Not to be outdone by BT, Cable & Wireless (the U.K.'s second largest network operator) unveiled plans earlier in April to build its own NGN over the next few years.  The total CAPEX earmarked for the project is roughly $988 million (from 2005-2008).  The plan calls for the collapsing of 70 voice switches to 10 softswitches, to be housed in "IP routing nodes".  Furthermore, the few hundred metro nodes will be replaced by roughly 80.

Last week, C&W announced Tellabs as the first supplier for its NGN.  C&W will rely on the 8800 metro Ethernet multiservice routers, whose strong suit is the aggregation of multiple types of legacy traffic.  Another deal was announced with Marconi (this one on the access side).  Marconi is one of the incumbents on the Bulldog Communications (C&W's access business unit).  However, more announcements are expected within the next few weeks.  Cisco could likely win a piece of the IP core.  Nortel could potentially get a piece of the softswitching piece of the upgrade, thereby capitalizing on its Succession win last year.

A bit more than a week ago, Ericsson became the latest Euro vendor to form a relationship with a Chinese player to jointly develop TD-SCDMA offerings.  Known as the "Chinese version of 3G", TD-SCDMA (Time Division Synchronous Code Division Multiple Access) has been originally specified by the Chinese Academy of Telecommunications Technology.  The standard combines older TDMA with the Time-Division Duplexing (TDD) technique of broadcasting over a single chunk of spectrum, rather than the normal two bands.

The three big Chinese manufacturers now all have TD-SCDMA agreements in place with foreign vendors (i.e. Huawei is teaming up with Siemens, ZTE is pursuing Ericsson and Datang struck a deal with Alcatel).  The announcement was consistent with Hakan Eriksson's statement during the Ericsson analyst day the previous week: "TD-SCDMA has not been prioritized but Ericsson will have a presence".  Eriksson added that Ericsson regards this as a Chinese-centric technology, and as such, the company could rely on partnerships.

It is anticipated that the Chinese government will issue three 3G licenses later in 2005, and chances are each will be for a different wireless technology: CDMA EV-DO, WCDMA, and TD-SCDMA.  There could be some delay, as the Chinese government keeps on promoting TD-SCDMA.

The IMS (IP Multimedia Subsystem) framework is gaining more and more notoriety these days, becoming one of the hottest topics du jour in today's telecom world.  However, much work remains to be done, including issues such standardization, the refinement of voice QoS mechanisms (for a conversational class of service) in the wireless environment, and the availability of some new "combinational" services that can bundle features such as location and presence.  So fittingly (after playing a bit with Photoshop), I spent some time creating the above scoreboard that provides a good snapshot of the current state of the IMS market:  we are still in the 2nd inning of a 9 inning-game.  2005 is shaping up to be more of a year of experimentation rather than full-scale deployments.

Note: I wrote an article regarding IMS that appeared on the May issue of the IPCC Newsletter, and will be giving a talk about IMS at Supercomm.

Looks like this fellow is really eager to buy a computer system (photo credit: my friend Daniel, from Brazil).  For kicks and giggles - if you add the prices for all the equipment shown in the figure (i.e. a brand new typewriter, iron and TV), I wonder if you'd get pretty close to the price of a new computer system (or perhaps even higher? ;-).

Skype Journal reports on the progress of SkypeSee, which is the video conferencing feature that is on Skype's product roadmap (as mentioned here in Toronto during VON Canada last month).  Basically, the latest 17w version beta (IMHO, the product is already in beta, not alpha quality) is pretty light (only 359k) with good video refresh rates and crisp resolution (users can read 11pt. text from the other site - that is impressive).  The GUI still needs some refinements, but the hacker in me finds it OK.  Funny enough, thus far, they are calling this product wigiwigi, and it already has its own forum.

South Korea perhaps represents one of the best examples of where convergence is taking hold.  About 12 million out of a total of 15 million households have Internet access (typically around the clock, 24 hours per day) for a flat rate of 30,000 won (1 US$ is roughly equivalent to 1,004 won, so this is equivalent to under $30). 

