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As I start out once again on the Emerging Communications (eComm) path, this time looking towards building a 2013 event, I'm very pleased to start out with a superb interview about a new term and technology known as Hypervoice.

During this interview you will learn what Hypervoice is; the emergence of a Hypervoice consortium; a potentially vast field of opportunity if the consortium is a success; and our shared realization that Hypervoice is another "Google moment", but this time, for voice.

Most notably during the interview, Martin stated:

The highest aspiration any pre-existing voice service I've ever seen had was to be as good as being there in person and at no cost. What I think Hypervoice does is it takes it beyond that. It can actually be better than being there in person.

and:

So all the things that Hypertext has done for us in the last 20 years, that's what we'll experience with voice in the next 20. It's going to transform how we work.

This interview came about because in May 2011, I had the distinct pleasure of being introduced to Kelly Fitzsimmons.

She had ambled on somewhat casually about her companies forthcoming product, Symposia.

After sometime of questioning her about the technology and ideas behind the product, it struck me like a thunderbolt that the concept should be taken globally and that it was on par with hypertext; it was in many ways the voice equivalent of hypertext.

I was very excited and so I'd asked Kelly to provide one of the keynotes at Emerging Communications (eComm) 2011 (video). Her husband also launched the company's Symposia product at the event (video).

However, for whatever reason (I did not ask), Kelly did not cover exactly what had excited me, as I'd anticipated. I then introduced Kelly to good friend Martin Geddes as he was away to run a Future of Voice Workshop at the time.

Then earlier this year Martin told me that Kelly had asked him to write a whitepaper on the topic and that he'd coined the term Hypervoice to describe it.

A couple of weeks ago Martin asked if I could help to get people on a free virtual Hypervoice event due to take place on 12th Dec 2012 (registration). I agreed to help and suggested I interview both Kelly and Martin. This post is a result of that request.

Below is the interview transcript. I added a range of headings as well as bold/italic markup afterwards to make consumption easier because the interview extends to nearly 10,000 words.

You can download the audio of the interview (21meg MP3, run time is 01:06:36).

Last week I had the pleasure of chatting with good friend Martin Geddes about his new whitepaper "Rethinking the Business Model for Telephony, Unified Communications, and Social Media to meet the needs of Modern Commerce" (see end of page for details on how to obtain free).

Towards the end of last month, I had the pleasure of doing a pre-conference interview with long-term friend Martin Geddes. Back at the very first eComm he expressed (archive video here) the opinion that it was actually lack of business model innovation which was holding communications innovation back as a whole, more than anything else.

Now that Martin has been in his BT role since the very end of last year, I wanted to catch up and see if he has changed his opinion or whether he has in fact further developed it. It turned out to be the latter.

The run time is 59 minutes.

I do have to say if we sound odd and if the interview is not quite as focused as say others we've done together (please see here, and here and if your in love with Martin this transcript also), it's because we were both sick at the time!

The full transcript is also below.

Lee: Okay Martin, you are turning into the "business model" man. Let's begin with a preliminary - if you don't mind me labeling you that, you're Head of Strategy at BT Design. I would like you, first of all for the sake of the readers, as well as listeners, to tell us what a business model is.

Martin: For instance, I'll tell you what a business model is. Let's take an example from outside of telecom. You can compare Southwest Airlines, Ryan Air with other airlines, like British Airways or American Airlines. What is fundamentally different about these companies are not the procedures the pilots follow, or the natures of the airplane, or the kind of thing they offer which is basically travel. It's the business models they use to approach their markets. In telecom, we also see new upstarts with new business models. What we've seen over the last couple of years, and a study by IBM reinforces this, is if you're going to invest money in improving your business, the highest returns are not in investing in new processes or new products but are actually in inventing new business models around the existing propositions.

Lee: Could you elaborate on what business model innovation is? I mean, you've alluded to it. Are you able to expand on what we mean by business model innovation?

Martin: What actually is a business model? I think a very good framework to work with is the business model canvass that a guy named Alex Osterwalder has popularized. It's a very simple diagram. You can draw out the parts of any company's business model. At the heart of it is a value proposition, something they're doing for the user that they're willing to change behavior or part with money to engage with. Then, to either side of that value proposition, you've got a revenue model and you've got a cost model. They come together to give you their profit and loss. On the revenue side, you've got a bunch of segments attaching. You've got distribution channels to reach those segments, and you've got different types of relationships for those customers. In telco, it could be prepay versus post-pay. If you're a supermarket, you might have customers with loyalty cards versus customers who are anonymous to you. On the cost side, you have a bunch of things; you have, assets, not just things you do. Contrast those in the telecom world and network is a thing you have and billing is a thing you do. You have a bunch of partners who help you perform those activities.

In creating a business model, you've got a revenue model which is how you price things. You can disrupt the price products, and a cost model which is how you allocate the costs for the things that you have and do. The traditional way of looking at business is thinking about "How can I build a better product, build a better value proposition to the user?" You try to pour all your money into that. If you look at the airline example again of EasyJet or Ryan Air, or Southwest Airlines, their proposition is just being cheap. They've elevated those other boxes around the user. For example, cutting out all the travel agents in the distribution channels to reach their segments is an example of a business model innovation and going direct to the user, using the web. I think in our world, particularly telephony and voice telecoms, we're going to see the very old, successful, and highly established voice minutes business model being continuously challenged by new ways of working. What we've seen over the last 10 years with new technology and VoIP largely being used to optimize the existing business model, we'll actually start to see much more fundamental and disruptive change.

Lee: You bring us to the exciting part and then you stopped. I'm not too sure if I should ask; would you conclude firstly the current business model for telephony is minutes, or is there more to that business model than just minutes?

Martin: If we take that framework I mentioned earlier, and start thinking about all the different component parts of that framework, the model we have for today's telecom business model is a very simple segmentation enterprise consumer, prepaid/post-paid. The product doesn't vary much, or be adapted much to different segments or needs. It's very much a one-size-fits-all type of product. You might contrast that with Unified Comms products that are attacking the enterprise market, that comes in many flavors. The nature of the relationship with the customer is very shallow. We send you a bill but we know very little about you and how you communicate, how you prefer to communicate. The supply side, as well, is very long established, the network equipment providers basically defining the product and its capabilities through organizations like the GSM Association, 3GPP, designed by committee of what the product does. The evolution of that product, like rich communication suites, the GSM Association is still following the same meta pattern of how we satisfy the user needs.

The current business model is more than just minutes. It's that whole ecosystem for how all those parts hang together. It's important not to diss that ecosystem too strongly as a fan of change because it's been extraordinarily successful to have lasted, essentially in its core structure unchanged, from the very beginning of telephony, even dating back into the telegraph, all through to today. There must be something very strong at the core of it. However, until the last couple of years, telephony has never been an easily programmable feature that could be included and incorporated into software products. There is a fundamental shift in the enabling technology that's going on that will have a ripple effect into business models that we see.

Lee: A number of issues have come up now. When you speak about the 3GPP and GSMA and we have a committee to decide on user needs, do you feel that is likely to continue, or at least continue to the extent that has existed; user needs being decided by - I want to call it political committee?

Martin: I think you have to separate out two or three things that those organizations do or achieve in its activities. I think one is providing consistency of meaning to these communications tools or products. We know what a free phone number does. We know that it tends to begin with "800" somewhere. If I send you a text message, I have a very clear idea as to what's going to happen at your end, what the experience is like. Providing a common social semantics to the services; there's some value in that. It won't disappear quickly, but you're finding that increasingly, people can easily find other services like Facebook and they can easily understand what giving someone a poke, or sending a message onto the Facebook wall means. That purpose is a challenge.

The other part is providing interconnectedness. The telco products that make lots of money today, voice and SMS, are interconnected ones. That interconnectedness is something that continues to be a challenge in the Internet sphere. Basic interconnectedness of say instant messaging networks has been a long-standing problem. From the user's perspective, they want to have something that just works and they don't want to have to worry about "Is the problem I'm having sending this message one that comes from my network provider, or the application provider, or the device provider, or some other plug-in provider, or AppStore member." They just want the stuff that works. Another way of looking at it is the users are lazy and we're all users. Providing the bits of glue, whether they're in the NSS stack or the BSS stack that helps all this stuff hang together, remains a valued and valid thing for these organizations to do. They're not dinosaurs who have passed era; I think their purpose will mutate and they'll be less and less involved in the user experience, the presentation layer stuff; however, there still will be a role for these organizations in defining the glue that holds together all the stuff that the application layers do on top.

Lee: That's an interesting perspective. Again, we'll need to wait two, three, five years to see.

Martin: Look what's happening with Apple, where they have a very vertically integrated end-to-end control business model, which gives a highly consistent user experience for their users. It's proving to be very successful. The problem of course is there is only one Apple, and if you don't like the iPhone, then if you really want to have a phone with a keyboard, you can't participate in the Apple ecosystem. How does that interconnectedness and the ability to have many more possibilities of drawing together AppStore, phones, different services, links into the existing voicemail, telephony, whatever, if it's not to have lots of combinations of those things that work together and have a lot more innovation? Then that's what these organizations are good at doing, helping define those interfaces.

Lee: That's an optimistic view that you've cast out. I just want to make sure I definitely got out of you, but did you fully elaborate the best you could on what's driving the change in the business model for telephony?

Martin: I think there are a number of things that drive it. One is technology. Previously, telephony required understanding relatively obscure telecom protocols like SS7, which were, as you know Lee, you had to go on an expensive training course to learn. It's not something you just go down and get the nearest O'Reilly book on how to build a telecoms network. Increasingly, telephony and telecom's capabilities get wrappered up in very standard IT protocols and become easily consumable web services, for example.

The other big changes I see, one of which is that the users have clearly moved on. The user behavior is increasingly embedded into social applications and that threatens the contact book and the dialer of every handset as a means of controlling the user and the business model. As telephony gets embedded into other applications, then those applications have increasing control over which bearer will the call go over and which business model will support that call.

I also think that's kind of the consumer behavior moving on to social applications. The other part is the enterprise user; we're still sort of living in the tyranny of email and the silo'd, separate communications apps. I think Unified Comms, in some ways, is still exacerbating the problem, rather than relieving it. I still don't have a communication system that helps to manage my productivity and my time. Who should I be talking to and of all the people who would like to talk to me, where is the Unified Comms that lets people register they would like to talk to me, say something they would like to talk to me about, and let me schedule that or automatically schedule that in my calendar for me, and help to organize my life? Where can I tag those conversations, archive them, integrate them with my to-do list and projects, my email? It isn't there. The idea of the PBX and the separate thing called telephony that's different from Unified Comm and social networking is they're all going to be managed together in something new.

That will also drive business model change, so I think maybe the last aspect driving business model change is the sheer inefficiency of interaction between consumer users and enterprises is that so many calls I have to contact centers keep asking me over, and over again "Please dictate your name, your address, your mobile phone number, your email address." There is basic information that is so easily automated away with new tools and protocols. It's hard to carry that data over SS7. You'd have to adapt the existing systems. It's increasingly easy to do it over other protocols and tools. I think that those things taken together will drive the new business models and it will take a while for them to embed themselves. Business model change doesn't generally happen fast, but those who manage to dominate the high ground of new business models early on tend to be very hard to displace, so it's like once Windows got established om the PC, it's dominate for twenty or thirty years.

Lee: There are a number of points I would love to jump in on, but I would like to jump back a little for now. You had said and correct me if I'm wrong, that VoIP, Voice over IP only enhances the old business model. Did I pick you up correctly when you said that, because it's very much how it sounded to me; that VoIP is not a revolution. It was as you put it; only enhancing that old minute model in some fashion, optimizing it is a way you seemed to put it across.

Martin: Yes, now Voice over IP is being used as a way of converging networks, reducing costs, and employing slightly more commodity IT networks. Because of the pricing elasticity, as we drop in price of telephone calls, the number of calls has gone up and the minutes have gone up. It's helped to drive increased value in these network.s However, if you look at the applications that are out there, they're still either trying to collect termination fees or origination fees and even Skype's business model is based on interconnect with the PSTN, which is its business model.

What it doesn't address and the crisis that the users increasingly have is how can I better use my time for the communication that I actually want to do, particularly in the context of interaction with companies or interaction with work colleagues? If you're in a consumer-to- consumer space, then let's just chat and gossip away. There isn't necessarily a revolution in the business model around that, but I think the more consumer-to-business space there definitely is one, and yes, having cheap minutes or free minutes is a good start, but the cost of the call center agent per minute is the problem now, not the cost of the telephone call. How do we use those call center agents to do things that are valuable and that only humans can do, which isn't dictating names and addresses?

Lee: And do you feel or should I use the word think, that - I won't give my opinion here - that there is a demand for what's being called high definition voice? Do you feel high definition voice is going to inject new cash into the system in any way? Is it a revolution? Is it bringing new money into the system, or likely to bring in fresh money?

Martin: I think the answer is yes, not a huge amount, but I think there's only two things that users are clearly willing to pay for as a value added service. One of which is the improved sense of the other person being there with you, which HD voice brings. People have always been prepared to pay for that enhanced richness in media. There is a great paper by an economist at the FCC, called Douglas Galbi called "Presence in Communication". It's a story of the history of communication from the parchment onwards. There is a clear theme; the sense of the other person being there with you over time and space is something that's fundamental in the human need and desire. HD voice does that for you.

You experience the first ever Skype call where the audio's really good; it's like a goodness, it's like a real positive surprise that telephony is capable of that. The other thing I think people are willing to pay for is crossing over different media, so it's voicemail to email, or I have Ribbit for mobile on my work mobile, so I get my voicemails as little text SMS summaries. That integration of different media and bridging their different strengths is something that people are willing to pay for.

In the mass market, there are lots of other niche features that people find extremely compelling; if you're a real estate agent or a dentist or something that's vertical, so that you need a program for telephony API and platform. In terms of mass market, I think the only two big mass market things out there that will make money are HD voice and what I call cross medium integration.

Lee: That mass market - this might sound like an outlandish question, do you feel that the mass market is likely to continue being a mass market in the long, long term, or will it all become niches?

Martin: The value of interconnectedness will always be high. Having some kind of lowest common denominator of how we communicate is likely to persist for a very long time, and the patterns of interaction that the existing mobile and landline network have is likely to persist for a very long time. We've seen little changes that people almost hardly notice, so like on fixed line there's a dial tone and mobile there's not, and that results in very subtly different, slightly different behavior. There is no busy tone on a mobile phone.

Lee: What I wanted to get at is the mass market was always what you end up before, in telecoms, in order to make money.

Martin: It will fragment, it would be this slightly paradoxical way of each of these little fragments needs its own communication needs satisfied, and they still need to communicate with all the other people. I think there will be some - maybe ten years out from now, I can imagine there being half a dozen global communications platforms that aggregate together existing - interconnect with existing landline, mobile, and Skype and Facebook and a whole bunch of other SIP termination points and your talking picture frame and your TV, and, and.... So, there'll be these new platforms that are the mass networks, but they aren't necessarily branded and sold directly to the customer and they don't necessarily correspond either to today's telcos, which have the physical structure underneath.

Yes, the user experience will fragment. Yes, we'll be communicating from a huge range of devices and applications. Yes, there will be some extremely successful new ones that, maybe in the context, are "mass market," so just like iPods today are dominant in the mp3 player segment, there will be things that are dominant in their segment and will be regarded as mass market and will have voice capability embedded in them. But, there will be no one, dominant communications media platform. I think the thing in the middle is these aggregators and how they help make it easy to integrate all kinds of end points and product protocols into any application device; that's where the business is.

Lee: I didn't want to jump there just yet, but I like the way that the case you're slowly building up here, I think you're going to end up saying that Ribbit's in the perfect position to sit there in the middle of where there's this value exchange.

Martin: Clearly, I wouldn't have joined BT if I didn't think Ribbit was a good idea. Yes, I think the greatest value will come from being able to offer what one might call the best network, but that network isn't the cell towers and the fiber; it's the ability to connect to, interact with, and transact with the greatest possible number of endpoints, at low cost, and great ease of integration. It's a different way of competing compared to the past, where the network was a physical asset. Increasingly, the network is a virtual asset and sort of relationships you have. Think back to our original discussion about business models, it's about all those suppliers and partners and how you will be able to integrate with those that's now the differentiator, not owning some piece of physical infrastructure asset.

Lee: I'm glad I wasn't wrong and it wasn't my imagination; If you don't mind me just jumping back a little again, we spoke about the mass market and we spoke about possible things you can do to cause incremental value changes, possibly, like HD communications or media conversion like voice to text, like Ribbit does. But surely, the greatest value going forward is in the long tail of communications, i.e. away from the mass market. You'd mentioned estate agents [realtors], so surely the money is in the long tail. It's in servicing niches. It's in building applications, communication applications, which are tailored to specifics, be it teenagers in love or people who sell cars or doctors. Don't you agree that the money, long term, is in the long tail?

Martin: Yes and each of those applications will generate a whole bunch of systems integration revenues and revenues [0:29:14?] vertical, and still people using those applications need to communicate with everyone else. Real estate agents need to communicate with people buying houses, and people buying houses aren't going to go out and buy a special application to help them communicate during their house buying period or program. The opportunity that's out there is for the person who offers to "the network," to offer the features and capabilities that integrate with the realtor application, that makes that application save time for realtors, which can be simple stuff like if a realtor wants to leave a message for one of his customers, he doesn't really want to have a long social chat with that customer, or that customer might be roaming abroad and he doesn't want to call that customer while it's 3:00 in the morning. Why can't they just record a voice message, in fact, why can't they even just deposit a pre-recorded voice message that maybe synthetically injects the right text, spoken or voice, into the message to the user can pick it up on a voice medium and respond, assuming voice is the way to communicate for that? I think that it's the middlemen in the platform that going to enable all these applications we build that will be the powerful players in this, the Windows of voice.

Just like Windows made it much less relevant as to which PC you need to have bought, they've abstracted away all different kinds of hardware; these communications platforms will abstract away all different underlying networks, protocols, and differences in the end points, and that you intelligently interact with them appropriately. Whether I'm sending you and SMS or a Facebook poke, or an instant message, or whatever, it will help you manage those communications and the relevant business processes.

Lee: Okay, so do you see the mass market being as relevant going forward, or less relevant, and do you see more of a rise of fulfilling niches? What I'm trying to push at is the old telephony was very vanilla. It served everybody the same. It didn't depend what you were trying to do with it, and as you said at the beginning, it made the money from minutes. Would you like to say anything on the widgetization of telephony?

Martin: I think there will be new mass markets, but they'll be within the categories into which voice and telephony and other communications are embedded. Whether it's gaming consoles, or medical imaging machines, or whatever it might be, healthcare monitoring, [0:32:32?] they'll be successful and there'll be dominant players within those categories, which will be "mass markets." The number of underlying platforms that power these, I think, will be relatively small.

Today, there are huge numbers of suppliers that can sell you interconnect with minute-based voice. But once you start to go beyond that and start thinking of a multi-application, multi-modal communications world, where you want to interact with customers via SMS, email, instant messaging, Facebook, ten different social networking applications, and the emerging end points like IPTV, set top boxes, and embedded applications in cars, for example; once you start to get that huge range of end points, then that will drive just a few major players to control the platforms. In a sense, it's the invisible engine in the middle, the software platform -

Lee: But it's interesting that you're saying the software platform because when you talk about these services, traditionally that would have been telecom equipment and vendors, your Siemens, your Logica, Alcatel and so on. They would design, approximately by committee, standards in order to sit in the middle to build multimedia conferencing units etc. The way you're talking, this all has become software platforms?

Martin: Yes, they'll still operate across the stack, Cisco, WebEX and Cisco telepresence at the top of the stack, and they're still doing stuff down at the bottom end of the protocol range as well. There's nothing stopping all the players from participating at all levels, but I think the greatest rewards will be the specialization of the one thing really well.

The patterns of how these companies and the industry associations work will shift. It won't be - without trying to open up the range of possibilities for innovators rather than necessarily closing them down, rather than defining this is what an IP video telephony system should do and here's what a busy signal should mean and this is what happens when you try and call someone. Make this IP video thing look like telephony but with a video, then instead it's about how do you just enable the basic building blocks that say, "Hey, maybe I just want to be able to see what's going on in my hallway twenty-four hours a day when I'm away on holiday, see my dog who's in the kennels" for a pet owner who goes away on holiday for two weeks, and how that application works might be very different to ring a dog. [laughs] A dog can't press the answer button, so the applications need to work in a very different way and be transported in a different way and priced in a different way.

Probably use connectivity rather than video being seen as this super important, real time thing that has to be the highest quality possible in the network, actually dog monitoring might be the opposite. Discovering, scavaging capacity that was left on this network at the lowest possible price, probably free, and if I lose contact with my dog for two minutes, it really doesn't matter. Allowing these new ranges of possibilities, technically and economically, that's a challenge.

Lee: It's interesting; it sounds like Ribbit could enable the future of pet watching.

Martin: Frog watching, of course being an amphibious company. [laughter]

Lee: I just want to have you stress and earlier point if possible. The unified communications, some people will interpret what you said in some fashion as meaning "unified" and so to resolve any ambiguity, can you stress in your own words how the direction of unified communications is different to that which you've been speaking?

Martin: I see Unified comms as trying to bring together previously disparate communication medium experiences into one "seamless" experience. It hasn't taken off as fast as it originally expected. You have to ask yourself why? It could be that there's value in keeping these different things separate, just like you have a personal mobile phone and a business mobile phone at weekends, and only one of those is with me. I don't have to worry about setting up a web page to say, "I'm working today. I'm not working today." I just pick up the right phone. It's really easy.

