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The dictionary definition of the "endgame" is: the stage of a chess game after major reduction of forces. I would add that it is the point where the player with the advantage starts to push hard for the win, whereas the other player is now playing for a draw. I bring this up because I think we are now approaching the start of the endgame in the unified communications (UC) industry.
I think that there are two parts to the endgame, the first is in the network layer and the second is in the application layer. This paper will deal with the former; next time I will cover the latter.
After reviewing a number of papers that I have written over the last 18 months, I realized that the overall message is somewhat confusing:
My UC Deployment Market Data service has convinced me that UC is in rapid deployment. Yet the notions that UC systems don’t interoperate and yet are rapidly replacing other forms of corporate communications are clearly at odds with each other. So that caused me to consider:
At this phase in the communications technology transition, it is difficult to see how it will all turn out. It is understandable if the market is confused about the future of UC since I appear even to have confused myself. Although my crystal ball is just as cloudy as everyone else’s, I think I have developed a ‘unification theory’ for the future of UC, so I thought I would throw it open for comment.
Enterprise communications in its widest sense (i.e. the transmission of information) is now all about IP. Over the last 20 years use of telephony (including FAX) in the enterprise has been steadily eroded by a collection of IP-based technologies; including web-sites and online commerce, as well as email, instant messaging, video conferencing, web collaboration, etc. At the same time, enterprise telephony vendors failed to create significant new value (if you ignore ‘IP telephony’ which, for the end-user, was an identical user experience). The net result is that few, if any of the tier 1 PBX vendors continue to exist in a form that would have been recognizable 10 years ago: bankruptcies, divestitures, mergers and acquisitions have all been a part of the consolidation and decline of an industry that formerly provided enterprise communications platforms. Few, if any, of the former PBX vendors would classify themselves as anything other than UC vendors.
Just as analog television is being shut down in favor of digital television (between 2006 and 2020 in various countries), ultimately the PSTN will be shut down in favor of IP communications. The creation of a timeline for that shutdown is a clear signal to all interested parties on what their investment priorities should be.
For some time, the big US carriers have been petitioning the FCC for relief on their regulatory obligations to support the PSTN. They argue that the capital required to maintain the PSTN is being inappropriately diverted away from innovation and that is harming US (translation: their) competitiveness. For its part, the FCC has already gone quite far down the road of shutting down the U.S. public telephone network. A report by the "Critical Legacy Transition Working Group," now nearly a year old, lays out the agenda, issues and open items on the path to the replacement of the PSTN by an all IP network by 2018.
Clearly, a significant volume of business communication remains on the PSTN. Conference calls, call centers (etc.) continue to be a staple of daily business communications activity. However, those processes are being steadily replaced by a combination of UC collaboration tools and by other mechanisms, all of which are IP based.
While the mobile "telephony" business goes from strength to strength, much of the value these days for the user and mobile carrier alike is in everything other than voice access; yet voice over GSM/CDMA "minutes" continue to be the lynchpin of the mobile usage contract. While free VoIP, texting and video chat apps abound in the "app stores," it is only the pricing models of wireless data that keeps voice and SMS traffic on the traditional cellular network. (One of my friends quipped recently that “Using VoLTE was like burning wads of cash to save money on firewood.”) Indeed, unless the mobile carriers keep their "finger in the dyke" on the voice vs. data plans, their value-add will be commoditized to being that of bit-carriers, which would surely presage another "race to the bottom" on wireless data pricing.
So, while landline and mobile telephony remain important as business communications modalities, voice communications in general is in decline. Clearly, the lifespan of PSTN is finite and voice will ultimately transition to IP networks. However, there is a requirement to resolve some issues with net neutrality.
IP networks without prioritization or bandwidth reservation are "best efforts" networks: i.e. you get your packets when (and if) they arrive, on a first-come, first-served basis. This is the only modality that is available on the public Internet, although ISPs can offer advanced routing, such as MPLS, on their data network services.
"Net neutrality" is a fine concept and was essential for the growth of the Internet. Indeed, it is objectionable for a last-mile vendor to constrain usage of its customers to its own services when the overall value of the Internet is vested beyond the last-mile. However, an environment where a scarce and capital intensive resource (i.e. bandwidth) is shared on an equitable basis among large pools of users is open to manipulation and aberrant behavior by those seeking to gain a business advantage, to the detriment of all. The primary example here is the download of TV shows/movies which can consume large chunks of local bandwidth.
