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January 30, 2009

Guest post: Product Management Transformation

To make the ‘two-sided’ telecoms business model a reality telcos need to become better retailers (to create one sticky side that third parties on the second side will pay to interact with). In this guest post, Ernest Margitta from product management specialists Tribold, looks at how telcos need to transform their understanding of products.

In running a retail store, there are some basic principles that everyone understands about products and inventory. For a start, the Sales staff rely on knowing exactly what they have to sell - what is in stock, what options are available and to whom, what the lead times are for special orders, etc.

Purchasing needs the same information to know when to source additional stock to match customer demands and to find suppliers that can deliver. And Marketing and Product Management need to know which products are doing well, which ones need refreshing or retiring and where to focus their next product campaigns and development ideas. The common thread across these departments is the need to service the customer with the right products.

To that end, the idea of product is at the center of the retail universe. The retail business is all about procuring, marketing and selling products, with business success clearly linked to product success. Retail success is therefore heavily dependent on factory supply - the product design, build, warehousing, and distribution tasks associated with making the products the retailer wants to sell.

Communication Service Providers (CSPs) certainly share the same challenges of the physical product retailer, especially when it comes to determining and then supplying the products that customers will find attractive and want to buy. There a few important differences for a CSP, given the fact that CSP products are mainly service offerings that they often supply themselves. Services are not lined up in boxes on shelves. Services are not shipped from distant factories whenever stocks run low. Still, services are products. They must be designed, manufactured and packaged.

The underlying service delivery capability must be in place before the services can
be delivered, just as the factory for the retailer’s product must be operational before
a retailer can expect to have that product to sell. And like any other products,
services are subject to supply limitations - their delivery is constrained by network
and systems capacity and capability, and by the ability of the organization to
manage the delivery and support of those services.

With this dual role as Wholesaler and Retailer, CSPs have all the same requirements
as an automotive company for the manufacturing, management and supply of
products, on a day-to-day basis as the orders flow in from the customers and on a
longer term basis as products are created, delivered, and eventually retired. But
while everyone in most any CSP company understands the primary importance of
products, too many CSPs continue to manage products across this chain in a
fragmented and unfocussed way. They simply do not have either the day-to-day or
long term visibility of their products that is essential for profitable performance.

So whilst price and speed-to-market pressures exist across all industries, there are
clearly many aspects of the communications industry business model that make life
complicated and confusing for CSPs in ways different to that of an automotive
company or retail store. For example:

• Services, by definition, involve actions and decisions by people and systems,
not just the delivery of tangible items. Retailers have the luxury of being able
to separate, in concept and in practice, key stages of the value chain - the
factory, the distribution to outlets, and the retail operation itself. In a
communications company all of these boundaries are blurred.

• ‘Manufacturing’ of brand new services often requires retooling of the factory
(network and IT infrastructure). But due to the way the CSP factory has
evolved over time, each part of the factory (individual networks, BSS/OSS
systems) has their own unique way of defining and independently managing
the notion of products and services. It is not connected like a seamless auto
assembly line.

• Customers expect that the majority of the end product they buy from CSPs
will be delivered in an automated and instantaneous fashion, while the reality
is that many of the processes, from the factory to the retail outlet (e.g. web,
phone, store) are manual and error prone.

That brings us to the broader situation faced by most CSPs today: every department
involved in delivering products and underlying services to customers has individual
custody of product information, relevant only to their job. From initial product
concepts through to the purchase of material, network configuration, pricing policy,
customer service policy, ordering and billing, each group has visibility and control of
the elements only it needs.

Many of these elements are relevant to multiple areas, like prices. Others are unique to the particular business function, like the serial
number of a particular device.

Over the years, this approach for each department to have control over its own
subset of product information has led to a myriad of business and operations
support systems having some view of product, but none having a complete view of
product. Multiple parallel systems handle different functions: billing, order
management, trouble management and so on.

Often, the entire suite of systems is replicated to support a specific network or
service delivery technology too. This creates a further proliferation of product views,
duplication of product information, and, in many cases, confusion over product data

The result: in most CSPs, product information is fragmented, inconsistent and prone
to errors; product management is seriously sub-optimal and is reflected in low
productivity, extended times-to-market, duplicated effort and mistakes. The
Wholesale/Retail chain does not function in a best practice factory-to-store-to-
customer mode.


Products still of course can be launched, and customers still can buy them…
eventually. But many CSPs achieve launch and manage products successfully only
because of the persistent efforts of people across the organization: people who
know how to deliver results in spite of the inadequate systems and inaccurate
information with which they have to work. If the systems environment actually
helped all of these people in their efforts, they could be much more productive, and
much less frustrated.

“Carriers today have a strong need to implement a single product catalog. This becomes even more crucial as carriers need to increase operational efficiency to be
competitive. Moreover they need to prepare for more complex customer-centric
services today as well as in the future.” Martina Kurth, Research Director, Carrier Operations & Strategies, Gartner

So having lived for years with the results of such confusion, no one in the CSP
industry today seriously debates the benefits of a unified product catalog and a fully
integrated approach to product management. But conventional approaches have
not sufficed. On the one hand, it is simply not practical or economical to scrap the
entire systems environment and start again.

On the other hand, many attempts
have been made to overlay new process workflows that reach out to product data
wherever it is held, but these workarounds always struggle because the definition of
product and service is not coherent and unified. Yet, the prospect of incrementally
migrating and consolidating product information to a single location has traditionally
seemed to most people like an operational and technical nightmare.

The troublesome truth? No matter how streamlined and efficient the product
management processes are, they will fail to deliver results as long as they have to
operate with defective, fragmented and inconsistent data. Equally, efforts to
rationalize, normalize, and unify product data will deliver only partial benefits in the
absence of well thought-out processes that work on that data.

Everyone in other retail and wholesale industries understands the central
importance of products. None could survive for long without the ability to see and
manage the entire portfolio of products from either manufacturing or selection
through sale. People in the CSP industry increasingly realize that they need much
the same sort of focus on product capability. They know a big change is needed.

The solution for CSPs is now within reach

Moving to a seamless ‘factory floor-to-store shelf’ chain for CSPs does require a
transformation of sorts around Enterprise Product Management. But it does not
need to be a disruptive transformation. To that end, the industry needs more than
just smart technology to achieve real change in how products and services are
managed; it needs smart technology coupled with a smart implementation
methodology that together provide a practical, incremental approach to

The methodology must encompass a few core principles to ensure transformation is
achievable whilst business-as-usual continues:

• Product data is key… but don’t forget about the process
• Incremental transformation is not an oxymoron
• Greenfield is not a prerequisite

The details of the scheduled path to transformation should depend on the exact
nature of the legacy configuration, specific applications in use, and the priorities of
the CSP. But while the details may vary, the broad approach required is likely to be
much the same for all CSPs.

Product data is key… but don’t forget about the process

The solution for CSP enterprise product management must address both product
data and product process in a holistic manner. The principle underpinning the
approach to CSP enterprise product management is that every person and every
application across the enterprise should have just one place to go to see what
products and services are actually available. At the heart of the solution is a central,
unified product catalog that maintains a consistent, closely managed and definitive
view of the company’s products.

The product catalog must contain product offer information and commercial product
and technical service specifications, all in a componentized fashion. Specifications
reflect the service delivery capability of the service providers’ platforms and are the
basic building blocks for the end-products they sell.

By logically decomposing
products into componentized specifications, product and service engineers can
expose to product managers the full service delivery potential of their platforms,
enabling product managers to readily identify and assemble new market
combinations of available capability.

The centralized catalog enables the CSP to decouple the business definition of
products from the functional IT applications that need to know about products. This
break with tradition delivers dramatic benefits enabled by the ability to see all
products and system capabilities in one place, the assignment of unambiguous
ownership of product data, and a platform for rapid yet tightly managed product

Let’s get organized

The need to get CSP product information organized across the factory and into the
store has become more and more apparent for years. What has not been apparent,
or available, is a fully coordinated plan to take control of product data and product
processes, and the tools with which to do that.

CSPs have also had to face the challenge of ensuring that legacy systems are able
to operate and carry out their roles while those data location and ownership
changes are implemented.

Now the approach for successful enterprise product management transformation
has been mapped out. Now there is a repeatable methodology to effect the factory
floor-to-store shelf transformation in easy low-risk steps, and well-defined principles
to guide architecture and deployment. Now there are tools that make it possible to
create that unified product catalog and manage it effectively.

Now is the time to organize the CSP Factory and the Store.

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January 28, 2009

CMO Forum @ Mobile World Congress

The Telco 2.0 team will be in force at Mobile World Congress (MWC) in a few weeks’ time. If any of our readers would like to meet up with us please mail us.

In the meantime, if you are a strategy leader at an operator or media company we’d strongly recommend you ask for an invite to the ‘CMO Forum’ at MWC, which this year goes deeper than ever into the mobile marketing opportunity.

Telco 2.0 will be presenting some analysis and facilitating the discussions. The GSMA has lined up a superb list of speakers and panellists from across the value chain. See agenda below (NB: there are only a few seats left for this event - which are reserved for senior strategy execs at operators and media cos only):

Wednesday 18th February: 11.30-6.00PM


11.30-11.35: Welcome: Moderator: Simon Torrance, CEO, STL Partners/Telco 2.0 Initiative

11.35-11.50 CMO Context Setter: Adding Value to Brands in the Digital Economy - Size of the Opportunity: A summary of Telco 2.0 research, sizing the opportunity for telcos to support brands. Includes key illustrative use cases. Chris Barraclough, Managing Director, STL Partners/Telco 2.0TM Initiative.

11.50-12.20 - Pocket-Sized Thinking: The Top Ten Mobile Marketing Campaigns of 2008
Jess Greenwood, Deputy Editor, Contagious Magazine
Contagious is a quarterly magazine focused on the most innovative exercises in branding, design, technology and popular culture. This session will explore examples of creative and effective marketing strategies incorporating, or entirely executed through the mobile channel.

12.20-12.30 Introduction to Mofilm, the world’s first Global Mobile Film Festival
Jeffrey Merrihue, Chairman, Mofilm

12.30-1.30 Lunch

1.30-1.50 CMO Keynote: Mobile - the Ultimate Channel of Engagement
David Christopher, Chief Marketing Officer, AT&T Wireless
Mobile’s future development is dependent on engagement with other industries. These industries work to different business models, on different structures and with different motivations, timescales and business practices. What does the mobile world have to offer these markets, how can it demonstrate its value and what needs to hurdles have to be overcome.

1.50-2.00 Questions

2.00-2.45 - Mobile as a Marketing Medium
To include:
  1. Mobile-specific advantages - targeting, personalisation, audience of one, immediate response
  2. Beyond banners and display - defining the mobile marketing portfolio
  3. Maintaining and developing brand value through mobile
  4. Measure and Metrics - proving the mobile case
  5. Advertising as a revenue source for future services

Wayne Brannon, Executive Director, Chevrolet Europe
Ken Hertz, Principal, MemBrain, Entertainment strategy consultant, MacDonalds, InterContinental Group and others.
Cenk Serdar, Chief VAS Officer, Turkcell
Scott Seaborn, Head of Mobile Technologies, Ogilvy Group
Vanderlei Roque dos Santos, Nestlé - Vevey - eBusiness Leader

2.45-3.30 It’s Viral Baby: Obama, Dipdive and mobile music
Will.I.Am - Musician, Writer and Producer. Steve Koskie of Dip Dive and Fred Goldring
Frontman, writer and producer of the multi-platinum band, the Black Eyed Peas will discuss the impact of a short video he created last year - together Steve Koskie of Dipdive , Fred Goldring and others - called “Yes We Can”. Based on Barack Obama’s now famous speech of the same name, it was launched on Will’s own new social networking site “Dipdive”. Some 50 million hits later (and still growing), it has become a phenomenon that proved to be a significant factor in changing the direction of the 2008 Presidential elections. Will, Steve and Fred will discuss the making and the success of the film, and their concept of Dipdive as a vehicle to revolutionise the artist/fan relationship.

3.30-4.15 - Social Networking on the Move
To include:
  1. Mobile’s role in social networking - mobile only or mobile enhanced communities?
  2. What mobile adds to social networking - immediacy, voice, text
  3. Getting the user experience right - one click functionality, brand value and recognition
  4. How can operators stay ‘cool’ and keep up with changes in consumer behaviours?
  5. Where’s the money? Defining the value chain
  6. Marketing to virtual communities

Pieter Knook, Head of Internet Development, Vodafone Group
Marc Vanlerberghe, Director Product Marketing, Mobile at Google
Henri Moissinac, Head of Mobile, Facebook

4.15-4.30 Coffee break

4.30-5.15 Entertainment in your hand
To include:
  1. Business models for mobile entertainment
  2. How different is mobile as a creative platform - is it a completely new medium?
  3. Mobile’s place in the on-demand revolution for content owners and advertisers
  4. Mobile’s role in user generated content - YouTube, citizen journalism and more
  5. Getting the revenue - how do you get paid? (link to next panel)

Gideon Bierer, Executive Vice President, Digital Media, MTV Networks International
Anssi Vanjoki, Executive Vice President, New Markets, Nokia
Ronan Dunne, Chief Executive Officer, Telefonica O2 UK

5.15-5.45 Phone to wallets - the mobile money opportunity
To include:
  1. Definition of mobile money - what role can/should mobile play in financial services?
  2. What potential does mobile have to alter consumer purchasing patterns? From advertisement to transaction in a single click
  3. Will mobile payments provide a channel to new customers in emerging markets?

Tim Attinger, Head of Global Product Innovation, Visa
Boris Nemsic, CEO Telecom Austria Group
Marty Beard, President, Sybase365

5.45-5.50 Wrap up and final comments
6.00- Close

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Thomas “Voice Mashup” Howe Answers Your Questions

As we discussed a few weeks ago, there’s a huge opportunity for telcos to help enterprises (big and small) reduce costs in everyday business processes by using telco voice and messaging capabilities. The ‘communications-enablement’ cost is tiny versus the operational savings.

Enterprise CIOs are starting to see this and telcos are making more and more API’s available. But telcos need to insert their platforms into the IT value chain more proactively now. It’s specialist developers like Thomas Howe (one of the millions of developer “ants”) who are showing the way. Here’s his presentation from the last Telco 2.0 event and below that some answers to questions. Thomas will be joining us again on 6-7 May in Nice.

