October, 2006: It seems that as the web is growing there are more and more opportunities for the ISP to grow their business and find new revenue opportunities.  This is good news as it shows that a creative ISP can grow an entire new business model beyond the voice, video and data “triple play”.   I believe that this new area of opportunities will be hosting and providing complete Enterprise 2.0 solutions to businesses.

So, what are Enterprise 2.0 applications?  According to Harvard Business School's Andrew McAfee they use freeform, emergent, social software to enable ad hoc collaboration.  McAfee's work essentially applies and combines many of the key Web 2.0 concepts of social software, user generated content, and discoverability via search to the workplace. Given the popularity of these things out on the Web, a number of companies have begun to seriously consider his ideas.  Some of them have even begun building products labeled as "Enterprise 2.0" solutions and we may be witnessing this as part of a larger trend of moving the consumer world of Web 2.0 into the enterprise. 

According to McAfee modern Web 2.0 software (at least the successful ones) introduces ideas that deal with classic user adoption challenges that enterprise software tends not to directly address.  In particular, that despite what they're given to use, users "vote with their feet" and prefer software tools that are simplest, most effective, and most familiar. 

Key to this discussion is that unlike the Web, users tend to have very few software options in the enterprise and are usually prescribed the tools to use to get their work done.  And when faced with a dizzying array of features and capabilities in their shiny new, sophisticated enterprise IT systems, they tend to default to the tools that are easiest for them, over which they have the most control, and are most familiar with.  These "comfort apps" are things like plain old e-mail and Microsoft Office.

The fact is, most procedures in the often bureaucratic world of business are seeking specific predefined outcomes that are often driven to completion without measurement for effect or optimization.  For example, software must have the features - and only the features - laid out in the original requirements list; processes must have the same repeatable, measurable results each and every time; and budgeted activities should generate only what was intended from the outset, with little expectation that significant unexpected results will occur and need to be managed, much less exploited.

Yet it seems clearer these days that highly general purpose software like simple e-mail, blogs, wikis, and other social software can enable and form the foundation of almost uncounted open ended and adaptable collaboration scenarios.  A real-world example of effective, useful, truly emergent collaboration is last year's PeopleFinder project (aka KatrinaList)  and shows the real potential that can be tapped if - and only if - you have seeded your organization with these tools and found a way to make them the easiest, default choice for the workers in an organization

Does all this mean we're challenged for techniques to solicit contributions and emergent output from our workers?  Very likely; getting workers to move much of their work from private, undiscoverable tools to social, public, freeform tools will undoubtedly be a challenge; and ironically a challenge that most organizations won't be likely to take on without knowing the outcomes. Several things are clear from this, and I hope the diagram above shows this well.  One is that traditional enterprise software development processes have probably continued to impose too much control and predefinition in the two major stages of the software lifecycle, the first being the creation and/or procurement of software, and second in its actual adoption and use in the organization.  Like agile software development - and to a greater extent Web 2.0 software development techniques in general - has shown us that lack of active, end-user driven feedback loops results in software that just doesn't do what is needed and doesn't evolve gracefully when the local landscape inevitably does.

The second thing that seems apparent is that there is little to no software competition within the enterprise.  This is very different from the Web where users will flock to the easiest, most effective tools given good options that number in the dozens - and often hundreds — of potential, easy-to-switch-to solutions (think about why you use a given Web client for e-mail.)  Enterprises that don't learn from the co-evolution process of development that many successful Web 2.0 sites are using to "find" the right set of features and capabilities are likely acquiring software that few users will find useful or effective.  This may be the biggest legacy that McAfee's work gives us; that emergent, social software results in:

1) Richer, reusable information ecologies in our organizations ala the Web, and

2) A workable framework for co-developed situational software based on social software platforms that can readily adapt to what users need at a given point in time.

I have been asked by various readers of my column what are some of the new applications that an ISP can get involved with and create new and innovative revenue opportunities from - I recommend you watch the trends of Web 2.0!