It's really about creating combinatorial experiences that are appropriate to that moment, that context, that application rather than being an application called "Unified Comms.", I'm now in my word processor, and I'm now in my unified comms application, and I'm now in my browser. These are all separate things. Actually, it's how does that particular web page where I'm trying to visit my mortgage earlier today, why can't I have the widget in that mortgage page that says, "Contact customer care." That widget doesn't know anything about me today, and in the future it could be that widget is one that knows this is my mobile phone. This is my landline phone. I'm at home, you can call my landline, or actually I'm on Skype at the moment, you can call me on Skype. I'm abroad and I'd rather have free Skype calling in my hotel room than $2 a minute calling on my mobile phone. I think the personalization aspect and the ability to integrate communications is maybe more of a compelling story than the ability to "unify" them in to a single user experience.

Lee: Thanks for that clarification. Now, when you spoke earlier about UC, you had said it cannot be separated from productivity and time. If telephony cannot be separated from productivity and time and as you said, a lot of UC clients can unenhanced - what's the word for unenhance? I've got a mental block here - unenhanced; I like that word. Let's keep it there - unenhanced your productivity and time, let's take things a step forward. Ultimately when you're talking about productivity and time, productivity is more of a business term. But we also want productivity in our home lives. The distinction between home life and business life is anyways blurring, as more people work at home etc. What you're ultimately speaking about, when you say productivity, is fulfilling wants, needs, and desires.

So really, what you're saying is that telephony cannot be separated from fulfilling wants, needs, and desires? Would I be correct in going that far; fulfillment of human intentions, so the future of telecoms, therefore, is fulfilling intentions, human intentions, not dog intentions?

Martin: So I'll tell you where my thought process comes from. I use my personal life, and people know, I have a plug-in called GTDInbox, which helps me use the "getting things done" methodology inside Gmail. I can just tag Gmail with the context it relates to in a project and whether it's something that I should do someday, whether I need to do it next action, until it's completed. I can just click on different contacts and different projects to see what I'm supposed to be doing.

It makes it easy to integrate these two worlds. If someone sends me a voicemail message, I can't today tag that. I can't do anything with it. It's not a digital object that I can manipulate in any way, whatsoever. I'm just utterly captured by the telco's voicemail system and it throws itaway after twenty-one days. It's like the exact opposite of Gmail. If I need to get back and actually there was something really useful, a reference number in that voicemail that got sent eight months ago, tough. It's gone. It's an empty productivity tool.

There is no way of me integrating my voicemail messages into my personal work flow. What I do see it being; of course the role of unified comm's is being an interface into my world of personal productivity. It isn't a communications application, unified comms, it's a work space in which I can work and I can integrate the digital objects like text files I'm working on and blog posts, and bits of additional media, and communicate and share them. What I see missing over, and over again is that work flow, that personal work flow element. Yes, there's lots of stuff about sharing media, but almost every time I've tried to use any of these tools, they don't easily adapt to my way of managing my work flow. They try to embed somebody else's idea of doing it. I see mostly unified comm's apps as being too tightly coupled. I've tried to use the sharing stuff inside, like the Microsoft Office Suite, and it's good. It's great if you buy into the complete Microsoft vision, but I've got Google mail and GTD Inbox. Please work with my way of doing things and that, today, doesn't happen.

Lee: I learned something new about you today, Martin. I didn't know you were so deeply into the cult of David Allen and reading 43Folders.com daily. Again, nice to learn something new [laughs].

It does pose a question that there will be an interesting play between the things we use to communicate in operating systems, because today an Apple Mac comes with iCalendar and contacts and often, it's frustrating that your communications don't tie into that very well. If you get an email on the Mac, yes, it can auto populate certain things in iCal by stripping out dates and times, but the integration is less than elementary.

The future is quite interesting in terms of how the OS will develop as well. I know you've got a cold and I can hear you sounding tired. I feel racked with guilt so let's just string this more towards British Telecom and their platform Ribbit. You had earlier said that more and more third parties, i.e. non-telcom operators will disintermediate the operator by "stealing" the dialer, by stealing the contact book, i.e. the way people are using Facebook, i.e. potentially people can use telephony within Facebook. That old solid interface that telcos have, the telephone dialer and also the phone contact book, will be taken out of their control. Once that interface is taken out of the control of an operator, then as you said earlier, people can decide or applications can decide which bearers to use. I assume if we turn this up again, asking you about how BT's reacting, I assume they want to stop the dialer and contact book being taken out of their control?

Martin: Different parts of each telco have different sets of interest essentially. There is a retail answer, and the wholesale answer is yes at the retail side it's very profitable to control the user. It takes a Verizon with their FIOS offering, they lay a fiber to your home. They control the access. They give you a set top box you can plug in the set top box. And as a consequence they can charge you $7 a month to be able to access your home media and your PC on your set top box. The control of the fiber extends all the way back into the home. They can ding you for watching your own stuff in kit that you've bought, which is a great business model if you can manage it.

Who wouldn't want to extend those revenue streams on behalf of the shareholders? At the same time, there's this other world going up of fragmented communications and the consumers are increasingly being tilted toward using third party applications. The history from the IT industry is it's the platform makers who become the dominant players in this ecosystem. BT has clearly bought into a very highly developed and successful platform with Ribbit and it's acquired over 10,000 developers in a very short period of time, and lets you build communications applications without having to worry about the weird nuances of how thirty different people have interpreted the SIP protocol.

Lee: I'd asked about dialers and contact books. Maybe it was better to back up even a little further and say hey, what might the future business model look like before I ask about BT and Ribbit? Can you shed any light on future business models and then go on to talking about BT and Ribbit, and then we'll go on to talking about BT and Ribbit, and then we'll wrap up for the sake of you needing your next Lemsip.

Martin: I think there's a Googilization of voice going on and it's gotten very literal with things like Google Voice where the flip is from trying to charge the end user for relatively simple software applications to instead monetizing the relationship with the user via some third-party. Google do it because they want to advertise to you, so the business process there is marketing.

The business processes that still retain most of the inefficiency are customer care, billing and payments, and identity-based services. That's where the telco is strong, so I think the business model of the future will increasingly see enterprises being charged for accessing what the telco knows about you and what they can do to help interact with you more efficiently and effectively.

Whether it's the telco that actually sells that capability straight to the enterprise, I think there will be middlemen who make sure that enterprise doesn't have to have a relationships with thirty different telcos to cover off their user base. There is yet to be a "Windows" of telephony that acts as that platform, that embeds that rich communication capability, manages those relationships with all the telcos and the customers and deals with all the privacy and regulatory issues that span different jurisdictions that the enterprise doesn't want to have to think about. I think we'll see this Googlization process of going from a single-sided market towards the multi-sided market. The opportunity for the telcos is to build on is the termination fee regime that it is today. Today, they already have a couple of forms of this market structure. One is termination fees. You get to charge the inbound caller, not the end user customer that you already have. Another example is free phone [toll free], it flips the model on its head, you get to charge the other side of the communication. Those are probably the templates for the future, rather than trying to charge the user directly, to having enhanced voicemail or privacy or other features.

Lee: That's very interesting, the two templates that you gave there. I think it would be hard to disagree with that, and it reminds me of the next month's event; one of the Platinum sponsors, VoiceSage. When you said "interact more efficiently than users" I think you know enough about VoiceSage to comment whether or not that's the type of business you also mean.

Martin: Yes, so VoiceSage offer the Software as a Service (SaaS) application to, for example, make it very easy to send out automated reminders to all their customers who haven't paid their bill this month, i.e. please send us some money. The limitation that VoiceSage or any other application provider is presented with is interface the telco's expose today. You can send a bulk SMS, you can send a phone call, but if you want to do anything different beyond that, even if the underlying networks and system supports it, tough; those capabilities aren't exposed. It's simple stuff like I want to contact these users but not if they're roaming. I can't do it. I want to expire this voicemail message because the users just finished paying their bill on the website. I can't do it. What happens as a result is the user calls in the call center and says, "You sent me this voicemail saying pay my bill but I've already paid my bill." Well, the voicemail message was sent to you yesterday. But you've already wasted $10 on the phone telling the customer that, whereas you really want to just expire the voicemail.

Lee: Exactly, so VoiceSage fits into that picture very nicely and if British Telecom go where you're suggesting BT go, then British Telecom is likely to support other businesses like VoiceSage in doing what they do.

Martin: Yeah, that's where I think the future revenues are; the next network is a software-defined network, interconnected with huge numbers of endpoints and makes it easy for businesses to interact with their customers, or other businesses.

Lee: Interesting stuff and I'm ill. My throat's getting sore, and you're ill. I know you're energy is lagging; I can hear it. What we'll do is finish off with the easy question [laughs], which is how is British Telecom responding to the changed landscape, to templates that you spoke of etc., and how does their acquisition of Ribbit some time ago, as a platform for developers, fit into that in response of British Telecom in the long term?

Martin: I can't share BT's trade secrets, but it's obvious that Ribbit aims to democratize access to telecom's protocols in communication to the mass space of IT developers rather than the small base of telecom developers. I joined BT because BT has a unique combination of capabilities as well as the motivation to deploy them. Global services give BT possibly the strongest of relationships with enterprises. A strong wholesale division gives you relationships with other telcos. Existent retail base lets you boot strap new businesses by starting off with your own end customers so the experiments with how to use new enablers like interactive SMS to engage our customers more efficiently and effectively. An integrated IT and network division in BT Innovate and Design to actually be able to execute on building these solutions, rather than being stuck in separate silos and IT and networks and not talking to each other.

Lee: It's going to be very interesting taking your projections, beliefs if I may call them that, or knowledge, and hopefully for some of them, Ribbit and general sentiment at British Telecom and seeing how it goes over the coming years. I'm sure that over time we're going to hopefully see a lot of the leading innovation in terms of business model coming from British Telecom and I'm sure we'll expect your leading thought on those topics. Once again, for the third time running, you're keynoting at the Emerging Communications conference, which takes place the end of next month, for the first time in Europe. I really appreciate you keynoting. Can you just say the topic that you're keynoting on, and we'll finish off there.

Martin: Many of the same things as this conversation today, but in a more succinct form. Going beyond minutes what is the business model, and describing it as moments because the critical moment is when you try and bring two people together. How do you set up that communications channel to bring the right people together, at the right time, in the right way, and solve some business process problems for somebody who's willing to pay for it and put new money into the communications world? I'll be reviewing what the opportunity might look like, who the players might be, what kind of business models we might see, what their goals are and how I see maybe this world unfolding over the next five to ten years, which may be a very different kind of communications landscape than the one we've seen in the last ten or fifteen years.

Lee: Okay Martin, I will let you get back to your Kleenex, your Lemsip, and I'll go drink tea with honey. Once again, I really feel that the time, an hour or so we spent chatting together, was very beneficial to get an insight into where you see the entire industry going. Once again, I want to thank you from the eComm community for coming and supporting such an event and meeting with people.

Martin: Thank you Lee. I look forward to being there next month.

Lee: Thank you.

Last Monday I had the opportunity to have a conference call with repeat Platinum sponsor Global IP Solutions (GIPS). I spoke with both Jan Linden (VP of Engineering) and Joyce Kim (Chief Marketing Officer). What transpired from the call was a clear vision of the value proposition offered by GIPS and some insight in the H.264 SVC technology.



The run time is 30 minutes.

The full transcript is below:

Lee: Hey, happy Monday, how are you doing Joyce and Jan?

Joyce: Pretty good.

Jan: Pretty good.

Lee: Okay, that's fantastic. We're going to jump in here and we're going to speak about what Global IP Solutions has been doing, but before we begin; GIPS, as you're more commonly known, has been a sponsor of the eComm event previously. For the event this month GIPS is a Platinum sponsor. First of all, I would like to get a handle on some of the reasons why GIPS decided to sponsor again?

Joyce: Certainly, surely I think there are a lot of conferences out there, but eComm is one of the more unique conferences that has a lot more substantive content. I think we find that the audience is a great mix of strategic thinkers, innovators, and entrepreneurs in the relevant space. We find it very refreshing from most of the usual conferences to where it's pretty level sales pitch. I think we've found eComm is definitely more long-term strategies and new innovations which obviously, we want to be at the forefront of.

Lee: I appreciate the kind words. In talking of the forefront of communications, GIPS has been really generating quite a lot of noise around what's getting called HD Voice and wideband codecs. I've even heard talk of the standardization of a new codec. I would like to know where GIPS fits into all of this.

Jan: That's a good question. One of the things I would like to start with is more to clarify what is a codec and what isn't a codec. I think there is a lot of confusion for people who are not really digging into the dirt there.

A codec is obviously an important part, but it's not everything that makes the HD Voice experience. If you look at the analogy of a car, you have a lot of different things like tires, body, steering wheel, etc. and the codec - let's say that's the tires. It's one very important part that makes the whole thing run smoothly, but without all the other pieces, you don't get the full experience.

That said, we're very much focused on HD Voice, and the things we do, in addition to codecs, is things like jitter buffer and packet loss concealment. Those are things to address what happens on the network. We also address things that handles on the device, like sound card. For video, it's cameras, microphone adjustments, speaker adjustments; all those things are necessary for the great experience.

Maybe, the most obvious thing for the end user is taking care of issues like echo, background noise, and the level of the signal, the automatic gain control. Those parts address what happens at the end points of the users. All these parts are important to deliver this full HD Voice experience. That's what we focus on. Codecs, we do that, and we'll get back to that I hope, if I get a chance, but also for us it's really important to look at the whole picture where you get the total HD voice experience by addressing all the other issues.

Lee: Okay, I just want to technically clarify; you spoke about packet loss concealment, jitter buffering, and so on. I thought I knew something about codecs, certainly, and had assumed that smart codecs like the one that GIPS used to use to power Skype, the iSAC codec. I thought it had packet loss concealment and jitter buffer handling and so on, built in.

Jan: It's not normally part of the codecs. Any codec, be it proprietary or a standard codec, doesn't include a jitter buffer. Jitter buffer, as you say, is extremely important for the performance over a packet network. Packet loss concealment is to some extent included, in terms that many codecs have something to handle packet loss, but it doesn't have the logics to apply it in the right time, and when to do it, basically, so the codec is very pure, just compress the signal or decompress the signal, but doesn't do any of these things that effectively handle the issues in the network.

Lee: Okay, so if I used to take say, an HD codec that maybe is in the public domain, the SILK codec, would I get jitter buffer and packet loss concealment etc with that codec?

Jan: No, all the standard codecs, the same with SILK, it does not include the jitter buffer. It will have parts of the packet loss concealment in the codec, but not all the pieces that you need to put it together. Again, of course, on top of that, the other things I mentioned you need in terms of echo cancelation, noise suppression, gain control, and put the whole thing together into a high quality solution.

Lee: When it comes to putting these things together, you spoke about handling devices like sound cards, microphones, cameras, and so on. Then you're saying that some of the packet loss concealment and jitter buffer technology is outside the codec anyway. Is it not possible for companies to assemble these themselves, without using GIPS?

Jan: Oh absolutely, and people do. It's just a matter that to do this really well, you need a certain expertise and you need a long experience of doing this. That's what we bring to the table, so we can do it at the highest possible quality, and you get the benefits of time to market. Our customers don't have to deal with this. They can get it done immediately. If you do it internally, it takes a long time, and most people will actually not succeed well enough to get to a quality level that's close to what we can offer.

Lee: Can I hassle you there and say we don't get to quality level you can offer. I think what I've gained from speaking to you in the past is GIPS is really a research and development company and the R&D to integrate the things that you speak of costs a lot of money. What GIPS is doing is basically allowing companies to minimize their overhead in R&D and I guess there is some kind of business model where companies pay a royalty fee to you but you're one centralized R&D in assembling these for devices, networks, or whoever. Is this correct?

Jan: That's a great summary of how it works. People come to us basically, and by integrating our software, they integrate our expertise into their engineering team. They get all of that, but they don't have to pay for all of it because we do it for many. They can get the same benefits more quickly, without having to invest as much money. So, in the end, it's a cheaper way to achieve the results than to try to do it yourself.

Joyce: It's also future proofing, in that sense, where we focus our specific R&D in those areas, where as new technologies and innovations come forth, we can provide that as sort of an extension of that specific R&D capability.

Lee: Can you give an example of new innovation? Again, I have a habit of hassling a little bit to get where the meat is. What kind of new innovations have come along, that you will then develop for and pass on to GIPS customers?

Joyce: Certainly, we're talking about audio or voice right now, but video would be a great area where innovations are coming about, that we can provide as they continue to develop. We'll talk about video capabilities and video codecs, such as the H.264 SVC standard. That is something that is up-and-coming, not fully taken off in the market, yet, but all our customers will have the advantage of having that expertise incorporated into their products, should they wish to do so.

Lee: You mentioned devices, so I know at the last event you spoke about building for the iPhone [Slides | Video]. Which devices do you cover, generally speaking?

Jan: Well, we pretty much cover anything from DSP-based solutions all the way up to PC solutions. We may be mostly known for the PC cell phone type of applications, video phone on the PC, but we also do a lot on embedded devices like the iPhone we mentioned; we have several customers offering VoIP over the iPhone, or Windows Mobile, or Symbian devices. We are looking at doing something for Android very soon here; that's one of the most current development projects that's ongoing. It pretty much spans the whole spectrum of devices. Our focus is to build something that's that adaptive, that you can put on any type of platform and you can get the same quality, same integration for our customers; they don't have to work with different types of integrations for different platforms.

Lee: When it comes to SILK, which was announced at the last eComm event in San Francisco, we've got an HD codec there. A lot of people, including myself I must admit, were confused as to what that means for GIPS. Since I thought GIPS is the "codec company," which had previously powered Skype, I wanted to know does this mean that it affects GIPS in some fashion? Can you pass some kind of comment on SILK? I know people will be asking.

Jan: I think it's a very relevant question. I think what we've already talked about here might explain part of that. We do so much more than a codec, and in fact, SILK is a very attractive codec for our customers to use, in conjunction with the rest of what we do. Again, we look at SILK as the wheels or the tires of the car and we provide the rest of it to put the whole car together. That means that SILK, standard codecs like G72.1 AMR [G.721] wideband, you name it; they all fit into our solution.

Lee: And GIPS also offered their own codecs, as well, I understand.

Jan: That's correct, and in particular, the iSAC codec, we're very well known for that and it's been deployed in hundreds of millions of end points.

Lee: That's the GIPS wideband codec, right?

Jan: That's our proprietary codec, which a lot of our customers use, but a lot of our customers also use standard codecs for interoperability, or can use SILK for wherever that's appropriate.

Lee: The iSAC codec is a wideband codec. Is there an evolution of iSAC towards, say, ultra wideband for example?

Jan: Going back to we don't stop our development and this is what you get when you work with GIPS. You get something that continuously evolves and gets better and better. When it comes to the ultra wideband or super wideband, whatever you may call it, that has until recently not been a big thing. Now when it is, we of course offer that as well. So iSAC now has a super wideband mode. We'll add other features over time, like series support, etc, anything that makes sense in terms of addressing the needs of the market.

Lee: Okay, so what you're doing is knocking down time to market for companies and you're also knocking down the cost of providing voice - audio, I should say, to be more general, and video solutions for devices, software, and so forth. It's about time to market, it's about saving money. This is the focus of GIPS?

Jan: In a couple of sentences, that's a very good summary of what we do, yes.

Lee: Okay, so that R&D, because I must admit for me, when I looked around the website I wasn't 100% clear. That's why it's really good to do this interview. Especially since GIPS is a sponsor, I really like to know what it is that GIPS is doing and get in a nutshell the sort of value. So it's research and development. If GIPS is an R&D company, then can you give me some idea of what's new? What's in the pipeline?

Joyce: Sure, I think we mentioned it a little bit, where we've been dealing with audio and voice over IP for quite a while. What's relatively newer for us is on the desktop video conferencing side. I think as you know, in the industry, real time video, tele-presence, video conferencing itself is really becoming more mainstream as more, and more collaboration applications are coming to mind.

Interestingly enough, we're just actually in the midst of completing a survey of over 1,000 business professionals. We did this across the U.S. and Asia. As you may know, Asia certainly has a different mindset when it comes to using real time video due to the networks and so forth. But a couple of interesting points that came out, for example, is that you'd be surprised to find that about 60% of users actually have used video conferencing or video chat capabilities relatively frequently.

We're seeing that consumer level technology, maybe that's Skype or Yahoo Messenger, Google, they're pushing this capability to the business level. What we find interesting is that video was seen as a lot more useful in communicating internally at companies, so a lot of employees at different sites, for example, would be using these types of Internet-based capabilities. I think that's going to drive the technology into what's widely going to be known as unified communications, and really seeing that being adopted at the desktop level.

That's part of the reason why we've invested our R&D into, for example, the H.264 technology. That's a standard video technology that will provide the interoperability among multiple solutions out there. Part of that comes with a new innovation called SVC, scalable video codec.

If you think about video conferencing today, you're going to have multiple participants, so let's say there are four different participants. You can have two out of the four, very high bandwidth, office environment. One might be in a home, DSL, fairly robust bandwidth environment. Another person might come in from a mobile line. If that's the case today, a lot of the technologies will relegate pretty much everybody on that video conference to the mobile quality. For efficiency's sake, that's how it's done today.

With a technology like SVC, you really can deliver the optimal quality for each participant, so the two that are in the office with very high bandwidth capabilities are going to get the HD level quality that they can get, while the mobile user will get the mobile level quality they can only receive. These kinds of technologies are really pushing the quality in almost a lifelike experience, along with the HD Voice, to the forefront with a lot of users.

Lee: I wonder if you're able to tell me a little bit more technically about SVC? I know that good people tell me it will be "everywhere" within the next few years, but I wonder if you can tell me, to some kind of technical level, how it achieves the optimal quality?

Jan: Sure, basically instead of compressing the video signal into just one stream that you have to take as it is, it creates different layers. It starts with the base layer; the basic lowest quality is supports. Then it adds enhancement layers on top of that. The idea is you can then, depending on each of the user's bandwidth constraints, screen size, etc, you can peel off the layers to the appropriate amount of data you need. Then you only have to transmit that data to that person, instead of sending either the smallest that works for everybody or sending too much to someone. It makes it very flexible because it's so easy to just decide what layers you want, and you can do that in a very low processing way so it doesn't cost a lot of processing either.

