Looking Back and Looking Forward

This article reviews some upcoming themes and the passed year’s themes.

Looking Forward: MWC 2010 and some themes for the coming decade

What will probably be the main themes of MWC (Mobile World Congress) 2010?

  • Unfortunately, LTE (Long Term Evolution) will be a key focus of the show.  I’ve discussed previously why most operators do not need to jump on this bandwagon immediately.  We do not appear able to change our focus from “feeds and speeds” to also encompass service innovation with the same level of investment (at least of time if not cash); this risks further relegation to dumb pipes.  Being a Utility business is OK if you have a monopoly over supply, operators do not, and therefore their price/earnings multiple will move from 7 to 1 or 2 with the current focus on pipes.  Also there are very few unique 4G services, if any; most also work on today’s deployed networks.  Note IPTV does not work economically on LTE, no matter what some suppliers claim.  Please remember to raise these points when some suppliers start rambling on about 4G services, they’re just re-branded services that can be provided today.
  • Android will be on a significant number of smartphones, this is obvious, though the handsets will all look samey and do stuff we’ve come to expect, e.g. easy access to web based services.  You’ll find few operators innovating with services specific to their local market, check out Smartone-Vodafone (respect to Chris Lau and his team) for one of the impressive few.  On a related matter, we keep getting excited about there being over 100k apps in the Apple app store, but there are 180M+ web sites on the internet, so Apple has a long way to go.  But this point does highlight the convergence of both web and application search / social recommendation.  Also we keep focusing on the application part of the App Store, but it’s a device store front for the sale of lots of stuff including content, and it’s an efficient content delivery channel at 70:30 revenue split.
  • Common Micro USB charger standard will be touted, a very small step is dealing with the critical issue of device fragmentation – a serious impediment to our industry, which I’ll come back to later when I discuss what I’d like to see at the show.
  • Symbian will remain a question mark, its attempts at open source have not yet been successful; will it become just a Nokia OS (Operating System)?  At the show we’ll likely see continued questioning about its future, especially given the number of Android based devices at the show.  On a tangential point, what I don’t understand is Android means resembling a human; Android’s lego-like ‘metal mickey’ logo looks nothing like a human – perhaps this is what Google wants us all to become….
  • Service exposure will be a theme and I hope we’ll see a move from technology demonstration to commercial reality.  I’m hoping for some significant progress on OneAPI with operators driving it, not just the GSMA.
  • OTT (Over The Top) service growth, in particular video, and its attendant backhaul congestion will be theme; LTE will likely be thrown at that problem even though it’s a radio interface and the SAE (System Architecture Evolution, LTE’s core) will not solve backhaul congestion.  Instead a range of compression, optimization and content delivery solutions that are video aware will be presented as an integrated access network solution.
  • In summary, we’ll see handsets and pipes, the usual gap in service innovation and only a few bright spots in OneAPI and a few operators doing cool services in their local markets (e.g. Smartone-Vodafone)

What I’d like to see (wish list) at MWC!

  • ALU (Alcatel Lucent) and NSN (Nokia Siemens Networks) announce their merger and halving the joint workforce in an attempt to create an oligopoly in telecom supply rather than the emerging duopoly of Ericsson and Huawei.  Duopolies are never good for the customer, and watching ALU and NSN’s death march is not fun, just boring.
  • GSMA join forces with the Cable Industry’s Canoe ventures to achieve a global telecom approach to targeted advertising with a focus on the advertisers needs rather than the many failing / niche self-focused attempts.
  • Operators announcing services, e.g. SFR did recently did with HomeScope, its easy to be critical about the service (see Home Camera for a better option, though I’m biased) but SFR are actively innovating on services and we need much much more of it.
  • Operators, as an industry, tightly define 2 or 3 handset OS and a few handset display formats they will only ever buy, in a long overdue attempt to constrain the fragmentation that is killing the industry; and as critically they will actively enforce compliance.
  • The industry finally owns up that there is no such thing as the mobile internet, it’s just the internet which is accessed from different devices, e.g. mobile, PC, eReader, TV, and STB (Set Top Box). Should we be talking about the STB internet?
  • Operators sign up to OneAPI and do something about it.  With many incumbents, I hear them worrying about helping competitors in working together on OneAPI.  I can not contain my frustration at such self-defeating thinking.  Risk is minimal, not working together will ensure OneAPI is dead on arrive which will hurt everyone, and further push operators into being dumb pipes.
  • Apple gets on board with the industry, in particular OneAPI.
  • Operators announce API management solutions across ALL the APIs they can expose including BONDI, OneAPI, web, content and other operator’s capabilities.  All under a common policy and security framework: Sonoa Systems, 4DK and ALU’s Service Exposure Suite are good examples of technologies that enable operators to deliver on this.
  • Enterprise services, CEBP (Communication Enabled Business Processes) becomes as important a theme as consumer content.  Enterprise services remains one area where operator service innovation has remained solid – though the cloud initiatives from IBM, Microsoft, and Google will start to become a significant threat in the coming years.
  • An LTE reality check: a honest assessment on the lack of customer acceptable devices (not clunky demo phones), and the reality of migration through HSPA/HSPA+.  So we stop the hype that distracts the industry from the ‘bread and butter’ work of customer service and service innovation.
  • The Java community gets its act together and makes Java certified mean something and is aggressively backed by all operators.
  • People leave the show talking about services, not the latest phone or how LTE solves all problems.  People talking about how Dial2do, Home Camera, Fonolo, Voicesage, Fun Mobility, Bubble Motion, Ifbyphone, Affle, etc. make their life better.

