On February 17th, 2009, President Obama signed the American Recovery and Reinvestment Act (ARRA), which funded a number of initiatives including two broadband stimulus programs, BIP and BTOP, administered by RUS and NTIA respectively. These programs are focused on making broadband available and affordable for all Americans with ARRA driving a significant number of independent and competitive operators in rural areas to expedite the migration to IP-enabled networks.

The move to an all IP network brings operating efficiencies, advanced subscriber services (such as HD Voice, Virtual PBX, Find Me/Follow Me and IP Conferencing) as well as anytime/anywhere subscriber access and account management, and we expect there to be strong demand in these areas, in addition to the strong demand for broadband access. These welcomed stimulus programs bring critical funding to rural operators, foster economic growth, and help to place all subscribers across the United States, regardless of geographic location, on equal footing for access to the most advanced voice and data services that are available today.

AT&T has asked the FCC to set a firm deadline for a complete move to an all IP network and an end to the PSTN, in a similar fashion to where television broadcasters were mandated to switch from analog to digital transmissions. AT&T said in its response to the FCC that “with each passing day, more and more communications services migrate to broadband and IP-based services, leaving the public switched telephone network (”PSTN”) and plain-old telephone service (”POTS”) as relics of a by-gone era.” “Congress’ goal of universal access to broadband will not be met in a timely or efficient manner if providers are forced to continue to invest in and to maintain two networks,” AT&T said in the filing. In that response AT&T also stated “It makes no sense to require service providers to operate and maintain two distinct networks when technology and consumer preferences have made one of them increasingly obsolete.”

AT&T’s response to the FCC is affirmation that VoIP has matured into the mainstream, and this turn of events is a further endorsement of the superior technology, cost effectiveness and efficiency that an all IP network has to offer. By and large VoIP to date has merely tried to emulate the PSTN, but as we start to see deployments and applications that more fully leverage this technology, such as HD Voice and presence, VoIP will become even more compelling and the PSTN more redundant and obsolete.

According to the IBISWorld report “in the short period [from 2002 when VoIP emerged] to 2009, revenue growth accumulated to an astronomical 179035.8%.” In this report George Van Horn, senior analyst with IBISWorld, stated “VoIP has skyrocketed from non-existent to a massive application targeting telecom carrier’s voice revenues.”

The move to an all IP communications network has always been a question of “when” and not “if,” and it is looking like “when” is happening sooner than later. It will be great when we have a single network upon which to direct our focus allowing us to realize the full and true potential of VoIP.

As 2009 draws to a close one cannot help but reflect upon the year that was, and what the year ahead, with all its promise, will bring.

While the economy and its recovery, real or imagined, played a large part of 2009, the mainstream introduction of HD Voice in 2009 had VoIP finally showing what it was capable of, rather than what it could emulate. During the year there were also significant acquisitions in the voice over IP space worth mentioning: 

• In April Acme Packet announced that it was buying Covergence, in a deal estimated at $22.8 million to help round out their product line with Covergence’s software-based session border controllers for large enterprises.
  
  
• In June, we saw HotMail co-founder Sabeer Bhatia’s and Yogesh Patel’s SabSe Technologies acquire Jaxtr, for an undisclosed sum, undoubtedly for its consumer service that provides free and low-rate international calling to over ten million members around the world.  The same month we saw Natural Convergence buy NewStep Networks, a provider of seamless session management solutions.
  
  
• In July, after navigating Verizon’s attempt to block its bid, Avaya successfully acquired the Nortel’s Enterprise Solutions division for $915 million, after clearing government regulators.
  
  
• In September, eBay announced that it was selling its Skype unit to an investor group that included Marc Andreessen’s new venture, Andreessen Horowitz.  Under the deal, eBay received approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million, for a total of $2.025 billion.
  
  
• In October, Cisco System acquired Tandberg, the video conferencing equipment manufacturer, for $3.4 billion, to acquire additional video technology for their UC and enterprise products.
  
  
• We saw a major endorsement for VoIP and the SIP protocol in November when Google purchased Gizmo5 for $30 million, after rumors that Skype were put to rest that it was considering acquiring Gizmo5, as replacement technology to combat the JoltID issue with the founders of Skype.
  
