They tried and failed with UBB. Now they are at it again with "speed boost" technologies. The two technologies at question are Verizon's "Turbo” service and Roger's "SpeedBoost”. There are very few technical details, but it appears in the former case that users will be able to purchase additional instantaneous bandwidth to the detriment of other users on the same shared service. Whether this will make a difference to actual throughput is another matter because the slow video may be due to server problems and not network congestion. And if you are in elevator with very poor connectivity, you will unlikely get any faster download speed, no matter how many times you press the turbo button. But will Verizon give you a credit if you don't get the advertised speed boost? I doubt it. Similarly the Rogers' service, while still free, seems to imply faster speeds if they detect you are streaming a video, particularly from their own on-line service. Will users who are not streaming video, but using other real time applications get the same benefit such as VoIP or Telepresence? I doubt it.

The carriers continue to have this brain dead idea that bandwidth is a scarce resource — which is only true to the extent that were the ones who created this artificial scarcity. Building a business case around an artificial scarcity is as stupid as trying to make a premium market from air we breathe. Customers aren't interested in buying bandwidth or quality of service to enhance their user experience. Just as with electricity they want and expect that just about any appliance or application will simply work — with no need for special speed boosts and other gimmicks. Imagine negotiating with the electric utility for a little extra power when you needed to turn on your stove or TV.

It is last mile packet loss which has the biggest impact on the customer's user experience — NOT bandwidth or congestion. The Internet (TCP/IP) is designed so that packet loss is used as a signaling tool to reduce packet throughput. Regardless of where the packet loss occurs the Internet is designed to slow down any data stream, that is affected by a lost packet. However the rate to which a data stream is slowed down is greatly dependent on distance. This is why moving caching boxes as close as possible to the user affects end-to- end throughput, particularly if there is ongoing packet loss.

Although bandwidth and congestion can be a factors affecting packet loss, there are much more clever ways of reducing the impact of packet loss, especially in wireless environments. There are two much simpler solutions. The first is to locate caching/cloud servers as close as possible to the end users. Something that companies like Akamai and Google do already — at no charge to the carrier. Decreasing wireless distance from the wireless node is the other critical factor. This is why integrating WiFi with 3G/4G is so important.

A good example of a carrier that "gets it" is Free.FR in France. Free.FR is redefining what the idea of a carrier in the 21st century is, thanks to these innovations I have been talking about and pioneered by R&E networks like SURFnet. Integrating a blend of Wi-Fi, 3G and its all-fiber backbone, Free will offer unlimited voice, texting and data over the mobile networks. Free.fr deploys their own set-top box for automatically sharing a portion of one's broadband connection via Wi-Fi with other Free.fr customers. Over five million set-top boxes means Free.fr has a free Wi-Fi cloud covering major cities such as Paris. Even when away from home, you can easily get broadband instead of resorting to an expensive 3G network. Their set top box will also allow extreme local caching, to further enhance the user mobile experience. This is the future of broadband. Not silly gimmicks like TurboBoost or SpeedBoost.

Written by Bill St. Arnaud , Green IT Networking Consultant

… guide the FCC's work on technology and engineering issues, together with the FCC's Office of Engineering and Technology. He will advise on matters across the agency to ensure that FCC policies are driving technological innovation, including serving as a resource to FCC Commissioners. He will also help the FCC engage with technology experts outside the agency and promote technical excellence among agency staff. He will be based in the FCC's Office of Strategic Planning and Policy Analysis.

Henning brings an excellent background to this role, having been one of the co-authors of the Session Initiation Protocol (SIP - RFC 3261) and the Real-time Transport Protocol (RTP - RFC 3550 and 1889), the two main standards used in most Voice over IP (VoIP) systems today. Henning is also the author/co-author of over 70 other RFCs and countless Internet-Drafts and has been active with the Internet Engineering Task Force (IETF) since the 1990's. He also served on the Internet Architecture Board (IAB).

Given the recent FCC workshops on the transition of the Public Switched Telephone Network (PSTN) to new technologies, it's great to have someone with Henning's background and knowledge in a prominent role at the FCC. Henning himself noted this in an email to the IETF DISPATCH working group mailing list, where he noted that the FCC is definitely seeking input from technical folks.

Obviously in this new role he'll be working not only with real-time communications but also with the wide range of other areas that the FCC covers. Regardless, it's excellent to have someone with Henning's background providing this level of advice and input to FCC activities.

Prior to joining the FCC, Henning has been a professor and chair of the Computer Science department at Columbia University. In my experience he's also just an all-around decent person and I'm very much looking forward to seeing what he'll do at the FCC.

Written by Dan York, Author and Speaker on Internet technologies for over 20 years

http://www.fcc.gov/live

The FCC's note about the workshops mentions that people watching the live stream can send in questions to panelists using either of two methods:

• by e-mailing livequestions@fcc.gov
• tweeting on Twitter using the hashtag #FCCLIVE

Given that a video recording was provided for the first workshop, hopefully a video recording of this second session will also be made available.

