AOL's AIM Developer Program - Purple Rain for Developers

As you probably know, I'm not in the news business, and you'll rarely see top-of-the-morning breaking stories here. Lots of other bloggers do that really well, and that's not my thing.

Today's announcement by AOL for their AIM PhoneLine Developer Program is a big story, and may well turn out to be a watershed for Voice 2.0 coming of age among mainstream providers. Everyone is a winner here - AOL, the developer partners, and ultimately subscribers. You can get a good look at this if you're attending Fall VON next week, where three vendors will be showcased by AOL - Iotum, MyNuMo, and mVox Technologies. With AOL's TotalTalk being phased out later this year, this really does look like a transition from Voice 1.0 to Voice 2.0 - something that will be very welcome by the IP community.

In addition to the above parties, Jeff Pulver has got to be pretty happy. Not only is AOL doing this showcase at his show, but these are the kinds of vendors that enable Voice 2.0 services, which are awfully close to the Purple Minutes holy grail Jeff has been searching for from service providers.

I'll segue now to Jeff Pulver's blog for my wrapup. I was privy to this news last night, but not able to post about it then. Other commitments (the paying kind!) prevented me from posting until now, and by now, the story has been done to death - and very well. So, if you're hearing about this story for the first time, I'm going to steer you to the multitude of blog posts that cover this story from many angles. My only insight to add is the fact that the blog coverage was so extensive and much of it happened right away - this itself tells you that AOL is on the right track with Phoneline, and that this is the kind of developer program many have been waiting for.

So, I would steer you to Jeff's post first. From there, it won't be hard to pick up the threads that will lead you to many other posts, all of which are worthy of a read, especially if you are wondering what all the fuss is about for Voice 2.0. I may be missing some, but I'd urge you to check out the posts from Alec Saunders, Andy Abramson, Mark Evans, Mathew Ingram, Jim Courtney, Ken Camp, Garrett Smith, Bruce Stewart, and James Enck.


Technorati tags: AIM Phoneline, Jon Arnold, Voice 2.0, Jeff Pulver

Toronto's WiFi Launch - Part 2

Yesterday, I posted about the basic details of this story, along with my overall take on Toronto Hydro Telecom's WiFi launch. I said it would be a short post, with a longer post to follow once the news was out.

Well, I'm reversing myself - that post was longer than planned, and this one will be short. Catherine McLean's story did not run in today's print edition of the Globe & Mail, but it did turn up in the online edition. There are more details about the launch there, and the only thing I really missed in yesterday's post was the pricing for rentals - it's $10 for a day, and $5 for an hour.

What I really love about online editions of newspapers are the reader comments, and there are some real interesting ones that show the range of viewpoints around this initiative. Of particular note is the comment that Toronto already has a free WiFi initiative, called Wireless Toronto - something I've been meaning to blog about for sometime (better do it quick before somebody else does!). Given my earlier posting about Fredericton's free WiFi service, I just have to mention the comment from someone in Fredericton praising their service - oh, and of course, his posting was made using their WiFi service!

Still, I haven't seen any talk about this story on the blogs - not sure why. Toronto Hydro Telecom now has news and information about the service - officially branded as OneZone on their website, but aside from Catherine's online article, that's about it.

So, for all you muni WiFi guys/gals out there, I hope you find this of interest!

Technorati tags: Toronto Hydro Telecom, Jon Arnold, Municipal WiFi

Toronto Hydro Telecom Launches WiFi Service

This is really part 1, and will be quite short. This afternoon I spoke with Catherine McLean of the Globe & Mail about today's launch. I've written about Toronto Hydro Telecom's WiFi initiative before, but was not in the loop for the news today. That said, I don't feel alone, as I've seen no sign of this story on the blogs, nor has the news been posted on their website.

In short, Toronto Hydro Telecom launched their WiFi service today, along with their much anticipated pricing. You can subscribe to it as a service for $29 a month, which is about $10 cheaper than the standard high speed offerings from our incumbents, Bell and Rogers. For travelers and surfers who just need their fix on demand, you can buy access for short terms, much like you would at any WiFi hotspot. I don't have the numbers on this, but I should have them tomorrow.

