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.

In the telecom industry Managed Network Services (MNS, aka Outsourced Network Operations) is likely to be a $10B business in '08, with a CAGR (Compound Annual Growth Rate) of between 13-17%.  Europe accounts for 45% of the market.  The leading supplier in the market, Ericsson, rips-out other supplier's equipment and installs its own in the networks it manages (e.g. H3G Sweden).  So for any supplier in the telecoms industry, if you can not deliver your product as a managed service, you may not be delivering it for much longer.  The MNS market breaks down roughly as follows: Ericsson - 32%, ALU - 30%, NSN - 15%, Motorola - 8%, the rest (Nortel, Huawei, ZTE) - 15%.

An Operator's drivers for MNS are:

• Direct operational cost savings. Cost savings of up to 20% are possible thanks to the scale of the managed service provider (MSP) in aggregating resources over multiple customers.  Simply, introducing an MSP provides an opportunity to break down the fiefdoms that lead to underused resources within the operator.  The 'Gridlock Economy' by Michael Heller is worth a read on the topic of underused resources.
• Better use of capital and resources. More predictable and balanced operational and capital expenditure, and the substitution of fixed by variable costs to improve cash flow.
  
• Faster time to market. The ability to focus resources on strategic rather than operational issues; and access to resources and technical competencies in the MSP can improve the operator's ability to deploy new technologies and bring new services to market.
• Business transformation. By focusing management on the core activities of services innovation, marketing and customer service; outsourcing network operations can enable operators to be more market focused and customer oriented.

MNS breaks down into network outsourcing and service outsourcing.  Network outsourcing is buy far the larger business, roughly $8B, compared to service hosting at roughly $2B.  Network outsourcing tasks include network planning, vendor management, network operations, network maintenance, network optimization, network build and deployment, site acquisition and management.  Service hosting tasks include product/service definition, service delivery platform development, service delivery platform operation, content acquisition and management, application and content development, application operation.

Examples of Outsourced Network Operations include:

• 3 UK: MSP Ericsson, $3B over 7 year contract, >1000 people, network deployment and operations.  Done to enable H3G to achieve profitability and focus on breaking the 5 million customer barrier.
• Bharti Airtel: Ericsson, Nokia Siemens Networks (NSN), $2.5B, >600 people, managed capacity/services for deployment and operations.  Manage rapid grow on a $ per Erlang model.  Removes expense and delays of RFP/Q process
• Brazil Telecom: NSN, $100m over 3 years, operations and maintenance of fixed and mobile core.  Done to enable supplier to manage NGN migration.

In this previous weblog article I reviewed a typical mobile operator's financials, and how that impacts its priorities.  OPEX (Operational Expenditure) dominates its costs, at roughly 80%, and people costs costs are roughly one third of the technical operations cost - MNS addresses this cost.  People issues dominate the MSP process and economics, re-assignment to the MSP enables many 'fiefdoms' to be removed releasing value; however, the conversion process is expensive, with typically a 20% loss in productivity during the process.  In addition, the relationship between the operator and the MSP is complex and at times fraught, it's essential to have a simple set of measurable targets between the Operator and MSP.

For any supplier in the telecom industry it will soon be a matter of survival to determine how they deliver their product as a managed service or find a way to fit into one of the MSPs' solutions. 

Over the past couple of years I've been helping operators understand ways they can harness open innovation.  Using a quote from Henry Chesbrough, UC Berkeley, from his book 'Open Innovation' to explain:

"Open innovation means that valuable ideas can come from inside or outside the company and can go to market from inside or outside the company as well.  This approach places external ideas and external paths to market on the same level of importance as that reserved for internal ideas and paths to market during the Closed Innovation era."

There are a number of examples of operators putting in place the programs to enable them to harness Open Innovation such as:

• O2Litmus - covered in this article
• Verizon's Open Developers Initiative - covered in this article
• Telecom Italia NexTIM - covered in this article
• Telenor Content Provider Access (CPA) - covered in this article
• Orange Partner - covered in this article
• And many more such as SingTel Partners Program and Sprint's Business Mobility Framework.

In this work 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.

Just picking on a few of the critical issues:

• Capabilities from the network (e.g. location, presence, billing, address book, messaging, single sign-on, age verification, short-code provision, call control etc.) must be exposed by REST (REpresentational State Transfer) and/or SOAP/XML.  Simple and stateless, like the popular APIs (Application Program Interface) on the internet.  Not ParlayX, which is too complex, does not have credibility with application developers and hence will stifle open innovation.
• Don't nickel and dime application developers, charging for each location dip or presence check will stifle open innovation.  Rather the operator should create the conditions to share revenue, open innovation enables an operator to outsource risk and some operational costs.
• To date most operator ADCs (Application Development Communities) have been ineffectual compared to a direct sell into the operator, so there's a significant credibility gap.  If an operator launches an ADC, it must used.  The ADC must be owned by at least the CMO, ideally the CEO, and processes put in place so it becomes part of 'business as usual.'

Web2.0 open innovation models such as Apple's iPhone App Store, Programmable web, Facebook, Google's APIs, and SaleForce.com's AppExchange provide a template.  For example, Facebook in August this year achieved over 100 million users, with over 24,000 applications and 140 new applications added per day. 

Operators 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, high-street store presence, and a strong position in the industry's ecosystem.  However, if an operator is not as effectice as the Web 2.0 models menioned above, developers will ignore then.  Which means service innovation is lost to over-the-top services, further pushing operators down the path to become just an ISP (Internet Service Provider). 

