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October 30, 2007

Guest Post: IPTV - Gateway to New Business Models?

Alcatel-Lucent is one of the major sponsors of the Telco 2.0 Future Broadband Business Models study, and was a Platinum sponsor of the Telco 2.0 Executive Brainstorm, two weeks ago in London. We asked Martine Lapierre, Vice President Marketing Programs, and one of our panelists at the event, to sum up the potential of IPTV to support new business models, rather than just emulating existing broadcast services.

One of the important insights to come from the Telco 2.0 Future Broadband Business Models survey, and a recurring theme of the Brainstorm event, was the need to give more consideration to end users as a critical telecom asset, and not just as a profit centre. Survey respondents certainly believe broadband service providers should focus on revenue opportunities from partners who want to reach and do business with this customer asset.

We believe that broadband service providers can keep their customers brand-loyal by packaging third party services in a way which addresses end user demands for convenience and simplicity. They can attract upstream revenue by providing meaningful customer intelligence to these third parties (advertisers, government organizations, content providers), who can in turn make their marketing targeted and relevant to end users.

One of the strategies operators are employing to realize this vision is the deployment of IPTV services to households around the world.

Why? IPTV services give broadband service providers the following:

  1. A touch point within the customers’ home network — strengthening the broadband service provider’s relationship with that all-important customer asset.
  2. Ownership and management of a back-end channel capable of providing very rich customer behaviour and intelligence, which can be monetized.
  3. The ability to broker engagement between a number of 3rd parties and consumers through the most-watched screen in the household today.
  4. An anchor to evolve towards more sophisticated ad insertion, ad-sponsored distribution, and other models of content distribution.

The survey — sponsored in part by Alcatel-Lucent — will finally close at midnight tonight GMT. Last chance to complete it if you want a free copy of the summary results!

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October 29, 2007

Ring! Ring! Monday News Analysis, 29th October

Portals, Partners, and Platforms

Apple: sorry, we don’t accept money. Seriously; you can’t buy an iPhone for cash. Unless you’re a telco, in which case Apple may be after as much as $400 in revenue-sharing for each gadget.

Telco2.0 Comment: There are a couple of interesting things here. First up, the relationship between Apple and AT&T; handset subsidies have landed in North America with a vengeance. One wonders how long AT&T will stick it; if they have any choice. Secondly, Apple’s increasingly desperate efforts to keep control of the devices - they have started refusing to sell iPhones to cash buyers, presumably so they know where their customers live. [Business idea: French law prohibits sales of locked devices. Stock up on iPhones there and re-sell them around the rest of Europe and/or re-import them to the US!]

O2 and Orange, meanwhile, plan to recoup the Apple Danegeld from data charges.

Digital Product Innovation

We mocked it, but it’s true: 3UK is indeed doing a special Skype phone.

Telco2.0 Comment: It makes sense for an application with no business model and an operator with no business model to get together, we think.

Telco2.0 Strategy

Arcor minority shareholders to go for €400m?

Telco2.0 Comment: Vodafone pursues its agenda of matching the OTT players’ ability to integrate multiple services from different suppliers by acquiring more things it can bundle. But €400m?

Digital Politics and Regulation

Sprint forced to unlock gadgets.

Telco2.0 Comment: Whilst Apple struggles to keep the iPhone locked up, Sprint got sued, and is now legally obliged to unlock anyone who wants to churn away. Can anyone see the inconsistency here?

Telcos win cable court case.

Telco2.0 Comment: Interesting case. Major US telcos win a court battle against the common practice of the developers of an apartment block signing an exclusive deal with a cable-TV MSO; good news for Big Tel, but pretty horrible for anyone who wants open-access, as the precedent presumably applies to anyone who wants to wire up a new building with fibre or require developers to hook up to a public fibre network.

Verizon: it’s better to be feared than loved

Telco2.0 Comment: OK, so you’ve been forced to stop calling your clapped data tariff “unlimited” and everyone hates you for giving the secret service all your data. What would you unhesitatingly choose to do? Yup, offer to give everyone’s data to advertisers without their explicit consent - that’ll learn’em. See Keith Wallington ‘s comments at Telco2.0…

Not that it seems to be profitable, though

Technology Disruptions

Sprint says its mobile WiMAX is building a platform for innovation.

Telco2.0 Comment: Or maybe just a really big bit pipe. We hope it’s the former.

And mobile phones really could kill you…if you’re in North Korea.

Cap’n Gordon Cook has the fear, meanwhile, about IPv4 exhaustion. So do the good folk at RIPE, it seems:

And ARPANet pioneer Larry Roberts is threatening a Bandwidth Apocalypse. Seems the only way to stave it off is to buy the new kind of router he invented - funny that. The NANOGers weren’t impressed.

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New Ideas for Incremental Muni-Fibre and Metro-Fibre

We continue to be fascinated by the presentation by Roy Gradwell, Director of Connected Real Estate Ltd, at the Telco 2.0 Digital Cities session. We think the ideas he floated deserve a much wider audience. He presented a new option for financing network build-outs, different from existing vertically integrated models (e.g. Verizon FiOS) or Muni/open models (e.g. Amsterdam’s Citynet).

What interests us most is that it provides a practical framework for realising Malcolm Matson’s open access vision of the future, where networks are funded and owned by long-term low-risk investors and any service provider can ride on top. This is called an OPLAN (Open Public Local Access Network), and implies both the end-user access and metro backhaul are part of the same open network. It’s an intellectually attractive proposition. The trouble is finding the route from “here” to “there”.

Some of the biggest problems with municipal fibre deployments are down to the fact that it’s a big, expensive, monolithic project. The up-front cost is hefty, and its repayment means you have to be very sure there will be enough demand to pay it back. It’s difficult to trial the idea of muni-fibre (or any other kind of metro-fibre rollout) without making a huge investment and therefore taking a big risk. This is the “anchor tenant” problem Dave Hughes, Director of BT’s Wireless Broadband division, mentioned during the session. Other speakers noted how hard it was to co-ordinate the purchase of connectivity across multiple public services given their varying contract commitments and buying cycles.

Plus, if you’re the city government, you can run into problems in the courts - in some places you might get sued by an incumbent telco, and in the European Union quite a few cities have run into trouble with the legislation on state aid to industry.

On the other hand, as Roy points out, for enterprise and government users the bottleneck is between the LAN and the WAN; and in the UK, there’s been hardly any metropolitan area network investment since the end of the cable boom in 1996.

The principle doesn’t need too much stretching to cover residential users either - after all, there’s not much difference between a LAN-wired office block, a LAN-wired factory, or a LAN-wired block of flats from this point of view, and getting fibre reasonably close to the home is the precondition of fibre-to-the-X, VDSL, WiMAX, and the like.

Nobody wants to build a metro backhaul network without access network customers; but nobody wants to build an access network without a plentiful supply of cheap metro backhaul. And few are willing to risk doing both. So, what is to be done?

Gradwell’s suggestion is simple, as all the best ideas are in retrospect. There are six core elements:

  • An incremental approach to building an open-access muni metro network.
  • Shift from opex to capex - own, don’t rent.
  • A multi-utility approach to cabling and ducting around town.
  • A hybrid public/private approach to access networks that connect users to the trunk.
  • A stable infrastructure investment plan to encourage private actors to invest.
  • A holistic view of end-user costs that looks beyond just out-of-pocket ISP and TV/phone service fees.

The incremental OPLAN

He suggests that cities, or for that matter other actors, start by taking an inventory the sites they already own and their major internal networking customers. Then link up heavy traffic generators that currently use third-party connectivity. Stop shipping your internal phone, e-mail, database synchronisation and video surveillance out from the LAN (where you almost certainly use at least 100Mbits/s Ethernet and probably Gigabit Ethernet) to a telco or ISP network (at some much lower capacity and higher price) and then back in to the LAN in another building. Rather than paying for every bit, why not run the GigE direct between the switches in the two buildings?

So step one is to look for clusters of public buildings (e.g. fire + police) that share a connectivity need and join them together.

Shift from opex to capex

With a small capital investment, these buildings can now share a common backhaul to the Internet or outside world, rather than having to buy one each from a telco. You get an immediate drop in opex from both their internal communications as well as external traffic. The business case is easy to make, particularly where the capex is low because you’re digging up the street for other reasons anyway.

Multi-utility approach

It’s a sort of mixture of opportunism and foresight - opportunism in that you pick out links that happen to be needed, ducts, culverts, and the like you happen to own, and add more fibre than you need, and foresight in that you deliberately seek to add fibre whenever you dig up the road, and plan to add a node when you start a new building. By managing the physical ducting as part of a multi-utility plan, you can greatly lower your costs. Replacing the pavement? Lay a fibre. Lamp posts wiring getting old? Lay a fibre. Sewers a bit too Victorian? Lay a fibre. Gas pipes looking leaky? Lay a fibre.

Today’s telecoms industry seems to be an unnatural joining of infrastructure, operations and customer relationship businesses. Who would be surprised to see them go their separate ways?

Hybrid public/private approach

And then, of course, why not hook up some more buildings? But you can do better than that; if you have all this capacity, you could link up to the company across the street and charge them for it. Then you might extend it to their other site across town. And private players may decide to hook in and build access links between businesses and residential users and the backbone, and start offering retail services.

A stable plan

By publishing a long-term plan of what “open links” are going to be deployed and when, private players can start to make investment plans to piggy-back on this network. A corporation might not be around in 20 years’ time, markets change from week to week, private investment plans get cancelled easily. A town or city is there permanently, and human geography changes only slowly by comparison.

Holistic view of cost

With this model for incremental deployment, you keep rolling until you cover the whole city. It has the advantage that there are no leaps of faith; you simply install links where you have a need for serious bandwidth, or where the cost of telco transit hurts. The EU and incumbents can’t complain because you originally built it purely for your own needs — right? The open access tariff is a secondary motivator.

It’s only in the later stages of deployment, where the network has to add leaves to reach odd patches of city property in residential areas, that any of the usual problems emerge. But by then, you’ve already wired up everywhere that’s reasonably traffic-dense, and that’s a start. It’s not restricted to city authorities, either; a group of businesses or other organisations could get started building a shared fibre network in the same way, rather like this very cool L2 Ethernet operator in Wellington, New Zealand.

By the end, you’ve taken a lot of cost out of public service delivery and private enterprise within the city. So by shifting their tax dollars from opex spend to capex, with a small and temporary investment blip (with quick payback), you end up with cheaper goods and services. The real cost to users isn’t the telco bill they see in person; it’s the ones they pay by proxy.

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October 22, 2007

Ring! Ring! Monday News Analysis - 22nd October

US telcos who participated in illegal surveillance aren’t out of the woods yet; Senator Chris Dodd plans to filibuster the act granting them immunity. Remember that the Foreign Intelligence Supervision Act provides that each subscriber in the US could individually sue….that’s a chunk of change. Here’s the Senator in his own words.

Digital Politics and Regulation

Spanish MNOs in trouble with the law; accused of operating a cartel.

Telco 2.0 Comment: Voda.es, Movistar, and Orange.es are accused of having colluded to keep prices up after the regulator forced them to stop rounding up all calls to the nearest minute for billing purposes. It’s one way of capturing value from status-update calls; but not recommended.

Row of the week; Comcast starts zapping BitTorrent users.

Telco 2.0 Comment: Killer detail - they’re doing it the same way the Chinese censors spork websites carrying data they don’t like, by sending fake TCP RST messages. Adjust your iptables accordingly. Better yet, Comcast doesn’t actually have a rule against torrent users. Huge amounts of discussion are on NANOG.

Digital Product Innovation

GSMA, Western Union in tie-up.

Telco 2.0 Comment: The rush into the mobile payments/money transfer sphere is well under way. Wonder if the Vodafone/Safaricom M-PESA system will get incorporated into this?
New Zealand startup offers mobile content marketplace for all.
Telco 2.0 Comment: OTT watch - if you don’t build the platform someone else will. Now it’s happening - Veoveo essentially lets you upload anything mobilewise and charge for it, promising to start paying out once you’ve sold £20 worth (a damn sight better than network operators’ e-commerce activities). Cash is collected by credit/debit card, PayPal, and Google Checkout. It’ll be interesting to see what they offer in the way of APIs, widgets and such.

T-Mobile.uk sues Logica over their web portal; new Logica boss wishes they hadn’t got out of the telecoms business.