Right now, the service is free, and is available throughout most of the downtown Toronto core. During this honeymoon, I would expect the service to be pretty popular, but the big challenge comes when it reverts to a paid service.

There are so many questions here, and I'll just raise a few of them now. I don't know how the billing will be done, especially for the on demand services. Will they add this to your Hydro bill? Or will Toronto Hydro Telecom do their own billing? Or will they just use a credit card? Being a utility, are they now going to engage in expensive marketing/advertisting/branding to compete head on with Rogers and Bell for subscribers? And are they now going to be competing against those offering paid WiFi in hotspots? Can they really be a viable paid service just offering broadband access - without any cool content or apps? For those who want to be regular subscribers, they'll typically need a wireless router to access the signal indoors. How will this be supported? And finally, with the launch being delayed a few months, the free trial starts after the warm weather is over. This will likely be a drag on usage, as WiFi works best in outdoor spaces. In downtown Toronto, once you go indoors, it's not too hard to get broadband access, as people are typically at home or at work. Once the cold weather comes, I don't see too many people using this service. I'm sure they would have rather seen the launch take place earlier in the summer.

Today's news and these questions take me back my post last week about Fredericton's free WiFi service, which brought out a lot of important issues for this emerging space. Reading it again makes me wonder about what Toronto Hydro Telecom is getting into here. I think it's great that they're offering WiFi, but I'm concerned about the viability and their vision about what line of business they are really in.

I hope to have more on this tomorrow, but at least you've heard it here first.

Technorati tags: Toronto Hydro Telecom, Jon Arnold, Municipal WiFi

Podcasts Are Being Heard

As readers of my blog know, I do a weekly podcast series for Pulvermedia titled Canadian IP Thought Leaders. Podcasts are a great vehicle for discussion, but unlike live radio, it's pretty tough to tell who your audience is. I have a rough idea of how many people listen to my pods, but very little sense as to who listens or what people think, other than the comments that come back. It's also great to see that many of my guests are featuring the pods I do with them on their websites, so that's another form of validation.

Having said that, it was nice to see this blog post from Bruce Stewart of O'Reilly Emerging Telephony. It ran last week, but it just crossed my path over the weekend. He's got a great blog, and it was nice to see his good words about my last pod - with Jim Van Meggelen on Open Source - and my podcasts overall. It's nice to be heard, and I hope you keep on listening Bruce - I've got lots of good ones lined up for the Fall!




Technorati tags: VoIP podcasts, Jon Arnold, O'Reilly Emerging Telecom, Bruce Stewart

Fall is Here - Showtime!

Summer is officially over, and you can feel it in the air, at least here in Toronto. The kids are back to school and it's time to think ahead to the Fall.

Next week is Fall VON - #10, so it's a big one. The buzz is not hard to find, especially on Jeff Pulver's blog, and hopefully I'll see you there.

I've never been busier with shows, and wanted to post about my schedule so people know where to find me if we happen to be doing the same things.

After Fall VON, I've got a bunch of shows in October, and a few others lined up for later in the year. My current schedule is up on my website now, and will be updated as things develop.


Technorati tags: Fall VON, Jon Arnold, J Arnold & Associates

Telio and Vonage Revisited � the Song Remains the Same

I may be the only one out there talking about these two operators in the same breath, and you know what? � I�m going to keep on doing it. Their IPOs were very close together, and in June I posted about them, and how they have taken two different paths to market while essentially being in the same business.

Last week, Telio posted its Q2 results, and Vonage did the same earlier last month. After having a cursory read of their filings, I felt it was a good time to revisit things and see if the storyline has materially changed. A line-by-line analysis of their filings may lead to such a conclusion, but a quick read was enough for me, especially since I�m following this space regularly. So, in short, my earlier position has only been validated by the Q2 results � Telio�s business model has a much better chance of success than Vonage�s.

