North America is an exception in the mobile broadband (MBB) market amongst developed nations.  At the end of Q1 2009 there were 17.3 million data-only HSPA subscriptions in Europe, 14% of all broadband connections are now mobile and mobile is growing at 5 times the rate of fixed broadband.  Depending on how you calculate it, the MBB connections in the US are somewhere around 4% of all broadband connections - and the overall broadband penetration in the US is only 60% with the US at number 20 in the broadband league.  At the end of 2008 mobile operator 3UK was the third largest UK ISP (Internet Service Provider) after the incumbent operator (BT) and cable provider (Virgin) with nearly 1M MBB subscriptions; the merger of ISPs Carphone Warehouse and Tiscali knocked 3UK off that spot.

Just comparing MBB contract plans:

• At the low end in the US 250MB costs $40, while in the UK 1GB costs $7.50; and
  
• At the high end in the US 6MB costs $60, while in the UK 15GB costs $25 - and even netbooks are bundled with the plans in the UK.

The US is between 6 to 20 times more expensive than the UK!

Roughly 95%-97% of MBB traffic is from laptops/netbooks (source EU operator).  Mobile broadband is now a mass market service in many developed markets.  Data-only subscriptions involve either a USB dongle (>90%) or embedded broadband (<10%), data cards are no longer relevant in most markets.  Customers prefer the USB dongle as it can be shared between devices and customers.

The USB modem has created a separation of network and device, minimizing many scaling issues faced by smaller operators.  This enabled small operator 3UK (roughly 4M customers) to disrupted the UK market with its aggressive MBB tariffs, bundled netbooks and prepay mobile broadband.  In the UK, customers now expect a netbook when signing up for a MBB contract - the US gap is not just the 600 to 2000% higher price!  The European netbook market in Q4 '08 accounted for 20% of laptop sales, in Q1 '09 this accelerated to 29% - that's >5M units per quarter principally driven through mobile operators.  Below I show a comparison of MBB plans that include bundled netbooks from Broadband Genie. 

The US has a long way to go before it reaches the value being offered in other markets.  The reasons behind this are ineffective regulation (e.g. local loop unbundling regulation in the US in embarassing compared to other countries) and we have essentially a duopoly in fixed and mobile broadband.  Something needs to change.

Earlier this week I discovered Telstra have launched an integrated storefront experience called the TelstraOne Experience: across the phone's features, web, content, games, customer relationship management, and all the other services they provide.  Critically, its front-and-center of the customer's phone experience and aimed at one-click access.  See picture and video below on its operation.  Its based on SurfKitchen's SurfKit Mobile Internet Platform.

After reviewing Cricket's MyHomeScreen, supplied by mPortal, in the previous weblog entry; its great to see other operators harnessing the potential of the On Device Portal (ODP) to deliver an integrated experience to customers.  How easy it will be to put such as experience on say a Nokia S40 device that's also running Ovi will be a test of whether some handset manufacturers are now in competition with their primary channel to market. 

In cases where the operator can not put its experience front-and-center, they should evaluate whether it makes commercial sense to remain a channel for those devices.  For example, on the iPhone operators have already decided being a channel is OK.

In the article Reinventing the On Device Portal - The App Store, I reviewed how Apple's implementation of its App Store on the iPhone provides a template for operators and how the struggling ODP (On Device Portal) can come into its own. 

I've reviewed the ODP landscape, its struggles and evolution in previous weblog articles.  Originally created to improve the operator's walled garden portal experience, it was over-sold as providing a solution across all devices.  In practice, the user experience of an ODP on a significant minority of devices was a good way of deterring customers from data services.

The Operator's App Store is not a new concept; there are early adopters, for example: Verizon AppZone is built using mPortal's ODP.  The critical issue is not technology; operators must simply commit, pre-load their ODP App Store, and have an integrated storefront strategy.  Fortunately, given the processing power in phones today, most devices are now addressable by ODPs.

Cricket's MyHomeScreen is an excellent example of such as implementation, supplied by mPortal.  Firstly, its preloaded; its front-and-center of the customer's experience, see figure below - its the overlay bar/carousel with cute icons; its much more than a widget engine it has a back-end to provide a unified storefront and integrated into the operator's back-end systems.  Services included in MyHomeScreen:

• Website widget, and of course any website can be presented as a widget
• Storefront widget for graphics, tones, themes, games or ringbacks.  Here Cricket can aggregate a number of catalogs to present a unified storefront - see the The Emerging App Store Ecosystem article on why this is important to operators;
• Account status widget to see the prepaid balance, call detail records, status of orders, etc;
• And of course the the usual weather, news, gossip, entertainment widgets;

Cricket has shown the industry how to tackle the consumer electronic and OS app stores head on.  Rather than complain about Nokia Ovi, operators now have a template on how to deliver an integrated storefront experience across the web, content, games, customer relationship management and all the other services they provide, all front-and-center of the customer's phone experience.

In previous articles I've reviewed the consolidation of the service fulfillment space amongst small and medium sized companies:

• OSS Consolidation Part 1: Examining Service Management (Fulfillment and Assurance) - original article that provides the definitions used, explained the disconnect between the two categories of fulfillment and assurance, and provided a service fulfillment landscape.
• Update on OSS Consolidation Part 1 Weblog Article: Service Management -  after a run of M&A announcements I needed to update the landscape.

As a reminder on the definitions:

• Service Fulfillment systems support processes that ensure service providers give requested services to customers in a timely and correct manner, so called Order-to-Cash cycle.
• Service Assurance solutions monitor service performance based on the customer's view, not the network manager's view, based on defined key performance indicators (KPIs), key quality indicators (KQIs) and service-level agreements (SLAs).  These solutions help service providers connect network, service performance with the end-user experience, so called Customer-Assurance cycle.

Although Service Fulfillment and Service Assurance play complementary roles, there is a disconnect between these two functions in service providers' infrastructure.  In my experience the actions of fulfillment can be responsible for some of the toughest service assurance issues, e.g. a USB modem would not work because the SIM was configured for the phone data service not the modem data service.  Fault finding took several days of technician's time, when an integration between the fulfillment and assurance systems would have immediately highlighted the problem.  And given the increasingly real-time nature of service provisioning, it would appear a natural integration.

I've updated the Service Management Landscape to include the latest M&A action, as well as adding in some of the Service Assurance companies.  Service assurance is frequently grouped with probes and network assurance (an unfortunate legacy mindset from the days of when the network was the service); but my focus is on those companies that report on the status of a customer's service.  This is a broad area, which is starting to include business intelligence, but again I've not included those companies in the list; rather those focused on services up to the level at which a customer experiences those services. 

An interesting statistic is in the past couple of years as I've tracked this market over 50% of the companies have been acquired.  What's particularly interesting is the acquisition of service assurance companies is by large network assurance suppliers, and for service fulfillment its the large CRM/billing suppliers.  So the divide between assurance and fulfillment looks set to continue for some time to the detriment of operators and their customers.

There are 4 main application store provider categories:

• Operating System: Google Android, Microsoft Mobile
  
• Consumer Electronics: Apple, Nokia (Ovi), RIM, Sony, Nintendo, Microsoft Xbox
• Mobile Storefronts: Getjar, Handango, and in the future Amazon (they've already started with Kindle)
• Operator: Vodafone (Live), OrangeWorld, O2 Active

Though the term app store is not entirely correct, as some stores includes content (ringtones, movies, music, etc.), games, and bookmarks (widgets); the name has stuck and its a good as any.  The app stores have different foci, e.g. Apple is widgets and games, not broader content, that's through iTunes.  Nokia Ovi is virtually everything.  And operator stores have traditionally focused upon content, though some operators have recently brought in a separate widget engine, e.g. T-Mobile's web'n'walk widgets - which is a browsing experience optimized for mobile.  A widget is like a bookmark with the page's code preloaded, so only the user specific or new data is downloaded, speeding downloads and improving user experience.  Other stores like Getjar provide games and applications (not content or widgets) to a broad range of devices including the myriad of JavaME devices, while Handango focuses on smartphone games and applications.

A technical point I want to mention is widget engines are not application stores, they are simply a way to make browsing the web by a mobile phone easier.   App stores are inherently proprietary to solve the problems of security, DRM (Digital Rights Management), application signing, and performance. iPhone, Windows Mobile, Blackberry, Google Android, NokiaOvi, and Yahoo Mobile are have proprietary app stores.  An operator may use a browser with a W3C widget engine to improve the web experience, but they're going to need to build a proprietary app store around a browser - just like Apple did with iPhone.

