Just how free and open is the Internet?  Not nearly as open as it was a few years ago, according to a report by Arbor Networks. Instead of a landscape in which thousands of firms are scattered about, about 150 companies are responsible for half of Internet traffic. 

When I read this statistic I thought, “so what?” It certainly doesn’t sound like anything close to monopolistic or oligopolistic behavior. I definitely can’t think of any other industry in which 150 companies compete for half the market. However, the trend toward concentration, and the quickness with which it is happening, is actually quite startling. Just 2 years ago 5,000 companies were responsible for 50% of worldwide net traffic- 33 times more firms than today.

Google alone accounts for 7% of all web traffic, more than any other company. Not only do they hold a larger share of traffic than anyone else, but the nature of their traffic can be quite important. This is not just some funny Twitter page or blog that draws a large number of visitors. Google is in the business of organizing information, some of it very personal and valuable. In addition, offshoots like Google Voice provide services that some would consider pretty essential (phone calls) for modern life. 

Which brings me to the news that the recently invigorated FCC may investigate allegations that Google Voice is blocking calls to rural areas. This issue really brings the discussion to a head for me. I don’t have any idea what an appropriate level of competition is for web-based business. The trend toward concentration could just be like any other market in which stronger, more competitive players end up gaining significant market share, while others fall behind and eventually die out. People may only rely on the Internet to do a few things, and will seek out a handful of providers to allow them to do so. Who knows, the search market may even be a natural monopoly, and will be controlled by 1 or 2 providers. I don’t even have a real grasp on all the angles of net neutrality and its possible implications. However, it does seem to me that the “underdogs” that people seem to root for in the advocating of net neutrality, and issues like the “Pulver Order”, aren’t the benevolent actors they are made out to be. They are businesses and will seek to make a profit just like the big telcos. Just because they have a different business model doesn’t mean they are exempt from the same potential abuses in the quest for profit that other companies are guilty of.  In fact, it is this very type of behavior- discriminating against certain types of traffic- that I thought was supposed to be prohibited under net neutrality. But it sounds like Google, and potentially any other company that claims that VoIP is not subject to the same rules as PSTN communications, is trying to have their cake and eat it too. They want the Internet to be free and open, but only in a narrowly defined way. Once that openness means regulating activity to protect consumers and discourage anti-competitive behavior, the rules no longer apply to them.

It is still too early to tell if Google is in fact violating net neutrality principles, let alone doing anything illegal. However, it seems pretty clear to me that we need some common sense regulations to make sure that all consumers receive the same level of service, while encouraging competition in the marketplace.

With all the talk about the company that shall not be named blocking Google Voice from its App Store, a very simple question arose in my mind, to which I have yet to find a complete answer: How is Google Voice making money? After running a Google search for that exact phrase, my computer was immediately apprehended, and I woke up in my living room sweaty, dazed and confused (the following video may offer some explanation).

Google Opt Out Feature Lets Users Protect Privacy By Moving To Remote Village

From what I remember of the pages I viewed on the topic, most people don’t have an answer to that question either. For those who are unfamiliar with Google Voice, it is a recently launched service utilizing technology acquired from GrandCentral a couple years ago. It allows users to forward incoming calls to multiple phone numbers, and offers cool features such as voicemail transcription and online SMS, all for free. In addition, by choosing a Google Voice phone number, users can place and receive very cheap international calls, and free domestic calls, via a ring back service, as well as send and receive free SMS messages. It is this last part that confuses me. I understand the cost savings provided by using an IP backbone to carry international or long distance calls, as calling card services and VoIP applications like Skype have been doing it for years. However, given the fact that the service is only offered in the US, and that I have heard reports of calls to Canada even being free, I still don’t see how Google can make money on the service as it is currently set up. Even if they carry traffic over IP for the long run, they still have to pay termination fees, as small as they are, at each end of a call. Since calls within the US, and apparently to Canada, are free, they are losing money on any call within those countries. The SMS portion alone must be a huge cost.  As I see it, the only way they can turn a profit is through international calls. I don’t have any sense of how many international calls originate in the US each year, but my guess is there aren’t enough to justify Google’s business model.

