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July 31, 2007

Digital Home and the opportunity in ‘Life Data’ Management

It’s been a busy week briefing various expert speakers for the Telco 2.0 Executive Brainstorm in October. We’re spending even more effort in this area to make the ‘Mindshare’ process really hum. In particular we’re asking each presenter to prepare something genuinely new and different. Individually, they will be providing pieces of the jigsaw puzzle. The rest of the pieces reside in the minds of the brainstorming participants, which need stimulation and structure to be collectively unleashed.

Below are some highlights re the Digital Home Summit (18th October 2007, London) building on our last post on this subject:

Nick Augustinos, a Senior Director at Cisco’s IBSG consulting arm and a Board member of the Continua Alliance (an important group worth checking out at the link above) told us that the obvious focus for telcos is in supporting delivery of healthcare services to the home. But there’s a bigger prize out there…

Most R&D labs are working on technologies for monitoring the elderly, the chronically ill and the home bound. But his view is that, even putting aside the technical challenges (fault tolerance, QoS), this focus too tactical and simplistic for telcos, and won’t generate the sort of returns they should be looking for. (Thierry Zylberberg, Exec VP at France Telecom, will be telling us more about forecast revenues on the 17th Oct).
The bigger opportunity is in offering home healthcare services to all demographic categories, esp young families. He points out that, in the West at least, we’ve transitioned into a society where we are increasingly storing and sharing our own content and data in and from the ‘digital home’. We’ve started with music, photos, movies, homeworking data, so why can’t the home become another access point for healthcare? This presents telcos with a golden opportunity, to become trusted enablers of ‘life data’ storage and federation.
Family.png As more and more people join online social networks, there is significant opportunity to expand these concepts by adding ‘telco’ value to them. (This is a concept we are currently working on with a number of clients currently, so we fully concur).

Cisco is currently working on concepts taking this to the next logical conclusion, using the potential power of virtual worlds like Second Life as virtual social networks - “everything you wanted to ask your doctor but were afraid to ask…”!

So, Nick will expand on the themes above and get the brainstorm humming with some ideas around: the ’21st Century Home GP Visit’ for families and the aging independently, Creating communities of interest, leveraging Video as a form of interaction from the home, customized service delivery, Information Management (data management/storage, and services associated with this), and how this all relates to Green Initiatives.

Finally, he’ll elaborate on how to blend the virtual with the actual world and what benefits we might expect from doing so.

After Nick we spoke with Volker Binder, a Senior Vice President at Deutsche Telekom who’s in charge of their ‘Connected Home’ initiative and the end-to-end customer experience of its T-Home products (‘double play’ + IP based services). He said that T-Home are planning a lot of added value features to their online storage product, including better back-up, P2P sharing and ‘super-distribution’ of personal ‘life data’ (entertainment and information). But, when we described the focus of the event - the intersection of Home with Health - he got excited: “This is very interesting - we hadn’t yet considered integrating healthcare data”.

Volker is working up a presentation discussing the practicalities of conceiving, developing and introducing new services for the digi home market.

We spoke also to Luis Carlos Fernandez, Telefonica’s E-Health Services Director (he runs their research centre in Granada). They have a number of projects under development:

- A Teleassistance Services Platform (B2C and B2B).
- Virtual Operations: Real time transmission of intervention support in the operating theatre (video, audio, device measurements, etc.)
Remote%20Operation.png - A communication and services architecture to support medical professionals in optimizing the use of hospital infrastructure.

And a number of New Projects in the pipeline: Home Hospitalization, Health Channel for Teleassistance, Brain sensors, Deaf Video CallCenter, Indoor Location for teleassisted people, Personal Health Folder for Women, Filtered Information of Clinic Digital History.
Man%20in%20Hospital%20Bed.png Telefonica have been doing considerable work in developing business models around these services. Luis Carlos will share some of their thinking with us at the event.

As we speak to each stimulus presenter we get a sense of what insights they can bring to the event and which will be complementary to the other speakers. Formal powerpoint presentations make up about 25% of the Summit. 75% of the time is spent in structured interactivity with the audience working through our Business Model Innovation Framework. (During the breaks we also get some demos from our exhibitors). Hopefully this makes for good, intensive use of executive time…

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July 30, 2007

Google anchors its carrier off the coast of Telcoland

So what’s up with Google and the 700MHz spectrum? Well, Google has “pre-bid”-that is, declared its interest in bidding-for a large block of radio spectrum in the US’s 700MHz ex-TV band. (See here.) The big friendly search engine (or menacing, Orwellian data monster, depending on point of view) doesn’t just want the spectrum for itself; it wants it to be sublicensed for public access.