Because the CE / OS (Consumer Electronics / Operating System) run on proprietary OSs this requires them to build a dedicated application development community.  Its important to note operators have been selling content through WAP browsers, SMS and ODPs (On Device Portal) for many years without an operator specific developer community because the Java and Symbian development communities solved that problem for them.  This is a key point, a $31B mobile content market exists without the need for an operator to create a dedicated developer community.

In examining the app store ecosystem shown in the diagram below, CE / OS app stores now have a direct consumer relationship.  Once operators struck the deal with Apple, Pandora's box was finally opened for direct customer access.  Some CE/OS stores , e.g. Nokia's Ovi, claim they will work with the operator's billing engine (generally premium SMS through an aggregator) which can double the price a customer pays for an app, so customers will likely choose a direct billing relationship or use prepaid gift vouchers like Apple. 

In the customer's buying decision for an iPhone or a Google phone the app store is front and center of the user experience (UE) and proposition.  For Operators the app store has not had such prominence in either the UE or proposition; hence its much lower engagement.  But this is changing with the larger operators such as Vodafone, Orange, Verizon, etc. making significant investments.

Examining the consumer ecosystems in the diagram below, I break the market into 3 segments CE/OS, storefronts and operator stores.  You'll see I highlight operators can use all channels to market for their applications, e.g. remote control of DVR, web based service management, conference calling, yellow / white pages.  Currently operator do not use these channels, which I've discussed in this article.  This demonstrates they're still thinking like network operators not service providers.  The Mobile Storefronts and Operators do not require dedicated developer communities as they use standards based platforms, generally they ingestion content from developers direct and partner with developer communities, e.g. Sun's Java mobile and embedded community, Microsoft's developer network, Oracle's technology network, Ericsson's Mobility World, etc.  We're seeing some of the larger operators build their own communities, but it remains unclear whether this is really necessary.

Looking to the future, the CE/OS stores will continue regardless of commercial sucess as its needed to sell the devices, as that's where the money is made.  Mobile Storefronts have a few options: build the brand to be recognized as the preferred mobile store (difficult once Amazon gets in on the act), consolidate, or partner with operators to provide a white label turnkey store solution.  Either way their customer relationship is secondary compared to that of the CE/OS or operator stores.

Operator developer communities are the current focus of experimentation, the larger operators are placing their bets.  And some are open to other operators joining their ecosystem, as announced by Steve Glagow of Orange Partner at the Smart Pipes conference last month.  The key will be to deliver an integrated experience to the customer, like Apple iPhone, with a single interface for all content, applications, widgets and services.

This isn't an 'either-or' app store battle, customers happily use multiple website for buying their goods, e.g. Amazon, Barnes and Noble, JR.com, etc.  And customers even spend time visiting several stores to buy their groceries, e.g. Safeway, Costco, the Sunday farmer's market, and the local deli for that great pastrami.  Hence customers will accept and use multiple stores on the phone. 

The battle comes in delivering an integrated experience on the phone.  The device and OS stores have the edge over the operators' stores.  Hence why JIL (Joint Innovation Lab, discussed in the Smart Pipes conference) is focused on building its own app store and leveraging its combined purchasing power to influence some handset manufacturers to play fair.  In the interim while the "chess pieces" are being moved in the industry, smaller operators can do much with their existing content stores to grow a $31B market into a $100B market through improving the user experience by copying some of Apple's app store features and using the CE/OS stores to sell their applications because they're service providers not just network operators!

I've reviewed the impact video is having on networks in articles such as :

• The Mobile Broadband Explosion: Mobile Broadband finally reaches the Tipping Point
• The Internet's gone Video: What does that mean to operators?
• Mobile Broadband and DSL Broadband: How do the customers' experiences compare?
• Human Behaviour and Mobile Broadband Pricing

One of the culprits in ensuring video is efficiently served into operators' networks are Akamai, Limelight, CDNetworks, Panther Express, and a host of other CDN (Content Delivery Network) vendors.  We've recently seen a number of initiatives coming from Verizon (Partner Port), AT&T, BT (Content Connect) and Level 3, as they build on their existing enterprise CDN experiences to create video CDNs.

The rationale for a carrier-based CDN is they can place the distributed caches deep in the network, very close to the customer, as far as the MSAN (Multi-Service Access Network), home gateway, or even in the STB (Set Top Box).  Their drivers include:

• Reducing latency of content that their customers request, and operators should know what content their customers like to view;
• Reduce the demand peering is placing on their network as the content would now be in-network reducing the number of router hops, better controlling the required investment in core router infrastructure as traffic grows exponentially; and
• Receive revenue for traffic they already transport.  The logic goes: content providers are already paying for delivery and potentially carriers could provide better CDN value as they own core transport and can place caches close to the customer.  Which to be fair, if an operator can regionally or globally compete with Akamai on price and performance, then such competition is good.  Unfortunately this point has been lost in the emotional net neutrality debate.

Traditional CDNs couldn't get that close without partnering with a carrier and deploying internally (to the carrier's network), which Akamai has done giving it an impressive global CDN.  However, many of the smaller CDNs connect to an ISP such as Level 3 who then peers with the consumer network operators like VZ, AT&T, Comcast.  Hence there is a valid discussion to be had on internet peering commercial relationships which does not involve the content providers nor the customer.
 
In the UK tomorrow the government will release another version of its Digital Britain report, interim version is available here.  So BT and the BBC have been posturing before its release.  Unfortunately for BT, the BBC is the media in the UK, so its lost the argument before it even started with the phrase that will come to haunt all operators on this issue "can't expect to continue to get a free ride."  Specifically BT has been throttling some of its customers in the evening so BBC iPlayer does not work, and naturally those customers and the BBC are a little annoyed, and BT responded with the above phrase to the BBC's questioning.

But let's exame the video CDN market to understand the opportunity for operators.  The video CDN market in 2008 was $400M, of which non-pure-play CDNs like NTT accounted for only $40M.  The market is predicted to grow to between $800M - 1.4B by 2012.  So compared to the $2T telecommunications market its in the noise.  Prices per GB fell by on average 40% in 2008 principally due to Amazon's CloudFront services commoditizing CDN pricing.   CDN vendors are now offering highly competitive deals to customers, such as for high volumes - 400TB and above - are being priced as low as $0.04 per GB.  Live events may command a small premium (10-20%) over video-on-demand streaming content for efficient bandwidth management with pre-determined peak traffic. Value added services such as encoding, web acceleration and traffic reporting command a similar 10-15 percent premium and are increasingly the focus of the CDN providers.

So examining where this market is going:

• Pureplay CDN providers will likely consolidate and will likely acquire content management companies to offer additional content VAS (Value Add Service).
• Operators will partner, acquire and building their own CDNs, e.g. Deutsche Telekom partnered with Edgecast; Level 3 acquired Savvis and the assets of Servcast; and Verizon/BT are building their own CDNs.
• Net Neutrality will limit an operators ability to monetize CDNs in-country, the business case should be built on operational savings.  Internationally the limitations do not apply.  In-country if they're more competitive than Akamai, a content provider may choose them, those they'd best act as a consortium as a content provider need only strike one deal with Akamai rather than  750+ deals if its operator by operator.  BT's statement "can't expect to continue to get a free ride" will limit all operators attempts to monetize CDNs in-country.
• Mobile networks are suffering even more than fixed networks, so will likely deploy CDNs for purely operational reasons, ignoring monetizing CDNs.  This will further weaken the position of fixed operators.
  
• Given Amazon's commoditization of the market, value added services are necessary for differentiation such as analytics, trans-coding, and site acceleration.
  
• P2P (peer to peer) will play an increasingly important role compared to caching, but the technology and its network impact are still at an early stage, see IETF's ALTO project for more info.  Again operators have an advantage is owning the network to provide the more efficient solution.

On the issue of broadband pricing being broken, generally operators are making a profit on most of their customers, only a small minority, between 1-3% are using so much capacity that it makes them unprofitable.  If an operator offers a package with a byte cap limit at a discount for most customers, explains why their pricing is broken, and that most customers are unlikely to reach that limit given their current usage habits, this could be a way of realigning pricing to reflect their network economics.  The key is not to take something away without giving something back to the average profitable customer.

As mentioned in a previous aricle on virtualization I use SaaS (Software as a Service) and PaaS (Platform as a Service) interchangeably as I remain unconvinced of the difference from a customer's perspective.  The cloud computing market size, depending upon how it's defined, is estimated to be about $50B by 2011, of which 70% is in PaaS/SaaS, 30% in IaaS (Infrastructure as a Service).

Within PaaS we must define the focus of the platform, e.g. web applications, CRM applications, billing applications or SDP.  Google, through its App Engine offer, enables businesses to host their websites and data in the Cloud and enable them to use services like BigTable. The two things are important to note:  you can only host python applications as of today and you pay per bandwidth, storage and CPU used for hosting this web application; and you can easily integrate with other Google Services and Google Accounts.

