Google+ is definitely a revolution, a step toward social networking as many believe it should have been all along. Because it avoids most of the privacy problems that seem inherent to Facebook’s simple model of “friends,” it could potentially be used more effectively without putting its members at risk. Because it’s built around communication, it would establish Google not only as a social network leader but also as a player in the web-based communications space that will eventually displace the old PSTN we’ve come to know. And behind it all looms the old Google/Microsoft face-off, this time regarding the Microsoft acquisition of Skype.

Make no mistake, Google wanted to counter the Skype deal probably as much or more as it wanted to be a social networking player.  Skype, in Microsoft’s hands, could become a powerful force to integrate Microsoft cloud software into people’s lives.  Skype could also be the foundation for social communities, of course, and having Microsoft in a position to exploit Skype at its leisure wouldn’t serve Google’s interests.

The fact that Facebook went running to Skype for a deal is interesting too.  They can’t now expect to buy the company after all, and they’ve admitted that they have either never thought of the communication-based social network (unlikely) or that they can’t toss money and time at creating one to counter Google’s move. Facebook’s weakness, as I’ve pointed out, is its off-market trading and correspondingly high valuation.  They can’t afford to keep going to the well for more capital and they can’t be perceived as losing ground—though they are.

All of this comes at a time when the Street is newly aware of the eroding credibility of carrier capital budget planning.  To quote Credit Suisse, “We expect the ongoing disconnect between revenue growth and bandwidth economics to drive an ongoing shift in carrier capex to specific projects focused on revenue generation or cost savings”.

Network spending focused on cost is an open invitation to Huawei, and spending on revenue generation is clearly not going to focus on creating more of the low-value bits that have put carriers in the disconnect to begin with. This is the issue that raised our concerns about Alcatel-Lucent’s FP3 chip announcement. The world doesn’t need a way to push more bits until we can figure out how to make bits pay, and right now everything happening in the industry is disintermediating the operator more. Alcatel-Lucent, we’d note, continues to champion IMS as the basis for mobile broadband “services” when the Google/Facebook brouhaha makes it clear that it’s going to be tough to make even IMS voice work effectively against OTT P2P competition.

With bit-pushing going out of fashion, Cisco seems unable to break out of the bit-and-box marketing mold and is instead looking to cut costs by cutting headcount. The company’s reported early-out package expired in late June and there’s no official word of how many people took advantage of it, but we did hear that there were still as many as three thousand more jobs on review for elimination.  That could push the total cuts above the 4,000 that were rumored. Cisco’s intransigence with respect to the service layer is creating an opportunity for its competitors, who could not only gain market share on Cisco’s fall from grace but also gain an early lead in the service layer. So far, though, nobody is stepping up with a good story, and we’d not be surprised to see any improved positioning saved for early September, timed to the carrier strategic technology planning cycle that will end around November first.

From what’s been said, the big reason appears to be the creation of a communications ecosystem built to envelope Microsoft’s gaming and mobile products, and I think it’s clear that it would be extended to Microsoft desktop products as well, and could even offer an attractive reason for hardware vendors to offer a Microsoft-based tablet.

Skype is two things: 1) A community that already includes tens of millions of active users worldwide, and 2) A technology that can create a “behavior-centric” communications framework around any activity that’s persistently interesting to users and that has a social dimension.

Gaming is surely such an activity, and so is unified communication and collaboration for the enterprise. I think it’s clear that Microsoft is aiming at this. But I also think it’s clear that Phone 7 and Microsoft’s smartphone fate is tied up with this deal as well…and that’s complicated.

Technologically, this might be an interesting time to make a Skype-based play. Mobile operators are transitioning rapidly to LTE, which is pure IP. While there are ways to tunnel TDM voice over LTE networks, a quick migration of mobile users to LTE would mean that an all-IP calling community would develop quickly. That would call into question the whole IMS voice evolution, because without much interconnect between TDM and IP voice, a lot of IMS is redundant. If you don’t believe that, reflect that Skype already inter-calls without IMS. So might Microsoft put Skype voice on its handsets instead of conventional voice? It would depend on the operators.

Voice services are clearly not going to be profitable in mobile any more than in wireline, but they do sustain some revenue from non-broadband customers and justify at least part of the investment in wireline copper loop. They’re also still a big source of mobile revenue, if one that’s clearly in decline.

P2P voice is the cheapest way to offer voice services, which is why you can offer free Skype. Given that universal broadband will create a universal framework for something Skype-like, it’s hard to justify spending bigger bucks to create another voice model. Yes, the carriers have low IRR and can win a race to the bottom, but their horse in a future-voice race is more likely to be P2P-based than central-mediated and server-based. Remember that signaling issues were what was supposed to have brought down Verizon’s LTE network. Why create more of it?

It’s clear that Alcatel-Lucent is still having a bit of an identity crisis—several, in fact. It’s still apologizing for the aftermath of the merger, which looks like it’s finally finished, and not just in name. It is also having a bit of a confidence crisis, even though its articulation is strong and its strategic credibility numbers lead the network equipment vendor space by a pretty decent margin. Alcatel-Lucent has been battered a bit by Wall Street and by the internecine struggles of the past; it kind of needs a hug.