The GSMA reported in August there are now 4 million new HSPA (High Speed Packet Access) subscribers a month.  The total number of HSPA users has passed the 50 million mark globally from 11 million a year ago.  Mobile Broadband is definitely taking off, as discussed in this previous weblog article. 

When I was in the UK in July, I was chatting with a UK Operator's sales person as I installed a pay-as-you-go mobile broadband card in my laptop in their store.  I was asking about the types of customers using the service, how long they'd been sold-out of the ZTE modems, and what returns they see.  An interesting comment was the only returns are when the 3G service does not work at the customer's home, it shows there's a strong fixed to mobile substitution taking place for broadband.

But will mobile broadband provide the same experience as DSL broadband?  Taking a typical 3G roll-out architecture of 3 E1s from a cellsite, which given the recent upgrades in HSDPA to 14.4 Mbit/s means the capacity problem isn't over the air, its on the backhaul, as I've discussed in this previous weblog article.  Given the ATM cell tax, and other framing overheads, the maximum capacity available for the customers' broadband data is about 4.6 Mbit/s.  

Now looking at the figure from a simple MB (megabyte) per month perspective, that gives 1.5 TB (terabytes) available over the month.  Given an urban macro-cell covers between 1200 to 2000 connected customers, assuming 1500 customers means an average 1GB limit.  Which at first glance would appear to provide adequate capacity even if 100% of the customer base were using mobile broadband. 

However, the term I used in the title was customer experience.  The key experience is the many customers watching YouTube or BBC iplayer.  The video you see in the BBC iplayer today is encoded using the On2 VP6 codec at a bitrate of 500Kbps, though they've recently announced encoding using H.264 at 800 kbit/s.  YouTube is a little more sedate 300 kbit/s.

So this means that one cell-site can only support 9 simultaneous On2 VP6 BBC iplayer streams, or 5 simultaneous H.264 streams, or 15 streams of the more sedate YouTube streams.  And that's ignoring all the other browsing traffic (which increasingly includes annoying streaming video adverts rather than easy to ignore banner adverts) and P2P (peer to peer) traffic.  Remember when Tiscali launched in the UK and struggled through inadequate backhaul, even today Tiscali still struggles with customer service.

A critical issue is what are the chances of within a cell-site 10 customers (0.66% penetration) watching a streaming video at the same time during that critical 6PM-11PM period?  Unfortunately the statistics coming from the DSL ISPs (Internet Service Providers) appear to show that chance as significant today.
  
Some ISPs use GE (Gigabit Ethernet) from their DSLAMs into their metro/core networks today.  Compare this to the 3E1s in the example above, which is 0.45% of the capacity of a GE.  To maintain the same experience mobile operators are going to require lots of capacity deep in their network fast, and become more sophisticated than the DSL ISPs in managing the traffic over their 'longer access networks.'  Especially in managing the highly visible streaming video traffic which customers will likely use as a yard-stick to compare ISPs performance in the near future.

This article follows on from a previous article that reviewed LTE (Long Term Evolution, also know as 4G).  Several people asked why I had not included a fuller discussion on the 4G core in that article.  It is because LTE is an access technology; my focus of the article was on the access where there is a lot of hype at the moment.  However, to support LTE a new core is required, as specified by the SAE (System Architecture Evolution). 

In the standards community the names have now become E-UTRAN (Enhanced UMTS Terrestrial Radio Access Network) for LTE, and EPS (Evolved Packet System) for SAE.  Think of the SAE as a pure IP core without RNCs (Radio Network Controller) or SGSNs (Serving GPRS Support Node).  So in principle an operator would need to run two core networks to support the existing 3G network and the new 4G network.  Given the slight benefits of LTE compared to HSPA+, as discussed in a previous article, this would appear to be a significant barrier for LTE adoption.

However, the NEPs (Network Equipment Providers) are providing a range of solutions that enable the existing 3G core to evolve towards the SAE vision such as:

• One Tunnel, moving the SGSN into the control plane;
• Direct Tunnel, moving the SGSN and RNC into the control plane; and
  
• Internet HSPA: control-plane SGSN and RNC is integrated into the NodeB.

The 3GPP core market is roughly $1B in size, and the top three suppliers in this market are: Ericsson (34%), NSN (33%), Huawei (15%).  Who unsurprisingly are the three players behind the three different solutions that evolve the core towards the SAE vision.  Given we're likely to see the number of mobile broadband customers worldwide explode to over 1B over the next 4 years, mobile core costs could potential to explode as well.  Hence the immediate focus on moving the RNC and SGSN out of the data path and into the control plane, to better manage broadband growth.

Specifically the motivations for this early transition are:

• Lower cost/bit - depending on the architecture it has the potential to reduce equipment costs by 80%;
• Preparation for 4G - in other words avoid a dual core situation which would delay operators buying LTE BSRs (Base Station Routers).  Note the base stations are where NEPs make their money, so they're keen to remove any barriers; and
• Ease of integration of non-3GPP access (i.e. network convergence, avoiding multiple cores and service platforms).

Hopefully this sets out why we'll likely see the '4G core' happen before the '4G access.'

LTE (Long Term Evolution, also known as 4G) is entering the hype-cycle, and being rapidly pushed up to the 'peak of inflated expectations', just like IMS (IP Multimedia Subsystem), PTT (Push To Talk), FMC (Fixed Mobile Convergence), and far too many other technologies to name here.  So to cut through the hype and hopefully present a pragmatic view on the technology I thought it timely to make a few points, as I find I'm often repeating myself on this topic (I hope its not old age.)