Telco 2.0 Comment: You want hopelessly sclerotic development processes? You got’em. It’s taken T-Mobile’s British operation and Logica two years to relaunch T-Mobile’s website. Meanwhile, Andy Green’s remarks remind us of something mentioned at the Telco 2.0 conference last week; much as people say telecoms is a dull, staid business, even if the whole ad business was conquered by telcos it wouldn’t actually change our numbers very much because we’re vastly bigger than ads and Hollywood put together.

Telco 2.0 Strategy

Nokia profits up 85 per cent; market share closing in on 40 per cent.

Telco 2.0 Comment: World domination is within sight; as long as they can navigate their tricky relationship with the operators, that is…just compare the competition.

Orange.uk boss sacked.

Telco 2.0 Comment: Profitability falling, tough competition, and money going down the great hole marked “free broadband”…

Broadband Connectivity

WiMAX gets OK’d for 3G.

Telco 2.0 Comment: More barriers fall. It is getting very hard indeed to ignore the potential WiMAX challenge.

Chinese 3G: forever delayed.

Telco 2.0 Comment: MII - the Ministry of the Information Industry, if you’re not up on telecoms politics in China - has usually been assumed to be stalling on 3G licences in the hope that the locally developed TD-SCDMA system will be ready by then, something which has been frequently delayed. Interestingly, Lou Qianjin, the deputy minister, is now saying there “is no clear business model” for 3G services. Needs more Telco 2.0 in his life?

AT&T gets some HSUPA cards out there.

Telco 2.0 Comment: Symmetric connectivity is good.
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October 18, 2007

Telco 2.0: Get the Fibre Out There

An important consequence of technical change in telecoms we occasionally refer to is the shift from opex to capex; rather than buying more IPStream and upstream transit, the way to scale up is now to move to local loop unbundling and peering. Rather than laying more cables, new electronics and optoelectronics such as (10) Gigabit Ethernet and DWDM mean that the way to scale up is to swap out the boxes.

And some of the consequences of this were very clear at Telco 2.0 today.

On one hand, there were people like Dave Hughes talking about the growing demand for bandwidth from wireless systems, and also for bandwidth-guzzling video surveillance. On the other hand, all those telcos who came to find out how to make money in an IP-based world. Everyone realises that it’s getting harder to make money from the infrastructure; everyone realises that the demand for traffic is just going up. Someone’s going to have to put in the fibre. Or DOCSIS 3.0 co-ax. Or metro-Ethernet. Whatever.

And this just kept coming up. The key insight, however, is that where the fibre is actually getting built is where there are non-standard ownership models; in Vienna, where the cable operator is actually partly city-owned, in Dutch cities whose muni-fibre deployments are forcing KPN to compete, in Paris where the installation of fibre is leaking out of the sewers to head out into the suburbs on poles.

Spot the telcos.

It’s never been clearer that if you want fibre you need to build it already. Infrastructure expert Roy Gradwell made this clear with his fascinating presentation on what could be described as incremental muni-fibre; look at the buildings and land the city owns, look at your own networking needs, and then consider who else needs bandwidth around them. And then get cracking.

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BT Wireless@Telco 2.0; Getting away from “Why-Fi”

On the Digital Cities track at Telco 2.0 today, Dave Hughes, BT’s boss of wireless access networks, was talking about
the importance of pragmatism and the difficulties metro-WLANs face in cities that don’t have an American grid plan.

It’s well known that there have been a succession of metro-WLAN deployments that have gone bad; the sector’s icon, the Google-championed San Francisco deployment, is currently stalled after EarthLink pulled out. And Hughes offered a quick review of dozens of press reports on failed projects. Typically, they launch in a burst of hacker idealism and city-booster hype, but soon discover that radio engineering is actually quite hard, a point IT people seem to have to learn the hard way.

But there’s worse; what about the economics?

Free access is suggested, but the costs are already running way ahead of budget as more and more access points are required. Various fancy schemes are thought of; in San Francisco it was a choice of ads or direct payment. But what kind of ads? Are you suggesting inserting them into other people’s web pages? And so on. As Dave Hughes points out, you need an anchor tenant to support the deployment before you can think about anything else.

BT, Hughes points out, has successfully deployed a lot of WLANs across the UK; he attributes success to the decision
that BT itself would be the main tenant, charging users for service in the normal way. In a neat touch, BT’s subscriber base are the main market; BT DSL subscribers now get WLAN access as part of the total proposition.

This raises an important point; Hughes was clear that BT’s Wireless Cities program is a complement to fixed-line broadband, not a substitute. Especially in cities where the street plan isn’t conveniently rectangular, access points have to be placed often enough that they depend on good fixed access, rather than replacing it. And if the wireless traffic really cranks up…will we need to get the fibre in anyway to backhaul it?

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October 17, 2007

What will those 40Gbits Grannies download?

One of the less-discussed points about the joy of muni-fibre, and for that matter commercial FTTH, is what happens in the next hop. At the moment, the last mile is the slowest hop, in terms of data rate. The backbone is usually considered to be OK, thanks to the dark fibre phenomenon, technical improvements such as DWDM, and the fact it’s easier to lay more fibre in one dig next to the highway than ten thousand digs in the city centre. Especially in L2TP/bitstream markets, the sector from the aggregation point to the ISP’s gateway router is more of a problem, but this is usually a matter of ex-incumbent pricing rather than a real shortage.

But if the access network gets replaced by fibre, what then? ISP engineers deal daily in interconnects up to Gigabit Ethernet, but if 40Gbits Granny’s in town, there’s going to be a quantum leap in demand at the next hop after the fibre access ring. In fact, it’s worse than that; Granny is a special case, but a town’s worth of 100Mbits/s Mums means you’ll rapidly reach genuinely huge demands on the pipe out to the backbone. For that matter, you wouldn’t need that many to strain your friendly local IX.

That’s the sort of thing you have to think about when you’re sitting next to Ad Ketelaars of Eindhoven’s munifibre deployment, while Chris Schoettle of Akamai is presenting. Shoettle, unsurprisingly, thinks CDNs are great, and so do we; but there’s better than that. He makes an important point about distance and speed - quite simply, going from less than 100 to 500-1000 miles’ worth of speed-of-light latency means that a file you could be pulling down at 44Mbits/s (if you have fibre) instead arrives around 4Mbits/s. If you’re constrained by the local loop, you’re unlikely to notice the difference; once the speeds go up, though, you certainly will.

No wonder, then, that Eindhoven is keen to get not just CDN capacity in their backyard, but another IX somewhere in southern Holland or Belgium to take some of the load off AMS-IX. Screaming-fast local loops will force us to invest in content-delivery networking and related problems.

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Empowering the User through CDRs

CDRs - Call Detail Records, the database entities that permit telcos to bill their users - are getting a bad press at the moment with the latest revelations about US networks’ willingness to let the NSA dig through their databases without getting warrants or accepting any other quaint legal restrictions.

But at Telco 2.0 yesterday, we heard how CDRs might actually empower the users in a Telco 2.0 future. Keith Wallington of mobile SIP insurgents Truphone suggested that “in the future, this will be bigger than mobile number portability”. Wallington proposed the ability to have calls routed intelligently depending on your preferences and the patterns of use revealed by network data. And this brings us right to his point.

If all your contextual services depend on the contrail of signalling data you leave behind in the operator network, the ability to take that information with you when you churn is going to be crucial. Perhaps we need a right to claim our data; however, the really important point is as always the practical implementation of such a thing, just as it was with number portability.

So, of course, are the legal and privacy problems; the incentives for the operator to implement a platform for interesting contextual services are all about the clever things the operator could do with the data, but the strongest protections for user privacy essentially rule this out. If the user data, for example, was encrypted with a key the user controlled, the user could grant access to it for each service they wanted. But the operators will insist on being able to analyse the data themselves; or they probably won’t do it.

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Red Hat@Telco 2.0; Re-Engineering Telco Infrastructure

Telco 2.0 Comment: We’re delighted to have the people from Red Hat’s telco business at Telco 2.0. Ivelin Ivanov, their director of product development, agreed to do a guest post for us about telcos and their JBoss Java-based comms platform; it’s like a really tiny SDP that fits into products like IP-PBXs. In fact, when Ivelin demonstrated it, it turned out it was running on his laptop. If that isn’t cool, I don’t know what is.
Who would think a few years ago that the telco industry would ever reach a pace of innovation comparable to the web world? Well, it happened. Most still wouldn’t agree, but maybe pointing out a few facts will help.

Earlier this year the web thought leaders launched amazing new online tools for web mashups - Yahoo Pipes, Microsoft Popfly and Google Mashup Editor. They took over the web developers community by storm and changed the way applications are written and deployed. A new computing environment emerged.

A series of posts followed in the telco blogosphere, proposing interesting ideas for telco mashups. Some good examples came up during the O’Reilly Emerging Telephony Conference (ETel).

It was magical for me to find out that a tier one carrier was tuned in and listening to all the cool talk in town. Not only listening but also acting on it. Last week I was presented with early access account to an online service exposing telco services in a way easily consumable by mashups. Hopefully the service will reach general availability shortly and I will be able to post more about my experience with it while creating converged online services.

While there is a lot being said about creating mashups, it is less clear how one can create services that can be converged via mashups. Recently Telco 2.0 wrote about evolving telco platforms. The article argued that while Level 1 and 2 platforms are feasible and will evolve, Level 3 platforms have no future.

We would like to challenge the latter statement. L3 platforms are proven to work well in the enterprise middleware market and are starting to take off in the telco middleware space as well. At least open source L3 platforms are.

Yesterday, on the Telco 2.0 Product and Partnership Innovation track, I demonstrated a DVD Online Store service, which will show convergence of several middleware technologies - web, SOA, process management, and call control running on an integrated Level 3 service delivery platform.

At Red Hat we are working closely with several major telco equipment providers (NEPs) to embed the JBoss Communications Platform in some of their flagship products such as routers, switches, gateways and MCS (Multipoint Communications Systems). These are the kind of mission critical products that are traditionally black boxes with stringent quality of service characteristics. It used to be unthinkable to allow customization by third parties. However a number of market realities are forcing changes, impacting the way such products are created and distributed throughout the telco ecosystem.

What are examples of such market changes?

One is that telco vendors are starting to realize that they are no longer able to compete for business by offering seven-eight-digit products with 10-15 year life cycles. The IT vendors are after their market with all-software alternatives running on commodity hardware at a fraction of the total cost. In order for NEPs to compete, they need to be more flexible. They need to reduce cost, shorten release cycles and increase the number of innovative features in their products.

Telco20-blog-OSS-SDP2-1.PNG

Another market trend is driven by the emerging problem of complexity and power consumption in the data center. Increasingly enterprises and service providers are striving to reduce the number of boxes in their data centers by using virtualization technologies and integrated blade servers. Rather than adding more routers, switches, gateways, web servers and application servers as their needs grow they are looking for ways to layer them as multiple software stacks on fewer hardware instances.

The forementioned examples are among the market forces pushing telco vendors to offer L3 platforms. Their products become more attractive to end customers, who can customize and write new add-ons themselves or purchase them from third parties as needed.

Second tier equipment vendors and a new generation of hosted service providers, can now innovate faster by focusing on new features. They will leverage the bullet proof carrier grade base platforms from the top tier brands. With older generation equipment, a significant time has been spent on integration between newer services and existing hardware. Integrated service delivery platforms offer clear application management characteristics and rich sets of resource adapters, thus significantly shortening the development cycle.

The market for IP based communications equipment is growing fast throughout a broad range of markets - including small, mid-size businesses, big enterprises and service providers. The prices vary significantly between these target markets. IP PBX systems cost in the range from a few hundred dollars to tens of thousands, while IMS Elements, MCS and Soft-Switch systems can reach six to seven figures.

Some equipment vendors are starting to realize that if they can come up with a flexible base platform that can scale both in processing power and richness of features depending on the end end user requirements, they would be able to achieve enormous cost efficiency. Most ruled out the direction of developing in-house completely such application platforms.

Several have realized after extensive due diligence that partnering with proprietary middleware vendors may be a challenge because of licensing structure. It proves hard to include a $200K per CPU Communications Server in a PBX that is aimed to sell around $10-15K.

