Friday, July 25, 2008

Election Pollsters Making the Wrong Phone Call

A long time ago, I had a teacher who sometimes asked us to compose newspaper headlines for logic problems. His point was that one way to solve problems is by looking at them through the lens of a different paradigm.

The professor and his headlines exercise came back to me this morning as I pondered the 2008 election polls showing a close race between McCain and Obama -- so contrary to everything I see around me. (Admittedly, I live in California. But despite the notion that California exists in an alternate universe, it's also the state that elected Ronald Reagan to his first political office.)

These days I don't hear anybody -- even people I know will probably vote for him -- expressing any positive interest in McCain. But everybody is talking about Obama, including people who've probably never pulled the lever for a Democrat but are Obama supporters. 

Yet poll numbers show voters almost evenly divided between the McCain and Obama. But let's turn the problem on its head and, instead of the end point -- the answers to polling questions -- look at the process for getting to that end point. Then another explanation for the result percolates up.

Election polls reflect the pre-Internet -- or, rather  pre-Internets -- communication perspective of middle-aged political pundits and pollsters. One that assumes that everybody has a wired "home phone" on the PSTN. That's the Aha! here: Pollsters are only calling people who answer listed phone numbers supplied by the "phone company."

Do any of these pollsters and pundits have children? Or friends under 35? 

A lot of people aren't reachable on "home phones" anymore. Like my 17 year-old, they use cell phones almost exclusively. Many don't have wired phones at all. For a growing number, the "home phone" is an VoIP phone service. None of these services are listed in the "white pages."

I'm betting on lots of egg-on-pundit-faces in November. 

Monday, July 21, 2008

Mother of Invention: 8x8's Not-So-Secret Recipe for Pure-Play VoIP Success

Last Wednesday I googled "VoIP news" to check the buzz on VoIP pure-play 8x8's announcement that morning announcement of its new hosted small office "key" system and plug-and-play IP phones. The news was way, way down on the list – right behind Worldwide VoIP phone training launched by snom.

8x8 is VoIP's Rodney Dangerfield. It just gets no respect. Consider how it stacks up against its far better-known pure-play VoIP competitor, Vonage:

In the last five years, 8x8 revenues grew 460.3 percent while Vonage's grew 0.0 percent. 8x8 made $700,000 during the first quarter of this year. Vonage lost $8.9 million and is shopping for a $215 million refinancing deal to stay out of bankruptcy. 8x8 holds 73 patents. Vonage just got its first. Despite this, Vonage's stock price is $1.58 while 8x8's is $1.03.

Illustrating, I guess, the relationship of stock price to any useful reality.

The fact is that the longtime Silicon Valley company – they've occupied the same Santa Clara address for two decades – enjoys the distinction of being the only profitable pure-play VoIP company. And it's not luck or accident.

They do it by quickly innovating in the face of market and technology change; spending money on inventing and developing things – about 10 percent of revenue, according to 8x8 Director of Corporate Communications Joan Citelli -- instead of, say, gargantuan media buys.

"Necessity is the mother of invention," 8x8 Vice President of Marketing & Sales Huw Rees replies wryly when asked about the company's strategy.

The name 8x8 refers to the company's birth as a maker of math co-processors for 286 and 386 microprocessors back when dinosaurs roamed the earth, in the 1980s.

"By the 486, Intel integrated the math processor and sales dried up literally overnight," says Rees. "So what do you do then? The plan was to go into communications and develop chipsets and software used in video conferencing. In the 1990s, we had a 90 percent market share. The problem was that 90 percent of a very small market was still a very small business.

"So the idea was to sell [that technology, also used in AT&T's Picturephone] as the ViaTV videophone," he continues. "The ViaTV was quite a success – we sold about 100,000. The problem was that we had to keep discounting to keep them moving off the shelves. And the writing was on the wall that the world was going IP, so an analog videophone wasn't going to be a long term product."

It also seemed clear that video wasn't going to be the killer app for IP communications. "Voice is still the application that people can't do without," adds Rees. With its video conferencing expertise, 8x8 was already halfway there. "Take the video out and you're left with voice," Rees adds.

The company acquired some service-side businesses so it could build an end-to-end system and started selling the technology platform to service providers in the late 1990s.

But 2001 was déjà vu all over again. "The [telecom] market collapsed and we were left with technology and no customers to sell to," Rees says.

Tacking away from the platform approach, 8x8 decided to build a service for end-users, launching one of the first consumer VoIP services, Packet8, in 2002. "Ever since we made that decision our business has been growing," reports Rees.

But plenty of other companies saw potential in the nascent VoIP business, too. Vonage, Skype and others launched pure-play VoIP services in 2003, and by 2004 cable and phone companies were crashing the party.

But if the residential VoIP market was getting crowded, business VoIP was virgin territory. Seeing a problem ready for a solution, in 2004 the company launched the Packet8 Virtual Office hosted IP-PBX, which now serves 12,000 customers and is adding about 1,000 new customers each quarter.

With a solidly growing base of less price-sensitive customers, 8x8 could skip the scramble for residential VoIP subscribers at any cost to concentrate on higher-margin services and capabilities. By 2006, the company had decided to focus on business VoIP, rather than promoting residential business.

While Virtual Office targets the small-to-midsize business, this year 8x8 extended its reach at both ends of their existing market.

In June the company built on the hosted services model with its new Virtual Trunking service, delivering IP phone service -- the dial tone -- through the existing broadband connection instead of a dedicated physical line like a SIP trunk or T1.

