Telcotrash

No good news for VoIP in Italy

TelecomPaper reports on the new guidelines for VoIP in Italy as defined by the Italian Authority (where I wasn't able to find the original press release). VoIP will be subject to regulation if it principally is a PSTN replacement service (looks like PSTN, feels like PSTN, ...).  Only P2P calls between computers will be exempted. I am wondering how that will effect e.g. Skype and their SkypeOut/SkypeIn service (would a solution be to break Skype into two legal entities to escape regulation at least for the P2P part?)

The decision, at least at it is described on TelecomPaper, is definitely a ruling in favour of  Telecom Italia, which already offers Voice over ADSL with its "Il Telefono di Alice", so they can actually corner the market by leveraging their incumbent market power. For obvious reasons, Il Telefono di Alice doesn't include what would be call-by-call or preselection services in a PSTN world, and doesn't provide access to emergency services either. The new ruling however requires VoIP service providers to enable emergency number access, and nothing easier than that if you bundle it with a POTS line, and nothing better for your business than that when you are sitting on a pile of aging copper lines in the last mile and an IP-based core network using MLPS, that way you have the best of both worlds.

BitTorrent Includes Search Function

Wired reports that BitTorrent will include a search function on its website within the next two weeks, a check on the website however reveals that this has already happened. So no need anymore to be upated about the best torrent websites. Check out James for news about BitTorrent in the past.

T-Mobile Rolls Out 500 Hotspots in the Netherlands

T-Mobile Netherlands announced that they have rolled out 500 Wi-Fi hotspots in the Netherlands. The network will be extended to about 800 hotspots by end of 2005 (for those readers who understand Dutch, read the press release here). T-Mobile offers a subscription service with a flat monthly fee of 29,95 €, existing T-Mobile customers receive a discount and pay only 19,95 €. Next to the typical places such as hotels, Starbucks and McDonalds, T-Mobile's service will also be available in many of Holland's numerous marinas.

Vonage Prepares VoIP Service for Businesses.

PC World reports that Vonage has quietly been preparing a business offer called "Business Plus". The business segment seems to be defined as anything between 2 and 100 lines, so principally the SMB market. The offer is composed of a set number of lines and minutes for a flat monthly fee. According to the article, Vonage is currently testing with 500 friendly clients.
Just some days ago I posted about the IPO of CBeyond which is also targeting SMBs with its VoIP service. Seems that the players are indeed expanding their target beyond the consumer segment.

Caspian raises $55 Mio. in Equity Financing

(Via VentureWire) Caspian Networks has secured an additional $55 million in funding, giving it $317 million in total venture capital since its founding 1999. This new round of funding includes existing investors Oak Investment Partners, U.S. Venture Partners, Morgenthaler Ventures, New Enterprise Associates, Alloy Ventures and ABN-AMRO. Caspian will use the new capital to expand and strengthen global marketing and sales initiatives.

Caspian produces routers - but not the usual kind of routers. I've summarized what is written on their product homepage. Their main idea is the concept of "flow state" architecture: Caspian's technology recognizes and forwards streams of related IP packets together as flows. A flow is a sequence of packets sent by a specific application from one IP address to another. While conventional routers perform routing table lookups and forward every packet they encounter individually, Caspian performs one lookup for the first packet of any new flow it doesn't recognize, and switches all subsequent packets of that flow according to the relevant quality of service (QoS) assigned to that flow.

Caspian's technology is somewhat contradictory to the paradigm of the dumb network, as it adds intelligence to the core of the network. This is the more surprising, as one of Caspian's founders is Lawrence Roberts. The name Lawrence „Larry“ Roberts probably rings a bell – along with Bob Kahn, Vint Cerf and Leonard Kleinrock, he is one of the four people considered “founding fathers” of the Internet – or the concept of packet switching while keeping the core network dumb. In an interview back in 2001, Roberts already pointed out that with Caspian, he planned to change the general religion of adding intelligence at the edge.

Caspian and Roberts himself got some additional attention when their study of Internet traffic was published in 2001, basically saying that Internet traffic is growing 4x per year. Andrew Odlyzko had quite some remarks on that study and subsequently produced a research paper (pdf) on Internet traffic growth. (The Caspian study has been removed from the website, or at least I do not find it anymore, but I do have a presentation in pdf and ppt of it, drop me an e-mail at telcotrash@gmail.com and I can forward you a copy).

I wonder if Cisco could be a potential buyer of Caspian and its technology. Ammar Hannafi, a general partner of Alloy Ventures, only left Cisco recently to join Alloy. Maybe somebody can comment on how and if Cisco (or e.g. Juniper) could benefit from Caspian's technology.

