Monthly Archives: February 2008

How will Telcos fill the pipes?

Telcos keep investing in improving their broadband networks: from ASDL to ASDL2+ to VDSL and now  Fiber-to-the-home (FTTH). FTTH will enable bandwidths in the order of 100 Mbps, both for downlink and uplink.

Telcos are investing important sums to bring fiber to the users: Verizon, SBC and BellSouth plan multi-billion dollars investments in the next three years. NTT has reached 9 million subscribers in Japan for FTTH and target 30 million in 2010.

How will Telcos get a return on this massive investment? What applications can they deliver to justify it?

1) IPTV. This is the obvious answer. High Definition video will be the killer app, not only for video-on-demand but also for broadcast TV channels and live events. To deliver a HD channel requires around 10-15Mbps. With the trend of multiple set-top-boxes per family (in the living-room, in each of the bedrooms, in the kitchen), FTTH will enable multiple HD streams to reach each STB in the home with a different program. 3D HDTV is still in early stage, but will also provide a compelling reason for users to demand fiber. 

2) Interactive TV applications. Benefit from the high-bandwidth return channel to provide interactive TV applications on top of IPTV, like TV portals or participation TV (voting, messaging or video calls). Interactive Advertisement is one of the most promising applications for generating revenues. Targeted, relevant adds can be a reality on the TV, as the telco can have a detailed profile for their users, even measuring the response to campaigns. Interactive Advertisement will enable users to respond to the ads, e.g. by providing an email address, subscribing to the BMW channel, purchasing the product from the TV ad, setting up a video call to a sales agent or simply recommending the ad to a friend. The possibilities are end-less, and the potential to generate additional revenues huge.

3) High-Def Videoconferencing and evolution to 3D HD conferencing. Once multi-parties calls are set-up, the demand for bandwidth multiplies

4) Wholeselling to Internet players, like Google, Yahoo or Microsoft. High bandwidth/QoS demanding applications could be sold by Internet players, including the bandwidth required to deliver the application, purchased from the operator as a wholeseller. e.g. Google Earth Premium providing not only satellite pictures but also high quality live video, Rhapsody music service evolving to subscription-based video and music service through a QoS-aware sub-network “wholesold” by the telco, Premium YouTube HD with connectivity sold by YouTube, etc.

Having a FTTH network can provide Telcos an important competitive advantage and the means to provide new applications we can not even imagine now. Telcos need to keep focus on developing these applications.

Another alternative, not to be neglected, is to ask for government funding, given the social benefits Internet clearly provides. Renamed in the past as the Information Highway, there is no reason we should not have toll-free Information highways too. It worked in Korea and other Asian countries. It is a matter of understanding Internet as another public infrastructure.

Note 2:
See what Samsung envisions as the Ultra-High Definition (UD) 3D.  At 4096 x 2160 resolution it will require 300 Mbps of bandwidth. Not even current FTTH will be enough.

Japan: Mobile Phones and Fashion

Softbank spring collection

Each season Mobile Operators in Japan present their new handsets, often developed in exclusive by Japanese vendors as Hitachi, Sanyo, Panasonic or Kyocera.

See these articles with details on the latest models announced by KDDI and Softbank: KDDI spring’08 phones and Softbank 2008 Spring Collection.

It is interesting how Japanese operators manage the release of handsets with a seasonal renewal, like in the fashion industry. Not only that, but the handset as a fashion  item is becoming a reality: e.g. Softbank has reached an agreement with Tiffany’s for exclusive designs.

If this trend goes on, I wouldn’t be surprised to see soon mobile phones being presented in a runway as a fashion show.

Is this an specific behavior in Japan? or just an anticipation in Japan of what is coming for the rest of the world?

Why Telcos should move into entertainment

As their networks transform into IP and threatened by Internet players, many Telcos are hesitant whether to enter the Entertainment business. Here are three main reasons why Telcos must go for it.

New revenue streams:

Telcos are very profitable today and generate a huge amount of cash worth to be invested in accessing new markets, as Entertainment, rather than just upgrading their networks for higher speed Internet Access.

There are different business models to monetize Telcos huge content audience: Subscription, Pay-per-click and Advertisement

Extending into the content delivery value chain can put Telcos in a central role to use their network capabilities to give users access to the long tail of niche content. Operators must profit from their customer knowledge and offer personalized content and promotions, as well as target relevant ads.

Managed end-user devices :

Telcos are trusted by end-users, and are in a privileged position to manage the complexity of Home Networks, and provide mainstream end-users with simple, easy-to-use services .

Mobile operators are also in a better position to provide premium content to personalize devices (wall-papers, ring-tones, apps..), as well as advanced Multimedia Services based on Rich Media Client software that are tested and pre-installed in handsets, for which they can provide special data rate plans

As mobile broadcast technologies are available, UMTS operators can re-use their spectrum, sites, and antennas to deliver broadcast TV over DVB-SH. Mobile TV hybrid services (both broadcast for live channels and unicast for VoD), bundled with IPTV make a proposition that Internet players are unable to match.


Exclusive content agreements are a powerful way to reduce churn and attract specific customer segments. Only Telcos that are in the entertainment business will be able to use this powerful differentiation by exclusive content.

Global players, as Telefonica, Vodafone or Orange, can capitalize on the group size to get better access to global content. Since content rights are negotiated country by country, the Telcos, with in-country presence are better postioned to negotiate than global Internet players.

Distributing content is a way for Telcos to avoid being commoditized into bit streams.  Telcos must learn to make their own networks a strong asset to compete other players.