"We'd frequently get inquiries and when we explained that Virtual Office replaced the PBX, a certain percentage of people would say: 'But we just bought a PBX,'" explains Rees. “We were missing that chunk of the market."

Because this requires no infrastructure capital investment, 8x8 can sell Virtual Trunking anyplace there's broadband service. And customers can take advantage of VoIP without wholesale change or new infrastructure, continuing to use existing equipment and phone systems – even TDM systems.

Not only does this expand 8x8's market, it also opens the door into larger companies and bigger sales. So far the market response has been better than expected, according to Rees, and about half a dozen customers are up and running.

"The interesting thing is that size of the businesses [asking for quotes] is larger than expected. Companies with many T1s are asking for quotes. There's definitely interest in the market for these services."

The Packet8 Hosted Key System – the only such offering currently on the market, according to Rees -- extends the company's market in the other direction, replacing traditional small office systems with multi-keyed phones (hence the name) that allow several people to share a single line.

"Many customers have asked for this," he says. "Many small businesses have key systems, not PBXs. From an end-user perspective, they don't have to change their behavior.

"We now have a sufficient portfolio of solutions [that] we can literally service any size business," continues Rees. "Multi-site businesses can easily standardize phone service with a single provider – across the country and across the world."

Someday we may all be sorry we didn't buy 8x8 when it was $1.03.

* * * * * * * * * * * * * * *

Communications Direct has an excellent discussion of the Packet8 hosted key system, 8x8 Finds The 'Key' To VoIP, and the technological challenges of building this seemingly simple solution. "It's actually incredibly difficult to implement using SIP," Rees told me.

Wednesday, July 16, 2008

But Will They Come?

In an thoughtful post this week, Phoneboy Dameon Welch-Abernathy poses the question: Is there Money in Voice APIs? In his exploration of this question, Welch-Abernathy looks at Jaduka, IfByPhone, and Ribbit.

He writes: "But is simply providing an API to your telephony infrastructure enough to prompt the world to beat a path to your door? Don’t count on it." The bottom line is that those mashups have to be useful answers to real business problems.

FCC VoIP Ruling Good -- But Why Not Apply Them to Everyone?

In a post last week, Jeff Pulver rallies the troops around the FCC's policy of exclusive federal jurisdiction for VoIP. The provocation for this decisions was a Nebraska case where standard telephone service regulation rules to Internet based voice communication in contradiction to FCC policy."

All well and good. But let's look at this beyond simply what's good for the VoIP industry.

In the early days, no one would confuse a VoIP communication with a "phone call" - you made the call differently, you used a different device. VoIP operated in a different context in our lives. So the regulations applying to phone service didn't apply -- it wasn't phone service.

But when Vonage "consumerized" VoIP by marketing it as broadband phone service, the duck rule applied. If it walks, talks, and acts like a phone call it's a phone call -- as several 2005 lawsuits against Vonage over emergency 911 calling made abundantly clear.

So here's the bottom line: If current telecom regulations are counter-productive or have outlived their usefulness -- for example the Universal Service Fee underwriting rural phone service -- then let's abolish them for all service providers. But if these regulations have merit, they should -- pardon my heresy -- apply to all providers, including VoIP.

After all, what's sauce for the goose is sauce for the gander.

Wednesday, July 9, 2008

If You Want Toast, Buy a Toaster

If you want to listen to the radio while eating breakfast you buy a radio for the kitchen. And if you want to make toast for breakfast you buy a toaster. You don't go looking for a radio that makes toast or a toaster that receives All Things Considered.

Sound silly? Well consider -- that's what we do when we want to surf the mobile Web. We use a…telephone handset.

Am I the only person who thinks there might be a better way? You know, something designed for reading and typing – which is how we interact with the Internet – instead of dialing and talking.

Evidently I'm not alone here, judging by Taiwanese electronics company GIGABYTE Technology's sleek new M528 mobile Internet device, scheduled to launch in Taiwan in August with 3G service from Chunghwa Telecom, according to an InfoWorld report.

The M528 is part of a new series of ultra-mobile devices unveiled by GIGABYTE in June.

Slightly larger than a PDA – 6" x 3" x ¾" – and weighing in at 12 ounces, the Linux-based (Mobile Linux) M528 features a 4.8 inch touch screen – compared with the typical mobile phone's 3 inches – a slide-out QWERTY keyboard, 802.11b/g WiFi support, 4GB disk, Bluetooth, USB ports, micro-SD card slot, a 3M-pixel camera and an application suite that includes a Firefox 3-based browser, Open Office and Skype. It's expected to retail around US$750.

It also has a SIM card slot, if you want to use it as a mobile phone. No word on whether it makes toast.

UMPC portal has more discussion on the M528, if you're interested.

Thursday, July 3, 2008

8x8 - Incipient VoIP Patent Troll or 21st Century Tom Edison?

Tom Keating, among others, speculates about the implications of 8x8's most recent VoIP patent. (Full disclosure: I'm a Packet8 customer).

But speculation about whether 8x8 is preparing to open a new VoIP patent trolling profit center misses a more interesting point -- not to mention the fact that there is nothing in 8x8's history to indicate an interest in trolling for patent infringements. If they were so inclined, it's unlikely they'd need another patent.

What's important about the new patent is the fact of it, what it says about 8x8 as a company -- namely, that they invent things themselves. Now, I know that inventing and building your own "mousetrap" -- or VoIP gateway -- has been out of style for the last decade. But some of us remember when "virtualization" was called "time-sharing."