A few pointers on what the technology can do:

• LTE will not greatly improve spectral efficiency compared with HSPA+ (High Speed Packet Access).  Within a 5MHz slot you could achieve perhaps 80 Mbit/s with HSPA+ (using MIMO (Multiple In Multiple Out) technology), compared to 100 Mbit/s with LTE. A 20% increase is unlikely to have customers demanding LTE.  The only tangible difference will be a slightly lower round-trip delay for LTE perhaps down to 10-20ms compared to perhaps 30-35ms with HSPA+, though with a flat IP core (moving RNC (Radio Network Controller) and SGSN (Serving GPRS Support Node) out of the data path) that could drop to about 20ms for HSPA+.
• LTE enables a higher peak data rates by using more bandwidth, scaling from 1.25 MHz (useful for the CDMA operators, hence Verizon's decision to adopt LTE) to 20 MHz and beyond.  LTE uses OFDM (Orthogonal Frequency Division Multiplexing), the same technology used in DSL (Digital Subscriber Loop), that is lots of little carriers, rather that one big one carrier as in HSPA, which gives LTE its flexibility.
• LTE can use FDD (Frequency Division Duplex) and unpaired TDD (Time Division Duplex) bands bought during the heady days of 3G spectrum auctions, where HSPA and GSM cannot operate in those bands
• LTE is a global standard, with a global frequency plan, hence can leverage global volumes, another reason behind Verizon's decision to adopt LTE, rather than pay an average $15 premium for its (CDMA) devices.  This is also the fundamental reason why the total cost of ownership of WiMAX networks will remain more expensive than LTE.
  
• HSPA has some funny technologies hidden away in it such as macro cell diversity, i.e. a terminal may use 2 or 3 cells at the same time. LTE does away with these complexities so does not need RNC nodes. LTE also has built in operational and maintenance capabilities, such as self-tuning to help control operational costs.
• By 2010 most GSM base stations in Western Europe will be over 20 years old. Most were put in during the "cheap-energy days."  Today, finally, green credentials matter to companies so LTE will enable the power consumption of mobile operators RANs (Radio Access Network) in the long run to be reduced by up to 50%.

A few pointers on the market's development:

• DoCoMo and Verizon are in unique positions that force a move to LTE faster than the rest of the market, so by 2010 they will likely be deploying LTE, and will be the first movers.
• Most in the GSM community will be working through HSPA+, which will significantly delay their need to move to LTE.
• The Flat IP core I referred to previously is a way of leapfrogging to the SAE (System Architecture Evolution), which can be thought of as the 4G Core, while LTE is the 4G RAN.  With the core upgraded, and a relatively fast RAN in HSPA+, most operators are only going to deploy LTE based upon operation needs.  Hence you'll likely see LTE being deployed more broadly in the market around 2013.
• And of course the good old chestnut of handset availability.  This is actually likely to be less of an issue compared to say 3G as most of the customers using LTE will be using a laptop with a USB fob.  Just remember to bring a spare laptop battery when you use LTE!
  

Reviewing the financial reports of many mobile operators shows a similar story in how their costs breakdown.  There's roughly an 80:20 split between operational (80%) and capital (20%) expenditure.  Capital expenditures cover the amortized investment in the licenses and building the network infrastructure.  The bulk of a mobile operator's costs are operational expenditures, hence the importance of EBITDA (Earnings before Interest, Tax, Depreciation and Amortization) as a metric of an operator's financial performance; generally in the 25-35% range.

The operational expenditures breakdown into roughly:

• 40% Marketing and sales, building the brand, paying for all those TV adverts, sponsorship, subsidies on phones, etc;
• 25% Interconnect, cost of calls terminated on other operators, generally a regulated cost structure;
• 20% Technical operations; and
  
• 15% Other costs covering customer care, offices, etc.

Diving into Technical Operations in a little more detail, it roughly breaks down three ways between:

• 7% Transport, most mobile operators have to rent E1s or T1s from incumbent carriers.  As mobile broadband grows, operators need to find ways to have this cost grow in line with revenue not data volume;
• 7% People, hot topic and the focus of outsourced network operations a roughly $10B business, which is about breaking down organizational silos to enable better teamwork, removal of redundancy and leveraging economies of scale; and
• 6% Other (maintenance and site leasing), here we see suppliers being squeezed on maintenance contracts and options such as site sharing.

Other hot topics such as LTE (Long Term Evolution) and Flat IP are really about managing the longer term capital investment as data traffic grows.  But the part of the financial analysis I've not mentioned yet is the revenues.  A tougher nut to crack than managing costs, but nonetheless the biggest number in the financial reports, and one that is most open to competition.  Hence, just using the raw numbers in an operator's financials to weight the priorities; revenue maintenance / growth should be as important as all the cost saving measures combined.

Sigma Systems' first User Conference (June 4th-6th, Barton Creek Resort), explored the next generation of consumer and business oriented services, including insight and discussion around emerging trends and technology developments in the following areas:  targeted advertising, evolution of commercial VoIP & data services, global deployments in mobile broadband services, evolution to on-demand services, converged applications over video networks, data and multimedia services and IT back-office transformation.  In the OSS Consolidation article I included Sigma Systems in the Service Fulfillment Landscape.