So if I am right (admittedly a rare occurrence), what is Google going to do? My first thought when I heard of the service was that they would try to drive users to Gmail, and make the money up in ad revenue on the web. Well, it looks like I wasn’t too far off. According to some reports, Google may implement “ringback advertising” in which an audio ad is played before a call is connected. This seems like a more plausible way to generate revenue, though the company clearly has to weigh the likely decreased customer satisfaction that comes with listening to ads. While I would find the service incredibly annoying, there may be enough people out there who are willing to tolerate advertising in exchange for cheap calls that it makes business sense for Google.

It has been a while since I posted anything. Since I am located in Sweden, not much happens during the summer except vacations. But as summer winds down, I am back in the saddle. While I was out, a number of interesting news stories broke. The rest of the world moves along. 

Perhaps the biggest news involves the first major customer GIPS ever signed.  In the midst of Chapter 11 bankruptcy, Nortel has been selling off its major business units, and today, their CEO, Mike Zafirovski left his post. Given that heavyweights like Ericsson, Nokia, and Avaya have been the buyers so far, it looks like Nortel had some pretty solid stuff. It will be interesting to see how the new carrier-centric Nortel will perform, but I think they will be just fine.

The continuing saga involving Google Voice, Apple, and AT&T is also intriguing. In one sense, I think the developments are a positive sign because they signal a new approach to voice communication. Any resistance to these kinds of applications is just a sign of growing pains from old institutions trying to adjust to a new paradigm. From GIPS’ perspective, the continued innovation in the mobile VoIP market can only be a good thing, and should lead to some technological progress in the long term.

These are just a couple examples of interesting stuff that has been happening in the last month or so. I guess it just goes to show you how quickly things move in the modern world.

Last week in the US, the FCC took notice of Apple’s (and maybe AT&T’s) refusal to approve Google Voice for distribution on the iPhone App Store. In individual letters to the three aforementioned technology giants, the FCC launched an investigation into the relationship between Apple and AT&T and how the fate of applications submitted to the App Store are determined. To date, there are several open FCC proceedings regarding wireless access and handset availability, but to me this signals that the government is seriously interested in promoting openness of the wireless internet. The App Store reject pile is littered with VoIP applications deemed not suitable for the Apple/AT&T offering, however, the FCC has now decided to question Apple’s practices. Using Google as a test case is not surprising as the US government has a predilection to target higher profile cases.

Significant action by the FCC to promote openness within the wireless internet is a huge plus for the voice and video over IP community particularly as LTE and WiMax technology are rolled out to the public. Assuming new regulations are crafted to ensure a high level of openness the challenge will become how service providers and their networks manage the demand created by new IP communication applications. Even today the AT&T network is stressed. The GIPS San Francisco office is located in the shadow of the San Francisco/Oakland Bay Bridge and during afternoon rush hour, traffic chokes streets around our office.  When leaving the office for the evening, I frequently will make try to make a call as I walk to the MUNI Metro Station. Quite often my call is met with a “Network Busy” or is dropped in progress. I can only surmise that the network is oversubscribed due to the volume of calls placed from cars idling at the approaches to the bridge. I am also an avid user of mobile web and mobile email. Again, while navigating the streets of San Francisco, I am less than overwhelmed by the capability of the AT&T 3G/Edge data network.

Is there a reasonable solution that will provide excellent coverage and appropriate data throughput at reasonable price? I am not sure; however, I applaud the effort by the FCC to attempt to break down some of the barriers which are limiting innovation.

Google Voice has been much discussed with its impending widespread public release. I gave it a whirl over the weekend, and it seems quite nifty. To tie in loosely with my last post about novel methods of reducing mobile phone costs, it seems you can use Google Voice and Gizmo to make free PSTN-terminated calls.

Gizmo is a free VoIP client, which can be installed on a variety of PC and mobile platforms and provides you with a SIP number. Google Voice can be directed to forward and even connect calls to this number. Since domestic calls made through Google Voice are free, we seemingly have a neat system of free calling here.

Some instructions can be found on a Google forum, though some users in the thread report problems connecting the calls to Gizmo. Very interestingly, a blogger describes using this method to make free calls on his Android phone over the 3G/EDGE network.

Perhaps free-as-in-speech VoIP nirvana is not as far off as I had feared…