Back from Barcelona Mobile World Congress

I am just back in KL, after an interesting week in Barcelona. Apart from customer dinners and meeting old friends, the Congress reflected the opportunities and concerns of a changing industry, where Telcos fight to retain value, Telecom Vendors bring innovations to help Telcos, and new Media and Internet companies enter the Mobile space.

Apart from iPhone, Android and other Mobile OS talks, the most spoken topics around wireless technology were:

-Many announcements and discussions about LTE, as the one of Alcatel-Lucent and NEC joining forces to bring 4G faster to the market. Speculation that some emerging markets might go from 2.5G to LTE, skipping 3G/UMTS.

– Intel kept reinforcing their support for WiMAX on the CPE, as new telecom vendors contracts were announced

Mobile Advertisement, with companies as Alcatel-Lucent showing video ad insertion , and other as Yahoo positioning for agreements with operators for mobile advertisement in the search and WAP area. See our previous post on the matter.

But the two topics that will have the biggest impact in 2008 are : Femto Cells and Mobile TV

Femto cells are IP based BSR (Node-B and RNC in one box) that provide indoor 3G/UMTS at home backhauled through broadband (ADSL, fiber, etc). Femto will be used by 3G telcos to sell to the user a better indoor coverage for both voice, data and high quality video. More interestingly, Femto will enable straight-forward HomeZone charging with lower rates: e.g. unlimited data flat rates at home, as no radio resource is shared, will make 3G data plans more appealing, even replacing Wifi. Femto will also allow Mobile telcos to bundle their offering with broadband ADSL or similar. And furthermore, once a telco has a Femto cell at the end-user home, the telco can easily handle the complete family communications budget, including broadband, all the 3G mobiles at home, and all 3G data-enabled laptops of the family, all in the same bill.

Mobile TV is getting more and more traction with Mobile Operators, specially those who already have a sister company managing content rights. The model forward is to offer an easy-to-use Rich Media Client to handle both broadcast channels (via DVB-H or DVB-SH), as well as unicast channels for VoD, Catch-up-TV, or other pre-recorded channels. The Telco needs to work as a broadcaster, making sure content is updated, and channels are conveniently packaged. Mobile operators will face competition from Internet sites, such as YouTube, already offering the service on the mobile, but with proper exclusivity agreements for premium content, operators can relegate YouTube to be a complementary service for user-generated free content.

Mobile World Congress 2008 Barcelona

Next week in Barcelona we have the yearly Mobile World Congress, the biggest event of the Mobile industry. The theme for this year is “Ubiquitous Mobile Services”, but could have been well re-named as “Ubiquitous transformation”, as the industry is more than ever in a continuous change.

What are the main axes on which the industry is transforming, on which there will be a focus in Barcelona?

Universal Broadband:Wimax, Long Term Evolution (LTE) and 4G. Femto cells as part of the Digital Home
IP Transformation: “all-IP” networks are a reality for the transport and the Core Network. Evolution to IMS to enable Multimedia Services blended with Internet and Web 2.0
Mobile Entertainment: Broadcast Mobile TV, Interactive TV and Advertisement. Monetizing the knowledge of your customers. Enabling UGC
New business models: MVNO, wholesale, RAN sharing
New handsets: convergent smartphones (mp3, phone, camera, PDA, video, wifi, email…) with iPhone as a reference, as well as future Android. Also new terminals for specific use bundled with applications: health-care, metering, surveillance, automobile, or Amazon Kindle

Mobile Operators are threatened by smarter phones, and by Internet players, to become dumb pipes or pure Mobile Connectivity Service Providers (MCSP). Many MSPs will show in Barcelona how they are transforming, or planning to, to avoid becoming MCSPs. We will report it from Barcelona next week.

Gong Xi Fa Cai!

Happy Chinese New Year.  Today is the first day of the Chinese New Year.
Our best wishes for the year of the Rat.

MSPs towards Mobile Connectivity Service Providers

Nokia N81 ovi

In the past, Mobile Service Providers (MSPs) have successfully managed to keep full control -and get a share of revenue- over the premium content delivered over their networks. MSPs were determined to retain customer ownership, and so MSPs created walled gardens under their control.

Thanks to that model, MSPs have been enjoying good revenues from premium content downloads -ringtones, ring-back tones, logos, games, songs or videos-, premium SMSs and premium rate voice services (80x numbers). To get these revenues, MSPs have not invested much in promotion, advertisement or improvement of the premium services. So far, MSPs owned the customer billing relationship, and simply taxed content providers to reach the mobile operators customers, leaving many times the promotion on the content provider side.

As mobile data bitrates increase with 3G (UMTS, HSDPA or EVDO), and as handsets become more intelligent – iPhone, Android, Windows Mobile or Symbian-, MSPs premium content model is under threat.

MSPs does not seem to realize that if they do not invest in improving and promoting their own value added content services, they will be bypassed by Content Providers, and will be relegated to Mobile Connectivity Service Providers (MCSPs), or in short dumb pipes.

Recent news about Ovi (Nokia’s content services venture) rolling our N-Gage games confirm the threat. iPhone will kill any music download service an MSPs could have, to be swapped by iTunes. Google already has applications like Gmail and Google Maps, that can be installed in most smartphones. Unlike with RIM, operators do not get any revenues from the Gmail in mobile phones. This will not improve with Android.

Data usage is the only revenue MCSPs will be able to retain, but with the move to data flat rates, MCSPs will not even benefit from the growth in these services.