It's been a lively week in the news, with a large number of rather high profile stories. I'll wrap up some of the week's news for you here.

Survey: Home VoIP use grows in United States

By Linda Rosencrance, Computerworld, 07/21/06

VoIP use continues to gain subscribers in the home telephone service market, according to San Francisco-based Telephia, a provider of performance measurement information to the converging communications and mobile industries.

Households subscribing to pure-play subscription VoIP services -- meaning those who are either replacing or complementing existing traditional landline service -- rose from 2.2 million in the first quarter of 2006 to 2.9 million in the second quarter, according to the survey.

This survey by Telephia looks into attitudes in residential consumers trying to find trends and insights into the market. Even with all their stock prive woes since the IPO, Vonage continues to carry the market lead with 53.9% share.Verizon's VoiceWing and AT&Ts CallVantage tied for second with 5.5% each. They've got some doing to match Vonage, but either one my find they can buy Vonage for a song if Vonage's stock keeps falling. Buying market share has long been a common approach to winning in the consumer market.

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VoIP Providers Enter Uncharted Waters With Universal Service Obligations
By Frederick Joyce and Christine McLaughlin

The Federal Communications Commission’s (FCC) recent decision to impose Universal Service Fund (USF) reporting and payment obligations on VoIP service providers may create a whole host of compliance problems for this nascent industry. Although the FCC has established so-called "safe harbor" provisions, the fact is that figuring out how to navigate the troubled USF waters will be complicated by the very nature of VoIP networks and services. With the first reporting deadlines looming large on Aug. 1, 2006, there won't be too much time for affected VoIP carriers to plot a course.

The USF is a complex program, created in its current form by the Telecommunications Act of 1996. It’s the program by which telecommunications carriers, and other parties offering telecommunications services, contribute a percentage of their telecommunications revenue to subsidize certain services, such as basic phone service in rural or other high-cost geographic areas and Internet access in schools and libraries. Seeking to shore-up revenue shortfalls due to the annual evaporation of long-distance telecom revenue, the FCC recently decided to make VoIP service providers contribute to the fund. The so-called “contribution rate” (the FCC and Congress have repeatedly shied away from calling this program a "tax") currently is 10.7 percent of interstate revenue; consequently, the FCC's decision will entail real dollars for VoIP service providers and their customers.

The impact of recent FCC rulings requiring VoIP providers to contribute to the Universal Service Fund have gotten a lot of press. The USF has fallen short with declining long-distance revenues and the FCC elected to saddle VoIP providers with some of that shortfall. Real impact to VoIP customers remains speculation at this point.

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Analysis: SIPphone's Free VoIP Calling Plan
Read the fine the print on this Skype competitor's offer for free international and domestic calling.
By David Greenfield
Networking Pipeline

SIPphone rattled the VoIP industry today, announcing free calling to PSTN and mobile phones for users of it's VoIP-IM service, Gizmo Project.

The move was an obvious take off on a similar announcement from Skype last May that introduced free calling to US-based users until the end of the year. Both plans are meant to expand the market share of the services.

However, the SIPphone effort differs in a number of significant ways from the Ebya's Skype offer. Unlike with Skype, the Gizmo Project plan is permanent and requires both users to be "active" Gizmo Project users. "Active" accounts are those used regularly to make voice calls using the Gizmo Project software. Also unlike with Skype, the calls aren't confined to North America, but can be placed from anywhere in the world and received in 60 countries. Finally, while SKype allows any regular phone number to be dialed within a designated region, Gizmo Project limits user to calling users at the mobile and landline numbers in their Gizmo profile.

SIPphone raised a lot of eyebrows and garnered a lot of attention with their expansion into free telephone calls. The service plan parameters and requirements have gotten mixed reaction from the industry overall, with speculation that this move was just the first in a series for SIPphone.

Other articles:

Gizmo to give users free VoIP calls... sort of
Ars Technica, MA - 22 hours ago
The Gizmo Project, a multi-platform VoIP service developed by SIPphone, now claims that users can make outgoing calls to landlines and mobile phones for free. .

Gizmo Project - Call 60 Countries for free*
Corante, MA - Jul 21, 2006
One of the things people are missing with Gizmo Project's All Call Free program is that in order to take advantage of it both participants of the call need to ...

Gizmo Project Opens up Free Calling to 60 Countries
VoIP Magazine (press release), CA - Jul 21, 2006
File in "look at how easily we can mess with your business model," Gizmo Project announced free calling landline and mobiles in some 60 countries this week. ...

Gizmo Project offering free calls to lure users away from Skype
TechWhack, India - Jul 20, 2006
SIPphone is the company behind the much talked about Gizmo Project and they are making more news with the announcement that they are now offering web users the ...

Most Gizmo Project Calls Now Free
Enterprise VoIP Planet, Connecticut - Jul 21, 2006
Skype competitor Gizmo Project, a free softphone-based instant messaging and VoIP service from SIPphone Inc. (see our review), has ...