Amazon does not offer a way to host web applications on the Cloud, but simply provides virtualized hardware (IaaS).  The main IaaS providers I see in the market are: Amazon, Joyent, Flexiscale, Reckspace, f5 and GoGrid (plus there are lots of brokers and niche providers).  The savings come through economies of scale and statistical multiplexing to give a higher average processor utilization (>50%) compared to a typical 10-20% untilization within an enterprise, generally a factor of between 5-7 in savings is possible, which is significant.

So the choice a customer makes between IaaS and PaaS needs to analyze:

•  Vendor Lock-in: if you deploy on Google or Microsoft Clouds, you make a choice on both technologies and with which services you'd like to integrate;
•  Ease of Use: deploying a web application is easier to do than deploying and managing a complete infrastructure; and
•  PaaS or IaaS: do you want the Cloud Provider to offer you a way to host your applications (if you can accommodate with their technical restrictions) or an infrastructure allowing you to host your applications (without restrictions) the way you want?

Operators pour money into their data centres and custom systems integration; Vodafone Live as a great example of a vast custom CDM (Content Delivery Management) development with little to show in service differentiation or lower operational costs.  Today, suppliers such as Ericsson and IMIMobile (see this previous article) offer content delivery management as a PaaS, smaller operators have widely adopted this approach.  

I think this trend will naturally extend to the SDP as operators look to minimize investment in large speculative SI projects.  Hence, there is an immediate business opportunity for the NEPs (Network Equipment Provider) to deliver a PaaS SDP, especially to small and medium sized operators or operators undergoing rapid growth.   A PaaS approach allows the operator to flexibly customize their platform to react to local market conditions, while taking advantage of the 5-7 times cost advantage of using a cloud based approach.

However, for both IaaS and PaaS the critical issue is SLAs (Service Level Agreement), this is going to be a critical barrier for many operators.  SLAs within the data center are easy; the challenge comes for the end-to-end SLA (which includes the WAN, and enterprise network availability.)  Here the need for remote infrastructure to monitor and manage link availability in partnership with operators is essential, as well as integrate into the existing network infrastructure.  SLAs are one of the reasons Google is investing in undersea optical capacity and other global optical infrastructure, to enable it to get preferential access to global connectivity to offer its cloud services with a global SLA.  Some operators are in an advantageous position, they can provide the WAN SLA, hence why I think PaaS in telco is an interesting opportunity especially for SDP.

Telco IPTV market status / performance varies greatly by country, because of differences in broadband / PayTV penetration and the telco's access to competitive national content.  Generalizations are difficult to draw.  Some countries have had rocky starts while others have been relatively trouble free.  Free and France Telecom are both now over 1.5 million IPTV customers, China Telecom and Verizon (its technically digital cable) are now over 2M customers, and even poor old BT and Deutsche Telekom are finally around the 500k customer mark. In mature markets with high broadband and PayTV penetration the key has been matching the existing packages of the satellite and cable providers, making it easy for customers to compare products: content packaging and price are key.  This has been the key lesson for many telco IPTV service launches; content is king (witness the battles for sports events) and price is how customers decide.

In China where PayTV is dominated by analog cable China Telecom and Netcom simply offer more channels (70 compared to 50) and VoD content.  In France where IPTV has been available since 2004 there is fierce competition with the Satellite providers over content.  And increasingly VOD (Video On Demand), remote DVR (Digital Video Recorder), stop and play on live events, managing voicemail from the TV, etc. are used by the IPTV providers to differentiate - yet Satellite dominates with over 50% of the PayTV market, simply because the bulk of the market does not yet use interactive services. In the US the deciding factor is the number of HD channels and sports content.

In many high penetration broadband / PayTV markets the first phase of 'content packaging and pricing' has run its course, the market is educated on IPTV.  Now we are entering the second phase where accessing content on your own terms is coming into play, e.g. VoD, DVR and catchupTV.  And we're even seeing deals being cut where web based content is made available over IPTV.  But all this is easily managed by the existing middleware and VoD systems.  So why all the focus on IMS?  

Scenarios quoted cover: CallerID TV pop-ups (BSkyB did that over a decade ago to mute customer interest, and most phones have CallerID built in); VoIP (BT's selection of a softswitch architecture rather than IMS for its 21CN last year was a significant nail in that coffin); and FMC (Fixed mobile Convergence) video.  I understand the benefit of FMC data (getting it off the mobile network and onto the fixed when I'm at home or in the office as its much faster and cheaper), I'm still dubious on FMC voice if its a charged for service (as is the market).  When scenarios such as watching a movie on TV then switching over to watching on a mobile as you leave the house are very niche (only a geek could create such a use case), and again can be managed through existing platforms and static QoS (Quality of Service) without the need for IP session control with standardized dynamic QoS (IMS).  Given mobile operators have shown indifference to IMS, is it simple another case of technology-led sales rather than customer-led sales?

Bottom-line: IPTV doesn't need IMS at the moment because it doesn't matter to customers, rather the video related services of VoD, DVR, catchupTV, and related service innovation matters, e.g. adding web based content (search becomes even more important), stop and play on live events, local content, service management from the TV, bundling of on-demand content as customers' viewing habits change, user generated TV (e.g. local schools' channels), STB games (using the STB as a app platform), and the list goes on. 

Opening Points:
A smart pipe strategy is now critical to an operator's service innovation plans as we saw with Vodafone, Joint Innovation Labs, Orange Partner, Telenor CPA; plus there are many more operators making money today in working with third parties, e.g. Globe, Telus, etc.

However, all is not well in this ecosystem.  Yesterday we saw there is a large gap between operators and developers on their needs and expectations.  This conference provided one of the few times I am aware of in this industry where such as open and frank discussion took place.  The most dangerous thing we can do is right off these opinions as just the usual developer 'whinging and operator bashing.'  Developers have a choice, and they're not choosing the operator; rather the consumer electronics and operating system channels to market.  And when technology reaches a point of simplicity that Amazon.com enters; this gap can not exist.

We are seeing some important initiatives in reducing fragmentation, but they're technology biased.  We saw yesterday most of the developer frustrations are process and business related; and hence this is where we must focus.

Matt Millar provides a great summary of his thoughts from being on the developer panel on Day One.

James Parton, O2 Litmus: The first six months

• Litmus's objective is to grow their fan base by delivering unique services and experiences - note use of the word fan!
• Looks like O2 aspires to be the 'Apple' of Telco - the 'cult of O2.'
• It's a collaboration community, with the presence of real customers - this is a key difference to most other operator initiatives.
• Focus is customers: Web 2.0 has created opinionated, educated, connected and engaged audiences - where O2 wants them to act as virtual product managers.
• James is focusing on trying to meet developer's needs - fair and simple process, direct customer access, paid in 5 weeks not 90 days.
• Latest Litmus stats: 3000 customers, 560 developers (50 countries), 320 apps - about to promote across 600k of O2 customer base.
• Fring a VoIP service is in the store - this demonstrates the open access model, allowing experimentation.
• Roadmap includes subscription pricing, sale of services not just apps, URL based applications, SMS API, and opening up across the Telefonica footprint (260 customers)

David Stewart, OFCOM

• UK has achieved 130% penetration
• Mobile is >50% of total communication revenues (this includes broadband and corporate data services)
• 1 in 5 voice connections are through BT, O2 will over take BT in about 1 year with respect to number of connections
• Camera is the top selection feature for customers, browser is still small interest
• What is it that's driving next phase of development? - Mobilization of the internet and the separation of applications and the network
• Will not regulate on openness or net neutrality, area they'll likely regulate on is customer risks/protections (e.g. scams)

Grahame Riddell, Nokia Ovi

• Positioned store as next generation personal media network - personal, location-aware, content and apps, social buying experience.
• Beyond smartphone and S60 into S40 range based on Java.
• Leverage Forum Nokia's 4M developers
• Free apps and looks similar to the apple app store experience
• Uses behavioral algorithms in search to enhance relevancy
• Global and local content
• App provider gets 70% of customer price (less operator charges) - Nokia keeps 30%
• Targeting 300 million devices by 2012 (50M+ at launch)
• Nokia is going to have a rough ride from the operators!

Sean O'Sullivan, Dial2do: Social Phone

• Gave examples how the voice experience can be enhanced by the web
• Social phone book, e.g. INQ1
• Enhancing calling - bringing contextual information about the caller/callee (Dialplus)
• Key issues for Sean are: fragmentation, payment, share more rev, get at network assets, for the operator to get out of way - similar to Day One's developer panel session
  
• Everything is an asset - e.g. data such as when customers first use phone in the day, turn it on, etc.  And these can be monetized.  There are lots of operator opportunities.