One solution to the cost saving plan is found in leveraging open source software. Since open source business models are primarily based on services and not on license fees, it is possible to structure creative deals where an open source platform is included in PBX appliances, with more basic SLA for a lower fee and the platform is included in higher end servers for a more demanding and respectively higher priced SLA.

A lot of key decisions are being made in 2007. Strategic partnerships are being forged that will reshape the layers of the telco food chain. Integrated Service Delivery Platforms are a hot topic in these discussions and one that will be talked about more often in the future.

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October 15, 2007

Ring! Ring! Monday News Analysis, 15th October

No O’Reilly ETel for you!

Telco 2.0 Comment: You’ll just have to come to Telco 2.0 instead. We designed it specifically as a reaction against the kind of conferences where all you remember is the delegate bag — although ETel wasn’t among them and will be missed.

Digital Home

Ericsson and Sony Ericsson demo “IMS for the digital home”

Telco 2.0 Comment: You may struggle to see the relevance of IMS to digital home applications - so do we. And we happen to know that some important people at Sony aren’t happy that Ericsson is insistent on pressing IMS on them. After all, you could tear part of an IMS from its rack and beat an intruder over the head with it; but that doesn’t make it a security solution.

Tech Disruptions

Broadcom fabs HSPA system on a chip.

Telco 2.0 Comment: Impressive, if still not as tiny as Intel’s latest lot of 45nm WiMAX/WiFi chipsets.

SavaJe saved?

Telco 2.0 Comment: SavaJe, the all-Java mobile OS, impressed a lot of geeks before force-landing in a field earlier this year when it ran out of money. It looks like it may just have found enough to get airborne again; if Sun has any sense they’ll open-source the whole damn thing.

Mozilla mobile browser?

Telco 2.0 Comment: Mozilla’s Firefox was the gateway drug to open-source software for the PC world. Can they do the same for mobile? Especially as the browser is currently, post-iPhone, the preferred user interface for essentially everything.

Telco 2.0 Strategy

AT&T: Mmm, spectrum…gimme spectrum

Telco 2.0 Comment: No surprise that AT&T can’t get enough spectrum. What is more interesting is that clearly, Aloha Partners was a radio version of cyber-squatting; no plan to roll anything out, just try to get as much as possible and re-auction it.

EBay needs a direction

Telco 2.0 Comment: We’re going to present some numbers at the Telco 2.0 Exec Brainstorm this week that really bear this out. Clearly, Skype was recreational M&A. Anyway, perhaps they can buy a direction second-hand on the Web?

Digital Product Innovation

VZW does mobile banking

Telco 2.0 Comment: Is it too soon to guess they won’t do it any better than all the other developed-market telcos?

Unconvincing Skype rumour suggests 3 and Skype working on handset.

Telco 2.0 Comment: Hard to say what this actually means. 3 has been offering Skype on Windows Mobile gadgets since 2006, and on X-Series Nokias since the spring; after a fashion, that is. Skype calls are treated in the normal way; 3 is hardly going to offer free Skype service without even data charges, are they? Mind you, they seem to like losing money…

Prices coming down at T-Mobile; Web’n’Walk tariffs are cheaper across the board, and there’s a daily rate for casual laptop users.

Telco 2.0 Comment: There’s no evidence they were struggling to find customers, so the answer has to be that fierce competition with 3, O2, and hotspots is crushing the margins.

Yet further gPhone speculation.

Telco 2.0 Comment: Amusingly, one of the British newspapers this weekend rounded up half a dozen investment bank analysts’ GooglePhone predictions. Variously, they suggested there would be a device, there would be a “plain vanilla smartphone costing only $140 to make”, there would be an HTC Windows Mobile device with Google branding, there would be a Linux distro, there would be an applications platform, or perhaps just Google Ads for mobile - or some combination. Some of them also suggested it would be COMPLETELY FREE! and connectivity would be included, while others suggested that operators would have to share revenue with Google “like Apple”. None of their statements contained any verifiable facts. If it costs £60 to make it won’t be much of a smartphone.

Advertising and Attention: Content 2.0

Shopping malls that send you texts!or ‘tooths…teeth?

Telco 2.0 Comment: This sounds like everything we dislike about mobile advertising - it’s so easy to be an especially intrusive and repellent kind of spam. Still, perhaps we should encourage Bluetooth spam, as you can avoid it simply by not leaving Bluetooth on all the damn’ time, which also saves power and protects you from most mobile malware.

Digital Politics and Regulation

Illegal NSA wiretapping; the plot thickens. Disgraced Qwest exec claims he sold shares because the company refused to take part in illegal wiretapping, and the government threatened to refuse it federal contracts.

Apple sued over killer iPhone update.

Telco 2.0 Comment: But what kind of hacker goes to court when they can keep hacking? One group already claims to have mastered the technique of turning an “iBrick” back into a useful device.

FTel pinged €45m for dodgy DSL dealings

Telco 2.0 Comment: Court pronounces on a dispute with two ISPs going back to 2001-2. If this keeps up, a lot of incumbents will need to make a provision for paying off aggrieved competitors.
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Enterprise 2.0: Creating new VAS opportunities for Mobile Operators

Building on recent discussions on this blog about network Mash-Ups, Graham Francis from Aepona gives us a preview of what he’ll be talking about tomorrow at the Telco 2.0 Digital Product Innovation Summit:

How to create a richer set of Enterprise service offerings using Telecom Web Services to integrate Enterprise applications with network knowledge, mobility and service reach?

The adoption of Web 2.0 concepts and technologies in both the carrier and the enterprise market will be the next major step in the evolution of Telco 2.0 for those carriers seeking to offer VAS [Value Added Services] to Enterprises.

Is it possible that the carriers could take a market position as “Enterprise 2.0 enablers”? In Aepona, we think this is the next step on the roadmap for many carriers seeking to deepen their relationships with their Enterprise customers and to further monetise their network assets in the process.

What is the relationship between Telco 2.0, Web 2.0 & Enterprise 2.0 concepts?

Enterprise 2.0 is a term coined by Enterprise application vendors to “horizontalise” vertical applications and enable new desktop (or client) applications to be created that match to the end user use case requirements. In the same way that many carrier networks are implementing telecom web services technologies to abstract a set of vertical applications towards an SDP layer, Enterprise organisations are starting to implement “Web 2.0 Enterprise Servers” to do exactly the same thing for their own users.

What is the market opportunity?

The Enterprise market represents high value services for the carrier as many of these types of customers will pay a premium for availability, reliability and quality of service. Current mainstream offerings to the Enterprise market are based around capacity and hosted services, sometimes complemented by IT outsourcing projects. The challenge for the carriers (and particularly the mobile operators) up to now has been how to offer services that can deepen the relationship with the Enterprise through increasing the scope of their service offering.

Users within Enterprise organisations, just like consumers, are seeking more openness and tailoring of information and content to suite their individual needs to compliment their job functions. In response to this, a number of specialist Enterprise vendors are now introducing Enterprise 2.0 Servers to bring Web 2.0 to the Enterprise. These Servers take web service feeds from vertical applications and mash these up to present information that aligns with the Enterprise user’s role.

For example, a customer service manager may wish to produce ad hoc reports to identify the number of visits each service engineer in his fleet makes. Perhaps additional information may also be required including repair times, travelling time, etc. Information to produce such a report may need to be sourced from several separate systems.

Taking this concept further and mashing this up with Telco 2.0 and Web 2.0 components creates more value to the Enterprise. Telco resources can be embedded with the Enterprise applications to identify the real time location and distribution of the service engineer’s customers (using Google Maps and Location feeds) to view the geography of the area covered. Perhaps then, real time mms push could be used to introduce a more dynamic way of allocating service engineers to customer calls rather than to have pre-scheduled lists.

What’s in it for the Carrier? Why should they bother? What happens if they don’t do it?

The potential for improved customer retention is one of the main benefits. Increased revenues by offering higher value services by demonstrating to Enterprise customers that combining real time network knowledge and communications with Enterprise application logic can reduce costs, improve effectiveness and efficiency and increase sales.

If they miss this opportunity to create closer relationships with Enterprise customers, then these customers may either seek to choose an alternative carrier offering a higher value proposition or lower cost services or possibly choose to bypass the carriers network using the advances in IP networking and WiMAX, etc. This could result in a gradual erosion of the Carriers role in supporting Enterprise customers towards becoming a bit pipe carrier.

How does the business case work & how does the carrier make money?

The carrier provides one or more APIs (as Telecom Web Services) towards the Enterprise customer. These can be provided and sold as raw APIs with an access and usage charge (e.g. numbers of transactions per second). Each time an Enterprise hosted application places a request upon the Carriers network to (e.g.) set up a call, send an sms, determine a users location, a usage (request) charge can be made.

In addition to this, the APIs can be packaged as part of a “Systems Integration” service offering by the Carriers. The carriers would offer SI skills (perhaps themselves or in partnership with an SI vendor) to create “telecom web services call outs” from Enterprise application logic towards the APIs exposed by the Carrier. This may also need the Enterprise customer’s applications to be “WS enabled” and ESB products from Vendors such as IONA could be use to integrate back end Enterprise applications with the carriers APIs.

What are the types of services that could be created?

• Broadcast of newsflashes using sms (mobile terminated) for such things as customer updates, sales updates, traffic information, etc.
• Real time allocation of tasks to mobile field service engineers relative to their physical location
• Real time management for distribution of perishable goods (e.g. groceries, confectionary, cement, etc.) in environments where traffic congestion is a problem
• Application initiated calls for debt recovery/bill payment
• Click to call features for Enterprise web sites
• Secure access to back office enterprise knowledge and information systems using carrier authentication systems
• Targeted distribution of information to enterprise workers
• Collection and broadcast of near-live media to emergency workers and news reporters
• Adding Q.o.S to create reliable messaging, guaranteed bandwidth, etc.

Summary

Through adopting a 2.0 service layer architecture, carriers can now exploit the advantages they have in broad coverage and reliable networks. These can be combined with systems that enable easy integration with Enterprise applications to extend the intelligence of the application with knowledge about the end users status and location. Enterprise applications can then become “user context aware”.

This is what telecom web services can offer. Creating levels of closer integration between carrier networks and enterprise business logic means that the benefits the Enterprise gets from choosing a carrier that does this means it is less likely that Enterprises will switch carriers on the basis of price only.

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October 12, 2007

Home Monitoring - Liberating not enslaving our children

Intamac, a UK-based specialist in home monitoring and control services, is one of a select group of exhibitors in the Innovators Zone next Thursday at our Digital Home Summit. Kevin Meagher, their CEO, will be doing a demo of a web-enabled platform that allows telcos to enter the lucrative home and business monitoring market in a way that complements triple-play strategies.

We asked him to give us a some context for his demo:

These are strange times for parents. We live in a world where a child is mysteriously snatched from a room whilst her holidaying parents eat dinner a few metres away whilst teenagers shoot each other in the inner cities. We know rationally that there isn’t a child snatcher or gun-toting `hoodie` hiding round every corner. But we increasingly behave as if serious threats to our children are all around us, just waiting to catch us unawares.

The everyday stuff of our own youth such as walking to school alone, playing in the streets, crossing the town unaccompanied or just going off to play with friends now seems to pose huge dangers.

A recent report from the UK Children’s Society warns that parents’ fears about safety are stopping children from playing outdoors unsupervised. And, unsurprisingly it shows how today’s parents are not giving their children the freedom to roam that they enjoyed in their own childhoods in the 1970s.

Why are we such paranoid parents? Why do we worry at the idea of our confident, outwardly worldy mobile using, Powerpoint presenting, technology-savvy kids even walking on their own to school - when we were making our own way at even younger ages?

Maybe it’s because we live in a society where it’s difficult to gets things in proportion and where insecurity is pushed at us from all directions.

With a background of car alarms, police sirens and the continual media diet of bad news and sensationalism we are driven to form a particular view of reality - that seldom accords actually with our own experience. What we know rationally to be the exception feels more like the norm producing an unrealistic view of the potential threats that may surround us.

But because we care most about our children, we worry most about them. And in the UK the amount of time we spend worrying about them is increased by a vigorous nanny state foisting ever more intrusive health and safety legislation upon us, fear of litigation and a growing compensation culture.

This means that parents and teachers alike are less and less likely to take the responsibility for supervising sports days, school trips or even neighbourhood activities. It’s this that further isolates children from the sort of life experiences we enjoyed. Climb a tree? You can’t be serious - just think of the potential consequences!