Traditionally, the economic value of radio spectrum has been largely an economic rent, originating from the fact that licenses grant a monopoly of its use. No cash changes hands when the various unlicensed bands, such as the 2.4GHz swamp beloved of Wi-Fi users worldwide, are used; even though, of course, its use creates value for the user, this isn’t accounted for.

So why would anyone want nonexclusive spectrum? Isn’t it a contradiction in terms? And what does Google plan to do with it? Google, after all, is a model Telco 2.0 company, designed around the
horizontalisation of the industry (NB: in the plenary session of the Telco 2.0 Executive Brainstorm in October we’ll be talking about ‘coopetition’ strategies based on some new analysis by our senior stimulus presenters).


Google: Emerging Backbone

It’s well-known that Google’s infrastructure development has involved quite a lot of telcolike activity. For some years, Google has been a major buyer of dark fibre, constructing its own private (and apparently IPv6) backbone between its data centres. This makes a lot of sense; the opex cost of one’s own fibre is not great, especially for a company with hordes of its own engineers and network administrators, and fibre is a long-lived asset.

Therefore, Google seems to be assuming that a substantial fraction of its wholesale transit bill is made up of other people’s profits. Assuming that they expect to be in business a long time yet, the depreciation cost of buying dark fibre is minimal; it beats filling Level 3’s pockets, or relying on AT&T when AT&T likes to talk about charging Google packets at higher rates.

But this is all backbone networking. Nobody would seriously suggest using 700MHz for backbone/backhaul; range and penetration are inversely correlated with frequency, which is why the 700s are so coveted, but throughput is positively correlated with frequency, which is why high-capacity point-to-point microwave links are 5GHz and above.

The Access Cartel

Google’s real strategic problem, vis-a-vis the US telcos, is their oligopoly of access networking. In fact, it’s more like a group of regional monopolies, and the same goes for cable-TV operators. Throughout Internet history, and indeed telecoms history, long lines has been more competitive than local; the reason being that value is geographically concentrated in long distance and bulk IP, but dispersed in local, and that therefore the capital required to build an alternative local loop is prohibitively large. If AT&T did go through with Ed Whitacre and Randall Stephenson’s bloodcurdling threats of last spring, there’s always Level 3, Savvis, and GoogleNet itself for the backbone - but at the local level, there’s no substitute for tubes.

Should the Bells gang up on Google, there’s also another option; apply YouTube tactics to the infrastructure. Having a big long lines fibre network gives Google the option of becoming a backbone operator itself, and announcing that it will peer with independent ISPs. These, of course, rely on leasing telco lines to reach their customers; at this point, Big Telecom would be faced with a choice of pulling the plug on millions of customers (and probably getting involved in a mass of antitrust litigation) or backing down.

But they might still be vicious enough to go through with it. What then? In the absence of anything like local-loop unbundling, British-style, you might think Google (and the wider Internet community) would run out of options. This is where radio comes in. The CAPEX to deploy a radio network is considerably less than digging up the roads, especially if you already have spectrum. And technological change is making it more so; WiMAX equipment looks likely to be dramatically cheaper than cellular. Better yet, Google doesn’t have to pay; sublicensing the spectrum would mean that independents, municipal networks, and others could finance their own radio-access network. Alternatively, Google’s interest in Wi-Fi sharing (Fon), femtocells (Ubiquisys), and metro-WLAN (Google’s project in Mountain View) suggests they might be thinking in terms of user-provided infrastructure.

Perhaps such a system would offer free connectivity to GoogleNet, but charge for anything further? That would match with the cost base - anything on your own network is cheap relative to anything you have to pay for in kind (peering) or cash (transit). And it would - dare we say it - be rather Telco 2.0? It is worth noting, though, that Google itself has so far been far keener on HovisNet (Internet with nowt taken out) access than anything like that.

Balance of TerrorTelco

Put another way, securing access to the radio spectrum is the remaining chunk of Google’s strategic triad; rather than land-based missiles, submarine-based missiles, and aircraft, though, it consists of dark fibre, peering with the dark fibre, and radio.

There’s a long way to go before this is tested. It’s possible that regulatory action, Net Neutrality legislation, or simply a realisation that IMS everywhere costs too much, will render the whole thing moot. And there’s also a counter-strategy before using the deterrent; Google has just announced a partnership with Sprint-Nextel to develop services on its big WiMAX network. S/N hasn’t been anywhere near as keen on building a neo-Bell world as the neo-Bells; after all, it is itself a product of the competitive era in telecoms. So we might want to include Sprintlink in the backbone section of Google’s deterrent, and its various radio systems in the access side.