Q: Where is the money in ‘Communications-Enabled Business Processes’?

A: The question isn’t actually where’s the money. We know where that is - the outsourced IT market is currently worth around $750 billion dollars, with business process outsourcing being the second largest sub-segment. The BPO side of system integrators’ business is growing fast and, for some companies, is twice as profitable as the larger traditional “turn the screw” segment of outsourced IT. Not only is this a large market, but it is still rather untouched by the advances in communications-enabled business process. The real question for carriers is “in this segment of the market, how can we extract our fair share of revenue?”

Q: So why is it so hard to extract value out of telco data? The ability to ‘do the doing’ has been around for a while.

A: I disagree that we’ve had the ability to do [comms-enabled business processes] for a while. To extract value, we need APIs that we can access the data, a mechanism that allows us to access that API outside of the carrier walls, technologies that make it relatively easy to create those applications in the enterprise and the mind to do it. I would argue we have three of four of these in place now, but we had none of them five years ago.

Q: Every operator (and their dog) is talking about opening APIs / SDKs for ISVs and developers like you. Would you ever work with just one? What would dictate who you and who you didn’t work with?

A: Woof. That’s a fantastic question. I’ve worked with many, and it typically happens that when I arrive on the scene the application, the customer and even the carrier is selected based on past decisions. About a year ago, I did some work with an API on one vendor’s equipment after doing a project with a different vendor’s API, causing the first vendor to send me a really nasty letter. It really caught me off guard. One overwhelming thought I had was “How can you really expect anybody to program mashups to just one API?”, and the answer is “you can’t.” The consumer analogy would be: you can only call other people who use your carrier. I’ve touched everyone else’s API since then, trying to leave goodness with each of them, but unfortunately not their’s. So, even though I’m fine working on anyone’s API, and fully expect to, I suppose some segments of the market have a different opinion on that. Today, most APIs have their pluses and minuses, and when I get to pick, I try to match them up right. For machine-side work, I encourage you to look at Jaduka. Got a web site? Check out IfByPhone. Adobe? Ribbit… and so on.

Q: Are the operators going to make it easy enough to stimulate innovation from developers?

A. I’ll just say that I am soooooo amazed with Apple and how they pulled off the iPhone marketplace with the cooperation of AT&T. Simply amazing, and I suppose you need a superman like Steve Jobs to get that done. Now, that said, BT, Orange and Deustche Telekom are doing a great job at working with their developers as well, so it’s possible, but I think it takes a lot more effort and a more structured approach to the market.

Q: How do you ensure the quality of the customer experience is maintained in open source API models?

A. In time, I think it will be evident that you can’t ensure the quality of the customer experience without open source approaches. Would you really want to deal with technology that’s not well tested and widely used?

Q: Enabling the APIs increases cost and needs investment. Operators have a more limited market but we can terminate a call in any market.

A. Perhaps, and if you’re simply focusing on termination of calls, then you’re right. My advice: start answering the larger issues of integration, smarter termination, etc.

Q: Individual operators are not global nor unique within an area. How does a web site select for example one Click-to-Call offering over another? While one operator may have better data than others it’s still not omniscient. Does a web site want multiple Click-to-Call options?

A: Indeed, a web site can (and probably will) have many click-to-call options. The fact that one carrier may have better data might very well be enough that a web site designer will select one over the other. But without regard to that fact, it may also be that the site is provided by a large enterprise that is a strategic partner of the carrier and/or system integrator with a relationship with the carrier.

Q: How are the resulting privacy issues addressed?

A. That’s actually quite simple, I think. iPhone customers show that they are willing to share their data as long as you ask and customers see some value to it. If you never ask, and there’s never any value that the customer can see you deserve the problems you create. There’s an amazing amount of value that can be provided if you simply ask for permission.

Q: Are Voice 2.0 apps predominantly driven out of a data or Web context rather than a voice context?

A: I say they are predominantly driven out of an applications context, and rarely out of a voice application context. The fact that they are delivered by one mechanism or another seems to be un-correlated.

Q: There are ways to answer the question ‘is my customer at home?’ e.g. using Wi-Fi or femtocells or GPS. But we lack APIs both on the network and on the devices. There also needs to be an alert mechanism for ‘tell me when my customer gets home’.

A: Yes, there are ways of answering that, but no standard way for developers to access it, and no standard business approach to monetize it. We need that.<//em>

Q: How do you change the culture for making the business case?

A: Successful stories. See VoiceSage for details. I do.

Q: What should telcos do next?

1.) Educate Enterprise CIOs that telco API platforms offer a much cheaper alternative to upgrading Avaya hardware. 2.) Form partnerships with enterprise software toolset companies
3.) Educate SI’s on the opportunities for new recurring revenue streams from re-selling telco API platforms.
4.) Put proper commercial structure and market focus behind the telco API business development.
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January 27, 2009

Credit Crunch Update (Part 7): If Telcos Don’t, Cisco Will

Below is the seventh article in our series on the Credit Crunch and its effect on the TMT sector (previous here).

In 2008, venture capital investment flows in the US in Q4 fell by a quarter, private equity deal flow in Europe was down 59%, and hedge funds globally lost $582bn. Arguably, there are better times to seek funding for an innovative new idea. However, innovation is high on the agenda of government fiscal stimulus packages, which will be key determinants of economic growth, and entirely new industries are taking shape.

If telcos want to exploit a new ecosystem, they will need to actively invest in its creation - a concept which some cash-rich rivals are already demonstrating they understand…

The year is still young, and already we’ve experienced an unprecedented event of profound historical significance, which had its own unprecedented, if somewhat more prosaic, manifestations in the telecom world.

Inevitably, there were a few interesting twists behind the scenes, as one might expect with any ‘unprecedented event of profound historical significance’. However, now that the champagne has run dry and the joyous music is but an echo, we awake to find ourselves right back in the same intractable situation we confronted before the party, with the brief burst of sunshine now replaced by fresh storm clouds on the horizon, and a growing sense that visibility in the market is now defined in terms of days rather than weeks or months.

None of this is helped by the fact that, as with all unfolding crises, perceptions are distorted by the lagging expectations of market forecasters and observers. Take as an example Verizon’s Q4 results, which were greeted by a 3% decline in its share price in a rising market.

In the current climate, one would assume that a company reporting a seven-fold annual increase in its cash balance (largely through its ability to secure financing - itself far from a trivial achievement) would be welcome news, but the coverage in the financial media suggested that wireless net additions of 1.4m, vs. expectations of >1.5m, were somehow a disappointment.

This suggests that many analysts and commentators, despite all evidence to the contrary, are still viewing the world through the lens of “how things used to be” (i.e., it’s all about growth), rather than in terms of what really matters for the foreseeable future - namely, cash preservation (=survival) and sustainability of asset value.

Stated in another way, in a climate such as the current one, the survival prospects of an industry or individual company rest on the ability of said industry, or company, to demonstrate that its assets and services are relatively more indispensable than others’.

Those who are successful attract what is left of the consumer’s wallet, and, with costs and capital structure properly aligned, survive into the next economic cycle. Our proxy for the sector’s performance globally, the STOXX 600 Telecom Index, continues to suggest that telecom falls into the non-discretionary category, consistent with our own thinking.

DJ STOXX 600 Sector Ranked Returns, 24 December 2008 - 27 January 2009


Source: STL Partners/Telco 2.0, from Bloomberg data

In an era when politics, national economic aspirations and fiscal stimulus plans will have much to say about the relative sustainability of many industries, from a telco perspective, it is heartening to see the latest instalment of the WEF’s Global Competitiveness Report.

The WEF defines “12 pillars of competitiveness”, upon which it ranks the countries of the world:
  • 1.Institutions;
  • 2.Infrastructure;
  • 3.Macroeconomic stability;
  • 4.Health and primary education;
  • 5.Higher education and training;
  • 6.Goods market efficiency;
  • 7.Labor market efficiency;
  • 8.Financial market sophistication;
  • 9.Technological readiness;
  • 10.Market size;
  • 11.Business sophistication;
  • 12.Innovation
Admittedly, all industries have their limitations, and market size, macroeconomic stability and robustness of institutions are functions of much more complex factors than one industry can account for.

However, we see a case to be made that telecom would appear to significantly influence, or have the potential to significantly influence, all the other factors covered here, i.e., 75% of what makes up an economically competitive society.

In particular, pillar 12, Innovation, is critical. As we cited two weeks ago in our discussion of the smart grid opportunity, as with telco rejuvenation itself, economic rejuvenation relies upon a mixture of revamping/optimising the old and creating entirely new market segments, ecosystems and industries.

The dilemma in addressing the latter at present is the glacial state of capital markets, and here the news flow is not particularly encouraging.

The National Venture Capital Association/PwC quarterly “Money Tree Report” (a detailed spreadsheet is found here) for Q4 2008 shows a 26% sequential decline in investment in the quarter, a decline mirrored by “Internet-specific” businesses, which comprise nearly one-fifth of all venture capital investment.

On a full-year basis, telecom and semiconductor venture investing posted 11 and six-year low levels, respectively, and software, still the largest segment, posted a 10-year low in the fourth quarter. While the Money Tree Report correctly observes that start-ups took in more investment during 2008, the overall sequential trend was one of decline from a great first quarter, with Q4 investment falling by 30% over Q3 levels.

Similarly, first sequence investment in expansion and later stage companies fell off a cliff in Q4, with later stage posting its worst quarterly decline since the dark days of Q4 2003.

In better times, early stage companies in need of funding might reasonably have turned to alternative sources of funding (or exit strategies), but recent deal flow in the private equity world is fairly moribund (note the comment that the malaise has spread to the middle market), and the hedge fund world is likely to be feeling far less adventurous after the carnage of the past year.

So, as in our previous articles on the theme, we again throw down the gauntlet to the telcos - there is a role to be played in proactively investing in creating the new ecosystems and opportunities which will drive growth through the crisis and into the future beyond the recovery.

Starting sooner, rather than later, might also be a good idea - just ask Cisco, whose latest acquisition press release mentions its mission via its “…’build, buy and partner’ innovation strategy to move quickly into new markets and capture key market transitions.”

The acquisition and market transition in question? Richards-Zeta Building Intelligence, a private company specializing in systems for allowing companies to integrate building and IT infrastructure over IP networks. Definitely sounds like telco territory, and probably a space which will emerge as a huge beneficiary of government fiscal stimulus programs - but what part of the value chain will be left for telcos without more vision and alacrity?

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January 26, 2009

Ring! Ring! Hot News, 25th January 2008

In Today’s Issue: Obama inauguration causes Akamai to give off steam; world economy still awful; emerging market users can’t get enough WWW; Rwandan innovators sell electricity by SMS; Rwandan innovators start revenue sharing platform; Pakistan deploys FTTH through anarchy, also knit their own Akamai; Microsoft in dated, monopoly-minded product shock; NHS IT zombie army eats BT’s brains; OFCOM squeezes UK GSMers’ margins; Sprint launches rather sensible small business products; interesting new contacts/social network/IM app from Nokia Labs; Verizon’s new CPE is boring; more eldritch horrors creep out of the Bush

There was some sort of political event in the US last week; millions turned out to watch the Obama inauguration, but Telco 2.0 instead spent it reading posts to NANOG about the massive Internet traffic surge caused by all that streaming video, the most demanding form of content.

As Network World reports, Akamai broke all its own records, as did all the other major CDNs; total throughput peaked at 2 terabits per second, but the Internet stubbornly refused to crash. Despite the best efforts of enterprise sysadmins to spoil the fun by blocking streaming and p2p ports, network operators reported seeing traffic 150% above normal levels even on systems that were 80% business customers rather than eyeballs…

Meanwhile, the economy was still dire; Intel, Apple, IBM, Nokia, Ericsson and Philips have all announced layoffs, Nortel has gone bust, even the port of Dubai has suspended all construction at all sites worldwide.

But emerging market users are giving the Web a hammering from their mobile phones - growth rates in China are of the order of 110 per cent. You can be fairly certain it won’t be telco portals they’re reading, though. As we said in our review of the year, emerging markets are where the innovation is; check out Rwanda, where they’re using the business model of prepaid GSM airtime to sell electricity. The electricity company issues a load of electricity vouchers; they sell these wholesale to independent distributors, who SMS them to customers, who send a text message to the electricity company, who turn on the juice.

It’s almost traditional that emerging market electricity grids struggle because very few people who have electricity pay the bills, so there is no funding to extend the grid, so there is a permanent shortage; not any more. The really interesting thing here is that the people who started the service, based at the Kigali Institute of Science and Technology, are creating a business model for other developers - using their SMS platform, KIST and the developer share the revenue 50-50.

Brough Turner, meanwhile, points us at another fascinating emerging market story. In Pakistan, nobody knows or cares what the government or the telcos say about access to the right-of-way; so people are just stringing their own fibre-to-the-home networks. They lash ethernet switches to utility poles, run Cat5E cable into houses, then deal with an aggregator to hook up an optical fibre into their area, using a PC running Quagga, Zebra, OpenBGP or some other free router implementation to take care of the routing. As a result, urban Pakistanis can get 100Mbits/s Ethernet for cheap, much more easily than New Yorkers or Londoners.

Of course, there’s a downside; actual Internet connectivity is slow and expensive due to limited international cable capacity and incumbent dominance of interconnection. But they’re working around it; most of these networks already have a sort-of CDN, where they keep the video content so their users can grab it at line speeds, and they’re bound to reinvent the IX at some point.

Compare the latest greatest idea from Microsoft; Music! For your mobile phone! Nobody’s tried that before! Better yet, it’s music for your mobile phone with DRM that won’t let you move it between devices, so if you get a new phone you’ve got to buy it all again. And if Microsoft gets bored with the shiny toy, they might switch off the DRM authentication server and kill your record collection - they already did it once, after all.

