The Third Screen

This blog is dedicated to chronicling items of interest to customers, partners and friends of Solegy. Through it, we will attempt to articulate why the Solegy Team is excited about our company and the future of our industry, and to highlight items of relevance to the next generation ecoscape that is our business.

If you’re like most of the people I ran this post by before committing it to the Googleverse, you’re probably wondering what The Third Screen means. The rest of this entry will try to answer that question.

As you MUST have heard by now, there’s an arranged marriage afoot between your TV and your PC. Although it promises to be a long engagement, their respective industries are agog with hopeful anticipation. Indeed, it is nearly impossible to thumb through a newspaper or trade journal without stumbling across a story about how this television program or that is being re-packaged for life on the Internet. Speculation abounds.

Not as hyped as the union, but much more interesting in my opinion, is the expected progeny. Yet to be assigned a formal classification, it has already been given a nickname by those in the know - the third screen. Although YOU may not yet have heard of the third screen, I can vouch for its existence with the utmost confidence. My business partner, Stu Sleppin, assures me that the moniker is being bandied about by his rock-and-roll friends in the Hamptons with a fervor not seen since Web 2.0. Not knowing the Hamptons from Fire Island from a fire hydrant, who am I to argue?

Whether the name sticks or not, the image it brings to mind is tangible. I for one can’t wait until there is something that can fill the void between the two screens I now rely on to keep me in touch with the rest of the world. While there are many details that we don’t yet know about the third screen, there are a few things that we can safely surmise: it will be an always-on Internet device; it will be mobile; it will replace a bevy of gadgets that many of us carry around separately today – including, but not limited to, cell phones, iPods, digital cameras and PDAs. And, perhaps most importantly, it will further unleash the creative and dynamic “mash-ups” that are rapidly bringing the Internet to a new level of productivity and usefulness.

I don’t think it’s an exaggeration to say that companies even tangentially related to the Internet, television or mobile phone industries view the third screen as the Holy Grail. After all, in a world where all the content there is can be channeled to you through a single mobile portal, every company from Arbitron to Zales must map out a strategy to make the most of the space.

Sure, a lot has to happen before the third screen becomes a reality. To be effective, the intersection of the PC, TV and telephone worlds will require some clever rewiring inside of today’s networks.

That’s where Solegy comes in. The buzz word for what we do is SDP (an acronym for Service Delivery Platform), and we call our managed SDP solution ServicePDQ. It is our vision to facilitate the third screen evolution by providing a software platform that helps service providers to organize, orchestrate and charge for all of the applications, media and content that the third screen will enable.

If that sounds ambitious, it is. Realizing our vision will require a lot of work, and not a little luck. But we believe in the future that the third screen represents and we relish the challenges and opportunities to come.

Along the way, we’ll do out best to keep you up to date from this page in the blogsphere.

My thanks to Alec Saunders and his informative article here for crystallizing the value of a corporate blog. Although I had often considered starting one, it wasn’t until reading Alec’s blog that I began thinking of it as a potent marketing and sales tool. Prior, I viewed blogs primarily as a means to share ideas with employees and existing customers. If you are not familiar with it, and are interested in VoIP, do pay Saunders Log a visit.

It seems that the high-tech truck stop chain known as Flying J is being sued by the television networks for editing out commercials from network broadcasts, and replacing them with commercials produced and sold by their own in-house ad agency called Plaza TV.

According to an article in Adlaw

Rather than airing the network commercials that pay for the development of such programs, Flying J ran commercials for products and services such as the “America Truckers Legal Association,” “Truckers’ Magazine” and “Flying J Internet Kiosk.”

This appears to be another case of technology-induced disintermediation, and one more body blow to the traditional advertising business model. It was bad enough when individuals began to TiVo on through TV commercials, but now anyone in the chain between the broadcaster and the viewer can co-opt the content for their own purposes as well.

I don’t know enough about the relevant law to comment on the legality of this type of behavior; and it may well come to pass that the courts will penalize Flying J for its actions. But if this development foretells anything, it is that content owners will need to find other ways to monetize their goods. If Flying J is doing it, then it won’t be long before the corner deli and your doctor’s office do it too.

What can content owners do to answer the challenge? Interactive TV? Embedded advertising? Televisions that are smart enough to disable content when advertisements are skipped or replaced?