  
• In December, Telefónica, the parent company of O2, announced the acquisition of Jajah for $207 million, in an all-cash transaction – not a bad return for a company that raised $35 million from various investors including Deutsche Telekom, Intel Capital and Sequoia Capital over the last four years. With over 25 million subscribers, Jajah provided low-cost termination services via the web, mobile telephone and Microsoft Outlook, in a similar fashion to IVR Technologies’ End User Web Interface, mobile smartphone applications, and its Microsoft Outlook Add-in.
  
  
• And finally, just as 2009 was drawing to a close, on December 30th we saw SpinVox and its voice to text technology being acquired by Nuance Communications for $102.5 million, ending many weeks of speculation on the fate of this troubled startup as it struggled to repay a $48.8 million loan.

It was certainly a banner year for VoIP acquisitions and consolidations and none more dramatic than eBay’s spinoff of Skype, the potential acquisition by Index Ventures and Mike Volpi, and the associated lawsuit by Skype’s founders Niklas Zennström and Janus Friis over the JoltId software.  As we bid adieu to 2009 we have AT&T asking the Federal Communications Commission to create an orderly timetable for a shutdown of the analog phone system in the United States, so we can only imagine the excitement, opportunity and possibilities that the year ahead will bring. 

The hosted call and contact center market is a lucrative market for the next-generation VoIP service provider that offers a tremendous opportunity for revenue and margin growth.  While many service providers offer termination and SIP trunking services to the call and contact center markets, they most often miss out on the added margins associated to actually hosting and providing direct call queuing and agent routing services. 

According to the recent report from Frost & Sullivan (contactcenter.frost.com), entitled North American Hosted Contact Center Markets, this market earned revenues of $396.4 million in 2008 and is estimated to reach $1.5 billion by 2015.

“Despite the economic downturn, market participants have had tremendous success with hosted deployments for new and existing clients,” notes Frost & Sullivan Strategic Analyst Michael DeSalles. “Hosted technology providers offer a compelling set of financial and business benefits to a demanding client base. This includes the elimination of capital expenditures combined with access to a flexible agent deployment platform. Vendors today offer a full line-up of robust contact center features. This helps to significantly reduce costs, along with the opportunity to gain access to state-of-the-art technology. The days of massive financial outlays for contact center premise equipment are going away.”

Christmas came early for Google employees this past weekend when Google handed out the “Google Phone”, an HTC-built device called the Nexus One.  Google calls the distribution a “mobile lab” and it puts to rest rumors that have been swirling for two years about a Google phone, but it also brings into question Google’s previous assurances that they would not compete with Android hardware manufacturers. 

It is never a wise choice to bet against Google but being able to sell a mobile phone without carrier subsidy in today’s hyper-competitive mobile market is definitely going to be a challenge.  If the phone does come to market, and all expectations are that it will, the big question is how will its release impact the Android platform if Google competes with other Android handset manufacturers, while controlling the code base.  The Android platform holds tremendous promise and it is starting to gain serious traction with other handset manufacturers like Samsung, Sony, HTC, and Motorola so hopefully Google’s entry into the handset market does not jeopardize these relationships.  The code base for the OS versions of the Google handset will need to be readily available to the community at large in order to maintain Google’s appearance of transparency and recent reports of Android 2.1 already being ported to G2 handsets is an encouraging sign.  Google remember “Don’t be Evil”.

According to a report from IDATE, “the world telecom services market was estimated at US$1,365 billion in 2008 - a 4.2% increase over the year before - and is expected to be worth over US$1,416 billion in 2009. With a total turnover estimated at US$742.2 billion in 2008, mobile services account for 54% of the telecom services market and single handedly deliver all of the sector’s growth.”

In the highly competitive long distance termination market, with its diminishing margins and revenue, service providers need to look towards the mobile market.  The mobile market holds tremendous value as its pricing is eroding at a much slower pace than in the fixed line and voice over broadband (VoBB) markets.  Thankfully for next-generation networks, through the proliferation of extremely powerful and open smartphones, this can be achieved by loading special applications on these devices.  However, getting the application loaded is different than getting the application loaded and widely used so in order to be successful service provides must make sure their applications are as intuitive as possible and tightly integrated into the device as well as the habituated process of the user. 

