October 2008 Archives
On the 30th October I gave a webinar entitled "Telco adoption of Web 2.0 principles and open innovation for rapid application development." The presentation is shown below:
The webinar was also recorded, and is available here.
The purpose of article is to act as a follow-on discussion forum, so please add comments, questions you were unable to ask in the webinar, or points you think should be raised.
In the presentation I identified a number of critical issues.
Can operators meet these requirements?
What are the critical remaining gaps in enabling operators and application developers to work together?
The webinar was also recorded, and is available here.
The purpose of article is to act as a follow-on discussion forum, so please add comments, questions you were unable to ask in the webinar, or points you think should be raised.
In the presentation I identified a number of critical issues.
- Operators must:
- Implement processes to ensure ADC (Application Development Community) is used by the operator and not repeat the mistakes of the past; and
- Reverse developer skepticism by listening, implementing what they need, and show the ADC working.
- Application developers will not pay for capabilities exposed, e.g. location;
- Customer access is critical;
- REST and in some cases SOAP/XML are the preferred APIs;
- Full testbed is essential to the ADC; and
- Copy Apple's App Store, just copy better.
Can operators meet these requirements?
What are the critical remaining gaps in enabling operators and application developers to work together?
In a previous article, "The Internet's gone Video: What does that mean to operators?" I gave a preview of the presentation I planned to give at the Dialogic One Event in the keynote session "Carrier Video Services Trends and Opportunities" on the 21st October in San Diego. The presentation, shown below, is split into four main sections covering:
- The history of carrier video services;
- The impact of the internet going video on the industry;
- How operators are responding with open innovation to address the gap between their performance and that of the internet with respect to video; and
- Some real-world developer case studies.
On the 30th October I'll be giving a free Telestrategies webinar entitled "Telco adoption of Web 2.0 principles and open innovation for rapid application development." The pitch for the webinar is:
"The battle is intensifying between telcos, consumer device manufacturers (e.g. iPhone and Sony PS3) and web-based services (e.g. Google) in the delivery of services to customers. The Apple iPhone App Store has demonstrated the power of harnessing open innovation / web 2.0 ideas to increase customer value.
The majority of service innovations today are coming from the web and not the telcos. However, telcos provide the ideal channel to market for many applications, with control over their network and devices, a billing relationship with the customer, a nationally recognized and trusted brand, main-street store presence, and a strong position in the industry's ecosystem. Necessity being the mother of invention, telcos are now adopting open innovation / web 2.0 ideas (e.g. Verizon's ODI, O2 Litmus, etc.)
Join us as we discuss how web-based services have changed customers' expectations and how telcos are now responding to those changes with open innovation. The speaker will present the results of an extensive application developer survey on what telcos must do to harness open innovation. Finally, an action plan is set forth on what must happen to enable application developers and telcos to create a win-win partnership to deliver increased customer value."
My objective is simply to share some of my learning over the past year in working with telcos and application developers on the topic of open innovation and open networks. Some relevant weblog articles are "Open Innovation and Application Developer Needs," and "Application Developer Needs Part 2." The webinar also provides an opportunity for real-time questioning, so I hope it will stimulate an insightful discussion.
To sign up for the free webinar you can click here or cut and paste this link into your browser, https://telestrategies.webex.com/telestrategies/onstage/g.php?t=a&d=753805235. I hope you can make time on the 30th October to join the webinar.
"The battle is intensifying between telcos, consumer device manufacturers (e.g. iPhone and Sony PS3) and web-based services (e.g. Google) in the delivery of services to customers. The Apple iPhone App Store has demonstrated the power of harnessing open innovation / web 2.0 ideas to increase customer value.
The majority of service innovations today are coming from the web and not the telcos. However, telcos provide the ideal channel to market for many applications, with control over their network and devices, a billing relationship with the customer, a nationally recognized and trusted brand, main-street store presence, and a strong position in the industry's ecosystem. Necessity being the mother of invention, telcos are now adopting open innovation / web 2.0 ideas (e.g. Verizon's ODI, O2 Litmus, etc.)
