2005 Predictions

Another year, another round of pre­dic­tions. As is now becom­ing cus­tom­ary on TNL.net, it’s time to project out the future year. As always, I’ll revisit those pre­dic­tions at the end of the year.

Voice Over IP

VoIP expe­ri­enced tremen­dous growth in 2004 but it was just the begin­ning. This year, much more will hap­pen in that space.

Cable providers will start deploy­ing VoIP ser­vices on their net­works and phone com­pa­nies will start bundling VoIP ser­vices with their DSL offer­ing as a way to com­pete. By year end, all major broad­band providers, whether they are offer­ing ser­vices over cable or DSL lines, will have a VoIP ser­vice bun­dled with their access service.

Unable to com­pete with the larger tel­cos, some smaller play­ers in the mar­ket will merge on order to lower their cost per sub­scriber by bring­ing their infra­struc­tures together. Also, inde­pen­dent VoIP com­pa­nies will sign peer­ing agree­ment with each other in order to bypass tra­di­tional tel­cos and lower the cost of con­nec­tiv­ity from one inde­pen­dent VoIP com­pany to another.

Fur­ther pres­sure will be put on all play­ers on the Amer­i­can mar­ket as over­seas com­pa­nies will start tar­get­ing U.S. cus­tomers. Before year-end, at least one com­pany will offer an unlim­ited call­ing to sev­eral coun­tries plan. Other plans will pro­vide unlim­ited call­ing to each con­ti­nent. This will start putting pres­sure on estab­lished gov­ern­ment monop­o­lies in sev­eral coun­tries, espe­cially in Europe.

VoIP will also expe­ri­ence strong growth within the enter­prise, with com­pa­nies look­ing to open-source solu­tions like Aster­isk to replace their PBX infra­struc­ture with a lower cost alternative.

As all this hap­pens, equip­ment will not only become cheaper but will also become much eas­ier to use and install. Along with it, new sets will come out, with cord­less VoIP offer­ings becom­ing much more com­mon. Com­pe­ti­tion in this space will be on fea­tures avail­able in new handsets.

With sub­stan­tial por­tions of the phone net­work switch­ing to VoIP, video tele­phony will start tak­ing hold. How­ever, the price of equip­ment will still be too high for those ser­vices to expe­ri­ence the kind of growth other sec­tors in the VoIP mar­ket will experience.

Enter­tain­ment Convergence

The con­ver­gence of the com­puter and other enter­tain­ment forms (tele­vi­sion, radio, gam­ing, mobile phones) will con­tinue, fur­ther blur­ring the lines in the con­ver­gence world.

With broad­band now being the major way to access the Inter­net in the United States, Inter­net usage for new forms of enter­tain­ment will grow. Along with it, how­ever, will be a con­tin­u­ing chal­lenge to the estab­lished media order.

The chal­lenges faced by the music indus­try with the intro­duc­tion of Nap­ster will now be the new real­ity for the movie and tele­vi­sion indus­try. Five years ago, I started see­ing the phe­nom­e­non emerge and believe the four step process of the dig­i­tal asset dance will be full blown for the MPAA this year. The MPAA will spend part of the year suing com­pa­nies and users for down­load­ing movies. How­ever, they are also bet­ter pre­pared that the music indus­try in that they are already offer­ing legal down­load ser­vices like MovieLink.

While lit­i­ga­tion will be one of the ways con­ver­gence appears on the front page, many providers will find a way to mine this new world for new dol­lars. Expect some com­pa­nies to start offer­ing legal down­load of tele­vi­sion pro­grams for a fee. As the Inter­net becomes the stan­dard telecom­mu­ni­ca­tion infra­struc­ture, con­tent will start get­ting car­ried more heav­ily. Phone com­pa­nies will start using this to offer bun­dle TV ser­vices with their DSL offer­ing as a way to com­pete with the cable TV com­pa­nies that have invaded the tele­com turf. Before year end, at least one tra­di­tional telco will offer TV over IP. All that con­tent will be pro­tected by DRM sys­tems, get­ting peo­ple more and more used to hav­ing less and less rights over the con­tent they receive.

Mean­while, on the wire­less end, the intro­duc­tion of more pow­er­ful mobile phones and the intro­duc­tion of faster mobile phone net­works will also play out in the favor of con­tent pro­duc­ers. As voice traf­fic rev­enues con­tinue to decrease, expect mobile phone com­pa­nies to push data ser­vices such as down­load­able movies and down­load­able music more heav­ily. By year, MP3 will be the stan­dard for­mat for cell­phones and Apple will offer a mobile phone ver­sion of the iTunes music store, allow­ing users to down­load music from the store and cus­tomize their phone with the lat­est hits.

On the non-Internet end of things, video on demand will con­tinue the strong growth it expe­ri­enced in 2004 and more pro­gram­ming will be offered in HDTV for­mat, prompt­ing an increase in sales of tele­vi­sions and tuners that can receive those sig­nals. Mean­while, radio will fol­low the path taken by cable tele­vi­sion in the early 80s. As satel­lite radio takes hold as the new “edgier” alter­na­tive to tra­di­tional radio, peo­ple will get more used to the idea of pay­ing for radio. How­ever, they will also require that those ser­vices be offered over the Inter­net as well as over the pro­pri­etary net­works like XM and Sirius.

