The purpose of this article is to review some of the significant developments and trends in the telecom industry through 2008, and look forward into next year on what developments and trends may start to unfold.

Open Innovation, Telco API and SDP.
A theme of this weblog throughout the year has been Open Innovation, the Telco API and SDP (Service Delivery Platform).  We’ve seem much operator activity of late.  With the recent announcements from 3 Australia on the 3API (Application Programme Interface) and the launch next week of O2 Litmus.  Earlier this year we saw the launch of Verizon’s ODI (Open Development Initiative), BT buying Ribbit ($105M of ‘Cool’), and many more discussed in this webinar.  These are very much initial tentative steps in opening the network, laying down the ground work.  What is now called for is an acceleration in engaging the development community by solving their problems; and a serious attempt to present a simple unified approach by the telecom industry to the developer community.  In APAC (Asia Pacific) the messaging based SDPs are now quite mature, as discussed in the summary of SDP Asia 2008, with operators such as Globe using its SDP to be able to implement over 700 content related VAS (Value Added Services) annually, with 830M transactions per month, which is anticipated to grow to 1B per year by end of this year; and a ROI (Return on Investment) for the project of just 2 months.  These platforms are now evolving into next generation SDPs, with similar objectives to those of 3, O2 and Verizon.

Mobile Broadband Explosion.
A mobile broadband Tipping Point has been reached: HSPA (High Speed Packet Access) is ‘good enough’ for customers and prices have fallen so they are competitive with fixed broadband.  Mobile broadband (MBB) is growing faster than any previous service, including voice.  Operators are talking about annual subscriber growth rates of over 400%, in one case 100% per month!  It reminds me of the good old ‘mobile-gold-rush’ days in the ’90s, and aren’t we supposed to be in a recession?  MBB is exploding in Europe and APAC (in Singapore an unlimited MBB service can cost as little at $15 per month), North America remains a laggard.  Mobile Broadband is generally a USB HSPA modem connected to a laptop.  Back in August the GSMA published MBB customer numbers of about 50M, with roughly 4M growth per month.  Given recent numbers I’ve seen from operators we could see an end of year total between 80-100M.  There is a downside to such incredible growth, the once lightly loaded backhaul network is now congested, a MBB weakness that could impact streaming video traffic which customers will likely use as a yard-stick to compare ISPs performance in the near future.

The Internet’s Gone Video
Numbers from AT&T show the average traffic growth per customer is about 30% per year, couple that with the growth in broadband customers and the compound growth in traffic is about 60% in the US.  The average bit rate per subscriber for a fixed broadband ISP’s was 25 kbit/s (’07).  Fixed broadand ISPs now estimate their average per customer rate will grow to 70 kbit/s by (2010), which is in line with the 60% CAGR.

The structure of the data over the internet is also changing, multimedia content (streaming audio and video) is nearly equivalent to web site traffic, hence you have one third multimedia, one third web, one sixth p2p (peer to peer) and one sixth a mish-mash of other flows such as encrypted streams.  Multimedia traffic is growing at near 80% annually, of which video dominates. Extrapolating these numbers, within 10 years the average usage per customer will reach 5 Mbps!  Whether we see such numbers only time will tell, but given just one HDTV channel is 10 Mbit/s, and by then likely SHDTV (Super High Definition TV) will be hitting the stores, I wouldn’t bet against us reaching that number.

In the UK ISPs are struggling to cope with the rise in multimedia traffic, thanks in part to the BBC iPlayer.  With YouTube at 10% of traffic on the internet, and in the UK BBC iPlayer accounting for 15%, just 2 services account for 25% of the traffic in the UK!  The implications of this growth are stark, MBB is going to struggle, even with LTE (Long Term Evolution) in comparison to fixed broadband. So the FMC (fixed to mobile conversion) of subscribers may not be a sustainable model.

Apple App Store
Recently achieving over 300M downloads the Apple App Store provides a template for the industry on how to work with developers and how to sell applications.  They have also done a great job in simply educating customers on all the cool stuff you can do on the phone.  For operators, the ODP (On Device Portal) may finally come into its own as the solution to their App Store dilemma.  Verizon AppZone, built using mPortal’s ODP, and Three’s X-Series, built using Cibenix, are some early adopter examples of this move.  The critical issue is not technology, its process and culture – operators should simply copy Apple.