Who on earth would buy this product? Look at the differences between it and the Pakistani greynets (I don’t know if that’s a word, but now it is) - on one hand, adaptation, technical innovation, openness, on the other, tired ideas, lack of inspiration, mean-spiritedness and secrecy. Further, what is Microsoft - Microsoft - doing trying to be a customer-intimate consumer media firm? Their main product is called “Office” - this should tell you something about their actual strengths, expertise and specialisation. Shouldn’t they be putting their effort into brilliant new CRM and Voice 2.0 products rather than poor imitations of products Apple, Amazon and Google do so much better?

The National Health Service’s giant IT project, meanwhile, began when Bill Gates came to see Tony Blair; as usual, Blair was captivated by him, which is quite an achievement in itself. The project soon became a byword for IT failure, beleaguered by not so much a lack as a total absence of user engagement, secrecy, bad management, and a toxic mix of huge spending and penny pinching. Now it looks like it’s done serious damage to BT, which is warning of a huge (hundreds of millions) charge to profits due to problems at BT Global Services. The FT’s sources reckon the NHS contracts are seriously underwater - and the scary bit is they’re big enough to account for the whole profits warning.

There is some good news for BT, though; OFCOM is bringing the regulated termination charges on UK mobile networks rattling down another 22 per cent. Not so good news for the mobile networks.

However, there’s good news in the Telco USSR; look at this sensible enterprise-focused offering, leveraging Sprint’s specialities in voice & messaging into a product for workgroups. $30 a line a month gets you unlimited push-to-talk both one-to-one and one-to-many; another $10 guarantees you unlimited Web browsing and a GPS phone for each group member, and there are attractive rates on bulk telephony shared among the group.

You could use the unlimited data for this rather nice looking integrated contacts/instant messenger application from Nokia Labs, for a kind of instant Lotus Notes deployment. It’s implemented in XMPP, so it interworks with all kinds of other IM networks.

Verizon, meanwhile, has a new better fixed-line phone product which incorporates a variety of Web services. But does it provide any of the call-routing/multiring/general Voice 2.0 features they developed for Iobi? Otherwise it’s a little meh; “does the same things as your mobile but isn’t mobile” is not the best sales pitch ever. Similarly disappointing is their new femtocell product; it costs $250 up front for the privilege of helping VZW with their backhaul bill, and it provides only 1xRTT (i.e. like GPRS but American) service - which looks poor as HSPA rolls out. And it’s not integrated with the new fixed phone!

Meanwhile, more of the truth emerges about illegal surveillance.

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January 25, 2009

The High Road and the Low Road to Fibre

Telco 2.0 ally Brough Turner points everyone to an interesting story from Lahore in Pakistan, where not only can you get fibre to the home, but it’s cheap as well. It’s well worth reading.

Essentially, the government and the incumbent telco don’t know or can’t enforce their control of the right-of-way, which means that they have effective Layer Zero openness. Anybody can, in practice, string cable from the existing power and telephony poles; and it turns out that quite a lot do. Using basic IT gear, they place cheap Ethernet switches on the poles and run Cat5 or 6 cable into their customers’ homes, then get an aggregator to link the whole thing to a PC running an open source router implementation and a fibre-optic cable to their HQ.

The Low Road: Rawalpindi The Low Road in Rawalpindi. (Flickr user temp 13rec.)

Usually, the first router in a sense that Peter Lothberg (pdf) would recognise is at this stage. This gives you 100Mbits/s as far as the HQ; getting out to the Internet is more difficult, because capacity is scarce and expensive and the state telco controls interconnection. So most of them roll their own CDN - a file server stuffed with content which their customers can download at line speed, rather than hammering the backbone link.

It’s impressive stuff. It’s also a fine example of the distinction WELL founder and scenario-planning expert Stewart Brand drew in his book How Buildings Learn between High Road and Low Road architecture. You can see Brand talking about the book here. High Road buildings are like Chatsworth or a cathedral; they last because they are built massively strong, tailored to very specific uses with great care, and protected by the institutions that build them. Low Road buildings are like Brand’s office, a converted shipping container - cheap, generic, adaptable, liberated by indifference. If they survive, it’s because they can be altered to cope with change.

The high road; Schönbrunn Palace, still beautiful 91 years after the end of its purpose The high road; Schönbrunn is still beautiful although it’s been completely useless for the last 91 years. (Flickr user tillysan.)

Need to cable the place for a trading floor or a call centre or a developer team or a data centre? Cut a hole in the wall. Need more space? Build a mezzanine floor out of old pallets. Who will say anything? The planning committee? You’re not telling. Need fibre-to-the-home? Just nail the damn fibre to the lamp posts, and..hey, isn’t there an old PC in the corner. Just the thing for running a linux-based software router. Need voice? Set up Asterisk on Abdul’s old laptop.

The low road - building an instant house from containers in New Zealand The low road - an instant house made from containers in New Zealand. (Flickr user rodrigoejuliana)

It’s an attractive vision; if you’re on the Right, it’s the triumph of individual enterprise, if you’re on the Left it’s an example of the poor organising to defeat their oppression, if you’re an anarchist it’s an example of mutual aid and community, and the sheer hacker glee of hanging your own damn fibre on the bleedin’ lampposts is irresistible unless you have a heart of stone.

So, let’s hang the last regulator with the copper wires of the last telco. FIBRE JIHAD!

Of course, it doesn’t quite work like that. Low Road buildings buy their adaptability at the cost of fragility and their easy repair and low cost at the cost of having no insulation and less soundproofing; Low Road fibre networks issue everyone with IP addresses out of someone else’s netblock (they’re free but not cheap) and have their customers VPN into a proxy server at headquarters that does have a real, globally routed IP.

Now that's low. But what happens when the horizontal rain starts? Now that’s really low, but if there’s wind as well as rain…(Flickr user ang morh.)

Remember the time young Wasim got his kite caught in the wires? Remember the time young Shoaib bowled a bouncer that hit young Inzaman in the occiput, glanced off, and went straight into the Quagga box? More seriously, just imagine when they start doing BGP routing. Fun…and games.

How is he?! Howisheee? (Flickr user mjabbasi.)

And, of course, if everyone can string cable all over the place, everyone will, and that’s a lot of cable. Further, if everyone can remove cable, some of them will; and this is a country where AK-47 ownership is common. Where there’s a commons there’s a potential tragedy of the commons.

Low Road entropy, Quetta Low Road entropy in Quetta. (Flickr user changezi.)

Hence the need for the heavy engineering and interlocking committees of the High Road. What is the High Road to fibre? Surely it’s STOKAB, SingTel, CityLink, Reggefiber, et al - everything is set down in contracts and standard specifications, the government is frequently involved, cable is laid in sealed ducts built for the ages in reinforced concrete and steel. The capital requirements are huge and everything must be right first time, before the concrete sets. But if you get it right, it’s there for 150 years at least.

Mediocrity steals. Class steals from Doc Searls The high road; Level(3) infrastructure. (Flickr user dsearls. Haven’t we seen that monicker somewhere?)

If you get it right; that presupposes you actually made a start. This is the risk of going High Road - you don’t get the project started, or you start it and end up with a MagLev track in the middle of nowhere.

Completely useless - but too strong to knock down The Aerotrain test track in France. Completely useless, but far too strong to knock down. (Flickr user effelbee.)

So, we have two contrasting traditions, each with their own strengths, weaknesses, requirements, and affordances, both of equal validity. If I take the High Road and you take the Low, we’ll both end up in Scotland. You’ll probably be there first, but the road may wash away in the next storm. But, as Brand concluded, there is no middle way - the alternative is No Road. You must choose.

For example, if you bury services built to a Low Road standard in a massive High Road wall, you’re going to have serious trouble when a pipe leaks and the only way to get at it involves a pneumatic drill and extreme prejudice. If you build a cheap, adaptable structure of timber, you need to either make sure it’s always in use, or else accept that it will catch fire or fall down a few months after you stop maintaining it.

Temporary. Everything Low Road is temporary. (Flickr user purplewon2000.)

At the end of my street is a street cabinet used by a DOCSIS operator. The operator is a big publicly quoted company. The cable is buried in their trench, in the Queen’s highway. I’m not allowed to touch it; I’m not allowed to repair it; I’m even discouraged from reporting problems with it. Very High Road. But the cabinet is flimsy, and vandals break into it looking for copper - they don’t know about co-ax cable, and the BT cabinet next door is of heavy forged steel, with a great lock recessed into the steel for protection, so they break into the other one. And the big company doesn’t care enough to secure it, so it’s permanently exposed to the weather and they have no-notice multi-day outages. High, Low, or No Road?

Note the last maintenance visit was January, 2004 and this photo was taken in May, 2006. (Flickr user skuds.)

Probably, over time, the greynets of Pakistan will get tired of BGP routing leaks (pdf) and digging cricket balls out of their equipment. They will subscribe to NANOG, design a proper addressing scheme, set up a RADIUS server, they may well discover the joys of Internet exchanges and all interconnect with each other. They will eventually decide to put the fibre in a conduit, or even dig a trench. And at this point they may even agree to share the conduit, trench, or the fibre itself.

Stewart Brand concluded that although there was no synthesis between the High Road and the Low Road, there were common factors that held whether you were building for the High Road or the Low. Essentially, a building has to last, it mustn’t leak, and it must learn.

St.Pancras Station is transformed, by its massive structure. (Flickr user Kevin R. Boyd.)

So its structure should be strong and sufficiently overscaled to handle future expansion, because people always add to successful buildings, and it must be made of materials that last. Its roof should be pitched not flat, preferably built-up tile, slate, or metal. St Pancras Station, above, could be transformed for the new Eurostar terminal not because of the beautiful roof of the Barlow trainshed but because of the strong iron columns in the foreground, which were there to create a space for handling trainloads of beer barrels. And it should be of a design that makes it easy to alter, maintain, subdivide, and if necessary, demolish. (The lesson some buildings have to learn is that they shouldn’t exist.) The technical solution to make this possible is separation of the structure from the services, the skin, and the space plan.

You can't dodge the infrastructure You can’t dodge the infrastructure - the original columns of St Pancras. (Flickr user icefuzion.)

So, fibre deployers should:
  1. build big and solid
  2. leave space for expansion
  3. provide openness at every level
  4. eliminate coercion from the architecture
  5. always separate functions

This one is here because it's beautiful This one is here because it’s beautiful. (Flickr user RahimR.)

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January 23, 2009

Wholesale Mobile Data - UK Cross-Carrier Trial

We’re delighted to be welcoming back Andrew Bud to stimulate the 6th Telco 2.0 Executive Brainstorm in May. Andrew is Chairman of a large transaction network (mBlox) - important players in future Telco 2.0 ecosystems - and also Chairman of the Mobile Entertainment Forum.

He is currently in the middle of a cross-carrier trial in the UK on a ‘sender pays data’ concept (you’ll here more about this at Mobile World Congress in a few weeks). In May he’ll be exclusively sharing some of the results, to stimulate the debate on new telco wholesale services, a key plank of the Telco 2.0 growth opportunity.

To understand what ‘sender pays data’ means and why it’s important, here is a video of Andrew’s presentation from the last Telco 2.0 event in November 08, modestly entitled “Saving the Mobile Internet”. Below that a summary:

Sender-Pays Data: Saving the Mobile Internet - Summary of Andrew’s presentation:

We’re looking for the next wave of mobile content; it’s the post-ringtone world.

There’s a world-wide customer dread of data charges - it essentially throttles all forms of content, including advertising. Explaining operator data charges as part of a product promotion is extremely difficult; you have a choice between waffle and dishonesty. The length of the warnings required makes them extremely user-hostile, too.

But this is before we reach the broadband incentive problem; traffic overtaking revenue, with the added twist that the ringtone business, once a $12bn cash cow, is collapsing. Worse still, although some services hit physical limits in terms of consumption quite quickly, Internet access isn’t like that. And mobile networks have fairly hard limits on maximum bandwidth.

Is the answer sender-pays data? This has a long history - Rowland Hill invented it to create the penny post in the nineteenth century in the UK. Before Hill, post was paid for by the recipient, and people hated the uncertainty this created. There were also great opportunities for fraud. Hill’s simple idea was for the sender to pay, with one price, using a stamp on the envelope.

This spread - in 1865, the ITU was created and with it the termination regime, a sender-pays system. Amazon.com has done this twice now - with its products, at launch, and later with the Kindle. In the UK, broadcasting became sender-pays in 1991 with the privatisation of the IBA and in 1997 with the sale of the BBC transmitter network.

Upstream content providers would buy data from the operator for their content, which would then be exempt from charges to the customer. Revenue therefore scales with demand; users are reassured. The iPlayer crisis has awoken us to the problem; in 2009 there’s a major trial of sender pays data with four networks in the UK. Can you afford not to do sender-pays?

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January 22, 2009

Apple Earnings Call - Music no longer a growth engine

In 2009 we’ll be spending more time analysing the results of some key players in the Telco 2.0 ecosystem. Trying to give our readers a different perspective on the announcements. We start here with Apple.

In a Telco 2.0 article from earlier in January - “Apple blows a hole in the Mobile Music Landscape” - we analysed recent changes to Apple’s business model around music. Our conclusion was that the mobility premium for content sales would disappear creating challenging times for mobile operators who see music as a growth opportunity. In this article we provide a Telco 2.0 examination of the state of Apple’s overall business (iPhone, iPods, CPUs, Content, Retail), based on their Q4 earnings call yesterday.

In summary, it’s a good time for Steve Jobs to be taking a break. Here’s why:

i) Overall Company

Total Revenue up to US$10.17bn, y-o-y growth of 6%. No indication of how much is currency related. Growth in Americas only 5%. Gross Margin up significantly from US$3.3bn to US$3.5bn. However, Operating Income is stable at US$2,126.

Of course, top-line growth has been offset by R&D and sales marketing effort - which in itself is no bad thing especially going into a recession, given others will report much worse figures.

Cash generation looks really strong (although difficult to figure out) - basically Apple is sitting on a huge growing warchest of US$28bn (Total Cash US$7.2bn, Short-term securities US$18.4bn, Long-term securities US$2.5bn)

ii) iPhone

The iPhone is difficult to figure out because of the way Apple play with deferred revenue. But the headline figures are 13.7m units shipped in the Calendar year, which probably works out at around 1-1.5% of the total worldwide phone market by volume. 4.4m were shipped in the final quarter - which is below the market consensus of 5m.

