VC investment favouring convergence, evolving infrastructure systems

Bouncing back from the infamous telecom and Internet implosion of about six years ago, investment in the communications industry by Canadian venture capital (VC) companies has shifted its focus away from infrastructure development toward innovative applications developers. According to two of the country's VC firms, investment trends are favouring applications that encourage convergence as the line between wireless and wireline becomes increasingly blurry."There's a continual cycle of investment in the area of intelligent management of person-to-person communications. What I'm talking about here is solutions that manage your directories, manage your inbound and outbound calls, filter them, and prioritize them," explains David McCarthy, the managing director of BCE Capital's Ottawa branch.Two examples, suggests McCarthy, of companies developing this kind of technology would be Campbell CA-based Sylantro Systems Corp. and iotum, which is based in Ottawa. "I'm talking about the convergence of voice and email and instant messaging and wireless and wireline, and having an intelligent system that ties them all together for you," he tells Network Letter. "It knows whether you're home or whether you're at work and whether you want to take the calls from a certain person or whether you don't. And it learns about your preferences over time; it doesn't require you to go to a portal and type in all types of complicated rules."So you can say that this is the ultimate in a convergence play," he adds.Larry Perron, a partner with Skypoint Capital Corp., adds Montreal-based Oz Communications to the list, saying that the company is doing some very interesting things with convergence and multimedia applications."Oz Communications, for example, is another one that's bringing in powerful capabilities to streaming technology to a handheld device," said Perron, adding that the applications the company is developing are transparent to the transport technology. "It's agnostic with regards to its content, so it doesn't know its voice."McCarthy believes the communications industry is "moving away from services that are targeting specific devices and moving toward a direction of ‘any content to any device at any time.' Therefore, I think there will be a whole cycle of investments that are trying to solve various elements of that problem."However, while VCs are favouring these types of investments, McCarthy suggests that they will soon have to invest in infrastructure again. "Infrastructure and application investing tends to go in cycles and history shows that there are often long periods of infrastructure deployment followed by long cycles of application innovation," says McCarthy. "And you can think about why one drives the other: as bandwidth becomes cheaper, people think about what to do with it that they couldn't afford to do before."He adds that the pace associated with each cycle has change significantly since the 1990s. "I think what we're seeing more recently is that these cycles are speeding up," he says - a trend he attributes to the increased amount of competition in all sectors. "We no longer have a monopoly environment where companies are basically assured of a guaranteed return on their investment," he continues. "In the early , carriers would often look for 12-year paybacks on infrastructure deployment; now, anything over a year is considered difficult."However, when it comes to the future need to invest in infrastructure, Perron tends to disagree. He says that he thinks wireline infrastructure has been developed enough to handle the immediate and near-future stresses put on it by applications, and that the wireless landscape has been pretty much spoken for by the 3G. Where he says change will have to occur is with WiMAX."The WiMAX performance may not be sufficient to completely fulfill the requirements of the multimedia applications," he said. "You're going to see some performance degradation - I mean, we're talking WiMAX that has capabilities of about one megabit. If you look at traditional LAN capabilities, we're looking at a hundred and moving to a gig, so you can see there's two orders of magnitude difference there in terms of bandwidth capacity."WiMAX is maturing," adds Perron. "WiMAX, the way as it is defined today, is just the beginning; it's going to evolve. It's going to have to evolve to enhance the spectrum utilization."Network Letter affiliate publication Report on Wireless will have more on the VC landscape in the wireless sector later this week.

VC investment favouring convergence, evolving infrastructure systems

News | March 27, 2007

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