It's not hard to build something with layers. The trick is to do it in a way that it doesn't mean that the bitrate for the highest person goes up tremendously because the layers introduce overhead. That's the beauty of the SVC standard, that they've achieved a way of doing that in terms of low overhead and very high efficiency.

It also comes with some other improvements. Because you have layers here, you can find ways to protect the stream against packet loss better. One of the biggest issues we have with video is you lose packets, and then you lose your history, and you get a freeze of the picture or you get a lot of pixilation. By protecting the base layer, you know you'll get a decent quality all the time, and then you can let the enhancement layers get through if they get there. If they don't, you still do pretty well. That's some of the basic and most important features of SVC.

Lee: So SVC, H.264 as we see, you'll agree is going to become exceptionally popular over the coming years.

Jan: Oh yes, I mean; we hear it everywhere. All of our customers are talking about it. They see the benefits of it.

Joyce: And it's a technology that makes sense for the market. At some point, yeah, maybe it will be irrelevant if there is enough bandwidth everywhere, but certainly, you're going to have scenarios where the differences will occur, as more and more people do video conferencing.

Lee: Has it been tested over Air interfaces, for example, the extreme bandwidth constraint of mobile Air interfaces?

Jan: Absolutely, that's the idea, that you can go down to pretty much any scenario, and we do a lot of testing over those kinds of networks. Today it's mostly audio, but it's starting to happen on the video side as well.

Lee: When it comes to the mobile devices, are you planning on taking this H.264 SVC technology to devices?

Jan: Yes, absolutely, I think it's one of the key areas. Again, back to that; those are very constrained scenarios and that's where it's very important to be able to support this without having to dumb down the communication for everybody else that's on the same video conference.

Lee: Is that available today, or in the pipeline?

Jan: It's in the pipeline; parts of it are already available but the full support is coming very soon.

Lee: Now, everybody knows GIPS in terms of IP-based audio delivery. Going by what you're saying so far, GIPS is pushing harder into the real time video, it seems, and is there some kind of synergy between the two because sometimes it seems it's better that the audio can speak to the video side somehow, instead of using separate solutions for each.

Jan: Absolutely, as you know, a video conference without audio is pretty much useless. But, an audio conference without video is still a good way to communicate. The best is if you can have both, synchronized, and work really well. When we talk about synchronization, one of the key things is that the voice and video are synchronized so you get what's called lip synchronization.

With our experience and capabilities of handling the audio, we can make that happen much better than if you just focus on the video side of it. That, and the bandwidth management, you have this bandwidth available. You have to constantly adapt to what's available and to decide how much you're going to use. One important part of that is to figure out how much should I use on voice, how much should I use on video, to get the best possible user experience. Our experience of doing all this audio stuff means that we know what is the impact of reducing the bitrate on the audio so you find the right mix and tradeoff there.

Lee: Okay, it makes sense to me. Again, maybe because I was a developer for so long, I think a part of me would want to hack together some solutions without coming to GIPS. Have you come across any people who became customers, for example, who have tried to bring these components together for themselves, and if you have, why did they end up coming to GIPS?

Joyce: I think you're absolutely right, there are certainly lots of capable engineering folks out there who probably can take a bunch of these pieces and integrate them together. I think what we've seen, without naming specific customers, and we actually do have quite a few that do have that experience, believe they can do it, and usually within about a 6 to 9 month timeframe, will discover that optimizing that specifically for the level of quality they want is harder than they had envisioned.

What happens is there are all these other pieces. Remember, for the applications that we enable, we're a piece of that. Having to not focus in that area actually creates a much better product overall because they can look at the various user interfaces and other protocols that need to play a part in creating these types of applications. We definitely have a number of customers who actually have tried to put the pieces together, achieved some level, but the quality that GIPS can provide is certainly not there.

Lee: Okay, so it's the fact that you're centralizing the R&D, being in the game a long time, and it's spreading the risk for everybody, etc.

Joyce: Correct, and Lee remember, we have been doing this - I think our man hours is something in the order of 200 man years, or something. You get a lot of benefit for kind of taking the advantages of this, if you will, outsource capability.

Lee: I must admit, I've known about GIPS for years and we were all very excited with the iSAC codec. It's really good to hear where GIPS is doing, getting that clear to core message. I really appreciate that. Turning to the conference which takes place soon, can you just give me some kind of idea what

Jan: will be covering there?

Jan: I'm going to focus on the H.264 SVC and the benefits, and how to use that. It's going to be a pretty single-minded talk if you will. It's going to be really focused on SVC, the benefits, and how we look at how that can benefit the video conferencing market here.

Lee: Is that a technical talk on looking at what SVC is?

Joyce: It will be a mix. I think

Jan: will touch upon the importance of high quality video, which obviously as we've just talked about, SVC can deliver on the overall communication experience and then dive into the technology behind it, which obviously is the SVC.

Jan: Really, try to explain this is actually going to work, why this is what you want to do, and how you do it in terms of some quick remarks on what we've found out at this point in how you do this in the best way possible.

Lee: You're scaring me. It's not going to be a GIPS pitch, is it?

Joyce: No SVC is certainly not solely -

Jan: I mean, it's a standard.

Lee: It's going to be an independent talk about SVC, right?

Jan: Yeah, we have learned stuff; we might actually be the only ones that know some of these things, and we'll share that information.

Lee: Okay, so it's insight. I'm glad you're not scaring me. You're sharing your insight of the SVC technology, not some kind of sales pitch of why we need high quality video. I've been hearing that for the last ten years, but you're actually going to share your engineering insight, as you did last conference when you spoke about the challenges of Voice over IP on the iPhone [Slides | Video]. So, it's going to be a similar type of talk as in saying the challenges you've found or sharing insight into SVC itself, from a technical level.

Jan: Sure, that's our goal, to show our insight and our knowledge about it.

Lee: I really appreciate the fact that GIPS as a company supported the last event, came along and shared insight into challenges of audio on the iPhone and you're supporting the debut of the European event, and are really showing yourselves as a leader in communications innovation, and you're kindly now offering to share insight to the public on SVC.

I think I would like to wrap up there. I think we've got the message clear on GIPS as a company and value offering, and what you're bringing to the conference. Once again, I want to say we all appreciate the sponsorship, because sponsors pay for 2/3 of the event. The communications innovation community couldn't have two events running in a year, one in Europe and one in the U.S., if it wasn't for sponsors like GIPS. Again, I want to say for myself and the eComm community, I very much appreciate the sponsorship. I appreciate you spending your time to give me insights into the company. I wish you good luck with taking over the market when it comes to audio and video.

Joyce: Thanks Lee.

Jan: Thanks Lee.

As part of the run up to the debut European event next month, I'll be conducting a number of pre-conference interviews. The first of these took place on the 14th September 2009 with Gerd Leonard of MediaFuturist.com

The run time is 44 minutes.

Full transcript:

Lee: Okay, well I'm just back in Ljubljana, once again, enjoying the slow life here, and the fast Internet, fiber into the home that makes life very easy. I enjoy chatting to yourself because you are the futurist.

Gerd: [laughs] Well there's more than just one, you know. I have carved out a niche by focusing on media but there are many great futurists around the world where I take input from.

Lee: Okay, so we can't call you "The Futurist"?

Gerd: No, better not. [laughs]

Lee: You're able to tell us from your crystal ball, the future of telecom and media. I'm sure that's a valuable resource that you have, having that unique crystal ball.

Gerd: Well, it is not entirely a crystal ball. For me, it's always funny when I talk to clients because for me this is the present. For them it's the future because they have to operate things. From my point of view, I see the future as here already, but you have to have a little bit of imagination to actually project it into your business.

Lee: I like that way of putting it. Instead of going through a formal interview, and so forth, let's just cast out topics which have been bouncing around and just see how our chat goes. You must have seen plenty; there is this political push in the U.K. for three strikes, and you're cut off by your ISP or slowed down if you've been caught by your ISP for downloading "illegal" files. Have you got any comments to make there in this sudden ISP liability for content, which seems very crazy?

Gerd: I think there are a lot of more or less unfortunate things coming together on this. Basically, the content industry starting with music is rightfully worried about distribution becoming free. This is a global phenomenon. The more broadband we have the better devices, the more the push towards sharing and trading stuff without payment is clearly there. On the other hand, the content industry has, to a very large degree, refused to license the content in so many new ways that are being asked for, starting with imeem and YouTube, and MySpace originally. The refusal to license has essentially created a vacuum to where everyone rightly then also says if we can't actually do it legally, we have two choices which is to quit or to do it without permission. Then you have companies like imeem and MySpace and YouTube initially doing it without permission. That in return has created a need for the content industry to lobby the governments and industry organizations around the world to get the ISP to pick up the responsibility, which of course, is a rather ludicrous thought, given you could easily expand that to PDFs and JPEGs and what have you. That thought of deep package inspection for the sake of shoring up a specific business model is obviously not going to happen in Europe.

Lee: You said it's not going to happen.

Gerd: No, the discussion has been raging in France for two years, with President Sarkozy pushing it very hard. It was voted down by the French Council of The Court, I think that's what it's called; the Supreme Council. They have said this is basically not legal so the government pushed for it; the Parliament voted for it in France, and then the Supreme Council said you can't actually do this. It violates the constitution. The European Commission has voted on it three times, already, saying there is absolutely no way they're going to support this kind of activity to improve things in the content industries.

Lee: Okay, so you don't think this three strikes debate that's been going on in the U.K. will actually lead to anything?

Gerd: No, I think that anybody who believes that technology exists, that you can solve this problem, is mistaken on this. It's basically not a technology problem. It's a structural and licensing problem. It's basically a business problem. Whenever you try to solve a business problem with technology, like we have with DVD region coding, and those kinds of things, you end up really going against the consumer and sacrificing things that otherwise the consumer will hate you for.

Lee: So you feel that this motion, this three strikes push to have your ISP do policing is actually pulling value out of the system instead of adding value to the system as a whole?

Gerd: It's a fig leaf discussion. It's as simple as that. The discussion about solving this problem with technology is nothing but a fig leaf because it will never work. In a democracy, it's not actually technically feasible. If you imagine this, then I get disconnected from the web for downloading and I go to my neighbor and use his Wi-Fi. He also gets disconnected. Where do we go? We go to the Internet café and we'll do the same thing. It goes on from there and sooner or later, somebody will ask for his JPEGs to be prevented, and Murdock is going to ask for people who copy and paste from the Financial Times or The Wall Street Journal to also be disconnected. It's a whole chain reaction of issues. That is just not going to happen in Europe. That could happen in China and it is happening in China, but not in Europe.

Lee: So you don't see policing of every file format?

Gerd: The key question really is this; does any of this make any money for anyone? Does kicking people off the web because they have downloaded without permission make any money for anyone? The whole idea behind this is to say, "Well, we've got legal offerings that you should be using rather than downloading for free." If the legal offerings are so technology stupid, like using DRM, or they are so far priced out that kids can't afford it, like iTunes, then where are you going to point them to? In other words, if there is no commercial possibility to be legal, why am I being forced into those channels that I don't want to use? That is against every possible logic, if there ever was one.

Lee: Okay, I'm glad that you have optimism that it's not likely to go ahead, especially when you see large political backing. Often, these things are pushed through and incur high costs on the industry have very poor results in the end - but they still get pushed through and have high costs and make consumers' lives awkward. I'm glad that you're optimistic.

Gerd: Keep in mind that this proposal does not have any substantial political backing. This is all lobbying, mostly the IFPI, the Federation of Phonographic Industries. This is a very unpopular topic for voters. Nobody who is going to push this on the ISP level to get at my Internet connection is going to get any votes from anyone. Think about it this way; the IFPI can spend hundreds of millions of dollars on this lobbying about this, but in the end, will the Parliament and the government proceed in this direction if they ever want to get a vote again? It's not going to happen.

Lee: One thing interesting that you mentioned was the DRM. iTunes has most of the market share for music download.

Gerd: The problem with iTunes, is that people get punished for interest. The more music I like, the more I want to investigate, the more I'm going to pay. That would be fine if that was within limits, but kids that download a couple of hundred tracks because they've just heard this band or so; that just isn't financially feasible. Therefore, iTunes has sold 7.5 billion songs in four or five years. That sounds great but how much money is that in four years, and is it going to scale to $100 billion? It's not so basically iTunes is a great model for selling iPods, but not for selling music.

Lee: I hate to jump in with such an awkward question. It really is a difficult one but I have to jump in the very deep end and ask what is the model for selling music if you're telling us it's not iTunes?

Gerd: I personally am a great fan of all things Apple makes. I buy from iTunes and so on, but in the end, the model of selling music or content in the long run, but music to begin with, is to bundle it into access. Rather than me saying I'm making the effort to click on the track and buy it, I have a subscription or a bundle where I can do any of this. In reality, that bundle is already Internet access. That is already the same, except that it's not legal. The bundle is sold without permission, you could say. What needs to happen is as soon as I go online, whether it's on the mobile, or the DSL or whatever, permission for the use of music is included.

Lee: This is what you were pushing the last conference, the spring conference in San Francisco last March. The debut European conference, which you are kindly speaking at next month, you're speaking about telemedia futures and you're speaking about the need for telecom companies to move up the food chain into content. Telecom companies have been talking about becoming media companies for the past ten years, and doing some silly deals with sports coverage to get clips to the mobile phone and so on. All have been hugely unsuccessful. Many people say telecom companies should become the dumb pipe. They're transport only. Maybe not be a dumb pipe as such, but a distribution network, a way of moving things A to B with certain parameters and characteristics; the very last thing they ought to do is move up to content. That is not their business. When I look at your talk description for next month, you seem to be pushing the other way. Are you able to expand what you mean by moving up the food chain into content?

Gerd: Basically, if you're looking at the overall trend in this turf, it's that data is becoming a service now. In other words, I don't just pay for the 1's and 0's, I pay for the service of how it's handled. I have service offerings on top if it and then the service is now becoming content. Basically, when I want service, it relates right to what I want with content. You can't separate all these things any longer. When I talk about telecoms moving into media or content, I'm not talking about them producing music or becoming record labels, but essentially creating a platform for the use of the data, which is their original business, the voice of course as well; as well as the service, which is all kinds of offerings, and the entertainment and content experience. They have all of the things you would need to do this; they have the billing, the technology, the users, and the scale. They have so far not wanted to do this until maybe a year or two ago because they don't want liability. They don't want to be involved in something that is as hairy as rights issues. What you see now happening, especially in Asia, is that telecoms are saying, "Wait a minute. Our data output, or charges have to get cheaper because of the numbers of users and competition. People are making free phone calls over Skype and whatever other apps, even on the iPhone." They're going to have declining revenues in voice, and declining revenues in data. What is the solution for that? The next thing is to move up the next thing after data, and that's service and content. For that reason alone, they have to get engaged, which means not to pay whatever it takes, as has been done so far with music for example, but to create a new logic. That logic can't be to replicate the idea of a unit sell, a $1.00 a song or so, from iTunes to the mobile portal. That does not work for 98% of the population. The solution is to bundle the content, the basic access and then up sell. That can only be achieved in the long run, I believe, with a public license for that content. You have numerous efforts around the world of creating what I call a private license, like Virgin Media and Universal, like Orange in France and the record labels, and so on. Most of that doesn't work because it's too expensive and it has technology problems. Therefore, if you think about this, think ultimately; we have roughly two billion users on mobile and regular Internets. All of these users have providers. What if two billion people were able to have legal access to music and pay $1 a week, and if that payment was bundled, i.e. hidden with advertising, with subsidies like the cell phone hardware and so on; that would be a fantastic solution to everyone. I think telecoms are thinking, "Well, if we can make this happen, we don't just solve a huge problem which is content liability; we also create a next generation platform for the generation of new businesses, including virtual venues, virtual goods, and premium products." It's not really rocket science to think that far; that's why I was alluding earlier to imagination.

Lee: So you're seeing - I don't have to call it consolidation between telecom and media companies, there's certainly a clash between the two.

Gerd: The only that we can solve the problem of content on the web is by collaboration between the owners, the telecoms, the ISPs, the branding on the agencies and advertising companies, the people who make the equipment, the CE device makers and mobile phone makers. I would say rather than Nokia doing Comes With Music on their handset, they should do Comes With Music on the network. That would make so much sense because the money that they spend on this, if they shared the efforts to create a uniform standardized experience where Nokia could have a preferred position; that would be much better than doing it on the handset.

Lee: Why would Nokia even come into play if it's the network? The network obviously has many handset types. What role would Nokia specifically have as a handset manufacturer?

Gerd: Nokia would, in essence, become the preferred platform or preferred subsidy provider that allows them to do all kinds of things. In this system, the user is very unlikely to spend the money themselves. For example, if you look at Spotify, the latest craze in music; who is going to spend £10 a month on subscribing to music flat out? That is a very small number.

Lee: You don't think people are willing to pay a subscription fee, a low subscription fee for people to have flat rate music?

Gerd: I think some of them would be; by and large, not - especially because the price point has to be $.10 in India. The issue really is how to bundle the money as well as the service. In other words, going back to what I was saying earlier, $1 a week or €1 a week, if that can be paid by third parties, including advertisers and companies like Nokia, which essentially would then be a large advertiser or stakeholder, that would make all the sense. It moves the burden of access from the consumer.

Lee: Now Nokia pays some subsidy, others - Verizon, whoever pays some subsidy for the $1 or €1 a week. How do they get their money back? You say advertising. I can't quite imagine this yet.

Gerd: If you're looking at what's called the next generation advertising; I'm not talking about CPMs or buttons, or those kinds of primitive things, but branded applications. For example, the application you used to then get the content, like potentially Spotify, it could have Nokia in there in all different places, not just with a logo or something but with actual involvement with the channel, to where you are able to watch even Nokia branded content right next to the other content. Or, where Nokia could be seen as a presenter very much like Acura is presenting tech conferences or was it Lexus. You gain the benefit of essentially, next level of advertising, where your brand is all over the place and nicely integrated, but also completely customized, including location based awareness, which would be coming in on mobile devices. The amount of direct exposure you're getting to clients, there is currently 1.2 billion people using Nokia phones around the world. If they were able to get to all of those people in a targeted way using music, how much money is that going to be worth to them? Imagine that kind of branding that goes on, on mobile applications, like the OVI Store that they've just launched, and Apple iTunes and the Android Store. If they can have a preferred position in the sense that they are present because they're buying a piece of that system and making it work, that's exactly what they're trying to do now but they're doing it on their own handset, which in the long run is not economic.

Lee: I really like the description that you gave there. Even though we've only been on this call a short time, you've roughly mapped out the new ecology that you would like to see.

Gerd: It's not that hard. Thanks for the compliment, but this is already in place. For example, Google in China has a legal model for free music. If you go to top100.cn which is Google in China, streaming and downloading of all the music is free, and legal.

Lee: I wasn't aware of that.

Gerd: Yeah, it exists. Google has said, "Okay, we're going to share revenues with the labels. We're going to share revenues with the labels." I don't know what their revenue is, I think it's 70/30; I'm not sure. "We're going to share money. We're going to pay upfront a little bit. We're going to lubricate the ecosystem." It could be the headline for this interview. We have to lubricate this new ecosystem. If there is nobody in there who has any interest in lubricating it, it won't happen. To me, the ISPs and operators are the ones that could easily lubricate, if the content owners gave permission. The money is there. Can you raise a dollar or a euro a week for a wireless or Internet subscriber? You can. There are enough brands and subsidies, and enough ways of making this work for a dollar or a euro a week.

Lee: The telco provider could also be a broker between the content and an advertiser in order to brand the experience for one month with some washing up powder or some other service. They could work as an intermediary to help create stickiness, attraction, and involvement with a brand using the music as the attraction, like Google uses search.

Gerd: Totally, I think they become the platform for all of this. Imagine what would happen; this has been called the two sided model in many places, already, the two-sided telecom model. If they don't do this, Google will take over most of the connectivity around the world.

Lee: So Google moves down the food chain because the've failed to move up the food chain.

Gerd: They're going to do both; there's no doubt about it. They have to. Every single person around the world that gets to go online floats the boat of Google. Google puts satellite into space with a company called O3B, the other three billion. Putting online most of Southeast Asia, Africa, Brazil, India, and China for free, more or less for free as of next year. Google is going to provide connectivity, all of the cool companies that make equipment will have app stores. Which will sit outside of what the operator is doing. What are they going to end up with if they don't do this, if they don't move up into this telemedia system to where they are actually engaged. The total lack of engagement of telcos and ISPs have been really discouraging the whole solution of this.

Lee: That was very interesting what you said about Google moving down the food chain and offering free access. In order to jump into the crux of what you do, and I hate being so succinct, if you go and advise a telco on what to do briefly, a few sentences, what is your bullet point to them? What is your bullet point when you're first in the door, giving consultancy to a telecom company?

Gerd: Most of my work is think tanks. This is usually done in one afternoon or one day. The first thing is to look at what is happening. How do you make money in the connected world? That's the mind that we're getting vastly connected to very quickly, everywhere in the world. How do we make money there? There are a couple of major trends. One is the interconnecting of people, social media. That is becoming the number one thing on the web. I think Facebook has 5% of the global traffic now. What people are doing is they're connecting to each other. The Internet isn't about commerce. It's not primarily, and it's certainly not about data or information. It's about people, connecting people.

Lee: I would view it as being about communications.

Gerd: That's really the same word for it, in a way, but it's about people. What do they do? They consume content and they convene around content. They gather around content. Basically, starting with that you could ask what is the next big thing on the web. It's total abundance of a lot of things, abundance of content, 60 million songs, any movie you want - illegally, but it's all there. We have total abundance. Can you make money with abundance? Probably not as easy as with what I call the "new scarcities." The stuff that is really scarce now is curation, filtering, play listing, recommendation, sorting, connecting, and all the stuff that is more human in a way.

