ITEXPO 2010 Speaker: Will a Chinese Company Make a Run for U.S. Telecoms?

The competitive dance taking place within the smartphone industry is garnering much attention, especially from those smartphone users wanting more applications, easier social networking and seamless integration with corporate networks. According to Matt Bramson, chief sales officer with VarPhonex (News - Alert) Partner Solutions, the battle waging now is one that has gone on for years in a number of different innovations. The true winner in the end will not be a hardware provider, according to Bramson.


As for HD VoIP, Bramson does not believe that telephone sound quality is marketable. Bramson recently spoke with TMCnet’s Rich Tehrani (News - Alert). Their interview is provided below in full. When looking at innovations in 2010, Google’s Nexus One is gaining significant attention, but Bramson would like to see a willingness from Google to make it truly innovative by subsidizing both the phone and the service with anticipated ad revenue. In reflecting on the recession of 2009, VarPhonex saw growth across all segments of its business. Bramson expects this positive growth to continue in 2010. When asked his opinion on Obama’s first year, Bramson noted he is disappointed this leader has ignored proven methods of stimulating economic recovery.

If Bramson were to assume the same role, he would make sure the government got out of the way of entrepreneurs and other tech-focused companies. In looking at elements of growth in coming years, Bramson believes the greatest growth will be in hosted services.

 

This year at ITEXPO East 2010, Bramson is set to launch a new business unit. As for why a consumer would want to trust VarPhonex Partner Solutions to provide their company’s solutions, Bramson pointed to unrivaled experience and no upfront cost. When asked to share an outrageous prediction, Bramson sees a foreign company – possibly Chinese – take another run at acquiring U.S. telecoms.

 

Their conversation follows:

 

 

Matt Bramson (pictured below): If you consider the smartphone to be just the latest edge device then what we are seeing is a reprise of a battle that has been fought a few times already. The types of participants haven’t changed but their relative strength has. The hardware providers always come out swinging in the early rounds: they have the shiny new toy (phone handset, PC, set-top box, game system, cell phone, and now smartphone) that consumers have to have. The service and content that supports the hardware is initially largely overlooked. But inevitably the hardware providers punch themselves out – unable to outdo themselves – and they start to rope-a-dope with cheaper, lower-margin offerings.

 

Hardware providers convince themselves that this strategy will keep them in the fight until the later rounds – and then they’ll strike, but they never regain the energy to do so. So then the advantage shifts to the connectivity and the content providers. Now they have all the appeal – big, fast networks with built in services and interactive content and advertising, respectively – and they start to have their way. What’s different this time is that in the midst of the fight the rules are being written. Will the connectivity providers have to fight with one hand tied? Will the content providers have to completely change their fighting style? Given this dynamic, the fight is impossible to call. But here is one prediction: it won’t be the hardware providers – they haven’t won one yet. And Apple (News - Alert) is still mostly a hardware provider – the fact that they appear to be doing well just tells you that we are still early in the fight.

 

 

MB: I would love to believe that exceptional telephone sound quality is marketable – but I don’t think it is. It is tempting to look at HDTV and see a parallel: people are paying thousands for a better visual communication experience so they’ll pay for a better auditory communication experience, right? Here is the fallacy. When we are out in the world we see in super HD – everything we see is sharp and clear. But when we get home we (used to) see a blurry reproduction. The opportunity to bring that experience up to the level of what we experience out in the world is compelling. But ears and sounds are different. Throughout the day our ears are bombarded by background noise, unclear sounds, and all manner of din that we do an amazing job of filtering through. So our auditory experience in the world is decidedly low definition. The opportunity to create an experience on the phone that is as good as or better than that – and maybe pay extra or change providers for it – doesn’t seem very compelling.

 

 

MB: I know that Google’s Nexus One is the big tech product news so far in 2010. What I would like to see in 2010 – but I’m not sure I will – is a willingness from Google to make it truly innovative. The game-changing innovation that Google is uniquely capable of bringing to the marketplace is to heavily, maybe completely, subsidize both the phone and the service with anticipated ad revenue. Is a free Nexus One better that a $300 iPhone? Clearly, for most, the answer is yes. Is a $50/month service on Nexus One better than twice that on Verizon (News - Alert) or AT&T? That’s an easy one. But if Google takes this step then they would be escalating the battle referenced above to a level that they may not be willing to at this stage – for reasons I understand.

 

 

MB: We saw growth across all segments of our business. Consumers and businesses were eager for lower-cost alternatives for their phone service. Resellers and strategic partners were seeking additional and more diversified revenue streams. We expect that 2010 will see this continue in part because the microeconomic situation for consumers and businesses is likely to experience a slow, multi-year recovery.

 

 

MB: His decision to ignore proven methods of stimulating economic recovery – lower taxes, reduced regulatory barriers, clear fiscal policy – and instead use the financial crisis as leverage to increase government power in general and political power for his allies is disappointing. His kindler, gentler approach to foreign policy hasn’t surprised me, nor has its lack of results. It worries me that the poor results may have surprised him though. Having a naïve president puts us at a significant disadvantage.

 

RT: If you were president of the United States, what tech-friendly policies would you enact?

 

MB: Entrepreneurs and politicians are, for the most part, completely different species. If I were president, I would recognize that and focus on trying to get government out of the way of entrepreneurs and other tech-focused companies. I would try to lower their taxes, improve their access to foreign markets and employee talent, and reduce regulations on them and their suppliers. The idea that a government should be fostering a specific technology or encouraging certain types of innovation is based on the assumption that a handful of mostly lawyers know more than thousands of people with years of relevant education and experience who have risked billions of their own money – if that’s the case then we’re all in big trouble.

 

 

MB: In our space I think we will continue to see hosted services grow significantly. The other area I expect to see grow significantly is markets outside the U.S. Regulatory disruptions notwithstanding, I expect to see U.S.-based providers of hosted solutions start to win significant numbers of consumer and business customers in other countries.

 

 

MB: We are thrilled to be launching a new business unit at the show. VarPhonex Partner Solutions represents the realization of the initial vision of our founders. We have spent the last six years working to make 3,000 resellers in 115 countries successful and now we have the team and the tools to meet the needs of larger service providers. Any business that wants to add voice services to their core offering and/or has a distribution channel or customer base that is a fit for voice services should come over and talk with us. And any company that is currently offering voice services and isn’t thrilled with their margins, market share, or the differentiation of their offerings should run to Booth #124.

 

 

MB: We offer a number of things that no one else does and we have unrivaled experience. If a business believes it has an opportunity to offer voice services then we are the perfect choice. Expense? What expense? We inflict no upfront costs on our partners. We simply need them to hold up their end: sell. Our end is to give them exactly what their customers want to buy.

 

 

MB: Truthfully, I don’t see 2010 being a year for outrageousness. But to play along, here’s one: in 2010 we will see foreign companies – possibly Chinese – take another run at acquiring US telecoms. And this time enough has changed that they may be successful. Whether that will prove to be good or bad is hard to foresee.