Today's sessions look to be quite interesting and contain quite a range of participants. The full schedule and list of participants is available on the FCC's web site (click on "Expand" in the lower right corner of the page), but here is the brief list:

* * *

9:30 a.m. — 9:40 a.m. - Welcome Remarks by Zachary Katz, Chief Counsel and Senior Legal Advisor, Office of the Chairman, FCC

9:40 a.m. — 10:45 a.m. - Impact of the Transition on the Technology and Economics of the PSTN
Participants include: University of Colorado, Carnegie Mellon, George Washington University, Massachusetts Institute of Technology (MIT), Gillan Associates, SIP Forum

10:45 a.m. — 11:45 p.m. - Policies of the PSTN (e.g., accessibility, reliability, affordability, and public safety)
Participants include: Tufts University, Consumer Federation of America, University of Wisconsin, Neustar

1:00 p.m. — 2:10 p.m. - Implementing the Transition to New Networks
Participants include: Verizon, Comcast, Carnegie Mellon, National Telecommunications and Information Association (NTIA), XO Communications

2:10 p.m. — 3:20 p.m. - Syncing Expectations, Emerging Technologies and the Public Good
Participants include: Georgetown University, University of Michigan, University of Pennsylvania — Wharton, Acme Packet, Panasonic Systems Networks

3:20 p.m. — 4:30 p.m. - Economic Rationales for PSTN Transition
Participants include: Queens College, Indiana University, Syracuse University, Sanford Bernstein, University of Auckland, NZ

Written by Dan York, Author and Speaker on Internet technologies for over 20 years

http://www.fcc.gov/events/public-switched-telephone-network-transition

Given that the workshop was 4 hours long, you may or may not want to watch the entire session. The workshop was divided into four hour-long panels that consisted of brief presentations by the various panelists followed by questions to each panel from the moderator and attendees. FCC Chairman Julius Genachowski also appeared briefly to provide a few comments.

The order of the workshop panels is as follows (and differs from the planned agenda only in that FCC Chairman Genachowski's comments came between the first two panels):

• The Impact of Broadband Communications on Public Safety and Network Reliability
• Remarks by Julius Genachowski, Chairman, FCC
• Disability Access in Substitute Services
• Technical Capacity, Capabilities, and Challenges Facing Future Rural Networks
• Identifying, Evaluating, and Transitioning Key PSTN Edge Functionalities (e.g., alarm monitoring, medical devices, and consumer equipment)

In his comments, FCC Chairman Genachowski discussed how the world is changing and moving to an IP network. He highlighted that 19% of the nation's telephone connections are already interconnected VoIP and 30% of Americans have cut the cord and moved to wireless. He spoke of the role of IP networks in unleashing innovation, contributing to job creation, education, etc. and indicated he and the commission are seeking answers to questions such as these:

• how do we minimize consumer disruption in the move?
• how do we ensure public safety access?
• how do preserve and promote disability access?
• how do we ensure ubiquitous access?
• how do we ensure access to high quality service?
• how do we best foster innovation?

He emphasized that the current PSTN is reliable and accessible and we don't want to lose benefits of old system. He indicated that he wants to enable the private sector to take the best benefits of PSTN and bring those into the future while taking advantage of new technologies.

The panelists in each section all saw the transition as inevitable, indicated it was already well underway and raised legitimate concerns to be considered with regard to their topic area. For instance, the sheer number of installed devices connected to the PSTN will take quite some time to change over to devices that can work with IP networks. An example was given that a standard for alarm systems over IP was only standardized within the TIA in 2007 and a similar standard for smoke alarms over IP was only standardized in 2010. It will take quite some time for devices with those standards to propagate out into commercial availability and transition options may need to be evaluated. Similarly, while the use of traditional TTY devices continues to decline, there is still a huge installed base. These TTY devices are designed to work over the PSTN and the traditional protocol used does not work well over IP. These devices will need to either be replaced or have a transition device such as a terminal adapter installed to work over IP networks.

All in all it was quite an interesting session and hopefully did provide the FCC with the type of feedback they were seeking. The second FCC workshop on the PSTN transition takes place tomorrow, December 14, 2011.

Written by Dan York, Author and Speaker on Internet technologies for over 20 years

Circuit-switched wireline voice technology has created a high standard for reliability, accessibility, and ubiquity. Consumers will continue to expect and demand these qualities, even as they shift from PSTN services to services provided over different networks. The transition away from the PSTN is already occurring, and is likely to accelerate. Through these workshops, the Commission will seek input on the technical, economic, and policy issues that must be addressed to minimize disruption during this transition, and to protect consumers, public safety, competition, and other important interests.

The first workshop on Tuesday, December 6, will focus on "what obstacles and opportunities the transition may create regarding public safety, accessibility, and ubiquitous service.”

The second workshop on Wednesday, December 14, will focus on "a wide array of economic, technological, and policy issues that need to be addressed as consumers choose to subscribe to, and rely on, new technologies and services.”

