Shirky: VoIP Plan A and Plan B

Shirky tells it like it is: VoIP (like all Internet applications) is 
just a convention, just a shared specification describing how to 
interpret bits.

There is no spoon.

Seth

-----Original Message-----
From: [email protected]
Date: Sat, 28 Feb 2004 17:43:18 -0500
Subject: [NEC] #3.2 VoIP Plan A and Plan B

NEC @ Shirky.com, a mailing list about Networks, Economics, and Culture

           Published periodically / #3.2 / February 27, 2004 
               Subscribe at http://shirky.com/nec.html
			       Archived at http://shirky.com
          Social Software weblog at http://corante.com/many/

In this issue:

 - Introduction
 - Essay I: VoIP- Plan A and Plan B
     Also at http://www.shirky.com/writings/voip_a_b.html
 - Essay II: Exiting Deanspace 
     Full text at 
    
http://www.corante.com/many/archives/2004/02/03/exiting_deanspace.php

* Introduction =======================================================

Feb 27, this month's issue in under the wire, but late for the best
possible reason: Marina Charlotte Zelleke Shirky arrived in the middle
of the month, in fine form -- mother and child are doing fine. (Though
mother and father are a bit sleep-deprived, and father is behind on
his email...)

VoIP this month, presented as a struggle between firms like Vonage
that are trying to use VoIP to emulate the current phone system, vs
firms like skype that are trying to use VoIP to replace it.

I also include a pointer to a piece called "Exiting Deanspace", which
I wrote as a follow-up to last month's "Is Social Software Bad for the
Dean Campaign?"

-clay

* Essay I ============================================================

VoIP - Plan A vs Plan B
  http://www.shirky.com/writings/voip_a_b.html

2003 was a remarkable year in the US for voice over the internet
(VoIP). If you needed a label for the events of the year, "Collapse of
Denial" would be a good one -- after a long period of relative
inaction, the FCC and the state regulators are suddenly pushing hard
for a regulatory framework. The question is no longer whether voice is
going to become an internet application, but when.

"When" could still be a very long time, however. The incumbent local
phone companies -- Verizon, SBC, BellSouth and Qwest -- have various
degrees of interest in VoIP, but are loathe to embrace it quickly or
completely, because doing so means admitting to everyone --
shareholders, regulators, customers -- that both monopoly control and
artificially high voice revenues are going away. (The fact that this
is true does not much lessen the pain of saying so.) As a result, they
will likely try to convince regulatory agencies, both the FCC and the
states', to burden competitive VoIP firms like Vonage with additional
costs and rules, while delaying their own offerings.

Complicating this de facto Plan A, however, is the fact that VoIP
isn't a service, it's just a set of protocols, meaning that
competitors don't have to set themselves up as upstart phone companies
to deploy VoIP. If Plan A is "Replace the phone system slowly and from
within," Plan B is far more radical: "Replace the phone system.
Period."

Where Vonage and a number of the other VoIP startups present
themselves to the customer as phone companies, emulating the
incumbents they are challenging, you can think of Plan B as the Skype
plan. Skype isn't taking on the trappings of a phone company; instead,
it offers free two-way voice conversations over the internet (they
aren't phone calls, for the obvious reason) between users who have
downloaded and installed software onto their computer. (Other versions
of Plan B include instant messaging clients that let users talk, not
just type, and software like shtoom, a set of VoIP tools for the
Python programming language.)

The Plan B strategy is simple: "Familiarity is the enemy of progress.
Forget backwards compatibility, and concentrate on offering services
the traditional phone companies can't touch." For example, Skype
recently added user-defined conference calling, a kind of cross
between call waiting and conference calling, so that when someone
calls while you're on the phone, you can simply turn it into a
three-way call, a pattern more like joining a conversation at a party
than today's cumbersome conference calling.

Where Plan A is a fight between incumbent and upstart phone companies,
Plan B says that we no more need a phone company than we need a text
company. Email and weblogs and IM all use text -- why not use voice in
a similar variety of applications, and with a similar lack of
commercial bottleneck?

Plan A and Plan B are caricatures, of course. Vonage is experimenting
with un-phone-like features like mailing out voicemail messages as
audio file attachments, while Skype is talking about ways of
interfacing with the traditional phone network. Nevertheless, the
tension between the two plans is real: modification or replacement of
the current phone system. The litmus test is emphasis -- Plan A
emphasizes for-fee calls to ordinary telephones, with free
computer-to-computer calls presented as a bonus, while Plan B
emphasizes free calls as the main event. And much of how VoIP unfolds
will have to do with regulations written in 2004.