At the user conference I ran the panel session "Where's the Mobile Industry Going?" with John Namovic, Managing Partner at Deloitte; and Wedge Greene, Industry Guru.  The session's objective was to help the audience understand how mobile is going broadband from those working on the 'bleeding edge' of the mobile industry. Providing a comprehensive global overview of the mobile operator's evolution to broadband; including network evolution, new services and applications, emerging business models (MNO vs. MVNO), and review of important lessons learned.  In particular we'll be reviewing mobile broadband services, evolution to LTE (Long Term Evolution), xVNO economics (Virtual Network Operator (where x = mobile, fixed, converged and possibly even cable)), and FMC (Fixed Mobile Convergence) successes and failures.

Summary of panel discussion:

LTE Summary
1) What is Long Term Evolution (LTE)?  

• Also know as 4G, LTE is an OFDM (Orthogonal Frequency Division Multiplexing) radio system that can flexibly use radio spectrum, rather than the restrictive paired 5 MHz spectrum of old mobile radio systems.  In a 10MHz slot you could see 100-150 Mbit/s of capacity, though it's not much more spectrally efficient than HSPA+ (High Speed Packet Access).  See my Mobile World Congress 2008 article for a discussion on HSPA+.  The big advantage LTE has over WiMAX is global volume; LTE will be adopted worldwide, with DoCoMo and Verizon Wireless leading the way.  LTE also includes some useful operational features, but I'll not go into that here.

2) What are the operator's drivers to adopt LTE?  

• Utilize new frequency bands being auctioned, for 3GPP and 3GPP2 at 1.7 GHz, 2.1 GHz and 2.6 GHz. 
  
• Finally use unpaired (TDD) spectrum resources.
• CDMA operators with no future upgrade path can use LTE in existing spectrum to provide increased capacity and new services. 
  
• GSM operators without 3G licenses can use LTE to upgrade the network.
• Fixed network replacement in rural areas could use LTE. 
  
• Mobile operators HSPA coverage can use LTE selectively, building as the network needs to grow.

3) When is LTE likely to happen?

• Verizon and DoCoMo will likely have a commercial launch in 2010. 
  
• For the rest of the world, HSPA+ will be a significant impediment to LTE adoption, as well as the change-out in the core network required.  So LTE will likely be delayed until 2011-2013.

4) What should a CableCo do?

• Verizon realizes that global volumes matter, and is moving away from its "CDMA island' to LTE. 
  
• WiMAX makes sense in developing nations that lack a copper infrastructure to provide voice and mid-band internet access.  However, a lack of spectrum co-ordination leads to the creation of lots of 'WiMAX islands.' 
  
• For a MSO with spectrum, WiMAX is the only game in town at the moment, though wait 3 years and there will be a global standard that leverages global volumes which is critical for CPE cost management. 
  
• Recommendation for MSOs is to focus on what your customers want: the battle is video as Verizon and AT&T enter the market.  The mobile part of a quad play will become important in the US market (all those shared minutes plans), the battle isn't there yet and an MVNO could be a stop-gap.  Perhaps it makes sense to wait for LTE, than bet on the "son-of-LMDS/MMDS."

FMC Summary (not covered in session)
1) What is FMC?

• The most successful FMC service by far is the mobile phone, if by FMC you mean Fixed Mobile Conversion.  When consumers have unlimited nights and weekend minutes, FMC offers little benefit.  So let's take an enterprise centric perspective, there are 4 approaches to FMC:

1. The handset centric dual-mode approach where the enterprise replaces the mobile network with short-range radio (WiFi, DECT or Bluetooth) in the office.   They retain the mobile network for off-premises mobility.
2. The enterprise uses signaling and/or VPN (Virtual Private Network) functionality to give it more control over call routing and costs.
3. The mobile operators' favorite, is the substitution approach.
4. An evolution from (c) is the inclusion of femtocells in the office network, generally to offload some of the mobile traffic from its own backhaul network.

2) What are an operator's drivers to adopt FMC?

• For a fixed line operator as an attempt to stop fixed line revenue erosion, e.g. BT Fusion.
• For US mobile operators to manage indoor coverage, e.g. Sprint's AIRAVE femtocell trial.
• For a mobile operator it's to offload traffic from its backhaul network (femtocell).

3) What is happening with FMC today?

• For consumer: BT Fusion has failed, Sprint's AIRAVE (Femtocell) is still in trial after 9 months, though Orange Unik is achieved success with 500k+ customers.
• For enterprise: Most enterprises view the 'integration' and 'dual mode' approaches as unproven technologies.  When IT decision makers think convergence, it isn't about FMC; their convergence perspective is around voice and data (IP telephony).

4) What should a CableCo do?

• FMC has struggled as the benefits do not accrue to the customer; the benefits mainly accrue the operator.  So any FMC voice or internet access service must be transparent to the customer before they'll take off.  However, there are a range of FMC services that are gaining traction, for example Slingbox: watching my cable service on my PC or mobile when I'm away from home.  Accessing my home DVR from my mobile or laptop to record a program a colleague just mentioned while I'm in the office.  Home security service (e.g. home WiFi camera) enabling secure remote access from a PC or my mobile.  The list goes on...  What these services have in common is allowing me to do something new that I could not imagine doing 10 years ago and has value to me.  10 years ago I could call from home, and FMC has not changed that, only made it a little more complex and frustrating when I thought I was on the home hub, but instead was on the mobile network, so my international call cost $5 rather than 50c so I've got to waste an hour with a CSR (Customer Service Representative)...
• Recommendation for MSOs: Only use FMC for the basic services when it's completely transparent to the customer (and that includes handset range).  Focus upon new services that leverage cable's unique position in people's lives, cable = video.