Lee: It's all things that save time and attention.

Gerd: Right, so Chris Anderson gives his book away for free, the free audio download is 8 hours. Guess what he sells? He sells the cut down version that saves people time, for £10, which is cut down to 3 hours. I save 5 hours of time and I pay £10. Isn't that the logic of what we're doing on the web?

Lee: You pay money to save time.

Gerd: Well, pay money to get a benefit of some sort, but just the music itself isn't going to be enough sellable benefit because it is just distribution. That goes for pretty much all medias sooner or later. What needs to happen is that for telecom to get into this is to first say people are connecting, convening around content; if I inject content in this system, will there be many opportunities for me to add value? The answer is yes. Once content is legal, then I can start sorting it, start making lists, start up selling to all kinds of other things related to the content. I become a very powerful and valuable platform and I don't have to create any of it because that shouldn't be the job of the telecom, to make TV shows or music. That is a very straightforward approach to this issue, when we get engaged we solve this problem for everyone. Our value goes up tremendously.

Lee: It will be very interesting what unfolds over the next two to three to five years. In order to move things along a bit, we have been chatting quite a long time; it's very enjoyable though. You seem to have been expressing interest in operating systems. If you're a media futurist, why have you had such an interest in operating systems between "open" and "closed"?

Gerd: Basically, I look at it more from a paradigm point of view. The entire "world operating system," we are switching from the old operating system of essentially domination and control, not just politically but also in terms of technology. Telecom walled gardens, copy protection, DVD region coding, intellectual property, WIPO and all that stuff; we're switching from that paradigm of control. We're being forced to switch to an open paradigm, the values are trust, they are merit, they are creativity, they are all those things that are much harder to pinpoint than on the other hand. What is the meaning behind Nokia donating Symbian into open source, into the open source community? What is the meaning behind GlaxoSmithKline and its client publishing a billion hours worth of cancer research to the public? These things are happening around the world and technology is only mirroring this. The more openness you have - Firefox now has 23% market share, 75% of the world's web browsers [servers] run on open source system. You see all these companies moving painfully but surely in the direction of saying, "Well, if we're more open we get more participation. When we get more participation, we can do better in terms of competition, which ultimately means we make more money."

Lee: This the whole co-creation of value.

Gerd: Yeah, so this is not a small feat. Most people are really worried about open systems because the lack of control means you have to get used to a different operating mode. Most of the time, it also means you're probably a smaller company. You need less structure there.

Lee: So, one company we see leading the way when it comes to media is Apple. As you will be well aware, Apple hasn't been merited with huge banners of openness, rather the opposite; they're being called the "new closed" so I'm trying to reconcile them being very successful in the new media space, i.e. iTunes and the App Store, and at the same time we're hearing they're the new closed. Google, we hear noises that they intentionally - I don't know if it's true at all. From what I read I can't be clear on it, but there could be disputes over running Google Voice over Apple devices.

Gerd: Of course, first of all there is no recipe. The Guardian or National Public Radio or the BBC being completely open works great for them. Would it work to be completely open for Samsung or HP? I don't know. I think there is no recipe here. I usually go for what I call the "controlled open" approach. Where does it benefit to be open and where does it benefit to exercise some sort of control? That is always a very unique mix. In the case of Apple, this is a one big exception; an extremely successful company and it's completely closed. Steve is the benevolent dictator, or the other guys there as well.

Lee: It's just hard to reconcile these new models with Apple's ongoing success.

Gerd: Absolutely, however, how many companies are able to do this? If you look at the landscape of companies, how many companies can do what Apple has done? Even if you tried hard, the bottom line is it's probably easier to go the open way unless you have a very unique way of existence. Many people have tried to become like Apple or to be like Apple; it's not working.

Lee: Are you able to share your view of what you would call "Content 2.0"? What is Content 2.0 to you?

Gerd: I think the Internet is becoming a globally connected society, which basically means when we market or sell content, it cannot be only about the distribution of it. In other words, the monetizing cannot be done just by counting on distribution and on the rights of doing so or not doing so. Content 2.0 is my sort of mime for saying we create content. In the future, how do we sell it, market it, and distribute it, and how does it generate benefits? I'll give you an example from the newspaper industry, which is currently under great pain. A lot of jobs have been lost around the world, people shutting down, and so on. In the newspaper industry, it's sort of an average of between 70-80% of the expenses of a newspaper or print magazine is not in the content. It's in the machine, the ink, the paper, the trucks, and the buildings. If you could say, "What if we stopped printing," and those expenses diminish, if we can shrink the company to a place where we can safely keep the 20% of the budget for the content creation, if we were able to do that and at the same time grow new businesses around that digital content, to where Kevin Kelly calls the "new generatives," the new ways of creating money - for example, by aggregation, by commentary, by curation, if we can do that and if we can bundle content as software like mobile phone apps, that would show the path to a profitable future. Of course, never mind, there will be newspapers that will forever keep printing because there are other reasons to do so, not just financial. That sort of reflects on the general mission of the content industry, which is to say how do we keep content creation alive and then create new models around the distribution?

Lee: Okay, so one thing I have to ask because, again, you mention the future is, the crowd, and the cloud. If you have the crowd do you necessarily need an intermediary like a "newspaper, like a record company? The crowd is better at deciding what is a hit and what is this and what is that. It's this whole curation point; you kind of wonder if curation will become completely decentralized. I guess that's the billion dollar question.

Gerd: I don't think so. I think that the curation that the masses are doing, as you can see with Wikipedia or Amazon Reviews, or what have you, there is value to that. It's not the only value that can be obtained. I would much rather listen to Pat Mathini's new jazz guitar playlist than to look on Last.fm for people who like Pat Mathini. Am I going to pay for that? I think I would much rather pay for that than to pay $1 a song on iTunes. I think the professional part of doing this is equal to the consumer source part, and they'll be completely converging. What The New York Times, for example, is doing, or NPR, National Public Radio in the U.S. is to devise a strategy to converge the two and create very unique value in that process of converging.

Lee: I have to agree with you, but we may be leading the curve to some degree in lifestyles. If I look behind me just now, I've got 300 DVDs I've not watched, because I subscribed to Amazon DVDs a long time ago and I've just never had a chance to watch any of them. The DVD player is not connected. I still keep getting DVDs by mail every month. I just am bombarded by content. I've got more music than I could listen to in the next two years. I've got a zillion, it feels like, articles noted that I would like to read.

Gerd: Here's the simple logic in this context. People complain about kids downloading music but the fact is; research has shown that people "consume" about 40 new songs a month, if you let them. That's 40.

Lee: Run that past me again?

Gerd: The average person in music consumes about 40 new songs a month. That's the volume of consumption if you let them, if they have a choice of picking stuff. There, the question isn't so much am I going to get paid for the distribution of those 40 songs, or do they download 40 million and then never listen to it. Who cares? The bottom line is I'm going to get paid for the whole thing around the 40 songs; the buddies that also listen to it, the collection, the curation of the process, and for up selling from those 40 songs to a concert recording or a virtual venue, or what have you. That is where the money is. The money isn't in selling those 40 songs. There is some money in selling the 40 songs, but that's not the end game. If I'm going to say pay me a quid for 40 songs, that's a totally flawed calculation on the Internet.

Lee: I hear you and actually, while we're talking, I just went to Google and searched for something that my friend Martin Geddes said back in 2005, which I highly agreed with and you're echoing it. I put some keywords in Google to find it. This is Martin Geddes speaking about telephony, "Here's the deal. In the old world, the economic activity started when the phone call began," i.e. meaning charging for the media, the voice. "In the new world, that's when the economic activity ends. The money is in presence, social networking, filtering, privacy management, and so on. It's a complete inversion of the economics of telephony." In other words, he's saying it's all the signaling around a call which is where the money will be, rather than the media itself. It's nice to see that four years later or almost four years later, we're making the same noise still, but for what I would call the entire industry not just communications, but media also. It's an aggregation. It's in filtering. It's enabling social networking and so forth is where the juice lies to make money.

Gerd: Absolutely, if I just summarize two things there that came to me as you were talking. We need two things. At first, we need permission by the rights owners to get involved on a network wide, open platform license. We have to stop that one step calculation of if I want a song I have to talk to 50 people in 50 different places. They had something in open license and it has to be collective, either voluntary or compulsory, starting with music.

Lee: I like the notion of compulsory.

Gerd: Collective is fine if this was effectively the same as cable TV or radio or the copy machine for that matter. The second thing we need is for the telcos to get out of their data world and say, "We're going to lubricate this because that's how we're going to make a huge difference in our P&L in three or five years. We're going to put the money into creating a system that actually works for all involved parties." That is exactly what Google is doing. Google Books, the satellites, Google China Music, Google is lubricating the content ecosystem because they know that this rising tide will send their boats flying off into the sky.

Lee: Great, and I am really happy that we got in contact last year and you've been pushing, not just pushing, but highlighting what is taking place. You did so at the last conference and you'll be speaking again next month. I think you're doing a 20 minute keynote. Do you want to finish this off, since we've been on this call for some time, by giving some idea of how you see the future of advertising? We've covered content, policies, where money is, but do you really think that advertising is going to "pay" for everything? What is the future role of advertising?

Gerd: I think Fred Wilson from Union Square Ventures said that the age of one-way communication from an unwanted or uncertified brand is over. That is what advertising used to be. You get one-way stuff dumped on you from somebody where you don't like them or don't know who they are and you don't care. The business of advertising as disruption, interruption, or a nuisance that is unavoidable is over. On the web, we're not going to take anything like this. We're completely going to punish people that do this to us. For example email, any PR company that emails me with their pitch goes into the black list. I dump them. I punish them. Any PR company that follows me on Twitter and gets involved in a conversation and looks at what I read and what I like, and then sends me a meaningful link; they go on the white list.

Lee: They're positive in terms of Groundswell.

Gerd: They participate. Anything with interruption or disrespect for the user is going to be swept away. That is, right there, most of television advertising. That's just a question of timing. Advertisers are usually two to three years behind that curve. Basically, we're going to absolutely switch that model to where advertising is engagement and interactivity. The trillion dollar budget of advertising and marketing that is pretty much spent per year, I think at least 1/3 of that will move into the landscape of figuring out where are you, what do you like, where have you been, and what do you allow me to show you.

Lee: I would love to talk longer because I would love to tie what you have been pushing in that final statement with what Sense Networks are doing. I have to ask you; did you remember the talk from Sense Networks?

Gerd: A little bit, yes, but I'm familiar with what they do.

Lee: They're going to be speaking next month, as well. We're not just going to have Tony, but we'll have the CEO as well, of Sense Networks in Amsterdam. When you combine what they're doing and if you remember that all telcos have obviously got signaling networks, then it's an absolutely fantastic combination. I really feel I would love to end there. You're saying that kind of final point you were making and combining it with the likes of what Sense are doing, I think are really paving the way in an extremely exciting direction. Since the last conference, they've received funding, which is a good sign. I think we'll finish off there, and I appreciate the afternoon coffee chat with you. As usual, we spoke for a long time, but I felt as usual that it was uplifting. Thank you very much Gerd and I hope you have a very successful week. I appreciate you sharing your insights.

Gerd: Okay, we'll talk soon. Thanks.

Lee: Thanks, bye.

"Martyn Davies speaks to Lee Dryburgh, Founder of the eComm conference about his love of telephony, his career, eComm and the future of communication and interaction."

Download MP3 here (28:47 length, 26 meg) or visit this page to stream it.

A week last Monday I had the pleasure of interviewing Gerd Leonhard via Skype.

The run time is 37 minutes.

Additionally the full transcript is below. To distinguish between us I've indented Gerd.


Transcript

Good afternoon Gerd, how are you doing, today?

I'm doing fine.  It's snowing here, in Switzerland. 

It's always snowing in Switzerland.

Not always [Laughs]

Not always, so you have some time off.  Okay, so I know you only have a short amount of time, so let's jump into this together.  I want to start by saying thank you very much for speaking at the Emerging Communications Conference taking place next month, in March.

You're welcome.

I might as well begin by asking why you are attending and kindly speaking; what value do you see in it?

To me, of course, the Bay area is more or less a second home.  I lived there for seventeen years.  I also find that still, a lot of the great inspiration and the great people I talk to are still based in the Bay area and in the valley.  For me, it's a little like a homecoming thing, and also to get inspiration.  I'm very impressed with the program and the sheer number of interesting people.  I'm looking for this to be sort of a giant - everyone that you know from Twitter, Facebook, LinkedIn, or what have you, are probably going to be there, one way or the other.  That's what excites me.

It's a fantastic social gathering and a fantastic place.  I must admit; call me biased or not, but I'm exceptionally looking forward to it.

I want to start by asking you what is a "media futurist," this self-assigned title you've given yourself?  Do you want to expand on what a media futurist is?

Unfortunately, there is no [0:01:36.2 icon?] for titles, like an organization that gives them away.  This was essentially given to me by my clients who say, "You always talk about media content and entertainment and the future, so you're sort of a media futurist".  After this happened to me around a dozen times, I said, "Okay, that sounds like a great title."  There are a lot of futurists, but I specialize in media.

By and large, I'm not a futurist, like Paul Safo or people like that who are actually real futurists, being sort of generalists and very bright people.  I focus on media, which basically means content, technology, and entertainment business models that have to do with print, publishing, music, films, and all that stuff that is with the hairy questions of "How do you make money in the future, and what are the models?" 

I don't quite see the futurism in the same light as saying twenty years from now, we'll be living on the bottom of the ocean.  I really look at the next two to five years, so it's really more like a "presentist" in many ways, or even historian...

"Near-futurist"

It's a near futurist and it's basically a working title.  I that think sometimes people are upset with the idea that I, or anybody else, could actually predict the future, which of course, I'm not doing.

You find yourself at a more telecom/com focused conference.  What is the relationship between media and telecom/communications?

The past couple of years have shown that now that the owners of networks, ISPs, operators, and telecoms have to get involved with content and media because what's happening now is that those areas are converging.  Telco has been, traditionally, more outside of this turf.  I wouldn't call them DUN pipes, but in many cases, they've called themselves that.  They are outside the idea of social media or social interaction or content, entertainment, except for the various trials of integrating it.  Now, they're converging in the sense that they actually have to work together to create a new business.  There really is no future of the content business, I think, without making a deal with the telecoms, and probably vice versa.

I hate to jump right into the deep end, but could you expand a little upon that?  It's quite a shocking statement to be making.

Basically, we're seeing that with increasing broadband penetration around the world and the penetration of wireless devices at high speed, we're looking at a situation, in two to five years, where there is going to be a billion people networked, interacting, and trading content; first it will be music, then films, television and eventually books. 

If the networks don't work with the content owners to create new business models, essentially, we will be looking at a situation where everybody does it but nobody is legal.  Nobody could actually make a living of it because there is no real lubrication of the system.  In other words, governments will be asking the operators to clean up the networks and not have free content, or illegal content?  Content owners will be asking for sanctions and technical protection measures and in the meantime, all of the users will be doing whatever they can to circumvent.  That situation is not very fruitful for anyone.

What we're seeing, right now, is that people are trying to build, what I call, a "twenty-first century content economy," which means that it's no longer going to be about selling copies.  It's going to be about selling access and sharing the revenues, as we've seen in many different aspects on the Web; sharing revenues is a scary proposition for a lot of content owners but it may be the only way.

Sharing access - to me, you think that as soon as one person gets access, they can set up their own distribution, Peer-to-Peer, and then only one person ever needs to pay for access.

Absolutely, yes, but of course, you wouldn't do that if your access is bundled, right?  I'm not saying the access to the Web is going to be taxed for content, or charged extra; I'm saying that the smartest way to do this is to bundle access to music and then other content, into the access to create an ecosystem where money is being generated by all kinds of ways, including advertising, sponsorship, device manufacturer subsidies, and so on.  In that case, music in this case, feels like free to me but it actually makes money.

So, you're thinking it's part of your broadband monthly payment.  It's inclusive of music, for example.

Absolutely, and I think we're seeing this, already, being trialed around the world.  The Isle of Man has a trial.  This is a small island, but actually, it's a separate government right between the U.K. and Ireland.  You should know.  [Laughs]

[Laughs] I know the Isle of Man, a handy place for many.

And many other countries, including in China, Google has a flat rate at [0:06:56.4 unclear] with their own search engine.  There are many debates, all around the world, because the only solution for this problem is not to criminalize the users or to tax them but to create an economically viable system that can grow and generate revenues of all of the involved parties, which of course, includes CE device makers, mobile phone companies, manufacturers of devices, advertisers and so on.  I've written about this, many times.  My war cry on this is really taken from Larry Lesick, who says, "Compensation not control is the way that this is going to work".

So, you're not a believer in DRM, at all?

[Laughs] You wouldn't have asked that if you had read all my stuff.  [Laughs]  This business model for protecting content has nothing to do with technology.  Technology doesn't exist that can protect at least music, other content we can debate it even though I don't believe in it.  For music, DRM is dead because it has proven to be a total turnoff to any user, anytime, anywhere.

Surely, iTunes is the most popular music store ever.  I don't know what the percentage of music consumption via iTunes is, but it's DRM'd.

Yes, of course, that being the large exception, however, iTunes is a phenomenal success for selling iPods, not for selling music.  I love iTunes; I love the Apple stuff, but this is something we have to clearly see.  They have done a fabulous job doing it, but six billion songs or so that they've sold in four years is huge, but it's not going to drive the music economy.  It drives the iPod economy.  [Laughs]  If you're looking, in the end, how many songs on an iPod that have been purchased, I think that percentage last time I looked was under 5%. 

I do have to apologize.  I have not been following what's been happening with music, closely at all.  The general perception I was getting from the odd article here and there was that music itself was going to become free and there would be disintermediation between artists and consumers of music.  The music would be free and the money would be made from gigs, and so on.  It made sense to have people sharing your music on Peer-to-Peer networks, therefore, because it raised the level of awareness of the artists, which helped them sell t-shirts and gigs, and so on.  Is this some kind of totally out of sync picture that I've absorbed, somehow?

No, I think this is the right direction.  I wouldn't be as drastic as saying that music is free, in the sense of music not being paid for, for the creator.  I think it will feel like free; it will be free for the consumer because the commercial model being built around it will make it essentially a bundled experience, at least on the first level. 

When you buy your mobile phone with a certain operator, they bundle the music in it and you can do whatever you want with the music.  It's all just blessed as being part of the environment.  This is essentially like radio and T.V.  You don't have to get a license to listen to radio.  It's already bundled, obviously.  A hundred of years ago, that happened.

What we're looking at and this is what Chris Andersen is talking about in his new book, Free and also The Long Tail, of course, that the experience in itself can raise enough money to pay for the content because by and large the music industry is only a $22 billion or $23 billion business worldwide.  You can easily calculate how much it would take for all users to raise enough money in the network to pay for this.

I must admit; it's not huge.  That's not a huge mark at all.  It might sound huge, but it's actually relatively small, especially if you compare it to telecoms industry.

I essentially see the telecoms as becoming the key platform for the monetization of content because essentially, all of the artists and creators want to go direct.  They want to reach their audiences directly rather than through, necessarily, News Corp or Fox or what have you.  Of course, they will still need them and want them but ultimately, going direct is the goal, and the telcos can do this.  They have the direct connection to people who pay their bills with their mobile phones.  That exists.

So why - I'm kind of wondering why we need an operator in the picture?  Why does an operator need to know about content; just give me the pipes; artists can get their music out in Peer-to-Peer networks or however.  Why does there need to be a relationship set up with the telcos, unless your idea is to provide revenue stream from the end users?

It's quite simple; as long as the telecoms and the operators are not licensed to actually have music, which today they have music but they're not supposed to acknowledge it because the music isn't legal on the network, it's just being illegally transferred.  The key is; as long as they're not legal, they can't actually make it work because they can't build anything on it.  They can't use the data to sell anything else.  They can't up sell from the music, to concert tickets or live recordings or video on demand.  All these things can't be done because they're not supposed to even have the content, in the first place, at least not in the legal way.

You're building an awareness between the content level and transport level.  I can't help but have the feeling that the transport level maybe should be blind to what's up above, and what's up above, let them worry about providing up sell to concert tickets, and so on.

Of course, except that this system doesn't work.  Clearly, the faster and the cheaper that people connect on mobile devices; this kind of sharing of content is going to absolutely explode.  That's actually a good thing.  But, if nothing else can be built on top, then you won't see any way of monetizing this outside of the network, itself.  I always say, "Essentially, the future of content is the crowd and the cloud".  In other words, it's the people using it and the cloud where it sits.  If we can't interconnect the two and create, essentially, a new logic of how the whole thing turns around, like Google has created their own advertising logic and Twitter will probably create their own logic, as well.  If we can't do that here, then the value just drops dead, left and right of the system.

So, I have to play the Devil's advocate, a touch, here.  Do you think if that happened, that people would stop creating content?

No, I don't think so.  People create content for a lot of reasons.  [Laughs]  I mean, I should know; I used to be a musician and producer for a long time.  I think the question is not so much that they should get paid; I think the benefit of this whole thing working creates monetary and other benefits to everyone in the chain.  Governments can stop worrying about so called copyright infringement; record labels can stop worrying about distribution because it's built in; artists can stop worrying about having to find somebody to police on their behalf; and the whole system can become sort of functional again. 

Essentially, what we have now is a dysfunctional system.  That, in the end, can't really be good for anyone for social, cultural, monetary, or a lot of other reasons.  I think there is benefit in figuring this out together.  This is always what I will talk about in my speech; how will this work and why do we need this?

For example, do you feel we need record labels, still?

