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Optical/IP

Citron: Triple Play Is Tripe

SAN JOSE, Calif. -- Voice Over the Net Conference -- Vonage Holdings Corp. CEO Jeffrey Citron has no love for the Triple Play of voice, video, and data, saying that phone and cable companies are using it as little more than a marketing device.

"We don’t believe in the triple play and we never have,” Citron says. "We think bundling makes sense, but bundling has to be natural, and it also has to provide a cost advantage."

Many would say Citron is the central figure in the movement toward a VOIP paradigm, but he’s no starry-eyed visionary -- he is clearly not interested in discussing new services that don’t make immediate financial sense.

In an interview with Light Reading here at the VON conference, Citron showed supreme confidence that Vonage's business model is the right one for VOIP -- and that the moves by larger incumbents into the VOIP world are largely just symbolic.

More importantly, Citron seems to have one basic premise: Vonage is cheaper, and that's what folks want.

Citron certainly doesn't lack confidence in his views. He often punctuates the end of his assertions with an emphatic “right?" -- almost demanding that you agree with him.

"We don’t charge a premium just for putting things together; we should be putting them at a discount for doing so," Citron says.“If it’s more expensive, then what good is the bundle, right?

"Sure, the phone companies do discount the services from their normal rate card, but is it actually that much cheaper? And if you look at it, if you are getting broadband and cable TV from a cable operator, and then you go add Vonage voice service to that existing double play, Vonage would be cheaper for you."

As for IPTV from incumbents, Citron is equally skeptical. He points to BellSouth Corp.'s(NYSE: BLS) recent offer of IPTV services to its 3 million customers, of which only 200,000 have so far taken advantage.

“It’s interesting: Is video really an important part of the communications bundle?” He questions the fundamental notion that consumers will find value in such a combination. To illustrate further, he pulls out his oft-told tale about the kerosene oil delivery service that decides to deliver bottled water as well. (To summarize: It was a Bad Idea.)

“So the triple play hasn’t affected us, for the most part,” Citron says. “Frankly I look at bundles as really a tool to market and a tool to retain, but I don’t know if anyone’s really demonstrated that it is an effective tool to sell.”

Citron says that he has yet to see a service that requires the presence of voice, video, and data delivered through one pipe that exploited all three media in an interesting or valuable way. To this end, he says his company will begin working video telephony into its product later this year, and it is currently working on offering Vonage service over cell phones.

In the end, Citron believes that the major telcos will be focusing on wireless services and on squeezing the last bit of margin from their wireline services before they ever get really serious about moving their customers over to VOIP services.

On the technology front, Citron said the Vonage network is made up largely of homemade software along with Juniper Networks Inc. (Nasdaq: JNPR) and Cisco Systems Inc. (Nasdaq: CSCO) switches and routers. Very early in the company’s history, Cisco made an adapter for it that allows a normal telephone to be plugged into a PC for making VOIP calls.

Vonage is still a privately held company -- perhaps one of the most high-profile private companies in existence today. Speculation on a possible IPO has been swirling for some months now among analysts and media, but Citron won’t talk about his company’s future financing plans.

Citron said his company has raised a cumulative $208 million, in two rounds of funding. Vonage now has over half a million users, he claims, and is adding over 15,000 users per week.

Right?

— Mark Sullivan, Reporter, Light Reading

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Road Trip 12/5/2012 | 3:24:16 AM
re: Citron: Triple Play Is Tripe >"We donGÇÖt believe in the triple play and we >never have,GÇ¥ Citron says.

Sounds like a guy who can't do it.
light-headed 12/5/2012 | 3:24:16 AM
re: Citron: Triple Play Is Tripe I have used it for a few months now and it has cool features but it is completely unreliable because they don't control the last/first mile. Worse quality than sucky cellphone quality.

