The Pulver Report - May 20, 2003 Issue The Pulver Report(TM) Provided by: pulver.com, Inc. The May 20, 2003 Issue: RE-SENDING OF THIS NEWSLETTER TO ANY NUMBER OF COLLEAGUES IS ENCOURAGED, PROVIDED YOU ALSO CC: REPORT@PULVER.COM. IN RETURN, WE WILL PROVIDE RECIPIENTS WITH A SUBSCRIPTION. YOU CAN ALSO VISIT http://pulver.com/reports/subscribe.html TO SUBSCRIBE. TO UNSUBSCRIBE, PLEASE VISIT http://pulver.com/reports/unsubscribe.html. ANY OTHER UNAUTHORIZED RE-DISTRIBUTION IS A VIOLATION OF COPYRIGHT LAW. ------------------------------------------------------------------------ In this Issue: - Heard on the Net - 2003 Pulver Report Party: June 3rd in Atlanta during Supercomm - Jeff's Strategy for the RBOCs and PTTs: Become Broadband Parasites - Introducing VoIPWatch - Hotspotting @ LAX - Another State looks at VoIP - Call for Speakers: 2003 Wireless Internet Summit - pulver.com 2003 Conference Calendar ------------------------------------------------------------------------ Heard on the Net: Looking at the recent performance of some of the public "pure play" VoIP stocks, the sector has recovered a bit (and in some cases more than a bit) during the past six months. As far as I can tell, the sector once again has a "positive bias" and one can only hope for a wider recovery during the course of 2003. And even yet another positive VoIP story, "Dialing for Dollars" appeared in the Monday, May 19th issue of the Wall Street Journal. ( see: http://tinyurl.com/c6c3 - requires on-line subscription.) One data point close to the pulver.com home is that in the past four weeks the exhibit hall at VON Europe in London became "sold out" and things are shaping up for a real good Fall VON this September in Boston. . As I'm feeling positive once again about the IP Communications space, I've made the commitment to hold another Pulver Report party this year at Supercomm. The pulver.com party will be taking place at the Tabernacle on June 3rd. Please RSVP to: by May 30th. Please feel free to extend this invitation to all members of your team who will be at Supercomm. - People on the Move: Ken Percy recently left Miercom to work with Progressive Strategies Inc. Gene Retske has recently joined The Prepaid Press as Editor-In-Chief. To be listed in a future "People on the Move" column, please email: people@pulver.com to report a change in your position. Please refer to: "People on the Move" in the subject. ------------------------------------------------------------------------ 2003 Pulver Report Party: June 3rd in Atlanta during Supercomm In celebration of the 7th year anniversary of the Pulver Report, pulver.com is hosting a party at the Tabernacle in Atlanta, GA on June 3rd from 7:00 to 11:00 PM. Readers of The Pulver Report who are over 21 are invited to attend the party. Please RSVP by May 30th. Drinks and Live Entertainment will be provided. To RSVP, please visit: ( http://pulver.com/vonmagparty/rsvp.html ) ------------------------------------------------------------------------ Jeff's Advice for RBOCs and PTTs: Become Broadband Parasites background note: /* I realize the idea below that I'm proposing is a little radical as it represents the inverse of the present incumbent business model. In general terms, "Top down control" makes risk minimization the path of least resistance to profits and the winners become those best at controlling supply. "Bottom up control" makes the value creation the path of least resistance to profits and winners become those who are best at generating demand. In general terms, the telecom incumbents have won in the past by keeping Minutes of Use (MoU's) scarce - i.e. expensive. Companies in the computer industry won by making Millions of Instructions Per Second (MIPS) abundant - i.e. cheap over time. Going forward abundant (cheap) MoU's of connectivity will drive growth of applications in the communication world. If I'm right about this, I believe that some of the incumbents will be challenged to survive this new transition...but this too is possible. All that is required is a change of mind set. For example, MCI's new CEO comes from this high MIPs abundance world. */ Jeff's Advice for RBOCs and PTTs: Become Broadband Parasites On a VoIP panel discussion at the recently completed Ninth Annual Goldman Sachs Telecom Summit in Santa Barbara, CA, I outlined a strategy for the RBOCs/PTTs to play and win in the Voice over Broadband space and in effect regain their competitive edge in providing local phone service. To some, the concept of a communications Application Service Provider (ASP) breaks the known rules of engagement and has the potential to redefine the communications industry as it was once known. For those of you who know me, you may recall that I'm a believer of what I call "Lennon/McCartneyism" which was largely influenced from the lyrics from the song "The End" from Beatles Abby Road Album - "...and in the end the love you take is equal to the love you make." From those words I envision a Greenfield opportunity of embracing a balanced broadband empowered world where end user empowerment exists and where people can just pay for access (dumb pipes) and have the freedom of choosing who/what and where their service providers