I feel that we need agencies.  There are many great examples.  For example, Terry McBride and his company in Vancouver, called Network Records.  They serve as an agency where they help the artists develop, select songs, and basically do the right development steps.  Then, they put them on the Web and market them and take a cash percentage off of the top, unlike most record labels, which took 90% of the revenues from all sales.  This model is an agency model and that is what the labels are going to do, become agencies.

I just can't help myself but see it become such that hits are decided via "crowd sourcing".  Surely, millions of people can decide which songs are better without having five or six people in the middle trying to help that decision.  I just find it hard not to see complete disintermediation, but maybe that's just me and maybe you can change my perception that complete disintermediation will not happen.

I think it will but at the same time, this is not an either/or process.  A lot of professionals will be involved in picking artists and songs, so early, that none of us would even see anything there.  This is an art form.  This is not a vote for a campaign. [Laughs]  This is basically not a democratic process; [Laughs] if you go to identify what people will like, two years from now, and then nurture it along, you are going to need more skills than a search engine.

I think all these things, together at the same time, will create the play list and the labels of the future.  I always say it could very well be that the bloggers and the blogs like Hype Machine and Elbows and so on, are the next labels.  They are essentially doing that too; they are selecting content.  I believe that 90% of us, in the future, will probably not go through the trouble of making our own play lists and everything; we will do it through our network.  We will be sourcing play lists and content through our network that will include professionals, professional amateurs, and total user-based voting, or even machine intelligence. 

Machine intelligence is certainly a nice one.  I wonder if you are saying that the deals will be struck, such that when you pay for broadband access, you have access to music; surely, that might end up with the situation where if you are one ISP, you have access to Sony music, but if you are on another ISP, you only have access to EMI music.  Is that not a bit strange, that situation we could end up in?

You bring up a good question.  The authority for the ISP and the operator to have music cannot be based on individual negotiations.  Then, you end up with models that are what I call "private flat rate".  [Laughs]  That wouldn't work because the consumers don't care what the label is and they wouldn't know. 

This is very much like radio or television; when you play music on radio, you can play any music you want, from any label, anywhere in the world; it's all covered.  This is called a collective license in the music business, and it has worked well for radio and many other models.  What we need for the Internet is a collective license where you can play any music you want, as long as you report the data and usage, then a pool of money is being generated, and then you are covered.

Somehow, the ISPs and telcos need to become connected to this model of sucking in revenue to pass to labels/content creators. 

When you create a model to where all of us, roughly about 1.6 billion now, but pretty soon about 3 billion people connected to networks; if we can gather around music, and actually use it and forward it and exchanges it and remix it, we create a huge opportunity for a lot of up selling, including video, audio, games, and so on, like Amazon already does, and there are many other opportunities, of course, next generation advertising, like you can see now with [0:19:32.6 unclear names] and Bacardi, that sort of interaction of brands and music.  We create a huge ecosystem that is very powerful to monetize.  We won't see it until we actually have both things in place, which is the network, the crowd, and of course, a legal way of using it.

But, the business model is only adding "a surcharge" onto your access cost. 

It's not a surcharge in that sense.  I think it is a little bit hard to understand if you haven't really looked at the music business in detail.  Radio is licensed by law.  If you start a radio station in the U.S., if you get a frequency, or whatever cable channel, you know what to pay.  There is a standard license in place.  I think it's 2.2% of the revenues or whatever.  That is what you end up paying. 

We need exactly the same license for the Internet.  If you want to stream on demand, it's x%.  If you want to download as part of the package, it's $x per user.  That can be leveraged against the money that is being made in the network.  The radio station owners don't pay for the music.  They let the advertisers pay.  We end up with free music.

Okay, that certainly is what I would call an interesting thought [0:20:50.5 unclear].  It will be really interesting at the conference, if you could expand upon that.

I think that obviously, this discussion is not widely happening, all over Europe, because the record industry association, the IFPI, has been asking governments to put laws in place to essentially disconnect people when they have been proven to download music.  Now, you are not going to go to jail.  You are going to get disconnected from the Internet if you are a downloader, which is another ludicrous way of solving the problem.

I agree with you.  Is this push to disconnect users, which is being forced on telcos and ISPs, is this only Europe or is it North America, as well?

They are trying to roll this out, worldwide.  This is the alternative to the lawsuits, which the RAA announced six weeks ago; they are going to stop suing people.  Now, instead of suing people, which has been totally unfruitful, out of the 30,000 lawsuits or so, only one went to trial.  It was then declared a mistrial.  It was a complete disaster.  Now, they are switching to a strategy of saying, "If this person downloads and uses Bit Torrent, or whatever, unplug them".  They want the government to support this law.

In Ireland, the ISP Irecom, has already said they are willing to support this, while in Germany, [0:22:23.2 unclear] in the U.K., they have all said there is no way we are going to go anywhere near this.  They know what is next.  Everybody is going to ditch them.  [Laughs]

I would agree, but again, I haven't been following the evolution you appear to be sharing, but again, the last watch on my radar was that you're getting encrypted Peer-to-Peer networks.

Here is the thing about Peer-to-Peer sharing.  People downloading from Peer-to-Peer network has become a minor activity in regards to how music is being shared and exchanged.  Now, the big thing with kids is not even download, but just share playlists on the many, many streaming on demand services, including Project Playlists, and Song Czar, and Schemer.  There are hundreds.  You don't even download, anymore.  People are sharing music through Rapid Share, through Facebook, the streaming apps through USB drives.  This whole emphasis on Peer-to-Peer networks is the past.

You've been talking about content 2.0.  Can you tell me what you are meaning by content 2.0?

Of course, it's kind of a senseless headline, very much like Web 2.0.  Nobody really knows what that means.  Basically, content 2.0, for me means a new logic in the content business.  This is really, where we are heading, right now, because it used to be quite simple; we sell units.  When you sell content, you sell units, meaning DVD's, CD's, software licenses, licenses for T.V. shows.  Those are units, basically.  When you sell units, you can count them.  You can hunt people who make units without permission, and so on.  It is all very easy, or more so than today.

The future of content, the next generation, will essentially be selling access and then the units.  We're going to have to figure out how we can make money in a model, to where the first action is a click, rather than inserting a CD into something, or a DVD that you have to buy.  When that click becomes part of my natural environment, like I'm carrying the Android phone and click on a button, and I hear my favorite artist streaming, what kind of economy of content is that?  Who gets paid for what?  What is the value chain?  This is what I call content 2.0.  Of course, it's going to be quite a debate figuring out how this kind of content creates enough juice in the ecosystem to create more stuff.

Now, when you are talking about the future of content and telcos, do you see it being a clear cut legal or tentacle solution, or both?

[Laughs] Well, clear-cut - I wish it were.  I think that what we are seeing right now, just like the switch from Bush to Obama, is essentially a switch from domination and war to collaboration, at least, from my idealistic point of view, here.  [Laughs]  I think we are looking at the very same situation here.  We are going to have to collaborate to figure this out together to create a business model that works for everyone.  This is not something that one company can fix or one piece of the ecosystem should pay for.  In other words, the payment isn't going to come from the telcos; it isn't going to come from Google; it isn't going to come from the user only; it will come from all of them, but just in a little bit.

This is where the collaboration comes in.  For that to work, we need the telcos to step up and all to take a piece of the action, just as well as the content business.  If the content business goes on as they have been, especially in music, which essentially means to refuse the license, then I don't see any way for this to go forward.

Okay, are you aware of the Martin Geddes talk, at eComm 2008, when he was talking about the double-sided business model?

Yes, I did.

Do you want to pass comment there?  I can't help but see a huge overlap.

Absolutely, I think that is basically - of course, two-sided business models, in general, are the way forward for a lot of companies, not just for telcos.  They are creating a new vortex, where you can surf the left and the right, rather than just one side.  I agree very much with the Telco 2.0 people, also with Simon Torrence, on this whole scenario of having to have this.  If it is only on one side, it isn't going to create enough revenues and future possibilities because you will become marginalized.

I'm glad you see a strong overlap.  Martin would have spoken a lot about how telcos could aid the whole distribution of content and charge for that in various ways, and that the future of telcos is to out distribute your competitors.

Let me turn back to this access model.  I know you've indicated it is more complex than what I thought was just a surcharge.  I have to say; surely, it will end up with film producers then saying, "We need films covered with this, as well". 

Sure, ultimately the power of the network is going to have enough payment in it for most of the content to be transacted upon in this way.  The difference, however, is that music is something that is basically like air.  Everybody always has music, somewhere, followed by electricity or air - or the other way around.  Movies or games are a little bit - people have to dedicate time to them, right.  Video clips, five minute things, yes, but ultimately, there is a different value chain for movies.  There is also different up selling.  I would be more than happy to pay more for HD and high quality movies, but I'm not so sure I'd pay a lot more for over sampled mp3.  Most people would feel the same way, I think.

There is a different mechanism in place, here, but you're right; in the end, of course, all of content is heading in this direction.  We have to figure out how to make this work, more or less for all of it, but it will take a lot more time for books or films.

I need to ask a typical question here because I am always looking for where opportunities are.  Do you see opportunities for telcos?

I see both the opportunity, as well as the necessity for them to get engaged.  This is a situation that has to be resolved in the next year or two; I wouldn't say on a global level, but at least on a developed-nations level.  It is a huge opportunity to get a foot in the door.  The content owners, especially in music, are desperate for new mechanisms and they like the idea of the flat rate.  If they can get over their fear of being outmoded, in the process of giving distribution into the network, this could be an extremely powerful system and a lot of people from major labels, including Rick Rubin, from Sony and Columbia records, has said, "Is music like water, like David Bowie said, ten years ago".  That is the way forward.

Finally, I would like to ask you about copyright versus usage right.  On a quick look at your blog, you seem to speak about usage right and copyright.  Can you tell me what the difference is?  That's the last question.

I think that it's quite obvious that traditional copyright, as it is right now, gives the exclusive right of reproduction and of use, to the creator and the companies that represent him.  I cannot make a copy of a song and publish it.  I'm infringing.  Because of some of these traditions being fifty years and plus old, we have a real issue that anything that we do on the Web creates constant infringement of copyright. 

The reality is that all the stuff that is fun on the Web, with music, is probably not legal.  That includes streaming on demand, remixing, synchronizing to video, because of this exclusive right.  I don't think that in particular, there is anything wrong with exclusive right; I'm just saying what we really need, in addition, is a usage right that makes money.  I would much rather see a deal in place that says, "YouTube videos can be put with music, as long as the music gets a part of the revenue share.  If it's non-commercial, let's just make a deal and collect".  That would make a lot more sense than saying, "No, you can't use it, under any circumstances," which is not realistic, and remove them all. 

I'm essentially pitching this change from control to compensation, to be enshrined in the law, as well, that gives the legal right for people to use the music and just compensate as part of the process.

I think it's well known that my favorite book is Yochai Benkler's Wealth of Networks. 

I totally agree, same here.  [Laughter]

Okay, so you love that book too.  It's an absolute art piece.  You just feel it's a lifelong piece of work behind that book.

I have a huge stack of books here, but Yochai's book is still blocking the reading of all the other ones, [Laughs] so I couldn't agree more.  [Laughs]  I think he has unlocked a lot of truth and forward thinking in that book.  I would definitely concur.  That's pretty much the bottom line.  Read the book and then we should know.

He will very much speak about the battle of the incumbents of the twentieth century.  Can you pass any last comment on if you see what we call incumbents of the twentieth century continuing, or if what we'll see, is fragmentation into smaller units collaborating and so on?

I think, in general, in media and in content, if you can't collaborate in the future and create win/win scenarios, you probably won't be there.  If you can dominate and basically run the show, if that's all you can do, you will probably be faded out.  This kind of model is as old as the Bush model was, which is to go forward and start a war. 

I think, basically, it's all about that.  If the big media companies and the incumbents can collaborate, if they can truly work out something together, rather than saying, "I win, you lose," which worked just fine.  The Russian president calls this the "economic eagle-ism" and not to sound like a socialist, here, [Laughs] but this is a solution we have to find, together.  If they can do that, I think they will be there.  I think that in music; most of the large, international companies will not be part of it because to do this, in this way, just doesn't fit their business paradigm.  It's not the ROI plan that they had in mind when they got into the music business.

Okay, I've got you, and maybe being in Switzerland too long, you're getting indoctrinated.  [Laughter]  I very much appreciate the time, and I appreciate the fact that you did it when time is very tight.  It's been very good to touch base with you and at least get a taste of where you are coming from.  I really look forward to the 20-minute keynote that you are giving, in a few weeks time.

I look forward to it, and if people want to connect before that, it's on my blog - www.mediafuturist.com, or my Twitter, which is gleonhard, just like the name.

Last Thursday I had the pleasure of interviewing David Burgess. The audio quality is not as good as I would have liked owing to infrastructure problems at David's end.

The run time is 37 minutes.

Additionally the full transcript is below. To distinguish between us I've indented David.


Transcript

Good afternoon, David, how are you doing?

Pretty good, and yourself?

I'm all the more fantastic for being able to eventually connect with you, after a few tries there.  You are dealing with an open Source BTS.  Can you tell me something about what we mean by open BTS?  If we imagine a BTS, we're imagining an antenna.  We are imagining large, physical, costly hardware, and something which propagates radio signals.  Can you tell me what open BTS is?

Yes, I guess what you're describing there, in terms of the big antennas and what they call the civil infrastructure - that's the site.  That's the BTS site, but the core of the BTS site is a piece of equipment, the Base-station Transceiver Substation.  That is the piece of equipment that actually generates the network air interface, the interface for the cellular network.  Everything else around the site exists to support the BTS. 

What open BTS is, is it's an open source implementation of the cellular air interface, for GSM.  It's a piece of software that runs, uses a piece of open source hardware, called the USRP, the Universal Software Radio Peripheral, and with the USRP and this open source software, we can generate an air interface, that to a cell phone, looks just like any other GSM cellular network. 

On the network side, it looks like an Asterisk server.  It is an Asterisk server on the backside.  What we're doing is putting a cellular air interface on an Asterisk PBX. 

Okay, so this air interface, I want to say, "Hell, is it complete?"  Are you actually, in software, supplying the whole DTAP or BSSAP app stack?

Yes

The whole signaling stack.  I mean, you're supporting GSM so you're supporting the Base Station Subsystem Mobile Application Part (BSSMAP) and DTAP at our transfer application part?

Well, we are supporting a functional equivalent to that, but that's not how we're doing it. 

I just wonder what you're doing because if I send a text message from a mobile phone, then it's going to go over the interface and it's going to send a DTAP message, or when I make a call, it's going to send a DTAP message over the air interface, a set up signal similar to Q.931.

That's right, so at layer 3, GSM call control is very much like ISDN.  Most services, at layer 3 and GSM are very ISDN-like.  What we've implemented is GSM air interface in layer 1, GSM air interface LAPDm in layer 2, and then what we have in layer 3 is very much like ISDN SIP gateway.  We take all the ISDN-like services that GSM performs in layer 3 and we translate them into corresponding SIP services.

Okay, an air interface site.  Since it's a standard mobile, it's going to be your ISDN-like layer 3 signaling.  It is going to conform to the GSM spec on the air interface site, right?

That's right.

So, you're supporting your layer 3 setups.  Is it full support that you have?  Do you even support the text message signals?

We do, now, yes.  The two things we support, right now, are speech telephony, Q.931-type call control, and text messaging.  Those are the two services we support, right now.

Okay, how many people are behind this?  The reason I jumped into the technical deep end a bit quickly, there, is I'm surprised at that degree of engineering, and with the name open.  It's pretty costly to engineer those.  How many people are behind this, and why?

It's not that complicated.  That's the big myth [laughter].  The hard part of GSM is understanding the specification.  Once you understand the specification, it's not that complicated.  We have had three people working on this project for about two years, well, for about eighteen months of actual coding.  We started coding this stuff in August of 2007. 

We had all had prior experience with GSM systems, all in a signals intelligence context, not in a telecom context.  The system we have right now, we do call controls, text messaging; we have a 3-layer stack, as I said.  The third layer is like an ISDN SIP gateway.  We let Asterisk do everything else. 

To do that, we wrote about 10,000 lines of C++.  It's not a terribly complicated system, once you have a good mental picture of how it fits together.  We used a flow-based programming model.  We coded it using a nice well-planned object hierarchy.  Granted, the object hierarchy was informed by many years of prior experience in intelligence systems.  It wasn't that complicated.  That's the funny part.  The hard part is understanding the spec.  Once you understand the spec and you have a clear mental image of how these systems - how these protocols fit together and how the layers interact with each other; it's actually not that hard to build one.

You've kind of just hit the nail on the head.  That's where I'm finding it amusing.  It takes quite a long time to get to the position that you're speaking about.  It's known as a high degree of expertise.  Then, you're kind of giving the word "open".  To me, it sounds pretty revolutionary. 

Normally, you are talking about the likes of Alcatel or Nortel, and so on, who are offering such stacks and facilities and at high cost because it's considered high engineering talent.  I like the way you say, "Hey, it's not that difficult, once you understand the spec," but the whole difficulty sn getting to that level of where you do understand the spec - if you take the spec we're talking about, the layer 3, it means you have to understand everything else.  To understand the DTAP, the Q.931-type signaling, you had to strip it out from the SCCP, for example. 

Well, that's the funny thing.  I guess that maybe part of it is that coming from the signals intelligence background, you tend to look at the rest of the network as a black box.  All that's exposed to you is the air interface.  That's all you see.  Since all you see is the air interface, you tend not to think about all the complexity in the network. 

As I said, the people involved in this project, my business partner and myself [0:08:27.5 unclear name], we both started working in cellular signals intelligence in 1999.  We've been doing this for about ten years, now.  For the first seven of those years, I never even gave much thought to network structures.  I built a mental model of how the air interface worked, but wasn't really informed by a lot of understanding of things like HLRs and MAP and TCAP and all those types of things. 

When we started to first take a crack at building our own BTS, and we started thinking about network integration, and we started looking at all the components; even in a phase 2 GSM network, which is really simple compared to a lot of stuff that's getting rolled out right now; we were horrified.  We were horrified by the complexity because a lot of that junk really didn't seem to need to be there. 

You ought to be able to build a peer-to-peer telephone system [0:09:50.0 audio breaks].

Based on what?  You broke up, slightly there.  You should be able to build it on what?

Ironically, I said based on VoIP protocols.  [Laughs]  A lot of that stuff - if you rethink the way the telephone network works, a lot of that stuff you don't really need.  You can work around it; you can build much simpler peer-to-peer mechanisms; you can leverage tools like Asterisk and simple email servers, tools like [0:10:40.1 unclear], and it just doesn't need to be as complicated as it's made out to be.  We implement in about 10,000 lines of code. 

Just a quick tech question, there.  Are you going to offer a CDMA equivalent, ANSI- 41?

Not in the foreseeable future, no.  We're concentrating on GSM.  There are some very specific reasons that we really like GSM.  We're not terribly interested in CDMA because our original goal was low-density areas in the developing world.  For those areas, CDMA is not an appropriate air interface.  It's also complicated to implement.  The computational load to implement CDMA in a software radio is much higher than for GSM, so we're not really looking at that.

Okay, now this is the first time I've spoken with you.  I'm beginning to wonder if you saw one of the talks on the debut Emerging Communications Conference, the one with our Swedish speaker.  Did you see that at all, where he was speaking about peer-to-peer GSM networks?

No, I didn't.  I wasn't aware of that.  I'd love to.

The overlap here is pretty incredible because you're talking about developing nations and that's where he was seeing the demand.  Anders Carlius spoke at '08.  His video is actually online. 

I will have to go see it.  I wasn't aware of this; that sounds great. 

I remember, I was looking at the BBC news and I saw a company which was developing peer-to-peer GSM.  Obviously, it would be illegal in developed countries.  I thought, "Hell, that technology could be stolen and somehow used in developed countries, in some other ways."  I'll link to it when we do the transcript of this, and I'll also ping you offline about that.

What is it you actually want to do with this project?

Our goal right now is to find a sponsor for a pilot deployment, of maybe six to ten cell sites, in a rural area, in the developing world.  We've talked to people in Africa, in India, and in Central America.  We still haven't had anything come together yet, but that's really - our goal right now, is to set up a pilot program.  Once we can set up a pilot program, we believe we can overcome some of the carrier resistance to this approach. 

Initially, when you present this kind of thing to an incumbent GSM carrier, they would consider it as something for green field deployment, but the truth is; there is not a lot of green field left out there.  Only in the most desperately poor areas, and they've pretty much given up on a lot of those markets.  Areas that don't have GSM service right now, probably won't get [0:14:47.3 audio skips] deployment.

To get a carrier that is accustomed to running conventional, hierarchical MSC-oriented network, to get that carrier to look at the kind of network we're talking about, it's sort of a leap of faith, on their part.  We're hoping that by setting up a good pilot deployment, we can prove this is a viable technology and we can get carriers to come and see the pilot network and maybe give this kind of technology some more serious consideration.

What I want to know, at this point, is I can see what you're doing is really technically - I think it's awesome what you're doing, just from the little I've heard from you.  I think it's very nice; I'm trying to be polite in my choice of words, here.  [Laughs]  Apart from seeing it technically very neat and very hackerish, what I don't understand is what is the value proposition, speaking to incumbents?  Why would the ever want to go near it?

The gist of it is that the type of network we're talking about is deployable at much lower costs than conventional GSM systems.  Because it can be deployed and operated at much lower costs, you have the potential to push the cost of service down into the $1 a month range.  We know, from public records and interviews with former employees of cellular carriers in Africa, we know the actual cost of service in Africa is something on the order of $5 or $6 per month, per subscriber.  We believe in those same environments, the type of network we're talking about can be operated at an order of magnitude lower cost.  You could have profitable operations at around $1 per subscriber.

What that does is it allows you to address the last remaining market, which is the three billion poorest people on Earth, who will not get telephone service otherwise.  They will not get telephone service at $6 a month because they simply cannot afford it.  There are too many of them to do it as a charity.

