Tag Archives: Telecom

Clouds and Pipes

Telefónica Distrito C Madrid España - Spain

Telefónica – Spain (Photo credit: Wikipedia)

Clouds and Pipes. That’s what telecom has become. Services go over-the-top (OTT) and telcos provide connectivity. Telcos have fought a battle for more than a decade to retain Services and they lost. Only Voice and IPTV represent significant business other than connectivity.

Not even the assets they had at the time of the first cloud and pipes post are an advantage anymore:

  • Telcos do not have a billing relationship any better than iTunes/App Store, Google Play, Skype and many other OTT.
  • Telcos brand is perceived by consumers as ‘you-pay-for-all’ vs Internet freemium everywhere.
  • The only reason voice is still with telcos is because of clever bundles of minute plans. And IPTV in most markets resulted in a must-have bundle just to sell broadband.

Telefonica does well to try and play the OTT game too with a separate entity, Telefonica Digital. It’s the only chance to be anything other than a pipe.

As per RCS, forget about it. This was invented when Nokia ruled. In a post-iPhone world with Facebook and Twitter native support, what does RCS has to offer to a user?

Update: Check out Telefonica Digital Tu Go. That’s a good example of making OTT work for a carrier.
This app enables you to have OTT voice with your phone number when on Wifi. That is a far simpler and lower cost approach to poor 3G indoor coverage than deploying femto-cells.

Coming soon:
Clouds and Pipes: The End of Telecom as we knew it.
You can get an early copy of the book and contribute with comments by subscribing to the blog by email.

 

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iPad Killed Wireless Unlimited Data Plans

With the coming of the iPad, we started to hear about MiFi, tethering and mobile hotspots.

The case for the MiFi is simple. You pay a single data plan for your MiFi (or your smartphone with tethering), and there you connect all your iPads, laptops,  iPods,  and any future connected mobile device with Wifi. As LTE comes, you just get one unlimited LTE data plan for your MiFi and that is all you need from the Telco! A single pipe that you take with you anywhere!

Heaven for the consumer!! Hell for the Telco!!

Still wondering why AT&T, Telefonica O2, Vodafone and other telcos STOPPED offering unlimited data plans soon after the iPad arrived? They have four good reasons for that:

  1. The obvious: Tiered plans avoid heavy users to congest the network  (e.g. with P2P traffic). It also creates affordable plans to lure more users.
  2. The not-so-obvious: video is what drives traffic volume. Capping give telcos an (unfair?) advantage to distribute video content, compared with over-the-top. Example: Let’s say Verizon offers 1 GB data plan for your iPad and a Video-On-Demand App to stream all the movies you want at $8/month. The movies that you see with the Verizon App do not count for the 1GB monthly limit. Would you take Netflix at $8/month, considering it will soon kill your 1GB limit? Or do you take the Verizon video App?
  3. The real game: Telcos want you to get one separate data plan for each mobile connected device: One for your smartphone, one for your laptop, one for your iPad, one for your connected car, one for each of the future Machine-to-Machine connected devices. Telcos will bundle packages, but they want you to value each device connection with its plan and its cap.
  4. Protect Wireline: Telcos must avoid that LTE replaces the Wireline broadband connection. All fiber investment and IPTV play could go to waste if put to compete with 100Mbps+ Unlimited LTE plans. The easy differentiation: Wireline broadband is unlimited. Wireless broadband is capped.

The telco end vision for a consumer:

  • One unlimited wired pipe for the home (bundling TV and TV apps)
  • Many capped wireless pipes for each of the mobile connected devices, phone, laptop, tablet, car…  (bundling TV and other value-added services)

Broadband at 1 Gbps in 2012!!

korea2012

Koreans and Japanese enjoy today broadband connections at 100 Mbps. Not being enough, the Korean Communications Commission wants to boost the country broadband infrastructure to provide 1 Gbps service in 2012!!

That  is a tenfold increase from today’s speed and in only three years from now. If the objective is achieved, that increase in performance would even surpass Moore’s Law, initially forecasting doubling of computing performance every 18 months, and shortened by the industry to only 12 months. But Koreans would even go faster with this!

This aggressive objective makes the $6 billion broadband stimulus package of Obama’s administration quite shy, if we are to believe that broadband infrastructure is an asset for the economy to drive innovation and growth.

