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Tuesday, January 27, 2009

Enterprise UMA: Dead on Arrival. Enterprise Femtos: Come back in 2012

There seems to be a sudden flurry of activity around enterprise FMC version 2.0. I'm expecting to see a large amount of further hype over the next few weeks, especially around MWC in Barcelona.

In my view, it's all smoke and no fire.

Meru Networks has inexplicably partnered with T-Mobile US to offer a corporate version of the dual-mode WiFi UMA system. Its "distributed single access point" architecture makes it slightly less unsuitable than the more complex WLAN networks from other vendors, that would necessitate AP-to-AP handoff. It is highly notable that competing WLAN vendor Aruba put out a white paper about UMA a year ago which I discussed here, but has been very quiet on the topic ever since.

Quite why T-Mobile is still flogging the dead UMA horse is a separate question. It doesn't take much imagination to guess why it's made no mention of subscriber numbers to Hotspot @ Home. If it was even slightly successful, it would be shouting from the rooftops.

I've written many, many times over the past 4 years before about UMA's deficiencies for the general consumer marketplace. In the enterprise, there are even more challenges - security, PBX integration (please don't give me the substitution pitch yet again), devices, roaming, numbering, operator lock-in, WLAN vendor lock-in, WLAN coverage, TCO, management, monitoring and above all channel to market and support. Then there's the question of how the enterprise can use the WiFi on the devices for non-carrier applications. Oh, and most of the most popular dual-mode WiFi smartphones (except RIM's) don't have UMA. It's not in the G1, most obviously.

The only upside I can see is that unlike most of the PBX-centric approaches to corporate FMC, you can actually get SMS to work OK.

In a nutshell, I'm surprised that Meru is wasting its time and money on this. Yes I'm sure there will be a handful of demo sites, and maybe even some sort of commercial launch. But I'm utterly certain that in a year's time it will have had precisely zero effect on the overall enterprise comms market.

Enterprise femtocells are another emerging hot topic - but one which has slightly more "legs" - eventually. I've been hearing escalating buzz about this for the last 6 months or more. I first wrote something on this in May 2007, when my conclusion was that 2012 seemed like a reasonable timeframe for massmarket commercial offerings. Maybe I'm being optimistic given the economy, but I still reckon that's about right.

What appears to be happening is that the femto guys seem to have learnt some of UMA's lessons, and "get" the complexities of corporate integration. I've heard talk about PBX integration from day one, awareness of the issues around firewalls and network management, and definitely some cognizance of the difficulty of getting and retaining a channel. I'm expecting the lead routes to market to be hybrid fixed-mobile operators with large integration units and an loyal established base of corporate PBX customers.

It's still not going to be easy though - there's all sorts of little hidden issues to sort out in large buildings / enterprises (eg access to ducts and cables, do you need power-over-ethernet for femtos, what are the compliance and Sarbanes Oxley implications of 3rd-party infrastrucure etc). I'm expecting some others to go for the other end of the spectrum and start talking about SMEs. In theory, yes, SMEs could go "all wireless". But in reality it's not that simple, and there's the usual challenges of 10,000 channels to get to the buyers, high cost of sale per customer for little margin, and niggly annoyances like integrating/replacing landlines for faxes and security alarms.

To give an example of the complexities - what happens if a business gets femtocells installed on its premises... and then one of them gets stolen? Or hacked? Whose responsibility is it? I see lots of revenue for lawyers....

There's also a little bit of fuzziness about how "enterprise" gets defined here, and I expect to see a few "corner cases" emerge before the real massmarket. In my view, the main categories are:

- SME sites (small offices, shops etc)

- Private large-enterprise sites (corporate HQs, warehouses etc)

- "Public" business locations with lots of visitors (big retail stores, government buildings, HQ lobby areas etc)

The first point to make is that femtos are very poorly-suited to visitor-heavy locations, as they are single operator only. I'm not sure that a council would want to improve coverage or costs for just 25% of visitors. Obviously, they could confine the benefits just to employees, though - assuming the signal doesn't mess up macro-network coverage for visitors with interferece, deep inside the building. There's possibly some clever stuff that could be done with roaming - so maybe deals can be cut which enable Big Corporation Inc to say "cheap calls for all our overseas vistors while on the premises" although that's not as easy as it sounds either.

