The disruption potential of VoIP lies not so much in its ability to push down the cost of telephone service than in its ability to get consumers to ignore the telephone business altogether. The nature of the Internet makes VoIP advantageous even after the cost of plain old telephone service goes to zero. For while the network determines all the essential features of traditional telephone service, from audio quality (low) to addressing (telephone numbers), the Internet asserts few constraints on VoIP services or devices. Thinking of communication solutions as an extension of the web and implementation as hosting can help break the grip of the telephone myopia reflected in most VoIP business plans.

Framing the value of VoIP as replacement for traditional telephone service makes interconnection with the telephone network seem essential, but VoIP enables communication solutions that go beyond the
“telephone call.” Think of it as viewing the telephone itself as a more efficient telegraph. The infocom industry needs to unleash new demand associated with new services. A transformation from world wide web to worldwide communication requires interconnection among VoIP providers, not the telephone network. The unwillingness of Vonage and Skype to interconnect with other VoIP providers makes no more sense than Yahoo imposing on users a proprietary browser that can’t be used to access any other sites on the web.

The voice quality of a telephone call remains inferior to even an AM radio broadcast. Low fidelity loses much of the character of voice necessary to convey mood or subtle meaning not contained in the words themselves. A telephone call remains a poor substitute for meeting in person, but demand for high-quality audio still requires an industry wide market push, as in the effort that won HD video momentum. Improving voice quality remains off the table as long as the value of VoIP requires interconnection with the telephone network.

None of the means used to navigate the Internet have analogs in the telephone world. Web site visitors can arrive by entering a URL into the browser address bar. The relative ease of remembering domain names vs. telephone numbers is difficult to dispute; a significant portion of web site visits are the result of people guessing the URLs. And compared to web search engines, both the online and offline versions of yellow pages offer very weak functionality.

Absent a requirement to connect with the telephone network, VoIP implementations can support click-to-connect and flat-rate global connections. The problem is finding a path to critical mass. The rapid growth of the web after the emergence of the browser in 1991 followed the addition of click-to-connect functionality to flat-rate global connectivity associated with Internet. The web browser set in motion a virtuous cycle of growth as expanding content attracted new audiences and audience growth attracted new content. The same process could play out with a worldwide communications model that combines click-to-connect addressing and flat-rate global termination — neither of which can be found by interconnecting with the telephone network.

Daniel Berninger is the CEO of Free World Dialup

Earlier this week, Delta Airlines announced plans that will turn the boarding passes into advertising opportunities, or billboards, hawking destination specific businesses and products. An Omaha-based start-up, Sojern is behind this advertising offer, which is going to be adopted by four airlines in addition to Delta - American, Continental, United, and US Airways. Given that airlines are in such desperate position, mostly because of their incompetency, they are ready to try anything, however strange it might seem.

Now there is word that IDT Corporation, a calling card company is going to start using advertising messages on its pre-paid calling cards. Using technology from in-call advertising start-up VoodooVox, IDT will hawk marketing and advertising messages that are matched with their demographic profile. For instance, someone is calling Dominican Republic, an ad for airline would be piped in while the caller is waiting for his call to connect. IDT sells about 17.5 million pre-paid calling cards every month.

Given the razor thin margins in the long distance business, I am not surprised IDT is going down this path, but I wonder if they will use some of the fat CPMs from advertising to offer cheaper or near free long distance call. Now that would be cool, and perhaps somewhat receptive from the audience, who might get annoyed by ads intruding their calls.

These two examples make me ask the question: are we getting so saturated with ads that they will just become meaningless and lose their entire effectiveness?

I’ve been covering the VoIP space since 2004, and lately it seems like every other press release sent my way is from a company announcing the addition of an application programming interface (API) to its telephony platform. The promise of APIs is that they make it easy to integrate different services — even those provided by different vendors — into a single application. The press release from one carrier even went so far as to claim that its API would “boost innovation and development of new apps exponentially.”

But is simply providing an API to your telephony infrastructure enough to prompt the world to beat a path to your door? Don’t count on it.

To be sure, these APIs are necessary, particularly in the world of voice mashups. Voice mashups combine voice as well as data and applications across multiple systems to create a new, useful service.

One example of a voice mashup is Twitterfone, a free service that takes your voice, converts it to text and sends it to Twitter. MAXroam provides the overall infrastructure and inbound telephone numbers, Dial2Do does the speech-to-text part, and Zong provides some inbound SIP termination. APIs are needed all around — including on the voice side — to make this happen seamlessly.

Voice mashups can be useful in the business space. They can save a ton of money, and can help to enforce both business process quality and consistency. Imagine calling an airline and speaking to an interactive voice response (IVR) system. A certain percentage of calls could easily be handled by the IVR, which can ask all the correct questions to ensure customers have the right information.

