One of the key changes ongoing in telecoms is that a rising number of users buy their services from a company that is not a telco. Almost any company with a recognized brand is considering adding telecoms services to its mix, usually by leasing capacity on a cellular network under an MVNO (Mobile Virtual Network Operator) deal. And more radical options are opening up for these virtual telcos--creating their own networks using a technology such as WiMAX, and delivering voice services via VoIP; and then even pursuing the last mile and triple play bases with broadband wireless as an alternative to telco DSL. In some cases, we may even see non-telcos buying up spectrum to create fully controlled alternative networks. Against this background, why then is Microsoft being so coy about its plans for voice over IP?
Microsoft has been aggressive behind the scenes of the broadband wireless surge. Like Intel, it supports any trend that will stimulate usage of PC-style devices (including Windows phones) and support the open IP model, which places the balance of revenue and profit in favor of the device maker rather than the operator. It has put considerable weight behind stimulating Wi-Fi usage with a range of functionality incorporated into Windows and has cutting edge activities in mesh networking. Although, unlike Intel, Microsoft has not yet used significant investment dollars to promote Wi-Fi and WiMAX--perhaps still smarting from the failure of its multibillion dollar gambles on broadband wireless operators at the turn of the century--it has been a key lobbyist, along with Cisco and Intel, for additional unlicensed spectrum to be opened up in the US and Europe.
In this context, its moves into VoIP seem positively timid on the wireless side, especially when compared with eBay's acquisition of peer-to-peer VoIP pioneer Skype for up to $4bn. The giant recently announced the purchase of a small, two-year old VoIP technology company, Teleo of San Francisco, as a step towards launching voice services under its MSN brand and so keeping up with similar moves from the other major portals, Yahoo and Google. The move is highly logical in terms of the battle between MSN and these rivals, but it could go so much further, taking Microsoft into the world of telecoms services. Yet it stated categorically, when questioned about the Teleo acquisition, that its VoIP strategy does not extend to offering full telco services or a phone-based voice product.
This is an odd decision. As major operators shift towards convergence models that integrate wired and wireless services using IP, a strong phone-based VoIP platform could enable Microsoft, at last, to make significant inroads for Windows-based handsets. Even in the cellular-only world, companies like Verizon are looking to offer VoIP over their EV-DO networks and there will be a race to provide attractive handsets and operating software for such services--a race that Microsoft, in contrast to that for the conventional cellphone market, could enter almost at the starting gate, just behind Nokia rather than miles behind.
HESITANT ABOUT WINTEL
Microsoft could go a step further, launching full wireless phone services--voice and data--under its strong MSN brand and so helping to promote its broader objective of making the all-IP model ubiquitous. If the Wintel approach to life is to survive, it has to be translated to the handset--as that becomes, in its future forms, the key end user device--and to ubiquitous communications. Intel and Microsoft both know this well, but so far Microsoft is being more hesitant about taking the actions to support the theory.
Of course, it is possible that Microsoft regards the fight with Google, which increasingly focuses on communications facilities such as instant messaging, as the first stage in a war that it will later take to the telcos. And it will naturally be wary of threatening the incumbent operators too much as it still seeks to gain their approval for its Windows Mobile handsets. But like most players in the telecoms world, IP is forcing some hard choices on Microsoft. We believe it will never gain the share that its business plan requires in cellular-specific handsets, but has a better chance in converged and mobile IP devices. These products are a threat to the conventional cellcos, but they are increasingly being forced to embrace them, and Microsoft has an opportunity to create a platform for them--as it is doing with France Telecom.
But it also needs to put VoIP services on to handsets as well as PCs if it is to stay ahead of Google and finally see off Skype. Internet providers have to become telcos, because in the future few people will buy internet access as a standalone service.
Initially, Teleo will be used to enhance the voice capabilities of MSN instant messaging, allowing Microsoft Messenger users to place phone calls to people listed in their electronic address books. MSN will also integrate Teleo's technology with its local search function, enabling subscribers to locate and call local businesses such as restaurants. This is part of the long term MSN strategy to use the subscriber's electronic address book as the basis for competing in other services, with this address book unifying different communications offerings such as Hotmail email, Messenger, Spaces and upcoming functions such as presence.
