BT, long considered a risk-taker in the telecommunications market, has laid a $105 million bet to open its network to application developers in the hopes of creating innovative voice services. But will other phone companies take a similar gamble?
Eventually, they will. But it will take time. Experts such as Will Stofega, a research director for IDC, say that phone companies must evolve beyond simply delivering phone and data services. In an age where voice has become just another application delivered over an Internet-based network, phone companies need to be at the forefront of developing new services and applications. And to do that, they'll need some help.
"The U.S. operators, and most operators in Europe for that matter, aren't doing what BT is doing today," Stofega said. "But they will have to eventually, in order to survive. It just might take them awhile to get there."
On Tuesday, BT (previously known as British Telecom) said it was buying the Silicon Valley start-up Ribbit for $105 million. Ribbit is a software company that has built a platform that allows developers to integrate voice features into Web applications, such as Salesforce.com, Facebook, and the iPhone. BT plans to use Ribbit to provide developers open access to the company's newly built all-IP network called 21CN.
With the advent of the 21CN network, BT has been at the forefront of Internet-based networking. So it's no surprise that the company is embracing new Web 2.0 technology and more specifically turning to start-ups like Ribbit.
Instead of trying to develop cool, new IP-based applications itself, BT is looking outside the company and toward the open development community for help.
The idea is that by opening its assets to developers, BT can use an unlimited pool of talent to come up with new and innovative products and services at a fraction of the cost of trying to develop it in-house.
And let's face it, phone companies, such as BT, could use all the help they can get developing new applications. There's no doubt phone companies can build networks. They've done that for more than 100 years. But generally speaking, phone companies have not been known for creating innovative services and applications. Just think how little basic phone service has changed over the years. Voice mail and caller ID are hardly revolutionary services.
That's why companies, such as Skype with its free PC-to-PC calling and messaging platform, have become popular. And it's why carriers need to worry about companies such as Google, which are developing cool and inexpensive services like Goog411, which allows people to look up telephone listings for free. While it's unlikely that Google wants to take over the telecommunications industry, it's clear the company sees Internet-based communications as a way to sell more advertising.
By opening up its network to thousands of developers, BT can leverage truly cutting-edge ideas and technology. But giving developers access to expensive and critical network infrastructure is a risk. So it's also not surprising that more conservative U.S. phone giants, such as AT&T and Verizon, didn't put up much of a fight for Ribbit when BT came knocking on the start-up's door late last year.
"If they were really interested, the fact that no other major telco showed up for Ribbit suggests that they had other things distracting them," said JP Rangaswami, managing director of service design at BT. "And it shows that they were far less willing to see the value in what Ribbit could provide."
Representatives from Verizon and AT&T could not be reached for comment on this story.
BT is far from the first company to realize the power of an open development community. Open-source software has been around for decades. It's already proven to be a winning concept in computing. And in some small ways, it's already begun taking root in the communications market.
Companies, such as Google with Android, its open-source mobile device operating system, and Apple with its somewhat open software development kit for the iPhone, are leveraging open development communities to come up with solutions for particular products.
Even Verizon has begun taking steps toward openness with its open wireless network. But even though Verizon touts openness, the proposed open wireless network still requires devices to be certified for use on the network.
That said, the company is offering an open hosted-voice service for its business customers. Using XML-based technology, Verizon is allowing large companies to customize their voice applications using equipment and network resources hosted by Verizon.
Giving developers access to the infrastructure
But BT's purchase of Ribbit highlights an even grander vision for open development. Instead of playing gatekeeper to its network infrastructure, BT wants to give developers access to that infrastructure, so that they can create the devices, services, and applications that will help BT differentiate its network from its competitors.
"Our plan absolutely was to raise the stakes and up the ante," Rangaswami said. "We could have chosen to innovate around a specific device, like AT&T has done. But we didn't want to take the traditional U.S. telco approach. Instead, we wanted to be a part of the innovation."
Even though experts such as Stofega believe that BT is on the right track, he said BT and other phone companies that follow in its wake have many issues to work out. For example, the idea of having thousands of developers working on applications and services for a carrier's network may sound great. But how will a carrier manage those developers? And how will it make money from the applications that leverage its network?
There is also the question of quality control. In the U.S., especially, the public has high expectations for the traditional phone network. And the government has mandated that phone services include enhanced 911 capabilities to allow first responders to find people who call for help in an emergency.
"Even though the idea of this big developers' sandbox sounds enticing, I'm not sure the big phone companies want to be in the business of managing all these developers," Stofega said. "And because they have a duty to shareholders and public safety, they have to make sure they can still make money and live up to their government mandated obligations."
For these reasons, Stofega said it will likely be a long time before companies like AT&T and Verizon follow BT in terms of opening their networks to developers.
"BT takes big risks, because it's been backed into a corner," he said. "It doesn't have a mobility play, and so it's been forced to figure out how to differentiate itself. And the U.S. phone companies are just slower, so I think it will take some time."