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ANY OTHER UNAUTHORIZED RE-DISTRIBUTION IS A VIOLATION OF COPYRIGHT LAW. ------------------------------------------------------------------------ In this Issue: - Heard on the Net People on the Move Companies on the Move - Time to seek out new IP based Worlds: Words from Fall 2001 VON - Best of Both Worlds: The US Postal Service as the new US PTT? - From Telephony to Connectivity: by Bob Frankston - Response to 10 Myths in US Telecom Policy - Carl's Contention @ VON: Profits from Data vs. Voice - pulver.com's 5th Annual IP Communications Industry Executive Summit - Recap: pulver.com Telecom Policy Summit - Dog Web Years: by Carl Ford - Quick Recap: Fall 2001 Location Based Services Summit ------------------------------------------------------------------------ ======================== Heard on the Net ======================== People on the Move: - Brian Allain joined dynamicsoft as VP of Marketing. - Vincent DeGiacomo joined Sonexis as VP of Business Development. - Joseph Baldini joined Convergent Networks as VP of Business Development. - Juan Bergelund joined Fonet Global as Executive VP - Stephen Gleave joined Ubiquity as Chief Marketing Officer. - Alberto Cairo joined Ubiquity as Vice President of Partner Development. - Steve Gill joined Ubiquity as Vice President of Sales for North America. - Gene Wolf joined Ridgeway Systems & Software as CEO. - Taj Reneau became Webly Systems' new CEO. - William Schleyer joined AT&T Broadband as CEO. - Richard Tennant has become the CFO of iBasis. - Howie Balter left Net2Phone. Companies on the Move: - Motorola has recently made an equity investment in Personity, Inc. - Kirusa recently announced an additional $1.25 million for its A-round of funding. - Xelerated Packet Devices recently raised $12 Million in funding. - Flarion raised $45 Million in Series B Funding. - Asita Technologies raised $24 million in their second round funding. - NMS Communications recently acquired the voice quality and echo cancellation business of Lucent Technologies for $60 million in cash. - SS8 Networks acquired ADC's Enhanced Services Division; Raised $62 Million financing package led by Warburg Pincus and existing investors. - Oresis Communications acquired key recourses of Vsys, Inc. - Dial-Thru International acquired Rapid Link Inc. for $2 million in cash and 600k of stock. (Please email: people@pulver.com to report a change in your position. Please refer to: "People on the Move" in the subject) ------------------------------------------------------------------------ Time to seek out new IP based Worlds: Words from Fall 2001 VON It's been a while since I've felt such a strong 'warm and fuzzy' feeling at a VON Conference. Fall 2001 VON took place October 15-18 in Atlanta and one thing that it proved to me was that if people decide they need to be somewhere, they would travel, no matter how far. Case in point, despite everything else going on in the world, there were people from over 30 countries at VON, as well as people from all around the US. From the "thank you" emails that I received and from what I overheard in the hallways and exhibit floor, the conference was a great catalyst for business development, partnering and provided a very efficient way for people to get together for face-to-face meetings. Part of the time I spent in Atlanta was greeting our speakers and delegates and thanking them for coming. Another portion was explaining to those who thought that this was my last VON event that although the VON and SIP conferences were sold to Key3Media, I'm not going anywhere and it is still my team and I that are responsible for making VON happen. My Industry Perspective spoke about this being the time for the IP Communications Industry to seek out new class M planets which support IP based life forms. In other words, now is the time for us to look for new business ecosystems which support IP (whether they realize it or not) and the time to plant the seeds from which future IP Communication environments will grow from. In fact, right now, using my long-range scanners, I already see possible life forms of opportunity inside the Enterprise, as well as in the ENUM and expanded 800 number services space. Generally speaking, there is also a great opportunity today in enabling IP Communications in the Broadband space. Those service providers who are only involved in providing access to their own networks will miss out in the majority of the upside associated with owning a broadband network. Like it or not, once an operator provides access to broadband, there exists an immediate opportunity to launch communication services over the network, either as a hostile/parasite play by an unrelated third party or on behalf of the access provider as another reason why to pay their monthly fees to be a customer in an "Always On" world. These days, given the sparse features/functionality, I wouldn't be surprised if most consumers realize that always on isn't always enough. They will need more reasons to continue to justify why they should continue as a broadband subscriber. Now, one reason for a company to seek out friendly new environments which can support and sustain IP is that this represents a new business opportunity, which most likely wasn't reflected in their respective business plans. I say this because there is a chance that a number