Wrap-up panel session

• Enterprise is where to focus on monetizing APIs - gap within the conference - important focus for next year
• The large gap between operator and developer needs/expectations must be closed.  As an industry we're going to struggling to compete with the consumer electronics and OS provider stores, until that gap is closed.
• Suggestion that the web model does not apply to mobile - location can not be given for free.  Unfortunately on location the 'horse has bolted,' its now available for free on the phone.
• APIs go well beyond OneAPI - e.g. memory available on the phone
• Multiple stores on the phone are OK - let the customer choose
• We're entering a period of intense experimentation to determine what 'recipes' work.  This time next year, it will be interesting to see what has worked and what has failed.

The Smart Pipes conference had about 80 attendees from across the value chain; not just operators, suppliers and consultants.  In attendance were Steve Glagow, head of Orange Partner; Pieter Knook, head of Vodafone Internet Services, Sune Jakobsson, Telenor Open Services; James Parton, head of O2 Litmus; plus many more operators.  As well as leaders from Nokia Ovi, Google, Bebo, Fox, Opera Software, Microsoft, OpenAPI, OMTP, etc.  The conference was a who's who of those trying to create new business models in telecom.

Reviewing some of the sessions.

Sean Kane, Head of Mobile of Bebo: The Importance of Business Model Innovation
Bebo Mobile is currently working with 20 operators in mobilizing access to Bebo.  The main problems they have in working with operators are:

• Long deployment cycle, operators need to be prepared to give up some control, and move to new service launch in weeks not months;
• Pain of custom and extended contract negotiations, need to move to 'Fair and Simple,' contracts with web-based service providers;
• Constant organization changes and HQ versus country battles, need a persistent single point of contact; and
• Operator specific and arduous technical hurdles need to be simplified and 'trust' Bebo application as its working elsewhere.

Bebo Mobile are not interested in network based APIs, they're not looking for location, which given they represent a very large user base is a critical issue for OneAPI.  Their view of the world is they provide the platform, and operators customize as required, as they can not form 750+ versions of their mobile app.  What they'd really like is a standard camera photo uploader API/app - perhaps something OneAPI should consider?  A major concern is the proliferation of app stores.  It's not possible to work with them all, they think there will be a wash-out within the next 12-18 months, which means many developers will wait and see.

Pieter Knook, Internet Services Director, Vodafone Group: Why Open Access?
Set out their recently announced mobile widgets strategy.  Copying O2 Litmus with a 70:30 revenue share, and quoting James Parton of "Get out of the way" between developers and customers.  Initially the widget platform will be based on the Opera browser.  Over time the Joint Innovation Lab (Vodafone, Verizon, China mobile and Softbank) will spec out what is required of BONDI, OneAPI, and other relevant standards. 

These first two presentations set out an interesting dichotomy between VF's and Bebo's view - they're both providing platforms - who's providing the applications?  In the limit, Bebo would likely build a 'widget' - little more than a bookmark, c.f. the Facebook app on the iPhone / iPod Touch.

Steve Glagow, Orange Partner

• Orange have 130m customers - but they want to work more broadly across operators - great approach in building broader industry consensus.
• 3 foci: Orange API initiative, Open Innovation, and Application Shop.
• Currently they have 28APIs, and soon will have 36 APIs.  4k active users of APIs.
• Apps can be accessed via the App Shop, Orange World WAP site (most popular), web site, and an ODP (On Device portal).
• Why is an application that is Symbian signed / Java verified not adequate?  Its incurring additional costs to make it 'Orange Compatible.'  Steve indicated they're looking into ways to build in Orange requirements into Symbian signed / Java verified.
• Interestingly Orange only aims for 500 rotating applications through their stores.

Graham Trickey, GSMA: OneAPI
Provided a great update on OneAPI, interestingly they're looking at how to create a common commercial framework - which is by far the bigger problem than technology.

Panel Discussion: Developer Requirements

• Fragmentation is getting worse, multiple widget engines, multiple app stores, multiple stores within an operator.
• Network APIs are not that relevant, however a flat rate location API could be.
• Billing is critical, especially timely payment and fair rev share.  Working through an aggregator is disliked as they take 50% of revenue for no perceived value add.
• Customer access in any app store / developer community is critical.
• We have a significant gap between operators and application developers - this must be addressed if telecom is going to compete with the web-based SPs.

Erik de Kroon, Vodafone: Vodafone App Store Plans

• App Store is just a way of packaging content, they've been doing that since the start of Vodafone Live.
• W3C is the only widget platform that will survive - if universal commitment can be achieved in the industry this would address some of the fragmentation issue.
• The JIL (Joint Innovation Lab between Vodafone, Verizon, China Mobile and Softbank) developer website launched, www.jil.org.
• Will open JIL to other operators.
• Defining a privacy framework.
• Looking beyond widgets (as it is not adequate to run games) - no decision yet on how that will be implemented.
• VF plan to launch an App Shop soon across the UK, Germany, Italy and Spain.
• Will have the widget engine pre-integrated on devices.
• Will allow multiple widget platforms on a phone, e.g. Nokia Ovi and VF Widget platform.
• JIL could be the centre of gravity the industry needs, critical will be addressing developers needs given the gap exposed in the previous session.

Day One provided a lot to think about, there's a surprisingly large gap between operator and developer needs/expectations.  As an industry we're going to struggling to compete with the consumer electronics and OS provider stores, without rapidly closing this gap.

The analogy I'm drawing here is between an operator's IN platform and an enterprise's / web service provider's application server.  

The Intelligent Network (IN) enables both fixed and mobile operators to differentiate their proposition by providing value-added services in addition to the standard voice and messaging telecom services such as PSTN, ISDN and GSM services on mobile phones, e.g. 800 numbers, prepaid, etc.  In IN, the 'intelligence' is provided by a server called the SCP (Service Control Points).  There are other nodes, which provide triggers and databases, but I'll keep it focused on the core function.  IN is based on the Signaling System #7 (SS7) protocol between telephony switch and other network nodes in the network operator.  The main driver of IN was previously all new features and services were implemented directly in the switch. This made creating VAS (Value Added Services) slow and expensive.  So IN enabled a degree of separation, however, as we can see by the woefully slow rate of telephony innovation compared to the web, it only partially achieved this objective.  Today, IN is ham-stung by proprietary vendor implementations, which continue to 'lock-in' operators to specific suppliers and limit service innovation.

An application server hosts an API (Application Program Interface) to expose business logic and business processes for use by applications.  The term can refer to: services that are made available by the server, or the software framework used to host the services such as WebLogic, WebSphere, JBoss, and GlassFish to name just a few.  The main benefits of an AS are in lowering the Total Cost of Ownership (TCO) by:

• Centralizing the business logic making upgrades, config changes, etc. easier;
• Easier security as data and application logic must pass through this point;
• Improving performance of applications in heavy use environments; and
  
• Making application/service creation easy: the server does the hard programming, so developers can focus on business logic.

The AS can be thought of as the enterprise/web service provider's SCP.  Given the rate of innovation demonstrated by the web service providers compared to telco; and the need for operators to adopt systems that enable it to take advantage of the ecosystems being generated on the web; moving to an AS from their proprietary SCP would functionally make sense.  Then there's always the statement that telco is special/unique, it requires low latency, high availability, high throughput; which means enterprise systems are not addressable.  This was true perhaps 5 years ago; however, today telcos' requirements are no longer the 'gold-standard;' financial services, military applications, and healthcare have more stringent requirements in availability (zero downtime), latency (sub millisecond), and scalability.  But adopting a proprietary AS still risks some of the lock-in risks of the legacy IN.

A driver behind open source is the software development costs in organizations are between 10-15% of total costs. It's the business model that drives the cost and value.  When IBM was evaluating Linux, they estimated it took a development investment of about $400m to create a competitive OS; they estimated that Linux would receive about $800m in development investment through being open source!  Double what IBM could afford!  Socially it enables a more effective use of our development resources.  So an open source AS, focused on telco enables a larger development community to innovate on both the platform and applications.

Open source in the enterprise is now mainstream:
"By 2010, Global IT organizations will use open-source products in 80% of infrastructure-focused software investments and 25% of business software investments."  Source Gartner.
"58% of IT execs reported that they now use Open Source for mission critical applications, 79% now use open source in application infrastructure, 62% view open source software as capable of delivering significant business payback, and 80% viewed factors other than cost such as open standards support, use of code, and avoiding lock-in."  Source Forrester/Unisys.