WiMAX implementations

The folks over at dailywireless have prepared an excellent overview of current WiMAX implementations, service plans and equipment.

Cbeyond Communications files for IPO

Freshly delivered into my mailbox from VentureWire (requires subscription):

"Cbeyond Communications Inc., a provider of voice, data and applications over broadband for small businesses, filed an initial public offering Monday to sell up to $172.5 million in common stock, according to a Form S-1 filed with the Securities and Exchange Commission."

Admittingly, I hear the first time about Cbeyond. Here is what Cbeyond make their money with, according to their website:

"Using Voice over Internet Protocol (VoIP) and a 100% Cisco network, Cbeyond delivers to small business customers (an entrepreneurial class of customer with 4-200 employees - generally using 4-48 phone lines) an integrated package of high quality local and long distance telephony services, high-speed, T-1 Internet access and Internet-based applications for about the same price that small businesses typically pay for local and long distance phone service alone."

So wrapped-up, Cbeyond offers connectivity, a dial-tone and managed services, everything IP-based. This is the beauty of IP - it's end-to-end nature extends scope (as in number of services) and reach (as in reach into the customer's premises) of service offerings, and it enables smaller players like Cbeyond to enter markets formerly exclusively served by the incumbents (or not, that is).  Initial backers included Madison Dearborn Partners, Battery Ventures and VantagePoint Venture Partners. Cbeyond was founded in late '99 and pocketed a total of $136 million in VC.

I believe the IPO and subsequently the stock price of Cbeyond is going to be an interesting thing to follow up on, as they are going after a segment that has gained some attention from the big ones: Targeting large corporations is a no-brainer strategy and the SME market is something both telcos AND equipment vendors like Cisco, Siemens and Alcatel want to go after. The telcos have started some time ago to reorganize their sales force and product delivery to target this market segment, as this is (may I say finally) considered a natural evolution of their business, and I am quite positive that very soon we will see the respective offerings from the equipment vendors well beyond their current beachheads and investor day power point slides. For them, it's an opportunity to move up from their ever-more commoditized hardware business (did anybody say Huawei?) to the higher-margin solution market. It will be interesting to see what happens when e.g. Cisco starts attacking Verizon's customers base when Cisco is one of Verizons suppliers.

Cbeyond's S-1 filing can be found on the SEC website through EDGAR search (direct link that resulted from my search). I didn't have time to go through the filing, but hopefully will be able do so some time this week: the financial statements will be interesting to read, especially for valuation purposes and to see what return Cbeyond will generate for their pre-IPO investors.  

Correction on Skype bandwidth usage

DG Lewis rightly corrects me on my last post on Skype's bandwidth usage: it was actually me who got it wrong. I principally got the math right (and DG points out to a more general practice in converting bits and bytes), but I misinterpreted KBps (kilobytes per second) as kbps (kilobits per second) - so I wasn't paying attention, and the article "Why Skype for Mobile isn't a Big Deal" on TheFeature was actually correct in pointing out the bandwidth requirements. Apologies for my arrogance.

A note on Skype, mobile connectivity and bandwidth usage

Only today I stumbled over an article that was published in April on "TheFeature" titled "Why Skype for mobile isn't a big deal". TheFeature is owned by Nokia and claims to be "the mobile Internet industry's premiere thinking space" according to its own About-page. A promising start. Here is an excerpt from the article:

"There's widespread perception that Skype clients for mobile phones would cause a seismic shift in the mobile industry. But there's a bit of a disconnect between expectations and reality. [..] "Free" on the wired Internet doesn't translate to "free" on mobile. Few wired Net connections are charged on a per-packet basis, while that's still very much the norm for mobile data -- and even many so-called "unlimited" plans have caps that would be difficult to hit with everyday mobile surfing and e-mail, but could be used up by Skype pretty quickly. Skype says its software uses 0-0.5 KBps when idle, or 3-16 KBps when on a call. That's 30 KB per minute when idle or beween 180 and 960 KB per minute on a call -- which on many mobile networks would run up a huge bill quite quickly. "

