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May 25, 2010

LTE: ‘Longer Term Enthusiasm’?

Here’s a typically pithy summary of the recent well-attended LTE World Summit in Amsterdam by Dean Bubley, co-author of the Telco 2.0 ‘New Mobile, Fixed and Wholesale Broadband Models’ Strategy Report, founder of Disruptive Analysis, and long time Telco 2.0 Associate.

LTE (‘Long Term Evolution’) is a new high speed radio network technology standard which is designed to increase the speed and capacity of mobile networks. A good idea in principle given ever increasing demand and current fears of networks choked with mobile data. But is it a viable technical and commercial proposition compared to other strategies, particularly in today’s tightened economic environment?

In a previous article on LTE in mid 2009, another Telco 2.0 partner, Arete Research, expressed the view that LTE would prove ‘Late, Tempting and Elusive’, and from the vote below, delegates at the 9th Telco 2.0 Executive Brainstorm in London in April 2010 seemed to agree, seeing returns from LTE as a five to ten year proposition.

LTE%20vote%20EMEA%20May%202010%20Brainstorm%20timing.png

Source: Delegate Vote, Telco 2.0 EMEA Brainstorm, April 2010, London.

But what was the view from the summit?

Summit Report

The LTE World Summit in Amsterdam was a rather contradictory affair, with optimism and pessimism available in fairly equal measure. Early feedback from trials and the first small “commercial” deployments gave some reasons to believe that LTE will ‘work’. Unanswered questions about the performance and availability of spectrum, how voice over LTE will work, business models and availability of devices pulled the tone back again.

Given that the 3GPP had co-sponsored the event, and there was heavy representation from organisations such as the GSA and GSMA, it was possibly leaning towards a triumph of evangelism over reality. It was very striking that the agenda had very few dissenters and LTE-sceptics; it felt as though there was a distinct lack of balance in the debate, with far too many controversial issues being positioned as fait accompli by vested interests. There was also a heavy presence of both cheerleading vendors and operator technical staff rather too enthused by the “coolness” of the latest and shiniest acronym and the associated bragging rights of early deployment.

On the upside, there is growing evidence that at the basic level, LTE “works” quite well. In trials and very early friendly-user deployments, it does indeed give some pretty punchy maximum speeds (up to about 90Mbit/s in one example) and lowers latency dramatically. There were also some indications that LTE’s principal competitor, HSPA+, is struggling a bit to achieve its theoretical maxima - especially using the multi-antenna MIMO technology, which is proving difficult to justify in the real world.

Longer Term Enthusiasm?

There was also a strong sense of the breadth of enthusiasm for LTE - there were numerous conventional GSM/HSPA operators looking to upgrade, most of the CDMA camp looking to shift across, one or two greenfield start-ups and even a couple of WiMAX operators thinking about switching sides. It is now indeed looking like the unified long-term option - although exactly how long-term remains a matter of some uncertainty (as characterised by the spread of views in the Telco 2.0 Delegate Vote above). There was some suggestion that eventually we may end up a harmonised world with 2G/GSM plus LTE, with 3G being squeezed out in the middle, between data-centric devices and cheap basic voice phones that are likely to last until well past 2020.

(Full marks, by the way, are due to NTT DoCoMo - the only operator purist enough to refer to LTE correctly as 3.9G, and making reference to “real 4G” coming later, when the ITU decides what it is. Everyone else was clearly being driven by their marketing teams to round up 3.9 to 4 regardless).

Multi-Frequency Headache

One negative aspect of the story was easy to read - the proliferation of frequency bands is clearly going to be a huge headache for everyone, with as many as 20 options now on the table worldwide. Given the initial small volumes of device shipments, this does not bode well for manufacturers and component suppliers looking to gain scale economies - which is likely to lead to knock-on impacts on pricing and performance.

Many presenters from early-adopter networks were trying to drum up wider support for their favourite frequency bands for LTE - 900MHz, 2.1GHz and so on. Worse still, the largest and most-favoured “new band” for LTE in Europe (2.6GHz) was described by one operator running a trial (O2 UK) as being “very disappointing” in terms of coverage. This is yet more bad news for voice on LTE in particular - another area of pain that seemed to be given a superficial sheen of “do-ability” by some presenters.

Hotspot Overlay or Full Coverage?

That leads on to the next point. In all probability, LTE-only networks are looking a very long way off, at least until Digital Dividend frequencies around 800MHz are released from TV usage. In any case, the actual available amount of 700/800MHz spectrum isn’t really enough for multiple competing operators wanting to do “full” 20MHz-channel LTE.

There is thus a very high likelihood that any LTE network will just be an overlay for “hotspots” on top of existing 2G/3G technologies for the foreseeable future. Maybe some cities will get completely covered, but indoor penetration may be problematic without femtocells or WiFi offload. This means that there is really no opportunity for specific “LTE Business Models”, or various supposed “LTE-only Applications” that were highlighted in various vendors’ cringe-worthy videos. Pretty much any LTE-capable device and end user will be spending a good proportion of their time on ‘good old 3G’ connections for the foreseeable future.

To be fair, this was an LTE conference, so it was perhaps unsurprising to see the idea of ‘impure’ HSPA/LTE hybrid networks being downplayed.

There was a lot of discussion around the concepts that Telco 2.0 has expounded for several years - two-sided markets, “indirect ARPU” and various other phrasing being used to cover non-user revenues, either in terms of “slicing and dicing” wholesale broadband capacity, or through the exposure of various network-capability APIs. It is refreshing to see these concepts enter the industry mainstream - even if there was a dearth of real-world case studies and quite a lot of wishful thinking.

M2M and LTE - When Acronyms Collide…

There was also some discussion around M2M and devices - with various numbers being thrown around, such as 50 billion by 2020. We have significant doubts about the relevance of LTE to industrial M2M for the next decade - coverage, low price and low power consumption are key for applications like metering. GPRS will remain the winner among cellular technologies. For consumer products (think iPad or Kindle or camera or car), the situation is slightly different as price points can sustain pricier modules, and there is a need for at least some web/video capability. But again, coverage is likely to be a killer. That said, the US might evolve slightly differently here, because of Verizon’s 700MHz rollout, which should give better ubiquity.

Conclusion: ‘2015 at the Earliest’

Overall, the event pointed to a growing maturity of LTE as a technology, but one that is definitely suffering from the hype machine. Despite early pilot launches, Telco 2.0 does not expect it to “move the needle” in terms of mass deployment and uptake for several years, let alone revenues. It also seems doubtful that LTE, by itself, will start to drive new business models until at least 2015.

Likewise, attendees at the 9th Telco 2.0 EMEA Executive Brainstorm agreed that optimising existing network capabilities is at least as much a priority as investing in LTE at this point.

LTE%20vote%20EMEA%20May%202010%20Brainstorm.png

Source: Delegate Vote, Telco 2.0 EMEA Brainstorm, April 2010, London.

Further Analysis: Optimising the Broadband Business Model

Optimising the broadband business model is a key theme of the Telco 2.0 Strategy Report ‘New Mobile, Fixed and Wholesale Business Models’, while the Disruptive Analysis Report ‘Top 10 Technologies for Mobile Broadband Traffic Management’ focuses on the more technical aspects of traffic optimisation.

About the author:

Dean Bubley is a senior associate of Telco 2.0 and regular contributor to its research and events. He is the founder of research & consulting firm Disruptive Analysis, specialising in mobile broadband technology, devices and network infrastructure. For more details, please see: disruptive-analysis.com, and his blog here.

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May 24, 2010

Telco 2.0 News Review

Telco 2.0 Top Stories

  • More Googlemania/phobia: Hot Androids, Nexus One stalled by OSS, AdMob deal cleared, Google TV launches
  • Broadband Connectivity: $10m HSPA software upgrade = twice the iPhones?
  • Technology Disruptions: Telstra firsts dual-carrier HSPA
  • Strategy & Finance: Indian spectrum auction - first the madness, now the, er, madness…
  • A striking feature of the latest world smartphone sales numbers, other than the criticism of the methodology, is that they’re growing strongly and Androids are going like hot cakes. The latest version of Android is also out, and Google has also been speaking about the difficulties of getting Nexus One to market, getting into trouble over WLAN mapping, getting approval for their acquisition of AdMob (the Mobile Advertising platform), and launching a new TV service.

    [Ed: There’s more on these themes in the ‘Living with Google’ strand of the Telco 2.0 ‘Best Practice Live!’ free online event on June 28-30 June 2010.]

    The Googler in charge of Android, Andy Rubin, spoke at Google I/O, their pet conference, and gave some insight into the failure of Nexus One. He denies, not necessarily convincingly, that the carriers refused to play nicely with the direct-to-customer strategy, and complains about the complexity of integrating with telco OSS-BSS provisioning gear.