The question on stability has long since passed; in many respects open source now provides a more stable platform, given the broader and more diverse development investment.  We're even seeing some large operators declare open source as their preferred software model.  As in the enterprise, open source is going to happen for an operator's IN as it lowers the total costs of ownership by up to 90%.  M1 in Singapore is leading the way with its adoption of an open source IN from hSeind.  The web service providers have clearly demonstrated service innovation on an AS is much faster than on a closed, proprietary IN.  The current economic environment may prompt more rapid adoption by operators as they focus on operational costs; and operators have already successfully adopted open source for their BOSS (Business and Operational Support System).

So if an operator is looking at an NGIN (Next Generation IN), don't continue in the current proprietary rut: consider an open source AS and finally compete with the web service providers.

There's a great saying from Benjamin D'Israeli, 'There's lies, damned lies and statistics.'  To read the press, you'd think the trillion dollar telecommunications industry has been shaken to its core by Apple, a $33B consumer electronics company.  In April 2009 the Apple app store achieved 1B 'application' downloads in 9 months, estimates vary on the revenue generated by all these downloads, it is likely a few $100M, as most of the downloaded apps are free.  Given the volume of prime-time national TV advertising Apple is running for the App Store, I doubt as a line of business its even profitable.  I put quotation marks around the word application as in many cases it's just a bookmark; on an iPhone for iPod Touch check out iphone.facebook.com in the device's browser and then the Facebook app - spot the difference?  Charging people for bookmarks would definitely be an interesting business model, though its sustainability would be questionable.

But contrast Apple's App Store revenue to the total telecom content revenues in 2008 of $71B, $30B of which was for mobile.  Apple has definitely done well, and there are some important lessons in Apple's success for operators, but as usual hype and fashionable concepts are causing the industry to knee-jerk react and focus on the less-important part of the problem - service exposure.

Some of the learning points Apple provides to the telecom industry:

• They do not charge for any of their 1k+ APIs; and still operators think they can charge consumers for location.  As a proof point, consumer LBS (Location based Services) based on a charged for network location API (which is generally much worse than GPS on a phone) has not been successful.
• A great store experience that encourages people to linger, browse and buy something they did not plan, just like in a mall.  The ODP (On Device Portal) was created for just this reason, but unfair revenue share, lack of platform commitment, inept ingestion process and charged for APIs stopped this innovation creating market success.
• You can easily find the application once its downloaded!
• People love free (and that's free without the sting of an end of month data download charge), and after using the free stuff a few upgrade to the paid for app.
• Simple fair revenue share (70/30), with a clear path to cash, O2 Litmus is the leading light here.  A friend of mine sells his apps through Apple's App Store at $4.99 and another store (which has both the store, pSMS aggregator and operator taking their unfair shares) at $24.99 - he makes more money through Apple!
• Market size in the tens of millions of units (I'll come back to this as fragmentation continues to stifle the industry and in the limit could kill the operator store.)
• Platform/Device commitment measured in years, not months as is the case with most mobile phones.
  
• Simple process to publish with direct customer access.  Again O2 Litmus leads the industry, but the volume of customer access could be better.

Examining the fragmentation issue in a little more detail.  GLU.com had to create 25k versions of its Transformers game.  On average developers build about 400-600 versions of any game.  There are about 20k phone types on the market today, 750+ operators and depending upon how you count 25-200 different OS, that's a lot of permutations.  And even with this stifling fragmentation the industry has achieved $30B in revenue.  Just imagine what could be done by applying all the lessons Apple has shown!  Its too late to selectively apply just a few.

If operators really do want to charge for service exposure, then they're going to have to focus on the enterprise segment; I'll look at that in a later weblog article.  To the answer the question in the title "Is There Any Money in Service Exposure for Consumer Services?" The answer is no if an operator simply wants to charge for APIs.  I'll be covering these concepts and much more in my workshop at the Mobile Operator Smart Pipes and Applications Conference. 

Just a quick reminder: On May 19-20th in London will be the Mobile Operator Smart Pipes and Applications Conference.  In attendance will be Steve Glagow, head of Orange Partner; Pieter Knook, head of Vodafone Internet Services, Sune Jakobsson, Telenor Open Services; James Parton, head of O2 Litmus; plus many more operators.  As well as leaders from Nokia Ovi, Google, Bebo, Fox, Opera Software, Microsoft, OpenAPI, OMTP, etc.  The conference will be a nexus of the people trying to move the telco industry from being viewed as "a pipe to the internet" to a "value-adding network of customers and application developers."

Before the conference, on the Monday 18th, I'll be running a pre-conference workshop, "Achieving the Economies of Scale Necessary to make the Smart Pipe Strategy Commercially and Operationally Viable," details show below.  Here I'll be sharing a view of what 2015 will look like if we continue along the current trajectory; where increasingly Google Latitude becomes the default aggregation of people's context and Google buys Skype from eBay, social networks interoperate which includes messaging and voice inter-working, customers increasingly subscribe to music/video experiences rather than 'buy' content, mobile VoIP finally arrives, devices manufacturers have to copy Apple's experience to stay in business, and customers' expectations on services continue to change so mobile voice/messaging is considered like fixed telephony is today.  What does this mean to the mobile industry?  What are we doing, and what must we be doing?  The workshop will be a mix of presentation, roundtable discussion, and interactive Q&A.  For more background on the workshop see these weblog articles:

• Options on how the Telco industry can work with the App Development Industry
  
• When everybody wants to be your Friend: What's an Application Developer to do?
  
• If you are an Operator who is not selling iPhones, why haven't you built your iPhone App already?

And finally I would like to extend my thanks to John Holloway, CEO of ZingMagic; and Matt Millar, CEO, Live Talkback for their guidance, help and support at the pre-conference workshop.

Operators are stranded by a 25 year old operating system, their IN platform.  Imagine a web application developer trying to compete in today's market using Windows 1 as its operating system!  Being stranded in the mid 1980s creates a surreal situation.  Unfortunately for operators their customers are living in 2009, and their expectations of service providers are increasingly shaped by services on the web, e.g. Google, Facebook, Twitter; and consumer equipment providers, e.g. Apple, Sony and Nintendo.  Even evolved IN products only pay lip service to IT and web based technologies, they do not enable operators to play a significant role in the emerging services landscape beyond connectivity.  

The artificial war created between JAIN SLEE and SIP Servlet, has delayed decisions on how operators add value to the emerging services landscape.  SIP Servlet is generally used for VoIP service features and bought by the IT organization, while JAIN SLEE is bought by the network guys to solve a particular IN service problem.  So generally they're not competing.  It's not a battle between SIP Serlvet or JAIN SLEE, it's a battle between action and inaction, and the 'false war' has prompted inaction. As evidence: the spend on legacy IN platforms is still greater than the total spend on next generation technologies.
 
Legacy is both a gift and a curse.  Legacy networks have enabled operators to create an impressive business that even in today's economy is growing, for example the telecoms industry in Europe accounts for 3% of GDP.  But that legacy is a curse when technologies evolve in other industries so that the rules of service delivery change.  Just like IBM had to create a wrenching transition from its siloed 'we build everything' IT model, to an open innovation model; so operators must also address this change in their 'we deliver everything' service model, to an open service innovation model, as the change will happen far faster than most organizations can respond.
 
Change can only come from within, for some operators it will be a stark financial hole in the business model that prompts change, that so called 'near-death' experience.  Note the near-death experience only applies to the few that survive, most fail; IBM is an exception in its industry.  For other customer-focused operators, they recognize the large gap in their service innovation ability from their customer's perspective, e.g. O2 Litmus.  And are adopting the processes and technologies to enable them to play a part in the emerging services landscape, by understanding developers' needs, exposing capabilities, enabling service reuse, and leveraging their core voice assets by mashing them up with the web (see my IN returns article on some service examples).  Enabling them to share in the value created in the new service delivery landscape, and avoid becoming a pipe to the Net.
 

Virtualization is a hot topic, made more so by IBM's potential acquisition of Sun; two leading proponents of virtualization and cloud computing.  From an enterprise perspective the drivers for virtualization are saving cost; and improving employee efficiency, manageability of IT and enterprise security.  Take for example desktop virtualization, e.g Sun Ray thin clients, it's your standard PC experience except its running in the cloud so you can use any client as your own, no boot-up time, screen as you left it the night before, and the data is kept within the enterprise.  Other virtualization examples include Salesforce.com, a leading light in Software as a Service (SaaS), virtualizating the CRM (Customer Relationship Management) application.

Virtualization can be applied across a number of aspects, e.g. data center, server, application, service, desktop, database, storage, mobile device, network, and the focus of this paper the service delivery platform (SDP.)  By the way, I'm going to look at the opportunities and threats virtualization presents to telcos in another article coming soon.

