May 01, 2007

Premium Services vs. Premium Devices

This post is a continuation of the previous post, except this time prompted by recent posts by Garrett Smith and Moshe Maeir. Garrett refers to a premium MVNO called Voce and uses it to rhetorically ask whether there can be a premium VoIP service provider. He suggests that even though currently most of the VoIP providers seem to be pushing cheap voice calling, there is money to be made in selling premium services. He posits that, “there is room for a service that is $49.99 per month, that offers twice the premiums that Vonage (and their clones) offer.” He also cautions that if the industry does not act soon, then “you will have to prove your premium over and over and over again in order to have consumers believe your story.”

Of course a week earlier, Moshe had suggested the same thing by making a concrete proposal. The details of that proposal are interesting and noteworthy. To start off, Moshe would sell three devices – a desktop IP phone (he reiterates that it is NOT an ATA), a Wi-Fi phone and an USB phone – for $300. Then for a monthly fee of $75, he will offer a plethora of services like iotum’s relevant calls, find me follow me, find me follow me, voicemail (no voicemail to email?, no voicemail to text?), call forwarding redundancy, caller ID and “every other digital service you can think of….”. He will also include unlimited PSTN connectivity to some countries and a handful of PSTN numbers. Of course true to a premium service there will be customer service (I suppose rated highly by JD Power).

It is very alluring to offer VoIP service especially given the attractive high ARPU. But we have all celebrated the “Stupid Network” paper and “VoIP is a product, not a service” essay. The authors of SIP have proclaimed that it exploits the intelligence at the end. So why are we still pursuing a service provider model? Shouldn’t we be focusing on developing a line of premium devices? Most of the services (save those that are related to PSTN) can be realized at the end-points. A few years back it was in vogue to compare Internet to highway. If I am allowed to use that abused analogy once more, it looks like we are focused on building limousine service (not stretch limos, mind you) instead of building Lexuses and Mercedeses?

Let me go on a limb and place a friendly challenge: identify a service (not involving PSTN) that can not be realized at the end-points, but requires a service provider. Let me try to outline how it could be done by “consenting end-points”.

Posted by aswath at May 1, 2007 08:17 PM
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So here's the rub, Aswath. The issue isn't whether technically it can be done at the edge (it can, generally, as you know), but the issue is whether customers WANT it that way. When it comes to telephony, our research is showing more and more that customers actually PREFER to go with a "subscription" model. They are so used to it that "owning" their own telephony (i.e. buying the devices) actually makes them uncomfortable. Of course there are those users that prefer to buy once and own it, but suprisingly, when it comes to telephony, this seems to be a very small minority. It seems like people have just been trained for so long now that they are now wired for paying monthly fees for telephony and other possibilities are beyond comprehension.

Given that, it's not suprising that business models also tend to be "service" models, because doing otherwise is like swimming upstream.

Posted by: David Beckemeyer at May 2, 2007 07:31 PM


You might be right. After all you have attempted to market a device of one kind or another. I am just a backbencher like the two old men in The Muppet Show. :-)

But consider all the softclients. At least one could have tried. Skype gets all the kudos for P2P but not one person identified that they could have done it differently. (As I have argued earlier, it is very much a client/server model). So it is a fair question to ask me to demonstrate such an implementation. I hope I will be able to produce one soon enough.

Posted by: Aswath at May 2, 2007 08:30 PM

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