More details about attending can be found in the public notice. The document also indicates that the workshops will be streamed live at http://www.fcc.gov/live

Written by Dan York, Author and Speaker on Internet technologies for over 20 years

The following inforgraphic was released as part of the announcement presenting current stats on Skype usage.

It is not only undesirable but probably also impossible to regulate the new voice world the way we did when voice was a vertically integrated service delivered by regional monopolies. But the old regulations achieved various social goals as well as controlling monopoly behavior; the most important things the regulation assured were connections to 911 emergency services; universal access regardless of location, income, or handicap; access for law enforcement; interconnection between providers; and quality standards.

911 service: the previous post opined that this could be left to a combination of residual FCC regulation of cellular carriers and a competitive marketplace. Government's role should be limited to setting a standard for 911 connectivity so that it will be clear what a service has to do before it can claim to be 911 compliant. Assuming that government will continue to subsidize lifeline services for the indigent, government can and should refuse to subsidize services which are not 911 compliant.

Universal access regardless of location: it made sense to require a company which was granted a geographic monopoly to serve EVERYBODY who wants service within the geography. Easy-to-reach subscribers end up subsidizing the hard to reach; but monopoly prevents a competitor from cherrypicking these cheap-to-reach customers and offering them cheaper service which is not burdened by the cost of subsidy. If a company enters a market without requesting monopoly status, there is no basis for imposing universal service obligation on that company. Moreover, once a competitor enters what used to be a monopoly market, it becomes impractical to force the former monopoly provider to have a universal service policy; eventually they'll end up with just the most expensive-to-serve customers and no other customers to cross-subsidize the service. (see States Should Deregulate ALL Phone Services – Not Regulate New Ones).

There are actually two forms of subsidy currently in effect for high-cost POTS subscribers: implicit subsidy through uniform rates as described above and explicit subsidy through the Universal Service Fund (USF) which is funded by as assessment on the earnings of cellular, POTS, and VoIP providers (only when they interconnect with POTS). The USF subsidizes POTS service in expensive geographies, POTS service to the indigent, and broadband service to rural health care providers, schools, and libraries. There are two big problems with the USF: 1) it will go broke if it depends on a percentage of revenues from services which interconnect with POTS since these revenues are declining and will disappear when POTS disappears, and 2) subsidizing POTS isn't going to keep people connected once there's no POTS

We should not walk away from the universal access we have achieved with POTS. But it would be incredibly expensive to keep POTS alive for just those relatively few users, mostly rural, who do not have either a broadband or cellular alternative to POTS. We need to assure that either cellular or broadband coverage is available everywhere POTS is available. A repurposed USF may be part of the answer to this. The main problems to be solved are middle mile fiber and towers to put radios on in places where the economics will initially be bad (see Planning for the Ugly End of the Phone Network). The good news is that, once some capital investment is made, ongoing subsidies should be much lower than they are with POTS. New communications technologies are a lot cheaper than the old ones. Moreover, aiming USF at broadband rather than POTS gives recipients what they need to be connected in the modern world. USF subsidies should NOT be available for POTS service in areas where there is a cellular or broadband alternative after a cutoff date — say 2013. No use subsidizing the past. (Where USF should get its revenue is a subject for another post on another day).

Universal access for the indigent: The new USF will continue to provide for the indigent by subsidizing their broadband or cellular connections. Assuming that we really have extended broadband and/or cellular coverage anywhere, the cost of providing service for the indigent should be LESS than it is today, especially in urban areas but in rural areas as well.

Access for the handicapped: Former monopoly providers are required to make various devices available to those who can't use ordinary phones; there are keyboard devices for the deaf, for example. In a monopoly there was no problem with spreading the extra cost over the whole network. Without a monopoly, a carrier who provides these services below actual cost will be at a competitive disadvantage. Some of the problem goes away with broadband access and computers and even cellphones which support chat. The marketplace will have solutions for broad cohorts like us elderly who are only a little hard of hearing and a little foggy of sight and a little clumsy with buttons. But indigent people and those whose handicaps don't attract market attention will need some sort of subsidy to replace the cost the monopolies used to bear. This is really no different than Medicaid and Medicare and private insurance paying for wheelchairs.

To be continued to talk about law enforcement needs, interconnection, and quality.

Written by Tom Evslin

So far, so good. However, we still have plain old landline telephone service (POTS) and the former monopolies still pretty much have a lock on providing copper-based POTS in their regions of influence. The opportunity — and problem — is that POTS is no longer the only way for people to talk to each other beyond shouting range. Almost all of us use mobile telephony to some extent instead of fixed POTS; many of us have completely abandoned POTS in favor of more convenient cellular service and/or cheaper voice over IP (VoIP). Cable companies provide voice service on their networks which compete with the phone service sold by the old phone monopolies. Companies which don't own networks at all, like Skype and Vonage, provide voice services over the networks of whatever Internet service providers (ISPs) the caller and callee are using — these are called "over the top" phone services.