Aside from Vonage�s post-IPO share price free fall, nothing dramatic has happened since their IPOs. The changes have really been incremental, and the Q2 numbers simply provide some substance to important trends that show how these two operators are on different trajectories.

First, let�s look at Telio. The big story there is crossing the 100,000 subscriber plateau in Q2. Compared to Vonage this is puny, but their main market, Norway, is 1/70th the size of the U.S., and relatively speaking, this is a noteworthy milestone. In addition to the total number growing, Telio is having success selling into multiple markets. Norway is their home base, but the Q2 numbers also show growth in Denmark and Holland.

On May 15, Telio also added a mobile offering via a reseller deal with Telenor. Their offering � Telio Mobil � represents a small fraction of the overall total, but provides valuable experience selling into the mobile market, which can only be good going forward. I�m not alone in thinking that this has long been a missing link for Vonage, and I suspect it�s late in the game for Vonage to be going down this road.

In short, the subscriber count is growing, revenues are growing, marketing costs are staying in check, and channels are expanding. In Denmark, Telio is available across 55 7-11 stores � can you imagine signing up for Vonage with your Big Slurpee in the U.S.? Not me. Another thing they�ve done is taken more of their telemarketing in-house, which they claim has resulted in �more than 20% increase in sales efficiency�. I�m not sure how you measure this, but it�s not a big leap to conclude this will be more economical than outsourcing.

The number that really jumps out for me is that for Q2, sales and marketing expenses were 15% of revenues � down from 17% in Q2 last year. Not only is the trend in the right direction, but the level of spend is orders of magnitude lower than Vonage, and really is the key to explaining the financial health of these operators.

Now let�s look at Vonage�s Q2. We all know what happened to their IPO, and this filing is a timely reality check. Their share price has settled into the $7-$8 range, more than 50% below opening day, but has been trending up recently, and is now just shy of $9.

As expected, subscriber growth continues to be strong, hitting a bit above 1.8 million in Q2. They�ve added a million subs since Q2 last year, which is probably more than all the U.S. VoIP pureplays combined. Correspondingly, the revenue story shows significant dollars, coming in just below $250 million for the first half of 2006.

As a sidebar to these particular numbers, I should add that in today�s NYT, there�s an interview with Jeff Citron, and the story reveals that Vonage has just topped 2 million subs. I wrote this post prior to seeing the NYT article, which I came across on Andy Abramson's blog today. Andy has a great analysis of the story and provides a link to the full text of the interview. I find the timing interesting that the day I run this post, there's a NYT interview with Jeff Citron. If anything, Jeff's comments reinforce much of what I'm saying here, and I didn't see anything there that would change my thinking.

On face value, the above fundamentals of subscribers and revenues are to die for in the VoIP market, but as we know, that�s just one side of the coin. I have no doubt that these numbers will continue to grow, but the Q2 filing shows signs of realism and the bigger picture which tells the full story.

First is the tacit recognition that the competitive environment will make the future less certain � �we do not expect to sustain our historical subscriber line growth rate��. That is not news, but comments like this are setting the stage for what Vonage knows will be a more normalized growth path.

Secondly, contrary to Telio�s story, there is no evidence that customer acquisition costs will be declining in a big way any time soon. Q2 marketing spend was $90 million - $1 million a day � up 46% from a year ago. A big part of this is the inevitable maturation of the VoIP market, as it shifts from early adopters to mass adoption. This is reflected by the need to shift spending from relatively inexpensive online advertising to mass market media like TV and direct mail. They may be spending big dollars for online marketing in an absolute sense, but clearly, to reach the broader market, Vonage will have to migrate to more expensive media and high profile event marketing such as this year�s World Cup.

In their words, �for 2006, we will continue to incur a significant amount of marketing costs as we pursue our growth strategy��. That says it all for me, as the name of the game appears to be acquire as many customers as possible � as opposed to a strategy of finding a more economical way to do business, even at the expense of rapid growth.