As requested by reader feedback, I'm providing some foresight on up-coming conferences I'm attending, rather than just reviewing conferences I've attended.  For June I'll be running panel sessions at Sigma Systems's first user conference and at the Voice Peering Forum.

Sigma Systems's first user conference (June 4th-6th, Barton Creek Resort, registration is free), will explore the next generation of consumer and business oriented services, including insight and discussion around emerging trends and technology developments in the following areas:  targeted advertising, evolution of commercial VoIP & data services, global deployments in mobile broadband services, evolution to on-demand services, converged applications over video networks, data and multimedia services and IT back-office transformation.  In the OSS Consolidation article article I included Sigma Systems in the Service Fulfillment Landscape.

At the user conference I'm running the panel session "Where's the Mobile Industry Going?" with John Namovic, Managing Partner at Deloitte; and Wedge Greene, Industry Guru.  The session's objective is to help the audience understand how mobile is going broadband from those working on the 'bleeding edge' of the mobile industry. Providing a comprehensive global overview of the mobile operator's evolution to broadband; including network evolution, new services and applications, emerging business models (MNO vs. MVNO), and review of important lessons learned.  In particular we'll be reviewing mobile broadband services, evolution to LTE (Long Term Evolution), xVNO economics (Virtual Network Operator (where x = mobile, fixed, converged and possibly even cable)), and FMC (Fixed Mobile Convergence) successes and failures.

The Voice Peering Forum (June 23-24th, San Francisco), a biannual conference, brings together over one hundred unique organizations from all segments of the information technology and telecommunications industry to network and discuss the latest in peering, routing and interconnection of networks and the applications they support.  A good overview of the event is provided in this video.  I'm running a panel session on the first day entitled, "Telco 2.0 and Web 2.0: Making Money Together?"  This session will examine how the Web 2.0 paradigm is impacting telcos and how they are adapting to co-opt this paradigm to maintain service relevance in the IP-centric world.

Some of the questions we'll be discussing in the panel are:  What is meant by Telco / Web 2.0?  What is the state of current service provider Telco 2.0 / Web 2.0 activities?  What capabilities can telcos expose that Web 2.0 companies need?  What are Web 2.0 companies doing today to bypass the telcos for various service enablers?  Where is the money to be made by the telcos and saved by the third party entities?  How are operator's going to make these capabilities inter-operable across their network 'islands?'  Peering 2.0!

On the panel are Mike Lee, CSO Rogers; Francesco Fraccalvieri, Head of Innovation Telecom Italia; Stefan Kuentz, Swisscom; Asha Vellaikal, Orange; and T. Ty Wang, Senior Director, Oracle.  The objective in bringing together such a senior and diverse range of panel members is to generate a diversity of insights from people at the bleeding edge of service innovation, but link it back to the brutal simplicity that for such innovation to be successful it's got to work between operators.

I hope both panel sessions will provide some unique insights and through bringing together such senior practitioners in the industry provide an opportunity to share best practices.

"But shouldn't our suppliers be building the developer programs?" I hear some operators asking. However, infrastructure suppliers make money by selling boxes, software licenses, maintenance and support; those suppliers do not understand the end customers as well as the operator. If they do, then the operator will likely not be independent for long. There is a new category of 'Application Aggregators' that bring a menu of applications, e.g. uLocate and Useful Networks aggregate location based applications; and are dependent upon mutual service success with the operator, not selling boxes or software licenses. The bottom-line is all operators will need to combine the application eco-systems of infrastructure and handset suppliers, application aggregators and their developer communities. Only those operators in a monopoly or have resigned themselves to be a utility bit-pipe provider need not worry about such issues.

In researching application developer communities across a number of industries, reviewing with the creators and community members the successes and failures, here are some topics to consider if an operator decides to build a developer community:
 
Audience:

• Know your geeks (application developers). For many operators there are local SIs (System Integrator) and VARs (Value Add Reseller) already solving the customers' problems, this is a critical group to bring on board. This generally addresses the SMB (Small Medium Business) segment, but there are also local developers applicable to other customer segments, they're not all based in Silicon Valley or LA. And localization will become critical for an operator's long-term success against GMAY (Google, Microsoft, AOL and Yahoo!).
  
• Know your early adopters. These are generally high spending customers that will trade some of their time for exclusive access to the latest applications and have their opinions matter.  This is of great value to geeks as they lack customer access that operators can provide.

Tools and Education

• The program needs to use the latest protocols, environments and community tools. Check out Saleforce.com's Appexchange; and Orange's Widget, picture sharing and OpenID APIs. To win, an operator must educate (marketing); to educate an operator must speak (blog); to speak an operator must do/show (code examples and success case studies). The more code examples the greater the addressable pool of geeks, because less able but perhaps more innovative geeks can then "cut and paste" capabilities together.
• Do not require registration or login to educate, only have registration if the geek wants to make money. Beta programs (without a clear path to cash), NDAs and legal documents will kill any community no matter how large the operator.

Communications and Marketing

• Community communication by the operator needs to be made by Geeks, e.g. bloggers, writers; IRC (Internet Relay Chat) / wiki / forum addicts; regular conference presenters that draw a crowd; and have a track-record in writing code samples and helping others geeks.
  
• Have a "Geek Advisory Board" with expertise in the platforms, customer verticals and known to the geek community.
  
• Sell your best geeks, others will follow. Communicate success stories from the community's launch. Contextual application search to help customers find preferred/certified applications that are relevant to a customer's particular circumstance is vital.

Metrics

• Program must be aligned with the operator's overall business goals. Metrics include things such as number of new geeks, number of downloads, number of active developers, number of transactions, revenue generated from APIs.

