The eve of disruption

End-to-end voice over Internet protocol (VoIP) will disrupt, if not destroy, the traditional telephone business, suggested speakers at last week's Voice on the Net (VON) conference in Phoenix.

“It [end-to-end VoIP] is so hot it's cool, and it's very disruptive to business as usual,” said Jeff Pulver, CEO of pulver.com, the conference's sponsor.

But VoIP backers should abandon a “public-switched telephone mentality” of product development that parallels the existing industry, he continued.

“Maybe we're using IP to reinvent the wheel,” he said, calling on VoIP providers and vendors to do things “that clearly could not have been done 27 years ago,” rather than looking for new ways to deliver traditional telephone services.

“It's important to have products that service providers can build a business on,” said Kathleen Meier, VocalData's marketing vice president. No one, she said, “can disagree with Pulver's vision,” but when it comes to challenging the industry to take radical steps, “Jeff has a business to run, and exciting new news is what fuels his business.”

What fuels the IP business is money. Consensus at both panels and on the show floor was there's a lot less money available than there was the last time VON convened.

“What a difference a year makes,” said Ron Vidal, Level 3's senior VP of new ventures and investor relations. “There's discipline being imposed by the capital markets.”

That discipline will spell doom for some VoIP players, although “innovative, well-thought-out business plans are continuing to get funded,” Vidal said. “I think opportunities are everywhere. They're a little tougher to find, but they're everywhere.”

Those opportunities will be more applicable to companies that build a business case that goes beyond today's ordinary telephony, said Pulver. Broadband pipes, he suggested “are the platform for the killer apps” that will ignite IP's success in much the same way MTV drove cable, spreadsheets drove PCs and e-mail ignited the Internet.

Killer apps aside, there must be voice, said Rob Ennis, Tekelec's packet telephony director.

“What generates revenue?” he asked. “It's voice. Data is going to drive the dynamics, but voice is what pays the bill.”

However, voice is only the foundation on which the profits will be built, said Pagoo's CEO John Jacquay.

“The winners are going to be the retailers, the Yahoos, the AOLs,” he said. “The disruptive technology is going to come when the marketeers take over for the technologists.”

Such a transition could prove disastrous, according to Steve Craddock, senior VP of new media development for Comcast. “The marketeers don't know how to fix it, let alone change a light bulb,” he said.

Nevertheless, the technology must make money to get off the ground, and no one was confident that will happen soon enough to please the money markets. Even the most optimistic speakers see a success story that's two to four years out and could be dominated by, ironically, the incumbent telcos themselves.

The next gen players, therefore, have time to make a winning move, but no money with which to pay for it.

“[IP] is becoming increasingly pervasive. You haven't seen it get all of its economic legs yet,” Craddock said.

That might happen faster if the industry players “take [their] minds out of the technology box and put them into the applications box,” Jacquay said.

And, concluded Pulver, find a new, different way to deliver services.

“I wonder why we limit ourselves to the conservative thinking of the PSTN,” he said. “We want to take advantage of the environment.”