I’ll make a mental note to myself to think about it later. For now, yesterday’s episode of Lost (just downloaded from iTunes) beckons.

In an article last year, I suggested that contextualization of the data presented through a mobile phone’s user interface would be a killer app for the telecom industry. I believe that the arguments I made there apply equally well to the way in which portals present advertisements to online users.

A portal, like a device user interface, is a tool for presenting information. The ability for a portal to enhance a user’s online experience by serving ads that are truly relevant is a compelling opportunity for portals. The trick is to imbue the system with the appearance of common sense.

By and large, using complicated machines seems clumsy because machines have no idea about the world that we live in. Machines do not know that fire is hot, or that water is wet. They don’t know that you might call a doctor if you feel sick. Or, that calls from your boss are more important than calls from a salesperson. In other words they have no common sense.A device that had common sense would … make “intelligent” guesses about what you want by building a contextual framework based on a database of general knowledge as well as specific facts that apply only to you.

If devices were able to emulate common sense they would understand the context of your situation and what is likely to be going on around you. In terms of an improved user interface, such devices would be able to understand what you want to do and make intelligent predictions, reducing the amount of input required.

This common sense ability - based on semantic context as opposed to the current assistive input agents that blindly follow predictive text entry rules - would make any type of application easier to use by reducing the complexity of the instruction set. Continuing with the example above, a device with common sense would know that the number you dial right after calling your doctor is more likely to be your local pharmacy than your dry cleaner.

The ability to use common sense will be endowed to agents that are able to access a number of underlying tools, making decisions without the need for user input at each step. Among other things, interface agents will take the initiative; anticipating your needs in order to, for example, inform you of events that you might otherwise be too busy to notice or keep track of.

As Google has convincingly demonstrated, the online experience WILL be funded by ad revenue in the world of Web 2.0 and beyond. To date ads are most effective in the context of search. In the future, linking online services to ads that are relevant beyond the context of a seach will be a killer app for the portals. Imagine a portal that dynamically and inconspicuously places products into online content based on your personal tastes and particular needs at the time of viewing.

We finally announced our role as the managed platform behind Earthlink’s Mindspring Dial Out PC-to-phone service. Mindspring is Earthlink’s PC-based SIP client that allows real time voice and text (instant messaging) communication, as well as voicemail and email.

It was an exciting milestone for me because I view Earthlink as being on the leading edge of next generation communication providers, and am proud to play a part in their future plans. Even if you don’t consider their 5 million Internet access customers (the bread and butter business), the Earthlink line-up is quite impressive:

• trueVoice - a Vonage-like broadband phone replacement service
• Line powered voice - a voice/dsl bundle hybrid service that draws power from the central office over dsl lines operated by Covad
• Helio - an MVNO launched on Sprint’s network in conjunction with Korea’s SK Telecom and geared to provide streaming video content to the 18-34 year old demographic. Helio has announced tie-ups with content partners such as MySpace, Fox Sports and MTV.
• Muni Wifi - Earthlink’s effort to blanket major US cities with free or reduced-rate wireless Internet access (they, along with Google, won the contract to unwire San Francisco)

I can’t think of any other communications company with a broader range of interesting and synergistic initiatives. The potential for cross polination and innovative services that span multiple access networks is truly awe inspiring.

In part, this is made possible by the fact that, unlike other service providers in the convergent space, Earthlink has never owned its own network. And, what was once considered a liability is now proving to be an asset as it allows Earthlink to move in bold new directions that would have been all but impossible if they had legacy infrastructure (not to mention legacy mindset) to protect.

What’s more, with a company like Solegy behind them, how can they go wrong?!

The Korean Air lounge at the Incheon Airport just west of Seoul, has a sweet setup for road warriors. A laptop lane with comfortable chairs and free wifi access at super-fast speeds - nothing particularly remarkable in and of itself. But last week during a layover, I was amused to find the laptop users on either side of me BOTH using VoIP softphones to carry on conversations.

Now I travel a lot. And over the course of the years, I have grown accustomed to drawing curious glances as I talk into my notebook as if it were a telephone. Of course, on those occasions I was using a VoIP softphone to make calls. But I honestly can’t recall a time when I have seen anyone else doing so in a public space (unless of course it was at a nerdy techno convention such as VON), much less TWO seemingly unrelated people. I was literally surrounded! (Despite my best efforts, I could not get in close enough to detect if either were using one of the VoIP service providers powered by Solegy - THAT would have been cool).

