For those of you following the Canadian telecom market, you'd know that on May 12, the CRTC issued its VoIP ruling. In essence it was pro-competition - nothing wrong with that. But it effectively maintained a separate set of rules for incumbents, whereby VoIP offerings in their home markets had to comply with the same set of rules as POTS service - more or less. With all the other VoIP players being left unregulated, this makes it almost impossible for incumbents to be competitive with VoIP. With no economic incentive to do so, the incumbents have essentially stayed out of the residential VoIP market so far.
After the CRTC ruling, the incumbents said they would appeal the decision, and they have taken several opportunities in public forums to air their disappointment in the ruling. For the record, there are two large incumbents in Canada - Bell, which serves Ontario and Quebec, and Telus, which serves BC and Alberta. Together, they control about 80% of the market here. The other provinces are served by the other incumbents - Manitoba Telecom, Saskatchewan Telecom, and Aliant for the Maritime provinces.
Yesterday, the incumbents announced an end run plan to bypass the CRTC. They've decided to take a political route by making an appeal to the Federal cabinet which oversees the CRTC. It appears this is driven by their belief that the public supports their position, so they're gambling that 30+ million people can't be wrong, and this should carry more weight than the handful of CRTC regulators who ruled against them.
We are a peaceful and reasonable people, and I guess the incumbents think they can use moral suasion to get their way. Well, it's worth a try since so much is at stake. And on some levels it certainly seems ridiculous that the cablecos should have a free hand in this market, while nobody is challenging their near monopoly status in the cable market.
Also, I have no doubt that part of their argument will be that by keeping them out of this market, the regulations simply make it that much more likely that Canadians will start getting their phone service from American-based providers. That kind of rattling plays well to Canadian insecurities, and I'm sure the incumbents will play that card at the right moment. Stay tuned.
Friday, July 29, 2005
Saturday, July 23, 2005
VoIP Taxonomy - Part 2 - Podcast
In my July 20 posting on VoIP taxonomy, I mentioned we had done a VON Radio podcast about this, and would post it once it was ready.
So, for those who want to listen in, here's the link:
http://vonradio.pulver.com/podcasts/VONradio-tom_howe_jon_arnold_pt2.mp3
So, for those who want to listen in, here's the link:
http://vonradio.pulver.com/podcasts/VONradio-tom_howe_jon_arnold_pt2.mp3
Friday, July 22, 2005
VoIP Market Forecast - Frosty or Bright - You Decide
I don't normally comment on what other IP bloggers are talking about, but I have to weigh in on this one.
Yesterday, both Mark Evans and Om Malik commented on the latest report from Frost & Sullivan on the North American residential VoIP market. They refer to the press release that gushes about the "phenomenal growth" forecast for VoIP by this report.
So, while Information Week runs a very upbeat story on the research findings, Om and Mark correctly point out this growth story isn't very exciting at all, and if anything, it just confirms the view that VoIP will never amount to much more than a cheap second line service that may only achieve single digit penetration of the overall landline market. As Mark says, "ouch!".
So, is the glass half empty, or half full?
I actually share both points of view, but for different reasons. First, some background. For four years, I was the VoIP Program Leader at Frost & Sullivan, and I left this March to go back to independent consulting in the IP space. The just-released Frost report is an update to the initial report I authored for Frost back in April 2004.
I have not seen the new Frost report, so I can't comment on the methodology or assumptions used to generate the numbers. Looking at the numbers in the press release, I can see why Om and Mark aren't getting excited - by 2010 the N. American residential VoIP market will hit $4.1 billion. I agree, that's not very much.
Unless you have long memories, my version of events was a bit different. My Frost forecast last year had the market hitting $5.4 billion by 2008, which is a rosier picture. Not a great story, but a good story in terms of growth. I'm only mentioning this because the current report must be seeing something I didn't see for such a downward revision to come so soon. I can't really explain why Frost sees the market being so much smaller now, but that's not my concern. Looking at either forecast, the conclusion is still pretty much the same - the glass is half empty.