From a commercial standpoint, is that a great value proposition?  It probably depends on how hard your regulators are leaning on you for universal service.

It sounds to me like not only can you address the issues in poorer markets, but going by what you're dealing with there, this open source air interface, which appears on the other side as an Asterisk server, to me, it sounds like you could build some very neat applications and have some innovative development around it, let alone just cost saving.  It sounds to me like it could be some nice infrastructure, if we call it that, or platform to build some neat applications around.  Don't you see potential that way, as well?

Yeah, we can see the opportunity that you could do a lot of creative things with text messaging and with calling services that you might not be able to do in an ISDN-type world, standard GSM-like ISDN-type world.  Also, the technologies also are applicable - there are other places outside the developing world where this technology could be applicable, isolated sites like oilrigs, and ships, and those kinds of things. 

Another aspect of this technology that is attractive is that it is very rapidly deployable in the absence of any meaningful infrastructure.  If you need to deploy temporary cellular service in the wake of a natural disaster, like a hurricane or major earthquake, it lends itself to that very readily.  There are other [0:19:46.2 unclear] applications, services on airliners, campus-type... there are a lot of niche markets, too.  These are all places where we're actually more likely to get development money than going for the developing world.  In the end, our big vision is still the developing world.  Those other applications are just a means to an end.

When you say it's open BTS, does that mean somebody can go and download the source code?

Yes, there is a distribution of open BTS available from GNU Radio, right now, available for download from GNU Radio. 

Why did you decide to make it open source?

From the very beginning, we had always wanted an open source element to our project.  I think part of the thinking of that, frankly, was that we wanted to create a sort of movement mentality around this technology.  We were a little inspired by other open source projects that we've seen in this area, like Asterisk and OpenMoko.  We were really kind of inspired by those projects and we were hoping to create a kind of movement sort of mentality around Open BTS, as it evolves.

How long has open BTS become available?  I only became aware of it, myself, about seven months ago. 

That's about when it became available.  We made our first open source release in September of 2008.

So you guys are pretty fresh.

Yeah, like I said, we started actually building the software a year earlier than that, but we didn't actually start releasing things in open source until we had enough of a system to be useful and functional.  We didn't bother releasing anything in open source because your technical nature of the software is such that if it's released in an incomplete state, unless you're signal processing engineer with a lot of experience, there is nothing useful you would be able to do with it.  It's not like something somebody could tinker with at layer 1.  Nobody can tinker with it until it's complete - until it's talking to Asterisk, it's not really a tinkerable project.  [Laughs]  That's why we didn't release anything until it was fairly close to complete.

I seem to recall it was about three months ago, or maybe two; time flies and I can't remember.  Someone pointed out to me a lawsuit going on against - I don't know if it was you, named personally, but it was certainly to do with open BTS.  The quick look I took at it - are you able to comment on what this lawsuit is about?

I can tell you some.  The lawsuit is being pressed by a former consulting client of ours.  When I say ours, I mean Kestrel Signal Processing, Inc., which is the consulting company that my partner and I have, under which we've done open BTS, and a lot of prior consulting work.

Kestrel had built a GSM stack for an intelligence product for this small defense contractor.  Later, when we started writing open BTS, he made assertions that our work in open BTS was somehow based on proprietary intellectual property and trade secrets from this prior intelligence project.  Beyond that, I just have to let the declarations in the case speak for itself, and just say we deny any wrongdoing and will maintain a vigorous defense, and our declarations in that case just have to speak for themselves. 

Okay, I certainly hope that clears up for you, in the near future.  I know from other people who found themselves in similar positions, it can drag on a little bit and it's not exactly what I would call one of the things which make life better, having even these little things hanging over you.

We're hoping this case can be resolved.  We're all hoping this case can be resolved as quickly as possible. 

When I think of developing countries, I see quite a few of them aiming at using WiMAX, for example, in Sri Lanka - Sri Lanka Telecom is deploying WiMAX and connecting it to an IPv6 optical network.  It's not some kind of advanced economy, next generation network service-type scenario.  They're just saying, "We're connecting people for the first time in their life because we can't roll copper out through the jungle, so there are people who have never had a dial tone.  With WiMAX, we're beaming that somewhat into jungle territory and we're giving people their first dial tone". 

This is the kind of context I've seen WiMAX being used for in the developing world.  Why is it you're some kind of GSM evangelist?

There are a couple of things.  First of all, if you deal with a system like WiMAX, I'm not familiar with the system you described in Sri Lanka, but I'm going to assume that the customer equipment for this system in Sri Lanka is probably a rooftop antenna and a router?

It's what they call it.  It's quite funny what they call it.  They call it a "fixed mobile phone".  It's meant to be a fixed phone but it has a radio antenna and technically, it's not meant to leave the home.  It's a little bit bulky for that, but technically, you could leave the home with it.

What do those things cost?

I'm not aware of the cost, at all.  I could certainly find out and let you know, by the time I see you, in a few weeks at the eComm Conference.

I would be interested.  One of the reasons we like GSM is that the developed world produces a steady stream of recyclable handsets that can be purchased at very low cost, but are still perfectly functional.  Beyond that, there are tremendous price pressures in the GSM handset market, to drive the prices of customer equipment absolutely as low as technology will allow. 

Given all of the factors being equal, the radio for GSM is so much simpler than the radio for WiMAX or Wi-Fi, or CDMA.  It will always be cheaper.  All other factors being equal, it will always be cheaper.  It will always have lower power consumption.  It provides the basic service that people really need, which is basic speech telephony, maybe data service, its efficient rates for email.  That doesn't sound very exciting, but when you talk again, about the poorest places on Earth, the people who have never had a dial tone, that's a very big deal.  GSM can provide that service with probably the least expensive customer equipment that late twentieth, early twenty-first century technology is going to produce, the basic GSM handset.

So, while we are all buying new iPhones and discarding older phones, you're hoping that these can be sort of $5 a piece to the developed world, our old handsets.

Yes, I do.  In fact, you say $5 apiece; right now, there are companies in the United States, where you can buy refurbished, repackaged handsets, by the case - some of them for less than $5, depending on the model.  Unfortunately, those handsets tend to be North American handsets, which aren't compatible with GSM in the rest of the world, which is a whole different story.  There is no reason you couldn't do the same thing in Europe.  Again, people are discarding these things in huge numbers and replacing them with more complicated equipment.  They're still perfectly functional.

What is your grand vision, then?  Is it to provide dial tone to those who have never had?

Yes, over very large, sparsely populated areas, at very low cost.

What's in the way of this grand plan?

The main thing that's in the way of this grand plan is the fact that almost all of the cellular spectrum in the world is already licensed.  Companies already hold those licenses.  They are reluctant to let anyone else do anything with them.  In a lot of cases, they're prevented by regulation.  In some countries, you're allowed to sub-lease spectrum and do creative things.  In a lot of countries, you're not even allowed to do that. 

Carriers have no strong motivation to adopt a radically less-expensive technology.  The reason they don't is because if you start deploying $1 a month telephone service, out in a rural area, and you're still paying for your $6 month network, which you installed in the urban area a few years ago, people who live in town are going to want to know why they can't get the cheaper telephone service.  You can't afford to do it because you're still paying for that expensive network you already installed.

You can try rebranding; that's expensive.  We've talked to a few cellular carriers about this, and it's always the question that comes up.  "That's great; you can show me a network that costs less to operate.  Now what do I do with the network I just installed?  How do I leverage my existing SS7 infrastructure?"  That's an exact quote from an executive we talked to. 

The answer he wants to hear isn't "You don't; you scrap it and replace it with a packet switched network".  They don't want to hear that.  These companies have all the licenses.  They have all the spectrum.  Legally, you can't deploy these networks without their cooperation.  The challenge is to present this to them in some kind of way that makes it acceptable to them.

In a few weeks time, I see on the conference schedule that you are marked down as a demo.  Is this still going to be a demo you're doing in a few weeks?

That's a good question. 

[Laughter] Good question - I have you on schedule as doing a demo, in a couple weeks time. 

That's no problem.  I can do a demo.  In fact, if I have an Internet backhaul and no nasty firewalls getting in my way, we can connect calls to anywhere in the world.

What to do is ping me, off the call.  I'll do my best to ensure you've got the connectivity you need because I would love to see a demo in action.  A demo, to me, speaks louder than theory.

The thing about the demo of this system is that it's disappointingly mundane.  You put a little black box on the table, you pass out a couple of GSM handsets, and you just place telephone calls.  Unless you go to pains to do a few tricks to convince people otherwise, it's hard to tell that what they're using aren't just ordinary cell phones, talking to the local T-Mobile network.  The demo is disappointing in its ordinariness, unless you really want to look under...

That doesn't sound disappointing to me.  Hopefully, it doesn't sound disappointing to others, because that sounds like very good fun to place a call between two GSM handsets without using a real cellular BTS.

That's no problem; it's easy to arrange and I'll have all the equipment there and ready to go.

You mentioned spectrum.  Are you aware that the Wireless Innovation Alliance has become a media partner to the conference?

No, I've seen it but I've never really known what it meant. 

The Wireless Innovation Alliance is the most respected pushing for change in the spectrum space.  People who work in conjunction with the WIA, for example, if you take Maura, who is on schedule, she is Executive Director of the WIA.  You have others, like Richard Whitt, from Google; Sascha and Michael, both with the New America Foundation; these are all going to be spectrum-based talks.  Actually, I think one of the panels is going to be called something like "Spectrum 2.0," certainly it will be the 2.0 again [laughs].  The panel will certainly be on spectrum.  Maybe we will be able to find a way of getting you on that panel, if you're interested.  I'll put you in touch with the relevant people.

That would be fine.  I will study up on their policies and activities.  That sounds interesting.  There certainly needs to be a change in the way that spectrum is managed, in a lot of countries.  There is a lot of licensed spectrum out there that is sitting fallow.  The people who live under it can't afford the services that are being offered on it.  It becomes useless.

I'm going to do my best to make the connections there.  As one final, closing loop between people, are you aware of the work of Nathan Eagle?

No, I'm sorry; you got me there, too.

Don't be sorry, that's the whole good thing about the "community" - it all sounds like a love fest or something.  [Laughs]  He also spoke at the debut of 2008.  I'm going to need to link you up with Anders Carlius, and I'll link you up with Nathan Eagle.  We'll get the transcript of our talk we've being having about your Open Source Cellular BTS and I'll also insert the hyperlinks in there to try to close some loops for everybody. 

I really appreciate the time that you've given me in describing that because I think I've learned a lot more from chatting with you, than anything I read on the Internet about the project.

Thank you for the opportunity.

Last Friday I had the pleasure of interviewing Voxeo's CEO Jonathan Taylor via Skype. Jonathan Taylor will be added later on as a conference speaker.

The run time is 47 minutes.

Additionally the full transcript is below. To distinguish between us I've indented Jonathan.


Transcript

Good morning, Jonathan, how are you?

Good morning, Lee, I'm great.  How are you?

I'm actually very bad today.  I slept twelve hours.  That means I've only needed two coffees today, and normally, I need six in the morning to kind of jump-start.  Two coffees to begin the day is not very much.

My first question to you, it seems that people at Voxeo have two letter names, like R.J., and I see people referencing you as J.T.  Are you Jonathan, or are you J.T.?

Either one, actually.  I'm not personally working on a strong brand, so I have people who call me J.T. because my name is Jonathan Taylor.  I have people who call me J.R. because I'm Jonathan Robert.  I have people who call me Jonathan and some call me John.  It goes back to my career and a couple of places I've worked over the last twenty years, where there were other Johns and Jonathans.  I ended up being a J.R. at one company and a J.T. at another company.

So, it's not like an internal Voxeo policy to shorten everybody down to two letters?  [Laughter]

No, it might be a de fact policy that I'm not aware of, but not a formal policy.  R.J. and myself and a couple of other people - it's just one of those cultural things that happen and you never really understand why it did.

Luckily, I've only got a three character name and it's pretty monosyllable.  People just leave it as Lee.  [Laughs]

Not "La" [laughs]

It's easy to spell, as well. 

I wanted to interview you because people kept telling me that you have an interesting background and we have never spoken.  I know R.J.  I know Dan York, from Voxeo, both of them well, but you and I have never spoken.  Yet, people kept saying, "You need to speak to Jonathan from Voxeo.  He has an interesting background".  They never elaborated on that interesting background, and I don't know if you're able to on record, either.  At least, I'll try and ask you somewhat about your background and how you ended up in the communications space.

There are actually a couple of things that led me to the communications space.  First off, my father was a life-long AT&T employee, grew up in the Bell system, started off literally digging ditches and running phone lines.  I ended up helping design a large part of their digital signaling network 

I would go to the office.  It was intriguing.  It was the first place I saw computers.  It was interesting to see behind the scenes when you would use the phone.  There is all this infrastructure and machinery that, especially as a young kid, was immensely impressive.  That was the first part of it. 

The second part goes to the mid-eighties when a couple of things happened.  First off, I had my first computer, a modem, and I was really into bulletin boards.  At the same time, you had the competitive carriers like MCI and Sprint that were really just starting to get to the market in the U.S.  I had this big issue, which was like a thirteen or fourteen-year old kid, I wanted to call these BBS's but a lot of the best BBS's were a long-distance call, in California or wherever they might be.  Of course, this was back when my family would say, "We're going to call your grandmother, but let's only talk for a couple of minutes".  Long distance was expensive.  [Laughter]

It's the same sentiment here.  This is exactly how I got interested in communications, needing to download software.  The software was always in the States, and I'm being brought up in the U.K.  "No way, son, can you call America for an hour to download software" [Laughs].  You were being forced, by the telecom company, to be innovative.  [Laughs]  Tell me about your innovation.

I guess times haven't changed; carriers force innovation with their stagnant behavior.  This is when MCI and Sprint were first around.  This was before you had the capability to pick your carrier.  You had to actually dial local access codes in each market, and then enter your account code, and then the number you wanted to dial. 

These guys made the extremely silly mistake, I guess for customer convenience, of using 6-digit account codes, which were hackable.  I wrote a little program that would call the local access number, and just in sequence, go through access codes, and then try to call a number of a BBS.  If the modem got a carrier, it knew that the access code worked and if it didn't get a carrier, the access code didn't work and it would move on and try the next one.  I left this running on one of my computers, for a weekend one time, probably in 1985.  Within a couple of days, I had 800 access numbers.  [Laughs]

And then you went back to the bulletin board and uploaded your logs to share with everybody else.

I shared them with a couple of close friends that I had never met, but for online.  I was able to call and get the software that I wanted.  There were legal ambiguities, to say the least.  I was a young kid and just looking to learn a lot about BBS's and interact with people.  Unfortunately, one of the people that was in my circle took it too far.  I had a visit from the Secret Service.  It all ended up fine [laughs].  There was no big problem and no criminal history or record or anything like that.  They mostly wanted to know how we did it.  One guy that took it too far did get in trouble.  It was a very interesting experience.

What age were you, back then?  I was kind of fifteen when it was what we call "war dialing".  What age were you, back then?

I was fourteen or fifteen-years old.

That's interesting.

We were probably doing the same things on opposite sides of the ocean.  [Laughter]

Yeah, and then at fifteen, I was reading the CCITT specs, courtesy of PHRACK, which was later to go on and form the basis of my career.  You went on to form Voxeo, which is very well respected with developers.  Can you tell me something about the origins of Voxeo?

I'll give you a bit of the bigger contextual background.  After these hacking, phreaking incidents and timeframe, I continued to pursue my interest in computers, although I sort of got out of the telephony side of things for a while.  I ended up getting a job as an engineer, in high school, working for a storage technology company called Columbia Data Products.  Basically, with Columbia Data Products, I wrote what were really the first controller in software to connect SCSI controller cards up to PC's. 

When I got out of high school, I had this great job.  I said, "I can go to college, any time.  I have this great job now, so let me just run with this".  I didn't go to college.  I continued to work at Columbia Data Products.  In a very youthful way, after a year, I felt I had outgrown Columbia Data Products. 

I realized I had ideas, which were larger than my personal ability to execute.  As a nineteen-year old kid, I started my own company and I learned quickly that I was no good at running a company.  I went from fifteen people back down to just me. 

Ultimately, I figured out how to basically run a business, and I slowly built it back up.  That company was what essentially what we call now a VAR, value added reseller.  I bought a lot of equipment and added services and some custom software.  I shipped them to customers or installed them for customers. 

I had two markets, basically, that I sold to.  One was sort of city and county government in Florida.  I had just gotten some in's from friends and associates through the years.  The second was actually back to my origins, the BBS community.  There was show, at the time, called One BBS Con, which was the bulletin board operators' annual trade show.  I had a booth there and was selling storage equipment and Novell Netware LAN's for large BBS's.  At the time...

Novell netware LANS, that takes us back a little, too. [laughs]

At the time, most BBS software was not multi-line, suffering on DOS, largely.  To build a large BBS was like thirty lines.  You would actually get thirty computers with one modem on each computer and connect them together with Novell netware. 

I was at this trade show and I had encouraged all of my customers to get on email very early, again in part, because of my father's work at AT&T.  I was on the Internet very early on.  Also, in the mid-eighties, I had encouraged my customers to get on email, too.  What I would do is I offered my customers a 5% discount if they did all their ordering and most of their interaction with me via email.  I got a bunch of people at city and county governments and BBS operators to connect to Internet email so they could do orders that way with me.

I'm at One BBS Con, and this was like 1994 or 1995.  The timing was such that it was the end of the fiscal year for a lot of the county governments, so they needed to order a bunch of stuff.  I'm at One BBS Con and amazingly, at One BBS Con, in 1994, there was no Internet access.  I couldn't get to my email.  Normally, I would go get my notebook and dial in.  I'm at the booth, so people are constantly coming up to ask questions.  I thought, "Oh my God, what am I going to do?"

I called a friend of mine and said, "Here is my POP 3 username and password.  Could you login real quickly, and check my email?  Just read it to me so I can find out what orders are in there."  [Laughter]

It was very mechanized. [Laughs]

Right, "Can you check my email for me so I can read it and find out what my orders are and I'll call the distributors and get the orders out".  He did that and I hung up the call and thought, afterwards, "As more and more people start using email, a service like that is going to become very important," sort of remote access to your email via the phone.

I went through sort of three phases of design in about fifteen minutes.  I first thought, "All right, I'm going to build a call center, get all these agents..."  [Laughter]

Like Mechanical Turk style, reading it out. [Laughs]

Exactly, that was Unified Messaging 1.0, in my mind, which was call center agents, with a special email client that worked well for thousands of accounts.  Then I thought, "People are probably not going to want complete strangers reading through their email.  There must be a way you can connect a telephone to a computer". 

Phase two, and it was literally sketched out on a napkin.  I still have the napkin, somewhere.  I was trying to draw how you would wire a POTS phone line into a Sound Blaster card and do ring detection, [Laughs] and I would write software that would drive the Sound Blaster card, have a little ring-detection circuit.

Then I thought, "Somebody must have figured this part out, already.  There must be a way you can hook phone lines up to computers without getting Sound Blaster cards and putting some capacitors and different things on there, getting the impedance batch and everything".  So I said, "All right, let me do some research". 

I knew a guy that had been in the computer telephony industry.  I didn't know exactly what he did, but I knew he did stuff with telephony and computers.  I asked, "How do you do this?"  He said, "There is this whole world called computer telephony, Dialogic cards".  We got a copy of Computer Telephony Magazine and ordered a Dialogic card.

So, CTI was new to you?

Everything about computer telephony was completely new.  My background had been storage.  I had never done anything with the phone except the previous incidents with phreaking and hacking.  I said, "We'll get a Dialogic card".  We had sort of an API layer over the Dialogic card that came from a company called Stylus Innovation.  The product was called Visual Voice.  We hacked up this thing with a text to speech engine, where you could call in, enter your account code, it would grab your email, and read it to you. 

I started giving friends and associates the phone number to this thing and people loved it.  I said, "All right, let's start a company".  We started the company and said, "We need to get a voicemail system".  We looked at pricing for voicemail systems and I said, "These people are nuts!"  That was like $5000.00 for a voicemail system.  I have this computer telephony card thing.  I'll write a little voicemail thing, too.

Because I didn't know any better, I made a mistake and I put the voicemail into the email server, instead of doing it separately.  I say mistake because the company ended up being called IRDG.  When we talked to the analysts, they were literally, "No, no, you've done it all wrong.  It all needs to be proprietary so you have customer lock in.  How are you going to make money unless you can sell the hard drives for four times their actual costs, when people need more storage?"

We accidentally built a unified messaging platform.  We had no idea that there was a concept called Unified...

Naivety can sometimes be a good thing, and a clean slate, in your mind.

Yes, definitely, so we built the Unified Messaging Platform.  We did voicemail, email, fax, and paging, over the course of about a year and a half.  We added all those features.  We decided to sell it as an OEM product, and quickly licensed it to guys like Ericsson, Motorola.  There was a company in Santa Barbara called Digital Sound, which was a leading voicemail provider for ILECs in the United States.  They're now part of Unisys.  There was a company in Israel called MediaGate, which was basically the company that the people who started Rederex, which was a competitor to Dialogic, built after they sold Rederex.  We licensed technology to a bunch of companies.  We ultimately sold it to MediaGate.  I worked for MediaGate for years and then I left and took a year off.

I was thinking about what I wanted to do next.  I kept thinking back to when we first started developing the phone interface for the IRDG Unified Messaging product.  I was remembering, especially as someone not from a computer telephony or telephony background, how unbelievably arcane and difficult it was to get the Dialogic card working right, getting it to work consistently, and then dealing with phone companies to get T1 lines and Wink Start, Loop Start signaling, and DID's and literally all the stuff I had never heard about.

All good telecom stuff.