Then looking out a little further, into the coming decade a few themes I thi
nk will be important:

PayTV Industry Disappears in 2020

OTT (Over The Top) services will continue to flourish, from Amazon on Demand, Sony Store, AppleTV, Netflix and Hulu; customers like them, use them and in some cases pay for them. We’ve talked about this for years, with services like YouTube, which is fun but is commercially limited by the quality of its content.  Hulu, Netflix, Amazon on Demand, BBC iPlayer, and TiVo all mean customers can now get what they want when they want through an integrated (PC/Console and STB) experience – this is sowing the seeds of change in customers’ expectations.

The PayTV industry is currently a $140B business, growing to $222B by 2013. By 2020 that industry will collapse in most developed markets as customers and the 6 major content conglomerates fundamentally change the industry with a direct relationship over the internet. The critical enabler is not technology but a fundamental cultural change in how people consume TV content, the seeds of which are being sown today. From being frustrated that there’s nothing to watch on TV today, in 2020 as they turn on the TV their favorite programs, shows, movies, as well as popular and relevant stuff will all be there with none of today’s waste. Customers win with lower costs, better entertainment, more time and real choice. Content owners win with greater revenues.

What will this mean to the US Cable Industry in particular?  We’re already seeing consolidation between the producers and PayTV providers with Comcast / Universal and Time Warner / Time Warner Cable (TWC).  Will the industry start to consolidate with smaller MSOs (Multi Service Operators) being swallowed into these two conglomerates?  Can the industry continue to throw lots of low quality “channels” at customers for which most would not pay if they had a choice?  For example, my wife hates the fact that we have no choice but to pay ESPN $3.80 for channels she dislikes, as they’re in the basic package – Governments can get away with it in how they spend our taxes, but can a competitive commercial business?  The US ecosystem is very much an established old-boys network, which is resistant to change; perhaps the PayTV industry outside the US will change first.  Though we’re already seeing cracks here in the US as Fox is advertising that TWC may drop it.  As long as I can access ‘Lie to Me’ and ‘Lost,’ I really don’t need the Fox channel.  Once a significant minority of customers think like that, things are going to change.

Operator Consolidation to between 6 to 10 Global Consortia by 2018

We’ll likely see a hold out for 3 or 4 more years through outsourcing and margin erosion, but size matters in the economics of a commoditizing industry.  If large operator groups get there act together by reducing the regional overlapping roles and force through commonality, we’ll start to see a large gap in operator economics which will trigger a consolidation bandwagon, likely beginning in 2015 and in full swing by 2018.

IPTV becomes Hybrid TV

Hybrid TV is defined by the presence of a hybrid STB that is part IPTV (using a managed IP network) and part broadcast (receiving the broadcast digital content from a non-IP service like Digital Terrestrial, Digital Cable, or Digital Satellite).  There are many examples including Verizon FiOS and BT Vision.  For many IPTV over DSL service providers, to provide a basic competitive product requires they deliver the popular TV channels at the expected quality; which in many cases requires the IPTV provider to use the free to air digital terrestrial service.  Put simply, IPTV by itself is inadequate, interactive services are only nice-to-have.  Customers still prefer to select by means of channels – e.g. BBC1, Sky1, etc.  So through 2010/11 IPTV will become HybridTV; however the long term prognosis of such payTV systems does not look so rosy as described previously.

Clearwire’s Long Slow Death

They backed the wrong technology, costs will remain 50-100% higher than the global LTE standard, their capacity per customer compared to fiber is minuscule (<1/100th), wet leaves impact the reception of the service, and it can not adequately support OTT TV (which will become a customer decision criteria).  It would be best for their business to admit the mistake and restart, but with so much money poured into a broken business model it will likely take until 2013/2014 for the business model gap to become apparent to the analysts.

Service Exposure Industry Litmus Test in 2011

If we can not make service exposure work as a business it’s a good litmus test for the industry that we’re likely well down the road to being a pipe provider.  I think by 2011 we should do the test and then plan accordingly…

Cloud Computing’s Impact on Telecom

Cloud computing is a big business, in 2008 it was $16B and it looks well on its way to $43B by 2012.  Its mainly been the focus of web based service providers and early adopter businesses, e.g. cash strapped start-ups; but things are slowly changing, though security and reliability remain the main inhibiting factors.