Most interestingly is the deferred revenue that they are holding for the iPhone is US$7.3bn, which will be released to the P&L over the length of the contracts. With an admission that US$2.6bn was added to deferred revenue and only US$1bn released - yields an average selling price of around US$590, which more or less (with rounding errors) confirms the gossip of an average ASP of US$600 to the carriers.

A comment was made that the iPhone performs poorly in non-subsidised markets - indicating to us that at some point when demand evens out there will be a subtle shift in negotiating power between the carriers and Apple.

iii) iPods

Although all the talk was of the increase in iPod volumes (22.7m units), the fact of the matter was that iPod revenue was down 16% y-o-y (US$3.4bn vs US$4bn) - a terrible Christmas.

We’re a little baffled by this as we thought people would be buying high-end iPod Touches.

But, nevertheless, it shows that future growth will come from other devices - the days of music as the growth engine for Apple are over.

Interestingly was a throwaway comment that iPod had a surge in sales in the final week of the quarter - normally a time when retail buyers are less focused on bargains and more on cures for chrimbo excesses. We read this as a clearance sale to get rid of inventory pipeline and smacks of an even worse 1Q2009 for Apple iPods.

iv) CPUs

CPUs exhibited static growth at US$3.6bn, but story here was the difference in portables (up 23%) vs desktops (down 31%). Again, we’re confused here: why has Apple not moved beyond WiFi on the portables - do they not believe in AT&T capabilities in 3G and in embedding 3G cards in laptops? Or can they not see how to extract value from this?

v) Content & iPod accessories

These are up 25% y-o-y to US$1bn, which may look good prima-facie but it is hard to distinguish where the growth has come from - music, TV shows, brain-dead iPhone applications or huge-margin royalty related accessories?

The truth is that it doesn’t matter as Apple reiterated that this is overall a zero margin game (although 30% at the gross level). The truth is that if this segment continues to grow whilst iPod declines - shareholder pressure will make them look at turning it into a profit centre in its own right.

vi) Retail & Distribution

Retail revenues were only up 2% to US$1.7bn, which to be frank is poor given the new store opening programme in 2008. Average revenue per store dropped from US$8.5bn to US$7m, whilst they bragged that foot-fall increased.

During the call, this analyst dropped back into a teenage ’70s recessionary time-warp of buffoons frequenting record stores, just listening to stuff and buying didly-squat. Could Apple run the risk of this happening with techno-gadget addicts in the current recession?

Good news, the store programme seems on hold with only 25 new stores opening worldwide.

More interesting was the decision to go with Wal*Mart in the USA for iPhone distribution which Apple claimed was all about reaching the parts that AT&T and Apple stores can’t reach. We don’t have enough exposure to the USA retailing scene to verify whether this is true or not - but it is smells like a move downmarket to us.

vii) Europe

Europe had a great quarter with revenues up 12% to US$2.8bn which is 33% of non-retail revenues. With units sales up 13% - it looks like the exchange rate has balanced out between the euro and pound.

viii) Margins

Apple ‘fessed up that a substantial portion of the margin beating consensus was due to component pricing, which they estimated had almost sunk to variable pricing levels. It will be hard for them to go further. Inevitably, this implies a terrible quarter for the semiconductor industry.

ix) IP infringement

It was pretty obvious on the call that Apple are going to start suing competitors and not just let people copy their designs willy-nilly. We’re unsure who they are referring to, but the new Palm-Pre sounds like the best candidate - weak and reliant on Bono-driven financing. I doubt they’ll go after RIM to begin with, because they probably have more experience in defending litigation than anyone else.

Anyway, litigation is a daily occurrence in the wireless industry and the law of unintended consequences may just kick-in - expect to hear counter-suits from the likes of Nokia and Qualcomm for abuse of their intellectual property.

x) Conclusions

Apple is hitting the wall - rapidly.

Even with all the deferred revenue, the iPhone cannot sustain the previous Apple growth profile.

We think they’ll hunker down and perhaps drop margins to keep up volumes - especially in the CPU business.

Expansion overseas probably won’t solve the underlying problems of drying up of top-end USA demand.

We’re not sure what they can do in the iPod market given their huge market share - especially if there is a shift to playing music on mobile phone devices rather than having separate portable device.

However, they have a warchest full of cash and it would be simple for them to ride out the economic storms - losing something, but not as much as the competition.

Time to value Apple on cash plus a market of cash generation - rather than fantasy growth figures.

If we were being cynical, we’d say it was a good time for Steve Jobs to take a break - but we’re not and wish him all the best…

Finally, some lessons and Implications for Telcos:

- Cash is King
- Everyone will be hurt in a recession, even top end consumer brands
- The grass is not necessarily greener on other people’s lawns
- Making a margin in music content is going to be extremely difficult even with significant improvements in supply chain and operational efficiency

This analyst will be reviewing Nokia’s results tomorrow morning, Google tomorrow night and playing catchup with eBay and IBM…

[Ed - we’ll be reviewing the Device market at the 6th Telco 2.0 Executive Brainstorm on 6-7 May in Nice.]

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January 21, 2009

Me2Me: building the foundations of contextual voice

Every now and then we encounter a really interesting product someone’s come up with. Last time it was Fonolo, the search engine for call centres that digs through all the IVRs in the world, tries all the options, and plots their structure on their Web site. Then, it lets you click-to-call directly to the organisational function you want to talk to, and log the results of your call so that others can learn and do better.

Now it’s Me2Me. A Swisscom Ventures-funded startup, Me2Me uses voice-recognition technology to provide a sort of telephony-based personal organiser service. You call it, leave a note, and later retrieve it, either in a pull mode (you go looking for it) or in a push mode (it comes looking for you, for example when a pre-set reminder comes up). It’s not the first time this has been done, but the crucial thing here is that the message you phone in is itself converted to text and stored in a relational database along with the actual recorded sound.


This is, of course, a crucial step. Remember that classical telephony preserves everything except for the context of the call and the semantic content of the call; every crackle, passing helicopter, cough, etc, but nothing of where, when, how, why, and not even anything of what was said. In the past, sound and video technologies have concentrated exclusively on the waves in the air. This is a problem. We can apply incredibly rich methodologies to work with information that comes in textual or numerical forms; we can search, merge, filter, match, mapreduce, select, count, join, template, compare, and we can link different operations so as to carry out complex processing.

We can do comparatively little of this with images, and next to nothing with sound or vision. Usually, when we do this with sound or vision, we cheat and add text metadata to it, and then process that instead. Me2Me is doing the opposite; it’s adding the complete text plus the call metadata to the sound file.

Think of the difference between a tape recorder, or a collection of MP3 files without metadata, and an e-mail inbox; the stuff in the inbox can be searched, threaded, and filtered on a whole wealth of criteria. And a lot of e-mail clients let you use the filters to invoke other programs. The sound recordings cannot do anything like this. But once you’ve extracted text from the sound, all these options are back on. This means you can search through the stored information, you can filter it, and generally do intelligent things with it. The next clever bit, though, is that the database full of text is connected to the natural habitat of text, the World Wide Web. The system looks like this:


This means that you can interact with it visually as well - which is useful if you need to do complicated things or to work with messages in bulk. And that diagram also shows the really clever bit; the backend talks to all kinds of third party Web service APIs, so your messages can make things happen. As the voice recognition system identifies some words as system commands, you can tell it to do things with the information you’re about to give it.

For example, the current prototype lets you query the Swiss Federal Railways’ timetables, stock exchange prices, ski reports and various other stuff. But as the system improves, there will be more, and there will probably be user-defined commands and filters, so (for example) if you ask for a reminder of an event, the “reminder” filter triggers a call to Google Calendar (or your favourite groupware) to insert it in your visual calendar as well. You probably won’t be surprised to know that we suggested they ought to integrate Fonolo as soon as it gets to Europe or they get to the States.

And, a primary target for Me2Me is to funnel the contents of existing voicemail systems into the big bucket of data, thus tackling the world’s most maladaptive communications system itself.

All very cool, especially as it develops further. Me2Me’s CMO, Christian Giroux, describes it as a “voice command line” (hey, he may be the CMO but he’s actually an engineer), analogous to Mozilla Ubiquity, the project which lets you control Firefox and the Web services you browse with it through short user-defined keyboard commands (for example, “trainuk london leeds” gives you a list of train times). Both aim to find more humane ways of interacting with computer and telecoms systems; both want to make human language and programming overlap.

But the really interesting opportunities are two-sided, in more ways than one; not only is Me2Me a way of interacting with the Web by speech, as well as a clever to-do list, it’s also potentially a way of interacting with call centres by both speech and the Web. For example, you could issue a voice command that would result in a Web service call to some company or other - for example, a bank - which passes back an HTML form you can fill in so as to capture your data whilst waiting for the call to be answered, and accepts a whole variety of context data in return. And you could route the call depending on that.


And Me2Me is marketed as a managed service to telcos. So as well as charging a subscription to your customers, perhaps you could profit by having upstream partners link their CRM systems with it, creating new voice commands that benefit from all this, and sharing some of the benefit to them with you? Me2Me is building the foundations of contextual voice.

Another thought; when we said that telcos need to cherish people with good Unix/Linux/open source skills, we weren’t joking. Underneath the bonnet, and leaving the voice recognition stuff aside for a moment, it’s all done with Asterisk, the open-source PBX and telephony toolkit.

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January 19, 2009

6th Telco 2.0 Exec Brainstorm, 6-7 May, Nice

The website for the next Telco 2.0 event is now up here. It’s based on output from the November event combined with input from our 2009 research programme (introduced here).

We’re delighted to welcome back Werner Vogels, CTO of Amazon, to stimulate the debate, along with other specially briefed senior execs. More details on the brainstorming focus to follow…

To cope with demand and maintain quality we’ve implemented an ‘application’ process for participation. This should help to make the brainstorming process even more productive. All previous Telco 2.0 alumni will receive a special invitation to participate in the next week. Event site here.

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Ring! Ring! Hot News, 19th January 2008

In Today’s Issue: 2SBM - boosting productivity in the trucking industry; Google Maps on the iPhone eats telcos; Motorola sacks 4,000; Intel profits down 90%; Nortel goes bust; Samsung reorganises; Sony Ericsson loses money, ups prices; Sprint launches voice price war with barrage of sharp boomerangs; subsidy queue forms on Pennsylvania Avenue; munifibre advocates eye pile o’cash; VZW moves up LTE to NYE ‘09 if AWS OK; 700MHz spectrum traffic jam; Infineon has LTE chips; third Iranian GSM licence; Batelco buys Indian operator; Rwandatel sells out of phones, goes to China for more; infrastructure sharing in India; Latvia starts the big dig

Here’s something interesting; remember the Two-Sided Business Models (2SBM) report? A key case study in it looked at the possibilities for improving load factors in the road transport industry - reducing the mileage trucks spend transporting air from place to place. The CEO of UK transport major Eddie Stobart plc is floating the idea of a tax on empty truck movements as a way of saving energy and reducing traffic congestion. He reckons that every percentage point of capacity utilisation is equivalent to £100 per truck per month, which implies that a 1% gain in load factors across the entire UK trucking fleet would equate to a gain of £540m to GDP.

On average, trucks achieve a load factor of 70%, but Stobart claims theirs achieve 84% through some rather interesting IT systems; if the whole industry could match this, it would gain about £8bn a year, to say nothing of the social benefits of saving fuel and road space. Stobart is quite a bit more aggressive than we were; our calculations put the benefit of a 5% improvement at £218m a year!

Similarly, when an iPhone user needed to buy a tyre in a hurry, it was only a Google Maps search away…but where was the telco in all this? Carrying the bits. Grim, but then everything was fairly grim this week. Motorola sacked 4,000 employees, three-quarters of whom worked in the moribund handsets division which still hasn’t been either revived, sold or closed down.

Intel’s fourth quarter profits fell 90%, and the company promised analysts a depressing year of poor sales and falling margins. Nortel Networks went one better and filed for bankruptcy one day before it was due to make a $107m interest payment. Samsung announced a major reorganisation in the light of plummeting demand for all its products.

Sony Ericsson, meanwhile, having succeeded in beating Motorola into fourth place in the world mobile makers’ league, announced a €73m loss and decided to concentrate on more expensive gadgets, which is a tad counterintuitive. What will be interesting to see is what replaces UIQ on their handsets after it was shut down last week.

Sprint-Nextel, meanwhile, was pushing hard to squeeze cash out of its iDEN network, which happens to be our advice to them. But is this really the best idea ever? Their Boost Mobile in-house MVNO is offering unlimited US-wide voice service for $50 a month, which is half the price of the unlimited plan that Sprint mainline (as the airlines would say) offers. Launching a price war is one thing; launching a price war against yourself is quite another.

So, as they say, where is the hope? There is apparently a change of government going on in the United States (did anyone hear what happened?) and telecoms interests are as always keen to get in the new guy’s inbox. The Telco USSR was right there; they’re angling for a $2 billion slug of subsidy to build a “first responder network” for the emergency services. The killer detail; they want to use their existing iDEN network, which does indeed have various useful capabilities in that line…so what’s the $2bn for then?

In the current version of the new administration’s economic crisis plan, there’s some $6bn going for “broadband” - those with experience of the industry in the US will be thoroughly familiar with the way taxpayers’ money intended for fibre deployment vanishes once it gets inside an RBOC, so the community fibre guys are desperate to get their hands on it. The transition team is playing it down as much as they can.

At the same time, Obama is holding fire on the analogue TV shutdown, which creates a knock-on effect for the operators who bought the 700MHz spectrum that will become available as a result, and also pushes off hopes to get some of the spectrum for the last mile of rural broadband projects to a later date. Interestingly, Verizon Wireless seems to be looking at moving up the deployment of LTE to the end of this year, which is also conditional on the availability of 700MHz spectrum.

Which may have something to do with Infineon’s announcement of LTE silicon this week, including full compatibility all the way back to GSM voice only.

After all, there’s still plenty of activity down there - Etisalat just grabbed the third Iranian GSM licence, setting up a bruising contest with emerging market specialists MTN’s Irancell, and Batelco jumped into the Indian mobile business. Rwandatel has had to go back to Huawei for more handsets after they sold out, Indian operators are discovering the delights of sharing, and Latvia starts a fibre-to-the-home deployment.