Right, but I had never heard of before.  I would sit down to have conversations with people and I literally had no idea what they were talking about.  I would just pretend I did and take notes, and then go home and try to figure it out.

So you were hit with hardcore analog signaling, back then.

Exactly.  The other amazing thing is we would go license it to these companies, like Motorola and Ericsson, leaders in telephony communications.  We would sell them a system and they would come back and say, "We don't have enough people to get all this stuff configured.  Can you fly to these locations and order the lines and install this for us?"  I'm sitting there thinking, "How is it that some of the largest companies in telecommunications don't have enough people with enough experience to get all this stuff up and running?"  We've been doing telephony for eighteen months, now.  Why are we ...

Why are we going to be supplying the bodies?  [Laughter]

After I sold the company and was taking a year off, I kept thinking back to that.  A business partner of mine that I started IRDC with, John Higgins and I, were literally brainstorming in a room.  We put three words on a white board.  These are the words that started Voxeo.  Those words were "computer telephony sucks".  We said, okay, how do we make it not suck? 

We roughly divided the problem into two domains.  First, it was incredibly difficult, especially outside of telephony, to create applications for the phone, learning all these API's and the terminology.  We said what if we take web technology and apply it to the phone so you can build a voice application the same way you build a web application.  What would that look like?

The second domain was deployment.  We said rather than selling a box or software to people, and then they have to go deal with carriers or their local phone companies and all that strange terminology and process, we will just pre-deploy it all for customers, in our own data centers, and they can access that platform over the Internet.

Essentially, it was XML-driven telephony development, hosted or what we would now call Software as a Service or cloud-based deployment.

When was this?

This was in 1999. 

This is pretty early, you must admit.

Yes, companies like IBM, Motorola, and AT&T were just starting to look at Voice XML.  Motorola had a thing called VoxML.  We looked at that and thought it was interesting but it was really driven a lot by speech scientists, and especially from an IBR perspective.  The kinds of applications that were on our mind were really about enabling the next generation of what I call personal communications.  It was things like "follow me," "find me," unified messaging.  At the time, there was Internet call waiting.  You had dial up so how do you know someone is trying to call you when they're on dial up? 

In our minds, we wanted to really build a platform so people could build next generation innovative and useful personal communication applications on the phone. 

VoiceXML was all about speech and IVR.  It literally had no call control, at all.  You couldn't start two calls, and then connect them together easily, and then drop one off or record it, basically play with call legs like you would play with Legos. 

So we built a thing called "CallXML", which was the first XML telephony language that had both call control and IVR-like media control.  I built a prototype of it.  I got pneumonia and was forced to stay at home for three weeks, so I said, "I need something to do".  I built a prototype of CallXML and just like the beginnings of IRDC, started giving the phone number and URL out to my friends.  Everybody loved it and started building these little applications.  I said, "Okay, I think we have something here".  We wrote a sensible business plan and called for about $3 million of funding to get profitable.  I was in Silicon Valley, at the time.

We went and talked with Silicon Valley VC firms.  We would go in and they would say, "We love the plan but we can't do this $3 million bit.  The minimum investment we can do now is $30 million".  The .com era was still in full effect. 

After talking to the sixth VC who told me they couldn't do a $3 million deal, I started referring to myself as Pavlov's Entrepreneur.  I rewrote the same plan to call for $30 million.  I went back to the same VC's and they said, "This is great; let's do it".  [Laughter]

Sounds fantastic.  Can you clarify Call Control XML, where it came from?  I know CCMXML.  Are you talking about the same thing?  Does it appear so?

No, CallXML was actually different.  CallXML was a single language that does call control and media control.  The W3 Standard approach to voice and call control, you have VoiceXML, which handles media, and CCXML, which handles call control.  The way that Call Control came about was it became clear within the W3C, that they needed to address call control, as well.  There was a working group set up to start working on the call control language.  We had CallXML, which was getting good progress at the time, and we had put CallXML in as a suggested foundation of the new language.

There were two other companies, Cisco, and Tolera, which I think felt a bit threatened by that.  We already had a lot of market progress behind CallXML.  They went off in sort of back corners of the working group and starting working on an alternative to the CallXML.  I didn't mention it, but in my storage days, I spent a lot of time working on storage industry standards and learning about the politics and Jujitsu of standards efforts; how people come together and want to work towards progress, but also people were looking at their own company's commercial interests. 

When R.J. was in this W3C call control effort, and told me about this second effort, I said, "All right, that's great.  Get a copy of it and we're going to get an engineer, right now, to make the world's first implementation of it, before anyone else does".  That's exactly what happened.

We built the world's first implementation of CCXML, even though we had already done CallXML.  By the time Cisco and Tolera contributed to the CCXML concepts, as another possible starting point, we said, "Hey great; we have that, too".  [Laugh]  At that point, they just kind of gave up and R.J. took over the CCCML Chair and Editorship.  Since then, we've been the leading provider of CCXML technology, as well.

How closely related, in terms of tags, is CCMXML with what you had been doing when you had pneumonia?

It's very, very different.  The W3C language, which is VoiceXML and CCXML, are designed to do everything you could possibly imagine doing with a phone.  They are also designed by committee.  CallXML was really designed by me, and it was designed with a significant focus on the 80/20 Rule.  I focused on the 80% of things that people really often do, and not the 20%, which are sort of worn-off scenarios.  I made that.  I did everything I could to make that 80% very, very easy and very approachable.  I left out telephony terminology.  I tried to make the language extremely easy for people to develop for.

CallXML, we expected CallXML to sort of die off because it was proprietary and only ran on Voxeo.  Actually, what has happened is because it brings the benefits of XML telephony, but it's extremely simple, especially compared to VoiceXML and CCXML, and it does the job for most people, we actually continue to see significant uptake and use of CallXML with our customers, even today.

That's very interesting [laughs] because I've had to spend time working with VoiceXML and Call Control XML and I've often wondered about some of the origins.  It's really nice to hear some of that background

Moving on, and asking you a question I've asked of most sponsors, I would like to say firstly, that Voxeo kindly showed support for the inaugural Emerging Communications Conference, eComm.  That was before it was even established, back in 2008.  That was fantastic and appreciated.  I think that was through R.J., who is the CTO there, and Dan York.  Again, Voxeo have kindly shown support for 2009.  Can you tell me why Voxeo have shown that level of community support?

The thing that I really liked about the eComm show is that you have great topics and great people and great energy.  It's not stale, not the same old thing.  The other shows that we've gone to and participated in, in the industry, I would sum up, as the underlying message is "Here is what the state of the industry is, today".  The thing I really love about the eComm show is the underlying message is "Here is what the state of the industry probably should be instead".  [Laughter]

Yeah, and here are the opportunities you could be cashing in on, if you move quickly. [Laughs]

Absolutely, so it's that difference, that contrast from here is the status quo; to here is the status woe that I really like about eComm.  [Laughter]

The status woe - I like that.  Talking about sponsorship, we have been joking lately, that companies that sponsor eComm are accelerating during the downturn.  It started as a joke [laughs], but it's actually seeming reality because we're yet to speak to a sponsor who doesn't come back and say, "Actually, business is better".  After I published a conference call, where we had spoken with Skype and others about accelerating during this downturn, I think it was Dan or somebody from Voxeo said to me, "Our business is also accelerating".  I'd like to ask what sort of new and unexpected opportunities Voxeo sees because of the current economic climate?

One of the biggest things - we are also seeing great business growth right now.  A good chunk of that comes from the reality that a lot of our customers, at the end of the day, use our platform to deliver various kinds of self-service solutions.  Self-service solutions are a significant cost savings over deploying call center agents. There are other pros and cons, obviously, about usability and customer preferences, but there is no doubt that they do cost a lot less. 

It's interesting; we didn't start the company, as I mentioned, we started the company with a focus on personal communications.  On the other hand, we built the company as a platform.  One of the unique things about Voxeo is we don't build any applications, at all.  We don't have professional services.  We don't build apps that run on our platform.  All the apps that run on our platform are built by partners.  We have over six hundred partners, now, that have built applications to do just that. 

We also haven't tried to steer the customer base towards one area of technology or telephony application or solution or another.  We started with the folks on personal communications.  We started finding a lot of people that were using our platform for self-service, so we followed the customer interest and started doing more in our product technology and marketing to fulfill those self-service needs.

As a result, we have a good 60% of our customer base that is really delivering very friendly self-service solutions.  We're seeing a sharp uptake in those solutions, today, as companies look at how they can reduce their costs.

That's the single biggest thing.  We're also seeing, at the same time, a rebirth in really innovative applications.  I think that the stressful and chaotic times like this are really, when a lot of the best companies are born and built.  We're starting to see early signs of that.  We've had conversations, especially in the last two months, with some entrepreneurs and people that have some very cool ideas, that we're partnering with to help them deliver those ideas to market.

That's quite interesting that you say that, because I'm aware of a number of entrepreneurs planning on launching some very interesting companies, this year.  Hopefully, some of these will be represented at eComm.  In the communications space, 2009, for me, looks like a very fantastic year, a catalyst year.

Let me test your morning awakeness skills.  I hope you've had coffee [laughter].  I want to throw in a question of vision.  What new technologies/developments do you think will disrupt the telecom industry within the next few years?

Sure, there are a couple of specific things and a couple of fundamental things, I think.  Some of which I think are personally interesting and others professionally interesting.  One of the things I hope comes about and that I'm seeing early signs of is deployment of microcell technologies for cell phones, where I can have my iPhone, use it when I'm travelling, and then when I come home, I have my own microcell and my iPhone will work with it when I'm here. 

If you compare the capabilities of a cell phone with the capabilities of a landline phone, today, there is an enormous gap.  One of the big things I've always wondered and kind of complained about is I have SMS on all my cell phones.  Why can't I have SMS on my landline?  Why can't I do my SMS easily, when I'm at home, with these devices too?  I believe that the first company that combines microcell technology with Skype-like pricing is really going to change how the home phone environment works and the features we have.  Basically, we will start using our cell phones.

Today, I see companies doing cool things on the technology with microcell, but then they're using the traditional carrier pricing models.  I don't think it's really going to take off until you can see the intersection of Skype-like pricing and microcell technology.  That, to me, is personally very interesting.  I'm looking forward to that.  I'm looking forward to seeing who the first company to do that is going to be.

The other thing I think, specifically, is going to be location-based services, location-based technologies.  I know you have talked with some folks about that, in other interviews.  The applications that are coming out of open availability of the application information are just increasingly impressive.  Google, just recently, started talking about the Latitudes product they are sort of experimenting with.  We're seeing a lot of other interesting applications out there around social connections and mapping, which I think are going to be very impressive.

The other one, which is close to Voxeo, is what we're calling unified self-service.  There has been the idea, obviously, of IVR self-service, for some time, on the voice part of a phone.  You're just starting to see companies do more and more SMS-based self-service, especially the mobile carriers, or USSD-based self-service.  USSD is a technology I had never heard of until two months ago.  I don't know if you have heard of it before.

USSD is carried on the SS7 stack.  I'm Mr. SS7 in a past life [laughs].  USSD I know, very well.

It turns out that GSM phones, if they implement the full GSM standard, which they're required to do, have support for USSD also, in addition to SMS.  The user experience is very similar, but the way it was first described to me is that SMS is sort of literally like email.  It has a store-and-forward approach to the network.  It can take five, ten, fifteen seconds or more for the message to get there. 

When you have a USSD connection in the phone, it's like having a Telnet connection to the phone.  It's pretty much real time.  When these carriers are providing their SMS-based self-service solutions, really what most of them are doing is they're using USSD under the hood for better user experience.

You have phone-based voice self-service.  You have SMS-based self-service.  We're starting to see customers that are doing effectively instant messaging or chat-based self-service.  I'm sure you've seen more and more websites where it has a "chat now" button and you can click on it and talk to a customer service agent or sales person, right there.

Finally, for example, with our voice VoiceObjects acquisition, T-Mobile is one of our customers, and T-Mobile Czechoslovakia also had kiosk-based self-service.  When you went into one of their stores, instead of having to wait for a person, you could go to a kiosk and check your balance, pay your bill, buy a new phone. 

In the past, these self-service solutions were all different development efforts.  You'd build an IVR application.  You would build an SMS application.  You would build your chat stuff.  You would build your kiosk-based self-service.  The other thing is that as these non-voice forms of self-service become more popular, especially the chat-based self-service, there is a natural drive to, "All right, we're going to chat with them, but first, let's collect their name and their account number and get an idea of what they want so we can route them to the right support person".  That's classic IVR computer telephony-integration type stuff.

We took a step back and looked at that and said, "Let's do this unified self-service.  Make it so people can build an application one time, describing a self-service dialog, and then that one application can work via voice, IM, SMS".

I really like that.  It just seems incredibly logical, again, like why is it not here, today [laughs]. 

We've summed the concept up as unified self-service, kind of playing off of unified messaging and unified communications.  We're starting to see customers like T-Mobile Czechoslovakia, who are using our technology and tools like we have with the VoiceObjects acquisition, to do just that.  I think that that, especially relative to our business, is going to be a significant area of change over the next couple of years.

Finally, the big thing I see is dis-aggregation, breaking up the services that were provided by big entities, whether they're carriers or companies like Voxeo, and sort of selling them as more piecemeal technology solutions

Dis-aggregation - that's very interesting.  Did you ever read Moshe's book, The Pebble and Avalanche?

Yes, absolutely.

He gave me a copy of that a couple of years ago, and I've always meant to go back and read it.  I read just the first few pages and thought, "Oh, this is so true.  I need to read this book".  I will get around to it, this year, I promise, Moshe - if he hears this.

No, it's a good book.  It really is.

Just jumping back on developer track a little bit, Voxeo has been around ten years.  Fitting into the last question, how do you see voice developer tools changing, over the last ten years and where do you see voice developer tools going forwards?

It's an interesting question and one I've spent a lot of time thinking about, lately.  My analysis and conclusion is that it's really repeating waves.  If you go back to the 1990's, when we first built the unified messaging platform, it was all about telephony API's, whether it was the Dialogic API, or standard attempts like S100 and TAPI, or visual basic OCX controls from companies like Visual Voice, it was very API centered, telephony development. 

Then, starting about ten years ago, right about the time Voxeo was born, there was a strong push to XML, in general, throughout the development world and to XML telephony technologies like VoiceXML and CCXML and our CallXML language.  We've been riding that wave since Voxeo's birth, to the point that the XML-centered technologies have really taken over in the enterprise, especially, and especially larger enterprises.  Large enterprises, every RFP that we're seeing out there, today, are very centered on VoiceXML and CCXML type of technology.

Interestingly, at the same time, we're seeing on the more innovative front, away from a lot of large enterprises, a move back towards API-based telephony, but with distributed architectures and focused on programming languages like Ruby and Groovy and EKLA and Python. 

We believe that over the next couple of years, you're going to see the continued success of XML-based telephony, especially in large enterprises, and more growth again of API-based telephony in the more innovative development circles and startups. 

What do you think that's happening?  What is giving that push?

I think it's a couple of things.  I think these things go in waves, in part, because new technologies come around and there is a tendency to overreact, over adopt, and over support them.  XML-based telephony is great for a lot of things but it has its disadvantages, too.  VoiceXML and CCXML tend to be relatively complex.  They're great for developing applications but they make it even harder to sort of debug applications, after the fact.  There is a general movement away from XML, again, especially in the more innovative side of programming and startups, today. 

I think part of it is just pulling back from an over-adoption of XML and going back and saying, "Look, there are places where API-based solutions work great and there are places where XML-based solutions work great.  Let's be more sensible about where we divide that".  I also think it's partially cultural.  "Hey, enterprise is all using XML-based telephony now, it's no longer cool".

So, let's start doing Ruby-based.

Exactly, and Ruby is an impressive language, so it's 100% buzzword and cool-compliant.  I can definitely understand that.  I've actually been learning Ruby, lately, myself.

Okay, so you get the "cool kid" t-shirt when you're doing it in Ruby, right?  [Laughter]

Exactly

Talking about having a cool t-shirt and so on, what are you most excited about at Voxeo, right now?

Actually, a lot mirror image what we were just talking about.  I'm very excited about our success in the enterprise.  I mean, look, we're a company literally started by a phreaker/hacker in his youth.  I started Voxeo because computer telephony sucked.  That was my viewpoint.  It's interesting; I really don't like the industry that we're in, in terms of its stagnant nature.  I have felt a strong desire for change and started Voxeo, essentially, to bring change to the industry, to the largest degree I could. 

It's very impressive, to me, personally, that we're seeing as much enterprise success as we have.  Data Monitors just came out with a report, profiling premise IVR solutions.  It's got Cisco, Avaya, Nortel, and Genesis, and InterVoice, and all of the big guys, multi-billion dollar companies. 

The conclusion of the report is that there were two leaders in the industry moving forward - Genesis and Voxeo.  I just looked at that and thought, "We've been selling a premise product since 2006.  These other guys are multi-billion dollar companies.  They've been doing this stuff for five, six, seven, eight times longer than we have.  Even analysts are starting to say, 'Look, the way Voxeo is approaching the market is disruptive and that disruptive nature is being adopted by enterprises'."  Again, not trying to give too many kudos to ourselves, but I'm personally very thrilled at the enterprise success we're seeing, and the fact that we're displacing these large vendors that I've personally despised as a potential customer, and many of the prospects despised, too.  [Laughter]

That's very amazing.  You just come across, and in fact, I don't need to say come across - are leading innovators.  It's just really fantastic to have you on board as sponsors.  It helps rubber stamp the event as being the place of innovators.  It's really funny to hear that report.

That report has been great for us.  At the same time, recognizing the waves I was talking about earlier, we have several new stealth-mode projects and products coming out over the next six months that I'm very excited about, as well.  I can't talk about it that much now, but we are launching one of them at the eComm show.  I look forward to unveiling that and talking with everybody there, but I'm also very excited about a lot of the things we're doing to really push that innovation forward, this year.

Okay, just to being drawing this to a conclusion, since I've eaten four times as much time as I was meant to have, which has become fairly standard. Voxeo has made a number of acquisitions over the last few years.  I don't think there is any secret of that.  In particular, in the second half of last year, do you think that acquisitions are good for expansion and are they working out for you?  Did you make a mistake or did you not, is the real question.

I think acquisitions are a great way to expand if they're done right.  I think that eight out of ten companies don't do acquisitions right.  We've acquired four companies in the last four years, two in the second half of last year and the plan is that we're going to acquire four companies this year, assuming we find the right deals.

The acquisitions have worked out very well for us.  First off, if you look at it from a team basis, we've got about 160 people today, and about 60 of those people have come into the company through the acquisitions.  We have a great retention rate for employees that came in on acquisitions.  It's over 98%.  We've literally built the company largely with the people and technologies that we've acquired over the years.

I said it's great if it's done right.  The biggest problem I see is that a lot of companies buy other companies and then they pretty much just trash the company they just bought.  They come into the deal with a very preset concept on how the acquisition is going to work and what the company is going to look like afterwards and what the products are going to look like, afterwards. 

We've heard that, unfortunately, about one of our competitors.  Envox was bought by Syntellect, and from what I hear, they're getting rid of all the people, they're changing the product direction to fit what Syntellect was doing before.  I think that's the exact wrong thing to do. 

We structure our acquisition process around the idea that we don't know how things are going to end up and that there is a lot of experience and a lot of best practice and contextual knowledge that we're acquiring, that unless we're careful, we'll destroy without even realizing that it was there.  We go into acquisitions with a six-month process to just learn, to ask a lot of questions and sort of sell side-by-side, and figure out what the strengths and weaknesses are of the people and the technology and marketing of the different entities and then take the best from each and combine it.  That's how we move the company forward.

We pay a lot of attention to cultural issues.  We pay a lot of attention to making sure new employees are happy.  We move slowly.  We don't bring in change so we don't lose that best practice.  In doing it that way, acquisitions have been great for us.  That's why we're looking to do several more, this year.

I hope you find new companies to cut deals with in the acquisition space, this year.  I look forward to hearing about and watching what you're doing with great interest, trying to second-guess what it is you're aiming for in the longer run.

As a final kind of question, I would like to ask what you're looking forward to most, at the Emerging Communications Conference, which starts in what feels like just a few weeks?

I think it is literally a few weeks.  The single biggest thing, I mentioned before, I really believe that leading companies are often born during times like we're seeing today.  Personally, I'm very interested to see how our industry responds to the chaos and stress that is coming from the world financial condition.  I really do believe that we're going to see the start of new leaders in our industry at the eComm show.  I think it will be very important to be there and to talk with people and see a lot of the things coming out and being launched, and watch these leaders arise.

I hope that it's okay to have this in a public domain.  I'll not say much, but I'll say you will be a speaker and you will be doing something interesting.  It will not be on the schedule.  Is that okay to mention?

That's perfectly fine.

Okay, so we have warned people that you will be speaking but you will never appear on the schedule.  We will leave it for others who do come along, to find out what it is you're going to be doing.

Yes, we're looking forward to a couple of key announcements at the show.

Okay, I would like to thank you for spending the time with me.  That was very entertaining, I must admit.  You gave me my morning laugh and I find it very interesting.  It put a big smile on my face [laughs], especially earlier on, until we got down to talking about acquisitions and so on.  I loved hearing the origins, yourself, the company, and I loved hearing the tales of how you're competing exceptionally successful, as a nimble and innovative player among giants.

I honestly enjoyed it, too.  I look forward to meeting you in person, finally, at the show.

Thank you, Jonathan, have a great day.

You too, Lee, talk with you soon.

Last Saturday I had the pleasure of interviewing Karrie Karahalios via Skype.

The run time is 33 minutes.

Additionally the full transcript is below. To distinguish between us I've indented Karrie.


Transcript

Good afternoon, Karrie, how are you, today?

Good afternoon.  I'm well, how are you?