There might also be some other "hotspot" business cases for cafes or hotels or airports (eg the "free mobile broadband" business models I discuss in my recent report). I could certainly imagine a sign on (for example) Costa Coffee, saying "Free HSPA access for T-Mobile users". Is that "enterprise femto" if it's the coffee chain paying the bill?

I reckon that ip.access knows more than most in this sector about the corporate market. After all, it was pitching the concept of enterprise picocells back when I first met them in 2001. I remember mentioning to the CEO at the time that it wasn't as easy as it looked, and that the usual problems of attaching an operator-owned box to the corporate-owned LAN would apply (demarcation points, VLANs, firewalls, support, management, monitoring again etc). Over time, I was proved right, and the majority of its picocells in business environments (I think) have been put in singly, often with a completely separate backhaul connection rather than sharing the LAN. They've done some analysis on picos vs. femtos which I'm inclined to agree with as it reduces the need for things like femto-femto handoff - but neither is easy, either technically, operationally or commercially.

So, I wouldn't be surprised to see a few instances enterprise-ish femtos appearing in 2010-2011. But I'm not expecting to see "Company X deploys Operator Y's femtos throughout its new campus site and integrates with IP-PBX vendor Z's infrastructure" for a long time yet. It's not just a case of hanging a couple of cellular access points off an existing LAN.

NFC vs ordinary RFID in mobile phones

I saw an interesting presentation today about RFID tags, mostly pertinent to industrial applications like asset tracking, logistics and so forth.

It made me start thinking about where the applications for NFC on handsets might stop, and "plain vanilla" RFID begin.

There are a number of differences here - NFC is more secure, but shorter-range. It is also being standardised and tied into various business models with operators. Conversely, RFID has longer range (passives work at up to 10 metres, and powered ones considerably more), but is generally a bit less secure.

The issue I see is that most of the NFC applications are heavily dependent on the slow churning wheel of industry standards, as well as (probably) being tied to mobile operators. This is fine in concept for some of the more "sensitive" applications like banking, but probably over-engineered for things like "smart posters" and the like. There is also a huge elephant in the room about how NFC links in to handset UI and applications. If I have a stored-value card like an Oyster "in my phone", I ought to be able to check my balance from the phone screen, look at recent transactions and so on. At present, the UI/app side of NFC appears woefully weak to me.

RFID on the other hand could have lots of simple applications - simply attaching a passive RFID sticker to phone could be useful for things like anti-theft, for example, or tracking an employee inside a building (where's the closest cardiologist to a patient in a hospital, for example).

I'm wondering if NFC is over-complicating the whole "short-range access" part of handsets, by having too much focus on (mostly pointless in the short term) applications like digital wallets.

Monday, January 19, 2009

Carnival post - some great other stuff as well

Thanks to mjelly for including my post on the economy vs. mobile in this week's Carnival of the Mobilists.

There's some other top-notch posts this week too, including one of Tomi Ahonen's on Nokia, Visionmobile on telco APIs, and Ajit Jaokar on privacy.

Check it all out here

Sunday, January 18, 2009

Lots of talk about Spectrum Policy 2.0. Don't hold your breath.

In the last couple of weeks I've been pitched with various concepts and philosophies about next-generation spectrum management.  The general view of some of the more jaded members of the industry is that "auctions don't work". 

So first we've had some suggestions about revenue-share models for spectrum - which I reckon is quite cool in concept but a nightmare to implement, given the consultative and legislative processes in place.

Next up, Lee Dryburgh has a cool interview with Sascha Meinrath who espoused the "White space" argument of using the spectrum more efficiently by "opportunistic access" and a more democratic view of the airwaves by which people can transmit without being beholden to major carriers or operators. Frankly I'm unconvinced - it sounds pleasingly democratic but overlooks minor issues like economies of scale in device and RF silicon production. It's difficult enough trying to make power-efficient phones with the fixed bands we have today, let alone ones that have extra cognitive & tuning capabilities to sneak broadband into other under-used slivers of spectrum. Let's see how the current white space initiatives fare before imagining "end-user empowerment" utopias.  (It is, incidentally, last orders for the eComm 2009 early bird registration tomorrow, so head over to book yourselves in).

