From the monthly archives: July 2008

Who loves their bitstream?

That’s a line used by industry analyst Gary Kim during his keynote at the recent Voice Peering Forum. He was driving home the message that carriers need to add services that drive user loyalty.

As he wrote here,  "One of the themes [here] has been the absolutely central role applications now play in the whole communications business."

His advice to carriers was "make your platform attractive" because 3rd party developers will be the source of those new applications. That topic is one I’ve cared about since the beginning of Fonolo because we’ve always viewed carrier partnership as the best way to extend the reach of our product quickly. The difficulty lies in the large and slow-moving nature of carrriers and the lack of competitive forces incenting them to innovate. (See here and here.)

Two weeks ago, Gary posted an article titled "Watch Fonolo" that explained how our product fits well into this trend. Here’s an excerpt…

Lots of people think telcos are too "dinosaur-like" to keep up with the fast-paced world of IP communications….[but] In fact, there’s now widespread recognition that rapid software innovation is necessary, and cannot be done on an "in house" basis… So consider Fonolo… the sort of third party innovation carriers are looking for, and need, to create new value… Fonolo is an excellent example of how application developers and carriers can work together to create and popularize new applications that enhance and change the communications experience.

Thanks Gary!

 

iPhone-Stampede-2I just came back to Toronto from Calgary and can confirm that iPhone frenzy is in full force there. It was the lead story in the evening news even though Calgary’s annual "Stampede" festival was in full swing. (If you’ve ever been to Stampede, you know how worked up Calgarians get about it.) 

The print, radio and tv coverage all seemed to follow the same template: A) People are waiting in long lines to get one and B) There’s anger at Rogers (the exclusive provider in Canada) for their pricing plan. This article at the Globe and Mail has a good explanation and a chart that shows the impact of the data pricing.

Lots has been written about the pricing fiasco and the eventual capitulation by Rogers to the consumer pressure. But I haven’t seen anyone point out the parallels with what Apple itself did when launching the iPhone.

If you recall, Apple’s initial price for the iPhone was quite high ($600) but was still purchased by the "must have it any cost" people. That was followed by rapid price drop (to $400) a few months later. Apple took some bad publicity for a few news cycles (Apple drops iPhone price by a third, early buyers not amused) but in the end, iPhone is still a coveted (even worshipped) device, and they made money off that early crowd. (Call it the "fanatic bonus".)

Rogers tried the same gambit and fell on their face. They had to back down on the pricing before the launch so they took the PR hit but didn’t get the pay-off. And worse, the sub-headline in every news story — and now in the consumer mind — is that "Buying an iPhone will lead to a large monthly bill".  Instead of a bonus, Rogers got a fanatic backlash including some protest sites like this one with 60,000 members.

More from Mark Evans (Is the iPhone a PR Fiasco for Rogers?), Jon Arnold (Rogers Backlash on iPhone Pricing) and ITBusiness (Canadians welcome iPhone, pan pricing plans).

 

I met Alan Quayle at the recent Voice Peering Forum. He moderated the panel Telco 2.0 and Web 2.0: Making Money Together? which was on the same track as the panel I was on, Service Delivery Platforms: The intersect of Web 2.0 and Telecom (I’ll post a review of that panel shortly). Both panels tackled a theme that was in the forefront at the conference: How can carriers and 3rd party developers work together to bring innovative services to market?

I spoke with Alan during the show about our product and how it fits into the new carrier landscape. He gave the Fonolo beta a whirl and posted an article titled Start-ups to Watch: Fonolo, stopping the IVR Hell!:

"I’ve used the service a couple of times, and it ‘does what it says on the tin.’  You can select where you want to go for a range of companies’ IVR menus, and it calls you once connected to an agent…. set-up takes less than a minute and it works on any phone, you simply click on the webpage, get on with your life, and when the agent is connected you receive a call…"

Thanks Alan!

 

I attended the 2008 Voice Peering Forum last week in San Francisco and found it extremely informative. Hats off to organizer Shrihari Pandit.

You can read good summaries of the show by Rich Tehrani here and by Alan Quayle here.

Analyst Gary Kim kicked things off with a keynote address that focused on a topic that was central to the whole conference: changing business models for carriers. Below are some of the driving forces he listed…

1) Competition
No news here. Traditional phone companies continue to lose customers and revenue to cable companies, wireless companies and PC based alternatives. A key factor here is “Landline Substitution” which refers to consumers (especially younger ones) who are abandoning landlines for a pure-wireless existence.

2) “Over the top” services
This term refers to any service being delivered to the mobile device using an internet connection, as opposed to using a carrier-selected approach. For the carrier this boils down to loss of control. Specifically: difficulty in capacity planning (see the next point) and unwanted competition for their pre-selected alternatives. This issue connects back to the long running smart pipe vs dumb pipe debate that I wrote about here. But it also connects with the central question of what model works best for adding innovative mobile services. (This was a central topic of my panel. More on that in a later post.)

3) Mobile bandwidth demand
The new wireless standards keep pushing up the bandwidth available to the handset. This is exciting for consumers but presents carriers with a tough pricing dilemma. If you price too high, you discourage use and your shiny new services never reach a critical mass. If you price too low, your cell towers get overwhelmed by the throughput during peak times (Imagine downtown at 5:30, with everyone waiting for the bus and watching YouTube clips) which leads to bad user experience and lost revenue down the road. (See here more on the “backhaul bottleneck”.)

For a good example of this pricing problem, look no further than the furor over Roger’s recently announced iPhone pricing plans. (Globe and Mail, Mark Evans, Jim Courtney, Jon Arnold.)

Analogies
As we work to understand the role of carriers in the new ecosystem, it’s natural to reach for analogies from other businesses. Gary had two analogies: Cable TV (which charges less popular channels a monthly fee for a slot) and retail chains (which charge for “shelf space”). Both are ways to make money from “upstream” partners, while keeping costs to consumer low. This is another way describing the “two-sided” approach that the folks at Telco 2.0 have been promoting. (Great intro post here and slideshow here).