Voice is no longer a monopoly business. Even though the old monopolies are still regulated at the state and federal level, their competitors are regulated lightly or not at all. Cellular service providers need to get radio spectrum from the FCC; their use of public spectrum provides leverage for the Federal Communications Commission (FCC) to regulate them. Local regulation of cellular operators, however, is explicitly preempted by the feds. There is an ongoing debate over whether states can regulate the "phone" services provided by cable operators. These services are not regulated at the federal level. The FCC has asserted some jurisdiction over services like Vonage which connect to the regulated POTS network. However, services like Skype have successfully stayed immune from regulation — so far — by claiming not to be a substitute phone service. ISPs are not regulated. Period. But ISP networks are used to provide VoIP calls. The quality of these calls depends on the quality of the underlying network.

So, you ask, where's the problem? We used to have monopolies; they had to be regulated because they weren't controlled by markets. Now people have a competitive choice — many choices — for ways to talk to each other at a distance. We don't need the regulations anymore. Let's stop regulating phone service completely and retrain the regulators to do something else. It's not quite that simple, however.

Some regulation has to do with whether phone services provide the proper connections and information to 911. Cellular operators are regulated in this respect. Operators like Vonage have chosen to follow the standards for 911 capabilities so that they can represent themselves as a replacement for primary phones and to avoid liability. Operators like Skype have simply made clear that they are not meant to be used for 911 calls. Proponents of continued regulation worry that, in the absence of all regulation, voice providers might simply decide not to support 911 anymore — after all, it costs money to do so. If all the voice providers in a particular area decided not to support 911, there would be a severe problem in that area.

Marketplace proponents argue that consumers will choose to have at least one service which supports 911 so that there will always be providers who elect to meet that market need. Moreover, since anyone who has an adequate broadband connection can buy "over the top" service from any provider located anywhere, there shouldn't be geographic holes in 911 coverage. Given that we need to assure that there is either broadband or cellular service available everywhere that POTS currently serves before POTS disappears and that cellular providers are required to support 911 in their networks anyway, there isn't a need for any further regulation mandating 911 support.

I trust the marketplace on this one with three caveats: 1) there needs to be enforceable truth-in-labeling on what "911 support" means and doesn't mean (already lawyers have effectively used the threat of extensive damages to discourage shoddy 911 support); 2) to the extent we subsidize a "lifeline" service for the indigent in the future, only services which do support 911 should be eligible for subsidy; 3) people who deliberately don't buy a service that supports 911 should not be protected from the consequences of their stupidity by the rest of us.

But suppose you disagree and think that there should be a law or regulation which says that every voice provider has to provide 911 support, on whom would you enforce this law or regulation now that the old monopolies are on the way out? Does every online video game which provides voice need to also provide 911 support? Does Skype? Does Webex? What authority does government have or should government have to regulate how applications function. What if I buy my over-the-top VoIP service from an Estonian provider? How do we enforce US law on that provider?

When voice was a monopoly service, regulation was necessary. Now that voice is just another application on the Internet and is provided by a number of companies using many different technologies and operating globally, regulation is not only undesirable but also not possible.

So where does that leave the issue of quality? Universal access? Handicapped access? Law enforcement access for wiretapping (CALEA)? What will substitute for regulation? To be continued.

Written by Tom Evslin

A number of European regulators and governments are now making forthright statements defending the principal. This month, EU member states must transpose into national laws the revised New Regulatory Framework: this revision of the five directives (dating to 2002) was adopted to answer issues created by increased competition in the telecoms sector, in conjunction with the development of new technologies. It was supplemented by the EC's declaration of net neutrality, and specifically by calls for laws which guarantee an open and neutral internet. Indeed the newly established Body of European Regulators for Electronic Communications (BEREC) is tasked with ensuring that national regulators abide by these directives, as also the net neutrality principal. Since its creation, BEREC has reported several breaches of net neutrality, particularly the blocking of mobile VoIP.

A number of mobile operators have tried to introduce charging models for content which in some way bypasses their SMS and voice services. Telefónica is among them, having threatened to charge search engines for using its network. T-Mobile in Germany and in other markets has blocked Skype (though other MNOs, notably H3 in the UK, have enveloped Skype within their offerings), and TeliaSonera recently announced that it would not permit VoIP services on its fast growing LTE networks across Scandinavia and the Baltics: it already bans the use of VoIP from its cheaper contract plans.

KPN has similarly announced plans to charge new customers for services such as Skype and WhatsApp (which compete with its own services), and for access to Facebook, YouTube and other sites. Deep packet inspection technologies would ensure that customers do not access the 'value-added' sites without paying a premium first. In some respects the plan may be an attempt to ease worries among investors following a poor financial performance for the first quarter of the year: the company reported a 1.3% fall in revenue and a 4.1% fall in EBITDA, year-on-year. In explaining the 8.1% fall in EBITDA in the Mobile International division, KPN implicated customers using a range of apps which caused a fall in SMS and voice usage, and so reduced revenue and profit.