Later that same day, I came across a headline in the May 15 issue of The Pre-Paid Press: VoIP: Coming Soon, Coming Everywhere. The article quoted statistics from research firm eMarketer forecasting that 15.1% of US households would be VoIP users by 2007 (that equates to 25% of US households according to the article).

My experience in Korea may not represent typical behavior for most travelers (the Korean mobile phone network uses a CDMA version that is incompatible with the GSM phones used by most travelers - making it more likely that an alternate mode of calling will be employed). But, it surely does offer support for the idea that VoIP is approaching the tipping point.

Note: Poncari Sweat is a chilled beverage popular in Korea and readily available in the KAL Lounge. Not at all bad if you can get past the name.

The news on Vonage is everywhere, and its not good. VG shares reached foreboding depths - less than 50% of the IPO offering price. The general consensus: bad for the VoIP industry. No doubt.

And yet, I can’t help but admit to taking a fleeting moment of pleasure at news of this ilk because it vindicates my own personal viewpoint. For years I have been telling (OK, maybe boring would be a better word) anyone who would listen that offering a pure dialtone replacement service using VoIP is a hopeless race to the bottom. And at the end of the day, what Vonage offers is a simple home phone replacement service. The market is unimpressed.

Why? Because the real power of VoIP technology lies in the ability to leverage the rest of the Internet to introduce innovative new services that are simply not possible on the good old PSTN. Clever twists that tie together an individual’s business, family and entertainment lifestyles into a ubiquitous personal communications network. Something that Vonage has failed to do - or even to talk about - so far.

The irony is that Vonage HAS done more than any other company to build a critical mass of VoIP users. And that critical mass is needed before you can expect to entice software and Internet entrepreneurs to create cool new applications and services. Just like the really satisfying PC applications did not come about until there was a critical mass of PC users to buy them, innovative VoIP applications will not flourish until there is a ready market of potential users.

My moment of glory ends as soon as I remember that, while the mass of VoIP users may be massive, the jury is still out as to whether it is critical.

So here’s to the hope that VG will not succumb. It would be a shame to see VG fail before the tide has turned. But if they do fall victim to Clayton Christensen’s dilemma, they can at least take solace in the fact that there will still be companies like Solegy to carry the torch.

Solegy recently announced the release of an open source SIP stack and some related applications as part of the Open SIP Stack project. We did this to give application developers an easier way to hook into our ServicePDQ platform. Developers that prefer not to re-invent the wheel for basic core services such as admission control, resource allocation, presence management, and real-time rating and charging (to name just a few) can now more easily outsource these functions using Solegy’s carrier class managed solution.

This event got me thinking about the current state of open source SIP. As it has been a while since I spent any time looking into the subject, I googled a bit to locate new stuff, and am pleased to report that open source SIP is alive and thriving. A search for “SIP VoIP” on Sourceforge returns more than 240 projects running the gamut in terms of platforms (from embedded systems to mobile phones) and functionality.

This is a momentous change. For the longest time, open source SIP seemed to be limited to a handful of stalwart projects such as Asterisk, Vovida, SER, SIPx , OPAL and oSIP. With the exception of Asterisk and SIPx (which both include full blown IP-PBX applications), these projects are mostly stacks (a stack is a core piece of software that is used as a building block for other applications). Along with Open SIP Stack, there are now several new open source stack implementations to add to the list, including:

• ZAP - A SIP stack built on the Mozilla browser components
• Sofia SIP - A SIP stack that runs on the Nokia 770 Internet tablet

More importantly though, there are a growing number of end-user applications that build on open source SIP as their foundation. Why the recent upsurge? I think one word sums it up - Skype. The October 2005 purchase of Skype by eBay was a siren song to Internet entrepreneurs. When it comes to motivating development in a new industry or business model, there’s nothing like the prospect of a $4 Billion jackpot to serve as incentive. And when you need to launch a product quickly, nothing beats an open source project (especially one with a strong following and tested spin-off products) to cut cost and time to market.