Then, I saw in today's Sunday Times that apparently the UK government is contemplating giving away some of the "digital dividend" spectrum band after analogue-TV switch off rather than auctioning it. However, it will come with "strings attached" - basically that the new owners have to commit to doing a fibre rollout in tandem with the wireless deployment.

I've also mentioned before the idea of band-sharing of government spectrum (eg radar bands), in a similar fashion to the white spaces concept.

Overall, my view is that this is all very worthy, and we're starting to get the various technological enablers in place. But it's going to be an exceptionally long haul - 10 years or more - before we see any radical shift in the way that frequencies are allocated and used. I think there are distinct risks that any notional efficiency we gain by getting access to "wasted" spectrum, or by selling it in new ways, will instead just be wasted in a different way through fragmentation and poor user experience. 

I don't buy into the concept of "democratisation of the airwaves" for its own sake. In general, I think that market forces + occasional heavier fist of regulation seem to be doing OK at driving the current incumbents to improve accessibility and useability of mobile. A lot of the "net neutrality" rhetoric is tedious and irrelevant in sufficiently competitive markets. Maybe a bit less in the US, where there's more of an ideological belief that "openness" is somehow special, but at the end of the day I think there's something to be said for scale and large companies that have resources to iron out the complexities, as long as it's possible to hold them to account. 

That said, I think that 2.4GHz WiFi has been pretty good at providing a balance - having at least some unlicenced / light-licenced spectrum has helped keep the other licencees honest. It has, however, highlighted that large-scale "grassroots" deployments don't work.

Thursday, January 15, 2009

Victory for commensense branding - HSPA+

OK, so HSPA isn't the most snappy acronym on the planet. But most people in the industry have grown to recognise and evn like it.

There's been a bit of a spat about the next step though - some companies (notably Qualcomm) have been using the fairly clean and intuitive HSPA+ .

Others (notably Ericsson and the official standards-definer 3GPP) have been using clunky terms like HSPA Evolved, HSPA Evolution and the like.

Commonsense has prevailed - Vodafone's announcement has pretty much nailed shut the coffin on this Evolution verbiage. Why use four syllables when one will do?

Now I'm hoping they go one better and go back to call "that" Barcelona event by its proper name, 3GSM, rather than its current bland moniker....

Nortel - an lesson in economic realities

Yesterday, Canadian network equipment market Nortel filed for bankruptcy.

I don't want to address the specific factors that have led to its downfall, but rather the possible consequences for the wider industry, which highlight the "interconnectedness" of the telecom sector.

There are lots of direct and indirect consequences:

  • According to Reuters, one of Nortel's main creditors is Flextronics, a contract manufacturer. Its own statement yesterday highlighted that it had been undertaking "risk mitigation" with regard to Nortel for some time. Expect a lot more "risk mitigation" to occur in the industry - requests for cash upfront, reduced payment periods, perhaps leasing rather than sale and so on.
  • "Risk mitigation" is a lot easier for large, diversified suppliers like Flextronics. It will be less obvious what happens to Nortel's other suppliers. There's a good comment on supply-chain fragility here, which talks about the possibile impacts on specialist chipmakers. Airvana, which has an OEM relationship with Nortel for CDMA equipment, put out its own statement yesterday, referencing unpaid bills. Its shares fell 9% yesterday, against 6% for Flextronics.
  • Personally, I'm thanking good fortune that I don't have any outstanding bills with Nortel, which has been a client in the past. Things are tough enough for small businesses without dealing with bad debts - and it makes me certain to be wary about any other clients that seem to have cashflow issues in future.
  • Irrespective of plans for job cuts, there will be plenty of Nortel CVs out with recruitment consultants. Many suppliers and partners will find that key contacts are no longer in position - adding more friction and uncertainty even where business continues.
  • Its enterprise customers seem sanguine at the moment. Lets see if that attitude lasts if the company's corporate business unit gets sold - perhaps any new future owner will have a different attitude to support or pricing.
  • Nortel has equity stakes in a number of other technology companies. It is possible that these may be sold to realise cash - but at what price? Indian company Sasken, another of Nortel's suppliers, also has the Canadian firm as owner of about 10% of shares. Perhaps in anticipation of a fire-sale of a large chunk of equity, its share price tanked yesterday. Expect analysts to be picking through the shareholder registers of publicly-quoted tech companies in weeks ahead, to see who else is "exposed" in this way. Even for private companies, the anticipation of sales of stakes may negatively impact the valuations of the other owners' shares. Trapeze Networks, for instance, has Nortel, Motorola and Juniper as investors. If Nortel sells its stake at a discount, Motorola and Juniper's accountants will probably have to reflect a write-down in asset value themselves.
  • This is going to intensify the attitude of operators to restrict their strategic supply contracts to large and well-funded vendors. Mid-sized and startup vendors are going to find it much trickier to cut deals with carriers, and will be forced to approach the "big boys" as OEM partners or channels, or just focus on Tier-2 and Tier-3 customers.
  • Now Nortel has falled, everyone (especially in the investment world, such as hedge funds) will think "Right. Who's next?". As we saw during the financial crisis last year, this can precipitate the failure of other relatively-healthy companies. It's certainly not going to help anyone looking for credit in the telecom sector.