Biz Model

• The business model must be baked into the API. Ultimately, the Telco API is just a big business development deal. If the Telco API helps geeks make money, then so does the operator.

Integration

• The application developer community should not be owned by the CTO. After building the brand and the network, the application developer community is the next most important leg of an operator's business. It must be owned by the CEO, and integrated into Marketing's processes, so the innovations get out to the customer and are effectively monetized by the operator.

The above topics may appear obvious in building an application developer community, but the challenge is getting them simultaneously implemented.  Have a look at the many developer communities being launched against these 6 topics. An operator's application developer community is not a lab's project, nor something that can be released as a Beta; it's a core business assets, on a par with brand and the network, and must be led from the top.

Overall Summary / Opinion

An important first step in meeting the competitive disadvantage VZW faces compared to the GSM operators.  A device centric ODIS (Open Device Interface Specification) defines what a device must do to interface to the VZ RAN (between the device radio hardware and the access network), and the support structure to help partners (device manufacturers, MVNOs, M2M service providers or other service providers) through the process.  Commercial models range from retail through to wholesale.  The retail model is a little perplexing; difficult to see what beyond niche business focused applications could work.  Why would Nintendo build a VZW specific DS given the small addressable market?  However, for enterprise M2M with its higher margins there could be a case for a limited run of devices.  Wholesale is an important step beyond what VZW does today in potentially removing or softening the application test requirements.  However, in between the retail and wholesale models, the "custom" model, there could be a rich seam of commercial models and opportunities for monetize assets such as billing, customer support and distribution.   

The issues of exposing capabilities such as location, presence, messaging, content, FiOS, etc. were not covered in this conference.  They are in the plan, John Stratton is leading that across all Verizon, I saw him walking about at lunch.  This will become part of the open development process.

Summary of Sessions

Opening by Tony Lewis, VP Open Development.  An extrovert, unusual for VZ :)

Opening Remarks, Ivan Seidenberg CEO.  VZW messaging of the most reliable network.  LTE trial end of this year focused on speed and global compatibility - finally I'll be able to roam with Verizon.

Open Development Overview, Tony Lewis, VP Open Development.  Focus of the initiative is on new, non-traditional M2M devices.  All the device must do is meet VZW's minimum technical standard (see later) and the customer will have online support (billing, device ping).  The plan is to have a network only service option available in the second half of this year, likely by the end of the year.  Breaking out of the brew model, any application on the device, spec will only cover interface to the RAN, middleware, OS and applications are up to the Partner.  No equipment contracts or early termination fees.  Supported by a partnership management office that is focused upon helping partners they their devices through the process and working on the commercial arrangements.

Commercial Models, Mike Lanman CMO.  Three models, retail, wholesale and custom. 

• Retail model is where the partner (device supplier) makes money on the device and Verizon bills for the service the customer selects.  Device provider is responsible for marketing and distribution.  Customer service and billing will be all online.  Voice and data package options are likely to be similar to existing retail packages, though 'unlimited' 5GB package not likely, more likely a top package of 2GB with overage charges.  Will include have nationwide plans, data bundles, data only packages, and pay as you go.  Pricing is still in development and is likely to done initially on a case-by-case basis until VZW finds its feet.  Can leverage VZW's roaming relationships.
• Opinion: In essence a customer buys a device that is tied to VZW, selects a VZW package, and received a service less than buying direct from VZW.  Retail model is likely to be used for niche applications, where device manufacturer is prepared to build for a VZW only market, likely enterprise M2M, I can not see Nintendo building a VZW specific version of its DS for a potential market of 2 million.  Also customers will need education as they're paying VZW for a service but not getting the VZW experience.
• Wholesale is more interesting as the requirements on application testing that exist today are lessened, maybe even removed.  Also enables innovative pricing models of bundling data connectivity into the fixed upfront price for the device, or annual fees, or advertising supported, or absorbed into some other customer charge.

 
Activation and Self Service, Ajay Waghray, CIO.  Partner provides ESNs (Electronic Serial Number) of certified devices to VZW.  As VZW has certified the device they know the capabilities and how to activate, from simply turning the device on for the first time to possibly keyboard actions by the user.

Device Specification and Certification, Tony Melone, CTO & team (Ro Garavaglia + David McCarley). 

Spec covering CDMA2000, EVDO and in time LTE.  Voice only, data only, voice and data specifications.

ODIS (Open Device Interface Specification) Voice spec covers 3GPP2 emergency services, CDG90, 3GPP2 MEID, VZW OTA, and some VZW specific requirements.  Data spec covers 3GPP2 MEID, CDG 148, CDG 143, RFC 2486, VZW OTA and some specific VZW requirements.  Specs will be updated on a 6 monthly cycle, Q1 and Q3.

Network platforms (location, messaging, voicemail, content, etc.) - to be defined.  VZW will expose location outside the brew model, but no schedule or interface spec exists today - though we'll likely see something before the end of the year.

3 phase certification process (will have both VZW cert centre - not a profit centre) and 3rd part certification.

• Pre-submission - paperwork, NDAs, etc.
• Certification - 4 weeks (target) covering RF parameter testing (1 week), signaling conformance and features (2 weeks), ODI certification (1 week).  All radio interfaces will be turned on.  Certification will be good for 36 months.
• Post-certification - vendor interop (CDG57), field testing (CDG64)

 
Opinion: Likely takes a 9-18 month process down to 3 months.