Some of the more interesting projects include:

• Mindspring - Earthlink’s IM and voice client, built on SIPx;
• PhoneGAIM - A SIP softphone based on oSIP and the Jabber IM client (Jabber is yet another open source project that allows interoperability between all the major IM services);
• Iotum - A nifty plugin for Asterisk that enables users to create sophisticated call handling rules;
• SIPShare - A SIP-based P2P file sharing application also from Earthlink;
• Wengo - A softphone built on oSIP that includes a Firefox browser extension enabling calls to be made right from the browser window’s status bar;
• Gizmo - Another softphone and IM client using OPAL and Jabber;
• Gtalk - Google’s voice and IM client. Technically not a SIP client yet (Gtalk uses an extension to the Jabber protocol called Jingle for its voice sessions) but also open source, and they claim SIP is on the roadmap.

Whatever the cause may be, the results are gratifying. Since innovative new applications are needed to drive the VoIP revolution forward, the appearance of end-user applications - especially those built on an open source undercarriage - is noteworthy.

Curiously, I could not find any native Mac software. Could it be that the growing but still small universe of Mac users is not appealing to developers aiming to take over the world with the next killer app?

I came across an interesting statistic about MVNOs in Forbes.com:

While U.S. MVNO revenue was about $4 billion last year, the Yankee Group estimates the market will hit $10.7 billion by 2010 with more than 29 million subscribers.

If my math is correct (it often isn’t) and this forecast is accurate (they often aren’t), that means that approximately 1 out of every 5 mobile revenue dollars will be paid to an MVNO in 2010. Not too shabby.

For anyone not familiar with the term, an MVNO (or mobile virtual network operator) is a company that buys wholesale mobile airtime from a mobile network operator (eg. Sprint, Cingular, Verizon, etc.) and then resells it as part of a branded service. The business model started receiving a lot of attention when Virgin Mobile proved that savvy marketers could outsell the operators in specific niches by bundling in content and other services. Over the past year, hundreds of planned MVNO launches have been announced worldwide (even P-Diddy is an MVNO!). A fairly comprehensive list is available here.

Given the prominence of the MVNO business model and the fact that network operators are eagerly planning to merge their mobile , landline and IP networks (a move known as FMC or fixed mobile convergence), I wonder how long it will be before a major brand MVNO (such as Disney or ESPN) announces support for VoIP phones a’la Vonage or even Skype.

Although MVNOs could certainly ride the FMC coattails of their underlying mobile network operator, the mobile networks are at least two years away from realizing fixed mobile convergence given the underlying network complexities. In contrast, it would be duck soup (relatively speaking) for an existing MVNO to beat them to the punch using a platform such as Solegy’s.

Because the largest costs of doing business for a Vonabee are related to customer acquisition and churn, it could be argued that a major brand would have a significant cost advantage (if you believe, as I do, that brand loyalty would tend to reduce both these variables).

An article in the June 29 Wall Street Journal entitled Cable Takes on Web Video raises an interesting new development. It describes how Comcast has decided to start selling its own video content over the web. This content would be available to anyone on the Internet - even, for example, a subscriber of rival Time-Warner Cable. Huh?! If that’s not cause for a double-take, I don’t know what is.

For as long as there have been pipes, the natural tendency of pipe owners has been to strategically control access at either end in an effort to maximize the pipe’s value. From irrigation canals to radio frequencies, the same fundamental economics are at work. In the digital realm, this usually means that the pipe owners are in the driver’s seat. Much to the chagrin of content owners, the pipes control the customer relationship, allowing them to determine content selection as well as pricing and bundling. Think of network programming and the walled gardens created by services like AOL. In the case of Comcast, providing unique content encourages people to choose their pipes over competing services.

Of course, the Internet set the stage for change. On the Internet, the pipe “ends” now become porous, accessible to anyone who cares to connect. Accordingly, content owners are free to establish direct relationships with customers while the pipe has little or no control.

Naturally, the pipes don’t like this. Witness the ongoing debate over Net Neutrality. But the cat is out of the bag. Given a taste of the open forest, consumers will not accept a walled garden, no matter how well tended. The pipe’s last gasp attempt to retain dominance as they have known it is doomed to fail (if it ever gets off the ground). For Exhibit 1, simply look to Comcast. On the surface, they are acting like any rational content owner would. But Comcast’s move makes it plain that the die is cast. If a major pipe like Comcast feels the need to reach beyond the confines of its own network, it’s a good sign that they see the writing on the wall.

Does that mean that the pipes are just dumb conveyors of content? Not at all. But it does mean that their role will change dramatically. And those that recognize and embrace this role early on will reap the largest rewards. Score one for Comcast.