As for regulators, there is some inconsistency. The Norwegians were among the first to defend net neutrality, as early as 2007. It recognises that banning mobile VoIP is less due to concerns over network capacity (mobile VoIP is not bandwidth hungry) than to protect operators' own voice services, and revenue, from competition. KPN initially had the blessing of the Dutch regulator, OPTA, on the basis that the company would not block sites as such but would simply adopt a different charging model for services carried. Yet KPN may be forced to change its proposed surcharges: the States-General recently amended the country's telecommunications law to guarantee net neutrality in both fixed and mobile networks, and so prevent operators from surcharging for such services. The amendment was tabled by the Dutch Minister of Economic Affairs, Agriculture and Innovation, and was supported by a coalition of political parties.

On the EU level, the EC is sticking to the guidelines of the revised NRF: that ISPs are to be transparent about their traffic control measures, and be honest about advertised connection speeds. There is no ban on traffic shaping measures, such as bandwidth throttling or limiting certain kinds of traffic, as long as ISPs meet minimum levels of service and do not obstruct customers churning to other providers.

Meanwhile the Council of Europe (a separate entity from the EU, and which acts on behalf of 47 member countries), has produced draft principles on internet governance which assert that ISPs should not prioritise content from companies that have paid them, or charge extra for content from particular providers.

As has become habitual with mobile operators, their own failings — partly through lack of investment in improved offerings, combined with a reluctance to allow customers to use more fully the networks they are upgrading — are leading them to adopt policies which run counter to customer interests. In consequence, we should expect many more governments to enforce net neutrality through legislation.

Written by Henry Lancaster, Senior Analysts at Paul Budde Communication

Skype made the decision to retire Skype for Asterisk several months ago, as we have prioritized our focus around implementing the IETF SIP standard in our Skype Connect solution. SIP enjoys the broadest support of any of the available signaling alternatives by business communications equipment vendors, including Digium. By supporting SIP in favor of alternatives, we maximize our resources and continue to reinforce our commitment to delivering Skype on key platforms where we can meet the broadest customer demand.

Being a huge advocate of open standards, I of course applaud Skype's commitment to supporting SIP. However, as I noted two years ago in my detailed review of what was then "Skype For SIP" (and is now "Skype Connect") the fundamental difference between Skype For Asterisk and Skype's SIP offering is this:

Skype For Asterisk is/was two-way — you can make outbound calls TO Skype users.

You can't do that with Skype Connect. You can receive calls from Skype users. You can receive calls to PSTN numbers that come in across the Skype network. You can make outbound calls to PSTN numbers via the Skype network. But you can't make outbound calls to Skype users.

Skype For Asterisk could.

And therein lay much of its power.

Additionally, Skype For Asterisk passed along your Skype presence which could be used for call routing… and also supported Skype chat, too. Neither of which Skype Connect can do right now.

Skype For Asterisk provided a 2-way, multichannel connection into the Skype cloud in a way that Skype's SIP-based offering simply doesn't at this point in time. (Having said that, of course, SFA is certainly no where near as easy to set up or understand, a point Dave Michels made today.)

However, as Alec Saunders pointed out today, the economics also clearly favor Skype Connect in terms of monthly and per-minute billing versus the low one-time fee of Skype For Asterisk. Tim Panton also indicated that the Skype For Asterisk program had some challenges including the licensing of the product.

While perhaps understandable as a business decision, I know that Skype For Asterisk will be missed by many in the technical community.

Now, let's see what Skype will truly do with their SIP support in the time ahead…

P.S. And while it is of course easy to try to blame someone like Microsoft for this demise, as I noted in an earlier post, the acquisition deal isn't even remotely done yet…

Written by Dan York, Author and Speaker on Internet technologies for over 20 years

The problem is more social and economic than technical. A whole web of subsidies and special services assured that everyone had access to the PSTN (Public Switched Telephone Network), which is still a regulated service. The cost of the subsidies — the universal service fund (USF) subsidy for rural service, for example — is spread over the whole customer base for traditional telephony, which used to be pretty much everybody. Regulated carriers are required to provide special equipment and services for the hearing impaired and others. Lifeline (basic) service is subsidized by more affluent telephone customers for those who are less affluent. Telephone customers pay for 911 service through their monthly bills. Regulated carriers are required to report significant outages and state public utility commissions regulate their quality of service.

However more and more people are getting their telecommunications from unregulated providers. Cellular service is somewhat regulated on a national basis but not at all at the state level. Cellular providers contribute less to the subsidies than landline providers because cell phones were initially considered an addition to rather than a substitute for landline service. Some VoIP providers contribute nothing to the subsidy pools, especially when they are not charging their customers for calls within their network (Skype, for example). Other VoIP providers like Vonage have agreed that they are essentially a PSTN replacement and, because they interconnect with the PSTN for almost every call, they do collect from their customers to support the various subsidies. The FCC has asserted jurisdiction over services which interconnect with the PSTN. States are considering how much jurisdiction they have over nonPSTN providers connected to the PSTN.