of startups in the softswitch space will not make it if their sole target customer in their cloudy vision continues to be only the ILECs. Turns out, whether they are willing to admit it or not, most ILECs will choose to have two, maybe three vendors as a source for a particular technology and they choose companies that have been around for years, rather than months. This means that if a company is not short-listed as a preferred vendor by an ILEC by now, they may not have the chance to get listed as a vendor anytime soon. But before admitting defeat and becoming another statistic of a growing list of VC-backed Orphan companies, there still is time for those startups with vision to boldly seek out brave new IP worlds and civilizations. One such brave new world is the world of opportunity which Microsoft helped to create with the launch of WindowsXP. Now, more than ever, the opportunities for developers with vision, who can also execute, are great. Just as great is the challenge for all of us to help the public take advantage of what it means to have a real-time operating system on their desktop. Somehow we need to get people to give IP Communications another real try, and feel the power that end-to-end IP can truly represent. Speaking about end-to-end IP, during my talk in Atlanta, as well at Spring 2001 VON, I spoke about creating balance in an end-to-end IP environment and I referenced the words from the Lennon/McCartney song The End: "and in the end the love you take is equal to the love you make." You can check this on the conference tapes. I was a little taken back when these exact words were used in the introduction of Paul McCartney at the recent Concert for the City of New York. :-) For those companies who are able to successfully seek out new IP based worlds, the world of 2002 and beyond promises to be ones full of adventure. ------------------------------------------------------------------------ Best of Both Worlds: The US Postal Service as the new US PTT? David Steen, CEO, Teleplus Consulting, mentioned during a conversation at Fall 2001 VON, the crazy idea of having a government entity modeled on the take over of basic telephone service and achieving universal broadband connectivity. This insane idea included the notion that the government should buy out shareholders in the regional bell operating companies as well as the interested competitive players. After I stopped laughing, it occurred to me he might be on to something. The idea seems to address many of the issues causing the current telecom malaise. Private operators have prospered with service offers (overnight delivery) that add value over and above basic postal services. The government can pursue the communications policy wish list, including; universal service, legal intercept, equal access, reliability, E911, and security. If the government owns the infrastructure, it can unbundle network elements to enable private enterprise. The information technology industry can proceed to build applications that leverage universal connectivity, while private enterprises can build out private infrastructure to meet special requirements. Highways seem like another clear example where government sponsored infrastructure helps enable commerce. The trick to making this work is clear distinction between connectivity and services. The government telecom entity provides simple connectivity on a non-discriminatory basis. Turning the connectivity into services (voice, video, email) belongs to end users and private enterprise, in other words, this means building on the Internet model. The government should not attempt to favor one type of service over another in the same way it places minimal restraints on the types of vehicles that use the highways and accommodates many types of mail. The reliable centralized top down approach of traditional telecom and the Moore's Law driven dynamic approach of the information technology industry each have their merits. Government run telco's don't have an enviable record, but the postal model deserves consideration as we need to find a way to obtain the best of both worlds, rather than settling for the lowest common denominator. ------------------------------------------------------------------------ From Telephony to Connectivity by Bob Frankston The Internet demonstrated that telecommunications services, which includes both telephone and television distribution, are based on a more fundamental resource, connectivity. By shifting the focus to providing connectivity rather than telephony and television, it becomes obvious that there is a conflict of interest between the current service (and content) providers and connectivity providers. By separating the connectivity business from the service/content business we set in motion the virtuous cycle that has been frustrated. Unfettered connectivity (AKA Internet access) begets applications that drive the demand and the demand allows investment and innovation that increases supply of both connectivity and services/content while driving down the price. We must recognize that the rules have changed and that telephony and television are simply services built on connectivity. The Internet has been an effective proof of concept that pure connectivity (such as the Internet) is robust and can support a multitude of services transported through that connectivity, be they