Today’s smartphones such as the Blackberry, Windows Mobile and the iPhone offer centralized, virtual over-the-air mobile stores where these applications can be purchased, often at no charge, and conveniently downloaded directly from the phone for immediate use after sign-up.  The benefit to subscribers is quickly apparent as the process is significantly easier than using calling cards, they can continue to use the phone as they normally do dialing from their phone’s contact list, and they realize considerable savings over what they are currently being charged by their mobile carrier.  The benefit to the service provider is that they are now able to capture long distance termination revenue from mobile subscribers, well outside of their current network’s footprint, and at higher margin than with their landline and broadband subscribers.

Industry research further shows that smartphones will capture about 20% of the mobile phone market by 2013 despite the struggling economy, according to a report recently released from In-Stat.   The report, titled “Smartphones: Heading to the Mainstream,” states that smartphones will see growth this year even though the cell phone market is looking at a rare downturn for 2009. The report found that nearly 33% of those surveyed planned to buy a smartphone when they upgrade their current phone. 

“Strong demand is being driven by device manufacturers leveraging open OS device to reinvent the mobile phone experience,” said Frank Dickson, VP of In-Stat’s mobile Internet group, in a statement. “New and prospective smartphone buyers are drawn to new mobile applications, even though the median number of applications downloaded for all platforms, including the Apple iPhone, is relatively modest — below five applications per user for each platform.”

For the next-generation service provider offering a complete suite of telecom services that can capture the home, business and mobile markets translate into amazing opportunity with reduced customer churn, higher margin revenues and a growing and diversified subscriber base.

Next-generation service providers take note; according to Infonetics Research (http://twitter.com/infonetics) recently released biannual VoIP and UC Services and Subscribers report, VoIP enhanced telephony services drove nearly $20.7 billion in revenues during the first six months of 2009. 

Infonetics’ report is further support and validation of our position that next-generation service providers must offer in-demand services that help differentiate themselves from the competition and build back the margins that have been eroded by excessive competition in their traditional termination side of the business in order to not only survive, but thrive, in today’s marketplace.  No longer is it adequate to offer “me too” services with low price points, today value must be driven by satisfying consumer and/or business customers’ communications needs with a consolidated, empowering and cohesive service offering. 

Services that offer a compelling reason to migrate to VoIP and that drive long term customer relationships and loyalty are those that make communicating more convenient, more effective, and more intimate.  Services such as selective call forwarding and/or call blocking by time of day or day of week scheduling, Find Me/Follow Me services that can ring multiple phones simultaneously or sequentially, voicemail to email and voicemail to text message transcription, high definition audio for point-to-point calling and conferencing, as well as corporate auto-attendants are all great examples of services that are deployable today and that help service providers build their subscriber base, increase and diversify their revenues, and drive margin and profits despite today’s uncertain economic times and highly competitive landscape. 

According to Bernstein Research analyst Toni Sacconaghi the Apple iPhone has captured 31.8% of the mobile industry profit for the first half of the year and is responsible for 83.5% of Apple’s profits. Introduced just over two years ago no one can downplay the success of this device, which has changed the mobile phone market forever and forced incumbents like Samsung, LG, Nokia and RIM to take notice.

From the consumer’s perspective probably the two biggest strengths of the iPhone are its web browsing capabilities and the Apple App store, which at last count has over 65,000 applications and generates over $1 billion annually. The App store has made developers like Steve Demeter, author of Trism, extremely wealthy by giving them the freedom to focus on their application while leave the marketing, distribution and e-commerce to Apple. However, the glow around Apple seems to be fading with a recent series of lawsuits, boycotts and now an FCC investigation over Apple’s rejection on July 27, 2009 of the Google Voice application and the removal of all Google Voice-enabled applications from the App Store. What, if anything, the FCC suspects is not immediately evident, but one possibility could be whether or not AT&T asked Apple to remove the Google Voice application to prevent competition with its long distance and SMS services.

Government involvement is never welcomed by private enterprises, however, sometimes government intervention is the last resort if anti-competitive practices and collusion are present, not implying in any way that they are here. A ray of light through all of this has been that these anti-Apple sentiments are not falling on deaf ears — Apple’s senior vice president of Worldwide Product Marketing, Phil Schiller has personally responded to several developers in the last week about their concerns and issues with Apple’s App Store approval process, responding in summary with “they are listening to the feedback and are taking it all in as they continue to evolve the App Store.”