There are quite a few reasons why this is happening, including, among others:

• high household broadband penetration: 73% versus 26% in the US and 22% in Europe (South Korea is the global leader)
• high throughputs: South Korea has among the fastest speeds available to consumers (average of 14 Mbps compared to only 4 Mbps in the US)
• favorable demographic characteristics: 65% of the population lives in MDUs (Multiple Dwelling Units)
• excellent broadband facilities for the masses: South Korea counts with roughly 22,000 "PC Bang" cyber cafes and 1.2 million PC terminals

These factors translate to one of the most favorable customer profiles in the world.  South Koreans Internet users spend an average of 20 hours online per week (compared to under 13 for the US).  Roughly 12% of the retail sales are online (versus only 2% in the US) and 68% of stock trading is done online (versus less than 25% in the US).  Interesting to see how pragmatic regulation played a small positive role here - the restriction of Japanese imports made the PC the primary gaming platform in South Korea, and many feel that was one of the drivers for these impressive broadband numbers.

Note: The South Korean wireless market will be discussed in a separate post. 

Om Malik writes about VDSL2, and how much bandwidth it can deliver. It turns out that the new VDSL2 specification is about to be ratified by the ITU sometime next week, and that seems to be generating a lot of excitement among FTTN / FTTC proponents. Does this mean that last-mile copper solutions will be in fact effective for all customers, no matter how many miles they happen to be away from the CO?  As I wrote before, there is an inverse relationship between the loop length and the bit rate that can be supported by such last-mile copper solutions (be they ADSL2+, VDSL2, etc.).  For a minimum level comfort zone, for HDTV, around 19 Mbps are necessary (from a future proofing network perspective).  This means that the maximum loop length supporting that would be somewhere between 5 and 6 kilofeet, which won't cut it in about 57% of the cases for a carrier like SBC.  So FTTN or FTTC solutions represent a "go after the low hanging fruit" type strategy. 

On the other hand, in Canada, the situation is quite different, as Canadian carriers such as Bell Canada and MTS have very good loop length profiles.  In fact, according to Bell, 85 to 90 percent of its customer dwellings are within 1,200 meters of the node.  So FTTN with VDSL2/ADSL2+ seems to be the right approach for Canadian ILECs such as Bell to bring the triple play to all of their customers as quickly as possible.

A new concept is getting a lot of attention in the UK, namely that of a virtual broadband operator. An FT story documented the advent of a broadband Internet service that is custom-tailored to a football fan (ed.note: in the UK, as in my native Brazil, they call the game football, not soccer ;-).

Viatel, a UK-based broadband operator, introduced earlier this week a new branded broadband service specifically geared towards Chelsea FC fans (ed.note: Chelsea won the English Premier League title this year).  Chelsea Broadband will cost fans £28.99 per month and offer a 2Mbps high-speed Internet data connection with unlimited monthly downloads and up to five personal e-mail addresses.  Another "sticky" element added to the bundle deal is a free year subscription to Chelsea TV online, and as an added bonus, for the first 1,000 subscribers to sign on, free video highlights from Sky Sports. Chelsea will promote the service online, in its matchday program and around its Stamford Bridge stadium.    

Undoubtedly, this is yet another major coup for Viatel, which already had similar deals in place with Manchester United (from the English Premier League) and Hearts FC (from the Scottish Premier League).  The company also has a site (www.fastfooty.com) where fans can register their interest in having a similar service for their own soccer clubs.  But the math is impressive: between Chelsea and Manchester Utd. alone, the fan base represents a huge total addressable market opportunity of 14 million fans in the UK alone (about one fifth's of the UK population). 

Here are a few more ideas added to the mix: what about a similar MVNO type deal for wireless operators?  Special screens, ringtones, phone updates, and video streaming of a few highlights can be a part of a great "sticky" wireless bundle.  Would a player such as Virgin step up to the plate?

I wonder if on this side of the Ocean, other broadband service providers would consider a similar play.  Closer to home, here in Toronto, Rogers could definitely come up with a similar type packaging for a Blue Jays (owned by Rogers) branded broadband service.  And they can even include a few free tickets as an extra bonus.  I know a few die-hard Blue Jays fans that would definitely find this idea very appealing.

Microsoft and Sprint are teaming up to introduce a wireless location based service geared towards helping businesses locate, track and direct mobile workers through the use of text and voice messaging.  The service is expected to be available across all of the US and is part of the Sprint Business Mobility Framework, which is being introduced after recent successes with some target customers over the past few months. 

Sprint will rely on Microsoft's Map Point Location Server (MLS), which can do a lot more than just mapping and routing information from the MapPoint Web Service.  The MLS software also can perform real-time tracking and management of highly mobile employees (such as "road warriors") or vehicle fleets.  This requires a partnership with a service provider and Sprint represents the first US operator to sign on.  Last year, there were many similar deals announced with service providers in Sweden and the UK.  Closer to home, Bell Canada was the first carrier to provide the service, in a deal announced last year.