There are, of course, times when speaking with a live human being is necessary. So imagine that all the data collected by the IVR about your call is then sent to a customer service representative so that by the time the two of you are connected, they already know exactly why you’re calling. The call could even be routed to a particular rep based on the reason you’re calling.

This is the power of a voice mashup — the ability to treat voice and data interchangeably. While large companies have been able to afford the cost of developing these custom voice mashups, tools and services are now becoming available that let you make your own.

Jaduka started out by providing a voice API to their telephony infrastructure, which is maintained by their parent company, NetworkIP. But Jaduka quickly discovered that while developers signed up for the API, few were actually using it to launch services. The company now offers customized voice-enabled applications to enterprise customers.

Jaduka’s customers currently use over 4 million minutes a month, a number that is trending upward. But that’s a drop in the bucket compared to the more than half a billion minutes a month their parent company serves.

Ifbyphone provides a number of voice-related small business services as well. They also offer a voice API, but it’s essentially driven by web forms, which makes it easy to integrate their telephony services into any web site without needing to be a programmer.

And while not everyone agrees that what Ifbyphone provides would qualify as a proper API, it does offer a range of useful services to small businesses, such as interactive voice response, intelligent call routing and voice broadcast. They are all designed to help small businesses interact directly with their customers in the most efficient manner possible.

Indeed, APIs enable some great solutions. But APIs aren’t solutions in and of themselves. Nor do they necessarily make money.

Consider Ribbit, a company whose business model is to make telephony available through APIs. The thinking is that they’ll make their money on revenue shares as developers create interesting applications.

If Jaduka’s experience is any indication, however, I don’t expect Ribbit will last too much longer without a complete change of strategy. Ribbit might have 4,000 developers, but how many of them are actually making applications on which Ribbit is able to share revenue? I don’t put a lot of stock in the rumor that BT has purchased Ribbit for $55 million.

Even where you’ve got more than just an API, such as the case with Jaduka and Ifbyphone, the prospects for making a pot of money just don’t seem that great. The combined revenue of Jaduka and parent company NetworkIP is thought to be north of $150 million a year. Assuming Jaduka’s share of minutes per month also translates into share of revenue, that suggests Jaduka is responsible for $1.2 million of the revenue. Ifbyphone would not disclose customer numbers or revenues.

I think the market has a lot of potential, but so far, that’s about it. Go ahead and make those telephony APIs available, but don’t expect the world to beat a path to your door, and don’t expect to make any money just by publishing APIs. Figure out who your customers are, find out what problems they have, and develop solutions to meet their needs. APIs can certainly be a part of the overall strategy, but relying on APIs alone to generate revenue is a pipe dream.

A growing number of people expect mobile phones to emerge as the dominant means of Internet access for the 6.6 billion people on Earth; as proof, they point to the 10 percent of the 2.5 billion handsets in circulation that already include such access. But there exists a flaw in the mobile phone-as-path-to-Internet-ubiquity theory in that telcos generate the majority of their revenues from voice services that the Internet threatens to make obsolete — like a power company that makes most of its money through a monopoly laundry service that at-home washers and dryers have the power to put out of business.

In fact, given carriers’ efforts to excise voice functionality, it’s the Internet that seems unlikely to survive, much less prosper. Carriers routinely require device manufacturers to handicap handsets, for example, to remove Wi-Fi functionality in order to make it difficult to bypass voice plans. Another example is that of Apple and AT&T, which require iPhone customers to purchase both voice and data connectivity (i.e. laundry service and power) — a policy that’s even enforced for deaf customers with a doctor-certified inability to speak or hear.

Low cost or free voice functionality helps drive demand for Internet access, so it hardly seems a good idea to sacrifice voice in order to get mobile phones with Internet functionality. The way forward requires making the Internet more useful for connecting communication devices, not less. For example, addressing the three issues below would go a long way toward creating an Internet for devices that competes directly with carriers for mobile phone users:

• Close the ease-of-use gap between configuring session initiation protocol VoIP devices like the Linksys WIP330 IP Phone (a.k.a. “Cisco’s iPhone”) and the provisioning process for cell phones. The former remains sufficiently painful as to exclude everyone without an IT department or geek credentials, but the telcos cannot stop the 100 or so manufacturers of SIP devices from agreeing on a common provisioning mechanism.
• Unify the addressing of all SIP-based devices. The insistence on proprietary screen names and unwillingness to peer leaves real-time Internet services like instant messaging and VoIP mere islands of communication. Even the millions of users claimed by AIM or Skype are meaningless vs. the 3.3 billion wired and wireless phones addressable by telephone number. The secret to carriers’ ability to generate in excess of a trillion dollars in revenue from voice services is interconnection.
• Eliminate the user intervention steps necessary for wireless device connection. Connectivity should get addressed as a matter of reception, as in the case of mobile phones or even FM radios, not by presenting users with lists of Wi-Fi access points. It seems like there must exist automated solutions for picking and connecting to or disconnecting from Wi-Fi access points.