    “Fundamentally, we do a direct-to-consumer distribution business where you’re hooking into these various provisioning systems for all these operators all over the world. It’s a pretty intense undertaking just, literally, hooking into the billing systems that are available in all these operators in all these countries..”

    Meanwhile, Google has got into a terrible row after it turned out the Googlecars were logging all the WLAN hotspots they came across as well as taking pictures for Street View. (We carried this story back in April for the simple reason that it broke in the German press and nobody English-speaking reads Handelsblatt.) In an attempt to get ahead of regulators, they started deleting the data, but have now changed their minds…

    The news in mobile advertising was that the FTC cleared the acquisition of AdMob on the grounds that Apple’s iAds were sufficient competition for them. Google vs. Apple is the Valley news theme of the week and Daring Fireball has some interesting thoughts in this line.

    More concretely, here’s Google TV, a platform for interactive TV applications using Android as the embedded operating system, Flash, and Intel Atom silicon. Informitv has more detail.

    Google also open-sourced a video codec this week. It looks like they are concerned that the move to HTML5 native video is running into problems because the preferred video encoding, H.264, is patented and therefore some open-source projects - specifically Mozilla Firefox - can’t use it. Completing the obligatory Google and Apple roundup, the official Google App Engine blog has an interesting discussion of how The Guardian’s increasingly advanced web applications make use of Google technology.

    In other UK video news, the Office of Fair Trading cleared Project Canvas for launch, on the grounds that it’s a start-up rather than a merger and therefore can’t be held to be anticompetitive.

    AT&T’s decision to go with further HSPA speed upgrades is causing reactions. Kevin Fitchard of Connected Planet points out that although the $10m software fix doesn’t do anything for the radio stacks in AT&T’s fleet of mobile devices, that might be a feature rather than a bug; in cells where the radio layer is the busy-hour limiting factor, the upgrade from 7.2Mbps HSPA Class 8 to 14.4Mbps HSPA Class 10 represents a doubling of the number of iPhones the network can support, which is good business by anyone’s measure. Of course, it’s no help for the cells where backhaul or core-network signalling is the long pole in the tent, but then, what do you expect for $10m?

    Speaking of iPhones and AT&T, they hiked the early-termination fee charged to people who want to quit their 2 year iPhone deals early, so they obviously aren’t that horrified by the traffic costs.

    Telstra, for its part, has a very new 3G network, built out by Ericsson in 2006-2007 using some extreme high-power cells to yell across the GABA. This may explain both a certain reluctance to spend on LTE and also an interest in going further with HSPA - hence today’s news that they have tested dual-carrier HSPA at 22Mbps on their production network.

    On the other hand, there’s Sprint, which is apparently considering building an LTE network as well as a WiMAX network. Couldn’t they perhaps use Flarion for the backhaul? 802.20? IP over carrier-pigeon? More seriously, it looks like the real story here is the end of CDMA on any serious scale; at some point, Sprint is going to do something with the EV-DO network and the spectrum allocation.

    It wasn’t a good week for WiMAX as Russian greenfield operator YoTa has decided to build an LTE network after all. We saw YoTa paraded by Intel at MWC as a pioneer WiMAX operator three months ago, so there seems to have been a change of plan somewhere along the line.

    India’s crazy, crazy spectrum auction is over, and the winner would appear to have been the Government, which trousered some $14.6bn. Unsurprisingly, the most expensive spectrum was that in Mumbai and Delhi; Vodafone, Bharti Airtel, and Reliance forked out and collected. Voda now has a further 2x5MHz of 2100MHz, covering 50% of the population, for some £1.74bn. The two state operators, BSNL and MTNL, already have grants of free spectrum, so the main story from India is likely to be “price war rages” for some time.

    Many vendors, of course, will be happy as BSNL celebrated the spectrum auction by announcing a tender for 5.5 megasubs’ worth of GSM kit, although Huawei was not invited to bid. Telefonica announced a further heavy investment in its Brazilian operation.

    The FCC has started on the project of finding an additional 300MHz of spectrum, as required by the National Broadband Plan. The first chunk is the 25MHz of the 2.3GHz “Wireless Communications Service” band that has been held up by the concerns of satellite-radio operators. Fixes for their concerns have been issued with the order releasing the 2.3GHz band. The FCC also warned that the mobile market might not be sufficiently competitive.

    A huge new dark fibre network is planned in the US - note that it’s optimised for both multi-tenancy of the fibre, and also of the ducts, with many more access ports than usual to provide more options for interconnection.

    In the UK, O2 is going to trial LTE in the 800MHz band, which implies that there is still some will to implement the spectrum provisions of the Digital Economy Act. Australia, meanwhile, may have an inspiring plan for ubiquitous broadband, but the government seems to be over keen to decide what will be *on* the network.

    Numbers at Vodafone showed that annual net profits were £8.65bn group-wide, up £5bn from a year before, beating the company’s own guidance. Revenues in the UK, however, are down 4.7% - and it may be worth remembering that two-thirds of Vodafone’s business globally is still made up of voice.

    Foxconn has just had its 10th suicide this year. Chinese fenqing - aggressive, populist hackers - are promising to infiltrate the company and find out who’s to blame.

    HP, meanwhile, wants to use Palm WebOS in “Web-connected printers”. Why…?

    E-health in action. Verizon makes nice over a $18,000 phone bill. Nokia issues a detailed user-experience and design framework for Symbian apps. Cisco buys the industrial designers behind the Flip video camera in order to give their Linksys consumer grade kit a touch of Apple. Hey, some people like the ugly blue plastic and big antennas!

    Finally, Facebook’s privacy problem, as a convenient Web service.

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May 20, 2010

KPN: Pioneer Operator

Some operators stand out as being especially far down the road to Telco 2.0. We mentioned Telenor’s machine-to-machine activities (to say nothing of Mobilt Bedriffsnett, Content Provider Access, and Telenor Fusion) recently; now, another Telco 2.0 pioneer operator has moved into this field. KPN has just announced a partnership with the specialist M2M operator Jasper Wireless, under which Jasper will resell KPN service to its enterprise customers and KPN in turn will take an equity stake in Jasper.

This is an example of a number of important points about Telco 2.0.

  1. The horizontal M2M opportunity: see also here and here and here.
  2. The vital importance of the right channels - getting access to new markets requires the right partners
  3. Telco cashflow is not just for paying special dividends - as Jonathan Dann of Barclays Capital said at our last event, operators aren’t getting any credit from the market for their cash, so they may as well use it. One of the special features of O2 Litmus is that it has a resident venture-capital team from Telefonica Ventures.

    KPN hasn’t been idle in other fields, either; its decision to invest in Reggefiber and Citynet Amsterdam, and to stop stalling and provide service over the Netherlands’ munifibre deployments, showed it to be willing to work with partners who most operators still see as the enemy in order to modernise its infrastructure.

    And it took an early and innovative tack dealing with its underperforming German 3G network E-Plus - rather than keep pumping in the handset subsidies, advertising, etc, they converted it into a wholesale-optimised operator providing service to multiple MVNOs. As Jonathan Dann also pointed out, nobody in the markets cared at the time they announced the change, but they certainly paid attention when real profits started rolling in. The following chart shows KPN’s stock price over the last 5 years - re-rating upwards in the boom and then holding its gains through the crisis. (The Reuters page also shows that their last three quarterly earnings have beaten the estimates soundly.)

    KPN stock over 5 years

    To understand more about Telco 2.0 Best Practice, register (for FREE) for our new virtual online
    event broadcast on 28-30 June here. We’re delighted to have industry leaders like Hans Vestberg, President and CEO, Ericsson; Dr Hans Wijayasuriya, CEO, Dialog Group; JP Rangaswami, Chief Scientist, BT Group presenting a href=”http://www.telco2bestpracticelive.com/”>new material.

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May 17, 2010

Telco 2.0 News Review

Telco 2.0 Top Stories

Telco 2.0 Best Practice Live! Virtual (online) event, 28-30 June 2010, FREE to attend. Registration now open here. We’re delighted with the support we’re getting from the industry for this important project designed to show the ‘art of the possible’, with senior representatives preparing special material, for example: Hans Vestberg, President and CEO, Ericsson; Dr Hans Wijayasuriya, CEO, Dialog Group; JP Rangaswami, Chief Scientist, BT Group. If you have a best practice case study you’d like to promote, contact tim.cook@stlpartners.com

What if being a bit-pipe wasn’t such a bad idea after all? Nokia Siemens Networks published a study into the economics of mobile data (document here) that suggests it’s possible to provide up to 5GB of data transfer per user per month profitably. Doing so requires a flat-architecture IP network, a rigorous focus on efficiency, and some counter-intuitive factors; the more heavily trafficked cells are the cheapest to serve. It also strongly suggests that this segment of the business has major economies of scale, so being a “happy pipe” may be restricted to the biggest operators. That would suggest that the biggest operators might be better off pursuing a wholesale platform strategy supporting many applications, MVNOs, content players, and the like.

