for me, but I've got the story now, so here we go.

It's called Optimax, which is a very promising name. Sounds very powerful - optimum, maximum - but the name doesn't really grab me. Too generic and space agey, and a bit like one of my favorite oxymorons - "new and improved". As George Carlin wryly observed long ago (when he was both funny and dangerous), how can something that's new be improved at the same time? Sort of like jumbo shrimp. I think about these things too much, but I'll bet I'm not the only out there who would do a Simon Cowell, and say "it wasn't your best"....

That said - now I'm speaking to those of you outside of Canada - this is Canada, and we have these peculiar language laws where it's French first in Quebec. I'll leave it at that, but given that Optimax is launching first in Montreal, the name has to work in both languages. My French isn't very good, but I suspect Optimax is a unisex type of word that works equally well in English and French. On that level, the name works, so I'll stop harping on the name thing now.

The analyst call was hosted by Kevin Crull, Bell's President of Residential Services, and I'm told he steered clear of questions about IPTV, which is what most of us are really wondering about. With all the wonderful throughput Optimax delivers - up to 16 Mbps (at $80/month)- one would think Bell was ready to launch IPTV. Clearly, it's not time yet, but at least they now have the transport in place. For those keeping score, this is a FTTN - fiber to the node - deployment, much like what AT&T is doing - and what supports their U-verse IPTV service, which launched last week. FTTH - fiber to the home - is the other route to go, but it's more costly and time-consuming. Verizon is doing it this way, and the payoff is much higher bandwidth capacity - Optimax, you might say.

So, what's the big deal here? One word - Videotron. They've been a real thorn in Bell's side, and their initial launch of VoIP in Montreal has been quite successful - maybe not profitable, but pretty effective at stealing away a lot of Bell subscribers. So, is it a coincidence that Bell is launching Optimax in Montreal - I think not. Without IPTV or a Triple Play bundle to swat back at Videotron, a souped up Internet service is the next best thing.

Once again, Bell takes the high ground by not competing on price - which I think is the right way to go. They're not taking the bait the way CallVantage did in 2004 when Vonage started a very costly price war. And there's nothing in this to do with VoIP. Bell is just steering clear of this, and let Videotron stay with their low priced phone service.

Bell's enhancement to Sympatico gives subscribers more capability than what Videotron can deliver for the fun stuff - gaming, music downloads, video streaming, etc. If you can't win them back by matching price, you take it up a notch, as Emeril would say, with a premium service that gives people a richer experience for the things they love to do. If you can't afford $80 for 16 meg, that's ok. Bell can give you 10 meg at $65. You want choice, you got it. You want to stay in the slow lane for your fun, then stay with Videotron.

It's a competitive market, and while Optimax isn't revolutionary, I think it's a pretty good comeback to counter Videotron. The price conscious subscribers are probably not worth fighting for, but at least Bell can now go after the lost customers they really want back, at least long enough until IPTV is finally ready.

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Tuesday, July 4, 2006

The Power of Viral Marketing - Even AT&T Can Do It

Skype may be the gold standard for viral marketing in the world of IP communications, but this need not be the domain of startups and disruptors.

AT&T is trying their hand at this with the launch of their U-verse IPTV service in San Antonio. Blogging colleague Alan Weinkrantz reports that they're offering $300 to people who will host IPTV demos in their homes. You can read a more detailed account of how these demos are being done here. As Alan says, these are hi-tech Tupperware parties - classic grass roots, community-based marketing. I think it's a great way to go, especially in having the early adopters do the telling and selling - I'll bet they'll do a way better job than any call center agent ever could.

Last week I noted Alan's SAtechBLOG, which has a lot of content about his experiences with AT&T's launch. Regarding viral marketing, he has a really terrific posting, that you really should read. Alan is a very sharp PR/marketing/strategy guy, and he goes one better than AT&T, as he's been doing his own version of evangelizing U-verse. He offers a great critique of what AT&T is doing well with viral marketing, but more importantly, he notes several things they could be doing to make it even better.

The key takeaway for me is that you should NOT demo the service for your friends and neighbors. Give them the keys and let THEM drive the car. TV watching is a pretty personal and interactive experience, and the best way to sell people on IPTV is for them to see how easy it is to use and how they will notice a difference right away.

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Yak Communications - Another VoIP Casualty?

Been meaning to post about this one for a few days, and the fact that nobody seems to be paying any attention to this says a lot on its own. I only came across this because I spoke to a journalist about it last week - will let you know when the story runs.

Yak Communications has been in the long distance and calling card business for some time, and WorldCity is their more recent suite of offerings targeted at the residential VoIP market. I've never quite been able to figure out what business Yak is really in, and now I guess I'm not alone.