These virtualizations fall into two broad categories, SaaS and IaaS (Infrastructure as a Service).  The SaaS model is being extended to include Platform as a Service, e.g. BT Ribbit's (communications focused) and Sun's Zembly (social network focused) which provide development environments.  The distinction between SaaS and PaaS is more marketing, e.g. Salesforce.com has Appexchange for developers to create new applications, so could claim to be a PaaS; hence I'll use SaaS and PaaS interchangeable until someone points out the error of my ways.

We're seeing operators deploy SDPs as a traditional licensed product running on servers within their IT infrastructure.  But what does SDP virtualization mean to operators?  Are the cloud based SDPs a threat or a complement?

There are two main functions of the SDP: Service Factory (e.g. iPhone SDK) and Service Shop (e.g. iTunes).  The Service Shop can sell to a number of customers, e.g. consumers, enterprises or developers, though the developer shop is really more of a factory store.  The Service Factory provides the tools to ensure the application works on and can use capabilities being exposed by the device and/or network/factory.  Now within the SDP there are functions such as policy, identity, security, charging, cataloguing, sand-box, etc.  I'm not going to go into those details in this article.

Looking at how the cloud SDPs are monetizing themselves:
BT Ribbit's, charge for communication APIs, e.g. seats, calling, texting, transcription, etc.
Sun's Zembly, charge for use of their hosting infrastructure;
Mashery, charge for API use which they aggregate making it easier for developers to access;
Microsoft Azure, none made public, but given its focus on working with operators will likely look at revenue share or hosting charges; and
Salesforce.com, charge for seats and additional revenue from applications.

But back, like a broken record, to the fundamental issue - customer access.  Sun's Zembly is focused upon social networks, e.g. Facebook, where you can create cool apps, like 'stamping on friends' rather than 'poking' them, and get ad revenue from the impressions, of which Sun takes its share for hosting.  Salesforce.com has an extensive customer base and sales force, the apps help sell its core service and win additional revenue.  Mashery and Ribbit provide services that require enterprises to bring their own customers, e.g. Mashery's hosting of 'developer.nytimes.com' or Ribbit's focus on verticals such as Salesforce.com customers or the 'travel and hospitality' sector.

So the consumer/enterprise Service Shop is clearly something that an operator needs to have if it wants to sell services.  Going back to the Factory analogy, there are multiple stages in production, e.g. dye factories, cloth factories, and jeans factories.  A telco's role in service exposure (location, presence, calling control), policy, identity, security, and charging means it's the finishing factory that ensures the product is fit for purpose, wraps it up in a pretty bow and addresses it to a specific customer.  Which means an operator's Service Factory must be able to work with the many other cloud based factories, e.g. Microsoft Azure, partner operators with their development programs, Sun Zembly, etc.  However, such a factory runs the risk of being bypassed, by others further up the supply chain going direct to the consumer.  How operators as an industry structure their factories to minimize this threat as been discussed from an industry perspective in these articles.

• Why the Mobile Industry needs to keep an eye on Cable's Canoe Ventures
• Options on how the Telco industry can work with the App Development Industry
• The Long Slow March towards a Utility Business Model: Mobile World Congress Summary 2009

What all this means to an individual operator's SDP plans will be explored in another article coming soon :)

The previous weblog article described the learning offered by Canoe Ventures to the mobile industry in working successfully with other industries.  For the non-Cable (mobile) folks this article provides a little more depth on what the cable acronyms mean, how they fit together, and some analogies to the mobile industry to aid understanding.

Tru2way was formerly known as the OpenCable Application Platform (OCAP), that's the last time I'm going to mention OCAP.  Tru2way has a number of capabilities including allowing digital TVs to connect to cable without requiring a set-top box, just like those old unsuccessful cableCARDs. But of relevance in the comparison to the mobile industry is it provides a Java platform on the STB (Set Top Box) to run applications.  Similar to the J2ME MIDP 2.0 (Java 2 Platform, Micro Edition Mobile Information Device Profile) specification on mobile phones, but with much more processing power and a standardized screen.

EBIF (Enhanced TV Binary Interchange Format) is designed for older / cheaper STBs with limited processing power and memory, such as the Motorola DCT-2000 set top.  An ETV (Enhanced TV) user agent is downloaded to the STB.  The ETV app is inserted into the digital TV bit stream (MPEG-2 transport stream) of the channel being watched, when the user agent receives the ETV application it decodes and display the clickable object on the TV screen.  It enables polling, instant weather and traffic, and other simple point-and-click features - a bit like WAP-push (Wireless Application Protocol) just much more visually pleasing.  Verizon FiOS users can experience this using the widget button on their remote to see local traffic and weather.  EBIF is a subset of tru2way, so tru2way STBs will also run ETV applications.

Using Comcast as an example, only 15% of their STBs will be able to support tru2way by the end of 2009; while over 90% of STBs will be able to support EBIF.  Hence Canoe Ventures is initially focused upon EBIF.

In the Mobile World Congress Summary weblog entry I made reference to the Cable industries targeted advertising initiative, Canoe Ventures.

Canoe Ventures is backed by most of the US cablecos, including Comcast, Cox, Cablevision, Charter, Bright House, and Time Warner.  Its purpose is to make cable's advanced advertising applications easier to buy and use, and on making the results easier to measure.  N.B. this is a quite customer focused mission; not one mention of technology or esoteric audience qualifiers.  The head of Canoe is David Verklin, the former CEO of Aegis Media Americas.  N.B. they brought in an ad-man, so the organization understands what the customer (advertising industry) needs.

So Canoe can work among disparate MSOs and cable systems, its platform uses the Enhanced TV Binary Interchange Format (EBIF) and tru2way, and defines a common way to collect and report audience data. Focusing on CableLabs's EBIF enables coverage of most set-tops in the market today, including those used by Verizon FiOS.  Canoe is initially focused on a product called 'Creative Versioning,' which will use the cable industry's architecture and ad zones in an effort to make targeted ads more relevant to their viewers.   They've defined two templates, based on EBIF: One for voting and polling, and one for "request for information" applications.

Imagine these scenarios, you're watching the game show and as the presenter asks you to vote and some cute buttons appear at the bottom of the screen, and from the remote you place your vote.  Or an advert for a national pizza chain comes on, at the bottom of the screen appears a button with 'place your order with your local pizza place now' which again is activated with the remote.  All designed for easy viewing on the 10 ft viewing experience.  But most importantly on the back-end; the system makes it easy to target and measure within how advertisers do business today.

Canoe is focused squarely on serving the cable industry at this point.  But EBIF is relevant to both the satellite TV and telco TV service providers.  In fact, Verizon is a leader in EBIF, recently announcing its Verizon FiOS Widget Bazaar based on EBIF.

The critical characteristics in Canoe are:

• Industry acts in co-ordination, not multiple independent operator activities.
• They create a JV, so competitive issues between operators are removed
• It's led by someone from the customer's industry, so its focuses on what matters to the customer (advertisers).
• Its starts small, with incremental improvements that are easy to understand, and then quietly quantifies and tests them out before bringing them to market.

For both the advertising challenge and the third party developer challenge facing the mobile and broader telco industry, Canoe provides a clear case study how another industry is tackling the problem.  But as a note of caution, Comcast's cable ad business accounts for 5 percent (and falling) of the MSO's total revenue.  Don't expect these JVs to have a dramatic change on the existing business model.

On May 19-20th in London will be the Mobile Operator Smart Pipes and Applications Conference.  In attendance will be Steve Glagow, head of Orange Partner; Pieter Knook, head of Vodafone Internet Services, Sune Jakobsson, Telenor Open Services; James Parton, head of O2 Litmus; plus many more operators.  As well as leaders from Nokia Ovi, Google, Bebo, Fox, Opera Software, Microsoft, OpenAPI, OMTP, etc.  The conference will be a nexus of the people trying to move the telco industry from being viewed as "a pipe to the internet" to a "value-adding network of customers and application developers."

There will be keynotes from Sean Kane (Bebo) on the importance of business model innovation, Pieter Knook (Vodafone) on why Open Access matters and what it means - which I discuss in this weblog article, James Parton (O2 Litmus) on the importance of customers' desire and commercial viability in creating developer programme success; and David Stewart (OFCOM) on maintaining consumer confidence in Open Access - an important topic an aspect of which is discussed in this weblog article.

For developers, attendance at the 3rd party stream of the conference is free, which provides a great opportunity for developers to network with the decision makers in getting your applications into customers' hands.  This demonstrates how the tables have turned, application developers both big and small matter.  Slowly operators are learning to treat developers as customers rather than as expendable revenue sources.

There will be panel discussions on business models, sharing best practices (e.g. Telenor Content Provider Access), learning from mistakes, learning from other industries (e.g. from the wireless device industry), technologies, standards and emergent opportunities.

