Paying for mobile QoS? Three thought experiments

A regular refrain from vendors I speak with is that content companies, or application providers, could be persuaded to pay for extra mobile broadband "quality". The argument goes that a video website or cloud computing provider would pay for guarantees of absolute or relative prioritisation, bandwidth levels, latency, jitter etc.

Irrespective of the legal situation - which in any case varies by country and over time, I have my doubts about the technical and commercial practicality.

I think it is much more achievable in the fixed world, where the operator doesn't have to contend with the vagaries of radio, and where the presence of a "box" like a gateway gives a much better chance of monitoring what is actually delivered. The WiFi or ethernet connection at the fixed-broadband end-point to a final end-device (PC, TV, phone, tablet etc) also gives a clear demarcation point of responsibility. The operator can say with confidence that their bit of the end-to-end system did its job - and any issues with battery life, memory, device configuration and so forth are your problems. That's much more difficult with a smartphone - if the extra-quality video doesn't work, whose fault is it? And does the video provider still pay?

Nevertheless, whenever I spell out my concerns about differential charging for applications, I get bombarded by vendors (and some operators) insisting that their DPI box can detect absolutely everything, right down to what the user had for breakfast that morning.

Rather than get to an impasse, I thought that as well as commercial, legal and technical reasons, I'd also have a try at logical flaws in the argument - and perhaps highlight some extra opportunities along the way.

First off is prioritisation of the operators' in-house services. Many mobile carriers have their own video streaming, music or other rich application/content platforms. I'm assuming that some measure of optimisation is typically used by the operators to ensure these perform well - obviously it will be easier to test inhouse, and senior management can ensure adequate cooperation between network and application teams.

But.... if "real" quality can only be achieved at the level of manageable network QoS... and if "serious" content providers are willing to pay for it,.... then why not set up an effective structural separation between the services group and the network delivery team? If it actually came out of their own budget and P&L, would the inhouse video content team really pay money to the other department for improved network access? Or would they instead use rate-adaption and other tools to work around the limitations of best-efforts?

I haven't heard of any operators running an internal QoS market, but I'd be fascinated if any readers have anecdotes.

The next thought experiment takes this concept a bit further.

Now, consider the situation once again, where the operator's video content team is willing to pay extra for QoS to ensure their streaming is delivered better than it would be from the open Internet.

And consider that another operator offers network-based QoS - perhaps in the same country, or perhaps elsewhere in the world. Given there's already an "open market" in video streaming via YouTube, Hulu and so on.... shouldn't that operator in-house team therefore be prepared to deliver its content via other carriers' networks? Let's say, for the sake of argument, Verizon providing its video service to users on Telefonica O2 in the UK.

Given that they are in-house teams within operators, surely *they* understand better than anyone the capabilities - and potential differentiation - that comes from network-based prioritisation and QoS? If Verizon paid guaranteed-QoS fees to O2, shouldn't it be able to create and market a class-leading video service that end users would pay for? And shouldn't the O2 network team also think that Verizon's video people are therefore much easier to sell QoS to than, say, YouTube?

In other words.... if operators (and their vendors) really believe that "premium" network QoS can enhance the competitiveness of applications and content, or raise ARPU and improve customer satisfaction... why don't they put their money where their mouths are? If Telco X is clever enough and network-savvy enough to create a QoS- managed service that should outperform YouTube.... why hasn't it happened?

My last point is not about prioritisation, but coverage. Often, the gating factor on overall Quality of Experience is not radio or transport or core resource, it's a simple lack of decent signal. (Yes, I know that in theory coverage is a bit dependent on other users in the same cell, but let's just assume the culprit here is a thick stone wall).

Certainly, Vodafone is marketing a femtocell in the UK under the name of "Sure Signal" - and getting users to pay a premium for an "enhanced quality network" in their home or workplace. While some of the customers are just buying the femto to get any reliable signal at all, there is some anecdotal evidence that a proportion want "better than normal" coverage "5 bars, all the time!" - for example if they live inside, but near the edge of a cell. This tends to support the argument that a certain (smallish) group of users might pay extra for "gold service" QoS, however that is defined.

So then the question is... for an operator wanting to offer an improved *average* experience, both in terms of absolute coverage, and higher performance throughout each cell - is the best and cheapest mechanism really through network prioritisation? Or might it be more effective to do some sort of national-roaming deal with competitors, where the phone switches to a rival's network at a given location and time, if that network has a better signal and uncongested capacity?