Location and presence definitely are part of a recipe for a potential killer app: the possibilities are endless. Imagine an end-user getting pushed with some information when he/she is at a mall, being able to find out a movie is playing in that complex, and then finding out a person from his/her buddy list happens to be there as well, and can receive an SMS invitation to watch the movie together.  The IMS (IP Multimedia Subsystem) framework can be instrumental in allowing service providers to start experimenting with these so-called "combinational services".  Therefore, expect location based services to get more and more sophisticated in the future.

A week ago, Trapeze Networks announced yet another partnership, this time with Enterasys.  Trapeze was picked as Nortel's WLAN partner after Cisco bought Airespace (the previous WLAN partner that Nortel had).  As I already pointed out earlier this year, the WLAN space will still see some M&A activity happening this year, given the continued growth (despite the fact that Cisco pretty much owns half of the market).  So after seeing Trapeze engage in Airespace-like behavior and establish other relationships with vendors such as 3Com, Enterasys and D-Link, will Nortel risk having its own WLAN product roadmap derailed again (in the event that one of the above companies decide to acquire Trapeze)?  Stay tuned - we will soon find out the answer, but I am willing to make a strong bet that Trapeze is the next WLAN company most likely to be bought.

Note: Airespace had OEM agreements with Alcatel, NEC and Nortel before being snapped up by Cisco.

Note2: Proxim can also be a potential acquisition target, as there are continuing rumors that the company is in a messy financial situation.  Last week, Proxim shares dropped almost 60% after the company revealed it had "an immediate need" for additional financing, and might seek bankruptcy protection unless it is able to be sold or obtain enough financing in Q2 of fiscal 2005.  Many feel that the Orinoco product acquisition from Agere did not go well, and then, the failure of Proxim to introduce a WLAN switch further exacerbated the problem.  But Proxim still has some good IP (Intellectual Property), and the last drop in the stock might also present an opportunity for a perspective buyer.

I had an interesting chat with a friend of mine (from the VC industry) this weekend about the recent success of Huawei and other Asian vendors.  We talked about how India and China have become impressive powerhouses in the telecom world, given the recent trends of outsourcing, the vast human and capital resources available at their disposal and their focus on trying to achieve a huge technological leapfrog that would put them in equal footing with the West.  In other words, modernization of the telecom infrastructure was achieved without necessarily going through all the evolutionary steps that a country like Canada went through (a jump made possibly partially due to the advance of wireless broadband technologies).  Based on this, my VC buddy firmly believed that the next major Silicon Valley would be over in India or China (arguably one might already exist in Bangalore or Zhongguancun).

But interestingly enough, my friend never mentioned Eastern Europe.  And there has been a lot of action happening in that part of the world recently.  The region counts with a highly educated and motivated workforce and lower labor costs than Western Europe.  That makes countries such as Bulgaria, Czech Republic, Estonia, Hungary, Lithuania, Poland, Romania, Serbia, Slovakia, and Ukraine, among others, ideal for establishing both business and manufacturing hubs, particularly in the telecom space.

One success story is Estonia, where Skype has setup its lab with 75 developers, engineers (operations and network) and some customer service functions.  In fact, most of the company's development gets done in its Tallinn office, including new features that are on the roadmap, including video telephony.  So what would make Niklas Zennström consider putting his major R&D center there?  Well, for one thing, a history of success (his previous startup, Kazaa, also had its development in Estonia).  Niklas was impressed with the quality of the country's developers, which he felt was second to none.  Another factor was the favorable labor cost (a developer makes between €1,000 and €1,300 a month, which is about $1,230 to $1,600).  But there is a lot of innovation there.  Take even parking, for instance. The Estonian incumbent (EMT) has an innovative system for municipal parking: drivers pay via an SMS message to the parking authority.  The country's mobile teledensity is about the same as France's (65 subs per 100 people, compared to the French figure of 69).  According to the ITU, Estonia also ranks ahead of countries such as Hungary, Greece, Ireland, Poland and Spain in terms of Internet penetration.  These are impressive numbers and a testimony of how far along the country moved from a technology standpoint since its emancipation from the old Soviet empire. 