I'll be running a panel session on Day One (Tuesday 19th) "Understanding the requirements of Developers: Developer Interviews with the Most Vocal In the Business."  On the panel is an impressive line-up: Phil Mundy, Creative North; Paul Golding, Wireless Wanders; John Holloway, Zing Magic; and Tom Montgomery, Mobiun.  Our objective is to provide a frank review of where the industry is and what needs to happen from the people originating innovation, and who today have a choice in how to reach the customer: its no longer just the operator.

Before the conference, on the Monday 18th, I'll be running a pre-conference workshop, "Achieving the Economies of Scale Necessary to make the Smart Pipe Strategy Commercially and Operationally Viable," details show below.  Here I'll be sharing a view of what 2015 will look like if we continue along the current trajectory; where increasingly Google Latitude becomes the default aggregation of people's context and Google buys Skype from eBay, social networks interoperate which includes messaging and voice inter-working, customers increasingly subscribe to music/video experiences rather than 'buy' content, mobile VoIP finally arrives, devices manufacturers have to copy Apple's experience to stay in business, and customers' expectations on services continue to change so mobile voice/messaging is considered like fixed telephony is today.  What does this mean to the mobile industry?  What are we doing, and what must we be doing?  The workshop will be a mix of presentation, roundtable discussion, and interactive Q&A.  For more background on the workshop see these weblog articles:

• Options on how the Telco industry can work with the App Development Industry
  
• When everybody wants to be your Friend: What's an Application Developer to do?
  
• If you are an Operator who is not selling iPhones, why haven't you built your iPhone App already?

Pre-Conference Workshop, Monday May 18th, Achieving the Economies of Scale Necessary to make the Smart Pipe Strategy Commercially and Operationally Viable

Today we have hundreds of initiatives from operators opening their networks, working with developers, and finding new ways to unlock the value contained in their networks. A common lament from developers is, "I really should not have to sign up to 3 or 4 platforms per market." With Internet-based brands it is one relationship and it's global. Apple makes it easy for developers to reach its 30M+ customers, how can operators make it just as easy for the other 2B+ customers? There is work by the GSMA, One API, that is putting some of the technical standards together; but is this what developers require? What about the pragmatic commercial and process issues? This conference has brought together the leading figures in Smart Networks, an opportunity has been created to achieve a common understanding on the need for consensus and a chance to set out a pragmatic plan to achieve that consensus. This workshop provides a forum for this unique opportunity to be realized.

Objectives:

• Understand the impact of achieving consensus across operators in Smart Pipe Strategies
• Understand the degrees to which consensus can be achieved, with agreed prioritisation
• Discuss options to achieve industry consensus in working with developers
• Provide an open and frank forum for operators to discuss how to achieve consensus in their smart pipe plans.
• Set out an action plan to move from the agreements achieved to real consensus in the market place.

Timetable:

• 8.30 Registration and Refreshments
• 9.00 Introductions
• 9.15 The Call For Action: Understanding Why Economies of Scale in Smart Pipe Strategies Matter
• A view of the future - what happens if we remain an archipelago, how will 'global warming from the internet' impact the industry?
• Is the GSMA One API initiative enough?
• Is this just a mobile problem, does cable, broadband, satellite matter?
• What do developers require?
• 11.00 Networking Break and Refreshments
• 11.30 Facilitated Round Table Discussion: Where Can Consensus Be Achieved in
• Smart Pipe Strategies?
• Objective: to agree a prioritised list of areas where consensus/co-ordination can be achieved.
• 13.00 Lunch
• 14.00 Interactive Q&A session with Developers: Understand What They Need, and Where Coordination Matters to Them
• 15.00 Networking Break and Refreshments
• 15.30 Facilitated Round Table Discussion: Agreement on What Should Be Achieved, What Steps Can Be Undertaken To Achieve Co-ordination in Internet-time, Not Telco Standards-Bodies Time
• 15.00 End Workshop

Examining the factors necessary for app store success:

• Direct customer access: a critical factor in Apple's success, and why operator third party developer initiatives continue to languish.  However, this is changing.  O2 Litmus was launched with direct customer access at its heart.  Similarly Vodafone's Betavine Widget Zone is also allowing direct customer access.  Critically the store, whether it be for downloadable apps or network based value added services, must be pre-loaded and on the home screen of the device.
• Avoid device diversity: the bane of many operator initiatives, and the reason behind the failure of the ODP (On Device Portal - an early attempt at an app store).  Apple has it easy with one device platform.  RIM and Nokia are constraining the problem.  For operators there's a need to balance device coverage with the complexity it generates.
• Scale: 10s of millions of customers directly addressable, this is the critical metric for developers.  And a problem for most operators, even across Orange group they could perhaps match the size of Apple's iPhone and iPod Touch market; yet there is significant device diversity in that addressable group.
• Coverage: As seen in Norway, presenting a common front across operators to third party services promotes innovation and commercial success.  Apple works great for apps that use the platform (e.g. games) or the internet, but glaringly does not use the operator's network other than as a pipe.  This is a key battle ground for operators as the market decides are they pipes to the internet or networks.  Given most people's friends are within the same country, use a variety of phones, and are on multiple networks - can operators work together to open-up the richness of Apple App Store to a broader segment of their customers?
• Web-centric operational model:  Most of the apps on the iPhone are simply existing web-apps/pages; for example iphone.facebook.com and the Facebook app are the same experience.  Operators have had application stores for years, yet none achieved the engagement of Apple.  An important factor is being able to deliver applications / value added services in a web-centric operational model not as a traditional telco.

Given these factors, let's now examine the groups that could offer the applications:

• Device Manufacturers: Apple, RIM, Nokia, etc.  They avoid/limit the diversity problem, provide scale and direct customer access; and apart from Apple with its exclusive operator deals are available across most operators within a country.
• OS Suppliers: Android, Microsoft, etc.  Similarly provide direct customer access, limit the diversity problem, in time Android will provide scale, and Microsoft will likely be limited to high-end / business phones.
• Network Equipment Providers: As NEPs are selling the service platforms that expose capabilities and ingest applications to tens if not hundreds of operators around the world, they definitely have scale.  However, NEP's delivery processes are not designed to cope with the web-centric application delivery model, their margins are too high, the process too slow and ill-equipped to cope with an app that is popular this holiday and passé next month.  On coverage, because operators tend to choose different suppliers to their competitors, they will generally not provide good in-country coverage.
• Individual Operators: The group that's been at this the longest in offering app stores; remember those walled gardens?  Who now have renewed energy as Apple has worked out the recipe.  However, today's individual initiatives suffer from a lack of scale and coverage, and struggle with adopting a web-centric operational model.
• Aggregators: They started with SMS, enabling applications to have a single interface across multiple operators, and expanded to MMS and location; so why not provide an aggregation point for applications?  As operators realize they can also perform such aggregation roles, it's a business model potentially under threat.  In addition, they are dependent on the operator opening up access to customers, and are not adept at managing the device diversity problem.
• Industry joint venture: This could be considered a wishful state, but other industries have achieved such JVs.  Operators create a single entity across the industry to present a common ingestion method for apps, its operated as a web business not a telco business (but backends into telcos).  Enabling rapid ingestion, global coverage, mitigating device diversity as aggregating networks achieves a critical scale when the addressable base is perhaps over one billion.

Below is a simple comparison of the groups against the success factors.  The market has shown device manufacturers can be an appropriate channel.  But what is surprising is how NEPs and individual operators perform so poorly against the factors necessary for app store success.  The time for coordinated industry action in creating a JV is now.

Following up on my presentation at eComm last week, I was asked to provide a little more background on my comment about the three degrees upon which customers pay.  They pay on three dimensions: cash, time and privacy; creating a 'Customer Pay-Space.'  It's important to remember with the non-cash dimensions (time and privacy) value is originating from the user and that value has ownership, as Facebook learned last month - disregard customer privacy at your peril.

Paying by cash is a tradition in the telco industry, e.g. for internet access or voice minutes. 

Paying by time (i.e. advert sponsored) is a tradition in web-based services, e.g. search or portals.  I use the term 'time' to identify the value customers are providing, as attention is perhaps too strong a term.  Examples of the time I refer to are: the distraction of advert banners or sponsored links, the time taken to download banner adverts (experience the premium weather.com service to realize the time it wastes), the time taken after clicking 'no' on the sponsor's redirect, and those euphemistic 'breaks' in TV programming.  Now cash does flow from the advertiser to the service provider; but my focus here is the customer and their pay-space; not the service provider.