Of course there are real worries - like danger inherent in the vast increase in road traffic in the last 30 years. It’s true that scores of people are injured by hit and run drivers every single week in our major cities. But then of course our offspring aren’t being conscripted to be slaughtered in vast numbers in world wars or dying en masse of childhood diseases either.

What’s the root cause that makes our generation of parents seemingly too fearful to let our children play out of our sight? Maybe it’s because we might know a lot about the security situation in Afganistan and the current vagaries of the financial markets but do we don’t know who lives in our street. We’re isolated and isolation breeds suspicion. And so much of our isolation has been made possible by the technology that we surround ourselves with - cars, radio, television, video games and so on - that put up barriers to real communication.

We see this effect even in our traditional attitude to the systems we choose to monitor our own homes. Such systems certainly serve to isolate us further, so it’s a moot point as to how effective they are. Sirens so loud that they are designed to attract the attention of patrolling police vehicles heighten anxiety and systems link directly to remote control centres by passing those around us. That is until the latest false alarm causes the police to refuse to attend and further activations further increasing our fear.

The last thing we think of these days is involving our neighbours in the protection of our property and, by implication, our families. Yet by using the right technology we can start to reestablish the sense of trust and mutual dependency that underpins the strongest of communities. Indeed it can give us structure and information that will keep the worst of our anxieties at bay.

We can’t return to past but we can take advantage of what’s available now to try and restore some balance in our lives. For instance, the same technology that often serves to divide us can be a platform to unite us. If an automated internet-based system can send you or your neighbour a simple text or drop you an email when a family member returns home and knowing this you or your neighbour can call round or even have a quick check in a web cam to see what they are up to when they return, we might start worrying a whole lot less and begin to convince ourselves that we shouldn’t become prisoners of our own paranoia.

Then we might be more ready to take the risks that will enable our children to be released from being enslaved by a sedentary existence that extends little beyond the confines of the car, computer and television.

Time for us to work together so our children to get out and about again. Just don’t get me started about the threat from virtual worlds…

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October 11, 2007

Mobile Advertising - Telecom TV Panel

In preparation for next week’s Digital Advertising and Marketing Summit, here’s a panel we ran with Ogilvy and the Mobile Marketing Association, who’ll be amongst the stimulus presenters and participants on Tuesday.

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October 10, 2007

Will Video Kill the Telecoms Star?

In preparing for the plenary brainstorm next week we’ve come across a couple of useful items. The first is a report just out by Bain for Liberty Global on the European Video Content Market (99 pages here, but summarised for you below). The second are some recent ‘strategic presentations’ by BT (‘Generating Revenue in the New World’) and Accenture (‘The First Trillion Tridgets’) given at a public conference a few weeks ago - both available here.

The latter demonstrate a couple of things. Firstly that BT definitely knows where the future lies - it’s in the ‘platform’, beyond just APIs. Secondly, the big advisory companies like Accenture are heading in the right direction too, although they haven’t quite worked out what the business model for the platform is (it’s an open issue!) or how to describe the wider set of assets the telcos have to make it into a true commercial growth story. As you’d expect they’re also very good at not confusing telco execs too much, and using some gimmicky phrases to differentiate their ideas. Accenture’s are ‘pods/plexes/pipes’.

The trouble, of course, is that this sort of framework for thinking about the future environment is based on technologies not business models. There’s a lot more strategic commercial richness in each of these areas, especially the one people shun quickest - the ‘pipe’. (We’ll reveal our thoughts on this next Wednesday, and continue the debate on this blog).

One view is that a lot of telcos will have to surrender to BT in the next few years in an IT arms race. They’ll have the networks, alright, but won’t be able to keep up with building the IT and services platforms. BT’s competition is indeed Google (as their CTO said, slightly unguardedly, last year) and the Googleplex’s incredibly low cost of operation. Some thoughts on how BT might like to tweak it’s Global, Open and Real-Time product strategy are here.

So, back to Bain research and video: ie what might fill the pipe and need supporting by a platform:

We have to say that the report seems eminently sensible. It suggests that we’ll see an evolution in video content usage in the next 5 years rather than a revolution. To quote:

“Evolving Market scenario: In our view, this is the most likely scenario. The video content market evolves towards “Next generation” [More radical usage patterns based on On Demand models]. Consumer viewing habits undergo a gradual change. They move from analogue to digital TV and start adopting digital TV on-demand. Growth continues at historical rates (4% to 6% p.a.), fuelled by broader distribution of content and new video viewing opportunities. Profi ts start shifting from traditional players to new media competitors, but traditional business models are still profi table. Video piracy is an issue, but unlike in the music industry, it is not such a fundamental threat that it prevents content owners from making programming available online. Investment continues in content quality, distribution infrastructures and innovation.

There are six key reasons why we see “Evolving” as the most likely scenario:

  • Watching TV is very different from surfi ng the Internet—a “lean back” vs. “lean forward” experience—and there is little evidence that Internet usage is cannibalising TV viewing today;
  • In the next fi ve years, alternative technology solutions for viewing video content will make real progress in terms of viability for the consumer. However, it will take time to catch up with the “lean back” experience of traditional TV. In particular,Video on demand (VOD) based on TV (or IPTV) will be likely to offer a superior experience to Internet-based VOD for most or all of the period;
  • Youth behaviour is changing, with viewing shifting towards new Internet VOD models—but the impact will likely be limited in the period through to 2012, since the demographic changes will take time to fl ow through and also because experience suggests that only some youth behaviour will carry forward into later life;
  • In the short term, content creators are unlikely to actively promote the development of Internet-based on-demand platforms at the expense of TV-based platforms. However, they are likely to experiment with all channels to get their content to customers;
  • Equally, we believe industry players along the value chain (content creators, aggregators and distributors) will be successful in rethinking their business models and regulators will provide policies aimed at avoiding extreme outcomes;
  • The regulatory framework in this scenario is assumed to be one that follows market trends rather than aggressively steering towards a desired outcome.

Over the next 10 years (to 2017), the natural development of the “Evolving” scenario would lead to “Next generation.” The main constraints to the “Next generation” scenario coming sooner are infrastructure roll out, and scale.”

The report concludes: “Gradual change does not mean that established industry players can sit back and do nothing. Quite the opposite: They must position themselves now to remain competitive in the future. The consumer’s increasing power raises the stakes. To keep this empowered viewer from defecting, content quality, content aggregation and a superior customer experience are more important than ever.

This means traditional players will need to raise their game to compete in this market.”

“Will Video Kill the Telecoms Star?” is the question we will be debating next week with Liberty (incumbent triple player), Akamai (CDN) and Carphone Warehouse (broadband market disruptor) stimulating us with their thoughts and responding to our survey results on video distribution sytems.

We should have an interesting time interrogating just how the ‘game’ needs to be raised next week and beyond.

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October 8, 2007

Nokia’s dilemma: operator friend or foe?

One of the interesting questions in our online survey on the future of broadband is “who will own the network?”. The current results for cellular-style networks look something like this:

The points of note are that a lot of people think the mobile operators need to increase their efforts at sharing networks; and Openreach-style regulated structures from the fixed side aren’t so popular for wireless. (If you’ve not done the survey yet, you’d better click here quick and contribute your opinion too — and you’ll be on the mailing list to get the free summary results, which you won’t otherwise get.)

However, one respondent came back and asked me why I didn’t offer the handset providers or network equipment makers as an option (at least we had an “other” box!). Which set me thinking — why would someone vertically integrate the different parts of the mobile value chain? This is distinctly topical since Nokia has been busy entering the services space with its Ovi music and entertainment store (which potentially competes with operators, even if not intended to). They’ve also just bought Navteq, which offers an opportunity to bypass operators by baking the mapping data into the device.

We’ve done extensive work in the past for the mobile handset vendors on the co-opetition they have with network operators and how to manage that in an all-IP world. So let’s ponder Nokia’s situation and what their “Telco 2.0” strategy ought to be. Despite their protestations of being an Internet multimedia services company, they’re still a mobile phone maker at heart, and their destiny surely depends on how the core voice and messaging experience evolves. (This will also be the focus of our debate at the Digital Product Innovation Summit at the Telco 2.0 event next week.)

You are old, Father William

Despite the pace of change and the uncertainty of who the winners are, technology revolutions follow predictable cycles. Geoffrey Moore documented this in Crossing the Chasm, where new business models and value configurations (products, supply chains and sales channels) take time to catch up with the possibilities the underlying potential of the technology offers. The economist Carlota Perez has also extensively documented the consistent cycles of technology revolutions and is a recommended read.

Nokia is in the position today where maybe the Ford Motor Company was in the 1950s or 1960s. The product has revolutionized society, penetrated the whole market base outside the developing world, and become part of life’s invisible backdrop. Whole secondary industries have grown in its wake. It is a mature industry. And you’re the best.

The next, predictable, phase is upon us. The design focus moves away from features that exploit the underlying technology. Instead, the winning strategy is economy — not just of money, but also user time and effort. That means focus on what the user really wants. For example, lots of handsets might take great photos; the one that gets them into the hands of my friends with the least effort on my behalf is the winner. This is not easy for Nokia to supply with their existing organization, products or distribution channels. Luckily for them, nobody else has all the puzzle parts worked out either.

The problem is that the core handset product is also remarkably similar to a 1950s American car: appealing to the eye, laden with gadgets, but fragile and difficult to use. Furthermore, the design effort is going into the secondary features of the device. For the mobile phone, the core personal communications experience remains mired in the 1980s (if not the 1880s, with added direct-dial and no cord).

Nokia is vulnerable to a Toyota of telephony that focuses on the core user requirement and discards the chromed tail fins. And having stood in an Apple store and played with every icon on the iPhone, I think that moment has arrived. Google might just come along for the party and play the role of Honda too.

The way Ovi has been positioned at its announcement could prove to be a mistake. It will confound Nokia’s efforts to address and bring to market answers the most important unmet user needs. Ovi annoys Nokia’s most important go-to-market partners for any new and better personal communications services. It is an attempt to verticalise Nokia into the services business, but picks precisely the wrong place to do it. It’s Club Nokia 2.0, only worse.

Content is still not king

As someone involved in conceiving the Nokia blogger relations program, I’ve been passed many N series handsets. They are all wonders of consumer electronics. Almost all the memories of my childrens’ early years were captured on an N90, because that was the device right with me every day. Lifeblog is a godsend. (Although why E-series users are excommunicated is a mystery.) No longer do I have a dozen folders of pictured uploaded with names like “March 2006 TO SORT”.

The multimedia features have been a necessary step in the evolution of the device. Beating the technology constraints of converged devices keeps Nokia in a small class of elite vendors, and margins high.

But it’s not solving the real user crisis, just as the electric heated front seats and retractable sunroof weren’t the answers to the problems of Detroit. More megapixels won’t make Nokia the king of the hill in future either. What the iPhone does is cuts the crap, and makes the rest really easy to use. Just go look at the email application. Are you with Google, Yahoo, AOL or MSN? Then just enter your username and password, we’ll do the rest. None of the above? Only then are you confronted with the POP3 and IMAP buzzwords. (Apparently Sony Ericsson have this sorted too.)

Contrast this with Google Mail on my E60 where I’m asked every time if I really want to access the network and how I want to do it. Without the carriers’ acquiescence, the user experience is likely to remain broken. The “over-the-top” experience of running applications on Nokia phones leaves a lot of sharp edges and visible seams. It simply isn’t ready to go up against operators’ own baked-in packaged experiences, much as we like to throw stones at their portal and product efforts.

Communication is king and presence is a prince

At Nokia’s own internal thought leadership conference in Helsinki nearly two years ago they had Andrew Odlyzko, mathematician and Internet philosopher, explain the future dynamics of the Internet and broadband. One central part of his thesis is that communication is king; content is secondary. When I take a photo of my kids at the zoo, and share it with my parents, that’s communication, not content.

Douglas Galbi (an FCC economist) takes the model one step further, with three basic modes of communication: presence (the sensuous sense of the other person being with you, as social bonding); storytelling (which includes the narrative of a game, the lyrics and emotions of a song, or the scenes of a movie); and pure information transfer (I want a taxi! What’s tomorrow’s weather?).

“Presence” (which here includes gossiping on the phone as you drive home, not just smiley on/off icons) is what users have historically been most willing to pay for. We’re still just hairless apes with a tribal grooming instinct.