But what happens when there is no PSTN with which to interconnect? What basis is there for regulation? Whom do fees for subsidies get collected from? What if there's a major outage? Who has jurisdiction? That day is coming so these questions can't be avoided and they're tough. Should people who use services like Skype to make free calls have to pay a subsidy so that people who don't or can't use Skype can afford to make paid calls? Even if we wanted to require this in the US, what's to stop a new Estonian networking company from providing call connection services to US users via the Internet, especially if it's not charging for the service? Who is responsible for poor call quality during an emergency: Vonage which doesn't control the physical network or the ISP who doesn't control the Vonage servers or the end user software?

The problem of rural areas is particularly acute. The telephone network, like the electric grid, came later in rural areas than in the areas where the economics were more compelling. The electrical and phone network would have taken even more time than they did to reach rural America were it not for government-enforced cross-subsidies and a requirement that regulated monopoly carriers serve everyone in their area regardless of cost of service. This requirement wasn't a problem for the monopolies because they knew that they could charge well-above actual cost in urban areas and use that surplus for the more expensive areas. Regulators encouraged this socialization of cost; it's a lot like what the Post Office does. You can make a strong argument that universal access to service makes a whole nation strong — as good roads do — so that cross-subsidies are perfectly proper.

But we demonopolized, imperfectly and unevenly and incompletely; but we did. The result was a flood of innovation including cellular services (the old companies had to buy their way back into cellular) and the Internet. The result is much, much cheaper communication of all kinds. But we have a problem, Houston.

Without regulated geographic monopolies there's no good way to get the cheap-to-serve areas to subsidize service in the expensive areas. Verizon, for example, sold off its landline business in northern New England to FairPoint so Verizon could concentrate its capital on more lucrative fiber service in more populated areas. Not long after, FairPoint went bankrupt as landline defections increased and capital needs proved greater than anticipated. Even now that it has emerged from bankruptcy without the burden of the debt it took on to buy the assets from Verizon, it's still not clear that there's a path to profitability as landline losses to cellular, cable, and VoIP continue to mount. Verizon's earnings from fiber and cell service are no longer available to subsidize our landline services in Vermont.

It's easy to envision a future — it's almost here — when nobody is using copper landlines for plain old voice services except those rural pockets where both the erecting of poles and the original provision of telephone service was subsidized and where telephone service is still being subsidized today. People in these areas are stuck using POTS for the same reason that they needed a subsidy to get POTS in the first place: it isn't economical to provide cable or cellular or broadband services where the population is thin. The early money goes into areas with a better payoff (reasonably). Not only is there no cross-subsidy to assure buildout of broadband or cellular alternatives to POTS in rural areas; there is also a huge threat to the existing subsidies for rural POTs. These subsidies are collected from other users of POTS; if we country people are the only remaining users of POTS, where's the subsidy going to come from? We can't move forward to the brave new telecommunication world and we can't stay where we are!

But it's not all as bleak as it seems. Some answers in future posts.

Written by Tom Evslin

... the product that came from the grey areas of P2P file sharing and created some truly revolutionary network technology and created a software client that "just worked" like magic from behind any firewall…

... a company from Estonia of all places, which pre-Skype most of us could only vaguely put on a map but now many of us know more about, including that fact that many Estonians have multiple vowels together in their names in ways we don't in English (ex. "Jaanus" and "Liive")…

... a product that was given away for free across multiple operating systems (even if some of us whined about the lack of attention to our chosen platform)…

... a service that just went ahead and implemented SRTP and encrypted call control when all the major telcos were whining about why they couldn't secure calls over IP because of the demands, latency, blah, blah, blah…

... a product that gave most all of us the first experience we ever had with wideband audio — where it felt like you were right there with the other person… and in fact, many of us found we could record podcasts over Skype (even using video)…

... a product that offers the best implementation of persistent group chats I've yet to see… and that allows globally distributed companies and organizations to work so well together across all timezones and regions…

... a product that truly offered a multi-modal/multi-channel user experience… and raised the bar for all the enterprise products that were trying to deliver "Unified Communications" ... Skype was offering the "UC" experience before "UC was even coined as a term…

... a product that became a verb… "just skype me"…

... and a product that had enough of a sense of humor — and roguishness — to implement emoticons like these:

banghead)
(bandit)
(moon)
(finger)

(Tip: Don't type the last two in a chat window where people might be offended… and methinks the first one might come in VERY handy with meetings between Skypers and their new masters. :-) )

I started using Skype back in 2004 or so when it was still very early days. In 2005 I started using it to record the Blue Box podcast and to contribute to the For Immediate Release podcast. I was at Mitel in those days in the product management team and I remember back then talking to my peers about how Skype "just worked" through firewalls and how the wideband audio was outstanding.

Since that time, Skype has become part of the DNA of my personal IT infrastructure… I use it extensively for my own communication… and I use it very extensively within Voxeo where it is our Unified Communications tool of choice right now (for reasons I wrote about before). If there's one tool that's always open on my computers, it is Skype.

