Keith Willetts Keith Willetts CEO - Mandarin

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Size doesn't matter, quality does

  • OK, so I really am the last person on the planet to get an iPhone. Didn't need one you see - had this HTC/ Microsoft brick that had everything that an iPhone had but it had 3G. OK, so the 3G iPhone has been out for a while, but well, what was the compelling reason to change?

    Never been an Apple aficionado, so apart from my 2 iPods, never had much to do with their products. But I have to say, what a gizmo! From the super cool packaging to the super cool look feel and the super cool user interface, the whole thing is just, well, cool. Mega cool is their freebie plug-in called Shazam - you hold the iPhone to a radio, it listens to a song playing, tells you what the song is and then lets you download it straight to your phone. How integrated is that!

    I suspect that the iPhone has nearly all the same chips in it that the HTC phone has but the way it's put together, they way it is so intuitive to use, the way it just feels so nice, it exudes quality. And as Mr. Jobs bank balance will attest, quality equals premium price equals more personal jet aircraft!

    So with that in mind I was musing on the fate of VOIP players. A recent article in the (London) Times quoted a report by British communications regulator Ofcom stating that the percentage of adults using VoIP was just 14 percent in the first quarter of 2008 down from a peak of 20 percent in 2006.

    So what's going on? Wasn't VOIP supposed to wipe the floor with conventional voice calls? I guess the evil empire struck back after all with the telcos putting a nail into VoIP's coffin rather than the other way round. How did they do that? Or maybe they didn't - maybe VOIP just did for itself by being inadequate for the task.

    Well maybe a bit of both. After all, most circuit-switched voice traffic is running on platforms that are long since fully depreciated and service providers can pretty much price calls how they want because other than using a bit of electricity and labor to run them, the capital costs of these switches have largely been written off.

    But the real issue is quality - still a concern with VoIP even after all this time. With a circuit switched approach, you get your very own virtual path from end-end but with VoIP, your call is going into this big cloud with no packet priority whatsoever fighting all those video downloads that are hogging the net. Voice is real-time and real-time call delay and jitter can really screw things up, but then the Bell- heads told the Net-heads that but they didn't listen.

    And then there's the convenience factor - with VoIP just isn't there yet. When you do PC-to-PC calling you're anchored to your desk. And if one party is coming into the call over a raw IP connection or there's a mix of people on the traditional voice network and IP, all bets are off on what kind of call quality you'll end up with.

    So put simply, VoIP just doesn't have the price advantage over traditional calling to offset the disadvantages and it just gets too hard to mess with after a while on basic VOIP calls.

    The real issue isn't with VOIP as a technology - digitizing and packetizing voice calls, just like any other traffic - video, e-mail and so on is just fine provided you know what you are doing and engineer the network to cope. The digital backbones of virtually every telco are based on IP these days- even circuit-switched calls. The core of those calls is all fiber-based packetized technology, but managed and dimensioned in a way that retains call quality.

    It's really only the last mile where there's a discrepancy and where analogue still holds sway. Most mobile calls and the vast majority of fixed line calls still get to their central office in an analogue format, before getting digitized to get to the other side of the world, and then reconstituted on the phone at the other end. Using the VOIP as a bypass means that although the call is digital from end-end, but it also gets routed in with all of the other internet traffic and takes it chances on getting delayed with all of those video downloads that you neighbor is doing.

    What it comes down to is that quality does make a difference despite all of those pundits who say 'it's a new paradigm" and the world has changed. People will sacrifice quality early in a new product's lifecycle because it may have a utility value that outweighs the problems - mobile phones being a classic example - the early bad quality was offset by the value of mobility. But VOIP services don't have any offsetting values other than price, which service providers have squeezed.

    Voice is still a killer app and not just another data stream. Without the right engineering on a fully managed digital infrastructure, it's unusable and that's what ungroomed raw internet connections give you today.

    The notable exception to this is Skype, of which I'm a fan and pleased that Skype is now available for my shiny new iPhone! Skype to Skype calls are in hi-fi quality which is great and something way ahead of telcos and because its uses a novel peer-peer approaches, it overcomes many of the poor quality problems of ungroomed VOIP calls. That has allowed Skype to capture 8% of all international calls traffic according to TeleGeography, but probably still a long, long way from being worth the $2 billion plus eBay paid for it.

    Rumor is it's on the block and I hope somebody buys it who knows what to do with it.

    What a great bolt-on to Facebook!

    Keith Willetts
    About Keith Willetts Keith Willetts works as CEO at Mandarin
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