Join us as we discuss how web-based services have changed customers' expectations and how telcos are now responding to those changes with open innovation. The speaker will present the results of an extensive application developer survey on what telcos must do to harness open innovation. Finally, an action plan is set forth on what must happen to enable application developers and telcos to create a win-win partnership to deliver increased customer value."
My objective is simply to share some of my learning over the past year in working with telcos and application developers on the topic of open innovation and open networks. Some relevant weblog articles are "Open Innovation and Application Developer Needs," and "Application Developer Needs Part 2." The webinar also provides an opportunity for real-time questioning, so I hope it will stimulate an insightful discussion.
To sign up for the free webinar you can click here or cut and paste this link into your browser, https://telestrategies.webex.com/telestrategies/onstage/g.php?t=a&d=753805235. I hope you can make time on the 30th October to join the webinar.
As mentioned in the previous article "Open Innovation and Application Developer Needs," in helping operators understand ways they can harness open innovation I've spent most of my time with the application development community understanding their needs. And getting them in front of operators so operators understand what application developers need, NOT what operators think they need.
I maintain a list of about 1000 web/voice/telco 2.0 application developers, described in the article "Web / Voice / Telco 2.0 Application Developer List." This list enables targeting of different application categories, business models, enabler needs and geographic base. In reviewing the results of the past two years I've interviewed over 210 developers, gathering feedback through phone and face-to-face interviews, as well as a range of quite detailed questions. Again, I apologize to the people who spent hours completing the questionnaires, I promise it's for the greater good :)
In examining some of the issues developers have in common with current operator initiatives:
The list goes on, I'm just picking a sample. However, some of the problems can be solved quite easilly:
However, the surveys only capture a part of what an operator must do. Above all an operator must:
I maintain a list of about 1000 web/voice/telco 2.0 application developers, described in the article "Web / Voice / Telco 2.0 Application Developer List." This list enables targeting of different application categories, business models, enabler needs and geographic base. In reviewing the results of the past two years I've interviewed over 210 developers, gathering feedback through phone and face-to-face interviews, as well as a range of quite detailed questions. Again, I apologize to the people who spent hours completing the questionnaires, I promise it's for the greater good :)
In examining some of the issues developers have in common with current operator initiatives:
- No live test environment for end-to-end testing of applications;
- No developer sandbox;
- No/limited device independent platform;
- No/limited embrace of browser based services - this is a critical gap in the industry;
- Very limited access to key capabilities for providing interesting applications and services;
- A web of stakeholders within the operator which slows/halts the decision-making and/or approval process;
- Typically no single point of contact;
- Inadequate operational support;
- Little or no support for billing system integration;
- Lack of support for remote monitoring;
- Lack of flexibility / willingness to try new business models; and
- Rigid rules & guidelines for contributing an application.
The list goes on, I'm just picking a sample. However, some of the problems can be solved quite easilly:
- Provide a live testing environment / access to test lab;
- Single point of contact for technical issues;
- Consistent operational support, e.g. network connectivity;
- Clear path of decision-making up the chain of command;
- Real project with full organizational commitment from operators - not a 'fashion accessory;'
- VPN access to on-site systems for remote monitoring;
- Delegate testing and approval to third party testing houses; and
- 'Approved developer' certification for the ability to fast-track approvals, operational requests, etc.
However, the surveys only capture a part of what an operator must do. Above all an operator must:
- Implement processes to ensure the ADC (Application Development Community) is used by the operator and not repeat the mistakes of the past;
- Reverse developer skepticism by listening, implementing what they need, and show the ADC working; e.g. application developers will not pay for capabilities exposed - do not charge them;
- Customer access is critical, it's taken for granted on the web;
- REST and SOAP/XML is the preferred API (don't talk about ParlayX); and
- Copy Apple's App Store - they've got the recipe more or less right, copying is OK, we're not at school; just 'copy better.'
The purpose of this weblog entry is to firstly provide some specific real-world examples of how opening up the network (exposing the Telco API) can significantly improve existing applications and stimulate revenue. And secondly, look across some of the addressable markets the Telco API opens up.