Quoting Om Malik:

Availability of such high-speed connections has allowed Korea to emerge as a leader in the MMO and online gaming industries. Even higher broadband speeds are going to unveil many new usage scenarios, which can lead to new company creation. […] IPTV is another area of focus for KCC. […]

The efforts are part of giving Korean IT infrastructure a boost, according to KCC. The plan is going to cost about $24.6 billion and will create 120,000 jobs. KCC was established because of the convergence of telecom, broadcast and broadband industries.

Image from JoongAng Daily.

Telecom Slowdown? Seven Reasons for Hope

mobilephonespenetration

We have seen recent announcement of job cuts in almost all Telecom and Tech companies, including Microsoft and Google only to name those that are new to those announcements.

GigaOm recently echoed a recruitment firm report that estimated almost 200,000 job cuts in the tech industry in 2008.

Still there are reasons for hope that the downturn will be less severe with the Telecom and Tech industries as with others:

  1. On a global scale, the demand for communications and computing is far from decelerating. As can be seen in the chart above, the penetration of mobile subs is still low in regions such as China,  India or South East Asia that are adding an aggregate of 150 million new mobile subs each year!
  2. The rise of netbooks should contribute to fulfilling the demand for affordable computing in emerging countries and also on Wireless Broadband penetration in mature markets, as netbooks are a great opportunity to bundle more 3G mobile data plans. Laptops will outsell desktops for the first time in 2009 and that is good news for mobile operators.
  3. Broadband stimulus package. As President Obama said in the inauguration speech, it is time to “dust ourselves off” and begin the work  “to lay a new foundation for growth”, building “digital lines that feed our commerce and bind us together” […] “to meet the demands of a new age”. Broadband infrastructure is a must to incentive innovation and competitiveness, and other countries are pursuing similar initiatives, including UK, Singapore and Malaysia to name a few.
  4. Airlines should be worried about the slowdown, not telcos. Telcos have a great opportunity to sell more Telepresence and more Enterprise Communication tools to help enterprises save travel costs.
  5. How can consumers save more than staying at home watching IPTV, facebooking or browsing the web? Purchasing online cheaper and better (more informed at least), can save a few dollars for families.
  6. Telecom equipment vendors have not given yet prove of slowdown in telcos investment. Ericsson CEO said when announcing Q4 results “To date, our infrastructure business is hardly impacted at all”. Huawei even dares to predict 29% growth in 2009. Nortel filing bankruptcy is not a bad news for the surviving equipment makers, as one competitors disappears
  7. It will not be worse than the Internet/UMTS licenses crash in 2001. The Economist says “It cannot defy gravity, but the technology industry is faring better than it did in the previous downturn.” The article explains why IT investment is no longer a luxury for enterprises and how innovations such as SaaS that make companies more efficient can only grow.

That the slowdown is affecting the Telecom and IT industries is out of  question, as the drama of thousands of people losing jobs demonstrates. But there are reasons to hope that these sectors will be the ones to lead the recovery, and we hope that will happen soon.

Some interesting reading and charts from The Economist:
Technology stimulus plans – Paved with good intentions
Computers per person per region in 2009 – Chart
The outlook of mobile phones in 2009 – Chart (Origin of  chart above)


Telefonica Impressive Performance and Spanish Telecos

telefonica-eleconomista Via El Economista I found this table that shows the impressive performance of Telefonica over the past eight years since Cesar Alierta took over the CEO position from Juan Villalonga. Telefonica has gone from 15th place in 2000 to be the 3rd Telco worldwide in market capitalization after China Mobile and AT&T.   

Telefonica started its international expansion into Latin America in the 80s. Juan Villalonga continued it during the 90s. The bet on emerging markets, specially Brazil, and the long-term commitment to the region even after the Argentinian crisis in 99, is now paying off. After Cesar Alierta culminated Telefonica’s leadership in the area with the purchase of SBC operations in Latin America, Telefonica Group has now more than 250 million subscribers worldwide, and growing. Later, the acquisition of O2 operations put the Spanish telco in the European map, after the earlier disappointing ventures with the expensive UMTS licenses in Italy and Germany.

Beyond the impeccable execution of Telefonica’s top management, I have my own theory of what contributes to Telefonica being the biggest Spanish multinational: its people.