I will post future similar Eastern European success stories.  But one thing is for sure: the region presents an excellent opportunity to attract foreign high-tech investment.  Moreover, Eastern Europe is also very strategically important to the US (witness the acceptance of a lot of countries in NATO).  History has shown that wherever US interests are, the money tends to flow.  So aligning geopolitical interests with a talent-rich workforce, attractive labor rates, a more advantageous time zone difference (when compared to India or China), and a smaller cultural gap (vis-à-vis the same countries), and the answer becomes obvious: chances are the next Silicon Valley will be in Eastern Europe.

There was a lot of interesting coverage on the newspapers today on the aftermath of the CRTC VoIP ruling.  Mark Evans and Paul Vieira had a story on the National Post (where my opinion is stated).  I egregiously mentioned the fact that there is nothing in the ruling to prevent the MSOs from engaging in anti-competitive practices - ironically the very same behavior that the CRTC wanted to prevent the ILECs from adopting - not because I am actually 100% certain that the MSOs will do that.  Rather, my message was that should any player engage in such conduct, the CRTC always has the option to step in.  If that's the case, why not do the same with the ILECs and start from an even level playing field?  Also interesting to see the regulator quote right at the end of the article:

"No persuasive arguments were presented to the effect that ... the phone companies would not have the motivation, the means and the opportunity to engage in below-cost pricing that would have the effect of stifling competition."

Again, in an unregulated regime, should the CRTC notice this, they could always step in.  The MSOs would always hold the ILECs in check, until the equilibrium price is reached.  So would a pre-emptive salvo against the ILECs further the cause of competition?

Tyler Hamilton from the Toronto Star had a piece with the views from the incumbents, cable operators, and new entrants (Vonage, Primus, and startups such as Montreal-based BabyTel).  I am glad to see that Steve Dorsey, the BabyTel CEO (also from my alma mater, and a seasoned executive and entrepreneur in the telecom world) is right in synch with my own opinion that there is nothing in place to prevent predatory behavior from the cable companies.  BabyTel represented the lone voice of VoIP SPs pointing out this fact, given that Vonage, Primus, etc. were all praising the ruling.

Simon Tuck of the Globe and Mail also included a view of the dissenting voices in the CRTC in his article (ed. note: the final voting tally was 7-2).  Two commissioners (Andrée Wylie and Andrée Noël) were more avant garde in recognizing the fact that VoIP is different than regular telephone service. Ms. Wylie went as far as saying that the commission should have let market competition set the tone, rather than issuing “static” restraints on some VoIP providers and not on others.  I could not agree more with Ms. Wylie's opinion. VoIP should be an information service, not a telecom service.

And the final verdict of the CRTC VoIP decision announced earlier today was pretty much what most expected: nothing more than a rehash of their original position made public earlier last year.  The chances that the public hearings held last September would have changed the final outcome would be really slim. 

The key question is: will it really promote the growth of a nascent industry?  Again, the key mission of a regulator is to attempt to set the course for a market to be as competitive as it can be.  And by taking out the incumbent telcos (including Bell Canada and Telus) with a pre-emptive salvo, it is my belief that competition was not best served.  By constraining the ILECs to a certain VoIP offering price level, there is nothing preventing the MSOs (the other major VoIP players in terms of human and capital resources) from setting a price just below that level. 

From a pure microeconomics perspective, no matter what duopolistic model one chooses (Stackelberg, where competitors move sequentially, the Bertrand oligopoly, where competitors simultaneously choose prices or Cournot's duopoly game, where they choose quantities simultaneously), the "equilibrium" price level will always be smaller than for the case that one of the players (in this case the ILECs) cannot match the MSOs with a competitive move.  Let's take broadband access as an example in the US.  Some would model this as a Stackelberg game, in which the ILECs were the first to move (with DSL), with MSOs making a move in response offering cable access at a lower price.  It took the RBOCs a while to match the price, and eventually there were other pricing moves downwards.  But the fact is, there was competition - albeit not a perfectly competitive market. 

However, if one of the players is constrained on pricing moves (at least on their incumbent region), the resulting price would be undoubtedly higher than the Nash equilibrium of the duopoly.  This is just plain old simple Economics 101.  So the best prospects for lower VoIP pricing would be if the ILECs decide to attack each other's territory as a CLEC, albeit it might be costly for them (in terms of defending their own turf).

Mark Evans made a good point about which players got the early control of the VoIP market in the US.  After Vonage, Cox, Cablevision and Time Warner, the rest of the pack (about 396 players) each has roughly $70k in annual sales.  So what that really means is that the bulk of the market belongs to the MSOs and an xSP (Vonage).  Let's take this to Canada, in one region (say out west).  Shaw now has a $55 VoIP plan and is no rush to lower that down, because it does not have to.  Maybe it will a bit when Vonage will compete more, but that's about all.  Telus will not really be able to match any price drop in the future with their consumer offering, due to ruling.  And Bell West probably will not engage in a lot of competition in the Telus footprint (knowing that this move would be matched by a similar Telus move in Ontario and Quebec).  Is this the competition that the CRTC hopes to achieve?