October, 2006: The rise of Skype and other VoIP services means nothing less than the death of the traditional telephone business, established over a century ago. Skype is merely the most visible manifestation of a dramatic shift in the telecoms industry, as voice calling becomes just another data service delivered via high-speed internet connections. Skype, which has over 100m users, has received the most attention, but other firms routing calls partially or entirely over the internet have also signed up millions of customers. This is a huge opportunity for the ISP to pick up some of the revenues that are left over from the dying traditional Telco voice business.  VoIP to sound good and be crystal clear requires some amount of network connection quality and minimized latencies. If you have been reading my previous articles, this is an opportunity for the ISP to charge a little extra for this service.  That’s a lot more then the Telco’s will be able to do, read on…

The ability to make free or almost-free calls over a fast internet connection fatally undermines the existing pricing model for telephony. That means not just the end of distance and time-based pricing - it also means the slow death of the trillion-dollar voice telephony market, as the marginal price of making phone calls heads inevitably downwards.

VoIP makes possible more than just lower prices, however. It also means that, provided you have a broadband connection, you can choose from a number of providers of VoIP telephony and related add-on services, such as voicemail, conference calling or video. Many providers allow a VoIP account to be associated with a traditional telephone number - or with multiple numbers. So you can associate a San Francisco number, a New York number and a London number with your computer or VoIP phone—and then be reached via a local call by anyone in any of those cities.

Furthermore, your phone (or computer) will ring wherever you are in the world, as soon as it is plugged into the internet. So you can take your Madrid number with you to Mumbai, or your San Francisco number to Shanghai. Skype and other VoIP services, in other words, are leading to lower prices, more choice and greater flexibility. It is great news for consumers - but terrible for Telco operators.

As is always the case with a disruptive technology, the incumbents it threatens are dividing into those who are trying to block the new technology in the hope that it will simply go away, and those who are moving to embrace it even though it undermines their existing businesses. Since VoIP will cause revenue from voice calls to wither away, the most vulnerable operators are those that are most dependent on such revenue.

In particular, that means mobile operators, which have been struggling for years to get their subscribers to spend more on data services, but are still hugely dependent on voice. Worse, the very “third generation” (3G) networks that are supposed to provide future growth for these companies could now undermine them, because such networks make mobile VoIP possible too. Least vulnerable, by contrast, are those fixed-line operators that are now building new networks based on internet technology, which will enable such firms to benefit from the greater efficiency and lower cost of VoIP as well as new revenue generators such as IPTV.. While their voice revenues will slowly evaporate, they will then be well placed to offer fee-based add-on services over their new networks.

It is now no longer a question of whether VOIP will wipe out traditional telephony, but a question of how quickly it will do so. People in the industry are already talking about the day, perhaps only five years away, when telephony will be a free service offered as part of a bundle of services as an incentive to buy other things such as broadband access or pay-TV services. VoIP, in short, is completely reshaping the telecoms landscape. And that is why so many people have been making such a fuss over Skype - a small company, yes, but one that symbolizes a massive shift for a trillion-dollar industry.

Correction (May 2009):  These are now called "on top" services - wow things are happening just like I predicted!

In the last three weeks, as part of my Layers of Revenue series, I presented a content-driven business model for the broadband ISP.  I also emphasized that the key to the success of this model is for the ISP to completely “detach” from the traditional content business and focus on value-added services that support the functionality and applications that consumers want to see on the network.  What I mean by “detach from the content business” is to not position your company and your business as being a provider of just video, voice or data services which you charge for - that is what “content” is defined as today.  As a modern wireless “ISP” you now have the opportunity to charge for all kinds of value-added services on your network which “enable” the delivery of quality content to your customers. However, this does not mean that you should not participate in pure content revenue streams with content providers.  This is the topic of this week’s article – content partnerships.

The key difference in this approach is that as the ISP you do not charge your customers for content they will “pull down” over your network.  Instead you form partnerships with content providers and charge them a percentage for carrying their content on your network.  Now you have become a true channel partner for them and a way to market their content to the consumer.  Not all content providers will agree to form such partnerships; there is no worry here, because you can still get a revenue increase for the content by charging the consumer for an upgraded tier of network services (see my Layers of Revenue series of articles).