But not all con­tent will be com­ing from big cor­po­ra­tions. The grass­roots will also play a key role in the dis­tri­b­u­tion of online media in 2005. While pod­cast­ing has been the domain of a few geeks in 2004, eas­ier to use tool will bring the phe­nom­e­non to the fore­front and expect more audio ser­vices to be avail­able from reg­u­lar users. Fol­low­ing on the tail of this phe­nom­e­non will be an increase in video­cast­ing from indi­vid­u­als. Much of it will be dis­ap­point­ing but a few gems will emerge, cre­at­ing new stars who will emerge from the Inter­net and move on to more tra­di­tional media, based on the fame of their online offerings.

Busi­ness

Merg­ers and acqui­si­tions will dom­i­nate the soft­ware world this year, as more com­pa­nies real­ize that the only way into the enter­prise is through a com­plete set of offer­ings. Expect sev­eral multi-billion dol­lar merg­ers and/or acqui­si­tion. In my mind, McAfee will be acquired or merge with either Syman­tec or CA; SAP will be acquired by Microsoft; Busi­ness Objects will be acquired by Ora­cle. As holds true for such pre­cise pre­dic­tions, none of this will actu­ally hap­pen the way I pre­dicted it.

In late 2004, IBM left the per­sonal com­puter busi­ness, sell­ing its unit to Lenovo, a Chi­nese man­u­fac­turer. Expect the same to hap­pen to at least one other PC ven­dor this year as the mar­gins on per­sonal com­put­ers con­tinue to decrease, turn­ing them into commodities.

Apple

Apple, which to date has resisted the price pres­sures other com­puter man­u­fac­tur­ers have expe­ri­enced, will intro­duce a cheaper ver­sion of their Mac­in­tosh. This, how­ever, will not stem the con­tin­u­ing loss of mar­ket share they are expe­ri­enc­ing. As Linux con­tin­ues to grow, the Apple story in the com­puter busi­ness becomes more and more dif­fi­cult and the com­pany will increas­ingly rely on the con­sumer device busi­ness as its sav­ior, build­ing a new econ­omy around the suc­cess of the iPod and iTunes music store.

The com­pany will not, how­ever, release a video player this year. Among some of the new fea­tures I would envi­sion com­ing from Apple are:

• A flash-based iPod, which will be even smaller than the iPod mini and will be in the $100-$150 price range
• A part­ner­ship with a phone com­pany to cre­ate a phone that will be able to down­load music from a spe­cial ver­sion of the iTunes music store and play MP3 ringtones
• An iPod with audio record­ing built-in
• A portable cam­era with iPod-like features
• A new way to send pic­tures from the iPod directly to printer via Air­port express

While it focuses on the music busi­ness, Apple will not spend much time updat­ing its lap­top busi­ness. Adop­tion will drop in that part of the busi­ness as PC ven­dors start sell­ing sub-$500 lap­top PCs, mak­ing the iBook look expen­sive by com­par­i­son. Apple will try to enter the low cost mar­ket but not with a lap­top: they will intro­duce a mac with­out mon­i­tor for under $500, offer­ing inte­gra­tion with the iPod, and plugs to attach the com­puter to a tele­vi­sion as its major features.

On the soft­ware end, the com­pany will intro­duce a Word Proces­sor and Spread­sheet pro­gram. They will release them, along with Keynote, as a com­plete pack­age named iWork which will be aimed at stu­dents and small busi­nesses. The pack­age will be avail­able for free on new computers.

Devel­op­ment

Blogs and RSS will con­tinue their growth and will move strongly within the enter­prise space. Adop­tion of RSS will con­tinue its explo­sive growth but crest in 2005 as users start try­ing to find ways to cope with the infor­ma­tion over­load. New com­po­nents in RSS read­ers will attempt to help orga­nize RSS feeds but those basic efforts will ini­tially fail and dis­cus­sions will be set towards the end of the year as to the effec­tive way to orga­nize large amounts of data.

Weblogs and con­tent man­age­ment sys­tems will start cov­er­ing some of the same ground and enter­prise will start using weblogs inter­nally at the depart­men­tal level. Mean­while, exter­nal employee weblogs will start becom­ing the focus of more lit­i­ga­tions as cor­po­ra­tion try to retain their intel­lec­tual prop­erty and fight the kind of trans­parency that comes from hav­ing employ­ees talk openly on the web. Inter­nal rules and reg­u­la­tions will be set in how employ­ees can use blogs.

Mean­while, in the devel­op­ment world, Ser­vice Ori­ented Archi­tec­tures will con­tinue being the approach to deliv­er­ing next gen­er­a­tion ser­vices. SOA will grow largely inter­nally but some com­pa­nies will start expos­ing some web ser­vices via XML to their part­ners. A new set of inter­est­ing new appli­ca­tions will come out as a result of those exposures.

Secu­rity and trust will con­tinue to be big sub­jects and I sus­pect that trust will become an even big­ger one with new stan­dards emerg­ing around the con­cept but no gen­eral agree­ment as to the best implementation.

Open source soft­ware will con­tinue its strong growth, get­ting into more and more spe­cial­ized fields. With the delays in deliv­ery of Microsoft’s next oper­at­ing sys­tem, Linux will con­tinue to grow but com­plaints about price will start to arise. While the open source move­ment has offered free soft­ware, there will con­tinue to be an increase in the price of sup­ported ver­sion of the software.

Per­sonal

I’ll promise to update the blog more often, will do OK for a lit­tle while and will then fall back into my reg­u­lar pat­tern of a cou­ple of updates a week. Or not… Either way, only the new year will tell.

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