The media industry is small. Game software, movies and music globally don’t add up to SMS revenues alone. Nokia is betting that this storytelling mode of communication is going to be a winning proposition, and wants to insert itself into the deeply troubled value chain of media content delivery. This misses out on huge opportunities to fix the user experience in the other ways we communicate.

It’s a monkey business

Retailed mass media content has proven successful when consumed as a social signal - like ringtones and callback tones. This is a form of social grooming, and a subset of presence - you’re getting a distilled extract of the other person’s character or self-image. But most media trinkets are packaged and sold for individual consumption as narratives. This is not the business Nokia should be in. Nokia is in the business of — guess? — Connecting People. This is foremost a presence business. The most compelling content is “I love you” and a little flutter of the memory of a kiss and your lover’s scent. That’s not available as a download. (Hint: mobiles are popular because they have an affirmative answer to “will this help me get laid?”)

Remember the day at the zoo? Nobody makes a satisfactory product yet for me to share the experience. It’s sure not MMS. I should be going round the zoo, snapping away, and each picture should become the new backdrop on both Nana and Grandad’s phones, as well as being downloaded to their digital picture frame at home. Yet who is going to integrate, retail and support such a product? Who will distribute it? Who do you depend on to embed 3G or WiMax or CDMA into each new connected appliance?

What is remarkable is how little we know about why people make phone calls or send messages. Yes, there are studies which look at the outer layer of the onion and classify them into “keeping in touch with family”, “meeting up with someone”, etc. But the underlying user needs are poorly understood. Re-thinking the personal communication experience will take a lot more than the bland assurances of the unified messaging industry. Nokia has better customer insight than the competition. If you’re a mobile phone company, you’re in the business of delivering better telephony.

If it is broke, fix it

It isn’t hard to think of ways in which the current core functions of a mobile handset are horribly broken in the eyes of users. Forget the idea of these being little multimedia computers. You’re chroming the tailfins again. Nokia has to yet to build an acceptable telephone. And it’s taken Apple to come along, release a cruddy 2G phone with zero “computer” features (download an app? nope!), and fix one of the deep problems of standard telephony: the voicemail user interface.

Some of these needs are mass-market and horizontal. For example, we’d all like to know if the person we’re calling is already in a call, so we don’t interrupt. Many of the calls that do get through are (if we’re stealing from the Toyota metaphor) muda or waste. Manual transfers of location, status and availability data. “I’ll be there in five minutes.” “Is Bobby there with you?” “Is this a good time to interrupt?”. Rather than five-nines of success, telephony offers no-nines as perceived by the user. Many of the phone calls performing information transfer should be eliminated.

The “presence” and “information” features described earlier are weakly supported or absent. I can’t send my wife an “I’m thinking of you” vibrate buzz of her phone - only if she’s wearing the device. I have to send an SMS, which makes the phone beep loudly whilst charging up in the hallway, wakes the kids from their afternoon nap, and has her rushing from making dinner to see who is trying to get hold of her.

Everyone is familiar with the frustration of dictating basic personal and payment data to bored call centre operators who then frequently mis-transcribe those details. Why are we still insecurely encoding this data through the humans at either end using voice?

In summary, a mobile phone is an adequate “social presence” device with lots of room to grow; a weak information transfer device, with lots of potential; a fantastic device for capturing personal narrative; but only average at enabling the consumption of personal narrative. It will eat the iPod, but nobody will care much as there’s no money in music compared to the previous use cases.

Learn to love the network operators

Many of the features needed are niche. It would be a useful feature for my phone service to intercept incoming calls in the night (if the device isn’t being worn on my person) and announce “the local time of the person you’ve called is 4.23am. If you wish to ring the phone, press 1. To leave a voice message, press 2.” But for someone who is a shift worker, and works in the day, such a feature is far more attractive. Yet how can you reach such an audience? How can you market such a service?

Vertical integration in the telecoms industry is dissolving. Our own Telco 2.0 analysis is that the outcome is likely to be a variety of horizontally focused companies in the operator value chain. There are five basic telco strategies in the portfolio:

  • Pipe: Managed infrastructure services, such as Ericsson have successfully pioneered, with economies of scale.
  • Product: Companies with economies of speed (through processes that rapidly productise new technology). Few telcos are placed to do this - even Vodafone shut down their future products lab.
  • Protection: “Legacy” (though vast) voice and telephony business whose lives are extended through gentle feature and commercial innovation.
  • Platform: Companies that act as the IT integration glue and offer the business services to enable external third party innovation to get to market.
  • Packaging: Customer-intimacy companies that assemble user propositions which include devices, connectivity, content and application services. These have economies of scope (such as how Tesco uses grocery retail to target financial services).

Today’s operators try to be all of these at once. It won’t last. Nokia and Nokia-Siemens Networks have an opportunity to use the unbundling of the operator business model to drive home a fundamentally better core communications experience. Many operators are going to mutate into platform (and pipe) businesses as internally-driven innovation proves inadequate. Is Nokia going to supply that platform? Because you’re unlikely to operate it. There are just too many good ideas around to be able to implement them all.

Goodbye handsets, hello user experience

It’s already a cliché, but the job of Nokia is to create fantastic user experiences. I personally believe that the biggest unmet needs are in the core voice and messaging franchise. There are stiff technical challenges, which means an opportunity for vertical integration. You may need to create a tight integration between the RAN, application service and handsets. Flarion’s OFDM network was a step in this direction: support the chatty, bursty presence data of IP, not peak download speeds like CDMA or UMTS optimize for. To keep battery life up, the SIP server might bunch up presence updates to be sent to the phone; a pure “Internet” approach assumes all edge devices have infinite processing power.

For Nokia’s handset business, together with Nokia-Siemens Networks, this should be a golden opportunity. Who else has the core and edge assets, the scale, the engineering capability and the brand to do it? Furthermore, by embracing “open” as a platform play for the core voice and messaging products, Nokia can outflank Apple’s control culture.

The rub is that you can’t do this by disintermediating the network operators. The future does not solely belong to “over the top” applications like Skype. They are going to be large and powerful, but the ability of operators to put together a fully packaged offering to users that integrated pipe, platform, product, and the protected legacy services is too potent. You need to work with them to create the next-generation of freephone 800 number, the “smart” premium SMS service that also integrates identity, profile and preferences, and so on. It’s going to be a team effort, requiring help from players like Acision on the messaging front.

You aren’t in the multimedia computer business

Nokia has the best supply chain and engineering in the mobile handset space. But going forwards, Nokia needs to become a different beast: an original services manufacturer. It’s the services that the users value most, well above the budget for a sexy new handset. The iPhone has up-ended the economics of handset subsidies by tying a superior service into the device. Nokia must respond: it’s a life-or-death challenge.

At first sight, Nokia is heading this way. The problem is that Nokia is operating the platform and also creating a rival consumer (rather than B2B) brand that competes with that of the operator. It might be aimed at tier 2/3 operators who don’t want an in-house portal, but that’s not how the tier 1 operators will see it.

There is already a precedent to building a white-label service. Which operator (until recently) had the highest ARPU and customer satisfaction? Answer is…. Nextel. Motorola built a custom push-to-talk service, where the handset, network and software worked together perfectly to solve a core communications need. The era of that particular product is past, but the lesson lives on. Amp’d and Helio have shown there’s revenue (and a ton of bad debt!) in better integration of device and service. Why not rise to the challenge?

The opportunity for Nokia is to build the “white label” services that the market-focused operator or distributor can then customize, segment and sell on. The most important of these are the ones that improve the core voice product. Nokia will win this race because the platform has increasing returns to scale. You can start somewhere like India where you have majority market share, and roll out a de facto next-generation personal communications experience. All the ingredients are already out there in the raft of “2.0” voice and messaging start-ups.

Many of these white label services might even be given away or deeply subsidised. Music stores, enhanced voicemail systems, smarter messaging servers are all complementary goods to mobile handsets. Do what IBM did with Linux, and scorch the software earth that rivals stand on by giving away their part of the puzzle. The handsets are the razor blades, the network service the handles.

If it’s a fight, then fight to the death

If you’re serious about Ovi, and want to re-verticalise into Nokia-operated services, you’re going to have to fight smarter and better against the carriers. Why doesn’t PC Suite sync the Wi-Fi settings from my laptop to my phone? Why can’t I provision Wi-Fi from my laptop, rather than having to triple-tap passwords? Why doesn’t my E60 work with my Netgear MIMO access point? Why don’t you just give away a pre-provisioned Wi-Fi access point with every N series phone?

Bypassing the operators is going to be hard. You’d have to merge with Google, buy up spectrum, and in-source the core operator capabilities from some tier 2 operator who needs the dosh. It would be audacious, and probably wrong.

At the moment Ovi leaves you caught between the two options of fight or flight — and that won’t work.

The alternative is to win together with the operators. Re-examine the user interface to see where it can more easily up-sell a phone call from a message or a calendar reminder. Work to see what causes customer care calls, and how they can be mitigated or eliminated in the handset. Where’s the handset that shows your low pre-pay balance and makes it a one-click to top up?

Make love and war — together

That means working with the operators to overcome their structural issues; producing products that align with the horizontal industry structure; and not undermining the operators to gain pyrrhic wins in secondary markets such as music distribution. The value is in the data and the customer relationship, and the operator controls that.
Unless, of course, you actually want Apple or Google to mediate all phone conversations the same way iTunes is the nexus of music distribution…

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Digital Cities - Better Private-Public Collaboration for Broadband Access

If we believe there are significant social as well as economic benefits from providing very fast broadband access to as many people as possible, then we need to think of new ways to make it happen. And that means new models for private-public sector collaboration, as the current approaches are not effective.

That’s the background to the Digital Cities Summit next Thursday at the Telco 2.0 event. We’re delighted to have a stellar cast of ‘stimulus presenters’ who are all bringing new analysis to the table. The aim of the brainstorm is to define some clear Next Steps guidance for those involved in broadband provision to citizens in Europe.

In practice this will mean turning the output of the brainstorm into a report that will help clarify the partnership approaches needed between telcos, government (local and central), physical infrastructure providers, regulators, financiers and vendors; new revenue opportunities, growth areas and approaches to business cases; ideas for alternative funding vehicles and risk sharing; and overcoming go-to-market issues on public-private initiatives.

So, all brainstorms need a good structure, and we start by looking at: “Where’s the Value from Pervasive Access to High-Bandwidth: the real Economic and Social Benefits…and Costs?”

We then try to bring this to life with examples from different sectors: Healthcare (the UK’s National Health Service), Environment (via research into role of broadband in supporting sustainable urban development), and education.

Next we look outside of the communications industry to see what we can learn from PPP/PFI approaches in infrastructure development in other industry sectors.

Finally, ideas from those with practical experience from multiple sides of the fence about how service providers and the public sector could collaborate better to fund access and services. (What do municipalities need to do to be more friendly to investment? What do operators need to do differently to engage municipalities? Should municipalities operate independently from central government at all?)

Output from the event will provide good material for our partners, INEC’s, International Broadband Cities 2007 Conference in The Netherlands on 14th and 15th November.

This brings together 25 international visionary leaders from the political and industrial spheres to share their experiences, strategies and policies on broadband in relation to economic growth, social inclusion and sustainability under the comprehensive title: ‘Cities Planning for an Attractive, Sustainable, Competitive and Socially Inclusive Community of Tomorrow’. More details here

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Ring! Ring! Monday News Analysis, 8th October

As a preview to the Telco 2.0 event next week in London, here are some relevant news items from the last week to help stimulate the furious debate among the participating cognoscenti:

Ever wanted to physically wave a game controller round your head? Now you can, thanks to Nokia researcher Paul Coulson.

Digital Cities

WiMAX is coming: to 50 UK cities as Pipex expands and rebrands.

Telco 2.0 Comment: Like Urban WiMAX in London, they are playing up the fast uplink and targeting big senders of data; this is an underserved market thanks to the Telco 1.0 belief that the Internet is like TV, and that users who send as well as receive are somehow illegitimate.

Even more WiMAX: Nokia’s next Internet Tablet to get an Intel WiMAX chip, and GPS too.

Telco 2.0 Comment: That starts to sound a lot like a WiMAX mobile device…Intel leader in Europe, Gord Graylish, will enlighten us at 4.30pm next Wed

Pressure on Forsee at Sprint: perhaps calling it XOHM wasn’t such a good idea…and Clearwire gets hit by the shrapnel.