These partnerships can go even further if you start noticing a large uptake of content from a particular content source.  You could offer to cache the content locally on your servers for better performance and quality of service.  You could co-promote such content partners on your home pages available only to your subscribers.  This could continue and extend to partnerships with Application Service Providers who will deploy their apps on edge servers inside your particular network and so on.

In this model you continue being “detached” from the content providers in the sense that you are not charging for content or positioning your business as being part of it.  In my opinion this is the ISP business model that will prevail going forward.  It is important to customers that you do not discriminate and are preferential for particular content sources but more importantly it allows you as an ISP to stay on top of the ever changing world of new content and broadband applications.

This is the third and last article in the Layers of Revenue Series introducing to you my concept of how an ISP should organize their value proposition to the customer. Last week we got to the “meat” of the matter and discussed the various value-added services (layer-2 in my model) that an ISP can offer a broadband customer in order to improve performance of Internet applications and the growing amount of content out there.  We discussed how these value-added services can provide three key things for the broadband ISP model: 1) allow the ISP to up-sell the consumer on additional offerings,  2) Allow the ISP to function independently of the constantly changing world of new content and applications and, 3) differentiate themselves from broadband services provided by the traditional Telco or Cable provider.

Now let’s look at how we could position our new service offerings on the consumer broadband market and offer the different “tiers” of service.  Let’s begin by looking at our competition in the residential market in North America.  The average Cable operator offers broadband service for a flat fee of $45 per month.  This gets you 4Mbps of bandwidth, on a good day when the local network is not used very much.

Let’s now look at our new WiMax ISP’s offering that uses a content-driven approach to pricing.  Here is an example pricing model that could be offered to your customers and a way to communicate the various services to the consumer:

1.  Basic Internet Connectivity:

• Basic service (1.5Mbps): $19.95
  • Good for web browsing, email etc.
• Premium service (5Mbps): $39.95
  • Good for music downloads and basic lower resolution video.

2. Additional Services (added to the premium service):

• Telephony package: $9.95/month
  • Optimized performance for a telephony provider of your choice.
  • For best results we recommend Skype (free) or Vonage (special discounts available).
  • Optimized for clear calls to landlines.
• High-Def Video Package: $19.95/month
  • Optimized performance for streaming and downloading video content of your choice.
  • For best results we recommend Akimbo Systems or NetCast-HD.
  • (you could offer many other products under this category, like Media Center PC’s, IPTV hardware and services etc, all providing additional revenue streams).
• Security monitoring package: $9.95/month
  • Optimized service for in-home security systems, camera feed uploads etc.
  • Provides higher upload speeds for better camera performance when monitoring your home over the internet.

These are just examples of some of the services that could be offered as up-sell services to the consumer, there are many others that can be related to Multiplayer Online Games (MOGS) and others that may require performance tuning from the ISP to work better.  Since now all applications and content are running over IP networks, the opportunities for ISP’s are vast and changing all the time as new content is invented.  

There is a growing number of applications that require good bandwidth upstream from the consumer to the internet.  For example the SlingBox, security cameras, TV placeshifting, home servers etc. This is a huge untapped potential for an ISP!  The competition is offering very mediocre upstream performance averaging around 300kbs which seriously degrades the performance of these applications.  The great news for a new and emerging ISP is that it is mainly due to technical reasons.  Cable modems can’t provide a faster path upstream to the cable head-end.  This is a huge opportunity for broadband providers that do not have this technical limitation and could take advantage of this functionality by marketing it properly!

Next week I will talk about content partnerships and the huge opportunity in internet video and the emerging market of Media Center and Home Theater PC software.  It is time to start thinking of taking advantage of the video offerings being announced recently by iTunes, Amazon, Movielink and the like.  Make it Happen!