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July 25, 2007

France Telecom, Part 2: Little Boxes, All The Same

So we mentioned Liveboxes. The box contains an ADSL modem, a four-port Ethernet/WLAN router, and some other stuff running on its kernel. Specifically, there’s a socket for a standard PSTN handset, so you can use FT’s carrier-VoIP service, and a Bluetooth radio so you can walk about with the same service. There’s also an IPTV client, so you can watch FT’s TV.

Now, I don’t know what’s actually driving the thing - but many of these boxes have a real operating system, usually a small Linux distro. (Note that if you want to DIY, there’s a Linux available for the Linksys WRT54G router.) A lot of them can be remotely managed by a system administrator over the Internet - something which has already had embarrassing consequences for at least one ISP, whose CPEs shipped with the default passwords set and were promptly hacked.

This has all been a little techie by Telco2.0 standards so far. But here is the vital upshot: this is what a platform for new services looks like. Once you have a little box in the customer’s living room with an IP address, a general-purpose OS, and remote admin access, you’re in a position to come up with new ideas and get them out to the market very quickly indeed.

For example, as well as TV, WLAN, and VoIP, you can do femtocells and/or UMA. You can include a chunk of local storage and give it media-centre functions - for example, you could distribute heavy content like video during the night when the network is under-utilised, “peak-shaving” as the electrical engineers call it. Or, alternatively, you could ship the boxes with a ton of video on board and just top them up remotely.

You could give it Slingbox-like functionality; making the data (and services) on the box available remotely over the Internet. If you do that, you could also include digital home and e-health functions on it. But here, though, is the scary bit; why doesn’t France Telecom sell the boxes to non-France Telecom customers? Boxes like these are a powerful tool for building a virtual integrated carrier on top of someone else’s network.

In fact, it’s a way of becoming your own telco. If you have something slightly smarter than a WRT54, and a large external hard drive, and a WLAN/cellular handet, you’re on your way. It could hold your collection of music and video, and perhaps run a P2P client application all the time. It could permit you to get at that stuff remotely. It could also run a SIP proxy, if you don’t want to use GrandCentral or some other hosted service.

Actually, you don’t need anything smarter than a WRT54 for that. I checked; there’s already both a pure SIP proxy and a version of Asterisk for it, as well as a filesystem.

How long before Sony or Nokia ships it?

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Hidden Potential: France Telecom

How do major telcos respond to the challenges of Telco 2.0? France Telecom’s experience offers some answers.

FT is perhaps the archetypal traditional PTT; still part-nationalised, with a dominant position in fixed-line, ISP, and mobile markets at home. During the .com boom, the carrier expanded heavily and ran into debt (it didn’t help that the government hit it up for some cash to meet the requirements of joining the Euro). Meanwhile, the fixed-line voice market began a steady slide as the first alt.telcos, VoIP, and fixed-mobile substitution began to bite. Although the French government was slower than some to take regulatory action, eventually the new regulator ARCEP began to hammer at the de facto monopoly.

So, what did they do about it?

FT’s acquisitions turned out to be better deals than they looked in the smouldering aftermath. Among other things, they had given the company one of the strongest brands in the industry, Orange, a strong ISP in France (Wanadoo), and stakes in global cable backbones and other world-wide presence that permitted them to build strong businesses in bulk IP networking (Opentransit) and enterprise VPNs (Equant). More recently, the company has decided to go all the way, rolling the entire consumer side into Orange.

In terms of a business model, F Tel/Orange is very keen on bundling. As an integrated full-service carrier, it can offer quad-play in France. Interestingly, it’s trying to take advantage of industry horizontalisation to expand this vertically integrated model elsewhere; in the UK, Orange Broadband is providing PSTN and DSL service over Openreach’s wires through local-loop unbundling, and selling GSM/UMTS mobile service along with it as part of a “free broadband” offer. Telco 2.0 readers are of course well aware that “free broadband” really means “compulsory old technology”.

This is an important issue; if it is true that integration means greater market power, there is a lot of money waiting for anyone who can successfully lash disparate elements of the Telco 2.0 world into a virtual carrier. But so far, fancy MVNOs are a notable failure - if you read this blog, you know what we think about Blyk, and Amp’d Mobile just crashed and burned, as did ESPN Mobile and Easymobile before them.