Although many of the outages, dropouts, low volume, not being able to hear one way, echo, busy signals when other phone is not being used, regional busy signals, etc. could be from Vonage and not from congestion off their network. It is easy for them to blame network out of their control. Now that they admit to a Cisco/Juniper network I can see where all this jitter and latency is coming from (just kidding... sort of)

I am switching as soon as my cable provider offers VOIP because then they can control the QoS on the network. RBOCs and MSOs will KILL them once they offer their own service if it is priced competitively and has similar features simply because they can offer QoS for the traffic end to end. They just want to hype themselves for an IPO then they will go down the tubes after they dump all their shares.
minnecool 12/5/2012 | 3:24:14 AM
re: Citron: Triple Play Is Tripe Citron nailed it. The flavor of the month bundling push makes for wonderful CFO investor presentations, but the reality will be quite different.

Any individual service, priced right, will take out a bundle. A whole lot of telco exec's will be eating humble pie within the next three years.

My Vonage service is outstanding.
alchemy 12/5/2012 | 3:24:13 AM
re: Citron: Triple Play Is Tripe minnecool writes:
Citron nailed it. The flavor of the month bundling push makes for wonderful CFO investor presentations, but the reality will be quite different.

Any individual service, priced right, will take out a bundle. A whole lot of telco exec's will be eating humble pie within the next three years.


Nice rhetoric but the facts do not align at all. The MSOs have offered triple play for a number of years. It hasn't been VoIP but they've offered telephone, internet, and video as a bundle. What they've found is that bundled service with a discount for the whole bundle reduces customer churn significantly.

My Vonage service is outstanding.

The quality of any best-effort service is based on the accident of geography. If you happen to be in a region with little or no congestion, Vonage works fine. As more and more service providers start rolling out their own VoIP products with QoS enabled on them, they have less incentive to ensure that subscribers don't see congestion.... particularly on the upstream where symmetric services like VoIP and illicit web host customers are the ones who get penalized. They won't be able to traffic shape Vonage but they will be able to offer bundled premium QoS if you take their voice service.
rjs 12/5/2012 | 3:24:12 AM
re: Citron: Triple Play Is Tripe For the price I pay, I concur, my VONAGE service
is outstanding!

It is a fact that the big players like comcast et al
can start bundling and providing QoS. I doubt that
they will match VONAGE price though.

As Citron said ... It should be cheaper. Period.

I am sick and tired of used car salesmen and their
ilk ( fill in the blanks here ....) trying to sell me "more value added" at a higher price.

That is why, the BKHMs and AVNX and others in the optical component business are getting their asses
kicked by the Asians. They are still in the US state of bubble mind, namely, "I will give better performance for a higher price"

Dudes! "Give some performance at the right price" should be the motto.

Everybody votes with their pocket books ... so I am going to go to a Walmart and buy me a nice
fifty dollar DVD player which is not the top of the line, but the price is just right for what it
is supposed to do, namely, just play DVDs.



-rjs

PS: In case you are wondering, I do not work for VONAGE ... but I did stay in at the Holiday Inn Express last night (:
paolo.franzoi 12/5/2012 | 3:24:12 AM
re: Citron: Triple Play Is Tripe
In my neck of the woods, TDM voice bundles from SBC are priced at the exact same number as Vonage minus taxes.

SBC Price = Vonage Price + Tax

This includes unlimited long distance etc. The idea of the bundle is imagine this...you go into a neighborhood and offer Video and Data. For customers that buy both, you offer FREE voice service over IP. As you have to provide the pipe and the equipment at the home, the incremental cost of the voice service is basically tiny. Now, you may not get a lot of fancy features but the price is right.

Sounds an awful lot like a Cisco pitch from several years ago don't it?

Well, it may work this way but differently than we all thought. Push to Talk IM - Teamspeak and other free peer to peer voice services might take up goodly chunks of the voice over IP market and do so for free.

Even Vonage is trying to replicate an old business model with a new technology.

seven

rjmcmahon 12/5/2012 | 3:24:11 AM
re: Citron: Triple Play Is Tripe The quality of any best-effort service is based on the accident of geography.

The problem is that no regulator can enforce fairness of QoS and hence it will be used to discriminate. The FCC can try to stop things like port blocking to services like Vonage, but they can't do a damn thing about discriminatory traffic shaping which creates congestion.

This is very bad policy to have systems where QoS drives the network providers' revenues. The better model is to charge for Gbytes per month and for facilities upgrades.