While streaming media can be buffered and even throttled without impacting the overall experience, real-time communications cannot; yet net neutrality forces UC users to share bandwidth on best-efforts networks, which can degrade the UC user experience (not to mention everyone else’s network experience). Should service providers and other local network users subsidize the UC traffic of other users? Should UC users’ utility of that technology be impacted because someone is listening to Internet radio? Clearly neither case is desirable, so a different model is required, where the service provider can offer, and charge for, more reliable IP packet delivery that doesn’t (ostensibly) impact the fair and equitable usage of the network by all.
While bandwidth is finite on all networks; the most expensive and limited bandwidth is that of wireless data networks, due to spectrum/"laws of physics" limitations. These limitations, coupled with the cost of spectrum and the capital cost of the network infrastructure, are causing many of the big mobile carriers (i.e. AT&T and Verizon in the U.S.) to "review" their unlimited data agreements: either by grandfathering, switching, "rate-limiting," or all three. Even Sprint, which positions itself as the provider that continues to provide unlimited network access, nevertheless places certain limits on "unlimited" usage.
Last week, the web site 9to5Mac highlighted reports from iOS6 beta testers that they had seen a dialog box on their iPhones that suggested that the new "FaceTime over wireless" feature (vs. "FaceTime over Wi-Fi" which is currently the only supported network) would require additional payment.
The next day, TechCrunch provided a quote from AT&T CEO, Randall Stephenson, that said:
“I’ve heard the same rumor,” he said, insisting that for now, AT&T is focused on working with Apple to get the technology stabilized, so “it’s too early to talk about pricing.”
Note that AT&T is working with Apple on the implementation. This means that the iOS6 Facetime client has to identify itself and the user’s account to the network in order to negotiate access to bandwidth; which creates the opportunity for premium pricing. If "Facetime over 3/4G" usage is:
…then that bandwidth has to be separate. Exactly how that happens is not yet clear (to me anyway), but we can assume that the traffic is carried on different radio channels or perhaps the bandwidth on each radio channel will be partitioned or prioritized for paid usage.
The reason that I used the word "ostensibly" above is because any separation of general net-neutral usage from a layered tariff usage naturally means a reduction in available bandwidth for the general users (i.e. those who paid once, but not twice, for their data access). Once you have breached general net neutrality with a "voluntary" scheme to gain preferential access, then the thin edge of the wedge is firmly inserted. Then it just becomes a matter of time before more layered tariffs are applied to both wireless and wireline data networks.
The main benefit of net neutrality for the customers of ISPs is that they are not forced by anti-competitive practices to subscribe to the services of the ISP, but that all service vendors should have a level playing field, from a bandwidth utilization perspective, in the last mile network. This is not to say that service vendors (including online entertainment vendors, UC vendors, etc.) would not gain from being able to reserve bandwidth on an ISP network. Indeed, Mr. Stephenson stated in the TechCrunch article that this was something that content providers were asking for.
Without doubt, the ability to guarantee that a given service will work uninterrupted would be a competitive differentiator and therefore a benefit to the customer (don’t you hate those "buffering" messages in the middle of your movie?). No doubt the bigger content providers will be able to negotiate a kick-back on the premium access fees that they generate for the network operator. The ISP, on the other hand, can gain premium prices for providing guaranteed bandwidth which generates the capital needed to stay ahead of the bandwidth consumption curve. Furthermore, this explains how these businesses will evolve from being communications providers to being network layer providers and still be able to provide a reasonable return on investment to shareholders.
As long as bandwidth reservation is available to all service vendors, the general principal of net neutrality has not been breached. However, we are left with the thorny question of where the reserved bandwidth comes from and whether the non-premium customers experience service limitations for non-premium services. This is probably where regulators can provide new safeguards to ensure that bandwidth reservation does not become something akin to a "protection racket."
So it seems that the "UC VPN" vision of Karl Erik Ståhl, CEO of Ingate Systems, is about to become a reality – something I wrote about last year. Now that we can see how the network layer business will possibly shake out, in the second part of this series, I am going to make some (probably contentious) predictions on how the UC service market will shake out and what that means for everyone.
Also on UCStrategies.com in this series:
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