And Skype is probably the one company/product/service I've written about the MOST on Disruptive Telephony blog since I launched the blog back at the beginning of 2006. Largely because Skype has been one of the single most disruptive influences on our industry. Sure, many of my posts have been critical, particularly of the new Skype 5.0 for Mac, but they have been critical out of my passion for the product — and of wanting it to be so much better.

And now we who have been raging Skype fanboys confront a new reality…

Microsoft acquiring Skype!

Goodbye, bandits…

... you are no longer fighting "against THE MAN”… you now are "THE MAN"! It's hard to get much bigger of a megacorp than Microsoft!

I do actually think the acquisition is good for Skype in a number of ways:

• Financial stability – Being part of as large an organization as Microsoft will finally give Skype a bit of room to really figure out their monetization play beyond what they've done so far.
• Enterprise credibility – Skype has struggled for years to get any kind of real credibility within enterprises. Many have completely blocked Skype and many have no understanding of what it can do. Microsoft completely gets the enterprise… in some ways they own the enterprise… so this can only help Skype grow in business usage… and that's a GOOD thing for those of us who already use it that way.
• Security – Whatever you want to say about Microsoft, they do understand how to communicate about security, something Skype is lacking. I can only hope that MS will now bring a higher level of communication to this aspect of Skype.
• Synergy – I'm not a fan of that word… but it makes sense here. Think of the other products Microsoft makes… what if you could get Skype integration into Microsoft Office? what if Skype and Lync could play nice together to connect the whole Skype world to the enterprise UC offering of Lync? what about making Kinect work with Skype? There are a lot of cool things that could be done. (And, of course, we'll undoubtedly see Skype on Windows Phone 7, etc.)
• Customer Support – And hey, maybe Microsoft can help Skype get a proper customer support organization so that I am no longer their corporate receptionist!

I worry, of course, about the acquisition and what it will do to the tool I use so much. Those of us on NON-Microsoft platforms have complained for years about Skype's lack of attention to our Skype clients. The Mac OS X client has at least received more attention and near-parity with the Windows client (even though many may not be fans of the new UI)… while the Linux client has languished. In the new world of Microsoft, will those other platforms really receive much attention? (despite the requisite platitudes mouthed in the news conferences and stated in the news releases)

And how about the iPad client for Skype that has been rumored? Will that ever see the light of day?

Will Skype truly be able to function independently as a "disruptor of telecom" now that it is part of such a large corporation?

The answers remain to be seen over the next months as the deal moves toward closing. I have many friends who work at Skype and I do wish them all the best through this whole transition… I wish them well seeing how long they can hang on to their Mac laptops and iPhones ;-) ...

... and I wish them much ":-D” and hope they don't experience too much "(banghead)”.

Welcome to the new era of Skype!

Written by Dan York, Author and Speaker on Internet technologies for over 20 years

Microsoft Corp. (Nasdaq: "MSFT") and Skype Global S.à r.l today announced that they have entered into a definitive agreement under which Microsoft will acquire Skype, the leading Internet communications company, for $8.5 billion in cash from the investor group led by Silver Lake. The agreement has been approved by the boards of directors of both Microsoft and Skype.

... Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms.

The VoIP service market weathered the economic turmoil of the last couple of years, and, with increasing customer adoption, reached $49.8 billion in 2010 (compared to $34.8 billion in 2008). While the residential services segment remains the largest of the market at 69% of total revenue, business VoIP services are growing at faster rates; a notable example: SIP trunking had a breakout year with 143% revenue growth in 2010.

VoIP services market highlights:

• Infonetics Research forecasts the combined business and residential/SOHO VoIP services market to grow to $74.5 billion in 2015

• Managed IP PBX business VoIP service revenue is expected to more than double from 2010 to 2015

• NTT of Japan retains its leadership as the world's largest residential VoIP service provider, followed by Comcast and France Télécom

• The fastest growing segments of the VoIP services market are SIP trunking and hosted UC telephony

• The number of residential VoIP subscribers increased 19% in 2010 to 157 million worldwide

• Based on healthy demand for cloud-based services, the number of seats for IP Centrex and hosted UC services grew 20% in 2010

Written by Paul Budde, Managing Director of Paul Budde Communication

Quick primer on Moore's law; feel free to skip this paragraph if you don't need it.

Gordon Moore, co-founder of Intel, observed that process improvements resulted the number of transistors which could be placed on a chip doubled roughly every eighteen months while the cost of making these chips stayed the same. In the real world this means that cost of computer memory and computing power comes down 50% every 18 months. For example, in 1968, I was responsible for the purchase of 256,000 bytes of memory for a mainframe; it cost $100,000 or $382 for each thousand bytes. Today on Amazon you can buy an 8 Gigabyte (8 billion bytes) memory card for $11.93. Ignoring the free reader which Amazon throws in, this comes to $0.0000015 for each thousand bytes. If you do the math, you'll find that, in this case, prices went down even faster than Moore predicted. And I've ignored inflation.

