This article originally appeared in the March 2011 issue of INTERNET TELEPHONY.
Global and mobile – that’s the very appropriate mantra driving Metaswitch Networks’ innovation today. The coming of 4G networks has been well documented, as has the timeline for the introduction of 4G handsets by Verizon and AT&T (Sprint (News - Alert), of course, has had its WiMAX network and 4G devices in play already).
There is a more telling story that documents the evolution of communications technology, according to Kevin DeNuccio (News - Alert), CEO of Metaswitch Networks. In fact, he believes the current mobile Internet surge will prove much more significant than the original Internet boom of the 1990s, because it will be much more pervasive, reaching virtually every person on the planet.
“When the Internet came on the scene, it changed the world significantly,” says DeNuccio. “Today, the confluence of three things – the mobile Internet, smartphones, and cloud computing – makes for another technology change, the likes of which we’ve never seen before.”
Evidence of that massive change can already be seen in the mobile operating systems in play today and the applications that have been built on them. We have witnessed an acceleration of technology that has allowed one mobile operating system (Apple’s (News - Alert) iOS) to come out of nowhere and overtake entrenched platforms to lead the market in three short years. Then we’ve seen another competitor (Android) do the same in less than 18 months.
This nearly inconceivable pace of change and the rate of adoption of new technologies, in fact, prompted DeNuccio to move his CTO and some of his best engineers from London to Silicon Valley shortly after taking over as CEO in February 2010, where they would be at the heart of the innovation and change and could leverage the opportunity.
One result of that move was the launch of the Thrutu application on the Android marketplace, an over the top application that adds richness to a basic voice call using single icon clicks to launch actions that, until now, took six or seven steps. For instance, while on a call, a user can push a single button, which will take a picture and send it to the party on the other end of the call.
“It’s about enriching what has been a traditional way to communicate, centered around voice and combining that with data,” explains DeNuccio. “It will keep people on the phone longer, making the experience much richer and much more inviting.”
Within four days of launching, more than 6,500 users were already enjoying the application.
That, however, is but a microcosm of what is happening to the communications industry, which is undergoing a transition like never before, particularly in the mobile space, creating a challenge for carriers that must now build new business models without disrupting their existing revenue streams.
Metaswitch Networks built its reputation as an expert in IP software and session management technologies, selling to some 250 telecom equipment manufacturers in the world and, over the past decade, directly to carriers, enabling them to transition from traditional telephony to IP-based communications.
Today, VoIP is on the verge of becoming a fundamental wireline technology because of the enhanced communications capabilities it enables. But the greater opportunity lies in the 4G wireless market, giving way to three key elements of Metaswitch Networks’ approach to the future of communications as it brings its wireline legacy to the mobile world: mobile VoIP, 4G communications and messaging, and scalability and security of session management in SIP environments. These three strategic initiatives are a natural extension of the company’s traditional expertise to the mobile world.
Naturally, the infrastructure must be in place for carriers to deliver on Metaswitch Networks’ “global and mobile” ideal. But, those plans are well under way, and America’s two largest carriers, back in January, announced schedules for the rollouts of their first sets of LTE (News - Alert) devices.
The bigger challenge will be in evolving business models to meet new user demands, efficiently delivering new services and applications, and understanding how much users will be willing to pay for these new services. One thing is certain: Most users are loath to pay more for their communications services.
“The fact that we have to go through this massive architectural shift to deliver the mobile Internet and VoIP on 4G, while going through virtually a trillion-dollar business model change, makes it very challenging,” says DeNuccio.
The difficulty lies in cost effectively spurring innovation and driving new services, applications, and associated revenue opportunities, while continuing to leverage existing infrastructure.
A year ago, Metaswitch Networks acquired AppTrigger, specifically to address this dilemma and help carriers build out next-generation networks and services without jeopardizing their traditional customer bases and revenue streams. The service broker technology it acquired essentially adds a software layer to the network, enabling carriers to deliver legacy services and applications on their new networks, limiting risk for users migrating to newer technologies. Equally significant, because subscribers want to migrate at their own pace, is the opportunity to grow revenues from legacy networks though effectively creating backwards compatibility, allowing carriers to run next-gen applications and services on legacy networks.
“The ability to build out a new network and not have to make users change is an enormous capital preservation capability and facilitates the transition to new networks without having to rewrite applications or endangering your current revenue streams,” says DeNuccio. “If you look at the capital constraints and the business model transition the carriers are going through, the service broker has created a fundamental shift in application delivery strategy.”
The ability to run applications on multiple networks concurrently notwithstanding, the undeniable fact is that carriers will eventually have to facilitate the migration of their current 2G and 3G subscribers to new 4G networks. The economics of network maintenance versus revenue will demand it.
Current 2G users will present the greater challenge, for they have not realized the wonder of the mobile Internet and will need incentives, again requiring an evaluation of business models. That said, the past few years have seen a 25 percent reduction in the volume of voice calls, along with a 75 percent year-over-year increase in text messaging by older populations. That adoption of non-voice communication will make it easier to entice 2G users to make the jump to 4G.
The 3G to 4G transition should be much easier, because those subscribers are already leveraging data capabilities, the demand for which will quickly outstrip 3G capabilities. Simply, users will seek higher bandwidth networks to leverage the latest services. It’s not unlike the movement to high-speed wireline connectivity from DSL or even dial-up connections, where users recognized the need to increase speed and throughput for their typical applications.
Indeed, the migration will happen and, while it’s up to the carriers to drive that migration, companies like Metaswitch Networks, which provide the technologies to simplify the migration path and protect revenues in the process, will play a significant role. Perhaps the greatest challenge, as carriers look for the path of least resistance, will be the unknown force that could be exerted by aggressive companies like Apple, Google (News - Alert), and Facebook.
As Metaswitch continues to help carriers through this unheralded technology transition, the concentration of power held by these three players could well pose a risk to the industry as a whole, if the path isn’t well defined.
According to DeNuccio, however, Metaswitch Networks, with its deep heritage in software engineering, combined with a fundamental understanding of the nature of the change the communications market is witnessing, is well positioned to guide the carrier community through the process while providing the protection from outside forces.
“Our ability to marry a telecom-grade software engineering capability with the agility required to scale at the level telecom requires creates a level of innovation very few players can create,” concludes DeNuccio.
But, don’t mistake that confidence as a sign of contentment. DeNuccio anticipates a significantly accelerated growth rate over last year, driven largely by the continued growth of 4G networks and services, bringing many of the technologies Metaswitch Networks has developed into the mainstream.
And, as the communications industry continues to evolve and become increasingly global and mobile, exerting new pressures on carriers and equipment vendors alike, Metaswitch Networks will continue to adapt in turn.
“In a rapidly changing environment like this, while our primary strategy will be organic, there will be many opportunities to pick up technologies we can integrate and move market forward at a more rapid pace than by doing everything internally.”
Erik Linask is Group Editorial Director of TMC, which brings news and compelling feature articles, podcasts, and videos to 2,000,000 visitors each month. To see more of his articles, please visit his columnist page.
Edited by Stefania Viscusi