The Future of IP. As value shifts from connectivity to content

Transcription

1 The Future of IP As value shifts from connectivity to content Martin J. Steinmann Venture Partner Vesbridge Partners, LLC March 15, 2005

2 The Stupid Network is a Stupid Idea Stupid Networks lead to stupid and unsustainable Business Models Stupid Networks only have price per bit as differentiation Which leads to rapid commoditization Which drives profitability out of all competitors Which makes the business unattractive and un-finance-able Which leads to new monopolies The Rise of the Stupid Network by David Isenberg, AT&T, originally published by Computer Telephony August THE FUTURE OF IP 2

3 IP Broadband is about Content Services ESTABLISHMENT GROWTH MATURITY Basic Access No customer loyalty Price led marketing No differentiation Still bandwidth limited Traditional model Carrier owned CHASM Online Music IP Video (VoD) (N-PVR) Personalized TV (IPTV) IP Voice (VoIP) Connected home Competitive differentiation Historically as industries transform players change Regulator should maximize value to consumers THE FUTURE OF IP 3

4 Who Owns the Content? Entertainment industry consists of seven major players Sony Pictures Disney Metro Goldwyn Meyer Universal Warner Brothers 20 th Century FOX Paramount Because of fear of piracy content is increasingly difficult to distribute Sony, Electronic Arts and Nintendo own gaming Google owns search Google, Yahoo and MSN own AOL and Yahoo own IM Skype owns P2P telephony And, carriers and MSOs own access THE FUTURE OF IP 4

5 Yes, but SIP Telephony over Broadband? It is absolutely clear that there will never again be a successful and profitable service based on voice. Voice is dead as a revenue stream and anybody who does not see that is delusional. In the future, by 2007, there will be no possibility of earning any incremental revenue from wireline voice Tom Nolle, President, CIMI Corporation, February 2004 THE FUTURE OF IP 5

6 Hosted Voice: A New World Order TDM: Carriers own Voice A hosted service TCP / IP Intelligence in the network allows service provider full control of end-user s use of circuits Service provider creates, offers, and controls all services Broadband access is always on Applications communicate using IP packets Low technical & capital barriers to market entry Voice is not about content its about connectivity THE FUTURE OF IP 6

7 VoIP IS changing our industry Service providers struggle in search of value above the bit level QoS to the rescue: The secret sauce of managed networks will customers be willing to pay will it make a difference? Global competition: Services as IT applications offered by anyone to anyone and anywhere Significantly lower cost of entry: PC server vs. Class 5 switch Accelerating speed of innovation: The thing that gets Venture Capitalists going THE FUTURE OF IP 7

8 Predictions Decline in voice revenue will accelerate faster than service providers will be able to reduce cost New entrants with big brands (e.g. Google, Yahoo, AOL) will write the next chapter of Telecom history Pace of innovation will be faster at the edge (new services based on IT applications) than in the core (network gets smarter) Lowest risk investment for incumbents: Last mile fiber (FTTH) The regulator will not allow creative filtering The network will get smart eventually THE FUTURE OF IP 8

9 The Network as an Operating System Microsoft is a monopoly Windows is an eco-system Telecommunications industry moves to an open service creation environment enabling an eco-system of service delivery partners Virtual Network Operators (MVNO, VVNO, etc.) Carriers in the hosting business New service providers with only IT assets and global presence Simplicity is the key factor that drives cost reduction Connectivity is like compute power a commodity THE FUTURE OF IP 9

10 The Industry s Need for a Digital Identity People, devices and sessions need to be identified Internet today is a hostile environment which limits its potential Eventually every user and every device will need a token to represent its identity Identity and presence is the new broadband dial tone Federation of identity and presence information Simple consumer token for identity with no click activation Common directory service: New definition of owning a customer Security industry is still immature Security industry treats symptoms and not root cause: It s not if you get hacked, but when Need for trusted computing platform, reliable authentication, and granular authorization THE FUTURE OF IP 10

11 Crisis: Silos of Identity THE FUTURE OF IP 11

12 If George Orwell had known The World is Connected Who knows what about who? How to correct wrong information? How do we live in a world of total connectivity? Lexis Nexis says hackers commandeered one of its databases, gaining access to the personal files of as many as 32,000 people. CBS News, 3/10/05 ChoicePoint Inc., said records on 145,000 individuals were released to con artists posing as companies with legitimate use for the data. LA Times, 3/5/05 THE FUTURE OF IP 12

13 The Content Revolution Music industry carefully switches to a new business model Number of downloaded singles larger than disks in the UK today Are consumers sufficiently educated? DRM complicates the life of consumers RealNetworks Harmony CopyPod Consumers demand that purchased content plays on all their devices, across their home network, in their car, and using different formats Content owners fear piracy: One million consumers pirating one song is equally bad as one pirate distributing a million illegal copies Efforts by hackers to circumvent are not far behind (it is very difficult to secure an autonomous system) Consumer Electronics Industry suffers the most pain The vision of a digital home does not unfold with content that is locked into vertical silos and DRM that changes all the time The Hymn Project THE FUTURE OF IP 13

14 Peer-to-Peer Content Distribution Traditional Online Content Store: itunes Music Service (still) looses money Price of 99c per song: 65c to content owner, operating cost 35c, profit nil Peer-to-Peer: Peer-to-Peer is the cheaper and more reliable content distribution technology. It auto-backups and auto-routes using the users infrastructure Bit-Torrnet efficiently distributes large files P2P today is server-less and increasingly employs technologies that make users anonymous P2P is not limited to a particular port and deep packet inspection would have to adapt fast in order to keep up with the scene s change of protocol Encryption makes deep packet inspection even harder Can P2P be exploited legally? THE FUTURE OF IP 14

15 The Evolution of P2P Technology 1 st Generation: Napster 2 nd Generation: Kazaa (server based, off-shore, lots of corrupted content, law suits) 3 rd Generation: Gnutella, Grokster (LimeWire, BearShare) (many distributed supernodes, self-healing and configuring) 4 th Generation: Overnet, Bit-Torrent, edonkey (emule) (even more distributed, optimized for large files) 5 th Generation: In development (anonymous downloading, encryption) anonymization.net 6 th Generation: Streaming & taping (e.g. shoutcast) Alternative: Private P2P networks THE FUTURE OF IP 15

16 The Television Revolution Transition from broadcast media to individualized media Broadcast TV is really bad PVR is the fastest growing category (20% penetration by 2006 in US) TV Advertisment on the decline time-shift users skip more and more of the ads Individualized Content: Video on Demand / News on Demand Multi-party games Multi-room PVR / DVR Network PVR THE FUTURE OF IP 16

17 In Summary Content is king customers are paying for individualized and properly packaged content Voice: Content is owned by speaker and cannot be sold Tricks won t work The regulator will not tolerate it Consumers will spend more and not less on telecommunications & entertainment services Innovation is accelerating Ubiquitous broadband IP connectivity opens new possibilities THE FUTURE OF IP 17

18 THANK YOU Martin J Steinmann Venture Partner Vesbridge Partners, LLC March 15, 2005