The UK’s structural separation model, permitting LLU, means that Orange UK has become an integrated carrier without needing to spend all that money; perhaps not the result Ofcom was aiming for. At the same time, other FT divisions are using the metro-Ethernet lines Orange UK has installed to backhaul its high-traffic cells to serve corporate customers, from behind the Orange name as “Orange Business Services”.

In France, meanwhile, FT is offering IPTV and carrier-VoIP over its DSL network, in a bid to replace the vanishing economic rents from its PSTN business with new service revenues. The key to this effort is the Livebox, the WLAN router/modem/set-top box that is distributed to all subscribers. And we’ll hear more of that in part 2.

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July 19, 2007

By Grand Central Station SunRocket declared Chapter 11

The US’s second-biggest VoIP carrier, SunRocket, is bankrupt. You wouldn’t have been very surprised, had you read this article on Telco2.0, or even this one from back in 2003.

Not so long ago, Google bought a small company called GrandCentral Technologies that provided a hosted SIP gateway - permitting its customers to route multiple PSTN/PLMN or carrier VoIP numbers, or SIP names, to a single inbox they can access from any Internet connection. What connects these two facts?

First up, companies like SunRocket and Vonage originally succeeded because they confiscated some of the traditional telcos’ economic rents. An economic rent is defined as a return which is entirely due to scarcity; you don’t do anything to get it. In the past, bandwidth was scarce and difficult, and bound tightly to the telco’s infrastructure of identification, billing, and authorisation. With the plummeting cost of moving bits over IP, the proportion of a telco’s profits which are attributable to artificial scarcity has greatly increased - as Li Mo, chief network architect at ZTE USA put it, “the network is so much simpler when you take out the charging mechanisms.”

With the arrival of IP, it became possible to separate addressing, identification, authorisation, and payment from any one particular network. Instead, you can now assemble functions horizontally across different companies. VoIP carriers do their own number allocation and billing, and use other people’s networks for access (but usually their own in the backbone, whether real or virtual). It’s what we call Voice & Messaging 2.0.

Using really cheap transport, and being willing to accept lower margins, providers of what we might call “bog-standard VoIP” were able to capture some of those rents. But the same principle applies to them, in so far as their business model depends on the difference between the price they charge an average customer per bit and the price they pay to their transit providers, less the cost of customer care. Somebody could always come along and undercut them, and they did; traditional carriers entering a price war with deep pockets, new VoIP providers, and software-based VoIP operations like Skype or Gizmo - who don’t carry their own bits and whose product is often free.

These companies rely for their money (where they actually make money, that is) on the sort of alternative value propositions you’ll find at Telco 2.0 - and especially in our Data Transport Systems project - on a regular basis - presence/availability control, integration with other applications, and premium interconnection with older systems. So what does this have to do with GrandCentral?

A fundamental problem with the end-to-end architecture is what happens when your end is off-line. For mobile devices, especially, this is a regular event. Applications shunted into “the cloud” are one thing, but they vanish between logins - and this is very important indeed with regard to telephony, due to the strong social expectation that calls are answered whenever possible. Therefore, you need some sort of a persistent presence in the network to catch messages, and either hold them for delivery (voicemail, e-mail) or reroute them to an end-point that can answer them.

This is essentially what GrandCentral offers. Another important function they provide is the ability to overlay other networks into a single point of contact. Even if you only want to receive calls over the Internet, you still need to cater for people who are using only PSTN/PLMN telephony, and for any old VoIP identities you may have hanging around. And you may want the option of routing them either to a SIP data call, or a traditional GSM voice or SMS session, in order to have more reliability.

Until (essentially) last year, you could do these things if you felt like setting up your own SIP server. Realistically, only organisations (and quite big ones) and hardcore geeks are going to do this. Since then, though, there has been a rash of start-up VoIP hosters. GrandCentral is the best known, but there are others. Their vital contribution is to slash the activation energy required to get started with serious VoIP; now you just need to sign up.

If you’d like to debate these issues with the great and the good of Voice & Messaging 2.0, details of the Telco 2.0 Digital Product Innovation Summit are here.

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July 18, 2007


An SMS message! Who’s it from?

TELCO. (They can be anonymous for now.) Apparently they think I might be travelling to Europe, and therefore that I might want to know about their new roaming rates. Fair enough - that would be some of the contextual messaging stuff the people at Acision/ex-LogicaCMG Telco Products are always talking about, no?

Well, it would if I actually was travelling to Europe. Given that TELCO knows my phone has been in the same cell, near my home address, all day, you’d think they would have thought of this - strikes me that the trainload of phones zooming along the Channel Tunnel Rail Link every 30 minutes or so must show up quite impressively in TELCO’s switching centre as a lot of the same devices sending CC SETUP messages very quickly indeed.

