Skype moves into the Asterisk IP-PBX

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Last month Skype announced an agreement with Digium, the primary developer of the asterisk open-source IP-PBX software, to enable Skype from Asterisk. What this means is that one could make skype calls, even long distance and International telephone calls, from your office office phone as well as receive skype calls on your office phone. The initial versions will only support voice, with video support to be supported in the future.

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5 reasons why VoIP providers will go Bust

Recent news has highlighted that VoIP service provider SunRocket has gone bust. This is no case of bad management – more and more VoIP providers will fall off the face of the earth in the coming months and years.

Before getting into the why and the who, let’s look at the different types of VoIP providers. Pure Play VoIP providers are those that provide VoIP via an adaptor to “bring-your-own-broadband” customers. Examples are Vonage, Packet8, SunRocket, Lingo, Netzero, Packet8, and Earthlink. PC-Centric VoIP providers are those that provide VoIP on PC platforms, typically as an extension to an IM client. Examples are Internet portal and PC messaging providers such as MSN Messenger, Yahoo! Messenger, AOL, Skype, and Google Talk. Facilities-based VoIP providers are RBOCs (the primary Local Phone companies) and Cable MSOs such as AT&T CallVantage, Verizon VoiceWing, Comcast Digital Voice, and Time Warner Digital Voice.

Being a Pure Play VoIP provider is tough, for the following reasons:

  1. Low barriers to Entry – It is very easy to become a VoIP provider. With an IP-PBX such as Asterisk, a bunch of T1 lines, call termination agreements, an authentication server, a web server for user management, software, anyone can start a VoIP service. As a result, there are many VoIP providers in the market, leading to much competition.
  2. High Customer Acquisition Costs – As easy as it is to become a VoIP provider, getting customers is a difficult task. A lot of people don’t know the company or have reservations about VoIP. Second, Pure Play VoIP providers have no brand recognition or trust relationships with customers. As a result, they have to market heavily to get customers. In contrast, PC-Centric VoIP providers can leverage their huge user base to gain a foothold in VoIP. For example, AOL, Yahoo, and MSN simply leveraged their IM customer base by adding VoIP to IM clients and by promoting it on their web properties. Likewise, facilities-based VoIP providers have access to a huge customer base that they can market at low-cost.
  3. Lack of bundled service – This is where Pure Play VoIP providers are hit the hardest and the reason why Pure Plays will sink while Facilities-based and PC-centric providers thrive. Facilities-based VoIP providers such as AT&T and Verizon already have already have voice, video, data/Internet plays so they are able to offer bundled services with VoIP as an add-on. Likewise, Cable MSOs have video and data/Internet plays, and can provide VoIP/voice as an add-on in a bundle of services.
  4. Expanding scope of PC-Centric VoIP providers – not only are new players joining the VoIP bandwagon, but existing PC-Centric VoIP providers are expanding into the Pure Play VoIP providers’ turf. Skype used to be only on the computer, but is creating an ecosystem of cordless phones, WiFi phones and gateways, to go beyond the PC.
  5. New Game-changers: IP-PBXs are entering the home, especially open-source software such as Asterisk that can be loaded on any computer and you can connect a traditional POTS phone to it.

All these reasons point to a gloomy future for Pure Play VoIP providers. Now let’s look at how these providers compare in terms of market share.

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As this dated market share report on from Telephia shows, only Vonage has significant market share. The small players will find it very hard to survive because they don’t have enough scale. VoIP has high gross margins (low incremental cost of service), but to make money when fixed costs are relatively high very high, one needs a lot of customers. If customer acquisition costs are too high, which it likely is for these small unknown pure-play VoIP providers, then no amount of customers are going to help you – eventually you will run out of money. I believe this is exactly what happened to SunRocket.

The future is bleak for these pure play VoIP providers with little market share – they will be acquired or fade into obscurity soon. Ironically, Vonage, the pure-play VoIP provider in the news for patent infringement, may be the unlikely survivor.

Mandriva Linux says no Patent deal with Microsoft

Mandriva, the company formerly known as Mandrakesoft, that publishes the Mandriva GNU/Linux operating system says on a posting on the company blog by CEO François Bancilhon that there will be no cross-licensing pact with Microsoft. Mandriva has offices in the U.S., France, and Brazil and sells in more than 140 countries through dedicated channels and through the the company online store.

Novell, Xandros and Linspire have so far signed patent related deals with Microsoft, particularly after Microsoft claimed that Linux and other Free and Open Source Software (FOSS) violate 235 Microsoft patents. With this announcement Mandriva becomes the 3rd major Linux company, after Ubuntu and Red Hat, to reject a cross-licensing deal with Microsoft. In terms of Microsoft’s agreements with Linux providers, now it’s 3-3.

One big reason Red Hat, Ubuntu, and now Mandriva, has rejected patent licensing with Microsoft is that Microsoft has never identified the patents; Without evidence of infringement, infringers (and even criminals) are ‘Innocent till Proven Guilty’. To Quote:

So it seems like a thinly veiled attempt to send a signal to the FOSS community to line up and drop their pants to Microsoft, or rather to find out the reaction from the open source community (including large enterprises that use both Microsoft and Linux computers).

Mandriva, on the other hand, has even better reasons not to strike a deal with the arch-enemy. Mandriva’s biggest market is in the Europe, and the European Patent Convention of 1973 doesn’t recognize software patents. It’s unlikely that Microsoft will risk a patent infringement claim in Europe.

Is Mandriva, standing up to Microsoft, or is this a good publicity ploy?

Openads to focus on much needed features with $5 million investment

Openads, which offers open source ad server software for Web sites to manage their online ad campaigns, is a 6 month old company that spun out of London based Unanimis. While Openads itself is only 6 months old, the open source ad server software its developing is based on open-source phpAdsNew, which has existed since 1999. Openads will make money by layering services on top of the core software.

Openads is a very popular ad server with 25,000 publishers on 100,000 sites in 140 different countries and in 20 languages. Openads has approximately 30 ad networks. Apparently, this open-source ad server delivers 60-100 billion page views a month, compared to industry-leader DoubleClick’s 300 billion.

More importantly, Openads just closed a $5 million Series A round led by Index Ventures (who also funded Skype, MySQL, and Zend), with participation from First Round Capital, Mangrove Capital Partners, and O’Reilly AlphaTech Ventures.

With this round of venture funding, Openads will be able to hire a core team of developers and enable important features such as PayPal integration and Self Sign-up that users have been requesting for a while but weren’t the focus before the spin off.

Openads is democratizing the ad network, where any website or blog can host the ad server and serve adds, rather than a few companies (aka Google, Yahoo! and Microsoft) hosting adds to websites and blogs.

$5 million wont be enough to take Google head-on, but it’s a good start!

Is Microsoft’s patent claims a real threat to open source?

Microsoft claims that Free and Open Source Software (FOSS) like Linux, which runs a big chunk of corporate America, violates 235 of its patents. In a recent interview with Fortune, Microsoft General Counsel Brad Smith and licensing chief Horacio Gutierrez alleged that FOSS infringes on no fewer than 235 Microsoft patents.

According to Fortune, they further allege that the Linux kernel, which is the brain behind the Linux system and the core component common to all Linux variants, violates 42 Microsoft patents, while its user interface and other design elements infringe on a further 65. OpenOffice.org, the open source alternative to the Microsoft Office Suite, is accused of infringing 45, e-mail programs of violating 15, and other software programs/apps of infringing on 68 Microsoft patents.

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