On June 20, Yak announced they were "exploring strategic alternatives to maximize shareholder value", which is a polite way of saying it's tough to make a go of things in this game. I second the motion there, and despite some nice marketing and brand building, Yak has obviously not caught on enough to justify the investment needed to continue. They even tried to spice things up with free video calling - which I blogged about last November - but that's not the ticket either.

To make things official, last Thursday, Yak announced the selection of their investment bank - Orion Securities - to get on with the business of finding a market exit.

You know things can't be going too well when this announcement is made just ahead of the long weekend, when people have other things on their minds. Furthermore, there's no evidence of this news on their website, which says they want to ease out of the market as quietly as possible.

In my view, none of this is surprising, especially given how badly things have gone with Vonage and their IPO. I've long felt pureplay retail VoIP offerings have a low probability of success, and unless you've built a brand the way Vonage has, I just don't see how you can create much residual value. Sure, the cost of entry is low in this business, but the exit price isn't usually very high either.

At this point, it doesn't look like Yak has much more than a modest base of VoIP subscribers and a fairly strong calling card business. The brand is pretty reputable, but is far from being a household name. There is some asset base there, but not much, and it's hard to see how Orion will get much in return beyond the $10 million they have in the bank. Am sorry to say, but for a change, this isn't a good news story about the Canadian market.

Anybody want to buy a VoIP company?

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Saturday, July 1, 2006

Canada is Cool - Richard Branson Says So

It's only appropriate to say good things about Canada on Canada Day, eh. It's our version of July 4, but not quite as steeped in history. Being one of the last outposts of British sensibilities, Canada has a great mix of British, American and homegrown values that make it a pretty cool place to live.

As I'm writing this, the England/Portugal World Cup semi is on, and everyone around here - who hasn't fled to cottage country - as all well-heeled Torontonians do (which I am not!) - is pretty much glued to the game. A LOT of England flags flying and flapping in the wind from cars going up and down Yonge St., which is very near by.

I'm mentioning this as a setup to Catherine McLean's interview that ran in the Globe & Mail today with perhaps the most famous Brit of them all (next to Beckham these days), Sir Richard Branson. He was in town yesterday
at Virgin Mobile Canada's head office for a few things, but mainly to launch the Virgin Music Festival. In true Branson style, as the article explains, he made his grand entrance to launch this festival by "rappelling from a helicopter through an open roof". Gee, maybe Jeff Citron could learn a few things from Sir Richard about getting attention! I digress....

Anyhow, he has certainly taken a shine to Canada recently, and that's consistent with some of the attention I've been trying to attract in terms of all the good things going on up here in the IP communications space. His Virgin Festival of course, is a great vehicle to support and promote Virgin's music interests, and Toronto is the first market to host the festival outside the U.K., where it's been a big event for some time. I have no doubt it will be a huge success, and will serve as a test market for more festivals across the U.S. Well, for what it's worth, the Rolling Stones have long been using Toronto as their base to prepare for their tours, and we've been the lucky recipients of many impromptu club shows by them around town over the years. Of course, it doesn't hurt that their long-time manager, Michael Cohl, lives here.

Aside from music, Sir Richard also have Virgin Mobile, and that's really what I wanted to talk about here. Vigin Mobile is Canada's best-known MVNO, which runs over the Bell Mobility network. The article notes that for the first time, yesterday, they shared some numbers about how they're doing. Virgin Mobile Canada isn't sharing revenues, but stated having sold 250,000 handsets to date, and are targeting to hit 400,000 by year end. From what I can tell, this is on par with the U.S., where I believe the leading MVNO has 3 million plus subscribers. While we don't know if they're making money, this is not an insignifcant number for Canada, and validates they are reaching a niche with some degree of success.

The real thing to pay attention to here is the marketing strategy Sir Richard discussed in the interview. To date, Virgin Mobile has lacked a direct marketing presence, so building the brand and giving consumers a real touch point for the Virgin name has been a challenge. Their plan now is to open 120 "mini stores" nation wide over the summer, where consumers can directly buy handsets and Virgin Mobile services.

Sounds like a good idea to me, and shows that you don't have to go big to succeed. These stores are a relatively low investment and will give Virgin a great channel for testing the waters for market acceptance. Much easier to go this route, which can easily be ramped up as opposed to investing heavily in megastores, which is a bit like the Vonage approach of saturating the market on a large scale and hoping to land as many customers as possible. In fact, the article notes that Virgin did just that, shutting down their only Canadian music megastore in Vancouver last year.

Sir Richard may not be everybody's cup o' tea, but for Virgin Mobile, I think he's got it just right. Only in Canada - pity.

So, the takeway for those outside Canada is that we've got a great market here, and if it's good enough for Sir Richard, it's probably good enough for you too! So, stay tuned to my blog, and I'll keep the good stories coming.

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