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January 15, 2009

Telco 2.0 Reader Survey Interim Results: Thirst for Action

The results of the first tranche of our reader survey are below. This has been extremely useful in directing our research and event agenda for 2009. A big thank you to those who have taken part so far.

We will close the survey at the end of January, so if you haven’t taken part yet, please do here (it takes 5 minutes).

NB: We will donate to charity for every respondent (details here) and we will send all respondents a detailed analysis of the results in early Feb.

So far, the results show three trends:

1. An Increasing Desire to Turn Telco 2.0 Theory Into Practice

There is an increasing acceptance of core Telco 2.0 ideas in the market, and a growing desire to translate the theory into practice.

Overall, we were delighted at the positive views expressed on the quality and value provided by our analysis, with 77% overall scoring it “Ahead of the game” or “Unique”, rising to 90% for respondents from Telecoms Operators.


‘General Strategy’ and ‘Innovation’ topics scored most highly as areas of value, while ‘Case Studies’ and ‘Use Cases’ are also in high demand.

Feedback from our events and other recent market experiences lead us to believe that these practical examples are a key means to help turn acceptance of the visionary theoretical principles into executive belief and corporate action. Case Studies and Use Cases will therefore be a key feature of the new Telco 2.0 ‘Executive Briefing’ Subscription Service.

2. Future Value will arise from non-traditional Opportunities

Future areas with a good all round level of interest were:

  • “More examples of business model innovation from other industries”
  • “Innovative Mobile Internet service and applications”
  • “The Business Models for Open APIs”
  • “Exploiting Customer Data”

We will be focusing on these issues in our future research and our next event, on 6-7 May in Nice.

3. Telcos particularly interested in analysis around voice and messaging; vendors interested in billing opportunities

From the pool of respondents so far there was a mis-match in interest between Telcos and IT / Technology Vendors on two key topics. First, our telco readers are particularly interested in “Voice and Messaging 2.0: Building the Communications-Enabled World, V&M innovations” - showing that there is important life in the original killer application.

Secondly, our Vendor community is more interested in analysis around “Billing and Payments 2.0: Telcos enabling commercial transactions”.


Cynical observers may suggest that this implies a perceived lack of business opportunity in Voice and Messaging for the vendors, while there is big money in billing.

We think the Vendors are missing a trick on Voice and Messaging - and as Werner Vogels CTO Amazon spelled out in his keynote presentation at our last event most valuable innovation comes from serving needs that always need to be served - but serving them better. Voice and Messaging serve the key need of Telco customers - to communicate. See our report on this topic here. It’s equally likely that Telcos are ignoring the critical importance of innovative billing capabilities to optimize Telco 1.0 and enable Telco 2.0 business models. One of our take-outs was that we (and the vendor community) will need to do better to bring those opportunities to life.

Note on Respondents, as at 30th December 2008

Of the 115 people who’ve already earned our thanks and generated a charitable donation from us by completing the online survey by 30 Dec 2008, roughly one third were Telecoms Operators, half were IT / software / Hardware Vendors, and the remainder Consultants or from the Media and Finance sectors.

Just over a quarter were at CxO or Director level, another quarter Senior Managers, and the majority had either Global or EMEA-wide interests.

(To take part in the survey, go here).

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January 14, 2009

Credit Crunch (Part 6): Happy New Deal!

Below is the sixth article in our series on the Credit Crunch and its effect on the TMT sector (previous here). We note that telecom stocks are weakening versus the market, but opportunities look likely from government fiscal stimulus packages, especially around ‘Smart Grids’.

Anyone expecting a change in tone from the economy to start 2009 was wildly optimistic. The situation is deteriorating, and telecom will come under pressure. The stock market’s feeble attempt at a rally over the past month has landed telecom in third quartile, in keeping with our views.

However, telcos should resist the knee-jerk reaction to cut personnel and investment - there are interesting opportunities on the horizon from fiscal stimulus programs. Remaining focused on, staffed for, and invested for the longer term opportunities is key.

From here on our perch in the UK, the new year seems to be kicking off with a very dire tone indeed. While we continue to firmly view telecom services as must-haves for consumers, which may even more than compensate for their own cost in some cases, there can be little doubt that the industry will come under pressure as things deteriorate, and some voices are already predicting a dramatic deceleration in growth in 2009.

At the very least, the glacial state of the housing markets in developed economies will mean that 2009 financial results from telcos and cablecos alike may reveal more about underlying consumer behaviour and usage patterns than previously, as the effect of new household creation on broadband service uptake is drastically reduced. Ditto for business spend, given the expected rise in corporate defaults and business failures.

It should be an informative and interesting, but not overly pleasant year, and already there are signs of pre-emptive measures to compensate - these will also no doubt be a recurring feature of 2009.

Over the past month, our proxy for the industry, the DJ STOXX Telecom Index (the largest and most diverse telecom universe in any equity market) has followed our oft-stated expectation that telecom will outperform the market in down-drafts, and underperform during rebounds.

We certainly would not want to suggest that the market is counting on a sustained economic recovery at this point (and if it is, it’s wrong), but nevertheless this seems to illustrate our view that when investors opportunistically see better value elsewhere, the appeal of the “defensive telecom trade” will prove ephemeral.

DJ STOXX 600 Sector Ranked Returns, 12 December 2008 - 12 January 2009


This brings us back to our recurring question of what telcos should do to position themselves to be able to tell a different story to the market on the other side of the current catastrophe. As TeliaSonera demonstrates with an 11% personnel cut in Sweden, a necessary part of that story will be headcount reductions - that is a given. It also may be safe to assume that significant capex cuts are on the cards, as we saw during the post “dot-bomb” era, where mid-to-high single-digit capex/sales ratios for fixed line were commonplace.

The industry was fortunate in being able to emerge from that downturn with some considerable growth left in mobile and a largely unexpected fixed broadband explosion ahead of it. This time, however, we think the growth opportunities which will arise from the rubble will require a more hands-on approach to foster, and that there is a risk of throwing the proverbial baby out with the bathwater if companies are overly focused on the near term.

As our work on two-sided business model opportunities demonstrates, in many cases these growth opportunities will need proactive organic development via a conscious transformation effort within the telco and between upstream and downstream customers. However, other opportunities may arise largely as a result of external factors, creating entirely new markets for telcos.

These will require incremental investment, but also some good old-school telco capabilities, which may offer opportunities to redeploy, rather than fire, legacy employees. One fascinating example on the horizon may arise from President-elect Obama’s American Recovery and Reinvestment Program, and similar economic stimulus investment packages around the world. A central plank of the ARRP proposal is investment in energy efficient technology innovations across the entire spectrum, and one essential element must be the smart grid concept.

An interesting report released by the GridWise Alliance just before Christmas last year attempts to quantify the investment required for widespread smart grid deployment by utilities in the U.S., as well as the likely impact on job creation arising from it. The eye-catching headlines of the report are that deployment of smart grid technology throughout the U.S. over the next four years would generate $64bn in investment activity, creating 280,000 new jobs, of which half would be permanent beyond the initial deployment program.

The vast majority of these sustainable jobs are expected to come from suppliers to smart grid utilities: equipment and service providers, contractors, and entirely new jobs arising from the altered business models of the smart grid and its ancillary offshoots. We have seen no comparable in-depth estimates from Europe, but given the number of households in question, the opportunity must be of comparable or greater scope.


The good news for telcos, in our view, is that many of the functions and assets required are core parts of the legacy telco:

  1. Most obviously, the capacity to provide and manage connectivity, an essential part of the smart grid proposition, which rests on being able to monitor and manage energy production and consumption throughout the value chain in real time;
  2. Existing field forces of engineers with vast experience at installing, troubleshooting, repairing and replacing networked devices and CPE, which are integral to the smart grid concept;
  3. Customer care, billing, and tech support capabilities for end customers;
  4. Managed service capability for desktop and back office applications throughout the value chain;

In addition, there is scope for Telco 2.0 aspects to come to the fore:

  1. The GridWise report notes that the smart meter device is “fundamentally a point-of-sale device and integrated with home automation and smart appliances will provide valuable buying / habit data which we have seen spur our economy in recent years when used in the food supply chain.” Collecting and managing that data on an aggregated basis is precisely the sort of scenario we have envisaged for telco customer data itself. Energy consumption and telco service consumption data combined would be more powerful in a commercial sense, and indeed telco usage data would considerably enhance the usability and value of the utility data in accomplishing the stated goals of smart grid projects;
  2. One aspect of smart grid approaches is to allow individuals and enterprises to sell excess self-generated power back into the grid. This would require the formation of markets and trading platformsof the kind which some telcos have demonstrated experience in managing. Also, if telcos were successful in establishing themselves as trusted payment agents between third parties, there could be a more active role to play.

This is simply one early example in one market, but the severity of the current crisis almost certainly dictates that many more opportunities will arise from government fiscal stimulus programs is countries across the globe.

Telcos have much to offer, and much to gain, through this process, if they are adequately staffed and positioned, and if they invest now with a view to being prepared to rise to the challenge.

[Ed. - these themes will be informing our research agenda for 2009 and will be explored at our next event on 6-7 May in Nice, co-located with the TM Forum’s Management World]

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Apple blows a hole in the Mobile Music Landscape

At its recent MacWorld conference, Apple made three key changes to its iTunes music services offering: DRM free distribution, wireless downloads and variable pricing. A year ago, iTunes looked like a business under pressure. But these changes make the mobile operators’ and Nokia’s “Comes with Music” propositions look poor in comparison. In the article below we explore why this is the case and the significant new challenges faced by telcos involved in the content business.

Goodbye Sideloading and WiFi downloading…

Pre-MacWorld, Apple didn’t have the permission to download music tracks to the iPhone via its partner mobile networks, either 2G or 3G. This was not because Apple didn’t have the capability. After all Apple already sell games through the iTunes store to directly download to the handset. It was a licensing issue with the music labels.

Most users moved music onto their phone by synchronising with their iTunes library on their desktop. Purchases were possible over a WiFi network, direct downloading the music to their handsets. For an user, it must have always seemed strange that downloads weren’t possible over the mobile network. More importantly, the ban on 2G/3G wireless downloads will have created a barrier for impulse purchases whilst on the move.

Although hard to quantify, the music labels knew they were losing revenue with the restrictions and Apple definitely knew the user-experience was less than perfect. Now, an iTunes user can buy music either at home, work or on the move and copy it onto whatever device they want - whether iPhone, iPod, desktop or laptop.

…Hello Dumb Pipe

Effectively, the mobile operator is reduced to just selling a data plan to the user. There is little difference between the mobile ISP role and the broadband provider role - they are just a dumb pipe and have been excluded from any potential upstream revenues.

Apple’s mobile partners will struggle to recover from being just a dumb pipe. Even a really basic service like payments can be difficult to make attractive to iTunes. Apple already have 75m iTunes accounts with credit card details. Effectively the mobile operators’ payment services are competing against credit card processing fees.

Music as a Zero Profit Service for Apple

In the early days, Apple claimed its music service was a zero margin game. These days very little is said. The previous assumption was that Apple made its profits by selling devices and the music itself could be sold not at a loss but at zero profit. Apple is now the biggest digital music retailer in the world selling over six billions songs since inception and one billion in the last five months. At current run rates (and 99 cents pricing) that is an annualised business with around US$2.4bn in revenues.

To put this in perspective, the total worldwide Music Retail revenues in 2007 was US$29.9bn, with digital accounting for US$2.9bn. In other words, Apple has a huge global market share and with that comes huge negotiating power.

The gross margins that Apple earns on its download store for third party application are public knowledge - 30% of gross revenues. Music margins are less public and more complicated because of the licensing, but we think it is fair to assume that Apple is aspiring towards music downloads as a profitable service in its own right.

Economic Rationality of Variable Pricing

Many commentators have said that Apple has made a huge concession to the music labels by introducing variable pricing. We see this as more market reality than a huge concession.

Apple itself already has variable pricing for its third party applications. It becomes a really hard sell to the music labels to say that Apple should set the price on music when it doesn’t do it for third party applications.

But probably more important than this is the realities of the laws of supply and demand - you can charge a higher price for items in demand and lower the price of items with little demand to stimulate demand. Will Page, chief economist of the MCPS-PRS (artists’ collecting society), recently revealed data that showed the majority of online catalogues had zero demand. It is merely rational behaviour to reduce the price of these items to try and stimulate demand.

It is interesting to see how Amazon is taking a different spin on this by promoting and reducing the price of albums. It has long been known that the rise of digital has broken the bundle of the album. So rather than selling ten tracks in the physical world, consumers only buy the one or two hits in the online world. Why not recreate the bundle, promote it and sell for as little as US$3?

DRM-free downloads

The removable of DRM-protection from the Apple downloads was inevitable, once the major record labels had allowed Amazon to sell MP3 formats without protection. DRM-free downloads are a huge game changer, because they remove the tying of content to a particular device and we believe removes the incentive to cross-subsidise music, whether from contract bundles or device sales.

This blows a complete hole in the Nokia “Comes with Music” strategy - bundling music with the device and only allowing portability between Nokia devices. If music is DRM-free and portable, the attraction of buying another Nokia device in order to keep accessing your content is removed. Effectively, the customer retention rationale is removed.

Mobile Operators have a similar challenge when including music within a contact bundle. Music is not longer a retention tool if the consumer can still retain it at the end of a contract. There is still a large music opportunity within the prepaid market for the operators, but the operators will probably have to be extremely creative, including bundling postage (data usage) and possibly sponsorship to match the pricing of the largest music retailers (Apple & Amazon)

Challenging times for the rental model

We believe subscription services or a rental option are still attractive to a niche audience - especially parents worried about their children illegally downloading content. The technical challenge becomes how to protect content so that it only available for the rental period and plays on a wide range of devices and music players.

However, we believe that the preferred option for consumers will be to build a catalogue of owned music. The rental model will only work if the pricing is at a substantial discount to ownership.

In addition, the rise of streaming services such as Spotify offers a real alternative to operator-subscription services. It is only a matter of time, before these become available wirelessly as well as on fixed networks.

