P2P VoIP: A Black Hole for Media, Telecom

Change always has come quickly to those adversely affected by it and gently to those who benefit from it. There are two distinct classes of change, the voluntary and the inevitable. Voluntary change is a controlled process, usually scheduled, imposed and charged in accordance with a progressive implementation. Inevitable change is disruptive, happening despite existing structures, schemes and balances of power.

The subject of change, although in this case describing technology, is equally applicable to a political study and in many ways overlaps into the political framework of today’s media and telecommunication industries where the balance of power is no less political than in the time of Bismarck or Richelieu.

Spurred by the wrangling of media giants against two tiny peer-to-peer (P2P) companies, VoIP is now debated at the highest levels of government and judiciary. Cases being fought in the high court of appeals soon will be entrenched in the echelons of Congress. Laws are adapting, industries are reshaping and billions of dollars of assumed revenue are disappearing overnight.

The FCC’s political decision to divide AT&T is a recent example of voluntary change. Under the FCC’s guidance, division was promoted, scheduled and controlled. Unlike the change we’re witnessing today, dividing AT&T caused little or no harm and provided a well-engineered boost to the existing industry. Symbolically, it represents little more than the end of AT&T’s history as an independent company. Today’s change is more readily comparable to the collapse of a star into a black hole. What began as a blip on the radar screen, a small group of hackers hijacking AT&T service networks with tone-generating devices, has become an undetectable black hole with the potential to swallow the entire industry.

P2P, VoIP and P2P VoIP are the black hole into which the media and telecommunication industries will collapse. As with any celestial collapse, the star will be compressed and ultimately transformed beyond recognition. Appeals to government and judiciary will have the same outcome as a real star appealing to its own planetary senates for protection from the disruptive behavior of its neighboring black hole.

What legislative outcome do they really want?

Should all P2P technology companies be banned? Of course not, they cry, but what other solution can protect them from the inevitability of today’s change?

It is possible to legislate on any subject, but two fundamental questions must be asked of each legislation: Is the law in the consumer’s best interest and is there a viable way of enforcing it? To both of these, present legislative suggestions answer with a resounding “no.” One negative answer is plenty, but I would like to explain the newer, second negative in more detail: If enforcement legislation was passed, the counter-response would be creation of an online, open-source “nobody’s code” that millions of independent users could perfect and propagate globally. If the next step is to put millions behind bars, the legislation naturally renders itself redundant.

Can a star really fight the pull of a black hole?

If Britney Spears stops singing because the studios won’t pay her the millions she demands, music will benefit from her departure. Charlie Parker, on the other hand, played for music not money. He played because he couldn’t not play.

There are still a myriad of ways for today’s musicians to make it rich and benefit from P2P instead of fighting it.

The same applies to the telecom industry. If P2P technology invalidates the services some providers offer, there will be new services and new providers offering more efficient, cost-cutting solutions.

As co-founder and original CEO of Delta Three, the first Internet telephony service provider in the world, I can easily put myself in the shoes of today’s service providers. It is very easy to see that restructuring and repositioning are inevitable for any provider wishing to survive the change. Broadband networking and other services like interconnection will become the key to any provisioning model. For years, providers limited their network connection speeds and latency improvements in order to keep subscribers tied to landline phone services. Rising competition has put an end to balland- chain provisioning, with more effective flat-fee, high-speed models now dominating the market. It is only a matter of time before high-speed wireless access and increased connection speeds reach the “necessary” level for inevitable technological change to absorb the market.

“Necessary” connection speed is the speed at which the network must operate to seamlessly deliver whatever is necessary for an application to operate properly at any given moment on my connected device. “Necessary” connection speed is thus provisioned to cater to the application and its needs. I expect my service provider to remove all unnecessary constraints on my application behavior. If I am watching TV, video conferencing with 25 participants or playing 3D football with 21 other users, I expect smooth, unconstrained delivery. Whether it’s 20, 30 or 50mbps, that connection is all I require from the provider. Service offers are redundant - that is why P2P technology was invented.

Users will prefer service providers who deliver the “necessary” connection speeds for a flat rate. P2P technology allows me to be self-sufficient beyond that connection and no longer need a provider’s other services. If a provider chooses to bill me for the traffic I consume, I will simply switch to a competitor who does not. These steps are prescient and logical, but incumbent providers will still try to fend off the inevitable. High-margin services, as they were called, will need to be imposed in order to justify the infrastructure investments needed to deliver advanced high-speed connections, but without these, “necessary” speed will never be reached.

Problems will occur when providers demand a solution that allows them to monetize, control and bill for the network traffic. Inevitable change cannot be monetized and like a collapsed star in a black hole, it can only be studied and understood in an entirely new spectrum.

A real solution for service providers in the P2P era is value-added application reselling. Marketing private or cobranded P2P applications through network channels will create a highmargin, cost-effective business model. Improved applications will improve market penetration. Migration strategies are very simple: VoIP carrier-branded P2P applications still will function with standard carrier termination services until VoIP penetration renders the PSTN obsolete. By then, business model transformation will have been achieved and adaptable carriers will reach the next level of the game, bringing with them all the added bonuses and weapons they need to fight the next monster.

Dmitry Goroshevsky is founder, chairman and CEO of Popular Telephony Inc., inventor of the Peerio serverless and switchless communications system for enterprise and broadband networks. From 1996 to 2000, he was CEO of Internet Telecom Ltd., an IP telephony core technology that was sold in 2000 to Terayon Communications Systems. He also was a co-founder of Delta Three Inc., one of the first IP telephony service providers.