Finally, some commentary about the costs of doing business. As Vonage grows and competes more intensely against incumbents, they must bear a variety of costs, such as termination fees to legacy carriers, E-911 compliance, co-locating fees to expand their network, and porting phone numbers for new subscribers. So, while they report a slight decrease in direct costs from last year - $7.52 per line � it seems clear that over time, these costs will likely creep up.

There is a similar story on the revenue side. ARPU was $27.70 in Q2, up from $26.63 last year. This looks like good news until you realize that most of the increase is coming from the E-911 Cost Recovery fee they are now charging. Furthermore, starting in May, Vonage added free calling to some European countries, which will now slightly erode ARPU, since subscribers were previously paying for those calls.

And let�s not forget churn, the acid test metric for telcos. Q2 monthly churn was 2.3%, up slightly from 2.1% a year ago. The difference is small, but the trend is not in the right direction, and based on Telio�s claims, Vonage�s churn is quite a bit higher than theirs.

All of this points to a very challenging environment for Vonage, and I�d say their direction and prospects remains quite different from Telio. That said, I can�t help but cite Russell Shaw�s Aug. 30 post noting Vonage�s recent stock uptick. Their stock has been at $7 or less for several weeks, and Russell ponders if the current upward trend is sustainable. He�s pretty skeptical, and I�m of like mind.

I think the big issue and difference facing Vonage and Telio is the simple fact that the U.S. market is much more competitive, and as the MSOs start to dominate, it becomes harder for any VoIP pureplay to make a go of things. This is underscored by Vonage�s closest pureplay rival, Packet 8. They have been public for years, and have little to show for it. Their Q2 results tell a similar story to Vonage, but not quite as good.

Packet 8�s subscriber growth is positive, and they hit 151,000 lines in Q2 � 1/12th of Vonage. However, they report lower ARPU from last year, and churn is way up, from 2.6% to 4.1%. Q2 showed a modest operating loss of $6 million, but the scary number is the accumulated deficit of $201 million. Yeow. And the future doesn�t look much better � �we will continue to incur operating losses for the foreseeable future, and such losses may be substantial�.

So if this is the state of the nation for the #1 and #2 pureplay VoIP operators, you really have to wonder where the upside is � for anybody � these companies, their investors and their customers. One can only hope they can find a viable business model, or failing that, a buyer that understands how to profitably leverage their assets.

And to make things interesting, rising star SunRocket just announced fresh funding. They claim to have bigger numbers than Packet 8, and look to be ramping up to become the undisputed #2 VoIP pureplay. Looks like they can do that � especially with their aggressive annualized pricing plans - but I�m just wondering what that really adds up to. Clearly, some people still see value investing in this space, and maybe I�m missing something here. Whether I am or not, I�ll still take the Telio story over any of these, and until we see Q3 numbers I�m not about to change my mind.


Technorati tags: Telio, Jon Arnold, Vonage, Andy Abramson, VoIP

Fredericton, New Brunswick � the Right Way to do Muni WiFi

I�ll lay odds most of you don�t know that Fredericton is Canada�s first city to offer free WiFi, let alone even heard of the city. Well, they�ve been doing this since November 2003, and I think it�s a great story. Last week I was introduced to their WiFi evangelist, Don Fitzgerald. He�s the Executive Director of Team Fredericton, and we had a long conversation about what they�re up to. I finally got a chance to put this post together about it, and if you�re following muni WiFi, this will be a good read. And if you want more, Don will be my guest for my October 3rd podcast, so listen up then.

What I�ve been learning about muni WiFi is that every situation is different, and there�s no magic formula for making this work. There are so many variables in terms of existing broadband services, political issues, technology issues, financial issues, etc. In that regard, Fredericton is no different, and in their case WiFi has come out of a situation of necessity.