- The End of the Three-Part Deal

The official tradeoff in current telecom regulation is service
guarantees in return for monopoly control. Over the decades, though, a
third part of the bargain has arisen. Phone companies tolerated high
taxation as well, in part because it guaranteed continued freedom from
competition. As a result, telephony is treated as a vice instead of an
essential service -- the taxes and surcharges on a phone bill are more
in line with the markup on alcohol and tobacco than with gas or air
travel.

However, monopoly control, essential for the current bargain, is
ending. The cumulative threats of competitive local phone companies,
the decrease of second lines due to DSL and cellphone use, and now
VoIP have made the old deal unsustainable. The rise of a competitive
market seems conceptually simple, but most parts of the US have had a
phone monopoly for longer than they've had indoor plumbing, so the
possibility of phone service without the incumbent phone company is
hard for man observers to understand.

Even now, 20 years after the breakup of Ma Bell, some commentators
have criticized VoIP by noting that the phone company often provides
the high-speed DSL service that carries the VoIP traffic. "Isn't VoIP
simply a parasite technology?" goes this line of thought, on the
assumption that by undermining inflated voice revenues, VoIP will
destroy the DSL business as well.

This question makes no sense in a market economy. With railroad
bankruptcies in the 1940s, no one thought that the tracks would be
ripped up and sold for scrap. Similarly, the question of whether the
incumbent phone companies can survive if VoIP pops the bubble of voice
revenues is separate from the question of whether the wires in the
ground will continue to exist. Someone will sell data transmission
over copper wires, but there's no reason it has to be the existing
phone companies, in the same way that someone still runs trains from
St. Louis to Chicago, but it isn't the B&O Railroad anymore.

- Plan B: Saving Plan A?

With their monopoly ending, incumbents have no choice but to embrace
VoIP someday, because of the cost savings and the superior
flexibility. However, they may succeed in significantly delaying that
someday with the strategy of attacking their competitors through the
regulatory system, while slowing their own deployment of the
technology.

Plan B, however, is resistant to this strategy, because while it
creates the same value as a phone call, it does so without any of the
mechanics that regulation attaches to. No dialing, no phone numbers,
no _phones_ even, and, most ominously for the incumbents, no charge to
the end user. Vonage may be competition, but they don't undermine the
idea of charging the user the way Skype or Yahoo Instant Messenger do.

If you had to bet on the impulses of the phone companies and state
regulators, your bookie wouldn't raise an eyebrow if you put
everything on their trying to kill every Plan A company in sight.
We've seen this story before, as when the music industry, unable to
grasp the profundity of a technological change, killed Napster rather
than trying to bargain. This in turn sent the users to Kazaa and
Gnutella. The RIAA has now spent far more time, energy and money going
after these services than they ever did on Napster, with distinctly
less decisive results.

Similarly, the phone companies are overestimating the threat of Vonage
(which also wants to charge users to talk to one another) and
underestimating the threat of Skype (which doesn't.) And yet if they
succeed in killing off their Plan A competitors, they will strengthen
the far more radical challenge from Plan B.

This is the big wild card of 2004. It's clear what the consumers want
-- the maximum amount of experimentation with all sorts of models, and
not being forced to choose between new features and backwards
compatibility. However, telephony regulation is notoriously resistant
to user demands -- neither the FCC nor state regulators are elected,
and neither group is very responsive to citizen action.

The only thing that might save Plan A from death by delay is evidence
that users are adopting Plan B in large numbers, using the internet
for voice applications completely outside the framework of telephony
as we've known it for more than a century. We should all hope that
happens, because if wide adoption of Plan B convinces the regulators
and incumbents to acclerate their VoIP offerings, the users
benefit. And if it doesn't, Plan B will be all we get, so we may as
well start experimenting with it now.

* Essay II ============================================================

Exiting Deanspace
  Full text at
  http://www.corante.com/many/archives/2004/02/03/exiting_deanspace.php

I wanted to wait til the February 3rd polls opened to post this,
because I wanted it to be a post-mortem and not a vivisection. What
follows is a long musing on the Dean campaigns use of internet tools,
but it has a short thesis: the hard thing to explain is not how the
Dean campaign blew such a huge lead, but rather why we ever thought
that lead actually existed. Deans campaign didnt just fail, it
dissolved on contact with reality.

The answer, I think, is that we talked ourselves, but not the voters,
into believing. And I think the way the campaign was organized helped
inflate and sustain that bubble of belief, right up to the moment that
the voters arrived.

Take this as an early entry in a conversation everyone who was
watching Deans use of the internet should contribute to: what went
right? what went wrong? and what to do differently next time? We
should do this now because next time still includes a passel of
primaries and then, most importantly, the general election. If we have
the conversation now, we wont have to wait til the few uncontested
House races of 2006 to see if we learned anything.

* End
====================================================================

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2004, Clay Shirky
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