Regulation is necessary as a tool to guarantee that players do not engage in anti-competitive practices and to ensure that some public service goals such as emergency service (E-911) and law enforcement (CALEA) are met.  The FCC showed that this model worked - and it would have been wise for the CRTC to have taken a similar approach. VoIP is still in its blossoming stages and innovation in this area should not be choked before the industry has a chance to grow.  Therefore, in my humble opinion, the CRTC should have created an even level playing field for all the industry participants.  And, in the event that the ILECs would engage in anti-competitive practices, the CRTC could always have the option of penalizing them in order to avoid a large-scale industry consolidation.

RIP, Western Digital WD1200.  Blogging has been light because my home hard drive decided to go kaput on me on Tuesday night.  I had it replaced today, but finished installing new software, etc. late, so there will not be time for too much blogging. 

But just enough to point out a few things.  First of all, the fact that probability is really no more than a religion: either you choose to believe in it or not.  For a low-event probability (e.g. 1 in 1000), for 999 people out of 1,000, the probability is zero and for 1, the probability is 1.  So what does 0.001 really mean?  Similarly, what does an MTBF (Mean Time Between Failures) rating really mean?  Well, if you choose to believe it, it means that if there are 8,760 hours in a year (365 days by 24 hours per day), and if we have a HD with an MTBF of 50,000, that means that on average, that HD should run for 5.71 years without any failure.  Not bad, except that just like any other statistic or probability, there is an element of "religion" here, as this figure (5.71 years) represents both an average and an estimate.  There is always the risk of odd statistical aberration or other anomalies that are smoothed out by statistical averages. 

Moreover, sometimes, environmental factors can play a role as well, and elements such as heat and power can definitely have an impact.  What about the PC configuration?  Ever heard of a Microsoft Office utility called Findfast?  As written in this PCWorld entry:

" Findfast occasionally indexes every Office document on your hard drive. It's supposed to work only in idle time, but what it thinks of as idle time (when the hard disk isn't working) usually doesn't jibe with how you see idle time (when you're not using the PC at all). You can't help but notice Findfast doing its job: Suddenly your hard drive starts spinning wildly when you're just typing or reading."

Funny enough, my HD went when I was using Microsoft's defrag utility, although that might have been just a coincidence.  But I have turned off Findfast on my new Seagate HD.  However, I am still choosing a new backup source as well.  Maybe Om Malik or Tom Hardware's Guide can come to the rescue, but in the meantime I am open to suggestions.

Update (21/05): A TF reader e-mailed me that Findfast was discontinued after Office2000, having been replaced by the Microsoft Windows Indexing service.

For many followers of the speech industry, this was a scenario that was envisioned years ago as a way to further establish the speech technology industry, namely a merger between giants (and arch-rivals) SpeechWorks and Nuance. 

Well, that was no longer possible after ScanSoft bought SpeechWorks back in 2003.  At that point, ScanSoft was a MA-based imaging company that started up gobbling up speech companies such as L&H and Philips Speech Processing.  But why an imaging company with expertise in technologies such as OCR (Optical Character Recognition) would want to delve into speech in the first place?  Because many of the algorithms used in OCR have some commonality with those used in speech processing (e.g. recognition). Similar discrete-event simulation and Markov chain models can be used in both cases.

Fast forward to 2005, and the news today was that ScanSoft was about to acquire Nuance for $221 million in a stock and cash deal.  And hence, a speech giant was born, having a full portfolio consisting of engines in speech recognition, text-to-speech and speaker verification.  In the ASR (automatic speech recognition) market alone, the new entity will have a 75 percent share of the market.  Will regulators allow this transaction to go through?  Probably so, due to the increased traction of other vendors such as IBM and Microsoft.  But the integration of these two companies will be a challenge, as they compete in many product lines, so there is a lot of duplication.

In the meantime, another interesting thread on this story is that private equity company Warburg Pincus will buy $75 million in ScanSoft common stock in order to help finance the merger.  Warburg Pincus is the same company that has invested in companies such as Avaya, BEA Systems, Proxim, SS8, and Veritas Software, among others.  The company obviously believes in the potential of the speech industry, particularly with the proliferation of shrink-wrap or built-in small vocabulary speech engines in mobile devices. 