come from. A corollary that in this model, non-traditional service providers will show up and start offering "services." This is happening today as represented by the overnight success of companies like Vonage and this is one of the trends that may in fact help save the communications industry. In this Greenfield opportunity, the advent of end-to-end IP provides the virtual mulch. From this mulch, the opportunity exists to grow plants, trees, weeds and more. Fertilizer needs to be provided, the seedlings need to be nurtured and my hope is that we can help control the "weed" population without much (if any) regulation. My hope is that this become a world made available by deregulation rather than new regulation. With all of this said, my number one rule for those who wish to compete in the Voice over Broadband space is: "Embrace the Technology and Act as a Good Parasite." "Embrace and Act as a Good Parasite", yes this is what I'm saying. It wasn't that long ago that a common assumption was that local phone service would always be delivered by the incumbent operator. In the US this was the RBOCs and outside of the US it was the local PTTs What almost everyone seemed to miss was the fact that while most telecom executives were in the board room making assumptions about running a wireline telephone business, the business of the wireless industry happened and we are at point in time today where 40% of all telephone calls in the US originate or terminate on a cell phone and where this trend may in fact be accelerating. This in turn, plus the emergence of availability of broadband empowerment of consumers has had a noticeable impact in the top line revenue of 2nd line phone service in the US with the RBOCs and the PTTs around the world. There are a growing number of consumers who today rely on their cell phone as their primary phone and don't pay to have any connectivity to/from their respective incumbent operator. Residential 2nd line (and 3rd, 4th, etc.) service has been replaced by the purchase of either DSL or Cable Modem service and/or the increased use of wireless/cellular phone service in the home. In a parallel time frame, since 1997, the VoIP industry was incubating it's core technologies and the QoS on the public internet was getting better to the point that by early 2002, consumers were for the first time offered the choice of replacing their secondary phone service from companies like Vonage. From one perspective, revenue prospects for Voice over broadband services look to be on the rise and revenue from traditional phone services look to be on the decline. So what can be done to fix all of this if you are an incumbent operator? Put artificial barriers to entry in place to try to slow down the competition? Maybe that works, but eventually it doesn't. A better approach is to embrace the technology head on and leverage it to your favor. My strategy for the ILECs and the PTTs of 2003 is as follows: Embrace VoIP and launch a consumer 2nd line phone service inside your territory as a pure parasite play and deliver the service over broadband - both Cable and DSL and play the same game as the other voice over broadband service providers. You don't need to pay for the roll out of the cable plant, or to play for the access for your prospective customers to benefit from. As a pure parasite you gain access without the cost. Plus people still have a "trust" relationship with you so even if they don't opt-in for your primary phone service, you do make a compelling reason to be the secondary phone service in the home. Did I mention that you also know where everybody lives and you can quickly identify the customers who have left you and can focus on creating enough awareness so that you can gain new customers faster than the startup competition which has to spend significant dollars on branding and marketing. So start out by offering 2nd line phone service in the territory that you still offered primary phone service and then, if you want to keep the relationship, start rolling out "Purple" applications which enable your new customers with the ability to do more things with communications, things which they could never do before without IP based communications. (Eventually this means that new applications will be rolled out that may in fact be "sticky" enough for you to attract net new customers.) As far as I can tell, this strategy turns out to be a win/win all the way around for most of the players and would completely validate the ongoing work of the emerging new order of voice over broadband players. When successful, roll out the services on a national / international basis. The international LD arms of these operating companies can then go local outside of their national territory and help bring communications to a new generation of people. Just a thought on how everybody can win in this new broadband enabled world. ------------------------------------------------------------------------ Introducing VoIPWatch - A place for Press Releases & Industry News Earlier this month pulver.com acquired a new website, VoIPWatch - . This website provides an easy way for readers of the Pulver Report to submit their company press releases and provides a