The Jeff Pulver Blog: A Concept Misunderstood by Wall Street: "Voice" and "TV" as an Application

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May 30, 2006

A Concept Misunderstood by Wall Street: "Voice" and "TV" as an Application

When Vonage had the courage to launch their consumer voice over broadband service in March, 2002, they did so at a time when everyone else was on the sidelines just watching and waiting. Vonage's early success came from its commitment to a vision that in a broadband enabled world, "voice" really is just an application.

In 2006, "Voice" is still an application, although some regulators think otherwise. The promise of "voice" as an application knows no boundaries. But boundaries are well defined if voice is treated as a regulated "service."

Applications on the Internet -- whether they are voice, video, data, TV, radio, games, web -- work just fine most of the time on the "Best efforts" Internet. This much is true.

Ten years ago who would have thought that any company could offer voice as an application to consumers without the need for owning the entire underlying network? Looking ahead, while it is easy for analysts to try to put unaffiliated Voice over Broadband companies inside a telecom box, comparing them to a standard telecom services company that has CapEx and OpEx just doesn't compute. An independent, unaffiliated, non-incumbent company offering voice over broadband communication services has relatively little CapEx and the bulk of their OpEx costs (if any) are generally spent on marketing. The business model for the best efforts based voice over broadband business is in some ways a lot closer to Coca Cola than to say Verizon. Winning is all about customer acquisition hence the marketing spend.

Customers of these companies are the ones who pay for their own broadband access. What kind of Telecom Company does this make a Sun Rocket, M5 Networks, Abbyphone, Packet8 or Telio? From my perspective these are really examples of Internet Application companies. Don't let Vonage's reported regulatory treatment in the United States as a replacement/substitute to plain old telephone service (which is its issue with the regulators) take you down the slippery slope of how fundamentally different it is from most other communications companies who do not leverage the Internet.

One day soon (I believe and hope), a company will emerge in the broadband TV space that will be the functional equivalent of a voice over broadband company but inside the world of broadcasting. This will be a next-gen TV broadcasting mogul whose customers pay for their own connectivity and whose content is licensed from third parties. This mogul will not need to own any major broadcast transmission facilities and will not need to own any spectrum. But this new company will be wise to the ways of the Net and will recognize the power of "TV as an Application" on the Net in many ways just like how Vonage recognized "Voice as an Application" on the Net when they first launched. One day I hope to play a role with such a company, with such a vision.

Tags: voip, Broadcast 2.0, Disrupted Broadcasting, Vonage, Jeff Pulver

(c) 2006 Jeff Pulver. All Rights Reserved.
(This blog posting is copyright protected by Jeff Pulver. Portions of this blog posting may be quoted or abstracted if attributed.)

Posted by jeff on May 30, 2006 07:08 AM | Permalink

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The beginnings of television over broadband are already coming to be. A mix of BitTorrent (or some private caching network) and SlingBox coupled with TiVo (for the program guide) is all you would really need. Well, the biggest hurdle isn't a technical one but rather developing content relationships and pricing model.

Posted by: Charlie Kemper at May 30, 2006 04:32 PM

>You can't have it both ways!

I don't see why they shouldn't try.

The Incumbent LECs manage to pull it off on any of a number of issues.
--
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Posted by: Jeff McAdams at May 30, 2006 02:16 PM

The opex model for tv company you propose could be very different from the model for VoIP providers. The VoIP business can be seen as a business of connecting endpoints that create and simultaneously transmit relatively low-bandwidth-needs content in real time. The tv business is likely to be different. Content is not created in the very moment when transmitted. It has to be created, stored, and distributed either on demand or in a broadcast mode. And it tends to have a need for much greater bandwidth than the audio associated with telephony.

The tv company you propose will have either to purchase storage and transport itself, or go with a P2P model where it makes use of the storage and transport available to subscribers.

Posted by: d.l. at May 30, 2006 09:50 AM

It's nice to call it an application, but Vonage as opposed to say Skype markets itself as a primary line replacement. No wonder that the regulators see them as such.

Yes - we are all grateful to Vonage for leading and opening up the VoIP market - but that doesn't mean that they can get away with portraying themselves as a telco to consumers and as an application provider to the regulators. You can't have it both ways!

Posted by: Moshe Maeir at May 30, 2006 08:17 AM

May 30, 2006

A Concept Misunderstood by Wall Street: "Voice" and "TV" as an Application

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