Mobile Communities
airG's mobile community has more than 30 million registered users worldwide and is interconnected to more than 100 mobile operators and media companies including Sprint Nextel, AT&T, Rogers, TELUS, Virgin Mobile, Orange, Boost Mobile, Vodafone and MTV. I reviewed airG in a previous weblog entry. It claims to be the largest inter-carrier mobile community in the world; and most importantly compared to its mobile community peers it's making a profit. This is through its revenue share agreements with operators. Simply, airG stimulates traffic, and in doing so shares in that revenue stimulation. Their services include the standard community features such as profiles and messaging, but they also include anonymous chat for flirting, and a range of services for posting and viewing community members' content.
The first step on any community tool is signing-up, and it's the first in a series of barriers that can stop people joining. With the information an operator has available in their network within three clicks a customer could be signed up and have sent a friends invite to all the people in their phone's address book already on the community through just exposing single sign-on and the customer's address book.
Video streaming is another tough problem for application developers because of the variety of phones and the variety of video playing software on the phones. Many operators have invested in video streaming solutions for their handsets, exposing this capability provides value to many application developers, and enables operators to win revenue share agreements, and stimulate new services not possible without their involvement.
Prepaid eInclusion Application
An interesting eInclusion application is InLiving developed by KNH (Kirklees Neighbourhood Housing) and Creative North (UK application developer), with input and testing from local students. InLiving is a tool that housing organizations and local governments can use to help create successful and sustainable tenancies for 16 to 24 year olds.
A critical challenge with this application is the majority of people targeted for this service are on prepaid, if the account is empty they cannot participate. Exposing a wholesale data capability would enable the housing association or local government to pay. ARPU (Average Revenue Per User) estimates range between $2-4 per month, this stimulates data usage (non-SMS) within the prepaid segment. This is an example of an application an operator would never consider in its product roadmap; yet it exists today and can be significantly enhanced through the Telco API.
Communications enabled Business Processes
The primary challenge facing businesses today is human latency; the time it takes to get people together to discuss a problem and then make a decision. As a simple communications enabled CRM (Customer Relationship Management) use case:
In a relatively controlled environment of the enterprise's VPN (Virtual Private Network), an operator could expose conferencing, messaging and call control APIs, and potentially mash up messaging with a voice-to-text service provided by a third party such as SpinVox.
Operator Community Widget
We're already starting to see operators such as Verizon creating Facebook pages and encouraging people to become fans. This is just a first step, the potential of participating in online communities is far greater. Facebook provides an open environment for applications, similar to what an operator can create. The experience of launching an Operator branded application on such an open platform can provide essential learning for an operator in what it takes to create a good application development community.
Here is a simple use case of what an operator could do with a community widget:
Social Network Integrated Friend Finder
SNIFF lets customers locate friends using their mobile phone, even if their friend is on another operator's network. SNIFF provides rules based control over privacy and how location information is shared. SNIFF integrates with Facebook and other popular social networks. Launched in Sweden and the UK where it operates across all operators. Pricing is roughly $1 per SNIFF (location check).
One of the application's challenges, common to many location applications, is age verification because of location privacy concerns, hence the SNIFF application could be assigned an adult premium rate SMS code, which would deters customers. In addition, the process of using a credit card to prove the potential customer is 18 or older presents a further barrier to entry. The operator can in some cases have age information available; exposing that would enable a seamless user experience especially when combined with single sign-on. SNIFF is just one of many location applications motivated to partner with operators to provide a smooth user experience.
Ad-Sponsored Services
Virgin Mobile USA announced the Fund My Phone application; this extends the operator's Sugar Mama marketing program to Facebook's social networking platform. Consumers earn airtime for their fellow Virgin Mobile subscribers, scoring free minutes as ads are viewed.
Over 700,000 Virgin Mobile USA customers have joined the Sugar Mama initiative since its 2006 launch. By viewing ad spots, responding to branded text messages and completing surveys customers can earn free airtime. Virgin Mobile USA still earns revenue for its airtime, it's just the customer pays with their time and through an advertiser it's converted into cash for Virgin Mobile.