channel for community members to share their own news and stories. ------------------------------------------------------------------------ Hotspotting @ LAX On the way back from a recent west coast trip, I spent a couple of hours walking around terminal 7 at LAX "hotspotting." I had heard that Boingo was available at LAX but I wasn't quite sure where. During my attempts to find Boingo I ran into a couple of private WiFi networks and finally was able to download the Biongo software and check my email all before the battery in my laptop was discharged. If you ever see people walking around airports (or other public locations) with their laptop computer screens open and with the owners staring into their screens as if they were walking down the beach combing for missing objects, that is what it felt like during the time I spent hotspotting at LAX. I realize the sight of this may have looked a bit strange to the weary travelers whom I tried to avoid walking into. At least when using WiFi at locations which are familiar to you, one generally can find out where the access points are and one generally gets a feel for the coverage range. In my case I still don't know where the access points were but I did learn where the reception was marginal and appreciated the few minutes of uninterrupted emailing that I was able to get done. While it would be nice when laptops provide an audible indicator of the received signal strength of the incoming WiFi signals, hopefully we won't have to wait for such innovations before the art of hotspotting is perfected. Until then, look out for people like myself who at times can be found walking from gate to gate looking a little lost while at the same time seeking the best location for best reception of the WiFi access point. ------------------------------------------------------------------------ Another State looks at VoIP In the last issue of the Pulver Report I reported on on-going activities in Ohio, Florida and Virginia. Add Illinois to the list of States looking at VoIP in 203. I recently read a Notice from the Illinois Commerce Commission (ICC) concerning a workshop the ICC Staff is convening on May 22, 2003 at 1:00 p.m. Central time in Chicago and Springfield. The purpose of the workshop is to address Voice Over Internet Protocol based local services and to "discuss alternative regulatory treatments of such services." The notice states that Staff expects to address the following topics (as they relate to VOIP and similar technologies used to provide local voice services): - Staff Presentation: The Basics (e.g., how VoIP works) - Jurisdiction of the Illinois Commerce Commission - Certification/Tariffs/Taxes - Service Standards/911 Service Standards - Consumer Protection Standards For those of you active in Illinois who will be at this meeting, I'd appreciate receiving your feedback. Special thanks to Pulver Report reader Darrell Townsley for the heads up regarding this meeting. ------------------------------------------------------------------------ Call for Speakers: 2003 Wireless Internet Summit pulver.com will be hosting our 2003 Wireless Internet Summit, November 11-12 in Santa Clara, CA. This summit will be taking a look at the current Wireless Internet market space and will be covering a wide range of topics and issues ranging facing the industry ranging from WiFi VoIP to free WiFi Hotspots. We are currently working on the summit schedule and the formal website will be launching in June. In the meanwhile, if you are involved in the Wireless Internet Space and are interested in speaking at our Wireless Internet Summit, please email me directly, jeff@pulver.com by June 20th for consideration. ------------------------------------------------------------------------ pulver.com 2003/4 Conference Calendar ( http://pulver.com/conference ) "Events for the Communications Industry" (tm) June 9-12 - VON Europe 2003, Olympia Conference Centre, London, UK ( http://pulver.com/europe2003 ) June 9 - FWD User Group Meeting ( http://pulver.com/fwdugm ) July 8-9 - Supernova 2003, Washington D.C. ( http://pulver.com/supernova ) September 22-25 - Fall 2003 VON Tradeshow & Expo, Hynes Convention Center, Boston, MA ( http://pulver.com/von ) September 23-25 - SIPop! 2003, Hynes Convention Center, Boston, MA ( http://pulver.com/sipop ) September 30 - October 1 - RVC SoftEdge 2003 ( http://pulver.com/rvc2003 ) November 11-12 - 2003 Wireless Internet Summit Santa Clara, CA - 2004 - March 29 - April 1 - Spring 2004 VON Tradeshow & Expo Santa Clara, CA ------------------------------------------------------------------------- If you are aware of others who would like to receive the Pulver Report, please visit ( http://pulver.com/reports/subscribe.html ). To unsubscribe, please visit ( http://pulver.com/reports/unsubscribe.html ) Please send your comments and feedback regarding this issue of The Pulver Report to: jeff@pulver.com. Jeff Pulver Tel. +1.631.547.0800 The Pulver Report Fax. +1.631.396.3996 May 20, 2003 http://pulver.com/reports ------------------------------------------------------------------------ (c) 2003 pulver.com, Inc., All Rights Reserved. ========================================================================