Telco 2.0 Comment: Despite all this WiMAX activity, there’s trouble at Sprint Nextel. Perhaps all the new stuff has caused them to take their eye off the ball? It’s especially interesting that the market associates it with the WiMAX project, as shown by the fact the trouble also hit their partners, Clearwire.

Digital Home

Orange: picocells are the future.

Telco 2.0 Comment: Didn’t we say they were good at boxes in the living room? Better, we’ve got the man responsible for their STB innovation coming to the Telco 2.0 Executive Brainstorm.

BT makes FON a lot more useful, by signing up all its Wi-Fi users.

Telco 2.0 Comment: This is almost certainly the cheapest way to really boost your footprint, and the network value to your subscribers. Who would have thought, back in 2001, that BT would soon be a community WLAN insurgent?

Digital Product Innovation

GooglePhone nonsense, remixed! Apparently it might be a mobile Linux distro. Or something.

Telco 2.0 Comment: Arun Sarin has the most sensible comment on this: “Why would you do this when there are so many ways to reach Google?” Indeed. Relatedly, O2 announces Mobile MySpace - to put it another way, the devices have browsers and Internet access. Innovation does not mean press releases.

Multi-core mobiles: ARM announces new chips.

Telco 2.0 Comment: The intelligence is trying hard to move to the endpoint…

IMS: needs another IMS on top of it

Telco 2.0 Comment: According to Brough Turner and participants in a conference, IMS only deals with the transport layer and needs further standardisation at the applications layer. Still, maybe they’ll find a use for it next year…or the year after that…

Telco 2.0 Strategies

Vodafone buys more Tele2 fixed-line assets.

Telco 2.0 Comment: Assembling the total communications proposition

The cost of freedom: embarrassment.

Telco 2.0 Comment: Funny of the week. Australian records risque ringtone, phone rings in court, much amusement…for everyone else.

Safaricom to IPO.

Telco 2.0 Comment: call your broker for the float of a big, fast growing, highly innovative emerging markets operator! Mind you, there are some really worrying issues around the original privatisation; which is a pity for the creators of M-PESA.

And 30 per cent of some emerging market calls are deliberately missed; it’s a form of presence signalling for when you don’t have any money.

Digital Youth

A denial-of-service attack on reality: Bruce Schneier on fraudulent child kidnapping alerts.

Telco 2.0 Comment: Remember, if you make it easier to communicate something, more of it will be communicated, for good or ill.
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Going Over The Top: MXit

Mixit is the root of all evil whether controlled or not…Hermanus - (creator of mixit) I hope you sleep at night cause I’ve prayed many times that the fleas of a thousand camels with infest you!! (Link)

Surprisingly, this remark about South African hit mobile messaging app MXit didn’t come from a telco marketing director. Neither did it come from a telco data network engineer struggling to cope with demand. In fact, its author was more worried about the content of messages than their quantity; but being common carriers, of course, telco people should be quite the reverse.

And MXit should be giving you nightmares. Since its launch in 2005, the service has been recruiting users at a rate of 10,000 a day. It’s one of the first examples of a really successful over-the-top strategy in mobile; the heart of the service is an instant messaging client that uses the mobile packet data channel and the Internet. But as you will see, it’s far from being “just” mobile IM.

MXit is coded in Java2ME and is therefore broadly cross-platform. Messages are limited to 2000 characters, slightly but significantly more than an SMS, but sufficiently small that it works on all levels of mobile data service - all the way from HSDPA down to circuit-switched data. It leaps over several of the major advantages of telco products; for example, it’s interoperable, dammit.

MXit’s developers chose to base the system on the open-source Jabber protocol and the ejabberd server implementation of the same, which means that it can exchange messages with a full range of commercial IM products - MSN, Yahoo!, ICQ, AOL and Google Talk. This also means that it leaps the PC/mobile boundary; there’s a version to run on a PC (in an emulator, it has to be said, but there are people working on it in the developer community). On the most recent version, traffic is AES-128 encrypted.

The commercial upshot is dramatic. Consider these quotes from users:
The point that needs discussion is why aren’t the Cell Operators reducing theirs SMS/MMS tariffs? How much can it possible cost to relay a couple of text characters across the network? 80c?? That’s INSANE. It should be around 1-5c, if not completely free!
Even at typical cellular data prices (i.e. not 3UK!), it’s becoming impossible to disguise that although SMS is cheap, there is a vast gulf between the price charged to users and the cost of production. This is a classic Telco 2.0 phenomenon - as the cost of bandwidth falls, more and more of operators’ revenue consists of economic rent, and as subscribers become aware of this, it is competed away. From the unofficial MXit blog:
MXit fan has found the following regarding MTN, Cell C, Virgin and Vodacom’s internet data rates.

MTN charges R2 per megabyte of data tranferred.

Cell C charges R2 per megabyte of data transferred.

Vodacom charges R2 per megabyte of data.

Virgin charges us 50 cents per megabyte of data.

We are now able to chat using MXit at 75% cheaper rates than before using one of the above Mobile Service providers. Guess which sim card I am going to buy?
Even at 2000 characters, there are a lot of messages in a megabyte; the fact that Virgin, a MVNO, can make money selling data traffic at 25 per cent of the mainline network price should illustrate more than anything how much rent there is for MXit and others to attack. (Leaving aside the eerie similarity in pricing between South Africa’s allegedly competing operators.)

Here is the rub; over-the-top applications and communities are a powerful competitive advantage for bit-pipe operators, because their users are fanatical about cheap data. But, of course, that doesn’t mean you can necessarily make money out of them…

So, if MXit doesn’t make money from the client (it’s free), or the messaging (it’s free, and the data charges go to the operator), what’s the business model? Well, the news is that it seems to be emerging as a platform; MXit already has its own currency, Moola (it’s equal to one South African cent), and an e-commerce portal called Tradepost. To begin with, this is mostly used for bonus services (transferring files, mass messaging, and saving data on a central website). But the potential for a wider commercial ecosystem is clear.

The userbase currently stands at 4.9 million and 200 million messages a day, which compares not too badly to some operators. In November, 2006, roughly half the then 2 million users were between the ages of 12 and 25, with roughly half this group being between 12 and 18. Now that’s what I call digital youth. MXit management has a stated mission of reaching 2 per cent of the GSM phone population by 2008; that sounds unlikely to say the least, but perhaps they mean GSM phones in South Africa. There are 38.7 million subscribers in South Africa, so either their expectations have been blown to pieces, or someone’s missing a zero.

Further, MXit’s most recent version shows signs of taking over the device’s interface with the user; you can now play back MP3 and MP4 files from within the client, access the phone’s local filesystem from it, and (if you’re a Nokia S60 user) use the phone camera from within it. They’re not just going over the top of the telco, but the handset vendor too.

More on how to deal with these threats at our Digital Product Innovation Summit next week

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October 7, 2007

Interview with Vodafone’s new MediaSolutions! Group

We are delighted to have Frank Boulben, New Business Development Director, Vodafone Group speaking at the Digital Advertising and Marketing Summit next week to update us on the vision the company has for mobile advertising and the steps they are taking to realise this.

Recently, we were also lucky enough to interview Burkhard Leimbrock, Director Vodafone MediaSolutions! about the new unit set up to support the advertising effort in Germany. We sent Burkhard a list of questions by email (so they could be vetted by the PR department) and his responses are below - lots of interesting stuff but also tantilisingly brief in some respects! This Unit is one of Vodafone Group’s many experiments in mobile advertising and marketing. It will be interesting to see how this capabilitiy is developed and whether or not it will eventually serve the wider Group.

Telco 2.0: What is the purpose of the new MediaSolutions Group within Vodafone?

VMS: We have laid this out in our website which says:

Vodafone MediaSolutions! handles all of Vodafone D2 GmbH’s ad marketing and commercial partnership integration business.
Join forces with Vodafone MediaSolutions! to reach attractive mobile, online and offline target audiences in the Vodafone/Arcor MediaNetwork!.
You can count on us and our marketing partner Gruner + Jahr EMS to provide you with competent advice and support for the development and implementation of innovative, integrated campaigns and partner concepts.
[Ed: The website also has some interesting stats about Vodafone’s German operations: “The Vodafone live! mobile platform has 3.8 million unique users and generates 490 million page views per month. It is by far the most successful mobile phone portal in Germany. On our online portals (www.arcor.de, www.vodafone.de , www.vodafonelive.de ) generate a total of over 400 million page views every month, providing access to 3.5 million users which we’ll be happy to arrange for you.”
Also, buried on the website is the Vodafone rate cards with pricing details for their on-line portal and, if you navigate on the menu on the right, more details on their Digital TV and Mobile offerings.]

Telco 2.0: How big is the team and what specific functions does it perform?

VMS: We started with 0 teammembers in May 2007. Now, at the end of September we are five and at the end of the year we would like to be 10 FTE. Functions: 1 Head, 3 Senior Managers Partnerships and New Business, 1 Senior Manager Business Development, 1 Senior Manager Marketing, Research and Communication, 2 Manager Mediaservice, 1 Manager Admanagement, 1 Senior Manager Project Management + Controlling

Telco 2.0: Why did Vodafone choose to develop this internally rather than outsource this capability?

VMS: We have outsourced a lot of activities to external Adsaleshouse G+J EMS and they have more than 60 employees. But we need a lot of internal staff for managing inventory, crossmedia packing, controlling, client orientated presentations etc. We sell Mobile, Online and Offline inventory.

Telco 2.0: What plans are there to expand the future role of the group? What could the group look like in 3 years time?

VMS: We can’t speak for the whole Vodafone Group. But in 3 years we would like to reach the following goals for Vodafone MediaSoultions! in Germany:

  • Excellent team with deep knowledge in mobile marketing and interactive advertising for reaching a world class service for media agencies and advertisers, which would like to use the Vodafone/Arcor Medianetwork for reaching their target groups.
  • Positioning of Mobile Advertising in the market as a standard media beside from TV, Radio, Online, Print.

Telco 2.0: Does Vodafone have plans to become a major media player - similar to a newspaper, broadcaster or portal?
VMS: Yes!

Telco 2.0: Which partners are the MediaSolutions Group working with? What new partners are you seeking?

VMS:
* AdsSales House: Gruner + Jahr Electronic Media Sales
* Arvato Mobile for Mobile Adserving (by contract with G+J)
* DoubleClick for Online Adserving (by contract with G+J)

Telco 2.0: Can you give some recent campaigns/success stories you have contributed to?

VMS: Opel, Mercedes, Disney, Kraft Foods, Bwin, Coke and more …

Telco 2.0: The mobile platform has lots of potential media (banner, SMS, ticker-tape, games, TV, radio etc.). Which media do you see as being most important in the next 2-3 years and why?

VMS: Banner and textlinks are the most relevant one and TV and games will grow.

Telco 2.0: How do you see the mobile channel contributing to an integrated marketing mix (fixed + mobile; online + offline etc.)?

VMS: That’s nothing you can answer in general because it depends on communication targets of the advertising client. General I am sure Mobile will be a standard part of marketing Mix in 3 years.

Telco 2.0: Can you explain the benefits of the recent tie-up with Arcor?

VMS: Vodafone Germany owns nearly 75% of Arcor group [fixed line business in Germany]. So it is just logic that we are combining media power for giving advertisers the chance for reaching a higher reach with one partner.

Telco 2.0: There has been talk of mobile eventually representing 10% of all advertising. What barriers need to be overcome for this to become a reality?

VMS:
* Higher reach
* Standards for formats and reporting
* Better targeting solutions
* More flexibility for bookings
* Availability of inventory from all important mobile players in one country.

[Ed - we’ll probe Frank in more detail on these topics next week!]

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October 4, 2007

Evolving Internet ‘Platforms’ - Lessons for Telcos?

Says über-geek Marc Andreessen (Co-Founder of Netscape, and ex-CTO of AOL):
“One of the hottest of hot topics these days is the topic of Internet platforms, or platforms on the Internet. Web services APIs (application programming interfaces), web services protocols like REST and SOAP, the new Facebook platform, Amazon’s web services efforts including EC2 and S3, lots of new startups talking platform (including my own company, Ning)… well, “platform” is turning into a central theme of our industry and one that a lot of people want to think about and talk about.