Ramifications of an increasingly OTT world

Mobile Operators have always included in their business plans revenues from upstream 3rd parties and value-added services to their customers. The Apple ecosystem offers a counterfactual to this theory and illustrates that the mobile internet could move in exactly the same direction as the fixed internet where “Over the Top” players gain a large chunk of the upstream revenues.

We believe that, just as in the physical world, the spoils are shared between the best retailers and best content producers - physical distribution is a very marginal business. Apple will be more frightened about the challenge from Amazon and Google than the network operators.

In addition, we see that the lines are blurring between fixed and wireless networks in the market for content. Both Apple and Amazon have set the expectation that the content price will be the same and that retailers will operate across multiple access networks and geographic footprints.

This means that there will be fewer (any?) protective barriers between the fixed (i-Tunes, Amazon) world and the mobile world. The mobility premium for content sales disappears.

Challenging times ahead for the networks…

[Ed. - these themes will be informing our research agenda for 2009 and will be explored at our next event on 6-7 May in Nice, co-located with the TM Forum’s Management World]

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Guest Post: New ‘Order to Cash’ outsourcing models for Telco 1.0 and Telco 2.0

In the guest article below, HCL and Infonova discuss the opportunities to outsource key business processes in a world where Telco 1.0 and Telco 2.0 coexist.

Situation - Some indisputable facts

In order to reduce costs, many telcos and cablecos have utilised business process outsourcing, usually outsourcing processes with high volumes of repetitive tasks. An example of this would be Order Provisioning or L1/L2 Customer Support. This type of outsourcing has often delivered significant labour cost arbitrage gains as well as better management and improvement of Service Levels and Performance Metrics in the initial phase of such engagements - thereby initiating an expectation of continuing year-on-year increment of benefits.

However the business benefits of outsourcing have not always been scalable, replicable, and above all, sustainable.

Complication - What has changed?

The market dynamics are consistently and continually accelerating and altering. Consequently, Telcos and Media Operators must continually modify their product offerings and market approach - and survival will require that telcos operate both Telco 1.0 and Telco 2.0 business models simultaneously.

So what does this mean for most Telcos that have outsourced processes from their front or back office?

Conventional outsourcing often reduces the Telco/Media Operator’s capability to be flexible and responsive to market changes:
  1. Upgrading front and back office systems that have been partially or fully outsourced is both complex and costly
  2. the outsourced process locks the operator into an operating model that tends to extend the core business cycles - i.e. Concept-2-Market; Order-2-Cash and Ticket-2-Repair
  3. the challenges of modifying and launching new products and services are accentuated when processes are outsourced because the performance metrics of an outsourced contract usually require very structured upgrade programs
  4. and lastly, the front & back office systems that support the outsourcing contracts in most cases are “hard wired” for the original business proposition and unable to easily support triple and quad play (Telco1.0) business models without significant investment in both time and money.

Enabling two sided business model functionality requires the capability to manage (and automate) new business rules across processes and systems. This is a significant additional complication for most outsourced telcos, as Telco 2.0 operators are likely to require the capability to support multiple charging and revenue sharing models simultaneously. The current front and back office systems, however, are designed to support single sided business models.

For example, new channels such as supermarkets and equipment manufacturers such as Apple are also seeking Order-2-Cash solutions which can be own-branded - but most operators do not have the front and back office systems to support this white labelling functionality since most legacy front and back office systems only support Single Brand functionality and cannot support multi white-label branding scenarios.

With the lack of appropriate front and back office systems capabilities aggravated by severe funding constraints, most Telcos are not in a position to effectively address the Threats and Opportunities of the changing market.


So, given that Heads of Strategy and Marketing are expecting to pursue radical new Telco2.0 business models just as the Heads of Operations and the CFO are struggling with the complexity of re-working outsource arrangements to get more flexibility as well as managing the mounting costs of re-structuring IT systems to support of Telco1.0 business models…just as there is a massive financial squeeze - two questions are crying out for answers:

  1. Is there an outsourcing organisation that understands the need to provide a flexible outsourcing service to Telcos that can deliver and support Telco 1.0 and Telco 2.0 business models?
  2. Is there a platform out there that can simultaneously support Telco 1.0 and Telco 2.0 business models that will also support the outsourcing requirements?

Answer - Yes

HCL and Infonova recently announced the launch of a new business process outsourcing service. This joint service focuses on helping operators outsource the end-to-end “order-to-cash” process. The offering includes outsourcing the core processes that perform the execution of the business plan, i.e. the product management, the customer management, the order management, the billing and the collections.

We believe this outsourced service is different from other offerings for a number of reasons. The prime platform based outsourcing delivers multiple processes end-to-end - the complete order to cash process. The service also provides convergent telcos and media operators with the opportunity to outsource complex “order to cash” triple and quad play services (Telco 1.0) as well as Telco 2.0 double sided business models where the operator collects revenue for its services to facilitate business to consumer transactions.


HCL’s new platform-based outsourcing service tackles a major gap in the market for operators that have “hard wired” inefficient systems and processes and are weighing up choices between complex SI integration projects versus achieving the same and better functionality and flexibility as part of an outsourcing contract.

This end-to-end outsourcing approach has been designed to enable the operator to avoid the complex, risky and often highly political journey usually accompanying in-house transformation. The difficulties of building a new order-to-cash platform internally or externally and then bringing it back into the business, create a massive distraction and overhead that can be avoided by an elegant reliable outsource process with a professional outsourcer.

The overall impact through should be significant improvements in the operator’s balance sheet and cash-flow, with costs directly related to performance. The outsource service includes rapid online product management and launch functionality with capabilities for Telco 1.0 and 2.0 business models - with the aim of re-establishing the operator’s competitive edge and improve customer loyalty. The outsourcing framework should also improve confidence that strategy and market offerings can actually be delivered.

For example, mobile operators are partnering with and/or acquiring fixed line operators to enable them to launch triple play and quad play services - and vice versa. While the executives involved announce that the result will be a “transformation”, typically, the IT engineers from both camps start to work through how they can ensure that “their” pet systems prevail and become the masters of the data.

Most IT groups tend to believe that it would not be possible to deliver the functionality without their systems and their involvement - after all there is a natural level of responsibility to maintain the processes supported by their systems that have been in place for years - as well as the uncertainty that if the other party’s systems “prevail” or worse still everything is outsourced, this could result in systemic failure or even job losses!

The challenge is that most IT groups hold a conventional view (from both a business and IT perspective) of what needs to be done and logically architect the integration of their existing systems to deliver bundles of the services they already deliver (Telco 1.0). Incidentally, it is very difficult to deliver Telco2.0 business model functionality through integration of the legacy Telco 1.0 systems! There are a number of operators that have embarked on this journey often called “transformation” with their IT teams budgeting multi-millions of euros to deliver hard-wired integrated systems for Telco 1.0 business models.

Most C-level executives are reluctant to challenge conventional wisdom! But they could outsource the delivery of their new bundled services to a company like HCL with the confidence that this service would also enable them to operate Telco 2.0 business at the same time - achieving both speed to market, reduced cost to serve and significant flexibilities for its business operations - and with the outcome that their ‘transformation’ has been achieved much quicker.

This is particularly possible via HCL’s approach because it delivers bundled product offerings using the operator’s fixed and mobile wholesale interfaces at a fraction of the cost of typical integration programs. HCL’s platform is also able to operate as a wholesale aggregation platform and deliver the functionality for Telco 2.0 business models that orchestrate a multi party, multi level B2B2C environment.

A key element of the secret sauce is that HCL’s platform based order-to-cash outsourcing is supported by the high level of process automation delivered by Infonova’s non intrusive end-to-end front and back office BSS umbrella, operated by HCL’s process experts. HCL chose Infonova’s BSS as the basis for their platform based outsourced service because Infonova’s BSS delivers a business rule driven workflow and has sophisticated integration capabilities that enables orchestration and SLA tracking of any process associated with any legacy interface.

We believe that this approach delivers a broader impact for operators, with higher predict-ability, scale-ability, replicate-ability, forecast-ability, as well as a dramatic improvement to all their operating metrics and faster outcomes than usually delivered by conventional outsourcing techniques.


Ultimately the opportunity is to a.) ensure continuity and b.) build financial savings benefits over both the short and longer term while delivering the order-to-cash functionality required for both Telco 1.0 and Telco 2.0 business models.

For more information on the details of this approach, please see www.hclbpo.com and www.infonova.com

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January 13, 2009

2009 Preview: Re-thinking priorities

It’s the time of year again for the Telco 2.0 analyst team to come up with our highlights of 2008, and thoughts on where 2009 will take us. (For our predictions this time last year, click here). What makes the crystal ball particularly fuzzy right now is the general macroeconomic situation. Are we staring a recession in the face, a depression, or an outright panic? At one extreme we’ll see a little trimming of investment spending. At the other, it largely depends on how black a sense of humour you have.

2009 looks like being a year when the Strategy department should be renamed the Opportunism department. Expect wild currency fluctuations to play havoc with financial reporting, sudden implosions of previously stable operators and suppliers, and unexpected incursions from Internet players into telco services.

In this article we cover 12 topics: basic voice & messaging, media, fixed broadband, mobile broadband, regulation, emerging/growth markets, devices and CPE, M&A, OTT players, OSS/BSS, NEPs, Technology:

Basic voice & messaging services

Bundling continued throughout 2008, but there remained little sign of mass adoption of true “converged” services. Innovation in the core service also remains glacial. This isn’t likely to continue, as the users have “gone social”, and the imperative in 2009, particularly for mobile operators and suppliers, will be to work out how to incorporate this into their basic product offerings.

Meanwhile, “over the top” plays — especially VoIP (e.g. Skype and Truphone) — haven’t proved the competitive threat once thought. They will struggle in 2009 against the power of the bundle. Eventually, they will find ways of creating new business models that rely less on arbitrage or termination fees, but not in 2009.

Enterprise Unified Comms will continue to blossom. Expect to see hybrid models blending operator services and corporate-owned infrastructure, rather than “pure” hosted services. There are real and tangible gains here which will survive a downturn in discretionary spending.

Meanwhile, more and more enterprises have their own VoIP switch and often VoIP interconnect, cutting out the traditional telco services altogether.


The shine has been coming off the online advertising business over the past year, with growth dipping. (Offline advertising has been in freefall for ages.) Consumers continue to reward premium content, but are sticking with the brands and channels they already know. The value is in aggregation, and telcos simply don’t have the skills to do this well.

Big questions will start to emerge in 2009 for traditional media companies about the effect of going online in cannabilising traditional distribution routes to market. A large amount of pressure will be placed on the larger aggregators, especially YouTube, to increase payments to content owners. The lack of growth in advertising will lead to concentration of content sites and even bigger gaps to emerge between the hobbyist & professional sites.

Given the mad rush of telcos into building vertically integrated IPTV offers, we may see an equally frenzied rush for the exits. Instead, fixed telcos will figure out the “Telco 2.0” logistics metaphor. Help support multiple third parties in delivering media services, and offer them the transactional support and business processes they need to make that successful.

Fixed broadband

The divergence of performance in deploying fibre between different countries and regions continues. Many examples of note seems to involve government intervention at some level (even if it is only swiping regulated monopoly rents on copper and magically laundering the cash into a new fibre monopoly). As capital markets stay in the doldrums, it’s going to be either end users or municipalities (with stable tax revenues and long-term outlooks) who are going to drive capital investment in access networks.

The ISP business continues to look like a fools’ paradise. Expect to see smaller ISPs continue to suffer and be bought up by the telco giants at bargain prices. Niche plays, especially in the SME sectors will struggle to differentiate and will consolidate.

Mobile broadband

One word summarises the big broadband story of last year: “dongles”. Cleverer operators using discount broadband deals to reward and lock in their best customers. 2009 will see various pay-as-you-go mobile broadband models take-off. These will drive penetration into the mass market, but whether the generated revenue is enough to support mass-adoption of embedded mobile broadband is doubtful.

However, looking forwards, there are already signs of strain on many networks from this explosion of mobile broadband usage. Initially it is backhaul from cell towers that is being stressed, and that is being followed by new chunks of spectrum being added on. A product with no differentiation and rabid price competition equals no profit. Expect to see operator consolidation creating a lot of work for competition and anti-trust lawyers.

This will vary a lot by local market, based on issues such as: how many operators, how much/which spectrum, prepay vs contract, role of subsidy etc. Generally countries with Hutchison 3G subsidiaries are the most aggressive (plus others like Portugal & South Africa). We are going to see a lot of focus on ‘offload’ in 2009 - using WiFi, femtos, GSM refarming, anything — to get that traffic onto cheaper fixed lines at the first opportunity.

We’ll see some cracks in the seemingly-unstoppable LTE bandwagon, with HSPA+ being the beneficiary. Also, the outlook for standalone WiFi hotspots is bleak, unless integrated into 3G mobile broadband plans.


Looking forward, the Obama administration is making some very interesting hiring decisions in putting together its advisory team. These are bound to have a ripple effect into the staffing (and potentially even structure and mission) of the FCC.

Meanwhile, every regulator will be looking to fill up the taxman’s empty coffers via spectrum auctions. What worked in the past won’t work any more, with few willing to pay large up-front fees and risk new network expansion. New licensing regimes will be considered that shift us more towards a revenue-share type of model between government and private enterprise. This will take years to get to work, with multiple rounds of consultations & research papers & general hand-wringing about the delays in finding a more suitable way of renting out the airwaves.

Emerging/Growth markets

The surprise coming from emerging (‘growth’) markets is that this is where many of the most cutting-edge “Telco 2.0” business models are being established. We expect more of the same, with increased focus on innovative personal communications services, and B2C transaction services such as advertising and payments.

Handsets & Consumer Premises Equipment

2008 has been filled with a lot of “me too products”, copying both the iPhone and Blackberry. However, a couple of niche products that do things differently have been very popular this past year, such as operator 3 with both the Skypephone and INQ Facebook phone (both quietly powered by Qualcomm). All of these examples are demonstrating an ever closer coupling of the device with a co-designed set of online services. Furthermore, none of these services come from any telco marketing department researching the needs of end users and conceiving of the products — the innovation is coming from external platform providers.

The iPhone in particular demonstrates that there is real consumer demand for a true mobile Internet experience. The qualifier is that the end-to-end user experience has to be simple and actually work. Operators thought that there was a “fast follower” position with iTunes, and were wrong, and will be wrong again with application downloads.