Meanwhile, the data repricing begins: Vodafone has abolished its 500MB usage cap, and instead is planning to simply charge users who go over the cap more. You will need to work at it, as the line is drawn at 500MB, after which a further £5 is charged for the next 500MB, so this is aimed at the heaviest of the heavy users. Sprint announced that there will be no usage cap on their WiMAX network.

T-Mobile UK and Orange have announced the brand for their network-sharing joint venture - “Everything Everywhere”, which sounds about right for an infrastructure-focused wholesale business. They’re also putting a lot of emphasis on their combined retail presence. This raises an interesting point. What could your telco do with its retail assets? Your upstream customers might need forward and reverse logistics and a high-street presence, just as they need connectivity and a call centre.

DTAG posted rather good figures for Q1 - adjusted EBITDA was up 1.6%, but net profit was up from €655m to €900m, with cash flow also doing well. The fixed-line base, by the way, is declining by 6.6% year on year. It was results week for Zain, which reported revenues up 11%, excluding the African businesses in advance of the sale to Bharti Airtel. NTT announced a big jump in profits, essentially all down to good results at DoCoMo, and promised to return cash to shareholders. No less than three Brazilian operators reported Q1s this week - Oi (you may remember them) showed strong growth in profits after successfully integrating its acquisition of Brasil Telecom, UOL boasted of a 37% jump in ad revenue, and Telefonica’s local division reported shrinkage in both revenue and profits as the core voice business was squeezed.

India’s spectrum auction is fast becoming a sort of scaled-down version of the European spectrum hysteria of 2000; the bidding war is running in parallel with a vicious price war driven by multiple new entrants, many of which are going to be eliminated. The Indian government is delighted; they’re proposing to make Vodafone and Bharti pay again for their GSM spectrum holdings, marking their value to the market for 3G spectrum. Unsurprisingly, the industry is displeased, but it’s difficult to see what they can do about it if they want to stay in India - so Vodafone may have to fork out as much as a billion, on top of the £4.5bn they paid for Hutch-Essar back in 2007.

Verizon Wireless is looking at ways of covering the expensive rural markets of the US with LTE that won’t use too much capital. The idea is to rent chunks of the carrier’s $4.5bn worth of 700MHz spectrum to small regional carriers, who would build out their own LTE networks and then provide service to Verizon customers under a wholesale/roaming agreement. The details will be settled on a case-by-case basis. They’ve also started a low-key publicity effort.

AT&T, meanwhile, promised to get HSPA at 14.4Mbps to 250 million people by the end of the year.

Ben Verwaayen’s recent trip to New Zealand has been explained - Alcatel-Lucent is going to pay Telecom NZ $100m in compensation for the poor performance of the 3G network they built there. Apparently the Radio Network Controllers were the awkward squad, which is a handy data point.

There’s another reorganisation on at Nokia; the new setup creates a division for marketing and distribution, another for “Mobile Phones”, which means the Series 40 devices, and “Mobile Solutions”, which includes all the high-end devices, Symbian, MeeGo, Ovi, and all software activities. Anssi Vanjoki gets the nod for Mobile Solutions. In an ominous touch, hackers persuaded a N900 to run Android 2.1.

Comcast showed off an application for the Apple iPad that makes it function as a remote control for your TV. A remote control the size of a dinner plate, that is. BT, meanwhile, showed off its own tablet device - is this their idea of what comes after the house phone?

HTC sued Apple over alleged patent infringements, demanding they stop selling iPhones, iPads, and iPods Touch at once. Bill Ray is sceptical of the iPad’s chances.

The Electronic Frontier Foundation defends the finders of the lost iPhone 4, in what is unquestionably the most Californian news story in Telco 2.0’s history. More seriously, workers at an Apple subcontractor in China are suing, and Apple has tried to patent absolutely any form of location-based service, as far as we can make out.

Google, meanwhile, has stopped selling Nexus Ones direct-to-customer; instead, the webstore will “showcase a range of Android devices”. It’s increasingly clear that Android’s success - in the same story, we learn that Androids are outselling iPhones - has led to Google losing control of it. Arguably, in fact, Google losing control of Android is why it’s such a success - all the vendors, all the developers, and all the operators can do business with it.

Palm’s official blog, meanwhile, apologised for the failure of their app store, which went down and left customers without apps they’d paid for, or without updates for apps they’d already installed. Skype is looking away from Windows Phone and concentrating on iPhone, Android, and Symbian.

SAP, meanwhile, bought Sybase for a cute $5.8bn. It’s being suggested that SAP specifically wants Sybase’s telecoms BSS/OSS products, in-memory database technology, and Sybase Unwired, its platform for enterprise mobile apps.

Perhaps more telling as to the “why” of the deal is this IBM story. At their annual investor briefing, IBM CEO Sam Palmisano said that they were planning to spend up to $20bn on acquisitions in the Business Analytics and Optimisation sector, where their existing businesses were growing at 16%. They reckon the total market opportunity is of the order of $140bn - data really is the business of our time. Meanwhile, CEBP specialists Dialogic bought Veraz Networks, an IP NGN vendor.

Another major meta-analysis shows no evidence that THE RAYS will eat your brain. On the other hand, Facebook might. It was the week of Facebook rage; the EFF demands they stick to their declared principles, but it really went off when Mark Zuckerberg was quoted as saying that maintaining more than one identity was a sign of “a lack of integrity”. As if by magic, a search engine appeared that lets you search Facebook for embarrassing status messages.

And finally, we know there is plenty wrong with the Digital Economy Act, but this is going too far.

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May 15, 2010

WAC - latest analyst and press announcement

In case you missed it, below is the web brefing given to analysts and press on 5th May. We’re delighted that those leading WAC (the ‘Wholesale Applications Community’ - a new global alliance of mobile telcos to support developers) will be taking part in Telco 2.0 Best Practice Live! on 28-20 June - our new online virtual event. This is a global online event and will provide you with a chance to question the WAC team in more detail about aims, objectives, challenges, strategy. Register (for free) here.

WAC analyst briefing - May 2010 from Tim Haysom on Vimeo.

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May 13, 2010

Mobile Marketing 2.0: SMS, Apps, and Augmented Reality

The key themes of the Advertising and Marketing Services session at the 9th Telco 2.0 Executive Brainstorm were that mobile marketing is developing diverse new formats (e.g. via Apps), but that there are also still plenty of opportunities to use existing formats like SMS in new ways.

The presentation and case studies below are from Google’s big new acquisition, AdMob. They explore how new ‘richer’ content media formats, such as Apps, are catching the imagination of the advertisers. One of our key themes is that these richer media present only part of the opportunity, and that there is much that can still be done with existing, near-ubiquitous formats like SMS.

As further background on this we’ve summarised our take on the market context of these developments in our recent report Mobile Advertising and Marketing: Operator and Market Growth Strategies 2010 from which the following chart showing the relative strengths of different formats is extracted, and shown a detailed worked example of practical way to leverage existing assets in the briefing Mobile Advertising and Marketing: Text-based Local Search Use Case.

Apps are relatively ‘rich’ in ad content, but SMS ‘reaches’ a lot more potential customers
Picture1.jpg
Source: Mobile Advertising and Marketing: Operator and Market Growth Strategies 2010

The rest of this post summarises our take on the presentation by Russell Buckley, Chairman of the Mobile Marketing Association and now VP of Global Alliances with AdMob, that covered:

- The Broadening Definitions and Diversifying Formats of Mobile Marketing, including examples of new types of activity;

- How the boom in smartphones is changing the balance from “push” towards “pull” advertising.

The Broadening Definitions and Diversifying Formats of Mobile Marketing

It’s often tempting to think of advertising as the whole of marketing, and both online and offline, much of the glamour and spend of the industry has traditionally been focused here. However, a problem with advertising is that it is expensive and difficult to measure, and the effectiveness of newer targeted, measurable, and ‘pay for performance’ direct and online forms of marketing, have revolutionised the profile of advertising spending, particularly in the UK.

The same is true in mobile marketing - it is tempting to think of the goal as to be to put an ad in front of a punter. That’s one goal, but the reality is much more complicated, and there are many ways in which companies can attempt to bring their brands into contact with the consumer.