telephone, email, TV or website. What is more important is that it allows any of us to create new and unanticipated services. Connectivity is fundamental Just as the FCC required that television networks divest themselves of the production companies we need a period during which the connectivity business and the services/content business are distinct. This is a separation that is also good business practice for the current companies, since the operation of a network and the support of services requires very different business structures. If one business is more profitable and subsidizes the other, we have a dysfunctional company. Keeping the companies whole leaves them with significant incentives and the ability to prevent competition. Thus, the shareholders are also presently penalized by having companies that are focused on preserving their advantage rather than competing. The Connectivity Business is focused on simply providing a commodity connectivity. If customers want more connectivity, then the goal is to find a way to provide it. This is in sharp contrast to the current situation in DSL in which the focus is on qualifying or, more to the point, disqualifying customers. Not only is there no incentive to innovate, doing so would allow for competition. By having a company that focuses on connectivity we set in place the virtuous cycle that we have seen in computing and, for that matter, in the rest of the Internet. Local connectivity is an anomaly in its ability to frustrate Moore's law-style progress. ------------------------------------------------------------------------ Response to 10 Myths in US Telecom Policy: Daniel Berninger, pulver.com The article outlining the 10 Myths in US Telecom Policy included in the last Pulver Report attracted comments and reprint requests from several countries. It appears the same myths apply to Mexico as one enterprising person inserted the names of the equivalent telecom agencies in Mexico and redistributed the article as a commentary on telecom policy in Mexico. Responses from Japan expressed optimism about their country's effort as the incumbent views the introduction of competition as an opportunity to deliver new services. Leaders in Japan hope to follow the i-mode success with leadership in fostering competitive local loop access. A telecom reseller sent the article to his customers, and Key3Media picked up the article in newsletters distributed to Interop and COMDEX delegates. Someone from AT&T responded that the article favored the incumbent players too much. Someone else from Verizon responded that the article favored the competitors too much. ----------------------------------------------------------------------- Carl's Contention @ VON: Profits from Data vs. Voice: by Carl Ford Ever since I have come to VON, there is one slide that I've seen shown over and over again. It is the one that shows that relationship of data traffic to voice traffic and contends that over half to 80% of the traffic is now data. Another slide often follows that contends that voice represents 80% of the revenue. By now this data is at least two years old and I think the data points need to be reexamined. I think a tipping point has occurred and it is significant. I think data now represents over 50% of the revenue. I say this because data has always been consistent in the fact that what you pay for is what you get. Purchase a hundred megabits from Point A to Point B and that is what you get. It is straightforward on costs. Also, thanks to Moore's Law, the profit increases over time. Voice is different, filled with supplements and settlements, traffic theory and price/demand curves. The price on voice has been dropping, not only because of settlements, but also from the competition. Particularly, internationally the cost is no longer associated with cost recovery, it is based on competitive pressures. So now here is my real contention. I believe it is possible for us to dip below the cost recovery point of voice to the point where the International backbone is no longer self-sustaining. I say this because of the number of existing ingress and egress points continues to rise beyond the traffic requirements. I would contend that this could make sense, if the data backbone was being utilized for voice traffic as well. But that is not what is happening, from what I can tell. So, in an ironic twist, it may be that data supplements the delivery of backbone circuit traffic. I invite any or all to contend with me on this, particularly any friends with service cost backgrounds. You can reach me at: carl@pulver.com ------------------------------------------------------------------------ pulver.com Telecom Policy Summit Recap - Daniel Berninger The Telecom Policy Summit took place on October 1st and 2nd in Washington, D.C. The general session room at the Washington Marriott remained full for both days even given the worries about travel. The participants came from different parts of the information technology and telecom value chains. Everyone worked to bridge gaps in understanding between policy experts and technology experts. There appeared broad agreement on the urgency of breaking through the public policy morass discouraging investment, as well as, seeds of a consensus on what has to happen for the telecom sector to recover. Elon Ganor, Larry Irving, and Royce Holland opened the event