IP Summit: For IP-enabled applications, simpler is better

CHICAGO--Service providers hoping to cash in on the burgeoning demand for IP-enabled applications won’t have to worry much about price resistance but will need to develop offerings that are easy to use and capable of simplifying the lives of those who use them, according to panelists speaking yesterday at the 2006 IP Summit co-sponsored by Telephony magazine and Globalcomm 2006.

Chris Ruff, president of UIEvolution, a Bellevue, Wash.-based provider of software solutions for interactive content, told of consumers in Japan who regularly download to their mobile phones full versions of popular songs, at a cost of roughly $5 per download. “That shows the promise that people will pay for premium content,” Ruff said.

While agreeing with Ruff that end-users exhibit little price resistance when they perceive the application or service in question to be of high value, Neale Martin, founder and president of research and consulting firm Ntelec, said service providers still have to be careful about how they develop pricing strategies, with an emphasis on guarding against pre-conceived notions.

“Just a few years ago, it seemed insane to spend $25,000 to $30,000 on a car, but that’s the average price today. Some people will spend $4 for a cup of coffee. That’s crazy, right? But we do it all the time,” Martin said. “When we talk about pricing, we have this perception about what people should pay. … You have to really be flexible to see what works, and don’t try to stick a paradigm on a new thing.”

To ensure that price remains a non-issue, service providers also will need to ensure that the IP-enabled applications and services they offer help end-users simplify their lives while also being simple to use, according to Martin.

“We’re all looking for things that are intuitive, easy to use and easy to access. But making people’s lives better and easier doesn’t mean giving them a lot more [stuff]. It means making stuff work and making it more reliable,” he said.

However, despite the fact that consumer and business customers both are clamoring for IP-enabled applications, the telecom sector will struggle to deliver them, at least for a while, predicted Dan Moffat, CEO of NewEdge Networks, which builds and manages networks for businesses and communications providers, and which was acquired by Internet service provider Earthlink in December 2005.

“We’re at an interesting juncture, because the consumers are going to want this stuff, the business customers absolutely have to have this stuff, and yet our industry is so vulcanized into fiefdoms that control the access portion, that it’s not going to happen in the short term,” Moffat said.

Dave Schaeffer, CEO of Cogent Communications, a facilities-based Internet service provider headquartered in Washington, D.C., questioned whether service providers should be considering the provisioning of IP-based applications.

“It’s a huge fallacy for any service provider, based on their organizational structure, to think they could keep pace with that rate of innovation and technology,” Schaeffer said. “What they need to do is look at where their core competencies are—which are at the network layer—generate an equitable return on that layer, and leave the application layer to others.”

That’s not likely to happen, according to Philip Schuman, founder of broadband distribution consultancy HighView Media.

“Every major phone company executive would be out of a job if they did that,” Schuman said.