Today we see growth in the use of privacy (personal information) for targeted advertising and aggregated services such as road traffic monitoring.  For example, TomTom partnered with Swisscom to introduce its TomTom High Definition Traffic system in Switzerland - which caused much consternation in Switzerland even though the data was anonymous.  The privacy of personal information matters intensely to people, hence why I draw it out as a separate dimension in the pay-space.

Examining the dimension of the pay-space in a little more detail:  

• Cash: When people pay for a service, even if it's a token amount, their expectations are much higher than when the service is perceived to be free because of payment through time and/or privacy   For example, fixed mobile convergence services continue to struggle because customers expect the service to be as good as their traditional fixed line service.
• Time:  We've see the emergence of ad-sponsored services such as Blyk, and the recently announced tie-up between ZingMagic (checkout link at bottom of main page) and Liquid Air Lab for innovative ad-sponsored mobile gaming.
• Privacy: Covers the use of personal information such as context (e.g. location and status), through geo-demographic information, to user-generated content.

A critical issue in the time and privacy axes is the large variation in the value customers' assign to these axes.  For example, at my stage in life time is precious, so advertising annoys me (intensely as a matter of fact, that's one of the reasons I do not use ads on my weblog - do unto others...).  On privacy while I'm happy to share much information with friends and colleagues, however, I draw the line at my travel plans (I don't do Tripit).  I also hear people talk about how 'teens' have few privacy concerns, as they are 'net natives.'  Here are the results from a Pew Internet & American Life Project, "Teens, Privacy & Online Social Networks:"  55% of online teens have profiles online; 45% of online teens do not have profiles online.   Among the teens who have profiles, 66% of them say that their profile is not visible to all internet users.  3% of online teens and 5% of profile-owning teens disclose their full names, photos of themselves and the town where they live in publicly-viewable profiles.  So clearly most teens do care about privacy, the media tends to pick up on a few sensational outliers and the classic observation error ensues.  We're all different, and will continue to be so.

As we explore the third dimension of the pay-space; privacy.  And with the renewed focus on the second dimension of time, as advertising becomes increasingly intrusive to counteract the low click-through rates and conversion-to-sales rates.  It's going to be critical to let the customer choose where they want to be in the pay-space.  It may be that the space collapses into 2 states; cash or targeted advertising.  But I hope we can find a way to give customers choice over where they sit in the pay-space that enables the current rich service experience to continue unabated and expand into the mobile and cable industries.

Last year I heard many people talking very positively about a new conference, eComm (Emerging Communications Conference), last year attracted 300 people and 80 speakers from 15 countries; this year the number increased to 350, which given the current environment is a remarkable achievement.  eComm brings together people leading the change in telecoms from both inside the industry and out.  This conference provides a unique forum for anyone working on open innovation / third party applications, community and communications, open networks / handsets, communication enabled business processes, convergence of media / entertainment / telecom, service innovation, and cloud computing/telephony.

What stood out at the conference was the variety of commercial innovations based around the integration of the web and communications.  And importantly the real business being generate by services such as with Fonolo, Jaduka and VoiceSage all of which will benefit greatly as operators open their networks.

Briefly summarizing the sessions I attended:

• Malcolm Madison, OPLAN Foundation: Vision of muni-broadband as a driver for net neutrality, interesting take on using shareholder value to drive operator co-operation in opening their ducts.
• Doc Searls, Harvard University, Reframing the Net: Analogies of the internet to shipping, real estate, publishing and mass media.  For me he mixed web and the internet concepts.  Conclusion was the internet is a place/real estate - which is just the web.
• Mark Roettgering, T-Mobile USA, Communications Value System: described the thinking behind TMO's Open Development plans.
• Russ McGuire, Sprint, Cutting the cord on Big Bell Dogma: Reviewed Sprint's developer initiatives, which remain ahead of the pack.  He got some rough questioning.
• Conveneer announced their peer-to-peer client for mobile phones, opens up the phone to web-based applications.  Interesting approach, their challenge will be getting it onto phones.
• Phweet demoed their service, anonymous free calling between twitter friends.  Essentially using twitter messages as a form of availability management.
• Alan Duric gave a great review of how he made Telio (VoIP provider) successful; they recently launched a MobileMe type service that reduced churn by an order of magnitude for subscribing customers.  Telio are now focused upon adding video.
• Grid - interesting API aggregation proposition, unclear how it differentiates from the other API aggregation plays.
• TokTok (Ditech Networks) similar to Dial2do - voice control for search, reminders etc.
  
• Christopher Allen gave a great tutorial on iPhone app development: its just like the web!
• Florent Stroppa, Voxmobili, gave a great case study on Android development and the degree of customization possible; which has not, as yet, been realized on the G1 or G2.
• Skype announced a free codec as they try to embed Skype everywhere.
• Symbian, LiMO and Android had an argument on who is the best, which was of little relevance, they should focus on developer needs and let the market decide.
• Alec Saunders of Iotum gave a great review on the realization of his Voice 2.0 manifesto. He then reviewed his experiences on web based and iPhone based app development for his Callifower service; clearly showed iPhone dev is as easy as the web.
• Shai Berger gave a great status update on the progress of Fonolo.  Service now works across 500 companies.  Some interesting statistics on enterprises' IVRs.  He's now working directly with a number of enterprises because Fonolo improves CSR (Customer Service Rep) efficiency and customer's experience.  This is a key development, corporations like Fonolo because it makes the customer experience better - this was a concern with many of the operators I introduced to Fonolo.  Once Fonolo announce the corporate tie-ups it will provide the direct objective evidence that means operators should adopt Fonolo.
• Mark Spencer, Digium: announced a 'Skype channel' for the Asterisk server, another example of the greater integration of Skype in the communications landscape, it will be interesting to see if this will significantly increase the value of the Skype network.
  
• Chris Mairs, Metaswitch, Service Innovation Ecosystems: Key requirements are an opportunity to innovate, low barrier to creation, and most importantly a clear route to market.  However, why are there so few good telephony apps on iPhone/Facebook?  Issues include maturity, regulatory, billing, error handling, and security.  So recommended focus on devices such as SIP business phones and the recently launched Verizon home hub.
• Graham Brierton, VoiceSage: Cool communication enabled business process provider operating on a managed pay per use model.  Gave a number of simple examples of adding SMS and voice messaging to business processes, e.g. "where's my stuff" app to reduce in-bound IVR calls, then added payment reminder, which increased orders!
• Smule: cool social music app - wacky but engaging.  Reminds me of the Stylophone.
• Gerd Leonhard, MediaFuturist.com gave his view that value is moving to experience from content.
• Trevor Baca, Jaduka, How to do Things with Voice: Described their buyer verification services, critical support conferencing and weather alert services.  Identified the critical characteristics for service success: urgency, simplicity, context, scale, integration and the enterprise-focused.
• RebelVox, new user experience for voice: Like Bubble Motion, with cute fast-play function to speed through listening to a voice message (based on a military technology), and ability to break into a live call.
• Mark Rolston, Frog Design: Phone is a window, and described how many brands are creating their experience in that window.  Key message was the integration of real and on-line lives, giving some cute overlays of virtual worlds on the real.
• Tom Howe, Jaduka: CEBP (Communication Enabled Business Processes) makes voice a spice - an ingredient in many applications.  CEBP engineers are not voice engineers.  Small number of methods: notifications, diary, click to call and instant conference that are frictionless for an enterprise application developer (not the voice engineers).  This is a critical point beyond just CEBP to the whole of operator service exposure. 
  

On my presentation 'The Business Case for Opening the Network' I gave a perspective on the business case for opening the network, slides shown below.  The focus is an operational business case, identifiable services and revenue, rather than a 'strategic business' case such as femtocell.  I gave some background on the changes driving operators to open their network including customer expectations, explosion of 'open' service platforms at the edge, e.g. iPhone, Sony PS3, Nintendo Wii etc; and that most developers consider operator open development initiatives just noise compared to Apple and in time Android because of direct customer access.

I then discussed an example business model, the key messages are it's focused upon generally enterprise applications: communication enabled business processes e.g. Jaduka, VoiceSage, etc.; voice mash-ups e.g. Dial2do; presence and location e.g. M2M, asset tracking, enterprise messaging; content 2.0 (breaking away from messaging) and set top box services.  From which generates within 2 years of service launch around $40-65M for an operator with 10 million subscribers, assuming a 30:70 rev split between the operator/developer and the user choosing the purchase model of usage, subscription or advertising sponsored.  The critical point is it is not a revolutionary business case, for a business generating $10-20B per year, its really down in the noise.  However, as customers' expectations change given the prevalence of OTT (Over The Top) services that are engaged in a dialogue with customers to sustain engagement, operators have no choice but to adapt and leverage their assets to remain relevant as service providers.