I'm fairly well.  I was up a little late, today, I must admit.  I got up at 4:00 p.m.  I've only been out of bed for three hours, now, so I feel pretty refreshed.  I'm sure by 4:00 a.m. this morning, I will be back to feeling dog tired again [laughs]. 

You are going to be a speaker at the forthcoming Emerging Communications Conference.  I see you are Assistant Professor in computer science, at the University of Illinois.  I want to ask; what do you do in that role?  I know you could answer back, "I'm professor of computer science," but can you tell me what it is you are looking into, there?

I guess my role there is three-fold.  Firstly, I'm a researcher.  My main area of research falls into the category of social computing, but my primary interest is actually communication.  That has been my passion for some time.

For some history, I actually started out in electrical engineering, as a graduate student, looking at building network switches for tele-media networks.  I guess, one thing that happened to me, there, is I was lucky enough to see the first movie playing in Mosaic browser.  After that, I realized that someone else was going to make the networks faster, the boxes smaller, and I wanted to focus on the ends.

That sort of led me into human computer interaction, which led me to a branch of it, called social computing.  My main passion is actually trying to see how people communicate in our new network media environments.  Those are the areas that I research in.  That entails several different aspects. 

One, we build new interfaces to actually allow people have different styles of back channels they may not have had before.  Two, we analyze existing tools and social networks.  Three, I named my group Social Spaces, so we're not tied to any specific thing, but we do a lot of different work with social visualization and different styles of visualizing patterns of communication and behavior.

That is sort of my role as a researcher at the university.  My second role there is as an educator.  I teach undergraduate and graduate classes in multi-media networking, human computer interaction, social spaces, and social visualization. 

Third, I feel like my role at the university is also kind of like a community broadcaster to let people know that this is a valuable area of research.  We haven't had HCI in its current instantiation at UIUC in a CS department, for a while.  It's only been like this for about six years.  I feel as if I have to go around and make it clear what we do and why it's important, to the whole community, not just to the university.

It's interesting; at the start there, you mentioned Mosaic.  I remember Mosaic, too, but we probably shouldn't get all nostalgic.  Do you remember Gopher?

Yeah, yeah, Gopher - I used to read news using TIN and RN.  That's what really got me interested.  I love the idea that there were these amazing public spaces, some of them that were quite anarchical. You could just go in and talk to people.  You kind of felt this bizarre freedom.

Did you say, "networked media environment"?

Yes

Can you explain?  I have a good clue as to what you mean by that, but could I have you describe what you mean by networked media environment?

Early on, that would entail Usenet.  It would entail email, even mailing lists.  Today, it goes further.  Today, you can take it so far as to be games, like World of Warcraft, Second Life, but even things we build ourselves. 

One example of something that we've built are the sculpture chairs; we put them in cafes.  Someone can go to a café with a friend and talk to their friend, or they could talk to someone else who possesses this chair, kind of like being in the movie Being John Malkovich, in this case, were actually logging into a chair and having discussions with people in another space.  It includes media environments that people are familiar with, on typical computers, but also things we build ourselves to try and see what cues are necessary to sustain conversation.

What cues are necessary to sustain conversation?  Can you describe that?  It sounds very interesting.

One example with our chairs - we had these chairs that had "Mr. Potato Head" faces.  We were inspired by Tony Oursler, in his projection art pieces.  What happens is you have this remote interface.  You can log into the chair.  You choose what your face looks like.  It was very abstracted.  One of the points of this was to talk to people when you felt isolated and had no one else to talk to, so you didn't show your exact face.  You got to choose one of three styles, whether it be hand drawn, a cartoon-like face, or claymation. 

Then, you are connected to the people physically present at that café.  We're trying to think of different ways to actually include back channels.  Traditional back channels might be something like the way somebody says, "Uh", "Uh-huh," or maybe with their gestures and what they're doing. 

For example, if I were talking to you and doing my nails at the same time, which might imply that maybe I wasn't as interested, but that back channel is something we would like to transmit across a media'd space so people get some idea of what is going on.

One of the things we were looking at with the chairs was based on some type of behavior, could the color of the face change?  Could something else indicate, abstractly, your level of attention or agreement, if you didn't have the "uh-huh's". 

Another example of that is with another piece we have called "telemurals".  We use abstracted video instead of photo-realistic video.  A lot of video studies have shown that there are two main reasons people like teleconferencing with video.  One is to see somebody's posture, just to get their general state.  Are they happy?  Are they sad? 

Two, is the level of attention.  By having just silhouettes of people, we can get at your posture, your mood, and you can get a general idea of somebody's level of attention, but they don't have to give up their privacy.  The idea is how can we show things that are different from the way you see them in face-to-face, but still provide some understanding to people?

Probably, the closest idea of a back channel in media, as we know it today, is just the indicator that you're typing on Skype or MSN Instant Messenger.  It's a back channel that someone's doing something or thinking, and that you're about to get a message, before you've gotten it, so you don't freak out.

It's interesting because video telephony has never taken off.  It was pushed in the 1960's, the 1970's, 1980's, and 1990's.  People have said because the cognitive load is too high.  You end up spending more time worrying, "Am I in frame; Do I look okay," rather than concentrating on the conversation.  Yet, there are important things; there are beneficial things to seeing each other.  It depends on the context. 

If it's your child, you want to see them.  If it's business-like conversation, you may just wish to know the state or the posture, or in particular, how much attention is being given here.  It sounds like a way of reducing out the parts we don't like, often in video telephony, the "Am I in frame; am I looking okay," and we don't really care what each other's color of shirt is.  That sounds like very interesting work to signal that across.

Yes, and just to emphasize your point, you're probably not going to use a system like this to do tele-medicine, or to get instructions about how to run a space shuttle.  The interface I described is more for social banter, for somebody that you know, or if it's somebody you're meeting for the first time; the nice thing about seeing an outline is that person chooses their own level of disclosure.  They get to choose how much of themselves they'd like to display.  They could start with something more abstract, something less stressful.

Are you aware of the work of Distance Lab, who I was interviewing the other week?

Yes, I actually went to graduate school with Stephan Agamanolis. 

Are you aware he is a speaker, as well?

Yes, I am.  I was very excited to see that.  I love their shadowboxing piece. 

When it comes to yourself, there is one project.  I don't know if you led it or were part of it, but certainly, from the same department - it was Visaphone.

Yes

Could you describe Visaphone, and your involvement with that?

That was actually part of my PhD thesis.  I'm going to be speaking briefly about it at the conference because it's been inspiring for a lot of our other work.  In general, one of the points of Visaphone - let me start with the motivations.

One of the main inspirations was that somewhere we were doing a lot of teleconferencing back and forth.  It was quite fascinating that people would stare at this big black box of a speakerphone, even though it provided no additional information. 

One of the reasons for that, we think, is that people just are not used to speaking to disembodied voices.  You are used to associating a voice to a body, to a being.  We figured if people were going to stare at something, we might as well give them something useful, or something that might help them in another way to stare at.

A second inspiration for that was that sometimes when you're speaking to a distant location, because you can't see them, you don't know what's going on there, you can't tell if your voice is being heard.  We wanted an interface that lets you gauge your voice with respect to somebody else's voice, as well.  You won't have the scenario where you are yelling and somebody is being deafened at the other end because you can actually see the volume of your voice in relation to the other side's volume.

I just wanted to say that with Visaphone, what we were looking at was conversational dynamics between spaces, things like conversational dominance, turn taking, and also how people would use such a thing.  If you had an object that was aesthetic, and let's say one day in your homes you could have objects that were reconfigurable instead of collecting porcelain china plates, if you had an object that was dynamic, what types of objects would you collect and what information would you put on them? 

That sounds quite interesting.  If you were asked what is exciting you, at the moment, in the sphere of communications, what would you say?

I would say, first, don't fear communication.  Two, what I am getting really excited about, lately, is our work with sentiment analysis.  We're doing a lot of work to look at levels of anxiety in communication.  I guess that ties into fear, to some degree, like you said. 

Looking at general moods, there is a lot of work, recently, in natural language processing.  We can actually look at and predict, not with perfect accuracy, but just the level of mood in different communities.  We are doing this, right now, with peoples' blogs.  We're doing sentiment analysis in different Facebook scenarios. 

One, from the research standpoint, I'm excited about the possibilities of doing this.  Two, I'm excited just by this idea of a social mirror.  For example, if you could show this to people, will they change their behavior? 

Sorry, you said "field of communications" not "fear of communications" [laughs].

Yeah, I just popped you an instant message to say I said [laughter]...  I said what gets you excited.  I thought you might say, "I'm getting married in six months," so I tried to say, "What's getting you excited in the field of communications".  Some people find my accent strange.  You thought I said "fear of communications" [laughs].  You're thinking of all this sentiment-type stuff.

Yeah, your message to me is also another example of a back channel to the conversation, so that was fitting.  Looking at a lot of the sentiment analysis for happiness, as well as anxiety and fear, I think, is fascinating.  I think there is a lot to work on there.  I think one of the reasons I'm excited about it is because if we do it right, in the beginning, it won't be misused, later on.  Depending on how you build these interfaces, you don't want to scare people. 

One of the things I get very sad about is interfaces that try to do a lie detection.  If you do anything like that, you can seriously destroy conversation if you incorrectly assume something is a lie.  I like my interfaces to be abstract enough where you let people make their own assumptions about what is going on.  You don't say this is anxiety or you don't say this is happiness, but you just show different metrics and let people make up their own minds.

You have plug-ins for Skype, which say somebody is lying.  You don't like them.

I don't like those, no.  We are working on some of our own plug-ins for Skype, where we look at patterns of communications.  Basically, after this message, what it would have shown was our turn taking, our interruptions, if we speak over each other, if we argue. 

We have some other versions, now; they're not working perfectly, with speech recognition.  It also makes these visualizations of text that was spoken, so you can see words that were spoken a lot as bigger, words that weren't spoken as much as smaller.

A tag cloud

Exactly, so it's kind of like a varied version of a tag cloud, where people can annotate onto, later.

When do you think the Skype plug-in will be available?

One of my students if finishing up her masters in May.  I'm assuming she'll graduate, so I'm going to say May.

Instead of saying this person is lying, or anxiety, how do you display or indicate something, without being explicit, to let people make their own make up their own mind?  I was imagining the color red showing if somebody is lying.  What do you mean?  How do you obscure this?

Brainstorming, the first thing you would do is have different parameters, make them different colors.  Sometimes we try to avoid red just because it signals alarm or anger.  You map each of these to different colors. 

The simplest example - you have a bar graph with several different parameters.  You just let these bars rise and fall, but you don't label them.  As people experience interface, they'll make up their own minds and their own decisions about what it means to them.

It's okay if the green bar means something different to different people.  People should adapt the interfaces as to how they want to use them.  We don't say that this is how you have to talk.  There is no right or wrong.  It's basically up to you and we provide the information.

That sounds kind of interesting.  At the moment, you can record your calls.  You can have CDR's (Call Detail Records), start time, and end time.  It kind of begins to point to the possibility of applying metrics to people.  If you call "X" person, you get talked over X% of time.  Although you might not like it being explicit, this person tends to show anxiety 20% of the time.  Maybe you could group your buddy list according to certain conditions.

I would rather not label something as anxiety, but maybe have everyone with a color stamp.  Over time, let's say you enjoy talking to people who have a lot of green and blue.  That is what you'll remember.  You're not going to say, "This person is anxious".  You'll say, "I like this fingerprint of the person and I'm going to talk to more people like that," or as an imprint, as an alternative to an avatar.

That sounds like an interesting means of discovering other people, by fingerprinting people with these conversational metrics, if it's okay to call them that.  Then, maybe being able to say, like in Skype, you can set it to "Skype Me" mode.  I'll speak to anybody, but it would be nice if it were maybe granular.  I could speak to anybody with this type of - click a contact you already know and say, "I'm willing to go on 'Skype Me' mode for people with the similar fingerprint". 

Yes, and one of the other things about this is it also teaches you things about yourself.  It also gives you some level of self-awareness as you see your own color imprint change with respect to different conversations.  You might start wondering, "Do I really talk that much?"  Maybe I talk more than I thought I spoke.  "Why do I interrupt everybody?"  Maybe I didn't realize I was being so intrusive.  "Why don't I talk at all?  Why am I so silent in conversations?"  Sometimes, one of the ways our interfaces have been described has been I showing things you know, but don't realize you know.

It sounds as if it could be used to help a few couples out.  [Laugh]

It's hilarious that you say that.  When we showed Visaphone at SIGRAPH, a couples' counselor actually came up to me and asked if we could set this up in his office.  That was not our intent, but we've had a lot of interest from that domain. 

Yeah, "You always interrupt me".  "No, I don't".  "You always do, you never listen to me," and so on.

It was really a happy surprise to see that by making something physical and visible, the level of self-awareness and level of self-fear, almost, was surprising and exciting, at the same time.  When you see something like this, people are a bit more cautious about how they behave.  It probably does affect interaction, to some degree. 

Something very similar is in the field of speech and hearing.  Mirror therapy is one common way to get children to speak with speech delays.  In many ways, this is an alternate form of a mirror.

That sounds really nice.  I must admit, earlier in the conversation you mentioned an art piece, possibly which Visaphone came out of.  Which art piece did you mention, or was it a figment of my imagination.

It really wasn't, but because of a figment of my Attention Deficit Disorder, that ...

[Laughter] I thought you mentioned an art piece, and I thought, "Did I hear an art piece?"  Which one, because although it might be a bit strange because I'm meant to be a telecommunications engineer and have an engineering background, I've actually been very interested in people representing emerging communications in art form, just because I often see paths to commercialization, people so loosely experimenting and that's kind of what we need. 

Talking of which, I'm not sure you're exactly tasked with monetization, commercialization, and so forth, but what kind of opportunities do you see being spun out of the work that you have been doing, what you call commercial nature, if any?

Some things that we're looking at are actually building applications for cell phones, which actually combine conversations and games, things to break the ice, things to introduce people.  Some of the more obvious things are applications for Facebook. 

Also, this doesn't have exactly to do with direct communication, but we're building a lot of interfaces for showing people how they use energy in their homes.  We're tying these interfaces to the community, anonymously, so that people can converse with each other about how their visualizations look and what they're doing to curtail their energy usage. 

In some ways, we're using them in what I call social catalysts, as imprints to encourage further conversation.  By no means are we trying to replace face-to-face conversation.  We're trying to provide different channels and back channels to get things across, but also to encourage more discussion.  A lot of our interfaces are meant to be interrogative, to sometimes even ask more questions.

You asked earlier about an art piece.  Visaphone has been considered an art piece, in the past, and so has Chit Chat Club, which is a telesculpture that I mentioned.  A lot of work kind of blurs the boundaries, although the work isn't originally set up as an art piece, sometimes, the pieces to end up in museums.  I like this idea of free flowing between them because you get different people to see the work and you get a lot of perspective.  In going back to my point about social catalysts, you get more people involved in the conversation.

It reminds me of David Troy, who is a speaker.  He developed FlickRVision and TwitterVision.  He ended up displayed in the New York Museum of Modern Art.  It was actually another speaker, I can't remember at this point, who ended up with their piece displayed in an art museum.  That is fairly interesting.

Can you expand a touch more, on the cell phone work you were meaning, like give a concrete example of what can be done?

One example might be for people that might want to archive a conversation and what it might look like.  I gave those archival examples earlier; taking that into the game domain might have each person represented as a little centipede.  As they move about the screen, the longer they talk to this particular person, the longer their centipede gets.  They tend to cluster around people they talk to a lot.  All of a sudden, you start seeing things like group patterns.  You start seeing behavioral patterns, conversational patterns.

For me, one of the reasons that we're doing this work with phones - if I could have my way, these would be on interactive t-shirts.  The way people leave their computers on 24/7, the way people leave cameras on 24/7, it's not unfeasible to think that you might leave a microphone and speaker on 24/7 in your home, and what way would you want to show different patterns, obscure different patterns for privacy, and how might you want to see behaviors like this, over time.

I'm really thinking about the idea of when you do have microphones on 24/7, whether they are represented on cell phones or on your clothes, to highlight your social network as you walk down the street, much in the same way kids wear t-shirts to show their favorite bands or their favorite products; how might these visualizations of conversation behavior be used to show your identity?

That sounds very fascinating, just because it ties into the whole digital identity field.  I'm not sure if that is a field of yours, at all.

Identity is a big field in psychology and sociology, and social psychology.  The idea of identity and the differences between your fragmented identities online, offline, even in your different face-to-face communities is a big research piece that we're only slow chipping at the moment.  It is something we discuss a lot.

The idea of leaving a passive microphone on doesn't seem unreasonable.  Actually, what I often wish for - it was an idea that came from Martin Geddes; we need push-to-hear. 

Often, we make a call and another person is already in a conversation with people in the room.  Wouldn't it be good if you could push a button and just hear for two seconds?  Obviously, the other person at the other end gets a blip or warning, but push-to-hear, because what we're trying to do is close time and space between people.  That is a nice form of presence, is to hear what's happening at another location.

One interesting take on that, just to flip it over a bit, is with Visaphone people oftentimes use the visualization with the sound off.  In that case, it would be push-to-see what you hear, without actually hearing it.  You would see abstracted circles of volume of sound.  You would get some idea of presence, some idea of activity, almost the equivalent of a baby monitor for adults, which actually took privacy into account. 

Like a baby monitor for adults.  Presence was a hot topic about two to four years ago, mostly about three, actually somewhere in between.  We had the likes of USB-powered plants that when your loved one came online it grew to show they were online, or lit up.  I'm not sure - the work you've been doing ties into presence.  Do you see evolution in presence?  Maybe the word has been misused because many people, by presence, mean availability management rather than sense of other at distance.

I think that what has happened is that other people have altered the word because people became frustrated with not that much progress in the area.  I think people have looked at it from different perspectives.  There has been a lot of work, recently, in disruption; when is the ideal time to disrupt someone, if there is one.  Other areas are, like you said, availability with instant messenger.  Other things are just bringing people together, what people might want to meet each other.  Facebook does this by trying to match people up on its own, trying to introduce people.

One thing that I would like to bring into the discourse about this idea of disruption is that disruption has this connotation of being bad.  What if we think of disruption as a good thing?  We just start by thinking of it in a different way.  There are great things that happen from disruption.  When I get disrupted from work, I get to have a cup of coffee and talk to somebody.  I would say that's a success.

[Laughs] Disruption is good.

Yeah, so maybe we've been thinking about it the wrong way.  I think it's good that we don't hear the word presence as much, anymore.  It just means we've started looking at different parts of it and started using different words to describe the ideas of presence.

Does it amaze you that fifteen years later we still have online and offline, busy and don't disturb?  It seems rather as if we are still living fifteen years ago in that department.

True, it is interesting but maybe that's the best solution.  We haven't shown that yet.  Sometimes with people - doors in my office, if my door is closed, people aren't as inclined to knock.  If my door is open, they're more likely to walk in.  We do those cues face-to-face.  Whenever we move to different mediums, we tend to appropriate what we know and use those before we can move on and find different social cues to use.

It doesn't surprise me.  I think we'll also come up with different things.  Probably ten years ago, if you sent somebody a message an instant messaging and they didn't reply for two hours, you would probably get more upset than you would, today, knowing that people walk around, get cups of coffee, and go to the bathroom. 

In the very beginning, we expected it to be so close to face-to-face, that if somebody had replied to you, within a second each time, and they didn't once, you immediately thought that something was wrong, didn't like you.

I agree with you.  It's kind of happened with email, now.  You're kind of expected to reply the same day.  Now, if you reply the same week, it's still okay.  It's even getting to the point where if you don't reply, it's still okay.

Email is actually stopping to work, for me.  In many ways, I could use more of a pull medium than a push medium, in that respect.  With all these spam filters out there, they're catching some important mail.  My email has turned into my newspaper.  I glance at it as opposed to reading it the way I used to.

I agree with you and I think it's getting like that for all of us, just because of the sheer rise in communications volume across growing numbers of channels.  We seem to be seeing the long tail of communications happening, more means of connecting with each other.

Speaking of which, I don't suppose you're aware of Tony, with his Sense Networks?

No, I'm not familiar with his work.

He's from Columbia University.

Oh, Tony Jebara - yes, we went to school together.

Did you know he was a speaker?

No, I didn't know.  He's amazing!

Exactly, and I was chatting with him, yesterday, and it really overlapped with many areas that got me excited.  When you mentioned discovery of others, Tony is very much focused in that area.  It's some amazing work going on, there. 

The reason I mention it was just to begin closing loops between you, Stefan at Distance Lab, Tony at Columbia stroke Sense Networks.  I just see you three - I was going to say you should sit at the same table together, at lunch [laughs], but maybe it's better since you know each other, to spread out.  I just see commonalities there.  If conversations are not happening, they should be.

I should begin finishing off by asking you - I've asked you what gets you excited.  Do you want to share any last thoughts on where you see opportunities in the communications space?  At the beginning, you said your passion was the communications field.  Where do you see communications, for example, going over the next two, three, or five years?  Where is the excitement?  Where do you see development or experimentation, or where would you like to look, personally, over the coming years?

What I'm intrigued about is the creation of new types of interfaces that might even create new social etiquette or new social behavior in communication.  Right now, we have thousands of years of experience speaking face-to-face, and we tend to adopt that in different mediums. 

The telegraph came along.  We took some of that, but we created some of our own mediums on top of that.  Then, we had radio, telephones, email.  We had little emoticons with an email.  I'm curious; if you include visualization with communication, how might you influence communication, encourage different types of communication, and what types of channels that we're not familiar with or even aware that we use, can we show using visualization?  I would love to see some sort of visual feedback with communication.  I think we're slowly on the road to that.

That's fantastic and I look forward to the Skype plug-ins.  I hope they're good.  I very much appreciate your time.

Thank you very much.  I look forward to seeing you in San Francisco.

See you in March.  Thanks, bye.

Bye