For years the telecom engineering schools in Spain have attracted the best students, with the promise of a secure job in a promising sector in a country where unemployment rates had 2 digits for decades, before construction boomed fuelled by the now bursting bubble.

For years telecom engineers in Spain, telecos, had a reputation of bright intelligent people. Telefonica has been the top choice for telecos, ahead of other multinationals like Alcatel, Lucent, Ericsson or IBM and HP. Talent well managed always pays back. Well done Telefonica! Good job Mr. Alierta!

Disclaimer: I am Spanish and teleco, so I could be biased 😉

Telecom at the Speed of Moore’s Law

While the IT industry has Moore’s law in their DNA, the Telecom industry (both telcos and vendors) have not yet been able to embrace the concept and many analyst keep raising doubts about the sustainability of Telecommunications decreasing margins.

Microprocessors, hard-drives and memory cards double its performance/cost ratio every year. The price of an 8GB SD card was $50 last year. Now you can get a 16GB SD card for the same money. The price of a mid-range laptop has been just under $1000 for many years, only that each year you get a substantially better machine.

The Telecom industry has not been able to find the trick. Voice has been the key revenue generator service for ages. With voice revenues clearly declining, the industry is only now, beginning to switch to fix monthly fee models with a cap on voice minutes. People use the phone more and more. So the focus of telcos is now to keep the monthly fee price level, but give more minutes for the same fee, instead of reducing tariffs. The model also applies to broadband. Mobile broadband is capped, but telcos will aim at sustaining the monthly fee price, and focus on adopting more performing technology that will enable to increase the volume cap every year while slightly increasing the monthly fee. On fixed broadband the game is not capping but increasing the bandwidth. If you plot the increase of broadband bandwidth over the past years the growth is also exponential, and telcos should not focus on capping, but on making sure the technology enables them to increase bandwidth every certain time.

Moore’s Law is the self-fulfilling prophecy that keeps the dynamism of the IT industry and a sustainable market. Consumers and enterprises are now used to renew their PCs even before those are 4 years old, so in mature markets the demand does not seem to decrease, but at least sustain. Add the next billion of PCs in emerging countries like China, India or south east Asia and judge if the industry is still healthy.

As IT and Telecom converge, can Moore’s Law bring the same dynamism to the Telecom vendors and operators? Will they be able to keep the pace?

The Future of Telecom: Clouds and Pipes

Internet is the paradigm of next generation communications. One of the wonders of Internet is that it allows to de-couple Services/Applications from the access network. e.g. Anyone still uses the email or hosting services from your broadband access supplier? Most people prefer these Services independent from the broadband provider. One may need to move to a new house or a new city, and it is better to change only your ISP if needed, than migrating your web page and your email account.

Most communication applications in the Internet world are global and independent of the access network. Social networks such as Facebook, photo sharing as Flickr, video sharing as YouTube, blogging as WordPress, and VoIP, such as Skype are global services we use to communicate with others, regardless their network access. Most of these applications reside in clouds accessible by any Internet Service Provider. The ISP just provides the pipes.

And services such as Skype or Fling post a threat to the voice business that telcos have (so far) managed to bundle with the pipe access. As Wireless Broadband becomes more and more available with EVDO, HSDPA and WiMAX, Mobile telcos will need to keep being imaginative to bundle voice minutes, as well as SMS before it is cannibalized by Instant Messaging over their own pipes.

The broadband pipes are also used today by iTunes, Amazon Unbox or Hulu to distribute music, movies and TV shows. 

Tier 1 telcos, such as Telefonica, AT&T, Orange or SingTel have built an IPTV infrastructure allowing them to bundle Pay-TV, Voice and Broadband in a single offer. These telcos are capitalizing on current constraints such as content rights negotiated by country, high bandwidth required by TV and HDTV, and a complex Home Network environment, to provide a complete Service entirely managed by the telco.

As global players (such as iTunes or Google) start to negotiate contents for worldwide distribution, as pipes become more powerful, and as open devices get easier to manage by users, Telcos will need to re-think themselves to stop global players in clouds to relegate them to pure Pipes suppliers.

In a Telecom world of Clouds, Pipes and Toys (user devices), telcos will need to be smart and learn to play the Cloud game as well as allying with Toy makers to make their services more valuable than just Pipes.