Also in attendance Lowel and John Stratton who I saw walking around at lunch.  So full executive support at this event.  VZW consider this initiative core to their future success, equal to their focus on building their network and building their brand.


Findings over lunch conversations.  The ODI will be integrated with a similar initiative from the fixed side (FiOS) and across their application developer program.  Billing models are not yet defined, very much open to discussion with partners.  There is an opportunity for a device vendor to create an open platform (device and OS) and let other providers put their services on top deliver their branded phones, e.g. Skype Phone, Global Crossing Phone, BT Phone, etc.  Where depending upon the deal they cut with VZW they could target segments, such as international roamers.

 

Overall

My impression of MWC (Mobile World Congress, nee 3GSM) is it was quieter than last year, less hype and less people; however, the organizers claim attendance was up 3000, perhaps they were all the pick-pockets? 

I think the industry is at a crossroad, in my discussions with operators internet access is the product that's selling at the moment, with operators facing the same operational challenges of broadband ISPs (Internet Service Providers) as traffic grows exponentially.  Some mobile operators are seriously asking if being a mobile broadband ISP is really that bad.  This question sets up the crossroad, do operators take a left and follow the ISP route, or continue along the current strategy, or perhaps take a right along a path that enables and enhances services over their network (the nebulous open network initiative).

The flight to and from MWC was full of misbehaving adolescents playing with the toys bought by their parents and ignoring the flight-crew's instructions to turn them off.  Unfortunately, the 'adolescents' where middle-aged telecom workers playing with iPhones.  However, it certainly provided a clear example of why the industry continues to over-estimate what customers can do with their mobiles.  I felt the need to rebel, so I brought out my seven year old Nokia 6130i and pointed out to my neighbour that it would not run out of battery during the show, he then brought out an equally old Moto phone and agreed with me.
 

Top two topics: Mobile Advertising and LTE / HSPA Evolved (HSDPA+). 

The focus on LTE/HSDPA+ (Long Term Evolution / High Speed Downlink Packet Access) is a natural extension to the success some operators have in providing competitively priced internet access with HSPA.  There were many announcements on this topic with Telstra moving to HSPA Evolved (21/42 Mbps) this year, with LTE (160 Mbps) on the roadmap.  Ericsson estimates there are 174 HSPA networks in 76 countries with an estimated 180 million HSPA subscribers.  Alcatel-Lucent and NEC are teaming on development of LTE with the creation of a new joint venture, which given Ericsson claims LTE will be commercially available in 2009, means the new JV needs to work fast. 

Mobile Advertising is a simple label, but it leads to misconceptions.  A more appropriate, though not as succinct, label could be: Advertising over the mobile channel as part of a digital media campaign.  At the show, most applications had a "mobile advertising" component, most network elements gathered business intelligence for "mobile advertising," and most service platforms included the ability to insert "mobile advertising."  As I've unfortunately slowly learnt through my career, understanding your customer in-depth and providing a simple to understand (for them) solution to their immediate problem is the only way to extract cash.  In Advertising, media buyers and advertising agencies are the customers (the ones with the cash).  Very few companies were talking the advertiser's language, e.g. giving them 'slots' to 'targets' for their 'campaigns.'  Instead assuming the customer will change the way they do business given the unproven richness of mobile.  However, the announcement from Vodafone, Orange, O2, T-Mobile and Three that they are working together to develop common measurement standards for mobile advertising is a great first step

Mobile does transform the way advertising works, but equally Facebook (the online world) has lots of information about me, yet it still keeps inserting adverts for 30+ singles in my area, no wonder some social networks are seeing click-through rates of 2-4 per 10,000 impressions; that's not a campaign, that's an accident.  In the many pitches on mobile advertising at the show only one company had a complete end-to-end business intelligence and ad insertion solution, IMImobile www.imimobile.com, the wrinkle is you would need to adopt their complete managed VAS solution for that to be the case.

Other interesting insights from the show 

The variety of mobile phones and mobile enabled devices at the show was astounding, hundreds of new devices, at the high end Sony Ericsson's first Windows Mobile handset the Xperian 1, Nokia's N96 and Samsung's Soul should provide current iPhone users a reason to change their device by the middle of this year.

SUPL (Secure User Plane Location) is an IP based method to get the AGPS (Assisted GPS - cheaper GPS unit that needs to know roughly where it is before it works) unit up and running on a phone without the cost and complexity of a control plan solution.  TCS (www.telecomsys.com) were demonstrating their SUPL based navigation solution.  Available under a rev-share managed service framework this provides an ideal first step for smaller operators or those operators with limited geographic coverage or those not yet convinced on LBS (Location Based Services). 

Android from Google was capturing the attention of the press; however, there were lots of demos for the competing LiMo (Linux Mobile) at least 10 handsets from 5 companies.  Most of the demos were pedestrian from a user experience perspective.  Customers really care about how the phone looks, the price, the battery life, how easy it is to use, the bundled applications, and even the ease to sync with their corporate or personal email; OS is far down the list.   As A la Mobile pointed out when they announced their Android demo back in January, "Despite the open-source nature of the Android framework, developing a complete mobile system solution with customized, differentiated features continues to present major technical challenges requiring considerable time, effort, and resources."  Open source OS are not really free given the lack of a common hardware architecture like the PC. 

SpinVox (www.spinvox.com) continues its progress, launching with Vodafone Spain.  A simple voice to text service provided as a managed service.

Open Network is a nebulous term.  However, the SDP (Service Delivery Platform) is becoming a focus for many  operators as they look to make it easy for 3^rd parties, enterprises and their own services to use network capabilities such as billing, profile, single sign-on, presence, location, etc.  This was one of the topics of discussion with many operators at the show.
 