One of our main take-outs from the brainstorm was that it is important for the industry to take a broad view of what constitutes “advertising”. We’ve suggested, as far back as 2007, that perhaps advertising as such - banners, display, search-based ads - is becoming less important and things like social or automatic recommendation, data analytics, and real-time customer feedback may be becoming more so. In fact, advertising might be another communications-enabled business process And the huge importance of data - especially real-time or near real-time data - was a cross-cutting theme for the whole event.

A Mobile Marketing Insider’s View

Russell Buckley, Chairman of the Mobile Marketing Association and now VP of Global Alliances at AdMob, began with a quick overview of AdMob. He claimed that they were serving ads from 7,000 sites and 11,000 apps, and had achieved 165bn page impressions. He stated that the company was happy to work with operators, but that the operators had so far been less happy to work with them. (NB There are some interesting recent AdMob stats on ads served by Google Android in ‘Fig 3’ here.)

He described major change in mobile advertising in the last 18 months. Originally, the market, such as it was, had been dominated by operators, primarily selling push media such as bulk SMS and specialised WAP products. This was conditioned by the limited capabilities of the great majority of devices, and the low bandwidth of the data networks. In 2005 it had been SMS, in 2006, graphics; but then, in 2007, the iPhone arrived.

buckley-slide3.PNG

Now, the market was growing fast and was increasingly dominated by pull media - specifically, advertising on Web sites, advertising inside applications, and apps that were created in order to advertise or to facilitate customer interaction with products. This was conditioned by the arrival of mobile broadband and the smartphone boom since 2008. The primary use case was now either in the app environment or in the browser. He likened this to the “transformation of print in the last 100 years.”

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As a result, the industry had recently seen its first $1,000,000 campaign - an important milestone. Additionally, Russell said that location-based services were beginning to happen, and that the broader ‘Augmented Reality’ category would soon be a major market. Most of the problems that remained were ones of admin and operational processes. He cited a major campaign for Reebok as an example both of integrating the ad campaign across multiple platforms, and also integrating it tightly with the sales cycle.

Another example came from Sherwin-Williams, the US paint manufacturer. They developed an iPhone app that uses the device’s camera to match the colour of whatever painted surface it’s pointing at with the company’s colour charts, and return the stock numbers and details of the paints that match as well as the address of the nearest stockist based on the GPS location. In a sense, it’s an example of something that goes beyond “advertising” - it’s valuable to the user in itself, but handing them the exact product ID is an effective way to get them to buy that product.

buckley-slide12.PNG

AdMob was commissioned to publicise the app and drive downloads of it. The client bought $15,000 of text ads targeting the iPhone customer base in a concentrated two-day burst campaign, and the application went from being the 70th most downloaded in its App Store category to being the 18th most downloaded, representing an increase of 500% in daily downloads and a 1.08% click through rate. The campaign also succeeded in creating stickiness as although the download run rate fell back from the peak level achieved in mid-campaign, it remained more than double what it had been pre-campaign. This represented increased discoverability on the App Store due to the higher ranking.

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Buckley finished by remarking that, for the so-called “next billion” consumers in the emerging markets, their first contact with electronic media (and for a nontrivial percentage, even with print) would be on a mobile device.

Next Steps

We will be exploring the issues of the benefits of ‘push v pull’ marketing in all its flavours, how consumer data could be used and monetised in practice, and what ‘Augmented Reality’ actually means in our future analysis. We’ll also be featuring more case studies on mobile marketing in Best Practice Live! on 28-30 June 2010.

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May 11, 2010

Mobile Internet: Horizontal Platforms Needed (Guest Post, Qualcomm)

This guest post by Qualcomm describes what consumers, developers, OEMs, and MNOs want from the evolving ‘mobile internet’, and key factors for empowering ‘users’. It argues that ‘horizontal’ telco business models are increasingly necessary for telcos to capture value.

The article was written by Colm Healy, VP & GM EMEA Services & Xiam at Qualcomm, who was also a stimulus presenter at the 9th Telco 2.0 Executive Brainstorm.

Introduction

One of the goals of Telco 2.0 is to discuss and formulate ways in which the telcos might address the challenges of a world where voice and SMS are no longer the main revenue streams, and how they might coexist with the increasingly powerful webcos entering the mobile space. One of the practical tenets of Telco 2.0 is that it is not just about creating new revenue opportunities from ‘upstream’ players, but also about maximising the opportunities that already exists downstream with the billions of customers that operators already serve.

The pace of change in the industry has been fast and mobile internet usage growth curves are steep, as is the proliferation of app stores launches (see below). But there are huge untapped opportunities in the mobile internet. All the indications are that people want the internet on their phones, and all the players want to be involved. In short, where the mobile internet is concerned, everyone wants in - and not just those people who currently own smartphones.

New app store launches; source - Media tracking

Value Creation

What Consumers Want

Consumers are the basis of any future business model, so let’s start with them. There is clearly a market need and demand among consumers who are largely ignorant of distinctions between smart and feature phones, whose technical knowledge of devices and OSs is limited to non-existent, and whose elasticity of demand will necessitate a great experience across a wide range of handsets.

They are familiar with the internet and they have heard a lot about apps and app stores They want internet services on mobile. But that experience must absolutely and seamlessly work, add some real value to their lives, and be offered at price points with which they are comfortable.

A few indisputable facts

  • Consumers don’t care about definitions of smartphone and feature phones.
  • They increasingly expect advanced featuresets across various device price points.
  • They don’t care if applications are native, cloud based or are run by a mouse on a wheel inside their phone.
  • They do want convenience, fairness, transparency and a seamless experience.
  • They are willing to pay for that if it works, and the price is reasonable.
  • They don’t care who the vendor is if they know the transaction and channel is secure.

What Developers Want

  • Developers, Content and Service Providers want to distribute their content/services.
  • They want to do that at an economically viable price point.
  • Device and OS fragmentation are unlikely to disappear soon, so developers need to be able to identify where the opportunities are and respond to them quickly (irrespective of OS’s, Platforms, D2C, Freemium, Advertising supported etc).

What OEMs Want

  • Device manufacturers want to offer a differentiated device portfolio.
  • They don’t want to just end up with a commoditized one-size-fits-all offering.

What MNOs Want

  • MNOs want to monetize their investments in their networks.
  • They need the flexibility to offer services across various platforms.
  • Differentiation will come about for MNOs through providing compelling data experiences to their customers at a range of price points.
  • How successful they are in executing on these approaches will govern their competitive position in the marketplace and their long term value.
  • A key measure will be achieving penetration of services across tiered pricing plans based on different consumer needs, rather than a single all you can eat data tariff.

Value Capture

Business models are developing around mobile services anyway, with or without MNOs making an advanced services platform play. If MNOs do nothing, the likely landscape over a 3 year horizon will look as follows:

  • Limited upside to the MNOs beyond transport, and even that is not certain (competing technologies, net neutrality);
  • Continued migration to OEM/webco delivered services from both existing and new
    customers (this point is important in that in this scenario new customers will have no experience or expectation of getting services from telcos - they will in the true sense be internet natives);
  • Innovation will continue to be driven by handset, software, internet services companies;
  • Many fragmented, confusing offerings will emerge, of variable quality and trustworthiness (taking the fixed internet as a reference point, we have seen various concerns ranging from data privacy to sharp practices such as the so-called scamville frauds);
  • Frustrations around discovery, portability across different channels and devices;
  • A missed chance to give users control of their experience through the unique aspects of mobile - Privacy may not be dead as Mark Zuckerberg claims, but we are increasingly seeing that users are just as concerned about transparency and control of their data, as keeping it private;
  • An opportunity will be lost - Internet on mobile won’t deliver on the true potential of the medium and won’t be capable of fully delivering on the promise outlined above.

If MNOs do make a play in delivering intelligent services now, the potential upsides are great:

  • They will strategically position themselves as a valued service provider to their subscribers - getting the retail experience right on mobile will be critical to capturing value;
  • They can act as an honest broker - trusted, secure, in their interests to protect and cater to their users’ needs;
  • They stand to gain from the uptick in usage as well as providing services using their billing platforms and the knowledge of their subscribers;
  • The potential of data analytics to turn digital footprints into value for consumers, MNOs and other players that have been cited in the two sided business model begins to emerge.

Vertical models may have created the marketplace, but Qualcomm believes a retailing experience that is not tied to any one operating system or technology is necessary for the industry to scale.

Whoever empowers the user the most will win

It’s imperative that MNOs now implement intelligent mobile retailing and (micro) transactional platforms necessary to make projects like WAC a reality. Moreover, they will be instrumental in establishing the MNOs competitive advantage. But let’s return again to first principles and look at this through the prism of user experience.

Key elements that service providers need to start to put in place to ensure they retain value in the short term:

  • Discovery - interaction through the web on all platforms is moving from search to discovery;
  • Portability - ubiquitous connectivity across devices and places should be enabled;
  • Engagement - with the brands, content, people and places that are important to them.

