Voice 2.0 Chickens are Roosting…

by alec on May 7, 2008

Are the incumbents really planning a Skype competitor?  I wish them luck, if so. If there’s anything that the last 4 years have shown, it’s that it’s hard to build a PC based soft phone.  Skype is really the only company that has made a success of it, and it’s only in the last 12 months that sound quality has reached acceptable levels.

As Jim Courtney pointed out, many of the predictions of the Voice 2.0 Manifesto are coming true.  The price of minutes is going to zero, everywhere.  Users are choosing to build opt-in directory networks – they’re today’s social networks.  The telecom industry is being neatly carved up into directory, access and applications, just as I predicted it would.

Here’s the rub. Today’s rich user directories are held at companies like Skype, Facebook, LinkedIn,  MySpace and the Internet.  Applications, which are dependent on access to those directories, are being built to be dependent on not a telco network, but Skype, Facebook, LinkedIn, MySpace and the Internet. 

The incumbents are missing the party and the value of their business is being eroded.  In fact, their voice networks are valueless.  I repeat, the voice networks they have built have no value any more.  Five years ago that wasn’t true.  But today, sophisticated software based switching equipment can be run on Amazon’s EC3, requiring no hardware investment from the developer. It’s only a matter of time before telco’s are reduced to fibre backbones taking all their voice traffic to a compute cloud hosted in the Dalles Oregon, or Eastern Washington. 

The biggest asset a telco has today, believe it or not, is their billing system and the billing relationship with their customers.  They have become shop keepers who sell voice services.

Let’s posit for a second that they do plan a Skype competitor.  To be effective they will have to recruit a user base and a developer community in pretty short order.  They’ll have to show developers how they can make money with their platform.  And they’ll have to deliver a platform that provides the quality today that competitors like Skype already do.

If I were in their shoes, I would:

  1. Deliver on a standards based solution.  If they fail to do so, developers will be faced with the same balkanized world they face now.  Better to go with the largest market today — Skype — than risk a new platform, will be the developers logic.  On the other hand, writing applications that will run unchanged on 15 networks has undeniable appeal.
  2. Provide a way for applications that require centralized network assets to run effectively.  This is Skype’s blind spot, with their focus on P2P. Partner with Microsoft, Google or Amazon on a compute cloud to run massive media servers. 
  3. Partner with one or more of the social networks on an open directory solution.  Make the price of the partnership be that principles like DataPortability, and technologies like OpenID be baked into the solution.  That will help them accumulate users quickly and provide undeniable benefit to end users.
  4. Use their billing expertise to bake into their model a mechanism whereby developers can monetize the applications they create and provide a reasonable share to the network operator.  Reasonable means that the majority of the money goes to the creator of the application — that’s how retail works.

But what do I know.  I only predicted that all of this would happen 4 years ago.  The chickens are finally coming home to roost.

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