Over the next couple of years we’ll likely see telecom operators taking over content delivery networks as the margins in that business get squeezed and it becomes a value added service on any national / global transport agreement.  For example Deutche Telekom could likely buy Edgecast, Global Crossing or Level 3 could buy/merge with Limelight.  Though not technically cloud computing it demonstrates an important merging of transport and web-centric business services.

Cloud Computing and the Enterprise is a real threat for operators as the likes of IBM, Microsoft and Google build out their services for, in particular, the small and medium sized businesses (SMB).  Also Skype’s initiative in targeting SMBs is creating a global VoIP community, if partnered with one or more of the above cloud service provides it could provide very attractive economics, again reducing an operator to nothing but a pipe provider to the cloud.

Motorola and Cisco Merge to Become a Video Powerhouse?

Droid will not be Moto’s savior, unless you’re a 220lb+ person who may think the phone is not that heavy.  Moto has a strong STB / cable business, yet it continues to struggle in the rest of Telco.  Cisco remains focused on routers and anything that encourages the sale of more routers (e.g. their Telepresence initiative has little to do with video conference, its really just about selling more and bigger routers.)  Cisco also has a strong cable business thanks to the acquisition of Scientific Atlanta; perhaps Cisco and Moto together will have enough momentum to create a globally robust router and CPE business across all segments including Telco.

Copper Retirement and VDSL (Very high speed Digital Subscriber Line) Fails

By 2015 we’ll likely see some operators (outside those with national FTTH (Fiber To The Home) plans like Singapore) announce the retirement of their copper plant.  Operators using VDSL will continue to struggle in achieving the promised 50 Mbit/s.  So after three decades of talking about FTTH we’ll likely see those telcos finally bite the bullet and make the ultimate commitment, else die as a business, unless they’re a laggard state run monopoly in which case they’ll act as a tax of business and social prosperity.

Looking Back: Reviewing the passed year

The key theme has been as an industry we’re being driven by customer behavior, rather than leading it we’ve become reactive.  This is new, as an industry we’ve always been way too far ahead of customers, launching services sometimes a decade before customers were ready.  We’re never going to regain that position as web and telecom
converge, the emerging challenge is defining if telecoms has a role beyond pipe provider.

Some of the trend this year were:

  • App Stores.  Let’s face it, the ODP (On Device Portal) which has been around for many years is the app store, its just we blew it and let Apple take the lead.
  • A focus on widgets, or a hope that a browser can remove device variations.  This works to a limited extent but its not an answer; JIL (Joint Innovation Labs) is going to struggle if it just focuses on widgets.
  • Customer service gap.  I’ve referred to my own experiences in the weblog with telcos’ poor customer service and how that limits an operator’s role in service innovation as customers simply do not trust them when experimenting with new services.
  • Web services and telecom services: customers do not differentiate and as such they increasingly view some telecom value added services as dated and out-of-touch.
  • OTT services’ relentless growth, the continued explosion in video over the internet, and the failure of mobile TV.
  • Regulation – open access is inevitable for the good of the national economy (competition / innovation) and just as importantly the voting public like it.  Nothing gets the public angry like BT blocking BBC iPlayer – they paid for internet access and now it comes with strings!
  • Power is at the edge.  Witness the latest Samsung TVs with internet access built-in, TiVo, iPod Touch (iPhone that costs $300 rather than $2400), games consoles, eReaders, and smartphones which are reaching near 70% of phone sale for some operators.  Power at the edge is empowering the customer to choose their service provider.
  • Focus on other ecosystems. Advertiser just want to buy inventory they understand and can measure as part of their existing business; content owners want a direct customer relationship (device store fronts with a 70:30 split is a good deal).  Telco is a small piece of each of those and many other ecosystems, we must understand how fit in to maximize value rather than trying to own customer as in the end we risk owning nothing but a pipe.
  • SDP (Service Delivery Platform) became mainstream, so the technology is now in the network, the challenge is changing the culture to harness what it enables.
  • IMS (IP Multimedia Subsystem) regardless of hype has been internalized by operators and is generally being used for core voice applications where appropriate. See my IMS report for more information.
  • O2 Litmus showed operators get it in the importance of direct access to an engaged customer base.  Open Telefonica and Verizon Developer Community show a similar trend.
  • CEBP (Communication Enabled Business Processes) started to gain main stream attention.  See Pat Murphy’s CEBP report.

We witnessed this year the passing of many telecom-centric start-ups focused on service innovation.  Operators are taking too long to get new apps to their customers, a culture change is required to focus on service innovation, not just network operations.  Given the infrastructure is now being put in place to protect the network (SDP) there should be a far greater willingness to launch many new services.  This is NOT copying the bookmarks of Apple (that drives data traffic which is good), but communications centric services and enabling other ecosystems to deliver their goods and services to their customers with greater value and satisfaction all round.

Its no longer a technology issue its an industry-wide culture change to accept much more risk to innovate around services and business models (which means failing much more often) to remain relevant to our customers as service providers, else they will choose our future…