Start-ups to keep an eye-on:

Cibenix (www.cibenix.com): sometimes it's a matter of stamina, the ODP (On Device Portal) is in a renaissance with successful deployments in operators such as Three and Vodafone, and Cibenix is one of the few ODP remaining.

eBIZ.mobility (www.ebizmobility.com) enables operators to become a PayPal for online purchases using their existing billing system.

IMImobile (www.imimobile.com) has created a strong position in APAC, LATAM and MEA.  A simple managed VAS solution, e.g. content, content management and the gateways to deliver the content, all provided under a revenue share framework.  Several operators and suppliers were commenting on the difficulty to make money on content, I pointed them to look at an out-sourced model that is making money on content for over 200 operators today.

Useful Networks (www.useful-networks.com) and ULocate (www.ulocate.com) are saving the operator the problem of managing the 'long tail' of LBS by aggregating all those weird and wacky apps and making discovery easy.

Wadaro (www.wadaro.com) has a cute little app on the OS or SIM that monitors how calls or data sessions fail / terminate, and reports the stats back to a managed platform.  A simple way to find problems and focus network investment to improve the basic mobile experience.

Telephony was the first user generated content (UGC) service.  Operators provide a pipe, and we filled it with a conversation.  It fulfills a basic human need, the need to communicate, and as been successful around the world.  As telecommunication services become more sophisticated we're witnessing a divergence amongst operators on service success.  The roots of this divergence comes from local market conditions such as cultural, regulatory, competitive and national pricing factors.  Let's examine some of those differences.

• Caller Ring Back Tone: that tune you hear rather than the usual ringing tone when you call someone.  South Korea is generally considered the birthplace of the service.  We've also seen success in countries such as India, yet a relatively low take-up in countries such as Singapore.  With this service cultural factors have a big impact.  South Korea has a strong local popular music scene, India too.  Singapore with its diverse population does not have a unified music scene.   So imagine the scenario, you're in Singapore and you call a friend only to hear some wailing rather than the usual ring-back-tone, it does not encourage take up of the service, unless its to get back at the individual subjecting you to the wailing.
• VoiceSMS: that simple service that enables people to send a voice message rather than an SMS.  Some countries, for example Indonesia, have shown rapid taking up, while trials in India and Singapore have generated poor results.  The driver is local market related; it's to do with the literacy rate, with low literacy it's easier to listen to a message than read one.  While in text-mad countries like Singapore, with a big bundle of SMS included in your plan, why would a customer want to pay for an additional VoiceSMS service?
• Bundling: In the US there's a revolution underway, the old cable TV monopoly is dead.  Verizon FiOS enables customers to have a far richer TV experience, as well as voice and data (20 Mbits down / 5 Mbit/s return) for just $95 + tax.  While in the UK, the ISPs (Internet Service Providers) struggle with their video strategy, limited by the real-world throughput of ADSL, e.g. that annoying bell-wire in the home wiring that acts as an aerial for inference.  Cable at only 50% coverage of households, and monopolistic control of TV content by BSkyB, the local market conditions of the UK makes creating a competitive bundle of voice, video and data for all except BSkyB and Virgin difficult.
• Missed Call Summary: the SMS alert received when your mobile is turned on that list the calls missed while the phone was off.  It's a simple business case, it stimulates calling by 1.5-4%.  But in the US, where customers buy big bundles of minutes to avoid overage charges, such stimulation is bad for operators because it means customers use a little bit more of their bundle, which costs additional network resources.  Local pricing factors limit what services will be considered for launch by operators.
• Family bundle: shared minutes plans have proven very popular in the US.  Some operators have over half their customers on shared minutes plans.  This then enables VAS (Value Added Services) to be targeted to those plans, e.g. family finder a location based service.  Disney achieved 30% take-up of that service at $9.99 per month, before it closed down.  In Europe, evolving from a usage based model, shared minute plans are only starting to emerge; mobile phone purchase is generally an individual purchase.  While in the US, it tends to be linked to a household decision, hence the greater interest in quad-play.  On the issue of sticker-shock from quad-play; customers are not stupid, if they have 3 bills for $50 per month, and they can consolidate that to one bill for $120, they know they're saving $30 per month - its what they do with their credit card debt.
• Push to Talk: Blue collar workers love it because they work in a highly interrupted environment; it's not about conversations rather issuing instructions.  PTT was once promoted as a cool service teenagers would adopt.  How detached from reality can someone be?  Teenagers love SMS because they can have a private conversation with their friends, even within ear shot of their parents, try doing that with PTT.  Cultural factors are critical when evaluating services.
• i-mode: Back in the 90s, when we used dial-up to access the internet, Japan was in a sorry state with respect to internet access.  Most young people did not have a fixed phone line at home because it required a sizeable deposit to NTT, so they did not access the internet.  i-mode (NTT DoCoMo) provided a convenient way to access Japanese content, email and did not require a big deposit.  In addition, NTT DoCoMo controls the value chain in Japan unlike any other operator in the World - even Verizon.  So they could define the handsets, the software, the business models and had a hungry market.  This is an example of local market factors creating a unique situation.  I think we've seen enough i-mode failures outside Japan to realise it is specific to the Japanese market.

The list of examples goes on, in the Middle East there are some quite unique local market factors that I do not have space to cover here.  So whenever anyone quotes a service success in another market, we must analyse why it was successful in that market, then examing the similarities and differences between the markets to better understand its chances in the local market.