Initially, electric power generation companies were application-specific, which resulted in incompatible voltages and infrastructure being used for everything from street and residential lighting to industrial applications. The decision to abandon the link between application and power generation unleashed an explosion of devices offering the tremendous range of productivity and entertainment options we take for granted today. When it comes to decoupling the connectivity and application, the nature of the Internet makes it possible to create mobile phones with CD audio quality. The Apple iPhone’s elegance does not change the fact that basic voice quality remains unimproved since mobile phones first arrived 25 years ago. The mobile phone companies see the Internet as a threat, not an opportunity.

I received an emailed press release from Comcast this morning about their plans to work with Vonage to address “the reasonable network management of Internet services” that left me a tad confused. Comcast had already admitted to massaging P2P traffic, sparking an online uproar that resulted in the company backing down and announcing plans to use different kinds of network management techniques. (They massaged P2P traffic by either delaying or blocking P2P packets outright, which caused BitTorrent-type services to degrade.)

In an attempt to uncover the real reason behind the release, I called a Comcast spokeswoman and asked her if this was an exclusive deal with Vonage, and if any money was changing hands. She said that the agreement doesn’t preclude others from working with Comcast, that in fact it’s working with a variety of companies and groups. And no, there is no money changing hands.

Still, the press release kept nagging at me. And it wasn’t until I read Cynthia Brumfield’s post (Welcome back, Cynthia, from your blog vacation) that I realized Comcast might have unknowingly admitted to messing with Vonage’s VoIP traffic.

What’s interesting and surprising is that Vonage is not based on P2P technology, unlike Skype and other competitive VoIP providers. So this effort by Comcast, which extends to a seemingly unrelated “over-the-top” technology seems, well, out of the blue. Has Vonage had problems with Comcast causing problems for its customers, problems that stemmed not from the same kind of packet reset technology that spurred the initial controversy?

Well I don’t know about recently, but some two years ago a lot people complained about Vonage’s service quality on Comcast. Comcast, of course, denied that it was blocking Vonage traffic.

That was then. However, the fact that the two companies are announcing a new working relationship has me wondering if Comcast was messing with Vonage’s calls all along — you know, as part of its “network management.”

The economic downturn, in particular the housing market slump, that has been pressuring U.S. telecom operators now seems to be extending to cable operators as well. After enjoying nearly eight quarters of solid growth, it looks like the U.S. cable telephony business is slowing down.

The proverbial canary in the coal mine sounded the alarm yesterday. ARRIS, which makes hardware for cable operators, lowered its second-quarter forecast for both profits and revenues. Management blamed maturing cable telephony deployments and a slow housing market on the reduced demand for cable telephony services.

I think both are valid points. First, cable voice has become pervasive. You can now call your cable operator and get a fixed line connection without worrying if they actually offer voice service in your market. (Whether you’re happy with them, however, is a different story altogether.) So it’s hardly a surprise that the demand for equipment would slow down.

As we’ve previously noted, cable VoIP has been on a tear. At the end of the first quarter, Comcast had 5.1 million customers, while Time Warner Cable had 3.17 million, followed by Cox’s 2.46 million, Cablevision’s 1.68 million and Charter’s 1.08 million. Many of these subscribers came at the expense of telephone companies. Telegeography estimated that there were about 16.3 million VoIP households at the end of the first quarter of this year.

The cable companies benefited from the previous surge in new housing starts, which led to spectacular growth in their broadband and voice telephony businesses and in turn, made it easier for people to switch away from telephone companies. A slowdown in this business is only natural. In fact, I wouldn’t be surprised if large cable companies saw a sharp slowdown in broadband growth as well.

The real question is, just how big will the slowdown be? With the second-quarter earnings season just getting underway, it won’t take long to find out.

Ribbit, a Mountain View, Calif.-based company that is pushing a VoIP platform that marries web with voice is subject of acquisition rumors this evening. VentureBeat reported that the company was close to being acquired by British Telecom (BT), but later changed their story. When contacted by me, Don Thorson, Ribbit’s Vice President of Marketing dismissed the rumors but declined to comment any further.

It wouldn’t surprise me if BT (or some European telecom) acquired Ribbit (or any other platform) to expand across the borders and find a way to stay relevant. We had pointed out that a consortium of incumbent carriers were developing their competitor to Skype. Ribbit-type platform could be used to develop apps for the incumbent supra-net.