Telco providers initially launched broadband in New Brunswick in 1999, and were only focusing on the most densely populated markets. There aren�t many of them in Atlantic Canada, but Fredericton was not in the initial mix of priorities, so they were passed over by the telcos. Out of necessity � and vision � that�s the key here - they decided to do it themselves. Way back then, Fredericton saw how important broadband would be for their future. Believe it or not, Fredericton is a tech savvy community (86,000 strong) and has the kind of infrastructure that would benefit from broadband � such as e-learning, universities, medical research, government services etc. So it really was a vision thing that led them to embrace broadband early on.

To do this, they formed their own licensed telco � e-Novations - and laid a fiber optic ring around the city, which was initially used by the university and hydro utility. They soon started seeing demand from SMBs/SOHOs, and in 2001 became an ISP who could blanket the whole city to offer broadband. This turned out to be a good thing, as their success caused Aliant and Rogers to accelerate their broadband plans for Fredericton.

With that infrastructure in place, they started looking at WiFi and decided to offer it free. Don uses the analogy of sidewalks � WiFi is just basic infrastructure and it should be free for everyone to use. He made it clear that they are not a service provider offering voice - they�re just providing the broadband connection for people to use as they like. They could charge for voice, but don�t see why they should. Don noted that Fredericton is a knowledge-based community, and they simply believe this type of infrastructure is necessary, to �give them world class tools�. Isn�t the business of technology much simpler when your motives are so noble?

I really think that�s the core of what makes WiFi work so well there. To that point, we discussed other muni WiFi initiatives, both here and in the U.S., and Don is quite skeptical as to whether there�s an economic model for paid muni WiFi. I�m with him, and we agreed that deployments such Toronto Hydro Telecom will have a hard time making a go of things financially.

In Fredericton�s case, because the network is in place, the cost to add WiFi has been minimal, and as such, there is little pressure to recover their costs � which makes all the difference for how you go forward and offer services. It�s not about getting a more efficient way to do meter reading for utilities, and it�s not about getting an ROI on multi million dollar deals with vendors to build out a new network. I�ll take Fredericton�s scenario any day. They don�t need to make money off WiFi as their ISP operation is profitable on its own providing broadband access.

Interestingly, because the service is free, and there are no financial pressures, they don�t really monitor usage very closely, so he couldn�t tell me how much WiFi usage is voice versus data. He did say, though that they can get speeds of 40 MB or better, so there�s no problem supporting video for those who want it.

One would think that with such a great service being free, it would cause friction with the existing providers - much like the pushback Toronto Hydro Telecom is getting here from Rogers and Bell. On the contrary, says Don. First off, the number of people using their WiFi service is relatively small, so there's not a lot of money being left on the table. Secondly, this is Canada, eh. It gets really cold in the winter, and the usage of public WiFi is going to drop off quite a bit once the weather changes. The folks doing muni WiFi in warm places like Anaheim have no such problems! If anything, Don feels their WiFi will increase the overall usage/adoption of broadband, which can only be good news for Rogers and Aliant. E-Novations may be a broadband provider in its own right, but the incumbents have the vast majority of Fredericton's subscribers.

As with most muni WiFi offerings, theirs is used mainly in public spaces, and they have signs posted throughout the city that identify �Fred e-Zones�. How neat is that? Now that�s progress!






So, the bottom line is that WiFi works in Fredericton because their city council had the right vision. Don noted this as he talked about how Fredericton is frequently consulted by municipalities on WiFi from around the world. The key to their success is to treat it as infrastructure � it�s an investment (and a modest one at that) in their future and ability to build on its strength as a �knowledge-based� city. It�s not about the business model, to which he notes that most city councils will have a hard time getting funding for. The problem is they think they need a business model, and that makes for a much more complex and riskier venture.

And finally, Fredericton isn�t stopping with WiFi. They�re coming up with some innovative applications to engage broadband users � free of course � and I guess you�ll just have to visit someday to see for yourself! And if you can�t, listen to our podcast, where we�ll explore this a bit further.


Technorati tags: Municipal WiFi, Jon Arnold, Fredericton