Discovery

Consumers are already using more mobile content than ever before, however current modes of discovery and usage - such as search and static stores and portals - are limiting the mobile content experience from meeting consumer expectations.

Recent research commissioned by Qualcomm in the UK and US revealed that 80 percent of users noted they had difficulty obtaining content on their mobile handsets, meaning they spent more time searching and less time accessing content. Discovery needs to evolve from search engines to a more dynamic, real-time experience.

8 out of 10 users reports experiencing discovery problems

In the mobile world we need to deal with the case of a user who doesn’t know what they are looking for by anticipating requirements and interests. Discovery offers the chance to introduce relevant new experiences, rather than reinforcing existing behaviours. Rather than responding to one specific query at a time, we can blend discovery of multiple services and products. In effect we can move from demand fulfilment to demand creation. Consumers shouldn’t struggle to find the one app or piece of content among thousands that they care about. Consumers want limitless choice available to them, but in a way that makes sense.

Clearly, discoverability has also become a major issue for content providers with stores containing literally millions of items. Few developers consistently have truly groundbreaking content or sufficient negotiating power to get featured in a national ad campaign or placement at the top of the store. A strong discovery and personalization layer is a critical element in fostering discoverability to deliver relevant and contextual content and services.

Portability

User expectations for mobile are trending towards more control, more flexibility and greater freedom of access irrespective of channel. It is imperative that MNOs add value by giving consumers control. Control of their content across different locations and networks, and control of their data, which in the current social networking paradigm often is their content. Features that enable cross-device content portability, and statefulness so that I can access and engage the content that I want irrespective of where I am, and what peripheral I’m using.

Engagement

The MNO can play an invaluable role in the fostering of relationships between consumers and the content and brands they care about, across all channels and devices that their customers might use. Over time, MNOs will be able to offer suppliers the tools that allow them to experiment in creating ongoing engagement with their consumers within a retail infrastructure that lets them make informed business choices. They will be able to facilitate an ecosystem of free and ad-supported content and services through integration with ad networks, supporting free premium (freemium) business models through micro-billing, and creating models that enable paid premium markets to flourish. They will support the broadest possible range of business models and allow other entities to optimize their channel and pricing mix for profitability.

There will be no specific business model that will work for all opportunities. The key will be flexibility - for potential partners and consumers. But in the first instance the role and opportunity of the operator is to get the mobile internet experience right for all their customers.

About Qualcomm - a diversified mobile player

Qualcomm has had a long and fruitful history across various areas of the mobile industry since its inception in 1985. We’ve emerged from being a niche CDMA player to one that focuses on enabling mobility in all forms. In a phrase - any content, any network, any device. So not only do we design and build integrated chipsets and develop IP, we are a services company too. And we’re focused on enabling our customers to bring great services to their end users. We’ve had and continue to have great success with the Brew ecosystem with over $3billion paid to developers to date. That has given us valuable insights into how to go about building mobile content ecosystem that deliver value to all members in the value chain. We have relationships with all the key players in the industry including MNOs, OEMs, Developers, Industry Groups and Government. So we are looking at the issues of the day from multiple view points.

For more information contact Martin Clancy, Qualcomm [mclancy@qualcomm.com].

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May 10, 2010

Telco 2.0 News Review

Telco 2.0 Top Stories

[Ed: Diary reminder: 28-30 June 2010, Telco 2.0 Best Practice Live! - the first carefully curated, online, video-based, interactive knowledge bank of cutting-edge ‘Telco 2.0’ services, business models and solutions from around the world.]

Huawei goes along to get along with India; in return for the Indian government’s lifting of its ban on their equipment, they’ve undertaken to create an Indian business unit with Indian directors and management, and more importantly, they’re going to come clean at long last about exactly who owns the company. Rumours have circulated for years that the company is secretly controlled by the Chinese Army - the firm was founded in 1988 by a retired officer and instructor at their electronics school.

However, it’s also fair to say that a lot of the rumours originate from their competitors and from protectionist-minded politicians. But unlike most network vendors, Huawei has a government contract to carry out counter-surveillance sweeps at Chinese embassies worldwide. Another unusual feature is that officially, Huawei is a workers’ co-operative owned by its 65,000 employees; we should soon find out the details.

Alcatel-Lucent announced rather poor results for Q1; revenue was off 5%, and the company made a net loss of €402m. According to Ben Verwaayen’s statement, the trouble was concentrated in the core telecoms division and was partly caused by shortages of key components, which slowed down delivery of major contracts.

BT are announcing results on Thursday, and the main theme is likely to be more faster Internet service now. The Financial Times reports that the carrier is likely to announce that the target for homes passed with FTTC is being raised from 40% to 66%. The FT also mentions that BT has brought forward the delivery date from 2013 to 2012. They also point out that the wholesale side of the scheme is going to be important, which is clearly sensible.

In Italy, Vodafone, Fastweb, and Wind Telecom have agreed to jointly build a new FTTH network, with an initial investment of €2.5bn, much of which is coming from the Italian government’s investment bank. A key detail is that they’re inviting Telecom Italia to become a wholesale customer or perhaps a joint-venture partner. It seems that actually firing up the JCBs is the costly signal required to make an incumbent play nicely with a fibre deployment, as KPN’s decision to invest in Reggefiber and cooperate with CityNet, DTAG’s to be a customer of some alternative operators, Telstra’s decision to start cooperating with the Aussie NBN, and Telecom NZ’s to support Crown Fibre Holdings tend to suggest.

The Australian government this week published a detailed plan for NBN implementation, drafted by McKinsey consultants; the key points are that they’re determined to build it, Telstra or no Telstra, that they are taking a relatively generous technical approach, and that the carrot for Telstra is revenue from layer zero access. The cost estimates are based on the assumption that 50% of the end points that get fibre will be reached with point-to-point fibre, and the rest with splitters from a shared fibre, and that the 10% of Australian subscribers too scattered to get fibre will be served with 2.3GHz LTE radio or Ka-band satellite. The project remains incredibly ambitious - it will require 5,000 truck rolls to customer premises every working day for eight years, although the good news is that somewhere between 50 and 80% of Telstra’s 100,000 route km of ducts has space available. The document is available here, and there’s a wiki for your contributions.

In the US, meanwhile, there may be a launch customer for the latest proposed satellite broadband network. T-Mobile USA is apparently interested in wholesaling capacity if Harbinger ever gets off the ground. Clearwire, it turns out, has got Intel (which is both a key supplier and also a major investor) to alter their original agreement and take out a clause requiring Clearwire to use exclusively WiMAX. Connected Planet is nicely sceptical that there is much point charging off after the LTE wild goose; this Dilbert cartoon applies.

Benoit Felten is concerned that Free.fr is turning into…a telco, especially after he spots the CEO moaning about Google using their network for “free”. Felten makes the excellent point, which cannot be made often enough, that this simply ignores the entire wholesale transit and peering market, or to put it another way, the Internet.

Orange UK is getting onto the bandwagon of data re-pricing; “unlimited” is now £35 a month if you’re signing on for 18 months, whereas the lower tiers seem to be arranged to cut prices for lower usage brackets and create incentives to sign on for long-term service. An innovation is that you can pick one of a number of “happy hours” during which you can hammer the network as hard as you can; these are presumably periods of low network utilisation. Just the moment for a spot of Rapidshare, or maybe just to get your software updates… There are, of course, silly names for the tariffs (Panther, Dolphin, Raccoon).

Orange also announced iPad data rates, which are going to be usage-billed at 5p/MB up to a maximum of £40 or 800MB. If you blow the limit, you’ll be billed at 5p/MB, which is a slightly strange use of the word “limit”. There are also ad-hoc options and plans that include BT Openzone WLAN access. HD video in Apple’s H.264 format runs about 8Mbits/s, which you’d be lucky to get on HSPA; that would suggest that lucky iPad users would blow through the cap in 13.3 minutes of streaming video. Of course, the iPad’s features include the special nonstandard SIM so you can’t just use the cheaper data plan in the paragraph above…

Wired suggests 5 things Apple could do to avoid being seen as “evil”; the key one would seem to be publishing the rules of the App Store. At the moment, it’s impossible to know if you’re breaking the rules. Yhere was a writer in 1980s Hungary who used to argue that he actually wanted censorship, in the sense that there should be an official censor who acted according to rules made public, while the Party really wanted a vague generalised menace that would lead people to self-censor.