Last week I introduced our readers to the basic layout of the “Layers of Revenue” business model for a broadband ISP. I said that there are three primary layers in the model; (1) the broadband physical infrastructure, (2) ISP’s value-added services and (3) content.  I will not discuss the infrastructure layer in this series as that is basically the hardware implementation of your particular wireless or wired network.  The physical layer is interesting from the technical standpoint, especially to people deploying brand new WiMax networks, but I want to instead focus on the business model and the service offering for your customers.

Figure 1: Broadband ISP’s “value layers”.

This week I want to focus on Layer-2, the ISP’s value-added services. My basic premise behind the model was that the ISP becomes completely independent of the content they provide.  However, these value-added services will be dynamically selected by the ISP’s network in such a way as to establish an appropriate service mix (represented by the black lines in Figure-1) to support a high quality of service required for the particular content type requested by the user.  Furthermore, the customer’s perception of the ISP’s complete value proposition will be the combination of Layer-1, the physical network and Layer-2 the additional service provided on top of physical connectivity. 

Let’s now examine how this will work in the real world.  What I am suggesting is that the ISP starts “Tiering” the different capabilities of their network and charges differently for each Tier of service depending on a particular customer’s demand and the type of content they want to use on the network. Here are examples of the type of value-added services that are under full control of the ISP and can be added or removed or “throttled” to provide different Tiers or levels of service:

• Bandwidth (can be throttled).
• Latency to a particular destination on the internet (can be minimized).
• Packet prioritization for a particular web application.
• Content caching for a particular application or web destination (edge servers).
• POTS gateways for VoIP applications (improve call quality to old phones).
• On-line game caching servers.
• Many other’s to come with future applications…

As new applications become available they will all need some form of value-added service from the ISP’s network that will improve their performance and user perception of the quality of service offered by the ISP.  Today most ISPs do not offer any value-added services as I define them here.  All they provide is basic internet access, sometimes a choice of bandwidth, and all without any regard for the user’s experience with the different types of content available on the Internet.

This demand from web applications imposed on the ISP’s network presents an opportunity for the ISP to up-sell the customer on network configurations that will deliver the quality of service the applications need to function better.  The key is to position your service offerings in such a way that they are “driven” by the demands of the applications themselves.  What I mean is that now you can advertise your offerings based on the applications the customer wants to use on the network. You can now have a basic internet access package plus, a VoIP package, a Video package etc.  Your customers will now differentiate your services from the basic broadband service offered by competitors, Telco’s, Cable etc.  It’s no longer just basic broadband Internet access; it is now a complete service offering that supports the demand and quality of service for applications such as voice and video.

This model allows the ISP to re-coupe the additional investment required to support the demands of various web applications.  You now don’t have to worry about the next piece of functionality coming out from Skype or others and if it will threaten your telephony business, instead you partner with Skype for example, to see how you can deliver the best video performance for their new video calling service and up-sell the customer on this additional feature. It is very likely that the network upgrades you make will also work for another VoIP service like Vonage etc.   

Yes, I did say “partner” with the content providers.  Next week I will discuss examples of how you could charge for the different Tiers of services and we will talk about content partnerships that can enhance your business proposition.

Welcome to my new column from WiMax.com.  As part of a concerted effort to bring you unique and quality content on the site, we decided to start a weekly column that talks about what really matters at the end – the business of broadband!  Here I will discuss all aspects of running a wireless broadband business – we will cover business models, marketing strategies, politics and all other issues affecting you as a wireless ISP.  I want to make you think, I wan to challenge you! But, most importantly I want to help you chart a course through the dynamic landscape of dealing with changes in the broadband business.  One day voice is 80% of your revenue, and a few years later some brilliant guy from Sweden tells you that you should give it away for free and it is no different then HTML traffic -  How do I handle this?  How do I survive in the business of broadband?  So, let’s have some fun here, brainstorm and try to answer these questions – registered users are encouraged to provide feedback to this column.