Consumers will continue to be more impressed by a pink featurephone than a pricey smartphone in 2009. The addition of a decent browser to Nokia’s Series 40 gives you another reason to continue to lose and break cheaper phones. The slow counter-trend towards unlocked generic phones will continue to gather pace.

Also worth noting that there’s a counter-trend towards unlocked generic phones (albeit slowly).

Home CPE will be a real battleground in 2009 with big innovations in modems, PVRs, linking the internet to TV, home wireless etc. Expect to see even larger CPE subsidies from both satellite, fixed & mobile operators to attempt to gain control of the home. In the more sobering times of 2009, we’d like to see operators think a lot more creatively about how to create and capture more value from the Playstations, XBoxes and Wiis out there — make the most of what’s out there already.


The M&A spree of years past has ended. The global telco consolidation has largely run its course. However, as we have discussed in our series of articles on the credit crunch, there are plenty of quality telco assets that may be available at distressed (and sometimes distressing) prices, particularly in the debt-heavy cable sector.


Fring is our top pick. It will continue to gather pace as the combination of usability, wide platform coverage, and fit for purpose makes it attractive to a wide range of people wanting to keep in touch cheaply whilst mobile.

Twitter won’t gather mass market usage, but new communications patterns mixing push and pull content will be extensively copied and embedded into a wide range of other tools and services.


As the bottleneck between ambition and reality, investment in “next generation” back office systems will continue in 2009. There is a rush towards converged order-to-cash systems that can support the kinds of pricing and offers that are now needed.


As the economic storm strengthens, the forecast for network equipment providers gets bleaker. Nortel is unwell, Alcatel-Lucent is still consulting the manual to work out whether you pull the control stick forwards or backwards to end the tail spin. NSN and Ericsson seem to have the right mixture of products and services, but capital spending is likely to remain depressed. The eventual winners will be those who ask themselves the right question. It’s no longer “who has the biggest/fastest/most feature rich box?”, or even “who has the cheapest box?”, but “who can operate this thing for me at the lowest cost”. Telcos will reach into their pockets for capital spending only when there’s some proven operational saving attached.

Low-cost suppliers like Huawei will continue to do just fine, as will anyone with a good Unix/open source skills base as more and more Internet-standard equipment is used behind a radio network made as cheaply as possible. Get used to seeing OpenSS7, Asterisk, jabberd and friends replacing exotic telco protocols and products.

We expect 2009 to see a lot of telcos follow the Iliad route: a few big’n’cheap Cisco routers, a bunch of open source software, some good engineers, and a bit of creativity.


Webbification continues, with the integration of telephony and messaging into online applications. Location-based services will also continue their gradual emergence from the IT hackers, with traditional telcos having less of a role than previously thought.

Everyone will think WiMAX is a failure, but they’ll be wrong — it’s actually a quiet achiever. Yes, but it’s being deployed in the emerging markets only, they will say. In other words, where all the really interesting stuff (and money) is. Also the WiMAX operators don’t have legacy business models to worry about cannibalising, and also won’t want to compete head-on with the cellular operators who have better coverage & scale. This makes them disruptive.

[Ed. - our research agenda for 2009 will explore these issues in more detail]

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Enterprise CRM 2.0 - integrating Voice

We talk a lot about new forms of voice & messaging. We also talk quite a lot about context, and about Web service APIs. And we also talk a great deal about the importance of the enterprise market. Now, we’re going to put them all together in a sort of Telco 2.0 ‘Turducken’; after our 2008 Voice & Messaging 2.0 strategy report, which concentrated on new communications services for consumers, we’re working on one which has evolved from an initial working title of “Call Centre 2.0” to Customer Care 2.0. It’s all about how new voice technology can change the way organisations and their customers interact, for mutual pleasure and profit.

On the way, however, we’ve noticed an interesting technical problem.

The doughnut model - value is on each side of the call

First of all, let’s recap. It’s a fundamental Telco 2.0 principle that the price of voice is heading inexorably closer to zero, or at least the margin on it is; whether by VoIP of various kinds, or just by huger bundle sizes at static to falling prices, the core product is in crisis. We argue that the scarcity, and therefore the value, amid this voice glut is to be found in the context of calls - their latent content, the social meaning of the call, which isn’t necessarily captured in the actual speech transferred over the bearer channel.

If you know someone really well, this doesn’t matter; but for all other calls, there’s no user interface for the shadow of context. Context includes the reason for your call, the caller and recipient’s social graphs, their locations, their self-described status, their place in organisations…all the stuff that you spend telephone calls not talking about. This information is currently latent; invisible, hard to quantify or work with, and economically sterile. In the future, though, we think it will be the main source of economic value in telephony - which means thinking about calls in terms of what happens before and after the call.

But there’s currently no interface for capturing this data. As Thomas Howe put it at November’s Telco 2.0 event:


Your call is important to us, but not important enough to answer

It’s especially bad in enterprise applications - every day, literally millions of people spend their time either reciting the same information to successive call-centre agents or asking successive customers the same questions, then typing it into a computer. Quite often, the caller reads the information they give to the agent off a computer screen themselves, a computer that is in all probability connected to the other one by worldwide internetworks; the immense technological ingenuity of the Silicon Age is being expended so that two civilised human beings can pretend to be a pair of $5 Ethernet cards and a length of Cat5 cable. Meanwhile, other hordes of workers are busy trying their best to call people who don’t wish to receive their calls and are probably less likely to buy from them if they do receive them, while still more people endeavour to avoid them.

Yet others are constantly interrupted by content-free communication, because of the high social status of telephony compared to, say, e-mail; it simply requires more emotional and mental investment to deal with a telephone call than an instant message/e-mail/RSS update/whatever, but unfortunately we have the social custom that calls must be answered, sight unseen. Probably only voicemail, a bastard offshoot of telephony which is implemented very poorly almost everywhere in the world, contains less actual information per unit of human intelligence consumed than the great majority of telephone calls.

So, it’s urgent to provide ways to insert voice into new contexts, for example, by creating a Web services API for CEBP developers to use in other people’s business processes. But this is necessary rather than sufficient. The end of the telco voice premium means that generating more minutes is futile.

In fact, precisely because of some of the “features” of telephony we mentioned above - the invisibility of context, the hegemony of the caller, and the difficulty of processing speech compared to text - this may even be harmful. It’s precisely because existing telephony transfers all the content except for the context that so many calls involving a contact centre are muda - useless work. And the last thing we want to do is encourage that.

What if telephone numbers had more options?

Think of a telephone number. As Thomas Howe said at the last Telco 2.0 event, it’s essentially a little program, or rather it’s an API provided by the telephone network, that takes a maximum of three arguments - the line number, area code, and international prefix - and does one thing, initiate a telephone call to the number passed in. If the number is assigned to a GSM device, there is also the option of sending an SMS. The call is always initiated now; there is no provision for checking if the other party wants to receive it or is able to receive it. The source of the call is now usually passed to the recipient, but this feature is still not very reliable, and anyway it only provides a line identifier, not a user identity. Despite that, it provides only the most limited location information for fixed lines and none for mobile. It is stateless - there is no way of referring to a past call.

Clearly, whatever replaces this will have to have more arguments; we’ll need to be able to pass a user ID distinct from the line ID, to send and request a current status message, to do the same with location and social-graph information, and to create a unique reference for the call. This is vital to make the ideas in this post on Skype happen. Fortunately, SIP and XMPP provide quite a lot of scope for passing this sort of information; some of the message profiles we’ve just looked at already exist, and it’s easy enough to create user-defined ones for the others. And, crucially, they are both asychronous, so you don’t have to start a voice call in order to get context information.

Again, let’s look back to Thomas Howe’s presentation at the November Telco 2.0 event…


But there are some big unanswered questions here; for a start, a lot of the information involved falls under “plutonium” rather than “potatoes”. Obviously, it’s best if the user retains control of this, so the client application will have to be able to apply rules to different requesters. Another one is the way in which other applications and business processes interacting with these systems will keep track of conversations - the Web eventually standardised on the use of cookies, but this is widely recognised as an imperfect hack. Of course, migrating from the use of plain e164 telephone numbers to some sort of user ID which maps to a network location will help with this - a line doesn’t necessarily equal a customer, after all.

Can telephony be better than the Web?

Do we need a URL for conversations? A search engine? There’s an obvious issue in that telephony is a huge-traffic application, and the namespace would be somewhat crowded; however, this could be to some extent dealt with by delegating, so that conversations would be referenced by the participants. And the opportunities would be spectacular, both on the organisation side in CRM applications and on the individual (or community) side in VRM ones. (Which raises the question - is it time to think about IRM, Integrated Relationship Management, the intersection between CRM and VRM?)

[Ed. - We’ll be covering this topic in more depth over the next few months and sharing new analysis at the 6th Telco 2.0 ‘world’ event on 6-7 May in Nice.]

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BT gains Telco 2.0 Chief Analyst

Martin Geddes, for the last three years Chief Analyst at STL Partners and the Telco 2.0 Initiative, today joins BT Design as Head of Strategy, working alongside JP Rangaswami and his team.

We asked Simon Torrance, CEO of STL Partners and the Telco 2.0 Initiative, to comment:
“As one of the most creative thinkers in the Telecoms-Media-Technology sector, Martin helped us develop a set of insights which have now grabbed the imagination of industry leaders. We are grateful for all his hard work and dedication to the Telco 2.0 cause. As we move into a new phase - helping the industry implement these ideas - we look forward to interacting with Martin in his new role. As perhaps the world’s leading Telco 2.0 player today, BT is the best company he could have joined. We wish him all the best with this exciting move.”

Martin leaves the Telco 2.0 team with this message:

“It’s been a great journey the past three years at STL Partners/Telco 2.0, with enormous progress made. Nobody else in the marketplace of ideas has anything comparable in terms of a coherent industry vision. This foundation will no doubt support ongoing success and growth of the business.

I’ve spent most of my career as a hands-on ‘doing’ person, which very much contrasts with the ‘thinking’ and ‘advising’ role many people have seen me in at Telco 2.0. I am now returning to implementation, and will be putting many of our ideas into practice at BT. The team I’ve joined is responsible for maximising the business value of BT’s capital expenditures. I look forward to the Telco 2.0 Initiative continuing to support BT’s need for strategic insight and industry collaboration.”

Before he left we asked Martin to give us 10 reasons why BT is well placed vis-à-vis Telco 2.0 principles:

1.) BT’s focus on enterprise networking and IT services opens up possibilities to exploit critical relationships with ‘upstream’ customers - a key requirement for ‘two-sided’ business models.
2.) It is represented in 160 countries, and BT ‘Global Services’ lives up to its name. This gives BT a further edge in creating innovative new business models with global partners
3.) BT’s retail arm has a strong and differentiated home hub proposition, a platform for new ‘digital home’ services. Integrating innovative consumer electronics with core telco services is the key to retail success in the Telco 2.0 model.
4.) Its trusted retail brand offers strong potential for experimenting with new business models.
5.) BT clearly understands the importance of wholesaling to grow revenues. Growth through richer wholesale products is a key Telco 2.0 theme
6.) BT’s technology platform is world class. In particular, 21CN removes many of the barriers to experimenting with business model innovation
7.) BT has invested in transactions as well as data transmission. For example, it supports e-commerce with Tradespace, and is piloting online advert insertion. These B2B services are the growth engine of Telco 2.0 business models.
8.) BT has a culture of adaptability and change. It has continued to thrive through privatisation, moving from products to services, divestiture of its mobile network, functional separation, and most recently with the creation of BT Design and BT Operate
9.) The recent purchase of Ribbit shows that BT is at the heart of converged Web and telephony. New business models tend to come from working across traditional silos, rather than within them. Personal communication will always be at the heart of the telecoms industry.
10.) Without naming names, BT has hired several people I regard as industry mentors or heroes. The quality of the people there is very high.

Taken together with BT’s financial health in testing times, the overall picture for BT is a good one.

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January 12, 2009

Ring! Ring! Hot News, 11th January 2009

In Today’s Issue: DTAG, unlikely stock market darling; broadminded German VDSL operators share the love; wholesale prices out by CeBIT?; Telefonica beats eurotelcos, Big IT to DHL übercontract; UK broadband insufficiently broad; IPWireless bought back for pence from $100m buyer; Chinese forgers accidentally invent new phone; UIQ bites the dust; Palm’s iClone puts all your Web2 thingies in one handy e-puck, you smug git; NYC wants to turn off mobile networks when you actually need them; Nokia batteries bulge; in predictable news, EFF bashes DRM; Tata fills warchest, goes looking for a war; Jordanian government attempts to adjust camel/GSM balance

DTAG is apparently back in favour with German investors, after a ghastly 2008 marked by customer flight, clashes with regulators, and ceaseless privacy scandals. Unfortunately the reason isn’t anything the company is doing as such; it’s because the economy is so awful no-one can think of a better place to keep their cash. DTAG shares are down 11%, but the all-share index is down 40%. After all, didn’t we tell you telcos were still a highly defensive sector?

But perhaps this is too harsh. One consequence of the annus horribilis is that the German monstercarrier has lost its hang-ups about structural separation and is ready to share the love. Handelsblatt reports that negotiations between Telekom, competing operators, and the Federal Networks Agency are close to completion, both on wholesale pricing for DTAG’s VDSL deployment and on technical interconnection issues.

So far, the parties have agreed that all the VDSL networks DTAG has already installed will be open to competitors on nondiscriminatory terms, and that DTAG will have reciprocal privileges on VDSL networks installed by its competitors, who further undertake to extend the same privileges to each other. They hope to agree prices in time for an announcement at CeBIT.

Perhaps, however, the whole thing is a distraction? DTAG eventually decided to keep their T-Systems unit and build it up as a BT Global Services clone, but this hasn’t helped them with the Deutsche Post contract. Telefonica has grabbed the job of providing the German post office - and DHL - with all its telecoms needs, for some €350 million. For that, the posties get 150,000 LAN ports among much else.