Not knowing what went into the current thinking at Frost, the analyst in me feels compelled to defend my thinking, which really hasn't changed since last year. Aside from a revenue forecast, my 2004 report also showed the market reaching about 18 million VoIP subscribers by 2008. Subsequent forecasts from other analyst firms such as Yankee had subscriber numbers that seemed uncannily similar to mine. I still see this 18 million number being used, so it must still hold credence out there. However, many of the other analyst firms had better PR machines than Frost, and this number is almost always attributed to these firms, even though my forecast came out months before the others. Sorry folks, I had to get that in to make my point. I'm not doing this to dwell on history or comment on the work of other analyst firms. I'm just using this as a proof point to say that I think my numbers from 2004 hold up pretty well.
OK, so where is this going? Well, I'm doing this to get to the "glass half full" side of the argument.
I don't expect Om or Mark to remember my study, and again, I don't know what went into the current Frost report. That said, I now want to put a postive spin on things. The press release that Info Week picked up on that report had a glowing view of the market, but absolutely no context to explain why. Whether the number is $4 billion in 2010 (yeesh!) or $5 billion in 2008, it's not that big a piece of the telecom pie. So, I with Om and Mark on that one.
When I wrote my report, I explained that the numbers did not take a number of key factors into account. I called these wildcards, and they could go a long way to making these numbers bigger.
- the emergence of WiFi/WiMax for VoIP
- impact of peer-to-peer - Skype Out/Skype In was months away when my report was written
- the adoption rate of broadband penetration
- Microsoft's participation in VoIP to leverage SIP support in XP
Of course other factors could kill the business, such as regulatory changes, 911 issues, network outages, etc., but I think the good things far outweigh the bad.
On top of this, we're not even talking about the adoption of VoIP in the enterprise market, or where things will go once Google, Yahoo, MSN, etc. figure out their go-to-market VoIP strategies. Once the big players are all in the game, things can get a lot bigger, and a lot faster.
Of course, adding all these elements to the mix will alter how we define and measure the VoIP "market", but any way you cut it, I think the market will be way bigger than $4 billion 5 years from now.
So, to come back to Om and Mark, I'm hoping you see what I see for the glass being half full!
I'd love to hear what you think out there in blog-land!
Yesterday, both Mark Evans and Om Malik commented on the latest report from Frost & Sullivan on the North American residential VoIP market. They refer to the press release that gushes about the "phenomenal growth" forecast for VoIP by this report.
So, while Information Week runs a very upbeat story on the research findings, Om and Mark correctly point out this growth story isn't very exciting at all, and if anything, it just confirms the view that VoIP will never amount to much more than a cheap second line service that may only achieve single digit penetration of the overall landline market. As Mark says, "ouch!".
So, is the glass half empty, or half full?
I actually share both points of view, but for different reasons. First, some background. For four years, I was the VoIP Program Leader at Frost & Sullivan, and I left this March to go back to independent consulting in the IP space. The just-released Frost report is an update to the initial report I authored for Frost back in April 2004.
I have not seen the new Frost report, so I can't comment on the methodology or assumptions used to generate the numbers. Looking at the numbers in the press release, I can see why Om and Mark aren't getting excited - by 2010 the N. American residential VoIP market will hit $4.1 billion. I agree, that's not very much.
Unless you have long memories, my version of events was a bit different. My Frost forecast last year had the market hitting $5.4 billion by 2008, which is a rosier picture. Not a great story, but a good story in terms of growth. I'm only mentioning this because the current report must be seeing something I didn't see for such a downward revision to come so soon. I can't really explain why Frost sees the market being so much smaller now, but that's not my concern. Looking at either forecast, the conclusion is still pretty much the same - the glass is half empty.
Not knowing what went into the current thinking at Frost, the analyst in me feels compelled to defend my thinking, which really hasn't changed since last year. Aside from a revenue forecast, my 2004 report also showed the market reaching about 18 million VoIP subscribers by 2008. Subsequent forecasts from other analyst firms such as Yankee had subscriber numbers that seemed uncannily similar to mine. I still see this 18 million number being used, so it must still hold credence out there. However, many of the other analyst firms had better PR machines than Frost, and this number is almost always attributed to these firms, even though my forecast came out months before the others. Sorry folks, I had to get that in to make my point. I'm not doing this to dwell on history or comment on the work of other analyst firms. I'm just using this as a proof point to say that I think my numbers from 2004 hold up pretty well.
