Jim Machi : Industry Insight
Jim Machi

Mobile Networks

The Quest for Telco Growth

August 4, 2010

Last week I attended a webinar from the Yankee Group called "How Can the Telecom Industry Start Growing Again?" Sort of a provocative title which got my attention, and since I had the hour open, I attended. I'm glad I did.    Basically, their message was to be innovative, both in business model and services offered. This makes total sense. I would say common sense. I'm sure though, that some people view what Yankee had to say as very radical.   Some of you are probably aware that it's somewhat fashionable right now for the telcos to ascribe for a "Google Tax," that is, since there are over-the-top services that use the telcos broadband networks, these over-the-top services used the most should pay more, directly to the telco. The webinar was the first time I had seen some kind of analysis relating to if Google shared some kind of revenue, how much would it impact the telcos. Well, according to the webinar and Yankee's analysis, whether you are a wireline or wireless telco, not much! They didn't go into detail on their calculations and I'm sure some calculations will conclude that it indeed does make sense, but let's give Yankee the benefit of the doubt and say they know what they're doing here and the analysis is correct. Given how much ink has been spent on this topic, I was surprised!   Instead of asking Google to pay a tax though, why don't the telcos themselves move to say raise data rates of the users? If they're not getting enough money to support continued infrastructure growth, why not put a "tax" on the user of the "service" that demands new infrastructure? Simple steps have been taken by AT&T for instance with regards to mobile data plans and making them more dynamic - i.e. you go over a cap you pay more. Are they worried that if they raise the rates, that people wouldn't pay and would stop? Or they would all go to the lowest cost provider? In free agency and sports, the owners claim they're not making any money, yet they continue to dole out huge contracts to the players? So when the collective bargaining agreements come up, and the owners claim "poverty" it doesn't quite wash. This kind of flashes through my head when I hear things like a "Google tax" is required. More people are using the telcos bandwidth since the people want to get to the Internet, or get to Google, or get to the Apple iStore. The telcos are getting more money since they have more subscribers. The problem is the pricing models apparently aren't making sense from the supply and demand point of view.   Another way to be innovative in the business model, and one thing I didn't hear about in the webinar, is ad insertion. After all, the greatest free content, the TV, at one time exclusively lived off advertising and now with cable networks, partially lives off advertising and partially off of users' monthly fees. So how about for data users, do the business models evolve to include advertisements? We'd be innovating the business model as per the Yankee webinar, and we'd be moving to business models that made sense.

"Wireless Inside" Inside Japan

July 7, 2010

Japan has always been at the forefront of mobility and the use of mobile phones. It's always an interesting place to go to see how people are using mobile phones. In the land of Pok√©mon, it's not surprising this was one of the first places I remember seeing the equivalent of emoticons (emoji) built into the phones as a way to more easily get your point across when texting.    Wireless Japan is next week in Tokyo and with femtocells being at the forefront of news in Japan right now, I thought I'd write about that a bit. A femtocell is essentially a way to bring the wireless connection indoors, or in other words a way to create FMC.   A femtocell device would connect to a broadband connection on one end (your home or office DSL or cable broadband router for instance, or potentially in the future a WiMax one), which then through an IMS or IMS-like architecture gets back to the wireless or PSTN networks, and on the other end has a 3G (or other) connection to talk to your phone that's inside the building.    In places like Tokyo, where there are dense building structures, this is important as the 3G networks are not always able to penetrate the buildings. And in places like Tokyo, where people use their mobile phones a lot for texting, gaming, chatting, Facebooking, viewing videos, etc, keeping the connection going when going indoors is important.    One obvious issue with femtocells involves already having a WiFi connection in your house.   With many smartphones having both 3G and WiFi (4G) connectivity (see my June 30th blog about AT&T offloading users to WiFi services), why would you need to do this? Well, all phones are not smartphones for one thing. And all use cases are not the same, especially as I've said regarding Tokyo where the mobile phone use case is different from the US. But, it is an issue worth mentioning. And another issue is the business case - the ROI of paying for this benefit.   Two weeks ago, Ubiquisys, which makes femtocells, announced that Softbank would offer free femtocells. Softbank, which by the way is the exclusive iPhone carrier in Japan, has long been a femtocell supporter. I guess they are coming to the realization that people, while they "like" a service like that, do not like it enough to pay for that service. And this is also a way for mobile operators to keep their subscribers on their networks longer as opposed to switching to a WiFi network. Given KDDI rolled out femtocell services on July 1st, we'll see if this is successful in Japan. People are watching this closely

Oh to Solve those Mobile Bandwidth Problems!