Consumer Equipment become Service Platforms
Sony PS3, Xbox and Wii consoles have shipped over 75M units.  What I found surprising is that most of those units are connected to the internet.  Service providers have already started to use these platforms, for example the BBC iPlayer.  The Sony Store on the PS3 provides a great VoD (Video On Demand) experience, with download to own and rent options.  Why operators insist on building their own IPTV STB (Set Top Box) leaves me perplexed when such platforms are available.  Also PNDs (Personal Navigation (Nagging) Devices), e.g. the TomTom and Garmin, present a similar service platform opportunity in the car, Dev Khare covers this in his weblog.

FTTH (Fiber To The Home) gets into gear in the US
Verizon FiOS customer number for last quarter reached 2.2M for video and 1.6M for broadband.  Given the trends described above in the internet going video and the emergence of consoles as a service platform, FiOS puts in place the pipes necessary for the next round of service innovation in the home.

Application Providers Struggle
Service innovation is never easy.  For many app providers this has been a tough few months, with VC’s breathing down their necks to prepare for a ‘nuclear winter’ or simply the long march towards significant customer adoption.  In tough times developers can not afford to customize, or waste months in operator-centric process.  Operato
rs need to adopt the Open Innovation model of the internet, and incent their product management to support such innovation.

Other Odds and Sods
IMS is dead (the marketing vehicle, not standards based IP multimedia session control with QoS), LTE (Long Term Evolution) has replaced IMS as the next big marketing over-hang.  The only difference being LTE will likely achieve broad market acceptance, though not as quickly as the marketing hype would suggest.  However, there are critical learning points for the industry from IMS, for example do not ask people to simply believe, many operators found the marketing of IMS insulting.  The approach of ‘believe don’t think’ should never be repeated in this industry.  In addition, standard bodies should not run too far ahead of the market – we’re not smart, just sometimes we’re lucky – so keep standards work focused upon immediate requirements.

Looking Forward

On Open Innovation, 2009 will be the year of experimentation.  It’s critical for the industry to not waste time in competition on ‘my developer community’s better than yours’ rather take a co-ordinated approach on APIs, commercial terms and developer communities.  I recommend operators work together rather than create ‘yet another community initiative.’  The critical issue is now processes and culture change within the operator, not technology platforms.

RCS (Rich Communications Suite) was discussed in my summary of the IMS/SDP North America conference.  It has the potential for operators to finally deliver a next generation communications experience similar to the UI (User Interface) of Skype or Yahoo Messenger.  But its strong linkage to IMS (IP Multimedia Subsystem) may stall what should be a critical industry initiative.

Telstra recently demonstrated HSPA+ (21 Mbps) on their network, and are on course for launch early next year, as promised at MWC (Mobile World Congress) in February of this year.  It’s not the peak rate that’s important, it the capacity then enables HSPA+ to support more customers simultaneously at multi-megabit speeds.  We’ll see a continued rise of MBB take-up as some customers use it to save money compared to their DSL service, some consolidate multiple broadband services into one, and some use it to provide their PC, voice and broadband service all wrapped into one (i.e. the iPhone).

OPEX (Operational Expenditure) will continue to be the focus of many operator board meetings: controlling the rising backhaul OPEX because of MBB’s success; giving serious consideration to outsourcing more BOSS (Business and Operations Support Systems), as operators realize selecting best of breed components does not lead to best of breed solutions; and some of the old software, e.g. IN (Intelligent Network), will be ‘renewed’ with NG IN (Next Generation Intelligent Network) as its price points, maintenance and capabilities are radically different.  I’ll be covering this topic in articles early next year.

IPTV from ISPs (Internet Service Providers) is transforming how people consume video, packages are being personalized.  Previously you either subscribed to an expensive base unlimited package or you dropped out.  ISPs are offering ‘self-selected’ TV and ‘pay for what you use,’ rather than ‘all you can eat.’  In tough economic times such cost saving choices will meet many customers’ needs.

Femto will continue to be experimented with.  LTE will start to be experimented with, it will be 2012/2013 before it sees significant deployment outside the early adopters of Verizon and NTT.  ODP may make a resurgence as the operator’s App Store.  Perhaps by the end of the year we’ll start to see Operator consolidation begin.  The economics between a small regional operator and a large national/multinational operator are starker than ever.  Many suppliers can not afford to do business with the small operators, and this is starting to be reflected in the smaller operator’s proposition to the end customer.  Consolidation may begin in 2009, though will definitely be underway in 2010.

And finally wishing you all a restful holiday, and a peaceful New Year.  See you at Mobile World Congress (nee 3GSM) this coming February in Barcelona (though I wish they’d move it back to Cannes.)