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The Market for Broadband VoIP Solutions has seen Explosive Growth in the US
DUBLIN, Ireland--(BUSINESS WIRE)--July 19, 2006--Research and Markets (http://www.researchandmarkets.com/reports/c39696) has announced the addition of In-Sights: The Wide Ranging Nature of Business VoIP Adoption to their offering.

The US Business market is increasingly well aware of the wide array of IP voice solutions available to meet their business needs. So much so, that a great deal of dispersion has taken place in the VoIP arena. Broadband VoIP solutions have seen explosive growth and attract much of the attention in the marketplace. While these solutions are fueled primarily by residential customers, they certainly have traction in the business arena. Other solutions tailored more directly to the needs of businesses, including Hosted IP Centrex, IP-enabled PBX and IP-PBX solutions, have also gained traction. Increasingly, voice-enabled Instant Messaging clients (i.e. Yahoo!, AOL) are proving useful to businesses, especially as they gain connectivity with the Public Switched Network. All of these solutions are useful components in the ever-expanding breadth of VoIP options available to businesses.

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Wireless VoIP attracts attention

By Tim Greene, NetworkWorld.com, 07/21/06

Wireless VoIP is getting a push this week from Skype, which is introducing a handset that can link callers to the Skype service via Wi-Fi connections.

So users log the phone in to a local access point, gain Internet access and place calls. They are handled by Skype just as the would be if the caller were dialing from a Skype client on a computer attached to a wired network.
The convenience here is obvious. Customers don't have to fire up their laptop at a hotspot and the interface - a phone-like handset - is much more user-friendly. Four other Skype Wi-Fi phones are due out for Christmas.

Skype last week hit high visibility with news that a Chinese group had reverse engineered their proprietary protocol. They didn't skip a beat this week with another handset that does WiFi.

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In perhaps the most visible news story of the week, or at least the one that garned the most reaction, Business Week ran this essay -

The Phone Companies Still Don't Get It
They block competition and charge too much. You call this a communications revolution?

One day this spring in San Antonio, I sat on a couch to watch TV with two AT&T (T ) executives and three public-relations aides. It's not a bad job, sitting on a comfortable sofa in a pretty, air-conditioned brick Tudor watching TV, and the way I got it was by telling AT&T's PR folks that I was working on a story that could wind up saying that in this age of enormous technological upheaval, their very own behemoth was not adding to innovation but standing in its way. No, no, they said, that's all wrong. If only I could go down and see AT&T's new video technology in action. Some 200 participants in AT&T's test there were the first beneficiaries of the great new network war, the mega-telcos' drive into video. Come down to San Antonio, they said, we'll take you to a customer's house to show you.

The day before my trip to Texas, on my way back from a tour of AT&T's Florham Park (N.J.) labs, a PR guy had clarified that they didn't mean just any home. "Hundreds of reporters have asked to see this," he said, and they couldn't ask their test customers to take them all in. So the customer probably would be, while not an AT&T employee, someone with some connection to the company. "A friendly," the PR person had said.

When I get to Texas, however, still another PR person confides to me that, despite the many press requests, I will be only the second reporter to see the new video offering in action. You would think rounding up a bona fide customer for two reporters shouldn't be impossible, but the proud homeowner who meets me at the door is wearing brightly polished cap-toed oxfords and a blue button-down shirt, an odd outfit for a guy sitting around his own house waiting for a reporter to stop by. And so we make our greetings and I sit down in front of the TV. In the armchair next to me Jeff Weber, the AT&T vice-president in charge of Project Lightspeed, grabs the remote control. He presses a button. The channel changes (much faster, he points out, than on a conventional cable system). He hits another button. It changes again.

He gives a little flourish and gestures to the set. "TV," he says. "It works."

I ask if this brand-new system will let me record one show while watching another, as TiVo (TIVO ) or my own cable box at home do. Sure, says Weber, as soon as AT&T gets the new generation of set-top boxes built and delivered.

Meanwhile, the homeowner has remained standing, watching me watch TV. So I try to break the ice, asking what he does, assuming he doesn't work for AT&T. Actually, he corrects me, he does.

"So what exactly do you do?" I ask.
"I'm the architect of Project Lightspeed." For a few seconds I take this in, wondering why nobody bothered to tell me.

Baby Steps
It's a classic moment, an illustration of where the power lies in telecom. It is tough -- no, make that impossible -- to think of another ostensibly technology-focused industry where the chief technical architect of a planned multibillion-dollar, company-changing project does not merit so much as an introduction. In fact, in San Antonio, that architect, John Kirby, neatly managed to dispel any confusion about the status of engineering at the company when, after clarifying what it is he does, he explained that when it came to big new projects, "marketing dreams it up, and then I have to design it."

Ah. Welcome to Telco Land, a strange country where the biggest players talk more and more about innovation yet approach new ideas with baby steps, build little themselves, and when they think about technology are apt to believe it's a threat they have to fight.

