In recent discussions about Open Peer with analysts and at WebRTC Conferences I have been asked the question; How Telco’s fit into the WebRTC, OTT (over-the-top) Communications equation?
My views on this issue are grounded in economics and history. First, the history. In 2001 I joined a startup defined as a BLEC, (Building Local Exchange Carrier) doing very early work with VoDSL (Voice over DSL over ATM). The business case was that voice services could be delivered more efficiently over broadband connections resulting in enhanced services for customers and profits for the business.
By 2003 our focus on VoDSL was transitioning to a “new” protocol, VoIP (Voice over IP). I have distinct memories of countless meetings with Telco engineers and executives along with analyst and industry articles basically singing the same tune – VoIP is a geek’s technology, it will never be ready for prime time, will never be successfully commercialized. This is blood in the water to an entrepreneur’s shark instinct and we, along with other early players such as Vonage and Skype, and many of today’s most successful telecom equipment providers, went all in on VoIP. Today, VoIP and SIP are key Telco technology standards, now that they’ve been validated by early stage, risk takers. That leads me to the economics part of the response.
VoIP has been successfully adopted over the past decade simply because it has proven a better, less expensive way of delivering voice services. The early validation of VoIP by players like Skype, Vonage and a host of others doesn’t necessarily mean those guys were smarter than the Telco’s. It means they were operating under different management responsibilities and risk/reward paradigms. The executive management and boards of Telcos are hired and paid NOT to take risks. They run utilities owned by pension funds and are tasked to provide reasonable, conservative returns with as little risk as possible. They are not paid to innovate. That’s the domain of the other end of the risk/reward spectrum, startups and entrepreneurs.
So, How will Telco’s fit into the WebRTC, OTT Communications equation? History and economics indicate that they will ultimately embrace WebRTC and OTT completely. How do we know? Skype, the king of OTT communications today was once a geek’s technology and WebRTC obviously is today, but, WebRTC and OTT clearly provide enhanced services at reduced costs, quite simply, a better, easier, less expensive way of doing things. Economic history clearly indicates technology with these attributes succeeds and is widely adopted. The Open Peer software we build at our small, young technology company, Hookflash, provides higher quality HD video, and wideband audio sessions over reasonable quality broadband connections (wireline or wireless) than PSTN/equipment based solutions, at a tiny fraction of the cost. It also takes a unique new approach to web identity and connecting on IP networks, see Identity Federation.
Open Peer software also directly integrates with other software and applications including enterprise directories, social media, ERP and CRM which will add untold value in productivity, and eliminate the ongoing need and costs associated with PSTN connections and telecom equipment infrastructure. (And yes, it’s shortsighted to ask, what about features like voice mail or ACD?) Messaging is the new ringtone and exciting new features will emerge in Real-Time Communications via WebRTC and mobile to replace other traditional telephony features as computers in their various forms, smartphones, tablets and desktops (and even televisions) continue to replace telephones.
Progressive Telco’s are already launching OTT services such as Telefonica’s O2 Tu Go and British Telecoms’ SmartTalk. UK Analysts Vision Mobile produced an excellent White Paper (sponsored by Ericsson) on Telco strategy for OTT: The Telco Innovation Toolbox.
How Telco’s ultimately fit remains to be seen but here’s my take:
– the majority of communications will migrate to OTT, (essentially meaning all IP) due to superior economics and manageability – telcos will be swept along
– Many Telco’s may wind up positioned one layer back from most customer/subscribers finding their optimal opportunities in providing critical broadband capacity and quality for the growth of OTT and WebRTC services in an all IP era.
– adoption of OTT and WebRTC will happen more rapidly than VoIP did as customer adoption cycles continue to shorten replacing today’s hybrid IP/PSTN connectivity with all IP solutions. Microsoft Lync is a good example of this kind of temporary hybrid solution. I’d suggest Oracle’s recent $2 billion investment in Acme Packet is a leading indicator of the integration that will occur in an all IP communications marketplace.
– Telco’s will ultimately focus on their competitive advantage as infrastructure providers and benefit as growth in over-the-top services drives bandwidth demand
Telco topline revenue may decline as they transition from traditional subscriber revenues but margins and business stability will improve as Telcos provide enhanced broadband services including speed, capacity, Quality of Service, and security. Telco’s will thrive providing the foundational backbone for OTT services and WebRTC in the new growth era of integrated real-time communications on the web.
by Trent Johnsen