over-the-top

Does Gmail outage open the door for Operations as a Service?

Google’s Gmail suffered yet another publicized outage, which is raising concerns not only about whether the Google system is really ready for serious use, but whether SaaS and cloud computing overall might be exposing enterprises to more risk than they bargained for.

Data on the paid version of the service isn’t available so we can’t be sure whether the paid traffic is doing better in terms of reliability, but certainly many users would try the free version first to decide whether to commit to a paid equivalent.

We believe Google is on the horns of a major dilemma, in that it needs to start creating a for-pay model in application, computing and even video streaming services, and to do that, it needs something more than best efforts. That not only means its own platforms have to be very reliable. It means its network connections need to be good, too.

This may be the issue that will spawn more constructive dialog with network operators on premium handling, but rumor says the last talks were stymied by the question of who supports the customer. Operators need to think about making their own operations/support process highly efficient so they can not only boost their own net profit but sell operations as a service too Google.

Qwest to go for delivery conduit, not content broker

Qwest suggested during its second-quarter earnings call that the company would be pursuing a video strategy that would make it less a content broker and more a delivery conduit. Just what the technology might be like is still up in the air.

We’re hearing that there are two approaches being considered. One would rely on a partnership with a satellite player (Qwest has a DirecTV deal now) for broadcast channels and use the Qwest network for video on demand (VoD). The other would be a pure play on OTT-like video based on Qwest CDN assets and local priority content distribution to the access network. We don’t think these two options are very far apart, and thus we believe something CDN-ish is going to happen at Qwest.

Wireless Internet: Should “net neutrality” apply?

The FCC is being asked for a ruling on whether its net neutrality principles apply to wireless Internet. This step comes after AT&T limited the use of Skype on smartphones.

There will be a lot of interest in the FCC’s response. On the surface, the issue seems clear to us. The FCC has said before that the service matters, not the technology. On that basis, it would appear that the four net neutrality principles articulated by the FCC would apply to the Internet, period.

On the other hand, is wireless broadband the same “service,” and the question is, do the rules (promulgated in the context of a wireline access order) really apply here? The risk for operators is that OTT players can use Internet access to bypass core services like voice, yet the market is moving to a one-price-for-all mode anyway. We think AT&T will lose this one and probably should not have fought in the first place.

Internet free ride wins “unrealistic” prize

The Economist is sounding a warning that we’re resonating with (because we’ve sounded it too). The most recent issue points out that Internet companies and consumers have been vying for the crown of “most unrealistic.” Consumers want free services; Internet companies want a free ride on infrastructure, and nobody wants to acknowledge that advertising budgets worldwide for all ad forms wouldn’t pay the capex bill of network operators.

The tragedy of the current situation is multi-faceted. Silicon Valley is threatened with an unnecessary recession because it wants to pursue vacuous flips instead of more useful and thus eventually more sustainable models. The Internet companies are likely doomed to 50% or more attrition. The telcos are increasingly likely to throw in the towel on monetization and hunker down with bandwidth caps and tiered pricing that will stifle new applications and also stifle investment in equipment.

There is still time (through the end of this year, says our model) for radical action to save the industry from a drudge future. Media outlets are predicting a subscription model for content, and if over-the-top (OTT) players finally realize someone has to pay for stuff, the future for all will be rosier. But with all of this, there’s still a new study that says cloud computing needs open non-discriminatory access to universal communications. Sure, and we all need to win the lottery.

Over-the-top VoIP: Comparing Google and Skype

Over-the-top (OTT) voice over IP may be finally coming into its own, driven primarily by a desire to make cheap international calls. In its last earnings call, eBay reported good numbers for Skype, which has so far failed to create any of the often-touted symbiosis with the eBay core business.

Google has now entered the space in the UK and has included a text-to-speech feature for email. The success of Skype and the entry of Google are both centered on international calls, where the pricing difference versus standard voice is compelling. Google is taking a different tack than Skype. In the first release there’s no video or IM, and the service isn’t tied to a computer. You call a “service number” from which you can pick up voicemail and also hit a key to get dialtone for a new call.

