Skype is the major factor that threatens to bring telecoms down – this amazing company uses the web to allow customers to speak to each other via their accounts. Video calls are available as is chat and the ability to share computer screens. This is incredibly useful, and allows people to communicate easily and affordably despite great distances. The application has recently extended to smart phones, eating even further into a market that was previously dominated by telecoms.

There are two key factors which should protect telecoms. First of all, people are resistant to change, and even if Skype is a better service it doesn’t mean everyone will embrace it. After all everybody has a phone, but many people still don’t have computers. The data allowance of smart phone users will also limit the pick-up of Skype: if customers can secure larger data packages for their phones they will be able to do all their calls through the web. We are unlikely to see this become feasible until the deployment of 4G networks.

Skype has posed a major challenge to traditional telecom companies by threatening the phone call. A few key factors should slow down the rate of adoption, yet the affordability and convenience of Skype means that it will eventually come to dominate the market – it is only a matter of time.

And by regular folks they mean TV-watchers with an Internet connection but without a laptop and video camera.  I’m sure Cisco business development crunched the numbers and decided there’s a ton of money selling  $600 set top boxes with a $24.99 monthly charge to this segment.

The other perpetrators involved in this scheme include BestBuy, which will sell the gear, and Verizon, which plans to resell the service to its Fios customers.

Umi may make sense for computer illiterate, TV-centric types. Cisco’s umi commercial  envisions theatrical families who perform little skits for their friends, letting you in their words, “be with them.”

I do get the idea and raison-d’etre behind umi. But I suspect that for computer phobic types, it is probably just easier to go next door and chat with a neighbor.

Considering the state of the economy, you wonder about the consumer’s appetite for paying $25 monthly for something that can be had for free. Maybe this market segment doesn’t own a cell phone, so Cisco assumes they’ll have a little money to spring for Internet video.

On the other hand, doesn’t that computer illiterate but friendly, extroverted family in the commercial know a 14-year old in the neighborhood who can set them up with Skype?

?

Related articles

• Cisco Umi: Bringing Families and Friends Together (cisco.blogs.com)
• At $599, Cisco’s Umi Telepresence Is a Non-Starter (newteeve.com)
• Cisco Cius: Unimaginative But Slightly Intriguing (technoverseblog.com)

The biggest difference between the ancient branches on the email-voice evolutionary tree and the latest VoIP creations from Google, Skype and others is the Web and mobile calling, coupled with improved codecs. In other words, the overall technology has evolved in steps, not with a giant leap forward. It is slowly but surely achieving greatness.

There are already tens of million of existing Gmail users to talk and video chat with in direct computer-to-computer fashion. Google’s announcement last week to unite Google Voice (the service that rings all your phones) with Gmail and to throw in free outbound calls will probably add millions more. Most significantly, this service, is or will soon be available on Android phones as well.

Over the weekend, I tried Gmail’s existing video chat and made a free landline call. Conclusion: the new and improved Gmail service is a big deal for a number of reasons.

I’ve been a Google Voice customer since it was in private beta, relying on their voice transcription service to email messages left on my cell phone. The transcription quality is good enough, and for simple messages without too much background noise, it is very, very good.

On the email side of the aisle, I have a Gmail account, which I use when I don’t want to clog my other email accounts with non-urgent, non-personal correspondence. I just don’t access it that frequently, and had let the text and video chat features completely rust away.

Spurred by the free dialing that was added to Gmail last week, I took a first look at the video chat. Video calling a friend, I experienced smooth and non-choppy sailing with excellent HD sound quality. This is not at all like the early video apps I trialed pre-dot com bust.

I had so much fun with Google Chat, I may schedule more of these digital meetings.

As for the free calls from Gmail to a wireline phone, there wasn’t a hitch.

So Google has engineered another simple, error-free app that clearly will compete and may ultimately assign Skype to a long list of extinct tech companies. A very big deal!

Another big deal is that the new integrated Gmail-Voice app will gain a foothold in large and small businesses. When I was walking between meetings in my last cube-land job, I invariably saw someone staring into their Gmail or iGoogle page.  Now with Gmail’s free phone outbound calling, there’s fewer reasons for corporate workers to use that aging relic, the business phone.