In a tangible sense, the big news out of the event was that Alcatel-Lucent has a much broader capability set in Open API than was first apparent. Yes, the program is linked to applications and developers and the smartphone universe, but it’s really more than that. Open API is a federation engine that absorbs multiple APIs, orchestrates unions and exposes the results. It could be used to federate content delivery networks (CDNs) — which is something Alcatel-Lucent says it’s working on, though it didn’t say if the Open API was part of the work), cloud computing, and even multiprovider service provisioning of the type that the TM Forum/IPsphere forum (IPSF) has been involved in. How far the company take this capability probably depends on operator traction, but watch the space for some action later this year as a possible signal.

It’s also clear that Alcatel-Lucent is betting heavily on LTE and still doubling down on IMS, which is logical given its LTE focus. I still think there are a few too many IMS references; yes, we know ALU has it and that operators will leverage it if they deploy it. We need to know what else the company will have in the way of enablers for its Open API to expose.

The Alcatel-Lucent challenge, in fact, is to try to rise above legacy, including IMS, without turning its back on it. Part of the secret of Alcatel-Lucent’s high strategic credibility is its broad engagement. The company can’t sustain its whole portfolio forever and needs to exploit the parts of it that continue to involve it in the broad strategic sweep of the service provider space. At the same time, it has to stop making every application look like IMS in a brown paper bag, or every benefit come down to offering QoS. The future is built on the past and present, but that doesn’t mean the three march in lockstep.

More significantly, in our view, the talk included comments that operations complexity for metro Ethernet would have to be reduced and that the QoS mechanisms of the 3GPP were too complex and expensive to be feasible. We’ve been hearing for some time that operators believed that the ROI on mobile broadband would never reach levels that could justify some of the evolution visions of the 3GPP.

The issues are bigger than standards or IMS success. It’s a broader question of whether to scrap operations in a traditional way, given the best-effort nature of the Internet traffic that makes up most mobile broadband activity, or to streamline 3GPP processes. The operators we’ve talked to favor something more along the lines of streamlining, but they concede that it may simply take too long.

The big question for operators is whether to invest in 4G voice (IMS) or to simply focus on data and let current 3G networks carry voice traffic until users finally simply abandon traditional voice services. Some are considering their own overlay services based on simpler Internet voice technology, rather than IMS. We expect that the final verdict here won’t be rendered until the spring.

Google apparently plans a website that will offer the phone in unlocked form and also list the subsidized plans of those operators who elect to offer them. Google says it hopes this will encourage competition that would benefit the consumer (and also, clearly, Google).

The phone is pretty much what rumors had suggested, but that’s extremely fast (especially for graphics) and enabled with text-to-speech and Google-hosted facilities for speech-to-text and translation into other languages. In fact, it’s more what Google might do with the Nexus One in combination with hosted service components that’s the big news here. Operators are now looking at a Google-created service ecosystem that could end up killing their IMS plans and impacting their ability to monetize smartphones and 4G deployment. Those we’ve heard from so far are saying that the Google moves will accelerate their own interest in the service layer.

The question again is whether the winner really wins anything much. We are of the view that the value of traditional carrier voice-layer technology, including the so-called NGN voice stuff, is becoming problematic given trends in voice pricing and some interesting VoIP action that includes the finalization of the Telefonica/Jajah deal.

To us, it seems very likely that 4G voice questions are already being raised, with operators wondering if they want to be in 4G voice at all, or if they do, whether some simple non-IMS approach would be better. Skype, Vonage, Jajah, and others offer low-overhead voice that’s easily applied to smartphones and other wireless devices. If mobile moves toward a non-traditional voice model, then there’s no such thing as FMC and no value to IMS assets.

Why then buy VoIP assets from Nortel? The argument that it buys a position with U.S. operators is thin in our view. Are those operators more certain of a legacy voice evolution? We doubt it.

The company found, not surprisingly, that 5% of users consumed 80% of bandwidth. This skewing of the old 80-20 rule is one of the primary reasons why operators say that some form of traffic management is essential to insure that the broad population gets good service at a fair price. The data also shows that most usage is in the evening and at home, however, which means that femtocells would offload considerable traffic were they widely deployed.

Many operators tell us that while 3G femtocells are possible, the application of IMS and 4G would make it far easier, particularly if self-organizing principles were applied to cell setup. How valuable all this intelligence will be may depend on regulatory trends, though; many countries are seeing considerable public advocacy pressure against traffic management.

This month in our Netwatcher newsletter we’ll be taking a look at Wave, and we’re offering a short TMT Advisor Planners’ Briefing for those who registered for the service.

Wave is an architecture, not a replacement for email or even IM, as some suggest. It is the first example of a rich, federated, OTT service, and as such it could be a total game-changer for everything from unified communications and collaboration to IMS, TMF, and ITU NGN.

Does Google get all of this, or are we just being an alarmist? That’s for the future to determine. Meanwhile, we recommend everyone take a very hard look at the true details and not base their perceptions on the coverage.

Obviously the IMS approach would favor the big telecom equipment vendors while the others might admit a broader range of bidders. We’ve heard many operators voting for the fallback-to-3G approach because it would make handset transition easier since current smartphones could continue to operate on the current network, but there are potentially spectrum and cell issues to be resolved.