OK, so where is this going? Well, I'm doing this to get to the "glass half full" side of the argument.
I don't expect Om or Mark to remember my study, and again, I don't know what went into the current Frost report. That said, I now want to put a postive spin on things. The press release that Info Week picked up on that report had a glowing view of the market, but absolutely no context to explain why. Whether the number is $4 billion in 2010 (yeesh!) or $5 billion in 2008, it's not that big a piece of the telecom pie. So, I with Om and Mark on that one.
When I wrote my report, I explained that the numbers did not take a number of key factors into account. I called these wildcards, and they could go a long way to making these numbers bigger.
- the emergence of WiFi/WiMax for VoIP
- impact of peer-to-peer - Skype Out/Skype In was months away when my report was written
- the adoption rate of broadband penetration
- Microsoft's participation in VoIP to leverage SIP support in XP
Of course other factors could kill the business, such as regulatory changes, 911 issues, network outages, etc., but I think the good things far outweigh the bad.
On top of this, we're not even talking about the adoption of VoIP in the enterprise market, or where things will go once Google, Yahoo, MSN, etc. figure out their go-to-market VoIP strategies. Once the big players are all in the game, things can get a lot bigger, and a lot faster.
Of course, adding all these elements to the mix will alter how we define and measure the VoIP "market", but any way you cut it, I think the market will be way bigger than $4 billion 5 years from now.
So, to come back to Om and Mark, I'm hoping you see what I see for the glass being half full!
I'd love to hear what you think out there in blog-land!
Telus Labor Troubles - Messy Business
Telus is the #2 ILEC in Canada, and are facing union issues that can be a thorn in the side of any traditional utility. This story has IP overtones on a few levels, which is why I'm commenting on it.
I don't follow labor issues, but this situation ultimately leads to a less competitive market, as service providers of all stripes try to stake out their ground in Canada's emerging VoIP sector. Telus has been a leader and innovator among all North American ILECs, being the first to invest in a VoIP network, and the first to market with a fully featured hosted IP communications platform for the enterprise market (IP One).
They face a particularly tough challenge, as they are essentially a regional carrier trying to compete as a national carrier against the Bell Canada juggernaut. Just a few years ago, they were all one semi-happy family, but we went through the same break-up phase as the Bells did in the US.
Telus has banked a lot on IP as the linchpin of their strategy to compete nationally, and they are trying hard to establish themselves in the lucrative enterprise markets served by Bell, which is comprised of our two biggest provinces, Ontario and Quebec. Telus has long been the incumbent in Western Canada, and while Bell's Western operations (Bell West) have been giving them some strong competition, Telus is the de facto monopoly provider in that market, especially for residential service. The problem for Telus is that the West is a much smaller market, so for long term growth, they need to penetrate Eastern Canada.
The current labor issue has diverted attention and resources away from this, as it threatens to disrupt daily operations and tarnish their reputation about being an employer of choice (their marketing slogan is "the future is friendly").
I'm not going to get into the actual labor story, but it's not pretty. This has been brewing for years, and today was the big day everyone has been waiting for. Today, Telus unilaterally imposed a labor contract on the union. The labor board (CIRB) views this as bargaining in "bad faith", and many of the unionized workers in Alberta and British Columbia consider themselves locked out. This in turn will test the solidarity of the union, as it's uncertain how many workers will in fact cross the picket lines and go to work. Depending on what transpires, this issue could drag on for months, or be settled quickly.
This in itself has little to do with VoIP - it's just too bad that it's happening to a carrier that has so fully embraced the IP revolution. They get it. I hope this gets settled soon so they can get back to business.