Meanwhile, in the UK, OFCOM looks at the broadband market and finds that the breadth tends to vary, usually in a downward sort of way. An ADSL link marketed as “up to 8MBits” provides on average 3.6; one marketed as 2 provides on average 1.6, and a reasonable mobile link should now beat that, especially on uplink (an issue OFCOM didn’t even mention). To say nothing of technologies like UMTS-TDD, FLASH, WiMAX - so what did happen to the guys at IPWireless anyway?

It turns out they’re independent again; NextWave has decided to get out of network infrastructure, and has sold the company back to its directors for not very much, having paid $100m for it. As well as having a damn good mobile-TV technology, they must be some mean poker players.

Forgers in China, it seems, have missed a trick by going into production with their version of an Apple iPhone Nano, before being certain that the real thing actually existed. Which raises an interesting question; if it’s a fake of something that doesn’t exist, how can it be a fake? Haven’t they actually developed a new device?

Perhaps we should count it as a new mobile platform; TriadOS. However, at least one of the mobile-OS options has now vanished; farewell UIQ, which appears to have been rendered irrelevant by the open-sourcing of Symbian. Palm, however, is back with a well-received iClone. Yes, that’s right - another device with a really big touchscreen and a development environment focused on Web technologies. This one does, however, have a new user-interface metaphor (applications are “cards” which merge into the standard UI) and a lot of interesting ideas - and a keyboard.

New York City apparently wants to shut down mobile service in the event of a terrorist attack. Well, in practice, terrorist attacks often do a decent job of shutting down the mobile networks just with the panic peak load and the higher peak/mean ratio characteristic of newer comms systems. Perhaps an access-overload control system would be more useful? After all, without cellular service you can’t do this.

Nokia is recalling batteries that have begun to bulge sinisterly, and the EFF takes a look back at another year of DRM failure.

In India, meanwhile, Tata Comms is tapping the market for 30 billion rupees. And what will they do with them? Acquisitions in the US and UK are on the menu, as is a bid for WiMAX spectrum.

And finally, Jordanian telcos are angry over a new tax the government has imposed on them in order to subsidise livestock farmers.

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January 11, 2009

Top 10 Telco 2.0 articles in 2008

Later this week we’ll publish our preview of 2009. In the meantime, below are our Top 10 most popular articles from 2008…These are all themes that we’ll be progressing in 2009 (draft research agenda here):

1.) BBC iPlayer - destroys the ISP business model
The BBC, one of the world’s biggest producers of content, launched an advanced internet video service on Christmas Day [2007]. We’ve analysed the actual effect on ISP costs. The results are very scary indeed…
2.) Credit Crunch; a silver lining for telcos?
The current liquidity crisis in the financial markets may provide telcos with some unique opportunities for enhancement and transformation of their business models. Here’s an analysis of why, how and where…
3.) Lessons from Amazon - Transactions are telcos’ future
Amazon CTO’s presentation at Telco 2.0 was an inspiring example of what can be achieved by understanding both transaction processing, and the business model around it.
4.) Google vs Telcos - Tale of the Tape
Many people feel that Google will merrily extend its dominance of web search into voice and messaging and mobile advertising. However, new analysis suggests that telcos have some clear advantages for building competitive platforms…if they can exploit them
5.) Exclusive Interview: The ‘Long Tail’ de-bunked?
New research challenging the received wisdom of the ‘Long Tail’ theory was presented at the Telco 2.0™ event [in November]. We review this in depth with the economist concerned
6.) Vodafone - too much data, not enough vo and fone
“Ask not how data can replace lost voice revenue, but how data can rejuvenate the personal communications experience.” Satisfying people’s need to collaborate, chatter, and communicate should be central to every operator strategy. Here’s why…
7.) The Future of Voice Telephony - Death or Glory?,
Telcos have consistently abandoned their core product, and are ignoring new business models, whilst pursuing fools’ gold in media content.
8.) Credit crunch - silver lining for telcos, part 2
The cost of refinancing telco debt maturities (€76.8bn combined for AT&T, BT, DT, FT, KPN, TI, Vodafone, Telefonica, Verizon, and Vodafone) might pose headwinds in de-leveraging, but telco stocks may prove highly attractive in an era of rampant risk-aversion. We examine how telcos can take advantage of current market conditions.
9.) Nokia and Symbian: Missing an Opportunity?
While Nokia is busy buying Symbian, the competition has moved on and offers a lot more than purely handset features
10.) Online Video Usage: YouTube thrashes iPlayer…but for how long?.
New ISP streaming data shows that YouTube is currently the heaviest video traffic. But our analysis suggests this situation will change dramatically as traditional broadcasters increase their presence online, with significant impact for all players… .
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January 8, 2009

Guest Post: Charging for Bandwidth - the world is not flat

The broadband incentive problem is causing ISPs to crack all over the world. In this guest post Fergus O’Reilly, CTO of Highdeal, discusses the changes we need to make in our IT systems to deliver new business models.

Broadband operators across Cable, ADSL, Fiber and Wireless networks are beginning to re-examine how they charge for bandwidth.

The flat-rate, one-size-fits-all broadband tariff offer has been a big hit with consumers since it is easy to understand, easy to compare across ISPs and does not require understanding exactly what “bandwidth” is and which services actually consume it. Broadband has seen strong adoption over the past years in part because of that simple pricing model.

But this model is now under challenge:

The Pain Points
  1. Bandwidth usage has risen uncontrollably. Throughout the 2000s actual usage of broadband bandwidth soared. Initially this growth was driven by “unofficial” peer-to-peer downloads among individuals, but now a lot of the growth is from music and video services like Apple iTunes, Google YouTube, BBC iPlayer, and others.
  2. Operators have discovered that a small proportion of their subscribers consume a very large proportion of their bandwidth. Time Warner Cable, for example, let slip in 2008 that 5% of their consumers use over 50% of their bandwidth.
  3. highdeal.png

  4. When operators sell “unlimited” and “all-you-can-eat” packages they may promise say 20Gpbs to all subscribers but their networks are not sized properly to handle the traffic if suddenly all subscribers each try to use that 20Gbps in parallel.
  5. The infrastructure was built under the premise of “build it and they will come” and come they did. It would be hypocritical to turn around now and complain that content providers are building too many cool services or that dematerialization of audio and video content is a nuisance.
  6. To continue to provide quality service, operators have to continually invest in their core, backhaul and peering networks to handle the increased traffic. This investment is very costly, meaning that service provider margins are being severely compromised.

Solution options tried

Get Content Providers to Pay - operators have raised the idea of passing on the costs to the Internet content and application companies.

This idea got rapidly shot down because of fears about Network Neutrality. Content providers are happy to pay their share for connecting their servers to the Internet, but they do not want to have to pay for preferential carriage - they do not want to be put in a position where ISPs discriminate against them unless they pay up.

De-prioritization & Throttling: Silently de-prioritize some high-bandwidth traffic like peer to peer exchanges.

Network Neutrality again. The US FCC rapped Comcast over the knuckles for doing this without properly informing their subscribers.

Cap & Overage schemes: some ISPs, particularly some of the North American Cable providers such as TimeWarner, and Rogers, have started rolling out new tariffs based on cap and overage charging for high bandwidth consumers.

This can be a hard sell since it requires consumers to carefully track their usage. The majority of subscribers have absolutely no idea of how much a Gb of bandwidth is, nor should they.

What needs to be solved

Subscribers have become used to having always-on functionality at predictable pricing, so moving away from the flat-rate model is going to be a hard sell for consumers. Service Providers will need to introduce new models to manage bandwidth and charge accordingly. They need to get more revenue from subscribers who use the most bandwidth, without penalizing or confusing the remaining subscribers.

Some answers to the pain

One way to achieve this bandwidth management is by introducing some form of tiered-pricing based on usage & bandwidth boosts. Service providers will probably strive to introduce more sophisticated schemes, such as noticing when you are trying to upload the family vacation home movie to a video sharing site and offering an instant 10x boost of your upload speed for a flat fee.

Operators will have to invest in solutions for traffic policy management from vendors such as Camiant, Bridgewater Systems, Sandvine or Juniper. These are the guys that can peer into network activity and then open or close the network valves to let more or less traffic flow to an individual subscriber for an individual service.

Most participants in the Network Neutrality debates are OK with such policy management as long as it is neutral: time-sensitive services like audio and video streaming can be prioritized as long as all such services can get the speed boost, and not just those that the ISP picks and chooses.

On top of this, service providers will require a pricing and charging system, such as Highdeal Transactive, that allows them to invent more creative pricing models for selling bandwidth. Account balances are checked in real-time to ensure credit availability and calculate advice-of-charge, thus eliminating credit risks. The extra revenue gained from the new services offered will help pay for network buildouts, particularly with heavy investments associated with FTTH rollout.

Industries such as utilities seem to have excellently managed the transition from simple metered to new charging structures. In the broadband space, a new approach to architecture is required, which involves integration of policy, charging and network elements. This will allow service providers to:

  1. create real-time business model management solutions
  2. offer & charge for new services based on quality of service
  3. calculate sophisticated service revenues
  4. manage revenue sharing between multiple partners
  5. sustain massive transaction volumes across their platforms while rapidly changing their business models to optimise profitability.

The key is to have real-time control over the allocation of network resources, and to charge users according to resources & services used. The tools to do this are already available today - all service providers need to do is apply their creativity to use them to their full extent.

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January 5, 2009

Ring! Ring! Hot News, 5th January 2008

In Today’s Issue: Carter the unstoppable spec machine; UK rocked by spectrum row; double dongle density; no more BT USO, a quid pro quo for fibre? oh no; Andy Burnham is king of the world, it says here; Indian 3G licences, prices doubled; Nokia goes into crisis vulture mode; new PyS60 comes with music, without Symbian security certificate; CCC demonstrates killer SMS; Android vs OpenMoko; changes at the OMTP; Samsung fabs own mobile chips, escapes the Qualcomm Borg; Telco 2.0 elsewhere; models for efficient message-passing protocols!

Ministerial intervention; the UK’s telecoms minister, Lord Carter gets involved in the increasing row about 900MHz refarming and the 2.5-2.69GHz auction. The short version is that OFCOM wants the original GSM operators to disgorge some or all of their 900MHz spectrum, which has benefits in terms of range and building penetration, in return for the industry getting any more spectrum from the public sector. They feel this is unfair, while the other UK mobile operators who either began as 1800/1900MHz PCS GSM or 2100MHz UMTS feel they are being disadvantaged by not having access to the older GSM band as more users migrate to UMTS.

A fine mess. Nobody imagines either lot of spectrum will sell for anything like as much as the 2.1GHz did, but the issue is going to remain bitterly contested as all those mobile broadband dongles the networks handed out (there are more faster ones coming) chew up data network capacity. Carter has decided to leap into the open ground between the two groups of carriers, the various interested parties on 2.6GHz (notably BT), and the regulator - but what he intends to do there is far from clear.

As Sir Humphrey said, we’ve got to do something, this is something, and therefore we’ve got to do it. Most of the news this week comes from the UK, and His Carterness is a strong believer in this doctrine. In an interview with The Times, he suggested dropping BT’s Universal Service Obligation in favour of hitting up the whole industry for a levy that would subsidise broadband service in otherwise hard-to-reach parts of the UK. Gordon Brown, meanwhile, has been talking about “digital broadband” (as opposed to analogue broadband?) in terms of a Keynesian public works programme.

So is this the starting gun for FTTH in the UK? After all, it’s always been a question of aligning the three main political forces, OFCOM, BT, and the Ministry. Ending the USO would make BT happy, but at the expense of OFCOM; hence the idea of a universal service levy. As the idea comes from the Ministry, presumably they’re happy too. But Carter apparently wants to guarantee “2 megabit video-capable” service - which is rather less than all UK urban and suburban and most rural DSL lines will currently support. Seeing as you can now get 100Mbits to the home in five Brazilian cities, this is weak, weak, weak. The good news is that he is apparently impressed by arrangements in France and Finland.

I can’t wait for my Iliad UK line. Interestingly, it is suggested that mobile/fixed-wireless service might substitute for the BT copper in the wilds. Which suggests there’ll be a use for that spectrum after all. (The bad news is, well, NTL…) At least all this is a bit more positive and sensible and practical and useful than the latest wheeze from Carter’s boss, Andy Burnham, who apparently wants to make all English-language content on the Internet carry parental-guidance ratings. Because he’s in charge of English, or something.

After all, who imagines that India, the biggest concentration of English-speakers on the planet, knows or cares who Burnham is or what he wants? Their 3G spectrum auction has been held up, because the ministry of finance wants to double the reserve price. Crisis, what crisis? as somebody didn’t say. Similarly, Richard Li, with a little help from the Chinese government, just raised his bid to take PCCW private.

Nokia, meanwhile, is practically boasting that it hopes to further expand its market share during the crisis, basing this on its historic success in the mid-market. However, at the same time they reckon they will also expand their share of the smartphone business…Over Christmas, Nokia shipped a major new version of Python for S60, including all kinds of nice new features, a move to Python 2.5.1, and less restrictive Platform Security signing requirements. Unfortunately they omitted to put their own product through the signing process, so anyone who tried to upgrade without disabling the certificate check got a fatal error. And it has dependencies on firmware that hasn’t reached most S60 devices yet. Whoops.

Whoops the second. This year’s Chaos Computer Club hackercon saw the demonstration of a serious exploit of the SMS/MMS functionality on most S60 devices. Basically, you send the target an SMS e-mail with a FROM: field of more than 32 characters, which overflows the buffer and sporks the messaging service so badly that only a factory reset will get it going again, probably because the overflow ends up in the persistent memory it uses for system files. More here.

Meanwhile, Google Android runs on the OpenMoko open-source phone. If you wanted to do that. And a gaggle of vendors are the latest “advisers” to the Open Mobile Terminal Platform.

Qualcomm’s dash for applications, media, services, and PC/netbook technology looks more and more timely, as Samsung announces that it’s taking its mobile radio chipmaking in-house. Their LTE and WiMAX kit will therefore now be fabbed in their own plants, and it’s all in aid of not paying Qualcomm royalties any more.

Need even more Telco 2.0? There’s a long interview with Martin Geddes on the future of telecoms at EComm’s blog.

And finally, we’ve occasionally promoted the lightweight, open-source, push-only voice and messaging protocol XMPP on this site. This week, it turned out that even models like it.

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