Overall, it's not good news at all. While at one level, it is going to be necessary for some companies to fail in order to allow the rest of the industry to consolidate and maintain profitability, this is not a panacea. As seen in other industries, the interlinking of supply chains and other relationships has significant knock-on effects.

I'm hoping that the mobile industry doesn't have the sort of dense layout of dominos seen in the finance sector. There is good cashflow coming in at the top, after all. But Nortel provides an object lesson to us.

Saturday, January 10, 2009

Mobile industry in a state of denial about the economy

I'm increasingly of the opinion that many in the mobile industry are being insufficiently pessimistic about 2009.

I keep hear people saying "Oh, nobody will ditch their mobile account". Well, yes, in the same way they won't ditch food, either. But I wouldn't want to be selling foie gras, or running an expensive but undifferentiated restaurant at the moment.

In particular, I'm curious to see if the sudden burst of growth and enthusiasm around smartphones will be the unstoppable bandwagon that some observers believe. Generally in a recession, people like "cheap luxuries" (pizza delivery does well, for example). I'm not sure that top-end phones and ongoing data plans fit into that category.

I also think that there will be a big focus on the cost side for operators in 2009. Handset subsidy and increasing customer support and returns costs will be a major focus. Some operators will also try to position themselves as saving costs for their customers - we already see offers suggesting people can "save money after Xmas", by deferring handset upgrades for a few months in favour of receiving a large cut in their bills instead.

At a retail level, there will be more shopping-around. Customers will start to question whether they really need 600 minutes, or free video-calling credit they don't use. There has already been a notable shift to rolling monthly contracts, and a broad range of SIM-only propositions for use with unlocked phones. I've seen that 3 UK now has a 6-month contract - perfect for economy-worriers.

The other thing I've been discussing with people concerns investment and capex. This year will see a range of spectrum awards - 2.6GHz in various other countries, 3G licences in India and so on.

I'm particularly interested to see whether bidding for UK 2.6GHz spectrum is much more muted than it would have been in the past - or whether impending capacity problems for mobile broadband will make the operators grit their teeth and do it anyway. I spent a lot of time looking at this are for a governmental body last year, but before the full grip of the recession hit. What's now clear is that any potential bidder relying on debt to fund spectrum purchase or network build-out will be having second thoughts. I'm not expecting too many adventurous expeditions from North American or Asian companies fancying their chances in a highly-crowded market, either. On the other hand there are 5 operators - and 2500-2690MHz isn't enough for all of them to get 2 x 20 MHz for future LTE deployments.

My friends over Telco 2.0 have been musing about whether we'll see a push to make spectrum purchases more linked in to commercial success, perhaps by revenue-share arrangements. I think that's an interesting notion, but would probably take years of consultation and hand-wringing by all concerned.