June 30, 2010

Back 6 or so months ago, there was a BusinessWeek article titled "Can AT&T Tame the iHogs". At the time, there were issues surfacing publicly about outages on the wireless networks, with AT&T and other network operators such as O2 in the UK. AT&T said  that 3% of users accounted for 40% of the data traffic, kind of setting up the scenario of tiered pricing models. So what has happened since then?   Well, first of all, we've indeed seen the rise of tiered pricing in the data world, as AT&T announced on June 2nd that they would revamp their plans.  The pricing has been reasonable as I see no key outbursts of unfairness. This should definitely help stop people from continually streaming Pandora or whatever to their phones. But it won't by itself solve the problem.    When looking at the Cisco Visual Networking Index, mobile data is expected to grow at over 100% CAGR through 2014. This is nearly double 3G+ subscriber growth. So people are going to continue to access the Internet through their mobile broadband connection, so other measures need to be taken as well.   That AT&T tiered pricing release also talked about WiFi. Another part of the strategy relating to solving the mobile bandwidth problems is to offload data to WiFi. While at one time the network carriers were not embracing WiFi, for fear of competition, WiFi is now a key part of their strategy as a way to offload the network. My smartphone has a WiFi connection and a 3G connection. Offloading to WiFi can really free up the network. And it better with the expected growth. While that release gave a hint of the offload strategy, in May AT&T actually announced an offload trial in New York City, in Times Square no less.     But still, that won't solve the problem either. Even 4G networks, while offering better bandwidth that will help, won't solve the problem. There needs to be bandwidth optimization solutions in the network as well, which I'll write about in some future blogs.   And then even when we get there, there will be more work to do. Because within that Cisco report, when looking through the data, you see that Video as part of mobile data is actually growing even faster than anything and represents about 2/3 of all mobile data traffic by 2014. All this means in the context of this blog is that there will be more and more and more and more complex stuff passing through the mobile networks. This is an ever evolving and interesting problem to solve.

3G Video + Humidity = Singapore

June 2, 2010

A couple of weeks ago I visited Singapore for some press meetings. One good thing about Singapore is that there is a 3G network here and when we talked to the press, we were able to demonstrate some live 3G video applications that have been built on Dialogic video enabling platforms. 
  One bad thing about Singapore is that anytime you move when you are outside, you sweat. And since you have to move when you are outside, well, you sweat. In case you haven't figured it out if you've never been there, it's super humid. I guess that is your lot in life when you are on the equator next to an ocean. Luckily for me, I found a place called the "Eski Bar." This is a bar that has been set up essentially in a meat locker environment. So it's coooooooooooooool inside.
  But back to the 3G video apps. If you go to the Dialogic YouTube channel you can see some interesting videos of some of these apps, but it was nice actually showing live demonstrations of Video Value Added Service apps that our partners have built - such as Voice SMS, Video Portals, 3G video call completed to a non-video 3G phone, and IVVRs. Showing these in action to the press is very powerful.

The Business of Video Messaging

May 5, 2010

I have no doubt that mobile video messaging and mobile video calling/messaging will grow. Cisco's February report "Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2009-2014" highlights that very well. The report separates out growth by application, including video messaging, video calling, video streaming and various forms of PC based mobile communications. It is clear according to this report that video and PCs/smart devices will be key drivers for the increase in global mobile data traffic.    The report shows the traffic by terabytes/month, which is interesting in a way. For instance, you can compare that in 2010 there is forecasted to be 14 terabytes/month of text messaging compared to 50 terabytes/month of video messaging. Yes, you can compare and wrongly assume that video messaging is about 3.5 times the business of text messaging. But while the report is saying that the video data traffic is about 3.5 times the text traffic, it is not saying anything about business revenues.   We can make some assumptions about business revenues, though it's tricky business to figure out video messaging revenues since it depends on the payment plans. So let's look at the sheer number of messages as a way to look at the overall business.  Let's make the following assumptions - the average text is 35 bytes and the average video message is 70 kbytes. They are likely wrong, but directionally correct, which is all we're going for here.      Going back to the 14 terabytes/month for text messaging, if you do the math above, that comes out to 400 billion text messages/month globally. Considering in March the CTIA put out their Semi-Annual Wireless Survey results for the United States, where it says almost 5 billion text messages per day were sent in the US last year, that's 150 billion/month last year just in the US.   So 400 billion is in the ballpark, probably the low end of the range actually.