with strong calls for giving consumers more opportunities for choice. Howard Symons (Mintz Levin), Susan Ness, and Kelly Levy outlined how the Telecom Act of 1934 along with updates in 1996 presently shape the telecom landscape in the United States. Bill Whyman (President Precursor Group) pointed out that investors like companies that have monopolies, but Jeffrey Blumenfeld (formerly Department of Justice lead attorney for United States vs. AT&T) pointed out the government eventually finds a way to break up monopolies to protect consumers. Michael Spencer (Telco Partners), Dennis Specht, and Bob Frankston explained the situation as a collision of vertically integrated (traditional telecom) and horizontal integrated (information technology) business models. The Communication Act of 1934 created a monopoly with a guaranteed rate of return which obtained for the country a reliable slow growth telephone network absent service innovations with price increases mapped to the Consumer Price Index. The appetite of the information technology industry for new applications eventually lead to services that seem to qualify as telecom services which attracted the attention of regulators and incumbent telephone companies. Investors leaped to fund information technology driven telecom innovations between 1995 and 2000. The incumbents largely repelled the insurgents in 2001 by leveraging friends in the executive and legislative branches of government, as well as, at the quasi-independent FCC. The events on September 11, 2001 seem to have shuffled the deck yet again. Stay tuned. ----------------------------------------------------------------------- Dog Web Years, by Carl Ford I have often contended that carriers are more turtle like than rabbit. They grew up this way thanks to years of regulation. Listen to any Jeff Bezos Amazon marketing presentation and you would think he was competing with an ILEC. So many of us came out to revolutionize the ILEC, but soon we realized that a carrier resembles its namesake and an aircraft carrier where turning nimbly is an oxymoron. Carriers aware of the product life cycles are willing to move slowly with those who prove that they too can last. So here is good news in these hard times. This has been a web dog year. If your company is surviving under these circumstances, you have gained credibility. Also, just like a dog where every one calendar year equals seven for a dog's development compared to a humans development. We can say the same thing. We all talked in Web years and said that a quarter or a month was a year. A web dog year I contended at Fall 2001 VON says that your company developed five to seven years of normal economic development. When we come out of this, many will be impressed with those who survived this year, and some will get credit for starting and surviving in it. ------------------------------------------------------------------------ Quick Recap: Fall 2001 Location Based Services Summit The second LBS Summit, the Fall 2001 LBS Summit, took place in Santa Clara, CA, October 29-30th. It offered many interesting presentations on a variety of LBS topics. We would like to specifically thank Tom Sugrue, the FCC Chief Wireless Telecommunication Bureau, for his excellent presentation on E911 status and future. We would also like to acknowledge Rosum's presentation on their novel Digital TV (DTV) signaling location method. This approach has the potential of revolutionizing location technology. In upcoming LBS reports, ( http://pulver.com/lbsreport/subscribe.html ) we will be covering these and other presentations that were given at LBS summit. Presentations from this event are available at: ( http://slides.pulver.com ) ------------------------------------------------------------------------ Call for Speakers: Spring 2002 VON in Seattle It's that time of the year again. I'm looking for new speakers and suggestions of topics to cover at Spring 2002 VON http://www.von.com ) which will be taking place April 8-11, 2002 in Seattle. Please feel free to email: speaker@pulver.com with your ideas/suggestions and please visit: ( http://pulver.com/speak/submit.html ) by December 14th to formally submit your proposal. Just for the record, please note that we prefer to deal directly with the proposed speakers rather than working with an agency. Speakers who have been past delegates at VON generally have a better chance to be selected to speak at a VON conference than those who have never been to VON and are not familiar with the community. Please visit ( http://slides.pulver.com ) and take a look at the presentations from Fall 2001 VON to get a feel for the level of presentations we are looking for at Spring 2002 VON. ------------------------------------------------------------ If you are aware of others who would like to receive the Pulver Report, please visit ( http://pulver.com/reports/subscribe.html ). To unsubscribe, please visit ( http://pulver.com/reports/unsubscribe.html ) Please send your comments and feedback regarding this issue of The Pulver Report to: jeff@pulver.com. Jeff Pulver Tel. +1.631.547.0800 The Pulver Report Fax. +1.631.396.3996 November 5, 2001 http://pulver.com/reports ------------------------------------------------------------------------ (c) 2001 pulver.com, Inc., All Rights Reserved ========================================================================