Hint to business phone manufacturers: Try a retro campaign and make the business phone chic, in a Mad Men kind of way!

Finally, it is not a coincidence that this announcement comes after Google and Verizon went public with their dating, I mean their joint net neutrality proposal.

Google Voice has been a point of contention for the carriers. In the past a shot across the bow like this from Google would be met with letters to the FCC.

I suspect this time around there won’t be a peep. Except from Skype.

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So why are our cell phone conversations still stuck with a slice of audio spectrum that dates to the 1930s? I’ve written about a newer wide band codec (G.722 standard) that could deliver a far broader 7kHz of sound. Unfortunately, you’re more likely to experience that on station-to-station calls in a large corporate environment (courtesy of Avaya, Cisco, and other enterprise players).

Outside of the confines of an office park, we’re all struggling to make ourselves heard over a skinny, tinny sounding 3.3kHz swath. I found some of the answers as to why this is the case from a presentation given at this year’s eComm event.

To be fair, as consumers it is possible to experience 12kHz of sound with a Skype-to-Skype connection using their proprietary but royalty-free SILK codec. But for everyone else, the situation is less promising.

You would think since it built its network almost from scratch,  the cellular industry would at least improve on the legacy PSTN’s sound quality. While searching for videos from eComm 2010, I came across Dialogic’s Martyn Davies talking about HD voice and the TDM dependencies that are still with us.

At about the 5:20 mark, Davies has a slide showing why wideband is difficult to implement in a real cell network. The reason is that every part has to be upgraded—transmitting station, back haul, core network. The easiest part is upgrading the firmware in the cell phone itself!

One way out of this, at least in UMTS-type networks (too many acronyms, but UMTS is 3G for European and Japanese GSM systems), is something called TrFO (or transcoder free operation). The magic that TrFO performs is to negotiate a codec end-to-end between cell phones,  thereby avoiding triggering transcoders within the network.

Because UMTS is packet based, it’s possible for the two cell phone to signal each other in this fashion and communicate in wideband (forward to 8:13 in the video for the explanation).

What about getting wide-band audio to work between UMTS and everything else? The answer is a GSM peering standard called IPX.

Unfortunately, as Davies points, it’s not all sweetness and light here.

In short: we will eventually get wide band audio in the mobile world, but it will take some more hammering out of standards and agreements between carriers.

In 2007, Skype petitioned the FCC to bear down on wireless carriers that prevented customers from accessing VoIP applications on smartphones. In making its argument, Skype referred to the …  Carterfone decision, the moldy ruling that opened up the legacy corded phone market in the late 60s.

There’s a timeless quality about these FCC filings, as if history never happened.

In any case, the Skype petition was gathering dust until the FCC drafted new rules for net neutrality in October 2009. This very visible hand was enough to prod both AT&T and Verizon to recently open up their 3G networks to Skype.

But the CTIA presentation claims that it was device maker Apple, not the carriers, that had lifted restrictions on VoIP.

While there’s a strong case to be made that Apple was instrumental in getting Google’s VoIP app, Google Voice, off the iPhone, even Apple bashers have to take note about the terms of its agreement with AT&T:

It’s the type of agreement that demolishes the competitive-robust device market claim that is made in the summary of the CTIA filing.

(Editor’s note: Google was able to backdoor Voice onto the iPhone as a Web application.)

I’m happy that Skype user can make unlimited domestic VoIP calls to each other over Verizon’s network . I think it’s fair to say we can thank the FCC for taking a more vigorous approach to enforcing net neutrality on wireless networks. Back in October, a draft of proposed rulemaking included language for a new Internet principle of non-discrimination:

The devil lurks in the details. While broadband access providers can’t charge content or application providers for specialized or prioritized access (that’s the FCC’s definition of non-discrimination), they are given significant leeway in managing their networks. In fact, the proposal includes a category of “managed or specialized services” that can encompass VoIP and video, but for which discriminatory pricing rules do apply.

This is to say, Verizon or AT&T wouldn’t be allowed to charge a content provider extra for improved access to  a generic web-page, but access providers could effectively create a new service class for a video site by defining it as a managed service.