I also wanted to comment about this because it underscores just how different the world is for traditional carriers like Telus. It could just as easily be happening to Verizon or Comcast. Nextgen operators like Vonage and 8x8, of course, have nothing of the sort in their DNA. They just merrily go along their way disrupting the landscape and moving things forward in IP time. I can't conceive of anything comparable to a labor dispute that could sidetrack their business other than some draconian regulatory measures. So, I guess the bottom line is that the Telus labor situation highlights some of the messy realities traditional carriers have to live with that makes it so hard to be competitive with the virtual operators.
For those of you who want to understand how this issue is being viewed by the financial community, Jeffrey Fan of UBS Securities here in Toronto has done a nice analysis, along with the expected impact of this on Telus's share price. I've excerpted one of his comments below. If you'd like to get his full Research Note, let me know, and I'll put you in touch with Jeffrey.
"Potential Financial Impact
Based on Aliant's experience, if all TWU's members took action, we roughly estimate that the strike impact alone will be $35m - $40m of EBITDA/month. We note that the Aliant strike lasted for 5 months. Also, the company has not provided official financial guidance on this and the company could take other actions to offset this negative impact."
I don't follow labor issues, but this situation ultimately leads to a less competitive market, as service providers of all stripes try to stake out their ground in Canada's emerging VoIP sector. Telus has been a leader and innovator among all North American ILECs, being the first to invest in a VoIP network, and the first to market with a fully featured hosted IP communications platform for the enterprise market (IP One).
They face a particularly tough challenge, as they are essentially a regional carrier trying to compete as a national carrier against the Bell Canada juggernaut. Just a few years ago, they were all one semi-happy family, but we went through the same break-up phase as the Bells did in the US.
Telus has banked a lot on IP as the linchpin of their strategy to compete nationally, and they are trying hard to establish themselves in the lucrative enterprise markets served by Bell, which is comprised of our two biggest provinces, Ontario and Quebec. Telus has long been the incumbent in Western Canada, and while Bell's Western operations (Bell West) have been giving them some strong competition, Telus is the de facto monopoly provider in that market, especially for residential service. The problem for Telus is that the West is a much smaller market, so for long term growth, they need to penetrate Eastern Canada.
The current labor issue has diverted attention and resources away from this, as it threatens to disrupt daily operations and tarnish their reputation about being an employer of choice (their marketing slogan is "the future is friendly").
I'm not going to get into the actual labor story, but it's not pretty. This has been brewing for years, and today was the big day everyone has been waiting for. Today, Telus unilaterally imposed a labor contract on the union. The labor board (CIRB) views this as bargaining in "bad faith", and many of the unionized workers in Alberta and British Columbia consider themselves locked out. This in turn will test the solidarity of the union, as it's uncertain how many workers will in fact cross the picket lines and go to work. Depending on what transpires, this issue could drag on for months, or be settled quickly.
This in itself has little to do with VoIP - it's just too bad that it's happening to a carrier that has so fully embraced the IP revolution. They get it. I hope this gets settled soon so they can get back to business.
I also wanted to comment about this because it underscores just how different the world is for traditional carriers like Telus. It could just as easily be happening to Verizon or Comcast. Nextgen operators like Vonage and 8x8, of course, have nothing of the sort in their DNA. They just merrily go along their way disrupting the landscape and moving things forward in IP time. I can't conceive of anything comparable to a labor dispute that could sidetrack their business other than some draconian regulatory measures. So, I guess the bottom line is that the Telus labor situation highlights some of the messy realities traditional carriers have to live with that makes it so hard to be competitive with the virtual operators.
For those of you who want to understand how this issue is being viewed by the financial community, Jeffrey Fan of UBS Securities here in Toronto has done a nice analysis, along with the expected impact of this on Telus's share price. I've excerpted one of his comments below. If you'd like to get his full Research Note, let me know, and I'll put you in touch with Jeffrey.
"Potential Financial Impact
Based on Aliant's experience, if all TWU's members took action, we roughly estimate that the strike impact alone will be $35m - $40m of EBITDA/month. We note that the Aliant strike lasted for 5 months. Also, the company has not provided official financial guidance on this and the company could take other actions to offset this negative impact."
Wednesday, July 20, 2005
The Taxonomy of VoIP
Audience participation is fun, and here's something you might want to lend your mind to.