Indeed. Andreessen is certainly right to say that there is a lot of confusion about it, too - we mentioned this in our post on jNetX. In an attempt to clarify this, he defines a platform as any system capable of modification by the user; we broadly agree with this. What we find more interesting is his three-way typology of platforms, and the importance he attaches to them.

For Andreessen, there are three types of platform; the most basic consists of an API exposed to third-party developers, which they can use in their own work but cannot use to alter the core functionality of the system. More sophisticated “Level 2” platforms make it possible not just to use elements of the system outside it, but to use them to create a different version of the system. Finally, “Level 3” platforms act as run-time environments, permitting third parties to write code that is executed within the system itself.

Andreessen is keen to assign value judgments to each level; he argues that movement from level 1 up to level 3 represents progress, as it tends to reduce the barriers to entry for third-party developers. Rather than re-creating certain functions, you can use a Level 1 API; rather than building a complete new application, you can add new functions to an existing one with Level 2 capability; rather than providing your own infrastructure and technical support, you can rely on a Level 3 platform’s machines and institutional backing.

It’s an interesting idea, but there is a serious problem relating this to telecoms; very briefly, operators are very unlikely to let anyone introduce their own code into their core systems. It’s just too critical for that. Nobody, after all, suggests that ISPs should let their users inject code into their core routers; the same point applies with redoubled force to softswitches. So there is a natural limit on telco development in this direction.

But this doesn’t mean a lot cannot be achieved. Level 2, in many ways, is a nice place to be; you get a significant amount of the resources you require from the users’ devices, and you have a high degree of control over how you implement your application that you might not have if it was running in someone else’s system. Andreessen argues that Level 2 applications have scaling problems - they are often “killed by success” because it’s up to the developer to provide the infrastructure and the organisational backup.

The Telco 2.0 approach would be to address this directly; telcos are in a good position to do just this. If you can’t let other people’s code into the core network, that doesn’t mean you can’t provide hosting on a really impressive scale; just ask BT Global Services. And whether you’re Level 2 or 3, support is a huge issue - the whole platform strategy implies that other people’s businesses depend on you, so you’re going to need fanatical support beyond anything so far considered.

Further, it’s possible to question whether the distinction between 2 and 3 is all that important. Andreessen cites Akamai’s Edge Computing service - which essentially acts as a CDN for applications, permitting the customer to run their app on a network of servers in ISP PoPs - as a possible level 3 platform. But surely the point is that, rather than modifying the service, your code is hosted by the service?

Couldn’t a telco that decided to stay at Level 2, in the light of what we said above, offer Level 3-like functionality by hosting the applications that use the Level 2 “plug-in API” itself? Or, for that matter, with Akamai under a wholesaling deal? As so often, the question is which questions to solve using technology, as opposed to organisational or commercial change.

Jeremy “ipdev” Penston takes a sceptical view of all this; he argues that the window of opportunity for telcos-as-platforms may already be shut. We disagree - it’s critial to future growth (as our survey is showing) - but Akamai’s service is a pointer to how this strategy might fail. Steadily, more and more of the elements of such a platform are becoming available from other people’s platforms; there is not much time to lose.

We will launch our draft description of a viable ‘telco platform business model’ in a forthcoming post, and at the Telco 2.0 Plenary on 17th October.

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October 3, 2007

Real Youth Input at Digital Youth Summit!

A few people have asked us ‘Why don’t you have some young people at the forthcoming Digital Youth Summit?’. They point out that it is challenging to explore youth propositions when nobody from the target customer segment is present. Without being ageist about this, the principle reasons why we don’t invite the ‘yoof’ along are:

  • They won’t turn up - Telco brainstorms are probably not ‘hip’ for most young people
  • Even if they do turn up, they are unlikely to be willing or able to articulate their views in front of 80+ suited and booted telco ‘wrinklies’ - sorry everyone attending but if you ain’t under 25, then that’s their view of you.

So how do we intend to get input from the people we are targeting?

Simple: we’re getting along lots of people who work directly with this market on a day-to-day basis and understand their needs, attitudes and behaviours.

These include:

  • Peter Miles, whose SubTV business (described here with some useful background on students) provides TV and other propositions into the UK student market. We are going to focus particularly on students and explore opportunities to develop new propositions for this segment. They are already targeted heavily by the banks with the rationale that if they can win them when they are students, they can keep them during their lucrative adult years. We want to see how operators can apply a similar strategy.
  • Raju Rishi, from Rave Wireless, will explain what they have done to deliver tailored mobile solutions to students in the US. More on Rave here.
  • Liza Noonan, European Strategic Marketing Manager at Alcatel-Lucent will talk about The Worldwide Lab the company has developed to better understand the attitudes and needs of young people and test ideas and propositions. The Lab ‘team’ consists of 57 young people of various ages located across the globe who contribute directly to Alcatel-Lucent’s research into mobile phones, mobile usage, social networking, television and other digital issues. In keeping with its youthful theme, the Lab has a very ‘Web 2.0’ approach including a blog and some film of questions/issues discussed by youth participants that are posted on YouTube. You can find them all here or view one about the trials and tribulations of young people shopping on mobiles below:

We have seveal other stimulus speakers with knowledge and experience of the student market - see the full agenda here. So rest easy, the youth will be well represented even if there won’t be many with an age south of 30 present!

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Telco 2.0 and that doctor’s office mashup

O’Reilly’s 2007 Emerging Telephony shindig had a contest for telecoms mashups this year, which was won by this application to handle out-of-hours calls to doctors, developed by Thomas Howe, whose work we discussed here.

There is a detailed description here; in short, incoming calls are answered using a VoiceXML IVR server, which then routes each call to one of a group of nurses recruited to assess them through Amazon’s Mechanical Turk API, and details are sent by SMS to the doctor, with a confirmation message to the patient.

Rather than needing to monitor phone lines constantly, or manage staff doing the same, the Doc only needs to respond if and when an alert comes in; and their patients get meaningful out-of-hours coverage, rather than the right to leave voicemail that gets processed when someone cares. In the original version, enough trade is aggregated to support a group of part-time workers, and the costs spread among many participants. In essence, it’s a homemade version of the UK’s NHS Direct.

But what would happen if an actual doctor wants this service, rather than a group of techies at an O’Reilly conference? We drew up four scenarios.

Telco 1.0

Quite simply nothing; this service doesn’t exist. And it’s unlikely the carrier will invent it; they almost certainly don’t know there is a demand for it. This is probably so across all the competing providers.

Perhaps they opt for either a standalone or hosted/centrex PBX system; it’s unlikely, though, as these are expensive and cost money to look after. It’s not guaranteed that the package your friendly local telco will sell you can actually offer the functions you need, either - and not many people outside that company have the skills to develop them.

Telco 1.0 with added IMS

If the IMS/NGN dream ever comes alive, the chances improve…a little. Vendors of NGN equipment, not to mention telcos themselves, constantly boast of how it will make it possible to develop and launch new services much faster. But the responsibility for developing them, and the power to do so, remains inside the carrier or at best with a small number of large corporate partners.

There’s a chance one of these has come up with something; or perhaps they’ve all done mobile Facebook. And further, seeing as it’s the telco customer care people who have to support all the new services, will our customer ever get through to the call centre?

Out on the Internet…

If our customer is unusually technically clueful, and has the time and money to invest, they might fix their problem themselves. They could set up a (free and open-source) Asterisk VoIP server, and look for (or write) a plugin to provide the function they need. They’ll also need to find a SIP termination service and an e164 phone number so their telco-bound customers can reach them; either way, the telco has just lost a customer.

Fortunately, not that many people are Asterisk hackers, and the ones who are can command good money, so this is an unlikely scenario. Although, once somebody gets it working really well, they might start selling their service..

It’s looking pretty grim, no?

Over at Telco 2.0, though, the situation is rather different.

Telco 2.0: user-driven innovation as applied to telecoms

Of course, like the NGN operator, Telco 2.0 has plenty of standard APIs reaching out like the tentacles of a squid; but rather than restricting itself to the ideas it has in-house, and taking on the burden of supporting every weird idea its engineers have itself, it’s open to external innovation.

Telco 2.0 doesn’t restrict the use of those APIs to people it likes; but it does restrict itself from trying to invent everything, perhaps setting an HP-like criterion of “fascinating margins” for the ones it will develop itself (or take over). The task of scanning through the solution space is left to anyone with an idea.

And it considers external innovation a line of business in itself; so its commercial terms are part of the package, as much part of the API as the remote procedure calls to look up a subscriber in the HLR. The matching half of this is that the API necessarily includes a payments interface that works -much faster than dire pSMS. Therefore, there’s a far better chance that there is already a product that suits our Doc, and the overhead he or she faces in fixing it themselves is dramatically smaller.

Because it’s a telco product, naturally, it can use the existing identity attached to telephone numbers as well as any other, and it interconnects with old-fashioned PSTN or GSM, NGN, and the Internet. And the Doc can pay through their bill.

It’s just a pity nobody does this yet. Telco 2.0 visited this week’s Mashup Event Demo in London. There were not a few charlatans around; the classic sign of a boom sector. But there was good stuff, too. We spoke to Andrew Scott of geographical social network Rummble. He reckons the mobile version will probably rely on GPS-enabled phones for its location functions, “because it’s just too expensive to do triangulation, and they [the telcos] are so difficult to deal with.”

Asked if he’d use a telecoms API if it existed, Scott thought he definitely would; as long as it doesn’t cost too much. Rummble runs on an all-Java platform; which makes it a close fit for jNetX, come to think of it.

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October 2, 2007

How’s your Google Strategy?

At the 21C Global Summit a few week’s ago former BT Chief Scientist Peter Cochrane - an industry ‘guru’ who likes to shake things up - presented a number of thought-provoking ideas about telcos competing with Google, including this rather cryptic slide:

cochrane.gif

This is how we decipher it:

  • What Peter’s chart is trying to tell us is that e-commerce revenues will rise, network access costs will fall, and at some point the former will gobble the latter as a business.
  • Some products are natural complements — bullets and guns, strawberries and cream, milkshakes and straws.
  • Sometimes these have a high ‘cross-elasticity of demand’, where lowering the price of one significantly increases the consumption of the other. If the cost of delivering that discounted product is low, it may make sense to price it at zero. The local lunch deli throws a free plastic fork into your bag because it makes you more likely to buy an expensive slice of chocolate cake. The key question for us is: which of our telecoms products behave this way, and when?
  • What we’re likely to see more of in the converging telecoms-media-tech space are players from one part of the value chain trying to preserve the profits on their high-margin products by bundling and giving away for free complementary products from potential rivals from other sectors.
  • In telcoland it’s happening on a small scale at the moment, with fixed voice being “given away” or run at a loss to encourage customer relationships that include higher-margin mobile or non-geographic traffic. The highest-margin products staying chargeable.
  • Traditionally, access has been the high-margin product. And by selling it by the sachet (via telephony) rather than the bucket, profitability has been maximised through fine-grained price discrimination.
  • But margin is a function of revenue and cost. A disturbance to these variables can change the subsidy model.
  • In the e-commerce value chain, companies like Google have spectacular margins. However, this is off a small revenue base, yet one growing explosively. Their own stated goal is to become a $100bn revenue company.
  • Google will ascend the e-commerce value chain to incorporate more functions (sucking value out of merchant payments, for example). See some more analysis of this trend here.
  • Companies like Google and eBay will learn how to re-intermediate existing “voice commerce” (e.g. freefone numbers) over time, as well as maintaining hegemony over e-commerce. See here for more on this.
  • At the same time the costs of building access are falling as technology improves
  • Much of the cost base of telcos is associated with customer acquisition, billing, and resulting care. The “underlying” cost of the telecoms product (ie. access) is significantly less than the overall cost figure.
  • Therefore, at the margin, we should expect some products to have a flip in their economic model. The e-commerce revenue will be used to subsidise the access. Freefone numbers have done this for years, it’s just we’ve not worked out how to do it for IP - hence the Telco 2.0 Survey on Broadband Business Models (PS: 560 people around the world have taken part so far…have you input yet?)
  • This is because ‘access’ is a complementary product to e-commerce, and e-commerce providers want it to be free to stimulate volume as well as trigger usage data and stickiness to their platform.
  • Over time, an inversion of the telco business model will happen, with an increasing amount of connectivity being free.
  • This may require a radical approach — something Google has been working on, with many patents and investments (watch this space!)
  • So, if you’re a telco, you need a strategy for dealing with Google. Now.