These are just a few of the many thousands of applications that can benefit from the Telco API. Taking a broader market perspective and examining the potential markets the Telco API can address:
In summary, this article sets out just a few of the many thousands of applications enhanced by opening the network through the Telco API. As well as giving just some of the potential markets (and revenues) such opening can address. An operator's product development process can not address these opportunities, only by opening the network with the Telco API and getting out of the way of developers / 3rd parties can an operator access this untapped revenue potential.
Mobile Communities
airG's mobile community has more than 30 million registered users worldwide and is interconnected to more than 100 mobile operators and media companies including Sprint Nextel, AT&T, Rogers, TELUS, Virgin Mobile, Orange, Boost Mobile, Vodafone and MTV. I reviewed airG in a previous weblog entry. It claims to be the largest inter-carrier mobile community in the world; and most importantly compared to its mobile community peers it's making a profit. This is through its revenue share agreements with operators. Simply, airG stimulates traffic, and in doing so shares in that revenue stimulation. Their services include the standard community features such as profiles and messaging, but they also include anonymous chat for flirting, and a range of services for posting and viewing community members' content.
The first step on any community tool is signing-up, and it's the first in a series of barriers that can stop people joining. With the information an operator has available in their network within three clicks a customer could be signed up and have sent a friends invite to all the people in their phone's address book already on the community through just exposing single sign-on and the customer's address book.
Video streaming is another tough problem for application developers because of the variety of phones and the variety of video playing software on the phones. Many operators have invested in video streaming solutions for their handsets, exposing this capability provides value to many application developers, and enables operators to win revenue share agreements, and stimulate new services not possible without their involvement.
Prepaid eInclusion Application
An interesting eInclusion application is InLiving developed by KNH (Kirklees Neighbourhood Housing) and Creative North (UK application developer), with input and testing from local students. InLiving is a tool that housing organizations and local governments can use to help create successful and sustainable tenancies for 16 to 24 year olds.
A critical challenge with this application is the majority of people targeted for this service are on prepaid, if the account is empty they cannot participate. Exposing a wholesale data capability would enable the housing association or local government to pay. ARPU (Average Revenue Per User) estimates range between $2-4 per month, this stimulates data usage (non-SMS) within the prepaid segment. This is an example of an application an operator would never consider in its product roadmap; yet it exists today and can be significantly enhanced through the Telco API.
Communications enabled Business Processes
The primary challenge facing businesses today is human latency; the time it takes to get people together to discuss a problem and then make a decision. As a simple communications enabled CRM (Customer Relationship Management) use case:
- Jim is a broker at an investment bank that uses Salesforce.com. One of the bank's fund recommendations had been dropped; which requires he explain to his team how to present this to their 'top 10%' customers.
- Using the Operator's widget for Saleforce.com, he clicks on the task which automatically sets up the conference call to his team which includes recording and speech-to-text for legal recording purposes.
- For those of his team not on the call, they get a voice message marked urgent with the conference call's transcript.
In a relatively controlled environment of the enterprise's VPN (Virtual Private Network), an operator could expose conferencing, messaging and call control APIs, and potentially mash up messaging with a voice-to-text service provided by a third party such as SpinVox.
Operator Community Widget
We're already starting to see operators such as Verizon creating Facebook pages and encouraging people to become fans. This is just a first step, the potential of participating in online communities is far greater. Facebook provides an open environment for applications, similar to what an operator can create. The experience of launching an Operator branded application on such an open platform can provide essential learning for an operator in what it takes to create a good application development community.
Here is a simple use case of what an operator could do with a community widget:
- Sue sees her friend Jo has added the 'Operator app' on her Facebook profile so she tries it to see what it can do for her. As Sue adds the app she also confirms the download of the widget to her mobile phone.
- Whenever Sue wants to update her Facebook status message she can now include location information.
- At lunch she checks the widget and sees Jo has just downloaded a song they were talking about last week, from her widget she also selects to download the song to her phone.
- On her way home Sue stops at the local market, and while there receives a message saying Jo is close by, so she calls to see if they can meet for over tea.
- After dinner, while watching IPTV, Sue quickly checks her widget for updates as it saves going over to the PC. There are no new updates, but the Operator is advertising a 'one free premium VoD movie' voucher, which she selects.