VoIP is ever-evolving, with new variations and categories springing up regularly. I'm facilitating a process with Pulver.com to develop a list of categories that reflects the overall state of the market these days.
This posting is actually Part 1 of a 2 part process. We have put together a short list of high level categories, as well as a more lengthy list of sub-categories that we'd like to think captures the key varieties of equipment and services from vendors, as well as the main types of service providers.
At this stage, I'm just going to list the high level categories. I'm hoping this might stimulate some dialog, and I invite your comments on whether this is on the mark or not. Once I get some feedback on this, then we can get into the more interesting laundry list of sub-categories. This can be a useful exercise as the VoIP universe expands and envelops so many branches of the communications tree.
So, here's Part 1. It's a short list - there's not much there, but the idea is to say this - if you were to boil down the VoIP market into a handful of higher order groupings, is this what it would look like to you?
Higher Order Categories:
VoIP Equipment - gateways, softswitches, IP phones, etc.
Network Infrastructure - security, SIP proxies, QoS monitoring, etc.
Back Office Support Systems - billing, provisioning, etc.
Communications and PC Solutions - operating systems, IM platforms, conferencing, etc.
Service Providers - wireline, wireless, wholesalers, virtual operators, etc.
Facilitators - VARs, distributors, system integrators, etc.
Again, I welcome your input, in whatever form it takes. I'd like to evaluate the comments over the next few days, then get back to you on what is shaping up.
If you prefer to comment privately, you can email me directly - jon@jarnoldassociates.com
Addendum:
For another take on this topic, I was part of a VON Radio podcast this week with Pulver.com's inimitable Carl Ford, and Tom Howe of Versatel Networks. We had a high level discussion about this - among other things, and I'll be posting a link for it on Friday.
Until then, I urge you check out VON Radio, and I encourage you to contact me if you're interested in being part of future podcasts.
VoIP is ever-evolving, with new variations and categories springing up regularly. I'm facilitating a process with Pulver.com to develop a list of categories that reflects the overall state of the market these days.
This posting is actually Part 1 of a 2 part process. We have put together a short list of high level categories, as well as a more lengthy list of sub-categories that we'd like to think captures the key varieties of equipment and services from vendors, as well as the main types of service providers.
At this stage, I'm just going to list the high level categories. I'm hoping this might stimulate some dialog, and I invite your comments on whether this is on the mark or not. Once I get some feedback on this, then we can get into the more interesting laundry list of sub-categories. This can be a useful exercise as the VoIP universe expands and envelops so many branches of the communications tree.
So, here's Part 1. It's a short list - there's not much there, but the idea is to say this - if you were to boil down the VoIP market into a handful of higher order groupings, is this what it would look like to you?
Higher Order Categories:
VoIP Equipment - gateways, softswitches, IP phones, etc.
Network Infrastructure - security, SIP proxies, QoS monitoring, etc.
Back Office Support Systems - billing, provisioning, etc.
Communications and PC Solutions - operating systems, IM platforms, conferencing, etc.
Service Providers - wireline, wireless, wholesalers, virtual operators, etc.
Facilitators - VARs, distributors, system integrators, etc.
Again, I welcome your input, in whatever form it takes. I'd like to evaluate the comments over the next few days, then get back to you on what is shaping up.
If you prefer to comment privately, you can email me directly - jon@jarnoldassociates.com
Addendum:
For another take on this topic, I was part of a VON Radio podcast this week with Pulver.com's inimitable Carl Ford, and Tom Howe of Versatel Networks. We had a high level discussion about this - among other things, and I'll be posting a link for it on Friday.
Until then, I urge you check out VON Radio, and I encourage you to contact me if you're interested in being part of future podcasts.
Tuesday, July 19, 2005
Red Sox Revisited
I said I'd revisit the Sox after the Yankees series, not realizing they would be playing again so soon.
I'll keep this short - not much to say, really. I guess it's only fitting that the Sox were flying very high last time I posted, and barely two weeks later, after getting cut down by our "Daddy" this weekend, that as of now, we have meekly slipped out of first place.
