I am preparing a sourcebook of hosted/cloud based communications service provides that will be issued in February and posted at www.webtorials.com. As part of this effort, I searched the Internet for such providers and discovered about 200 companies that offer the hosted/cloud service. One of the providers is FluentStream Technologies. Joshua Elson, the CEO provided answers to several questions that I posed regarding FluentStream’s entry into the hosted/cloud communications service business. This blog raises the subject of Net Neutrality and its effect on cloud based services. The hosted/cloud based market is also discussed. I think the outcome of the Net Neutrality debate could help or hinder the growth of smaller and startup cloud providers. The interview is divided into two blogs, of which this is the second; you can find the first blog here.
If net neutrality does not continue, how will this affect your business? This is perhaps the single most important unanswered question with potentially major implications on our business model. Simplistically, our view on the world is that the Internet is shared, critical infrastructure that all should all have equal access to. Of course, providers of this infrastructure see the reality that user appetite to pay for content far outweighs the willingness to pay for additional pipe [bandwidth] capacity, and competition [among] carriers has eroded profit margins across the board. The bottom line in fighting network neutrality is that the carriers see prioritizing types of traffic for pay as a compensatory mechanism to preserve profit margins, or more cynically, prevent competitors such as FluentStream from offering a service they would like to provide in a bundle, shielded from open competition. In my personal view, to the extent that the carriers succeed in defeating network neutrality, the overall innovation in this space will be negatively impacted. In the worst case, carriers may be able to completely push small players...completely out of any hosted communications play relying on open network infrastructure. It is my sincere hope that the goals of small businesses pushing technological boundaries and the large infrastructure players are not totally immiscible [incompatible]. A compromise solution, it would seem, would be to provide small businesses prioritized access at a rate commensurate to our size and network usage. Our utilization of bandwidth itself is tiny, especially when compared to services like Netflix, Pandora, and YouTube. That said, our services are very sensitive to variations in latency and, in large part, carrier networks are a black box into which we can see very little. If there were a solution that recognized the importance of this end to end quality of service guarantee for our traffic, I would be willing to pay incrementally for this service. I've seen little indication that anyone's thinking this way, so as it stands now, we will have to see how this very large political issue plays out in Washington.
Why do you think there have been several hosted service company mergers recently? I have not been privy to any discussions with respect to acquisitions in this space, so this can all be considered speculative on my part. I think a number of venture funded hosted firms have seen their returns not meeting expectations, both on the basis of inadequate cost controls within the firm and a very competitive landscape that has driven prices down and increased variations in business and sales approaches. To the extent that under-capitalized firms feel they can get better economy of scale by aggregating, they have done so. Providers...are also looking for ways to fill in product portfolios. An acquisition may be the most sensible way to get there, especially if the target is cash crunched. In many respects, what is happening in this space is not so different from what has happened in many other emerging markets. There is always a rush of ideas and companies to every perceived market opportunity, especially one that is perceived as a paradigm shift. The natural selection process is just beginning to take place here--and I expect you'll see a number of mergers and failures before the survivors emerge in a mature market on the other side.
How do you see your market changing in the future?
We are excited to see and participate in the many developments that are happening in our ecosystem. I expect to see many tools that consumers are growing accustomed to appearing more frequently in the business world. There will certainly be more of an emphasis on video integration as well as continued improvements in voice and video form factor flexibility. I expect that companies such as FluentStream will continue to push the edge on the idea of multi-modal and blended communications approaches. Businesses will have to integrate social media, text messaging, and instant messaging into their overall communications environment. Users will demand the ability to quickly shift between communications mediums.
I expect to see some exciting developments on the device front. At a minimum, we've seen movement toward usability of phone "apps" for integrated business communications. I see this continuing in the future, with ever increasing sophistication. Beyond that, the emergence of intelligent IP-capable televisions, all forms of set top boxes, tablet and surface computing, and video game console extensions such as Microsoft Kinect all play into the communications ecosystem of the future. We are prototyping some very interesting solutions that take elements of the consumer experience and push those capabilities toward the business world. 2011 will be an interesting year.
FluentStream Technologies is a provider of cloud, enterprise, and call center telecommunications solutions, cutting across a wide variety of market segments and with a highly diverse customer base. We were formed in 2008.