I just wanted to write a quick note to acknowledge my gratitude for the Tucows team to keep adding value to its Blogware software. The latest build has now support for trackback anti-spam. Spammers apparently had raised the "art" of spamming to a new level (i.e. the spam links on comments were not enough, and they resorted to doing trackbacks from blog articles automatically linking readers to the spammers' web pages. So Blogware came to the rescue of bloggers willing to keep their sites spam-free: spammers can now also be blocked from trackbacks if their sites are added to a block list (this is managed in a very straightforward way from the Blogware dashboard control).  Spam trackbacks can now be easily deleted an blocked at the click of a mouse button.

Note: It would be nice to capture these updates in features in the User Guide, so one idea I would like to suggest is that of a Wiki for a Public Blogware User Guide.  I believe there are plenty of users that would gladly give a bit of their time to contribute to such a Wiki.

Earlier this year, I had the opportunity to catch up with Owen Matthews (Sir Terry's son and CEO of Vancouver-based startup NewHeights Software, a maker of PCM - Personal Communications Manager - software).  It was a great chat - Owen certainly showed some of the same character traits that have made his father so successful in the telecom business: enthusiasm, persistence and vision.  The interview can be viewed here (ed. note: no registration necessary) and it provides us with a great insight into the mind of an up-and-coming tech entrepreneur.

In case you are not familiar with NewHeights, the company designs a personal desktop application (Desktop Assistant) that manages an end-user's communcations.  Desktop Assistant manages voice, presence, IM, directories and all other aspects related to an end-user's communcations needs. The company has gained quite a lot of acclaim over the past year, including a deal with Bell Canada, acclaim from the VC industry and partnerships with vendors such as Ubiquity and Marconi.

Linux enthusiasts got yet another reason to smile when mobile chipset giant Qualcomm announced on Thursday that it would support the operating system on its chips for CDMA mobile handsets.  The built-in Linux support will come on the company's Mobile Station Modem (MSM) 6550.  Running Linux on the cell phone eliminates the need for a separate co-processor.  Qualcomm also plans to embed Linux functionality in future chipsets that support future generations of 3G (i.e. HSDPA and 1xEV-DO Rev. A), which will likely be introduced by mobile operators around 2006.  Up to now, Qualcomm phones typically only had its own proprietary OS (called BREW real-time operating system), so this is the first time that the company supports another third-party OS. 

The CRTC got some praise by issuing its VoIP operator 911 service mandate, albeit the Commission has moved slowly in some areas such as VoIP and local number portability.  The sluggishness in taking and implementing a final stance on VoIP has been blogged ad infinitum by many, and the overall consensus is that the CRTC will hold its initial view on the subject.  In other words, that the ILECs will be subject to the same rules and regulations as traditional voice services in their own incumbent areas. 

This will restrict Bell and Telus inside their own regions, but not so outside their incumbent areas.  However, the costs to deploy VoIP remotely can be quite high, so there probably will not be too much action in that direction.  This will give MSOs (most noticeably Rogers, Shaw and Videotron, among others) and independent operators (such as Vonage and Primus) a chance to take market share away from the incumbents. 

Subjecting ILECs to having to file tariff applications is onerous and limiting to them, because every time a player wants to change the rates, it must file an application.  The new pricing, if granted, has to be applied across the band.  The only way out of price regulation is if the CRTC believes that the particular market is competitive.  Then, price regulation can be achieved via a forbeareance application, a slow process that could take up to two years.  Therefore, the only recourse of the ILECs (other than forbearance) is more aggressive bundling and/or pricing.  So under this scenario, we can expect more Michael Sabia-like moves of offering 1,000 monthly minutes worth of LD in North America for an additional $5.  The cablecos and other VoIP service providers will have an excellent opportunity to take market share away from the incumbent telcos in the highly competitive residential voice market.

But the key question is: will the key goal of creating a market as perfectly competitive as possible be served if the CRTC's initial stance is held?  I have already stated my case and believe that heavy-duty regulation should not be applied.  In due time, however, the details will be uncovered and we will know which way the CRTC is leaning towards.more »

Back in March, I wrote the following in a note regarding the importance of five 9s reliability:

"Of course five 9s is highly desirable, because of the possible consequences of a service outage (even as temporary as it might be).  Here, the notion of expected value takes hold - i.e. even starting with a low probability event, when factoring in the bad consequences associated with it, the expected value could be high (e.g. someone who is relying on VoIP service as a primary line and all of a sudden cannot call an ambulance due to a service interruption)."

