Modular by Design — Telephony

Another area where the mod­u­lar approach is start­ing to have an impact is in the tele­phone ser­vice arena.

Tra­di­tion­ally, tele­phone ser­vice was offered on a land line and was divided into local ser­vice, long dis­tance, and extra fea­tures like caller ID, call for­ward­ing, etc… The model was pred­i­cated on the con­cept of one device (the phone) receiv­ing a pack­age of services.

The mobile phone busi­ness started hav­ing an impact by unty­ing the phone lines from the wall, mak­ing the con­cept of local­iza­tion a rel­a­tively moot point. Once local­iza­tion was bro­ken, the dif­fer­en­ti­a­tion between local and long dis­tance dis­ap­peared which left a divi­sion only between con­nec­tiv­ity and extra fea­tures. Since most of the sig­nals going over the air became dig­i­tal, the cost of deliv­er­ing extra ser­vices dropped to almost noth­ing, destroy­ing the com­pet­i­tive value of such offerings.

While mobile phone ser­vice made head­way against tra­di­tional land lines, a new set of tele­phone offer­ings appeared on the Inter­net: Voice over IP. With VoIP, tele­phone just becomes a soft­ware issue, unbundling tele­phone from the con­cept of a tele­phone net­work and drop­ping the con­nec­tiv­ity issue alto­gether. While mobile phones were tied to a par­tic­u­lar phone net­work, VoIP phones are not tied to any net­work: they can run any­where as long as they are run­ning on an Inter­net infrastructure.

It is due to this real­iza­tion that AT&T aban­doned the con­sumer mar­ket. Since ser­vices like Von­age are redefin­ing the con­cept of tele­phony by mov­ing the phone away from the lines and away from the device. Von­age ser­vice runs on a num­ber of plat­form includ­ing tele­phones, com­put­ers and will soon run on PDAs equipped with a wire­less card. This means that com­pa­nies which were once rely­ing on the bundling of a line, a device, and a set of fea­tures can no longer do so. It also means that the con­cept of over­seas long dis­tance will even­tu­ally dis­ap­pear since one could eas­ily run a tele­phone ser­vice on their com­puter with a local num­ber in a for­eign country.

For exam­ple, I can envi­sion a time when I will have a phone num­ber in France that will relay my calls to my com­puter, phone or PDA wher­ever I am, mak­ing it impos­si­ble to guess whether I am in the United States, Europe or Asia at any given times. How­ever, I may sound sleepy in the mid­dle of the caller’s day­time because I could be in a time zone where it is the mid­dle of the night.

With this model now in place, the chal­lenge of tele­phony is no longer a local one but a global one. Tele­phone com­pa­nies will have to fight against com­pa­nies all over the globe in order to retain their cus­tomers and since the deliv­ery of those ser­vices does not rely on the intro­duc­tion of expen­sive net­works in order to pro­vi­sion ser­vice, it will soon be pos­si­ble for small com­pa­nies to pro­vi­sion phone ser­vices. One can expect coun­tries like China and India to be the recip­i­ents of such out­sourc­ing and your tele­phone com­pany could well be located in one of those coun­tries in the future.

How does one solve this issue? By pro­vid­ing cheaper prod­ucts, empha­siz­ing cus­tomer ser­vice, gen­er­ally doing right by the cus­tomer or get­ting out of the com­pet­i­tive space. The power base has shifted to the con­sumers and the only way to fight it is to serve them bet­ter than a com­peti­tor could.