Data communications prices plummet

How much data you can transmit for a given price in a given period of time depends on how much of it can be squeezed into a copper, fiber, radio wave or other kind of pipe. The cost of data squeezing depends on the cost of the computer power which does the squeezing. So it shouldn't be any surprise that data communication costs follow Moore's law down further and further. In 1996 you paid $19.95 for the ability to send 32 kilobits (roughly 32 thousand bits) of data per second over a dial up phone line continuously, about $.61 per thousand bits per second. Today I have a $39.55 connection which lets me transmit 10 megabits (a little more than 10 million bits) per second, $.004 per thousand bits per second. This improvement, astonishing as it may be, is actually slower than Moore's law would predict.

Prices for talking also affected

Plain old phone calls within the United Sates used to be distance and time sensitive and cost up to $1.00/minute. You can pay those rates today if you make the mistake of using a telephone in an expensive hotel. Now unlimited domestic calling is part of most landline plans and, even on cell phones, doesn't cost much. Similarly international calling rates to places like China and India, which used to be priced in dollars, per minute now are priced in pennies. In a strange reversal of value, video calling on Skype from anywhere there's a broadband connection to anywhere else is free (once you pay for the computers and Internet connections). On the other hand, if you take your US cell phone abroad and call or get called from home, you're back to over a dollar per minute if you're not careful.

What's going on here? You can transmit and receive huge quantities of data on the Internet without worrying about how far it's going or whether it crosses national borders. The amount of data necessary to represent a voice call is laughably small compared to a graphic, a video, or even high definition sound. Why should this small amount of data carrying capacity be priced at such high rates?

The answer is toll booths! The old voice telephony structure consisted of national monopolies — some owned by government, some government sanctioned. These monopolies became enormously profitable for their owners; the value of voice communication is high so high tolls could be charged. At first high tolls were fair compensation for the high cost of laying undersea cable. But the costs stayed high even as technology running at Moore's Law pace kept doubling and redoubling the amount of data which could be stuffed into a cable. Replacing cable with fiber obviously required more capital; but the capacity of the fiber was so high that capacity was no longer constrained. Volume didn't grow to fill the capacity because the national monopolies conspired with the help of their governments and a UN body called the ITU (International Telecommunication Union) to keep international calling rates high.

The Internet happened. And those of us in the nascent Voice over IP industry realized we could move data as voice over these new channels. We were more efficient than the traditional carriers at packing voice data into the fiber which made up the Internet; but, more important, we could bypass the toll booths which had been set up at national borders and the ITU rules for keeping prices high. International calling rates collapsed like a pin-pricked balloon. India and China fought at first to keep the high revenues their national monopolies earned (and the huge bribes paid for the right to interconnect). But both those countries realized that they were sacrificing their whole economies to protect telecom revenue and loosened up. Cheap communication has been a huge enabler of their economic booms in a global economy.

Skype video calls can be free because they don't use any of the voice infrastructure which is still under the control of the descendants of the old monopolies. Most of the landline infrastructure in the US belongs to the reconstituted heirs of Ma Bell. Governments initially allocated radio spectrum for cell phone service in a way which assured that duopolies would control most markets for cellular service — hence relatively high cell phone rates. As lobbyists know, government can be a great help in maintaining artificial scarcity and protecting monopoly rents.

How about financial transactions?

Well, the cost of trading stock has gone from dollars per hundreds of shares to fixed fees of almost nothing for trading unlimited quantities. The government did a good job of breaking up the cozy old boy networks and fixed transaction costs. Technology reduced the real cost of trading. The market worked like it should have and prices for trading plummeted. Unfortunately bankers found some other ways to collect rents, but that's another story for another day.

Back in the 1970s I was hired to write some software to move transactions electronically between banks in order to reduce the volume of checks being flown to clearing centers every night on little jets (how FedEx got its start and its name). Part of the specification was that it took one day to clear a local transaction; two days for a regional one; and three days if the transaction was inter-regional. "It's gonna cost more in programming to hold all these transactions than just clear them instantly," I said naively. "I mean electronic travel doesn't take days."

The answer was — and still is — that the banks get interest on the float — the uncleared checks. The Federal Reserve decreed that the banks keep this benefit even though the "checks" no longer existed. In doing this they also passed up the very real value of knowing quickly that there are insufficient funds to cover a transaction. Couldn't be a better example of government action to preserve rents for favored constituents.

Medicine, energy, government, education and more

I'll be writing more about costs which technology is driving down — and attempts, often successful, to keep prices high regardless. Just think, if the price of medical technology went down as fast as the price of consumer technology, a cat scan would probably cost a nickel by now!

I'll also be speaking about Moore's Law and the Economics of Abundance at the Ethan Allen Institute's Sheraton Economic Series at 7:00PM on March 30 (this Wednesday). It's free and no reservation required. Details here.

Written by Tom Evslin