Not surprisingly, a Florida couple is trying to shut down Vonage service after they could not reach 911 during an emergency, resulting in the death of their baby girl (hat tip: Om Malik).  Regardless of the stance of a regulatory body on VoIP ("light" versus "full" regulation), there are a few social obligations that have to be fulfilled no matter what.  E911 and CALEA should be addressed (at the very least, if there is no reliable E911, consumers should be warned, and any provider claiming to offer this feature is obliged to comply with the strict guidelines for the enhanced emergency service.  If it cannot, then it is incumbent upon that provider to explicitly state that the end-user is on the hook for another E911 alternative (e.g. cell phone).

Three states (Texas, Michigan and Connecticut) are now taking action against Vonage due to the E911 issue.  The emergency service does not come pre-installed with the basic Vonage VoIP package; in order to activate the service, users need to provide the company with their addresses. In Vonage's defense, the E911 technology is typically handled by the local carriers, and getting them to open up that technology is a challenge (as claimed in this Technology Review article).  Thus far, only Bell South has been responsive, albeit it is demanding Vonage to get a CLEC certificate.  In Rhode Island, Vonage could get an E911 trial off the ground because the state owns and operates their system.

Also not surprisingly, the new FCC Chair is rumored to propose at the May 19th meeting that the Commission should require VoIP service providers to begin delivering 911 calls by September.  In other words, Martin would give a 120 day warning for all these VoIP operators to implement the service or else... Now, the "or else" clause can range from explicitly state that the VoIP service is strictly "add-on" and not a "replacement" of traditional telephony to a drastic, outright "shutdown" of the service.  I am particularly in favor of the former rather than the latter measure.  Under such a ruling, Skype, which clearly states that they do not recommend that people drop their regular phone, would be OK.  But in either case, the FCC should demand that RBOCs should open up their E911 centers to VoIP operators - and why not?  Those ILECs are losing money with E911, so this should give them an ability to cover some of their costs.

Business Week Online's blog (Blogspotting) has had quite a few interesting articles since its recent inception. One of them in particular struck a chord with yours truly, namely the one about the crunkie concept.  The idea is to post entries to a blog that can be pushed to cell phones of members of a buddy list whenever any of them are present in certain locations (for instance, a message saying that a certain product is now on sale whenever a friend walks through a shopping district).  It is one of the first attempts to connect presence and location to generate a new service - interestingly enough, this blog entry is called a Crunkie.  The product is the creation of Wavemarket - an app company funded by Qualcomm and early-stage VC firm Draper Fisher Jurvetson (which also has invested in companies such as Skype and SocialText).

Dragos wrote about an interesting site in his blog (@rgumente): GoogSpy, a tool that allows a company to see which keywords its competitors buy from Google (hat tip: The Marketing Playbook).  This is really quite an interesting concept and a way to find out a bit about what the competition is doing. 

I decided to do some experimenting and searched tiger (for the example below).  The results show that 5Tigers.org (the Tiger Information Center) does not pay to be #1.  Then I ran IP PBX as a search word and discovered that vendors such as Siemens, Avaya, Nortel and 3Com pay for IP PBX as an adword from Google (at least according to GoogSpy).  Funny to see other vendors such as Cisco or Alcatel missing from the list.  But even more interestingly, from the above, only 3Com makes it to the Top 10 Search Result list. 

Jack Kapica wrote a story in yesterday's Globe and Mail about how Robert F. Young (the Red Hat founder) and now owner of the Hamilton T-Cats offered to help Apple CEO Steve Jobs. It turns out that TigerDirect, an online retailer of computer peripherals and related accessories, is claiming that Apple's use of the word "tiger" (the name of Apple's most recently introduced OS) is a copyright infringement of TigerDirect's trademark name.  TigerDirect lawyers are arguing  that as a result of the Tiger OS, the company is losing the top positions in search results of engines like Google, Yahoo! and MSN.  (ed.note: Wow - this is a first one.  For kicks and giggles, I ran a search on my own PC and the first result was neither TigerDirect nor Apple: it was the Tiger Information Center ;-).  So Mr. Young offered to license the Hamilton Tiger Cats (or T-Cats for short) historical use of the word "Tiger" to Apple free of charge.  The T-Cats were called the Hamilton Tigers Football Club, established in 1869. 