IVR Technologies, has developed an iPhone application entitled iCallme:

that offers a fully integrated callback dialer for Talking SIP to the iPhone/iTouch platform that we have submitted to Apple for approval. While we are restricted by legal agreement on commenting on our personal experience, suffice it to say any changes to the App Store approval process that adds clarity, fairness, transparency and objectivity to the process and is devoid of carrier influence will certainly be welcome.  

One of the strengths of the Apple iPhone is the openness of the platform that allows creative and innovative developers to leverage the device’s ubiquity and connectivity to make an amazing device even more amazing. Hopefully, as Apple continues to blaze the trail into unchartered territory, this FCC investigation will result in a more level playing field for all developers across all mobile platforms.

Google Voice (formerly GrandCentral which was acquired by Google in July of 2007) is about to become available to the masses within a matter of weeks changing the landscape of telecommunications forever.  The service itself is packed full of useful features that streamline message management, improve call routing and enhance personal privacy control.  The service is quite compelling, and it even offers free calling to anywhere in the USA. 

As Google sets the bar higher for next-generation telecommunication service providers to compete for subscribers, they are driving more competition by bringing to market very compelling features and functionality.  Google Voice competes not only on price, but it also hits a home run with the feature set it offers.  This is a perfect example of how next-generation service providers must compete in this new market reality. 

Today, subscribers want to be able to manage their telecommunications services at their fingertips via the web or mobile device rather than by cryptic DTMF key sequences, and they want to have the freedom and flexibility to self-manage their services from home, the office or on the go.  In order for the next-generation telecommunication service provider to compete they must upgrade their networks to support innovative enhanced services, advanced messaging capabilities, flexible call routing capabilities and mobile device integrations through platforms like Talking SIP.  Talking SIP allows next-generation service providers to offer differentiated, empowering and high margin services to help drive revenue, increase margin and reduce churn in order to compete with hosted services like Google Voice.

Google Voice is a great example of how the phone services of the past are changing forever as we start to see voice applications/services that streamline telecommunications and leverage the connectivity and ubiquity of the Internet.

On May 21^st, industry visionary Jeff Pulver hosted the first HD Communications Summit in New York providing an opportunity to explore the issues associated with the widespread deployment of HD VoIP while bringing vendors, businesses and consumers together in a concerted effort to reboot the telecommunications industry. 

Leading vendors in the HD space like Polycom, Global IP Solutions, snom and Audiocodes were in attendance leading panel discussions on HD codecs, quality and its potential impact in the broadband, digital phone, mobile and enterprise arenas.   At one of Jeff’s recent social networking breakfasts he assured me that he never left the telecom space, but there was a void whether real or perceived, that’s certainly been filled today.  There is no mistaking that Jeff’s back in full force and form doing what he does best, which is sharing his vision and bringing the industry together as it crystallizes an emerging technology.

The range of the human voice extends from 80 hertz to 14,000 hertz, whereas traditional, or narrowband telephone calls, limit audio frequencies to the range of 300 to 3400 hertz.  HD voice or wideband audio eliminates the majority of bandwidth limitations and transmits in the range of 30 hertz to 7,000 hertz or higher resulting in a much richer and fuller conversation.

Click on the following player to experience the audio quality and clarity difference between a traditional narrowband voice call and one in HD wideband audio:

HD wideband voice results in a richer, fuller and more natural conversation that helps to bridge the gap that a lack of physical presence introduces.

In the coming months IVR Technologies, Inc. will be introducing HD voice capabilities to its flagship product Talking SIP, the fully integrated application, media and billing  solution, with HD integration to all of Talking SIP’s enhanced voice services and ultimately its new web-managed multi-party conferencing engine.

During the HD Communications Summit  Jeff announced the formation of a new HD VoIP marketing association, HD Connect and his plans to go to Wall Street to help educate the Buy Side and Sell Side about the possibilities of HD Voice. Jeff also shared his plans to reach out to the FCC later this year in support of a High Definition Voice/HDV initiative and announced the next HD Communications Summit will be taking place September 15-16^th with plans underway for both a European and an Asia Pac event for later this year.

Welcome back Jeff, we missed you!