They [the access oligarchs] won't be able to traffic shape Vonage

Exactly what stops them from traffic shaping Vonage into oblivion? Is the FCC going to audit their network devices and network configurations? Hell, the SEC couldn't police the rampant fraud on Wall Street, so it's hard to see how these federal regulatory agents will police the access oligarchs - particularly when "deregulation" is the mantra of the day.
paolo.franzoi 12/5/2012 | 3:24:11 AM
re: Citron: Triple Play Is Tripe
Okay rj, actually Enterprise customers have been down this road.

So, does the GBytes per month include Transmit and Receive Packets?

What happens if you get a flood of traffic from DoS attacks?

Do you pay for traffic that was lost and required retransmission?

Enterprise customers have entire staffs that monitor the QoS delivered by the carriers and ask for refunds when these are not provided. Most consumers will not have the sophistication or the tools to do so.

Lets use IP video as an example problem. A set top may be tuned to a multicast stream, but the TV is off. Do I pay for that?

How about the loss of a set top box (for example the power goes out)? Do I pay for the data sent to it before an IGMP query goes out and find that the channel is no longer subscribed to?

Billing on used bandwidth is very subjective and I think is not the way to go. I still firmly believe that customers pay for services. They should arrange for that and let the pipe providers and the service providers come to a business arrangement to make this work.

Is there a reason to shape Vonage into oblivion? Only if it is in the best financial interest of any service provider (Access, ISP, Backbone) to do so.

Anybody done a tracert to Vonage and figured out how many handoffs there are till you reach them?

seven
rjmcmahon 12/5/2012 | 3:24:09 AM
re: Citron: Triple Play Is Tripe So, does the GBytes per month include Transmit and Receive Packets?

Yeah, it's total bandwidth which includes transmit and recieve.

What happens if you get a flood of traffic from DoS attacks?

I see two options. Option A is we start an insurance company and spread the cost and risk across all parties. Option B is to strategically place intrusion detection/prevention sytems such that DOS attacks are quickly mitigated. Maybe a combination of the two.

Do you pay for traffic that was lost and required retransmission?

Yep.

Lets use IP video as an example problem. A set top may be tuned to a multicast stream, but the TV is off. Do I pay for that?

Yep. When I leave the tap water running I pay for both its use and the sewage return. No reason not to provide a similar feedback signal to end users of bandwidth.

How about the loss of a set top box (for example the power goes out)? Do I pay for the data sent to it before an IGMP query goes out and find that the channel is no longer subscribed to?

If price reflected cost the amount charged for an IGMP message would be negligible.

Billing on used bandwidth is very subjective and I think is not the way to go. I still firmly believe that customers pay for services. They should arrange for that and let the pipe providers and the service providers come to a business arrangement to make this work.

The vertical model prohibits competition and innovation.

Is there a reason to shape Vonage into oblivion? Only if it is in the best financial interest of any service provider (Access, ISP, Backbone) to do so.

Getting rid of competition is typically in the financial interest of the status quo. That's why the ILEC blocked Vonage traffic. Most won't be so stupid to block the traffic completely but rather will just traffic shape it into oblivion. They'll then turn around and sell their overpriced QoS as the only viable solution.
sgan201 12/5/2012 | 3:24:04 AM
re: Citron: Triple Play Is Tripe Hi,
We been down this road for so many times that it is not even funny any more.

A) Nobody want to write a blank check to their servcie provider so that they can charged any amount. This is essentially what you have in packet billing..

B) Case in point.. X.25 versus FR. X.25 was introduced in USA with packet billing. It never take off. FR has a fixed monthly charge like leased line and no per packet billing.

C) We are transitioning into consumer networking market. Let's say I want to watch a football game. With per packet billing, I or the SP have no idea how much I will be charged.

D) People had forgot that maybe about 10 years ago when long distance calls was still expensive. Everyone on the enterprise side was given access code and call detial recording was used to keep track how much each person call. Not until recent years when long distance is so cheap that it went away.. Even now, people suibscribe to unlimited distance calling plan so that they get a fixed expense every month.

E) DO you know how much it costs to keep track/count every single packets?? And, it is not scalable.. Every speed increase cause more to be counted and keep tracked. At this moment, billing is a very large component of costs for voice calls versus the actual call itself...

Do people ever learn??

Dreamer
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