Now to the good stuff – the first part of my “Layers of Revenue” series.  That’s right; you can have “layers” (or “tiers”) of revenue from your consumer (or commercial) ISP business without worrying about new disruptive technologies and what is the business model for a particular type of new content.  Broadband does not have to cost a fixed $19.95 per month to be competitive.  You can “up-sell” consumers on different tiers of services and still remain very attractive – how? Change the paradigm of how people look at your broadband service – focus on consumer experience and value perception!  By doing this you will be able to take advantage of all types of content the Internet offers today and in the future.  You want to charge $45 per month from most of your subscribers when the local incumbent Telco is charging $29.95?  You can, and you will see customers switching over from the Telco to your service offering. 

The Internet in general as well as Google, Skype and others alike are all contributing to a major change in how the consumer will perceive an ISP’s service offering.  The model I will propose does not exist today in its entirety except for a few cases where components of it have been deployed in countries other then the United States.  In my opinion, however, the model I describe below is going to be inevitable and a natural progression as the internet evolves as a service platform.  The main premise behind my “layered value” model is to separate the ISP’s primary business from all content!  The ISP should treat all content simply as TCP/IP traffic, no matter what it is; VoIP, Video, Web pages etc.  This approach is contrary to how all Telecom and Cable operators work today which have historically wedded themselves to particular types of content and have created dangerous dependencies on that content.

This week I will begin by defining the individual “layers” of my broadband business model.  The figure below illustrates the relationship between three primary layers of the model; (1) the broadband physical infrastructure, (2) ISP’s value-added services and (3) content.

In this model the ISP’s complete service offering consists of two layers; the physical infrastructure (wireless connections, wired connections etc) and the “Value-Added” services, but not the content layer.  The service or complete “pipe” as will be perceived by the customer has to include these two bottom layers in order for ISP’s to be able to innovate and differentiate themselves from the competition – and to charge more for the “pipes” they offer.  These value-added services will be dynamically selected by the ISP’s network in such a way as to establish an appropriate service mix (represented by the black lines) to support a high quality of service required for the particular content type requested by the user.  The technology exists today for networks to do this and enable particular services on a per-user, per-content basis.  Next week I will look at the different value-added services the ISP can offer to the subscriber.  There is a lot more of them then you think!

 I believe WiMax will enable a paradigm shift in the broadband industry that will change how people look at broadband and Internet connectivity in general.  This is because it will allow new ISP’s to bypass the incumbent Cable and Telco companies and introduce real competition in the broadband market space by offering truly differentiated services to the consumer.  The incumbent Telcos and Cable companies are fighting against net neutrality because they are not positioned properly in the market space and have made investments in the wrong technologies (in some cases anyway).  This is a result of their business history and also due to the internal conviction that they can control voice, video and web access - the key content desired by the consumer.  This status quo of today is changing fast mainly because the internet is getting faster and technologies like VoIP and IPTV disrupt the traditional value proposition of the incumbents.  

 A little about me,  I started in this space when I ended up at the helm of a wireless cable company (MMDS) at the age of 26.  That was a long time ago, but even then I quickly learned that I had to differentiate my business from the wired cable companies which I had to compete with.  We did some great things to achieve that, including convincing ShowTime (a premium channel in the U.S.) to lower their prices to the point where I could offer that channel on my basic lineup as well as prototyping the first data service over MMDS!  From running a wireless cable company I moved to digital TV software, including starting one of the first companies that provided end-to-end solutions for MHP - our European colleagues will know immediately what I am talking about here.  MHP became OCAP in the States and we are still waiting for its debut in this country.  These two software standards were designed to finally help deploy Interactive TV (iTV) to the masses. iTV did not become what we all hoped for – at the end consumers do not want to “interact” with their TV, it is a passive experience- we want to relax when watching TV.  Now I am part of a very interesting program at The University of Texas which deals with global technology commercialization.  We help technology startup companies around the world attract capital and bring their products to western markets. It is this international work that I hope will make this column even more interesting to our global audience.  In my work I travel a lot and see many varieties of wireless business models, I will share these ideas with you and discuss how different companies cope with their realities in different countries.