We’re hearing that Google is marrying this service with Android, and that Google is even considering having “smart” dialing based on whether a given party is in the VoIP or traditional calling zone. This is all part of a drive by Google to get stronger in the mobile space, and it will help the company accumulate presence data.

All of this will put tremendous pressure on carrier voice offerings when Google expands the base worldwide, something likely to happen within a couple of months.

Social networks drive telecom services change

New research has demonstrated the impact of social networks on basic communications behavior was demonstrated by research just published showing that membership for social media has surpassed use of personal email for communication.

It is this radical behavioral change that we think is central to the process of planning next-generation services. Not only is social networking a different model, it is a model anchored in a web portal, and thus easier to exploit with OTT technology than with telco technology.

The pace of market change is not slowing, and addressing the new situation will be critical for telcos if they want to pursue their monetization goals. It’s even more critical for vendors that want to sell them equipment, because not only is the investment in future infrastructure dependent on monetization, providers are looking for active vendor participation in solving their problems.

Yahoo’s best strategy for success, but does it know?

Yahoo may be staring its path to success in the face, but may or may not recognize it. The Yahoo Zimbra paid email system is outstripping Google (including Gmail and Google Apps) and most other webmail systems, too.

What’s likely most significant about Zimbra’s success is that it’s due in no small part to a deal struck with Comcast. We’ve said for some time that Yahoo’s best chance for success lies in partnerships with the network operators, who are eager to exploit over-the-top (OTT) innovation but seemingly paralyzed in their own initiatives in that direction.

Yahoo could step in and create partnerships that would not only generate new opportunities for Yahoo, but pioneer the integration of OTT and operator features into common service sets. Listening, Ms. Bartz?

FCC could enter cable bandwidth management fray

Comcast has, as we had predicted, asserted to the FCC that its voice service is not carried over the Internet or Internet access infrastructure, and is therefore neither subject to their traffic management policies nor to the FCC’s four principles of net neutrality.

They’re right, of course. Cable, or PacketCable specifically, divides the data path, and broadband Internet and Comcast VoIP do not share capacity. The question now is whether the FCC will decide that it doesn’t matter whether the stuff is separate or not. We think such a decision would be the regulatory equivalent of junk science: It would imply that common carriage on any facility imposed the regulatory burdens of the most regulated service on all services.

These are not logical times, however, and regulations are never logical. The biggest risk here is that the FCC would do something that would overturn the original 2005 decision that broadband was not a “telecommunications service” and thus was not subject to unbundling provisions of the Telecom Act. That was a highly speculative ruling that stood largely because the RBOCs bought AT&T and MCI, who were bankrolling opposition.

Vuze, the online video company, has also asked the FCC to look into the Cox plan for bandwidth management. This shows that cable company needs to control bandwidth use, primarily uplink bandwidth for P2P, but also streaming bandwidth will be increasingly colliding with the over-the-top (OTT) players’ desires to pump content at no incremental cost. The shared-media nature of the cable plant is the industry’s biggest risk, as DOCSIS 3.0 is the biggest asset, and moving to DOCSIS 3.0 is useful only if content doesn’t just expand to fill the new pipe too.

On-demand TV may win out over IPTV for telecoms

January 5 2009: The media says that 2009 may be the year of over-the-top video, citing rumors (which are largely true) that operators are reconsidering the IP video market.

We have said all along that the sweet spot for classical U-verse-like IPTV is very small in terms of ideal economic demographics, and that the competition from cable DOCSIS 3.0 will have negative effects on the IPTV model.

A number of EU operators have now concluded that they are not likely to earn a good return on IPTV given the higher-than-expected cost and lower margins. This is leading some to think about alternative models, it is true, but we are hearing that most are planning to focus on on-demand TV and to cede broadcast to partnerships with satellite operators.

This will not impact the FTTH model that uses linear RF, but that model is not as popular in Europe for regulatory reasons. We do not think that operators have any intentions of supporting an OTT model overall.