Wired also asks an important question about Facebook and privacy - what, exactly, is personal data? This is something we’ve been thinking about; we used to liken personally-identifying information and other information to plutonium and potatoes, but perhaps uranium would be more like it. If you’ve got uranium, it’s a matter of spending enough time and energy to enrich it to the point at which it becomes a useful source of electricity; but it’s only a matter of keeping the enrichment going further to get it to weapons-grade. And even if you mix it back down, you can still re-enrich it back up, as long as you’re willing to put in the time and burn the electricity to drive the centrifuges. If we can derive important insights about people from non-personal data, like Sense Networks do when they identify potential churners, at what point does the information stop being non-personal?

Facebook knows what kind of answer it would give; it’s hiring more and scarier lobbyists. And so does the European Parliament; they’re holding up votes on international data sharing agreements.

The slow march towards an acceptable developer platform for Nokia/Symbian devices is making progress; the new Qt SDK is available as a free download for Windows, Mac, or Linux machines, which lets you build the same application for S60 and Maemo/Meego Linux devices at the same time. Hurrah. Nokia also announced the first Microsoft application built for S60, a client for the Office Communications Server UC system. Smartphone shipment figures, meanwhile, are here.

Nokia in Brazil has announced an app that supports Brazil’s homegrown interactive mobile-TV standard.

Motorola has acquired “hardcore mobile Linux developers” Azingo, the first firm to get a LiMo implementation working, in an effort to trim their dependence on Android.

Is there anything that the Apple-Adobe row doesn’t affect? It turns out that it’s holding up ARM-based netbooks. PlayStation 3 owners whose devices were remotely updated by Sony to stop them running Linux are suing. Strange phenomena in trading platforms. The international politics of DNSSEC; but professionals worry about BGP security. France may be seeing unwinding of multi-device ownership. Hardly anyone encrypts telephony. Cory Doctorow gets phished. An author’s view of e-books. Alcohol: there’s an app for that!

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May 6, 2010

Enterprise 2.0 Session: Machine-to-machine - opening for business

This is a summary of the first half of the Enterprise 2.0 - New Opportunities in Wholesale and Enterprise Services session at the 9th Telco 2.0 Executive Brainstorm

Executive Summary

The M2M session produced a buzz at the 9th Executive Brainstorm, held in London on the 28-29th of April. This was partly down to the excellent quality of the speakers and the subsequent panel discussion. However, there was also a strong belief that M2M’s time is finally coming and a determination to learn the lessons from the past and from elsewhere, more specifically, from the Internet.

The panellists (Phil Laidler, Telco 2.0 Director of Consulting; Ken Figueredo, Principal, Ventura; Marie Austenaa, VP Strategy & Products, Telenor Objects; Jonas Nordstrom, Head, M2M Business Development, Ericsson; Alan Beveridge, Director, Sales and Business Development, Jasper Wireless; Kevin Johnson, Director, Embedded Systems, Intel; David McNierney, VP, SAP) all demonstrated a clear understanding of the importance of M2M achieving future growth through facilitating innovation and of the challenges this line of business presents - notably extreme customer diversity, a mismatch between traditional product development processes and many markets, and certain key technical issues, such as power consumption and remote device management.

There was consensus on the need for horizontal platforms (albeit different visions of the how the ecosystems might work in practice) , a two-sided platform business model, and engagement with external innovators. Telenor presented an impressive new venture launched under a year ago - Telenor Objects - an M2M platform implemented as open-source software.

What we saw was not so much the Industry rethinking M2M, as the industry getting on with redoing M2M. Visionary concepts perhaps, but very practical steps too. Heady stuff indeed.

Enterprise 2.0

A key theme at last week’s Telco 2.0 event was the way in which operators and vendors are beginning to make the changes they need to realise the potential of the machine-to-machine market. This includes machine-to-just-about-any-device, the Internet of Things or Embedded Mobile. But what are the key enabling ecosystems?

The industry has already been here a few times before; there has been a lot of confident talk about 400% mobile penetration in the past and rather little delivery. But what we heard at Telco 2.0 suggests that at least some players are now approaching the opportunity in the right way.

Telco 2.0’s director of consulting, Phil Laidler, who opened the Enterprise 2.0 session, remarked that Telco 2.0 in the enterprise is all about automating interactions, which can be machine-to-machine, application-to-person (A2P), or person-to-organisation (P2O). M2M systems seek to facilitate useful interaction between machines, or between machines and people monitoring them.

P2O systems are all about interactions between individuals and organisations - the most obvious examples being marketing, sales, order management, customer relationship management and customer care. The same ideas apply to internal enterprise applications where the people on the phone are employees or suppliers. To date, M2M has typically involved narrowband data, messaging, and occasionally video in surveillance or safety-critical monitoring applications. P20 has more often involved voice, messaging, email and increasingly the Web.

Rethinking M2M

Looking at M2M in this way challenges some assumptions. Traditionally, “Industrial” M2M has been an extension of SCADA (Surveillance, Control, and Data Acquisition) systems, primarily concerned with collecting data from remote sites and delivering them to a central control point. More rarely, the control centre could also send an instruction back to the remote site to take action. These systems tend to be built from scratch to meet individual enterprises’ requirements. They also tend to adopt proprietary (or at best, sector-specific) technology, and to have a highly-centralised architecture. They are often difficult to integrate with other systems, and not interoperable with systems in other companies.

From an interactions perspective, though, it might be very valuable to have the machines operating with greater autonomy and interacting directly with one another - this would permit much faster reaction to events, would cut the volumes of data that need to be processed centrally in real time, and would permit the system to be robust against loss of communications. If the devices in the field are smart enough to apply the analytical rules themselves and issue the commands to maintain stability, it becomes significantly less worrying if a network link goes down.

It has been very difficult, to date, for other businesses in a value network to benefit from a company’s M2M data; for example, the players at an oil terminal might include multiple oil companies, contractors, suppliers, the port authority, shipping lines, pipeline operators, a ministry of oil, and the customs service. All of these have a need to access data relating to the flow of oil through the pipelines; if they could all get data from the instrumentation system, it would solve many of their problems.

Another issue with M2M, is that you might solve one set of interactions by creating a huge new interactions problem. So, you have deployed hundreds or even thousands of sensors and control units and networked them. Some of them are built into long-lived pieces of equipment - wind turbines, trucks, and the like. Some of them are safety-critical, or installed in places that are difficult to access. You have then set up the data-processing backend. Now, how do you manage the devices? Without good solutions for this, the project has created a large number of costly maintenance calls that cannot themselves be easily automated.

Also, as all the speakers pointed out, one of the biggest challenges in M2M is that there are many companies out there, with immensely diverse business processes, interacting in complicated ways. The very promise of M2M - a market as big as the entire industrial economy - is also the biggest obstacle. Only the biggest customers are worth doing a tailored implementation for, as nearly all M2M systems are bespoke. As Phil Laidler pointed out, - simple applications for big customers tend to get done, simple applications for very small customers and the more complex, les stable interactions always end up being carried out by human beings. That leaves a great swathe of processes undertaken by mid-sized operating units (often part of much larger private or public sector organisations) who are left underserved.

The enterprise 2.0 opportunity map

The good news, is that if you can identify the common elements in the set of interactions associated with each industry vertical, you should be able to horizontalise them - to create a set of building blocks that apply to all the M2M verticals. If you then do this in an open, inter-operable manner, you start to create the infrastructure for the Internet of Things.

Embedded is horizontal

Ventura Consulting principal Ken Figueredo was the first speaker to touch on this, pointing out that there was a crucial strategic choice between creating a horizontal platform and limiting your activities to a few key verticals. Ken explained that the GSMA concept of Embedded Mobile was much broader than the typical industrial M2M concept, and that this meant both more opportunity and even more complexity.

Ken%20Figueredo%20-%20Telco2.0%20Presentation%2029%20Apr%202010.png

One way to deal with the complexity, as well as developing horizontal capabilities of general applicability, is to look for partners who can provide channels to market. Figueredo cited Vodacom’s partnership with Sierra Wireless as an example - as a major vendor of embedded mobile equipment, they already have a customer base and channels of their own, which allows Vodacom to reach the enterprise buyers who are going to make the decisions. Eventually, he said, it would be critical to identify the key “value intersections”, pointing out that M2M-focused MVNO Jasper Wireless, software vendor SAP, and Telenor were all targeting different ones, but that they were all betting that one particular role in the ecosystem would be strategically crucial.

Telcos’ role in the value chain: supporting innovation

Kevin Johnson, Intel’s director of embedded systems, arrived brandishing an Intel Atom-based system on a chip. He pointed to the vast numbers of possible sub-segments in the market, and asked which layer in the technology would concentrate the most value. The uppermost layer was display - visualisation dashboards, user interfaces and tools. Next down was analytics and data-mining. On the bottom layer, were the sensors, gateways, and controls themselves. He argued that both the value and the problems were concentrated in this hardware layer, and that horizontalisation was critical in order to scale-up the business.