In case you haven't been keeping score, after the original phone company, American Telephone & Telegraph, was broken up in 1984, the country was left with eight major regional telcos. Over the past decade these companies proceeded to gobble one another up. Now there are four: AT&T, Verizon (VZ ), BellSouth (BLX ), and Qwest (Q ). Just keeping track of the mergers and names is an endless challenge: The "new" AT&T is actually the rechristened SBC, based in Austin, Tex., which acquired the venerable name last year -- and it's in the process of buying BellSouth. That will leave two phone giants, Verizon and AT&T, and the much smaller Qwest. The biggest wireless carriers are Verizon Wireless, majority owned by Verizon, and Cingular, which is soon to be wholly owned by AT&T. It's not exactly the return of the old Ma Bell monopoly -- the world has gotten way too complicated for that -- but that's a lot of power in the hands of just two companies.

One way in which these companies are very different from the old phone monopoly is that while the original AT&T had a world- class research operation, its successors don't. One of the signal facts of the communications revolution is that virtually all the new technologies that made it possible were developed outside the phone world. Last year, Verizon's revenue came in at nearly $80 billion. AT&T (without BellSouth or Cingular) had revenue of $44 billion. And yet while Intel Corp. (INTC ) spent $5.1 billion last year on research and development, AT&T spent just $130 million. The word "research" doesn't even appear in Verizon's annual report.

But if in the era of telecom deregulation the most common industry buzzword was "competition," it is now "innovation." And Verizon and AT&T increasingly are asking to be viewed as leaders in the realm of ideas. Do a Web search on "Verizon" and "innovation" and you'll pull up speeches by Verizon CEO Ivan G. Seidenberg extolling its importance. The phone giants have even used "innovation" as a key justification for their aggressive merger wave. Last year, when SBC was buying the remnants of AT&T, SBC Chief Executive Edward E. Whitacre made sure to note that by merging, the combined company would have "the intellectual and financial resources to spur innovation."

Verizon and AT&T are under great pressure to recast themselves as innovators. They lag behind the cable companies in their efforts to sell high-speed Internet access. Their local telephone monopolies are under attack as those same cable companies' offer to provide phone service at lower rates along with TV and data. Looking ahead, wireless technologies ranging from the familiar Wi-Fi to more powerful wireless standards being advanced by researchers in academia and companies such as Intel pose a whole new set of threats.

In response, AT&T and Verizon are rushing to build networks to deliver TV service and high-speed broadband access. They point to them to make the case that, yes, they are technology companies. Verizon is spending billions to roll out a next-generation phone, data, and video network called FiOS (as in "fiber optic") to give its customers faster Internet service and an alternative to cable. While not matching FiOS' impressive speeds, AT&T promises to do something similar with Lightspeed, which it started marketing in parts of San Antonio under the brand name "U-verse" not long after my visit.

The rhetoric of the tech biz has always been about who can out-revolutionize whose revolution, and executives at AT&T and Verizon are embracing it. Says Thomas J. Tauke, a former Iowa congressman who is now Verizon's chief Washington lobbyist: "As we deploy new technology, what is happening is that we are the insurgents who are trying to come in and change the marketplace."

To give Verizon its due, the company has made some major strides. Its FiOS broadband and video network is by most accounts the state of the art in network technology. (It's pricey, though -- the highest level of FiOS home broadband service costs $109 to $139 a month.)

But dissonant realities remain. Isn't it a little odd, for example, to hear the CEO of a company the size of AT&T talk about needing to get bigger to have the resources to innovate? In fact, over the past decade the big telcos have mostly looked outside for technological innovation. "We develop services, and we figure out how to use and deploy technology that many others are developing," says Verizon's Tauke. Edmond J. Thomas, who ran the labs at Verizon when it was Bell Atlantic, puts it another way. "They do very little fundamental research and very little advanced development," he says. "Their view of the world is: 'We can buy it elsewhere."'

There is something to be said for "buying it elsewhere." If the big telcos built everything themselves, there would be no Cisco (CSCO ) and no Motorola (MOT ). But years of buying it elsewhere has yielded a culture distrustful of technology -- and of progress: It's impossible to imagine Microsoft (MSFT ) developing a big new product and having the lead engineer shift from foot to foot in the corner pretending to be just another customer. It has meant, as with AT&T's Lightspeed, that telcos are likely to offer services that only match, but not surpass, those available from others. And increasingly their approach has put the telcos on the wrong side of technological innovation, leaving them in the position of protecting their investments in their networks from the encroachments of new ideas.

This essay caught like wildfire as many industry watchers jumped to respond. My personal response was something of a personal rant. Remember, I used to work in the telecom industry directly. You can find my rant here. You can find some keen insight on the subject from:

Business Week: Telcos Can't Innovate - Bruce Stewart, O'Reilly Emerging Telephony
"The Phone Companies Still Don't Get It"... Business Week - Thomas Anglero, Telecom's Tsunami



Technorati Tags: Telephia survey, USF, Universal Service Fund, SIPphone, GizmoeProject, Gizmo, Skype, Business Weel, telecommunicatinos, innovations, lack of telco innovation