They’re probably more likely to be heavy mobile users than the general population, too. Similarly, Heathrow Airport is full of people who certainly are travelling to Europe, as well as picocells deployed in the sprawling terminals..there’s surely an opportunity here to put some of the talk about advertising that “users will value” into effect, by targeting devices that have just turned up in those cells.

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July 17, 2007

Behold the Data Transport Systems Project

So you’ve read about our methodology, and you understand that it’s all about the distribution of bits that the recipient considers valuable. You’ve read the map, and the essay that goes with it.

But how will all this be put into practice? For that, you need our Data Transport Systems project - think of it as Telco 2017. From here to October, Martin Geddes, Rafil Khatib, Keith McMahon and I will be inquiring into how the forces detailed in the maps will twist the telecoms industry over the next 10 years. We’ll be looking at everything from BitTorrent to cinemas and USB sticks, and drawing lessons from electricity grids and container shipping networks on how mass wholesale businesses can make very personalised, targeted ones possible.

Not just that, but we’re also interested in failure.

We’ll be looking at the differences between things that succeed and then go obsolete, and the ones that hit the trees at the edge of the airfield. MMS, this means you. There’s also going to be peering, interconnection, and the pressing question of whether telecoms is going to be a for-profit activity in 2017, rather than a huge cost centre like a corporate IT department, a government agency, or Haiti with routers. And if it is still profitable, where it will be making money.

Remember, the Map says by then we’ll see “other” passing broadband, steamphone, and NGN added together. DTS is intended to answer the question of what the other will be. It’s traditional to say that the future might be X, Y, or “something we can’t imagine yet”; but it’s also trivial. It’s abundantly clear that the traditional telco model won’t be “it”, but there are also good reasons to imagine that classic ISPs are not “the future” (so many are morphing into sizable telcolike entities, after all). So what will the synthesis be?

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July 5, 2007

Speaker Update - Telco 2.0 Exec Brainstorm

The stimulus speaker list for the Telco 2.0 ‘Executive brainstorm’ is building nicely. Here is current status, as at 5th July 2007:

Telco 2.0 Plenary - 17th October
• Steve Robertson, CEO, BT Openreach
• Shane O’Neill, Chief Strategy Officer, Liberty Global; President, chellomedia
• Thierry Zylberberg, Executive VP, Strategic Partnerships, France Telecom
• Chris Schoettle, Executive Vice President of Technology and Networks, Akamai Technologies, Inc
• Ross Fowler, Vice President, Europe, Cisco
• Richard Wilson, Partner & Head of Global Tech & Telecom Team, Apax Partners
• Daniel Waterhouse, Sector Partner, 3i

Digital Advertising & Marketing Summit - 16th October
• Frank Boulben, VP Digital Media, Vodafone Group
• Andrew Bud, Chairman, MBlox
• Bill Gajda, Chief Commercial Officer, GSMA
• Richard Wheaton, Managing Director, Neo@Ogilvy
• Tarek Wahba, Product Development Manager, Orascom Telecom

Digital Product Innovation Summit - 16th October 2007
• Johan Wickman, SVP, CTO, Corporate R&D, TeliaSonera
• Sunil Coushik, Co-Founder and President, Bubble Motion
• Carl Taylor, Director of Applications & Services, Hutchinson Whampoa Europe
• Keith Wallington, VP International Operators, Truphone
• Tony Fish, Investment and Turnaround, AMF Ventures
• Mads Moller, Vertical Head of Technology, Google

Digital Youth Summit
• JP Rangaswami, MD, Group Ops Service Design, BT Design
• Peter Miles, CEO, SUBtv
• Andy Tiller, VP Marketing, ip.access

Digital Cities Summit - 18th October
• Kip Meek, Chairman, Broadband Stakeholder Group
• Malcolm Corbett, Director, Community Broadband Network
• Dave Carter, Head, Manchester Digital Development Agency
• Bas Boorsma, Head, Connected Urban Development, IBSG, Cisco

Digital Home Summit - 18th October
• Kees Rovers, CEO, OnsNet
• Daniel Heery, Project Manager, Cybermoor Ltd
• Luis Carlos Fernandez, E-health Services Director, Telefonica
• Nick Augustinos, Director - Internet Business Solutions Group, Cisco

Remember that we offer discounts to those that register and book early - it saves us time and money chasing people later!

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Telco 2.0 Strategy Report Out Now: Telco Strategy in the Cloud

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