Kevin stated that “the innovators are your best friends”. He said that operators needed to find a role in the value chain that supported innovators. For example, creating a building-automation system involved a range of different actors, including the chip and RF-chain vendors, the device assemblers, the operating system vendors, the network operators, and the application developers. He argued that the role of the developers was the only one in the value chain where all the other domains overlapped - hence it was the critical node. They had to deal with all the technical partners, plus the end user.

Kevin estimated that in this example, developers would collect about 80% of the total contract value (on a €1m contract), with about €1,500 a month of revenue accruing to the network operator. In order to “make it happen”, he said, there were two critical elements that had to be addressed:

  • “Defragmentation”, in which the proliferation of proprietary platforms had to be reversed, the CPU and radio elements better integrated, and software APIs standardised
  • R&D. The two main R&D goals should be to cut power requirements radically, and to solve device-management problems.

Kevin%20Johnston%209th_Telco2%200_Intel%20M2M%20r2.png

Telcos would need to work on network optimisation, but that paled in comparison with the prospect of 100 million support calls. He asked why major billing systems vendors weren’t doing more to fulfil the BSS-OSS requirements, and pointed out that getting the tariffs for M2M traffic right needed experimentation. Summing up, he said that it was crucial to define an ecosystem for innovators, that the industry needed to speed up the device approval process through mechanisms such as Verizon ODI, and that efficiency required innovators, scale, and devices.

Looking for M2M hot-spots

Jonas Nordstrom, head of M2M business development at Ericsson, presented the results of a market research exercise conducted with key actors in the industry. He used the classical S-curve and hype cycle models to predict that there would be a major wave of deployment in the next six years, and pointed out that broadband was still in the phase where most value accrues to the original players. The interviewees were asked to identify the verticals they considered most disruptive, based on their market impact and the speed of their expected uptake. The top five were identified as Connected Car, Smart Grid, Fleet Control, Mobile Surveillance, and Medical Monitoring.

Jonas%20Telco%202.0%20ericsson%20Rev%20A.png

In the healthcare field, the interviewees felt that data management, automated diagnostics, and virtual and augmented reality were the most important in the foreseeable future. It would be vital to get the buy-in of the clinicians and the pharmaceutical industry.

In automotive - which will clearly be a critical sector if the interviewees are right - the research pointed to electric vehicle recharging, maintenance, and presence in the BRIC+5 countries (the BRICs and Iran, Indonesia, Argentina, Mexico, and Thailand) as important. Jonas described another research project being carried out by Daimler-Benz and MAN into “Cooperative Cars”. This would have cars communicate with each to capture and disseminate traffic information - as each GSM call generates two location updates, operators might well have a role here.

The next step, according to Jonas were was to identify the key horizontal capabilities needed. Jonas ended by confirming that the main barrier to M2M success was winning internal support within our industry.

Telenor Objects - Leading the way

We had heard a good deal about horizontal capabilities and platforms by this point. The next speaker, Marie Austenaa, is VP Strategy & Products for Telenor Objects, their new dedicated M2M division. It turned out that Telenor Objects is essentially an effort to implement the sort of horizontal, multi-tenant platform for M2M applications that others have been advocating.

Marie Austenaa remarked that Norway has a lot of space and some very complex industrial infrastructure, but not many people, so Telenor had long been asked to implement vertical M2M solutions. Past customers had ranged from oil and gas to fish farms, and one system had even been used to monitor a flock of sheep. Over time, Telenor had come to realise that the same functions were being implemented again and again in every M2M system they built.

An early adopter of M2M

The verticals Telenor worked with had many things in common. They had to collect data, send back commands, carry out data processing according to user-specified rules, and manage the device fleet. Telenor had also begun to realise the limitations of classical M2M; “it wouldn’t work on the Internet of things”. Far too much of these systems consisted of closed-source, monolithic, standalone applications. Little code was reused, and much of the hardware was task-specific; sometimes it was necessary to junk the hardware in order to make changes in the software.

Their answer was to use this to launch a horizontal approach to M2M, based on the question “What things do all the verticals do?” As a result, they launched two new companies within Telenor:

  • Connexion, to provide vertical systems and connectivity, and:
  • Objects, to build the horizontal platform.

The design of Telenor Objects’ software platform began with a layering concept. Telenor would provide a middleware layer to help different kinds of devices, networks, and applications to interoperate. This would provide open interfaces for data capture, data pre-processing, device management, and information exchange with other systems. This last feature is critical; for example, transport companies frequently borrow and charter vehicles from each other. What is most striking about Telenor’s approach, is that it looks very different from the traditional Telco 1.0 mindset of vertical integration and control.

Telenor%20Objects%20FINAL%2029%20Apr%202010.png

Telenor Objects is based on five key elements - the brand and channels to market, the technology, the partners, a managed-service business model drawing on the telco heritage, and open-source software. The complete system provides a range of reuseable capabilities, including a GUI for users, developer APIs, and a device library. The core of the whole project is the software platform, Shepherd, which implements a secure message-exchange and device management system. Shepherd has generic software libraries for each group of devices by function in the device library. Telenor has released the source code for Shepherd as open-source software through SourceForge.net; at least one delegate actually grabbed the codebase to his laptop during the session.

Telenor%20Objects%20FINAL%2029%20Apr%202010-1.png

An interesting feature of Shepherd is that it provides for distributed data processing in the network of devices - users’ business rules can be injected into the system, so that control can be delegated down to the device gateways, implementing the sort of distribution we mentioned above.

Finally, she said, it had been necessary to take a strategic decision to shape the market. A pure market approach had led to a succession of suboptimal vertical silos. In essence, though, the business proposition of Objects was a subscription-based service under which Telenor managed devices and customers paid them money.

Lessons from the AppStore

David McNierney, a VP of enterprise software vendor SAP, had the hard act to follow. He introduced the M2M market as being potentially huge but - here it comes again - immensely diverse and complex. He explained that SAP’s competence in providing ERP, workflow, and accounting/audit solutions for complex business processes was cross-applicable. In his view, the biggest customers were likely to be logistics, transport, and medicine, and he wondered how well placed telcos really were to serve them.

He referred to lessons from the Apple App Store, pointing out that this was an effort to serve a hyper-diverse market of individual customers and individual developers. Partnering, monetising, and analytics dashboards had been crucial competences. It would be very important to negotiate the terms of the partnerships involved in M2M; a special issue would be the degree to which the terms of contracts “cascaded” to the third-party developer’s own third parties. M2M applications would also be very demanding in terms of filtering the streams of data they generated.

Finally, M2M startups might struggle to scale up, and therefore there was a need for “strategic relationships” with a triangle of telcos, hardware vendors, and companies like SAP, IBM, BT Global Services, etc.

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Getting the machine into gear

During the panel session that followed, perhaps the most significant statement was from Telenor again. “A huge standardisation issue” had been identified in healthcare - furthermore, there was a huge culture gap between the medics, pharmaceuticals, and the tech industry. Marie Austenaa replied that “if there was a standard it would be so much easier, so let’s do one!”

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May 5, 2010

Telco 2.0 @ Open Mobile Summit, May 26-27 London

Simon Torrance, CEO Telco 2.0, will be on a panel discussing business models, ‘living with Google’, and sharing some of the outputs of last week’s 9th Executive Brainstorm at The Open Mobile Summit in London, May 26-27 (see here).

The Open Mobile Summit is run by friends of Telco 2.0, and we think it’s one of the more interesting industry conferences, so we recommend you have a look at it if you can. It brings together top executives from across operators, handset OEMs, Internet and media companies, to explore where the value is shifting in mobile. There’s a summary below on who’s going and the topics covered.

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Operators participating this year include:

- Olaf Swantee SEVP France Telecom
- Olivier Baujard CTO Deutsche Telekom
- Hakan Dahlstrom, President Mobile, TeliaSonera
- Pieter Knook, Director Internet, Vodafone
- Kim Byjberg, GM M2M, KPN
- Mike Short, VP R&D, O2
- Michael Reilly, Director Orange Healthcare
- Joacquim Croca, Head of Health Solutions, Vodafone
- Tanya Field, Director Mobile Data, O2
- Rolv-Erik Spilling, CTO, Telenor
- Niklas Sonkin, EVP, Tele2

Topics for discussion include: How operators can monetize the application ecosystem, Pricing and delivering profitable mobile broadband services, M2M, mHealth, the impact of the ebook revolution and the iPad, the business case for LTE, mobile advertising, content monetization, the value in social and location.

There’s more on the Open Mobile Summit here.

