Xconomist of the Week: Andy Ory on the Real Opportunity for Acme Packet

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where you use your access network purely for connectivity. The best example there is Apple TV. I still pay for programming from my [cable company], but I’m probably watching 85 percent of my content through Apple. Another state is when you pick up your black telephone at home and you use Verizon or AT&T. The third state is where they partner together. I think you’re going to see that happen.

There are some companies like Telefonica, which purchased JaJah [in 2009]. Both Telefonica and Jajah are customers of Acme’s. Jajah was an over the top company. Telefonica bought them and made them the centerpiece of Telefonica Digital. When you go to Telefonica Digital and you sit and talk with these guys, they look at you and say, “We are not a phone company. We see 300 million subscribers on Mother Telefonica’s global networks, and we’re going after them.” They say, “Once we do that, we’re then going after everyone else’s subscribers.” It’s kind of cool.

More likely than not, I think the innovation is going to occur over the top. You’re going to have people in dorms in Cambridge and Palo Alto and elsewhere that are going to come up with really interesting ideas, but they’re going to want differentiated service, and to make sure there’s high quality or security or regulatory compliance. They’re going to say to the network companies that can provide the connection, the Verizons or AT&Ts, “I’d like to buy a special circuit. I’d like to partner with you on the value that we create.” You saw it at Mobile World Congress: both Google and Facebook are starting to talk to the carriers about differentiated access.

X: And how do you avoid getting caught in the middle?

AO: People say, “FaceTime for video—that doesn’t use you guys, doesn’t that work against you?” I say no, no, no, you’re missing the point. It’s like a flip of the magnetic field. Things aren’t going from professional and networks to personal use, it’s the other way around. Seeing people in an unregulated, best-efforts, free way innovate is sort of the testing ground for the stuff that’s going to be hardened, secured, and then offered to businesses and homeowners. So I actually think it’s like a feedback loop. If you look at the early best-effort, over-the-top innovations, those are precursors for the kinds of things our service providers and enterprises can participate in using our technology to enable.

X: Ultimately, what will the carriers—some of your biggest customers—bring to the game?

AO: Apple sold 25 billion apps in 5 years. Every one of those apps rides over the top of the carriers’ networks. Every single one. They’re using the carrier’s data network that’s not service enabled. When the carriers service-enable their network, they can participate in the next generation of apps. That’s what our technology lets them do. That’s a big deal.

If you’re on Skype and I’m on FaceTime, it doesn’t work. Skype doesn’t want to spend time or money making it work, and Apple doesn’t want to spend time or money making it work. But what carriers do is they provide interoperability, they provide service reach. When you’re an AT&T subscriber, they’re not saying, “You want to use us because we can reach more phones than Verizon can.” You just expect you can reach everybody.

Right now [carriers] are marketing something that, built into it, is security, trust, quality of service, regulatory compliance, availability, interoperability and so forth, but you think you’re paying for voice. What they need to do is decouple the actual application from the attributes they can provide with applications and services. They should make those attributes available as building blocks that people can put into their applications. And then I think they’ll have a very interesting construct for value.

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