Ribbit has so far raised $13 million from Allegis Capital, KPG Ventures and Alsop Louie Ventures. The company has attracted about 4000 developers to its platform, though it is hard to tell if it is making any revenues from its platform. Over past few weeks, I had heard about Ribbit being in “play” and talking to likely buyers, but there is nothing concrete to add.

The big buzz of the evening is that Twitter, a San Francisco-based start-up that allows anyone to post short up to 140 character messages to its platform and thus broadcast them to one or many using different media such as web and mobile, is about to acquire Summize, a Potomac Falls, VA-based start-up that uses the Twitter API to search and find relevant messages on Twitter.

The rumors of the deal were first reported by a little known blog (not anymore of course) by Josh Chandler. Subsequent to the news, I made a few phone calls and did confirm that it is not just a rumor and a deal is certainly in the works. It is likely to be announced as soon as next week. I am still trying to dig-up the financial details and would report further when I get hold of them.

The deal would be a good move by Twitter, and would be putting some of its recently acquired $15 million in VC funding to decent use as it would help the company get hold of of a business model. Here is why. Most people think of Summize as a Twitter search utility and it is a might fine search service. It is so good that there are nearly half-a-dozen other start-ups that are using the Summize API. On first blush, it seems like Twitter could bolt on search on their platform and make it more useful. I think it would be thinking about Summize in a limited sort of a way.

“We monitor collective attitudes being expressed right now on the web,” is how Summize describes itself. In other words, it can quickly look at data coming from conversational sources - RSS feeds and Twitter tweets - and offer a quick opinion on what is being talked about. For instance, on this page you can find out what people really think of this deal between Summize & Twitter deal. All the data is coming from the twitter stream.

In a conversation earlier this year, CEO Jay Virdy, formerly of AOL told us that they had developed a way to geocode public timeline tweets (Short messages). This allows one to find out what people are saying about John McCain in Phoenix vs San Francisco?

In other words, Summize has come-up with a clever way of peering through Twitter’s vast data stream and finding out what’s hot, where and how. The results are essentially keywords - topic, person or location based - and thus can be used to show contextual advertising next to the pages that show these results. Summize, has thereby developed an ability to monetize conversations without being intrusive.

Summize could have easily done this on its own, and started to make money. It would surely need to compete for attention with Twitter, and figure out ways to keep generating more traffic. Instead, if Summize is bolted onto Twitter, it can help the tiny start-up get instant traction.

Just as AdSense serendipitously turned Google into a giant cash register, with Summize, Twitter can take first step towards a business model. Of course, Evan Williams & Company have to quickly figure out ways to fix their patchy-at-times service before everyone decides to switch loyalties to one of the many Twitter rivals currently being plotted by clever minds.

PS: Since Twitter doesn’t want to charge me for having too many followers, and it doesn’t cost me anything, go ahead and follow me on http://twitter.com/om. Not that you are going to read the tweets anyway

PS#2: My jet lag has finally hit so if you notice errors/mistakes, please excuse my tardiness. I will rectify when I wake up.

AT&T, long before it merged with SBC had made a half-hearted attempt at getting into consumer VoIP by selling a service called, CallVantage. It was surprisingly good, especially its call quality. Unfortunately, the company never quite made the commitment to it. And when SBC merger happened, well it fell victim of save-your-mentality that comes with it. Today, there is word that AT&T has stopped pushing the service through its affiliate channels - a sure sign that the company is backing away even further and would shut it down soon enough. Some believe that shut down is going to come next year, though I thought it was already killed, since the former AT&T Callvantage boss is now running AT&T’s CDN business, and we have not heard a single pitch from the company in over a year. I guess this is one less thing Vonage has to worry about!

AT&T has decided not to renew its contract to resell television services provided by Dish Networks. The announcement, made last night in a filing from Dish with the SEC, have sent shares of the satellite company tumbling and analysts rushing to point out that this may not be the end for Dish and AT&T. My question is, why not? Where the heck is AT&T’s belated IPTV service?

Several analysts said that AT&T’s refusal to automatically renew the five-year-old contract means the telco will try to negotiate a better deal by bringing Dish rival DirectTV to the table. Others say this kills any hope that AT&T might buy Dish. But Dish has been a stopgap measure to give AT&T a triple play of voice, data and video as the cable guys encroached on the voice business. AT&T has always wanted to offer its own video service.

Six years ago I sat through demos of AT&T’s Project Lightspeed (now Homezone) and marveled at the coming television service options ahead. By that measure I’ve spent a fifth of my life waiting for U-verse as it worked through technical hurdles and issues with the Microsoft platform. And only now is the service getting widely rolled out. Dare I hope that AT&T is actually getting close to owning its own triple play?

Right now, according to an emailed response from an AT&T spokesman, “U-verse TV is our primary offering in the areas where it is available, but AT&T | DISH is available across our footprint.” As U-verse expands, losing the AT&T contract may not be such a blow.