Social Network Integrated Friend Finder
SNIFF lets customers locate friends using their mobile phone, even if their friend is on another operator's network. SNIFF provides rules based control over privacy and how location information is shared. SNIFF integrates with Facebook and other popular social networks. Launched in Sweden and the UK where it operates across all operators. Pricing is roughly $1 per SNIFF (location check).
One of the application's challenges, common to many location applications, is age verification because of location privacy concerns, hence the SNIFF application could be assigned an adult premium rate SMS code, which would deters customers. In addition, the process of using a credit card to prove the potential customer is 18 or older presents a further barrier to entry. The operator can in some cases have age information available; exposing that would enable a seamless user experience especially when combined with single sign-on. SNIFF is just one of many location applications motivated to partner with operators to provide a smooth user experience.
Ad-Sponsored Services
Virgin Mobile USA announced the Fund My Phone application; this extends the operator's Sugar Mama marketing program to Facebook's social networking platform. Consumers earn airtime for their fellow Virgin Mobile subscribers, scoring free minutes as ads are viewed.
Over 700,000 Virgin Mobile USA customers have joined the Sugar Mama initiative since its 2006 launch. By viewing ad spots, responding to branded text messages and completing surveys customers can earn free airtime. Virgin Mobile USA still earns revenue for its airtime, it's just the customer pays with their time and through an advertiser it's converted into cash for Virgin Mobile.
These are just a few of the many thousands of applications that can benefit from the Telco API. Taking a broader market perspective and examining the potential markets the Telco API can address:
- Location based services (LBS). Enable 3rd parties to aggregate and experiment with innovative LBS. LBS market size is estimated to reach $59B by 2011, source ABI Research.
- Mobile Advertising. Under policy control enable some customers to pay for services through viewing advertiser messages, e.g. Virgin USA's Sugar Mama. Total US advertising spend last year was about $150B, with $21B being online.
- Community services. It's not just enabling access to online community services, operators can add their own widgets to those communities. A small market by revenue compared to others in this list, though it does have lots of 'eyeballs' with Facebook reaching 100 million users on August 26th 2008.
- Wholesale access. For the prepaid segment this enables services to be sent even when their balance is zero. It can be used by advertisers or local government bodies.
- Telematic services. OnStar (US based telematics provider which uses the Verizon Wireless network) has achieved more than 4.5 million subscribers in '07 and is the largest telematics service provider in the world. With monthly subscription plans ranging from $17 to $70.
- Enterprise mash-up services. Enabling operators to integrate communication services into businesses processes. Business process management in just the US is forcast to be a $6B in 2011, of which mashing up communications could take a significant share.
- Content delivery over IP. Enable content to be delivered and charged for using multiple methods, not just traditional premium messaging, a $50B market in '07.
- Set top box (STB) Widgets. Enable 3rd parties to put applications on IPTV STB, not just local traffic and weather, but local community services (e.g. restaurant menus, local services, local government). Enable services between the mobile phone and STB such as remote program record and viewing content on either device. IPTV market size is predicted to top $17B by 2010.
- eHealth and telemedicine. Integrating communications into health care systems, e.g. remote diagnostics and remote healthcare visits. The health care industry is roughly $4.5T worldwide, and $2.2T in the US. There's lots of potential in this segment!
- General Experimentation. If an operator is not convinced ad-supported gaming will work, then let some of the many providers experiment in their market. The Telco API provides a mechanism whereby operators can outsource risk, letting the market decide, c.f. Telecom Italia's NexTIM. This last point is critical to the importance open innovation plays in enabling a operator to expand the capabilities of its product development process.
In summary, this article sets out just a few of the many thousands of applications enhanced by opening the network through the Telco API. As well as giving just some of the potential markets (and revenues) such opening can address. An operator's product development process can not address these opportunities, only by opening the network with the Telco API and getting out of the way of developers / 3rd parties can an operator access this untapped revenue potential.