Wrong. To use the author's own words, there is a bit of a disconnect in his calculations between bandwidth (measured in kbps) and storage (measured in KB) and consequently between his deductions and reality. Multiplying the kbps by 60 does NOT lead to a KB value per minute (as the author has done).
There are 1.000 bits in a kilobit (10^3 bits) and 1.024 bytes in a kilobyte (2^10 bytes), while one byte consists of 8 bits (read Bob Bemer's explanation why a byte is called a byte and why it has 8 bits, he helped inventing it). So to convert from a bit-value to a byte-value you need to divide the bit-value by 8. Hence, 1.000 bits are 125 bytes. So by using the author's figures, a bandwidth rate of 16 kbps for Skype would actually mean transfering 2.000 bytes per second or 120.000 bytes per minute or exactly 117,1875 KB per minute - a far cry from the 960 KB per minute claimed. (Here is a site that easily converts bits and bytes)
Would this still run up a huge bill on a many mobile networks? In Germany, Vodafone D2 offers the UMTS Mobile Connect Card, the tariff with the lowest MB consumption is the Vodafone-Volume packet for 9,86 € per month, which comes along with a 10 MB data volume (or 10.240 KB). That means each KB data volume costs 0,0963 Cents, our one-minute 117 KB call therefore would have cost 0,11 Cents. The pricing of Vodafone's UMTS data tariffs is degressive, 500 MB cost 110,20 € per month. Do the math yourself.

The Skype ecosystem

Skype published a press release this morning on its website:

"Fiberlink Communications Corp. has partnered with Skype to advance the next stage in mobile working for enterprises worldwide. Fiberlink, a leading innovator and trusted enterprise partner for secure mobile workforce solutions, today unveiled a strategic partnership with Skype designed to make it easy for companies to offer Internet-based telephony services to their mobile workforce using Fiberlink’s secure mobile access software. [..] Fiberlink plans to bundle Skype’s telephony with Fiberlink’s Extend360™ mobile access software and offer it as a value-added service to its enterprise customers. In addition to this new service offering, Extend360 will ensure higher levels of security during Skype peer-to-peer transactions, protecting against security threats. "

Two things come to my mind:

1. Over the last two years, Skype has slowly built an extensive ecosystem of partners around its client - the right thing to do in an all-IP world where applications are decoupled from the network. I haven't really kept track of all its partnerships, but fortunately they are all summarized on their website: the partnerships are going through the whole value chain: devices (Motorola, Plantronics, RTX Telecom, Buffalo, i-mate), end-user connectivity (Broadreach), wholesale IP connectivity, peering and PSTN interconnection(Colt, iBasis, Level3, Teleglobe, Cable & Wireless, B3G Telecom), consumer-portal services(tom.com), payment services other than credit cards (Moneybookers), co-branding agreements (Hutchison), operating systems (Xandros), etc., etc. And don't forget their API, which opens Skype up to the world's programming community - something Google recognized to do and something Apple and Netscape should have considered doing long time ago.

2. they have moved away from a "one-size-fits-it-all" strategy by simply providing a download link on their website with good faith in DFJ's beloved viral marketing to a segment-driven approach (I couldn't resist using that term...): as mentioned above, Skype has signed co-branding and partnership agreements with companies that offer consumer-oriented IP-based services (e.g. portals, Internet access, mobile access), usually with a geographical focus on IP-literate regions, e.g. Daum in Korea, but Asia in general. They have started addressing the SME segment e.g. with their partnership with CDC Group, which will distribute Skype-branded hardware in their retail stores in Italy (increasingly more IP-literate, one of the very few countries in Old Europe that with FastWeb has a significant FTTH footprint and by the way finally rolled-out in the city where I have my "summer residence", yeah!), and in a second step integrate Skype into CDC's Dexgate VoIP platform. One of Skype's main features and also the main reason that causes quite some headaches for people running corporate networks, the NAT traversal, has been documented in their guide for network administrators (pages 3 and 4) (do read Aswath's post on that one), which should relieve them a little bit of their security headaches and make Skype more acceptable in the corporate world. And the deal with Fiberlink announced today points into the same direction: mobile workforce enablement. They have also gone into vertical markets, take for example the deal with Guillemot Corporation which will bundle Skype with its peripherals for game consoles.

In short, this company has a strategy. And not only that, they seem to be hiring the brains to execute it (see James and Jeff). So what's missing? The cash? Looking at Vonage's recent funding craze, cash for companies with no earnings, no history and no comparables seems to be a low-hanging fruit. Maybe DFJ will do another cash infusion soon, but I would also consider placing bets on Mr. Li Ka-shing, who not only controls both Tom Group and Hutchison Global Communications, but also 3, his mobile unit which needs some traction. Only recently in the Italian TV Show "Le Iene" ("The Hyenae" - French TV has the same show, a mix of investigative journalism, reality TV and sensationalism) it was demonstrated with a mobile phone from 3 how a UMTS data connection could be used to run Skype on a Smartphone and to do voice arbitrage compared to 3's normal voice prices (as I said, increasingly IP-literate..). Maybe somebody has forwarded the clip to Mr. Ka-shing.