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May 4, 2010

Telco 2.0 News Review

Telco 2.0 Top Stories

  • Broadband Connectivity: ‘1M iPads sold’; AT&T iPad data tariffs out; US operators re-price data
  • Strategy & Finance: China Unicom, Comcast, MTN Q1 numbers
  • Content 2.0: Apple kills LaLa, Spotify hooks up with Facebook
  • Advertising: Apple iAd goes straight for big ad accounts
  • Devices: Say cheese: Nokia N8, the phone for filming cops
  • Technology Disruptions: Cable cut, BGP leak: lights don’t go out

    [Ed: For your diaries: Telco 2.0 Best Practice Live! provides the first carefully curated, online, video-based, interactive knowledge bank of cutting-edge ‘Telco 2.0’ services, business models and solutions from around the world. It runs on 28-30 June 2010.]

    Apple reported this week that 1 million iPads have been sold, a better run-rate than the original iPhone - although getting to this conclusion appears to require some slightly questionable maths, well explained in the Wired story.

    Debate on the iPad also raged somewhat at last week’s 9th Telco 2.0 Executive Brainstorm, as did discussions on ideas of dealing with the mobile data boom by changing prices and reviewing the bundling process, complicated schemes with differential service classes, deep packet-inspection, and the like. In this vein Connected Planet reports that a wave of repricing has moved through the US market; T-Mobile USA has withdrawn its 5GB data cap, or rather altered it so that anyone who blows through it gets reduced bandwidth, rather than a bill. A line-up of others followed suite, with Leap Wireless offering tiered caps and AT&T setting its tariff for iPad traffic - $14.99 a month buys you 250MB, $29.99 unlimited. Users on the capped tariff will get SMS alerts/upsell messages at 80%, 90%, and 100% utilisation of the cap.

    Rene Obermann, meanwhile, said that T-Mobile USA was making so much money there was no question of DTAG exiting it.

    China Unicom Q1; profits are down 68%, although they’re still RMB1.4bn, as the costs of the 3G build hit home. MTN released KPIs for Q1 showing steady subscriber growth.

    Comcast announced Q1 numbers, showing revenues up 3.8%, strong subscriber growth, and monthly ARPU for customers who take their cable TV service of $122.98. Significantly, they’re also the third-largest fixed voice provider in the US - it’s not just FTTX and high-speed data generally that’s menacing the PSTN.

    In Denmark, meanwhile, the record industry is taking the side of TDC in a lawsuit over music rights. TDC offers a legit unlimited-download music service; the Danish equivalent of the MCRS-PRS is suing them after their agreement broke down. The record lobby is backing the operator against the songwriters; well worth remembering the next time they start going on about “creativity”.

    Speaking of music, Apple has shut down its Lala streaming-music service, which means that everyone who paid for music there is out of pocket. Apple is offering them iTunes credit as a refund, so they can go and re-download their entire collections. It is rumoured that this is clearing the ground for a streaming option for iTunes, although it’s also a reminder of why digital music that is “in the cloud” or dependent on online DRM checks might not be such a great idea.

    Spotify, meanwhile, has got in a pre-emptive strike by launching a new beta version of its service with a variety of interesting new features. Strategically, the interesting one is that they’re integrating with Facebook’s API, in order to let you control your Spotify playlists from within Facebook, share your music with others, and the like; this could clearly be a major source of new users. Technically, the most interesting detail is that Spotify can now index whatever DRM-free music you have on your hard drive; it’s not clear whether “add it to Spotify” means uploading it to their cloud servers, or whether it just means that you can manage it through Spotify’s user interface.

    Given their relatively pally relationship with the record industry, you might be forgiven for being a little circumspect about taking this step; especially as Facebook CEO Mark Zuckerberg “doesn’t believe in privacy”. The Electronic Frontier Foundation dons the satin tights to fight for your digital rights; “evil interfaces” indeed. Their top lawyer is worried that the FCC will back down from reclassifying broadband as a telecoms service.

    Details of Apple’s iAd platform have emerged. It looks like they’re aiming for the opposite of Google’s AdWords business model; whereas AdWords minimises the minimum buy-in, and therefore enlarges the addressable base of advertisers, iAd will require advertisers to commit to buying a minimum $1m worth of ads. The revenue share is set at 60% for the app where the ad is placed, 40% for Apple.

    Steve Jobs threw a well-publicised row with Adobe, after the news that Flash will not be available for the iPad; Adobe hit back. Interestingly, Microsoft is in agreement with Google on a key issue here - using the HTML5 native video support and H.264 video encoding as a substitute for Flash on things like YouTube. Telco 2.0’s resident Linux user would like to point out that Flash is the most common cause of Web browser crashes on his machine.

    For a creepy kind of fun, check out this article on the Apple internal security team, or the “Worldwide Loyalty Team” as they are officially called.

    Hackers, inevitably, succeeded in jailbreaking the iPad and the latest iPhones.

    And there may be an antittrust investigation over whether it is fair to make developers use Apple’s toolchain to work on the iProducts. It is, however, unlikely that many would choose to use anything else, given that using Apple developer tools is a major selling point…

    And Apple buys a mobile search application company.

    But whatever else happens, they are still selling a hell of a lot of iPhones, creeping up on RIM as the second biggest shipper. This is interesting, as the picture by shipments is exactly the reverse of the data from AdMob’s ad servers - the explanation is probably that AdMob sites are concentrated in North America, and that using ad-serving as a metric favours those devices that people actually use a lot. The latter point, we think, is actually a useful bias - whether people actually use all your features or not is important information. However, AdMob’s metric tends to underrate RIM’s market share, presumably because the typical BlackBerry is still a messaging-focused enterprise device which may not see much Web/apps activity.

    What with all the Apple news, what’s RIM doing? Doing a refresh of BlackBerry OS; the sixth version has now been previewed with a view to launch in Q3. Multi-touch, better lifestream integration, and an improved WebKit browser are on the agenda.

    What’s Nokia doing? First up is a major new N-series gadget, the Nokia N8, which introduces Symbian 3’s revised user interface, a big touchscreen, and includes a rather fancy 12 megapixel camera. There was some mockery of Anssi Vanjoki’s claim a couple of weeks back that cameraphones would rival dedicated cameras - the N8 makes it clear that he was almost certainly speaking of compact-type cameras, not the honking great DSLR types favoured by people trying to look like journalists for some odd reason. It can also both playback and capture HD video at 720p - listen! your radio network is begging for mercy! - which strongly suggests that Nokia sees photography as a strength.

    Nokia has experimented with devices optimised for content creation, rather than consumption, before. The early N-series included the N93, whose form factor let it behave like a (rather clunky) clamshell phone, like a Nokia Communicator-style smartphone, and also like a camcorder with a folding viewfinder. Several generations of devices have shipped with software clients for multiple video and photo upload sites (not that the implementation is particularly great). It will be interesting, to say the least, to see how this plays out. The gadget won’t be out until autumn, as after the N97 experience, Nokia is very keen to leave time for extensive user testing.

    The acquisition of Trolltech, meanwhile, begins to pay off; Nokia launched its Qt SDK, which will provide a single developer environment for both Symbian and MeeGo Linux devices and significant commonality with the desktop world.

    Vodafone adds another VF 360 phone; this one, oddly enough, is Android rather than LiMo. Speaking of Android, ZTE announced its first Android device, Google launched its Google TV project, which will use Android as an embedded OS for smart TVs. British Google Mail users can now have gmail.com addresses again after the copyright row was resolved. Samsung is straddling LiMo and Android as well. Vodafone picks up the Nexus One, as Verizon Wireless drops it.

    HP buys Palm for a billion; meanwhile, Palm Pres are going for remarkably low prices with Verizon.

    There’s a security exploit against BitTorrent out; and a major scandal blows up in India as unauthorised wiretapping of politicians is disclosed. Not that it’s unknown elsewhere. When satellites go wild.

    What didn’t happen this week: widespread Internet instability. Doesn’t sound like news, but the SEA-ME-WE4 cable, a major Asia-Europe link, was cut, and a similar BGP routing incident to this one nearly occurred when a Polish IT company leaked a 255-network long AS path into the global Internet. This time, however, it looks like SEA-ME-WE4’s customers have more route diversity and working failover plans, and network operators around the world have either patched the Cisco XR routers that crashed in February 2009, filtered long AS paths, or both. It was once said that science advances, funeral by funeral; Internetworking advances, outage by outage, but that’s significantly faster.

    In the UK, the coalition against the Digital Economy Act is getting bigger. It’s now lacking both the tax on PSTN lines to pay for broadband, and the sidecar regulation that would have mandated OFCOM to crack open the 800MHz band, so it’s very hard to say that the Act does anything useful whatsoever. If the predicted hung parliament turns up, the Liberal Democrats are likely to hold the balance of power, in which case extensive amendments or even a fresh start can be expected.

    Finally, the best app ever: the augmented reality program that tells you which music festival toilets have been emptied recently.

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

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