Video in operators has a long history. In the beginning, AT&T built the first Picturephone system in 1956; by 1964 the "Mod 1" was tested between exhibits at Disneyland and the New York World's Fair. The trial results indicated that people found the picture distracting for most conversations, and were not prepared to pay significantly extra - so it didn't catch on. Once digital technology came on the scene the CCITT (Consultative Committee for International Telegraph and Telephone, later to become the ITU) created the H.120 standard for video conferencing in the early 1980s; video conferencing has been around for over 20 years! As digital signal processing technology improved, ISDN (Integrated Services Digital Network) videophones became available. Because it required an ISDN line, specialized equipment, and customer feedback showed it to be a 'nice-to-have,' so the barriers outweighed the benefits.
I joined the 'video party' in 1991 when I did the technical due diligence on the PSTN (Public Switched Telephony Network) videophone, soon to become the BT Relate 2000. Customer feedback described the picture as 'like a moving frying-pan' to 'just recognizable.' The market quite rapidly decided that it really wasn't good enough. At the same time as having fun with PSTN videophones, I also worked on building the first Video on Demand system, demonstrating the BT adverts running over one of the first DSL (Digital Subscriber Line) systems from Stanford University (John Cioffi had not yet formed Amati). We showed some BT adverts running over a couple of kilometers of telephone line. The BT board loved it and ran a video on demand trial. There was customer interest, the challenge was price points. In essence we were providing customers with an E1 (2 Mbit/s) line and getting about $10 per month; when the rest of BT was charging business customers thousands of dollars per month for an E1 line. Hence VoD had to wait over 10 years before BT started commercial deployment.
Today we have an explosion of video devices and services, from YouTube, through mobile video telephony to HD video-on-demand. YouTube is now approximately 10% of global Internet traffic, and in the UK the BBC's iPlayer service is now approximately 15% of all UK Internet traffic. Add in video related traffic from other P2P (peer to peer) services, and well over half the internet traffic today is video related. However, the sad fact is that after all the investment operators have made in video over the decades, all this traffic is just using the operator as a dumb pipe. And the two video services you'd expect to be similarly following internet video in terms of traffic, i.e. mobile videotelephony and MobileTV, are clearly not.
Mobile video telephony is a failure, back in 1999 when I was working with operators in creating the 3G business cases, some of the revenue models had video-telephony accounting for 20% of calls by 2008, generating roughly 50% of call revenues. Today, video calls in many operators can be counted in the low thousands per day, while voice calls are counted in tens of millions. It's the same problem as SMS, unless most people can use it, no one uses it. Less than half the phones shipped this year have a video-telephony capability, so the situation isn't going to change anytime soon. For MobileTV, the situation is a little more complex. There are now at least 15 separate Mobile TV technologies, this complexity stifles the market. Japan has now shipped more than 20 million ISDB-T (Integrated Services Digital Broadcasting-Terrestrial) mobile handsets, and Korea has 8 million T-DMB (Terrestrial Digital Multimedia Broadcasting) devices, many of which are not handsets. However, the devices are used for the free-to-air services, so it does not improve ARPU (Average Revenue Per User) for mobile operators.
Put simply, customers are prepared to pay for their experiential video (stuff you sit down to watch on the TV), but expect the interactive stuff (newsclips, YouTube, etc.) to be free. The line between experiential and interactive is blurring. I hear often quoted that US students do not buy cable, they watch TV on their PC. In the rest of the world student can not afford cable! And most of those ex-student once they're earning get their HDTV, PS3/Xbox, and HD cable/FiOS. Video Subscription revenues are not going away anytime soon, in the limit the customer will decide the mix of subscription (Sports/Premium), ad-supported (VoD), and download-to-own - just like people today pay for HBO to get quality content without the annoyance of adverts.
But back to the interactive video services, which account for the bulk of internet traffic. An operator could look at this purely as providing a driver for customers to buy internet access. Unfortunately, for mobile broadband operators the economics are a little tough to take such an approach, as discussed in this previous weblog article. This is another example of why operators need to consider open access, that is the Telco API. By exposing capabilities that make it easy to stream content to mobile phone / STB (Set Top Box), or extract content from mobile phones, or ensure quality of service to the mobile phone / IPTV STB, in addition to the many other capabilities an operator can expose to make an application developer's life easier. In doing so an operator can then share in the revenue stimulated, whether it be through subscription, usage or advertising.