Eight games with the O's and Yanks on both sides of the All Star break - the perfect time to get it together and put some distance between the pack. We lose 6 of 8. And tonite, only 3 hits at home - to Tampa Bay????? What the hell is that about?
It's no coincidence that Johnny Damon's 29 game hit streak came to an end tonite - just as first place slipped away. Adding insult to injury, he made the final out - not just tonight, but last night too. He had a golden chance to tie the game in the most dramatic way possible on Sunday - Rivera on the ropes - it would have totally turned things around. This is how we broke the curse - by winning these games in our last at bat.
Let's not forget how just before Damon's last at bat against the Yankees, Alex Cora comes up with the bases loaded and none out. Alex who??? Just make contact. Hit a sac fly. Even striking out is ok - the top of the order is coming up. He hits into a DP that was executed brilliantly by A Rod and Posada - incredibly deflating, but par for the course for The Nation. Then - go figure - tonite against Tampa, he gets 2 of the 3 Sox hits. Huh??????
I better stop now - this isn't healthy. It's over. Season's lost. What's the point of scoring 17 runs in 1 game when you can only score 1 or 2 the rest of the time? What doesn't kill us makes us stronger - builds character right? Right? 3 hits against Tampa? Right?
Better take my mind off this and get back to VoIP.
I'll keep this short - not much to say, really. I guess it's only fitting that the Sox were flying very high last time I posted, and barely two weeks later, after getting cut down by our "Daddy" this weekend, that as of now, we have meekly slipped out of first place.
Eight games with the O's and Yanks on both sides of the All Star break - the perfect time to get it together and put some distance between the pack. We lose 6 of 8. And tonite, only 3 hits at home - to Tampa Bay????? What the hell is that about?
It's no coincidence that Johnny Damon's 29 game hit streak came to an end tonite - just as first place slipped away. Adding insult to injury, he made the final out - not just tonight, but last night too. He had a golden chance to tie the game in the most dramatic way possible on Sunday - Rivera on the ropes - it would have totally turned things around. This is how we broke the curse - by winning these games in our last at bat.
Let's not forget how just before Damon's last at bat against the Yankees, Alex Cora comes up with the bases loaded and none out. Alex who??? Just make contact. Hit a sac fly. Even striking out is ok - the top of the order is coming up. He hits into a DP that was executed brilliantly by A Rod and Posada - incredibly deflating, but par for the course for The Nation. Then - go figure - tonite against Tampa, he gets 2 of the 3 Sox hits. Huh??????
I better stop now - this isn't healthy. It's over. Season's lost. What's the point of scoring 17 runs in 1 game when you can only score 1 or 2 the rest of the time? What doesn't kill us makes us stronger - builds character right? Right? 3 hits against Tampa? Right?
Better take my mind off this and get back to VoIP.
Friday, July 15, 2005
VON is #1 - Surprise, Surprise!
Well, you didn't need me to tell you this, but here it is folks. Jeff Pulver's VON conferences are #1. Just ask Kevin Mitchell of Infonetics. They just published a really interesting study where carriers were asked to identify which shows were the most useful.
VON was rated #1 by 59% of respondents. Supercomm was next at 52%, and nobody else comes close after that. Granted, it's a small sample - just 44 respondents, but I think it's a pretty reasonable reflection of the market.
Now, to make it REALLY interesting, I'd like to see them do this again, but this time interviewing the vendors - they're the ones putting up the money to be there.
Regardless, it's great news, and it's something we've all known all along. It's just great to see it validated by a third party.
Hats off to Jeff and his tireless team, and hope that VON keeps setting the bar higher and higher!
VON was rated #1 by 59% of respondents. Supercomm was next at 52%, and nobody else comes close after that. Granted, it's a small sample - just 44 respondents, but I think it's a pretty reasonable reflection of the market.
Now, to make it REALLY interesting, I'd like to see them do this again, but this time interviewing the vendors - they're the ones putting up the money to be there.
Regardless, it's great news, and it's something we've all known all along. It's just great to see it validated by a third party.
Hats off to Jeff and his tireless team, and hope that VON keeps setting the bar higher and higher!
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