I wonder if the Detroit Tigers baseball club might also have a say in the matter, but all jokes aside, this is the first instance of a lawsuit mentioning positioning of search results as an element to indicate confusion due to trademark infringement.  In the meantime, a brilliant move by Mr.Young to get some great publicity for his team, and to also call a spade a spade.  Maybe Apple will reciprocate and send a few PowerBooks to the Hamilton T-Cats' coaching staff or put a few ads in Ivor Wynne Stadium.

Om Malik had an interesting piece on the ascent of Huawei, particularly on the coattails of the impressive win in the BT 21 CN RFP sweepstakes.  Huawei was one of the underdogs in the access piece (most folks had expected Alcatel and Marconi to be the winners in this category instead of Huawei and Fujitsu) and in the optical portion of the BT tender. 

Undoubtedly, the selection of Huawei in the two segments of the BT network (access and optical transport) clearly signals a validation of the quality of their portfolio, along with the ability to support a large European operator.  But the bigger questions to be asked are: 1- Does this victory also indicate a growing long-term presence of low-cost Chinese suppliers into Tier 1 accounts? and 2- Does the win also trigger a negative trend for all major non-Chinese suppliers (such as Cisco, Ericsson, Juniper, Lucent, Nortel, etc.)? 

The answer to the first question is definitely yes, but a more interesting consideration is that thus far, Huawei was picked for areas that have already been commoditized due to very high competitive pressures.  These low-margin LOBs include broadband access and optical networking (as in the 21 CN case).  However, other areas such as softswitching, network intelligence and routing are apparently safe thus far.  However, that is how most new entrants in a market begin attacking the bases of older, more established vendors - first with the low-margin products, and then, moving up the value chain.  So while the presence of Huawei in long-haul transport implies a potential margin erosion of vendors such as Ciena, the other vendors will be watching this development closely - because they know they can be next.

The second question is a bit more challenging, as other carriers might start asking: "If Huawei's gear was good enough for BT, then why can't it work for us?" - and traditional vendors really need to get a good handle on that question.  If more telcos start buying Huawei equipment, then Western vendors would really be faced with an uneven playing field, given the price differentials (due to the artificially undervalued Yuan) and the massive loan guarantees and subsidies being given to Huawei by the Chinese government (to the tune of US$ 10 billion).  This will not mix well with the already fragile telecom sector.  So what can these vendors do?  Lobby for Embraer-style subsidies (ed.note: Embraer is the Brazilian plane maker which receives a great deal of incentives from the Brazilian government)?  Press the WTO, their governments and other authorities to put pressure on the Chinese to float the Yuan?  Move up the value chain and focus on services and software/applications?  Partner with these players?  These are challenging questions, and their ramifications are even more complex.  But the one clear result of this increased competitive threat is margin erosion and lower pricing: carriers are getting to be very good at playing vendors off each other. 

Vendors such as Huawei, UT Starcom, and ZTE, among others are buying assets (CommWorks, and now even perhaps Marconi), partnering (3Com) and now winning bids in major tier 1 accounts (such as BT).  Their threat to North American and European vendors is real and has finally arrived.  They represent formidable competitors that have great resources (human and capital) at their disposal.  So we better start getting used to the idea of including Huawei in the potential winners list, even for carrier RFPs on this side of the Atlantic.

Earlier today, Avaya (NYSE:AV) and Juniper (Nasdaq:JNPR) announced that they formed a global strategic relationship to deliver enterprise class VoIP solutions to enterprises.  The partnership will leverage Juniper's routing and security solutions with Avaya's enterprise communications equipment, with each company being able to resell each other's products and services.

From Juniper's perspective, this deal enables the company to tap into Avaya's large installed base of PBX / IP PBX gear, and will be a catalyst to more sales of Juniper's enterprise routing solutions (including products such as the J-Series enterprise router).  This move is another piece of Juniper's puzzle in its quest for expanding its enterprise networking portfolio (after NetScreen - firewalls/VPNs, Perbit - WAN acceleration and Redline - application front end technology).

Avaya gets another relationship in the routing space (where it already had a deal with Extreme), and a best-in-class partner to jointly develop products geared to enterprise employees in remote, branch or mobile locations.  Of course, Avaya maintains that the relationship with Juniper is "complementary" to the one with Extreme, but that remains to be seen.  A more interesting consideration is whether or not we will see a subset of the Avaya call processing software being productized on a future Juniper routing solution targeting the SME market segment, and what is the time-to-market for such a product.