VON Spring 2005
By John Latta, WAVE
0518 5/6/05
San Jose, CA
March 7 - 9, 2005
The conference had only partially kicked off when some
trends became evident early. One is that VoIP is another land rush to
seize market positions enabled by technology. The VCs are swarming over
the space, the incumbents are both in and out and regulation in turmoil.
Moore’s Law and software, i.e., SIP, hope to finally drive down
the cost of a telecommunications application. This reeks havoc with the
incumbents, i.e., phone companies, who are masters at protecting their
turf. Put in another way, it is David against Goliath. But this happened
before in the Internet bust era. Now it is on the application layer with
voice.
At the Telecom Policy Summit, the appeal was for regulatory
Clarity. When Vonage CEO, Jeffrey Citron gave his keynote he ended is
talk with an appeal to the audience to write their members of Congress
to stop this madness of death by a 1000 regulators and endless law suits.
Sitting the room at the Telecom Policy Summit were VCs who stated they
have $1B+ to invest if they had a chance. It was all about clarity, clarity
and clarity of the regulatory environment.
VON Spring 2005
This is Jeff Pulver’s baby. No other way to say it.
Jeff is passionate and believes VON – Voice over the Net will be
a success. His company pulver.com is at the center of the VoIP market
including a successful petition to the FCC for a VoIP service. This is
the largest VON event ever.
This is a U.S. focused event. It is all about the U.S.
market in VoIP. There is a VON Europe. As we hear of the trials and tribulations
of the market, one must be continually reminded this is the U.S. and
it creates its own unique environment.
Regulators Play a Central Role
The Telecom Policy Summit was a pre-conference workshop
that lasted all day. The WAVE sampled it. Blair Levin, former FCC Chief
of Staff, gave a compelling review of the status of VoIP. The theme was “I
do not love you.” This is a play on words which was his assessment
of the chances of VoIP to gain a significant financial position in the
market. His valuation was based on the ability of VoIP to gain a favorable
regulatory environment so that it can grow – the rating was .5
on a scale of 5. Not what most were here to hear.
Random chaos is the best way to describe the regulatory
environment which VoIP is launching. For example:
The FCC UNE-P decision is widely seen as a massive failure.
The major challengers to the incumbents, AT&T and MCI, are now
moving into the hands of incumbents. There is no better sign of failure
of policy than to see competition collapse.
Each of the FCC VoIP decisions, Vonage and pulver.com,
was positioned by the FCC on the panel today, as very narrow. One of
the reasons is the limitations which govern the ability of the FCC
to rule, especially in jurisdictional matters, i.e., state vs. federal
telecommunications issues.
VoIP is seen as the tip of the iceburg of IP based services
which must be addressed. The FCC has a NPRM on this issue but it is
unclear how soon there will be clarity in regulation.
The Telecommunications Act of 1996 is also seen by many
as a failure. There is a push to make changes to it and the telecommunications
law in this session of Congress but the panel of Congressional staff
had a mixed assessment on the prospect for passage.
In response to a question from the WAVE, Blair Levin
stated that the U.S. does not have the political will to make broadband
a universal service.
Many are buoyant that the FCC moved so quickly on the
port blockage issue reported against Madison River which effectively
disabled Vonage service by this small RLEC. Yet, the level of enthusiasm
that this was a precedent was much less.
A VC asked the question – VCs are sitting on $1B
in Investments. What assurance can we get that our companies with technology
can will have a fair chance in the market. The answer was “go
do it.”
The Supreme Court will shortly hear National Cable & Telecommunications
Association v. Brand X Internet Services, No. 04-277, and FCC v. Brand
X Internet Services, No. 04- 281. These cases are to resolve the issue
about the cable companies opening their networks to competing ISPs.
On the panel today, the FCC representative stated that it will be good
to get a final resolution of this issue. Of course, this would only
be the case if the Supreme Court makes a strong decision on the issue.
There are many parallels with VoIP over broadband phone lines.
One of the issues is that VoIP players are small companies.
If new spectrum becomes available from the DTV transition and this
spectrum is auctioned off, it is difficult for small companies to compete.
Those with the most money are the incumbents. It was stated from the
panel that all attempts to make the auction process more open to small
players has been a failure.
Given the inability of legislation and the courts to stem
the strength of the incumbents each little straw of competition is cheered.
Today this is VoIP. But this faces an enormous battle to fairly compete.
Yes, companies cheer for Vonage but the target of a 1m lines by the end
of 2005 is still small. It is only a threat and a small one at that against
the incumbents.
Vonage – A Winning Player
The room was packed. Jeff Citron, CEO of Vonage, gave a
smooth compelling talk.
Vonage has 620,000 subscribers today and seeks to have
1m subscribers in 2006.
It has 35% share in the VoIP market. The rest of the
share is with the cable companies: Cablevision, Time Warner and others.
Vonage now has a presence in Canada and the UK and plans
to enter Asia.
Its phone service is rated 4.1 on a scale of 5 and Vonage
wants to be even better. Verizon is only 4.0.
As a result of a partnership with TI, Vonage has been
able to gain many devices for the home which support Vonage. This includes
Cisco, Motorola, Linksys and X-Pro Soft Phone.
New products are coming soon. These include a wireless
home phone from VTECH. The ID was very good. Another phone is the Utstarcom
F-1000 which can be used at hot spots – that is, a WiFi phone
for Vonage.
Vonage plans on entering the video market and they will
launch the Viseon Visifone.
As a consumer service company, Vonage has global distribution
which uses direct marketing, channel strategy, VAR and private label.
Jeff was strong on the need for a “deep, multi-channel vertical” distribution
approach.
The marketing message is:
Not a traditional phone company;
No nickel and diming;
Empower people;
Unlimited calling;
Free, innovative features;
Mobility – phone service where you want it; and
Access independent.
The keynote ended with an appeal to get involved. Write
your congressional representative:
Gain equal access to E911;
Protect a policy of net neutrality;
Fix the USF subsidy; and
Make LNP faster for VoIP.
The audience loved it. Vonage is David and most in the
audience are also David’s. Let competition work for market share.
But in reality is very hard. Competition flourishes when the playing
field is defined. Thus the appeal for clarity, clarity and clarity.
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