Talking on Planes, Trains and Automobiles

April 22, 2010

If you can talk on a mobile phone on a train, and in a car, why can't you talk on a plane?   Is it a technical reason, or a "for everyone's benefit" reason?  Personally, I'm all for not talking on a mobile phone in a plane, even if it is technically feasible. Imagine sitting one inch from someone who's talking on a phone for 2 hours, 3 hours, or even worse. I just don't even want to imagine it. It's just a diabolical proposition to me.   I figure even without checking, it is technically feasible due to WiFi. I have been on a plane where there were trials of WiFi. And where there's WiFi, there's broadband VoIP. Once WiFi service is installed, we'll have the instance of someone talking on a "phone" on a plane, but it won't be a mobile phone - it will be through a computer, though my Blackberry also has a WiFi channel so it could be on that kind of device as well. Once I start using WiFi on the plane, I will give this VoIP a try and see how it works. It is very possible though that the quality will be poor. I will report back once I try that. At any rate, I just don't want to be on that plane.   Let's get back to using mobile cell phones on planes. There are technical issues and there are potential safety issues. Wikipedia has a good overview of this if you want to read more. Essentially, the cell network wasn't designed for such quick hand-offs between cell towers, even though you can connect to them (haven't all of us travelers turned on our phones when we're low to the ground to get our email?), so there are concerns about network integrity. 

A Big News Week for Spectrum Auctions - Germany's 4G Auction

April 15, 2010

The other day, I wrote about India's 3G wireless auction. Turns out Germany has started auctioning off spectrum that will likely be used for LTE-based networks. The bidders include E-Plus, Telefonica O2, T-Mobile and Vodafone. It will be interesting to see how much the government makes from licensing the spectrum but it is likely to be much less than the 3G auctions that occurred in 2000, as times are much different now - the internet bubble had not quite burst yet.
  What will be the impact of LTE on the consumer? It's speed of the experience. I have written in the past about LTE being roughly 20 times faster than 3G. With 3G technology improving, assume LTE is roughly 10 times faster than the latest 3G technologies. 10 times faster will certainly improve the data and video utilization in mobile devices and will spur the advance of mobile value added services with these devices. We will see more and different kinds of video applications, and we will see more video usage.

Taming the Mobile Wild Boar

March 18, 2010

A couple days ago, I wrote about data problems on the mobile network and LTE helping to resolve it. One thing to remember about LTE riding to the rescue is that given the increased bandwidth, and given the increased marketing activities likely to occur once these LTE networks start to be deployed, the marketing hype might actually contribute towards getting more data onto the networks, so perhaps will ultimately not help anything you are experiencing today (say if you are on an iPhone in New York City living amongst many mobile feral hogs in such a close vicinity to each other). Given this thought, what can be done?

Since LTE is faster, and given there will undoubtedly be more and more data on the mobile networks, is simply deploying an LTE network the answer? As per my blog on Tuesday, while it's part of the answer, no, it isn't the entire answer.

Creating Mobile Feral Hogs!

March 16, 2010

All of these network and network infrastructure improvements, as well as likely tiered pricing options in the future, will help get us to improved mobile network service. The mobile internet marches on, and there will be increasingly more and more usage of it, and technology will solve the problem ultimately. Just don't expect the ride to be so smooth.
  I've read a few articles recently about domesticated pigs who get loose, and in the wild very soon turn into wild boars, eating everything in their path. I know they are a big problem in Texas and Arkansas and many other states, and have started to become a problem in southern New Jersey. I actually saw one of these beasts a long time ago in Hawaii when I was hiking. The thing was huge. 
Kind of like some of us who are going hog wild on our mobile networks?   We were all nice and pink like a domesticated pig and used our mobile phones according to the known statistical analysis, but now there are some people using mobile networks all the time, such as streaming Pandora all day onto their smartphones. And the mobile wild hog is born!
One response I've seen about the mobile network issues has been more and more PR from the operators in the form of articles and data coming out about the small percent of users who "hog" the networks by taking full advantage of their flat monthly data fee.   These people, they say, are the mobile feral hogs and these people are causing YOUR mobile network access to be in jeopardy. And in some respects they are right. But in other respects, some people are just utilizing their pay plans to the fullest, right?
So what can be done about this?   When I wrote my blog about attending Mobile World Congress a couple of weeks ago, two themes I mentioned were LTE and Femtocells. LTE is all-IP network, and depending on uplink/downlink measurements, is between 8 and 20 times faster than 3G HSPA. So it will help to reign in these feral hogs living on the mobile broadband network. And given the increased simplicity in its network architecture (being more flat), LTE should be lower CAPEX/OPEX for the operators. So it should all be good, right? Well, sure, but LTE is not exactly right around the next corner.



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