I'll be covering these topics and more at the Dialogic One Event in the keynote session "Carrier Video Services Trends and Opportunities" on 21st October in San Diego.
I joined the 'video party' in 1991 when I did the technical due diligence on the PSTN (Public Switched Telephony Network) videophone, soon to become the BT Relate 2000. Customer feedback described the picture as 'like a moving frying-pan' to 'just recognizable.' The market quite rapidly decided that it really wasn't good enough. At the same time as having fun with PSTN videophones, I also worked on building the first Video on Demand system, demonstrating the BT adverts running over one of the first DSL (Digital Subscriber Line) systems from Stanford University (John Cioffi had not yet formed Amati). We showed some BT adverts running over a couple of kilometers of telephone line. The BT board loved it and ran a video on demand trial. There was customer interest, the challenge was price points. In essence we were providing customers with an E1 (2 Mbit/s) line and getting about $10 per month; when the rest of BT was charging business customers thousands of dollars per month for an E1 line. Hence VoD had to wait over 10 years before BT started commercial deployment.
Today we have an explosion of video devices and services, from YouTube, through mobile video telephony to HD video-on-demand. YouTube is now approximately 10% of global Internet traffic, and in the UK the BBC's iPlayer service is now approximately 15% of all UK Internet traffic. Add in video related traffic from other P2P (peer to peer) services, and well over half the internet traffic today is video related. However, the sad fact is that after all the investment operators have made in video over the decades, all this traffic is just using the operator as a dumb pipe. And the two video services you'd expect to be similarly following internet video in terms of traffic, i.e. mobile videotelephony and MobileTV, are clearly not.
Mobile video telephony is a failure, back in 1999 when I was working with operators in creating the 3G business cases, some of the revenue models had video-telephony accounting for 20% of calls by 2008, generating roughly 50% of call revenues. Today, video calls in many operators can be counted in the low thousands per day, while voice calls are counted in tens of millions. It's the same problem as SMS, unless most people can use it, no one uses it. Less than half the phones shipped this year have a video-telephony capability, so the situation isn't going to change anytime soon. For MobileTV, the situation is a little more complex. There are now at least 15 separate Mobile TV technologies, this complexity stifles the market. Japan has now shipped more than 20 million ISDB-T (Integrated Services Digital Broadcasting-Terrestrial) mobile handsets, and Korea has 8 million T-DMB (Terrestrial Digital Multimedia Broadcasting) devices, many of which are not handsets. However, the devices are used for the free-to-air services, so it does not improve ARPU (Average Revenue Per User) for mobile operators.
Put simply, customers are prepared to pay for their experiential video (stuff you sit down to watch on the TV), but expect the interactive stuff (newsclips, YouTube, etc.) to be free. The line between experiential and interactive is blurring. I hear often quoted that US students do not buy cable, they watch TV on their PC. In the rest of the world student can not afford cable! And most of those ex-student once they're earning get their HDTV, PS3/Xbox, and HD cable/FiOS. Video Subscription revenues are not going away anytime soon, in the limit the customer will decide the mix of subscription (Sports/Premium), ad-supported (VoD), and download-to-own - just like people today pay for HBO to get quality content without the annoyance of adverts.
But back to the interactive video services, which account for the bulk of internet traffic. An operator could look at this purely as providing a driver for customers to buy internet access. Unfortunately, for mobile broadband operators the economics are a little tough to take such an approach, as discussed in this previous weblog article. This is another example of why operators need to consider open access, that is the Telco API. By exposing capabilities that make it easy to stream content to mobile phone / STB (Set Top Box), or extract content from mobile phones, or ensure quality of service to the mobile phone / IPTV STB, in addition to the many other capabilities an operator can expose to make an application developer's life easier. In doing so an operator can then share in the revenue stimulated, whether it be through subscription, usage or advertising.
I'll be covering these topics and more at the Dialogic One Event in the keynote session "Carrier Video Services Trends and Opportunities" on 21st October in San Diego.