My bet is that the UK auction will be moderately successful (if it goes ahead, given the interminable legal wranglings about spectrum & reallocation of 900MHz GSM frequencies which are currently blocking its progress). I'll have a punt that total receipts will be in the £1.5-2bn range - reasonably substantial, but nowhere near some projections I heard last year.

Overall, I think that the industry is going to have a couple of wake-up calls in Q1-Q2, as financial results start to unveil the grim realities. I don't think that some company's share prices have enough pessimism built-in yet - too many analysts and investors see the sector as counter-cyclical. I'm not seeing many signs that the much-vaunted fiscal stimulus moves by various governments will be of direct benefit yet - if anything, I reckon the fixed side of telecoms stands to gain more, by pushing state-funded fibre build-outs.

As I've said before, I'm not taking a glass half-empty view because I really want to. It doesn't do my own business any good if nobody is buying research reports or consulting services or speaking engagements. But at the same time, I think I need to be realistic - and I still meet quite a few others who seem to be enjoying the warm glow of their rose-tinted spectacles.

And lastly, getting back to the question of whether mobile use really is sacrosanct in a recession, a tip-o-the-hat to Patrick for highlighting a story about someone who actually has binned his phone outright...

Friday, January 02, 2009

Mobile social networking - how I'll know when it's going mainstream....

This falls into the category of "amusing personal anecdotes" rather than "rigorous industry analysis". But it also reflects on the complexities of getting user experience right, and mapping telecom and mobile services onto the way people actually live their lives.

One of my close friends is, for want of a better term, "a bit of a player". Trying to keep track of the various females in his life is a fulltime job. One thing is clear though - FaceBook is pretty important to him, as is SMS, MSN, Gmail and obviously mobile voice. He doesn't have a landline, and his Blackberry is strictly work-only.

But although he uses FaceBook as a hub for his busy social life, he does not really appear bothered (yet) about getting mobile access to it. He'll ask people he meets "Are you on Facebook?", remember their name or email address, and add it later via the PC.

I'm the same - even though I do look at FaceBook on mobile, I think I've only ever once "added a friend" on a phone - and that was in the relaxed confines of a conference, rather than in a noisy bar. (Note to readers: I don't have work contacts on FB, so please don't request it).

Conversely, if my friend wants to swap phone numbers, he'll type in the number and "give the other person a missed call" so they get the caller ID. Sometimes he'll just hand the phone to a new acquaintance and invite her to type her own name & number directly into it. He might also add an email address or IM nickname.

I've seen various people suggesting that mobile "will become the new social network". I'm not 100% convinced, especially because of the incumbency of Facebook / Myspace / Bebo etc. On the other hand, whoever gets the "add friend" experience working first is probably going to get a huge advantage.

When I see my friend say "Hey, you're really cool, we should meet up some time. Put your Facebook ID in my phone" I'll know it's really going mainstream...

Dual-SIM phones - separating voice and data?

There are already a few dual-SIM phones around on the market, like the Samsung D880 and LG KS660. They are particularly popular in markets for which there are advantages to arbitrage between different carriers' networks, especially for prepay users. Some tariffs do not include "cross-network" minutes, so it's easier for users to simply have multiple SIMs and numbers than waste money on off-net calls.

Most of these phones have been 2G-oriented, although there are some 3G ones emerging as well.

It strikes me that there could be a large market for dual-SIM devices which are optimised to work with one 2G (voice+SMS) SIM, and another for 3G data. So, for example, you could keep your existing voice service while roaming, but benefit from a local cheaper prepaid data SIM.

In fact, even when not travelling, it would be good to be able to disaggregate the voice and data plans, and purchase them from two different operators if that offered better price / coverage / speed. Yes, it would mess up some of the ideas that operators are trying to push with mobile social networks and IMS concepts like RCS, but as an end user I'm not really bothered by that.

Clearly, this wouldn't be for everyone - and there would definitely be value in operators and device vendors offering innovative fully-blended services to try to keep people bundling everything in a single contract. But it would be good to have healthy competition to keep them honest.

Really, the best outcome would be to do away with the legacy SIM card altogether, so you could sign up for the access provider(s) of choice more easily - and switch without hassle. Or perhaps the ownership model for SIMs needs to change, so that you the user (or a neutral 3rd-party) own it, rather than the network.