(Ed - Nice warm up for Cisco’s presentation at the Telco 2.0 Plenary on 17th October, when they’ll be stimulating the participating execs with ideas for how to develop a ‘Google Strategy’. The ensuing brainstorm should be interesting…)

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October 1, 2007

Ring! Ring! Monday News Analysis - 1st October

Digital Product Innovation

Here’s an example of negative product innovation: an Apple software update that kills hacked iPhones. Hacking was once defined as unauthorised innovation; all third-party apps, among other things, are eliminated by the patch. So all the enthusiasm that oozes out of that video is now going to waste, or else turning to virus-building bitterness..

Telco 2.0 Comment: Apple’s decision to bundle its own services with the iPhone made it rather less like a computer company and rather more like a telco. Fascinatingly, it’s now behaving in a way that shows all the worst features of telcos.

Brough Turner asks: why are mobile subscriber forecasts usually too low? He thinks it’s because the limit on subscribers placed by poverty keeps getting lower.

Telco 2.0 Comment: This is a key point in preparations for our Broadband Business Models 2.0 report - clearly, the GSM/UMTS growth curve will eventually top out, thus demanding a model change in order to develop the business further. But the exact timing is a very difficult question to answer indeed.

Emergent Business Models

MVNOs are harder than you think: after ESPN, now Disney Mobile joins the deadpool.

Telco 2.0 Comment: Even a brand like DIsney couldn’t do it. Who’s the leader of the club that’s made for you and me? N-O-K I-A D-E-V-I-C-E! Note that Tesco Mobile continues to succeed because its brand provides something useful rather than just glamour - a huge distribution system.

Technology Disruptions

A cautionary tale about CDNs from Emil at Renesys…

Telco 2.0 Comment: This is what happens when you disrupt your own technology!

Similarly, Vodafone’s roaming service experiences trouble.

Telco 2.0 Comment: Voda blames a “third-party carrier” for this, presumably their international backbone provider. Probably nothing to do with the BSS/OSS problems.

Broadband Connectivity

New Zealand goes for the Openreach model; structural separation.

Telco 2.0 Comment: There’s a reason why we keep going on about this (see video here). BT and Ofcom’s policy entrepreneurship has breached a logjam in terms of re-imagining the telco business model, and now we’ll see a lot more of this. See also. Although business model innovation probably doesn’t include buying Sprint. However, we will have the people behind Openreach at the Telco2.0 Executive Brainstorm.

O2 launches cheaper mobile Web.

Telco 2.0 Comment: Well, having turned up EDGE to welcome the iPhone, you wouldn’t want to bill all those gadget freaks every time the mail client syncs. It’s still far from a great deal, though; 200MB for £7.50.

Cogent breaks the Internet - again! It’s another of those peering disputes…but the killer detail is that they depeered a CDN (Content Delivery Network), Limelight.

Telco 2.0 Comment: Is anyone else struggling to understand this? The point of a CDN like Limelight is that it shifts the burden of heavy content (video and software updates, for example) off the backbone fibre and into the local network. Cogent is exclusively a backbone transit provider; so if traffic out of Limelight is pushing their peering ratios out of kilter, does this mean that a lot of Limelight CDN output isn’t CDNing properly? Alternatively, it could be the content going into Limelight; but Cogent’s business model is based on marketing heavily to content producers on price. Cogent stands to profit from content going to Limelight. So what the hell is going on?

Digital Politics and Regulation

Censorship furore at Verizon Wireless: carrier revealed to be filtering SMS traffic after abortion campaign alerts mysteriously vanished.

Telco 2.0 Comment: You may not like net neutrality, but things like this ought to show why other people like it. Especially given Verizon exec Tom Tauke’s past as a Republican congressman…
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The Future of Messaging and its Role in Mobile Advertising

As we discussed back in August, it’s been 15 years since the first txt msg pinged into humanity’s consciousness, between two engineers at a company we used to know as LogicaCMG but now call Acision. LogicaCMG’s Telco Products division, which has now been spun off into Acision, is best known as the world’s leading maker of SMSCs (Short Message Service Centres), the machines that handle SMS messages.

But it’s not all they do.

Below is a Q&A with Steve Van Zanen, Acision’s VP of Marketing, covering the future of messaging, the role of IP, mobile advertising and strategies for saturated vs emerging markets. (Steve and colleagues will be joining other expert stimulus presenters at the Digital Advertising & Marketing Summit, and the Product Innovation Summit - Voice & Messaging 2.0 - both on the 16th October in London.)

Telco 2.0: How far do you think subscriber growth in mobile has still to go? We’re already well into the majority phase of the Bass diffusion model; at what point will all the people who can have phones have them?

SVZ: I think there is still a huge amount of growth ahead of us. In terms of subscriptions, for instance, we can expect at least another billion net adds over the coming 4 years as penetration levels are soaring in regions like the US, China, India en Latin America. If we take SMS, as an example, volumes are expected to double from 2 to about 4 trillion per annum. Even in highly penetrated markets the ‘basic’ SMS service is still growing in terms of both penetration and frequency of use.

We shouldn’t forget that the mobile device, in the end, is just a channel for a rapidly expanding range of services. In markets where everyone already owns at least one phone, it is service innovation which represents the key area of growth. From our point of view, enabling operators to provide innovative services at high volume and performance levels is a definite growth area.

Telco 2.0: Text-messaging is the mobile industry’s gift that keeps on giving. Your infrastructure products are already migrating to IP. How rapidly do you expect messaging traffic to migrate to its own IP-based solutions, such as the various instant messaging apps? Will we see widespread adoption of IP-based SMS origination bypass services (e.g. Vyke, smsbug)? How might it affect operator pricing and revenue?

SVZ: Because SMS uses the core signalling network as a bearer, it is the only network embedded mobile data service not requiring any 2.5 or 3G overlay networks. This means it will simply work on any phone, however simple that phone may be, requiring no configuration whatsoever. This inherent ease of use will remain a key differentiator of SMS for some time to come.

With 4G networks, where the connection is IP all the way, this unique advantage will be lost, but we’ll have to wait till about 2015 to see that happen. Until then, internet originating SMS services, such as the ones you mention, will occupy a niche position as it either requires the sender to be behind his PC or, in some cases, users to download java applications on their phones. Although there is always a niche market for these types of approaches, they will never reach any mass appeal.

But we are of course making sure our platforms fully support IP and IMS based solutions. As the enabler of the biggest mass market mobile data service, we need to ensure full interoperability so operators can put together any combination of services as part of their communications portfolio.

Telco 2.0: Do you expect alternative forms of carrier messaging, such as Voice-SMS, to be complements for SMS or substitutes for it?

SVZ: We do believe that, especially in saturated markets, operators need to offer much more differentiated and personalised types of services. Some of these will enhance the intrinsic messaging service itself such as auto reply and external message storage & retrieval, or will still be messaging based such as voicemail to SMS or MMS. Some services could be taking more of a substitute position, such as Mobile IM. These services could, however, stimulate core messaging traffic as well, for instance when IM messages get terminated as an SMS or MMS. Overall, therefore, we see these types of developments as complementary to the core messaging experience.

Telco 2.0: Acision seems to categorise some rather surprising applications as “messaging”; for example, context-dependent advertising. How do you plan to integrate these functions within the messaging infrastructure?

SVZ: It is important to realise that Acision offers a wide range of mobile data services platforms, including a full mobile internet portfolio. We believe that increasingly operators will be looking to differentiate themselves across their entire services portfolio, and advertising is a good case in point. Only by controlling the advertising experience across all channels will operators be able to make the business model work. For this they will need network resident intelligence and access which is able to handle enormous volumes and respond to service requests within milliseconds. We provide such cross-channel applications. An interesting example, especially important for operators focusing on differentiation, is our customer intelligence portfolio which continuously extracts user behaviour data from SMS, MMS, Prepaid and Mobile Internet platforms providing a live feed to operational customer data stores.

Telco 2.0: One problem with mobile ads driven by messaging is the very large volume of extra traffic they might create. In SS7 and IMS networks, this is extra traffic in the signalling channel. How can operators avoid becoming victims of a self-administered denial of service attack?

SVZ: The implicit assumption in your question is that advertising will be pushed to consumers via SMS or MMS. We believe, however, that such an approach would be much too intrusive, making even email spam appear innocent. We therefore strongly advocate an ‘in service’ approach where advertising is inserted into existing communications events. It is imperative that the customer is fully in charge, able to determine whether to opt-in into the service and, if so, how often and how frequent adverts can be inserted.

Again, in order to achieve this, the operator needs to be in control of all channels, being able to make an instant decision whether the ad insert is appropriate and allowed, without impacting basic service quality.

Telco 2.0: Context-dependent ads are, by definition, essentially programs; rather than placing an advert at some location and point in time, an advert is delivered when several conditions are satisfied. How do you bridge the gap between traditional advertising, media-sales, and media-buying on one hand, and programming on the other?

SVZ: This is indeed one of the key challenges to overcome in this area. In actual fact the problem is even more daunting as we believe mobile advertising will go beyond the contextual advertising the internet currently offers and provide truly personalised advertising. Given the personal nature of the mobile device and the behavioural information operators potentially have at their disposal, this is one of the key differentiators the mobile channel offers against other advertising channels.

What will be required is a fully automated market place where the operator sells its advertising inventory to anyone wanting to place adverts. This should accommodate the professional media buyer as well as the ‘long tail’ niche player and the local corner shop. An essential ingredient to this sales process will be accurate information on customer behaviour where the operator is able to create an accurate prediction of future inventory availability. Again our customer intelligence platforms are a crucial enabler in this area.

Telco 2.0: And how do you go about pricing such an advert?

SVZ: Given the breadth of the mobile advertising channel, I think we will see quite a mix of pricing strategies ranging from Cost Per Mille for screen based ads, Cost Per Click where fulfilment is via the (mobile) web and Cost Per Action where the mobile channel is used as a response mechanism.

Regardless of the type of measurement, I think the pricing levels will be the most interesting development. The mobile channel offers a unique mix of personalisation, location, interactivity and response measurement which is unparalleled. I am expecting that the average value per ad will be significantly higher than what we are used to on the web.

Telco 2.0: What would be the top three priority actions you would recommend to operators looking to defend and extend their messaging business?

SVZ: I don’t think that in today’s market there can be a single answer to such a question. The days of the ‘one size fits all’ approach, are numbered, forcing the industry to take a more differentiated approach to the operators’ challenges. For instance, the level of saturation in a market profoundly impacts operator requirements. Also, it is our experience that the demands of ‘pure’ mobile operators are completely different from those of Fixed Mobile Convergent or quadruple play operators.

For mobile operators in high growth markets (such as the US, India and China) our offering focuses on assuring a high quality of service under extreme throughput and performance. For mobile operators in saturated markets (such as Western Europe and parts of Asia Pacific) we provide a personalised services offering that brings the operator service differentiation and control. To quadruple play and Fixed Mobile Convergent operators we offer high levels of differentiation through a highly integrated, cross channel service offering.

For the development of messaging itself I think the most interesting challenges are in the highly saturated markets. In these markets I would recommend operators to focus on the following:

1. Differentiate the intrinsic messaging service by providing innovative service scenarios such as voice messaging (voicemail to SMS or MMS), message storage and retrieval, Mobile IM, messaging buddy list and so on. There is still a lot of mileage in enhancing the messaging experience and operators should become much more creative in this area.

2. The internet is clearly of importance to the mobile industry. It actually opens up the possibility of very interesting service scenarios where operators could play a key role in truly mobilising internet services. Why not use the intrinsic strength of SMS, such as reliability and security, to extend PayPal or eBay’s services to the mobile channel? We have been speaking to some of the major internet players and we know there is keen interest to explore such scenarios.

3. Finally, alternative revenue streams simply need to be part of the operator agenda. Mobile advertising, we believe, will be one of the most important developments in this area. In order for advertising to gain any momentum, it will need to be across all the channels, especially the highly penetrated SMS channel. Operators need to start considering very quickly how they will be able to monetise their assets, including their messaging infrastructures, in new and innovative ways.

Telco 2.0: Thanks very much Steve. See you in a few weeks’ time.

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

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