N.B: Nothing in the proposed rule making prevents a broadband access provider from prioritizing IP packets as long it’s “reasonable network management”—for example, assigning a video packet lower priority to unblock congestion.

Again, I’m delighted about Verizon’s new openness on wireless VoIP.  Warning: much can change between now and when the final rules are decided on by the FCC, and new regulations will undoubtedly be challenged in the courts.

To get a flavor of the contentious possibilities, take a peek at the FCC comments from the CTIA, the wireless industry’s principle trade group. A single sentence should give you the flavor of the opposition:

Is wideband audio worth the trouble?

For various reasons, phone audio quality has remained the same since the 1950s– a  3.4 Khz sliver of sound.  We’re living in an age of ubiquitous digital MP3 — a codec that captures and plays back music in the 20 kHz range— and our phones are limited by by industrial age technology based on inductors and copper loops.

The sound we hear from our  phone ear piece is experienced  as merely adequate because most, but not all, of the important information embedded in human speech is contained within a 3.4 kHz spectrum slice.  Our phone network is engineered to effectively filter out critical higher frequency information that’s used by our brain’s audio circuits to decode human speech waveforms.

These missing frequency “bumps” (called formants ,which were discovered in the 1960s) make it especially difficult for listeners to distinguish between consonants, especially “s” and “f” and “m” and “n”.

And I won’t event discuss what the phone network does to music– it’s practically unlistenable.

So the answer is Y E S. Wideband audio is worth it.

For those who say that there’s no market and people won’t notice the difference: there were also some naysayers who claimed consumers would rather drink the diner swill than spend $1.50 for freshly brewed Ethiopian coffee.

The technology is  available. The big stumbling blocks to greater wideband usage are that both sending and receiving devices must use the same or similar codecs, the digital signal processing software for sampling waveforms.

And that’s where Skype has an advantage. With over a half-billion subscribers and SILK (which, by the way, is now a  royalty-free download for developers), they have an enormous opportunity to jump start wideband.

This may also give Skype a nice, albeit temporary, advantage as they move into the business phone market.

Now the new owners of Skype, private equity firms Silver Lake Partners and Andreessen (yup, the same) Horowitz LLC, have plans to extend Skype to the world of corporate voice. Can rebellious, Web 2.0-ish Skype take over calls that were once ruled by PBXs?

Easily! Outside of the largest and staidest of companies, the rest of the corporate world would be quite comfortable using Skype to make free calls. Younger workers routinely bring their smart phones to work and think nothing of Skyping their co-workers. The static phoneset on their cube desks is seen by Generation X, Y, and Z as a quaint device, an antique that serves a better purpose as a paper weight.

I know. Skype will be a hard sell to law, banking, insurance and making it past xenophobic IT departments. But even in these places, younger folks raised on cell phones and instant messaging will be pulled by Skype’s appeal of mobility and freedom.

The legacy PBX vendors, including Avayatel (which is owned by Silver Lake), have their own VoIP software for cell phones.  True, you get more office-y features (conferencing, station dialing, etc) but sacrifice the ability to use the same software to connect with other vendors’ VoIP enabled gadgets

Skype makes all this irrelevant, and with their large base of subscribers they take advantage of being there first with the biggest address book (currently over 500 million entries).

My guess is that Skypes’s  foray into the corporate world will initially take the form of specialized addressing that will let business users connect to co-workers using familiar four- or five- digit numbers.

So where is Avayatel in this?  They can give an assist to their Silver Lake team mate Skype with a gateway of sorts that translates between SIP and Skype’s proprietary VoIP protocols.  (Editor’s note: I guess you’re not going to talk about a few cultural differences between Skype and Avaya?)

What gives? You can read Skype’s petition filed  with the FCC in 2007 asking it to enforce.. the Carterfone decision!  Old timers will recall  that this was the landmark FCC ruling  breaking open the old Ma Bell voice network, ultimately giving  the public  the power to  buy wired phones–bless me– made by other, non-AT&T companies.   This  replay of recent history involves a wireless network, but unlike before, AT&T is partly relenting.  The smart money is saying that it’s really a quid pro quo to get the FCC to respond favorably to AT&Ts request to drop copper-based landline voice service.