Wouldn't it make sense for the mobile industry to have the equivalent of the airlines' interlining and codesharing agreements? In those situations, you can get an end-to-end ticket issued on Airline A, which covers one leg actually operated by Airline B. Your luggage gets "handed off" seamlessly and Airline A takes overall responsibility for end-to-end quality. Airline A benefits from Airline B's better coverage or schedule at a local level, while Airline B gets incremental revenue and traffic from Airline A's better sales and distribution to end users. Interestingly, low-cost carriers like EasyJet and Ryanair generally don't participate in these type of arrangements, only the premium-priced airlines do.

The analogy is simple.

If a customer with the "nameplate" Vodafone service sometimes actually gets connectivity via the Orange or T-Mobile network, would they really care, as long as their average performance went up? And, in fact, might they not even pay a premium for it? Could there ever become a distinction between a "full service network" (which puts you on one of its nominal rivals' cells when it gives you better coverage, but charges you more to cover the wholesale fees), versus the low-cost network which is all-or-nothing, running just its own, silo'd coverage?

Is the answer to better QoS (which customers are prepared to pay for) not another box in the network, but just better/richer wholesale arrangements and national roaming? Can we go further than current development in network-sharing, and have a more generalised platform for deals?

[Note: I know that it's not that simple, either because of regulation or because it takes a finite time to find, register and roam onto another network. But they could be improved by a telecom effort to find a convenient codeshare/interline approach]

NEW Mobile Broadband Traffic Management Paper

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Does the outcome of the Dutch 2.6GHz auction represent skepticism on LTE?

There are various spectrum auctions ongoing at present or the near future. The big ones are the 3G bands in India (2100 and 2600MHz), as well as a multi-band auction (800 / 1800 / 2000 /2600 MHz) in Germany.

But there is a smaller one that has just finished in the Netherlands, for the 2.6GHz band only. The outcome has been pretty lacklustre - just €2.6m. Martin Sauter has the breakdown of it here.

Trying to analyse this is a bit further, my current thoughts are:

- The two newcomers both have extensive fixed broadband assets - Tele2 has 431k subscriptions and the other (Ziggo) is a joint venture between cable operators. That potentially points to an "inside-out" strategy at 2.6GHz, plus Tele2 attempting to switch some traffic (data?) away from its MVNO arrangement.
- There are only three incumbents, which means that competition for spectrum in other bands is not as harsh as in other markets. Nevertheless, it seems odd that they only bid for 2x5 and 2x10MHz - although it's not immediately clear how those fit with the spectrum caps under the auction rules. The 5MHz is particularly strange, as it potentially means lower peak and shared rates for devices running in a "hotspot" 2.6GHz band location, rather than a wider macrocell.
- We can pretty much write off any opportunity for mobile WiMAX or TD-LTE in the Netherlands for the forseeable future, given the lack of bids for unpaired TDD spectrum.

One interesting possibility is that the Netherlands' very high fixed broadband penetration might mean that operators are looking to WiFi and femtocells rather than spectrum additions for capacity enhancement. The Dutch are already among the leaders in the deployment of picocells as well - both for public locations and for low-power GSM.

Another questionmark is around LTE. The results of the auction suggest that 2.6GHz (the main likely band for LTE in Europe) is not seen as particularly strategic - which may reflect reticence overally for the technology in Holland. I've suggested before that operators should lean on their vendors (and chipset suppliers) for support of 2.6GHz HSPA, which would seem to fit better with the allocations.

I'll try and catch up with the German, Danish and Indian auctions over the next week or so.



(There is also an ongoing 2.1 / 2.6GHz auction in Denmark)

Why I think the iPad won't change anything

At last week's Telco 2.0 summit in London, I crossed swords with financial analyst Richard Kramer of Arete Research.

He has a view that the PC industry (and specifically laptops) has failed to innovate for much of the last 10-20 years, and will be overturned by newcomers, particularly Apple's iPad and more generally a new wave of tablet-style competitors. He was less definitive about the role of telcos in supporting these devices, but definitely felt that they represented a step change in how people engage with the web and various forms of content. He singled out the newspaper and magazine industry as being a prime candidate for iPad-isation in similar fashion to the iPod and music.

I disagree strongly. I believe that the iPad is a side-show, albeit a glamorous one. I also have extremely grave doubts about the massmarket viability of next-generation tablets (or MIDs, or smartbooks or mobile computers etc) based on Android, Meego or Chome OS. I'm even less sanguine about the possibility that there could be a telecom operator model underpinning those ecosystems.

My belief is that the PC industry is guilty not so much of a lack of innovation, but a lack of cohesive marketing strategy. There is no "Windows PC Community" estimating the incremental GDP arising in the developing world from PC-based Internet access and software industries. There is no glossy marketing pointing out that sharks haven't bothered evolving for 300 million years, because they are essentially perfect for their niche.

Instead, the PC industry has gleefully taken the GSMA's shilling, hoping for a few extra crumbs of operator subsidy and extra retail outlets during the recession. At the time when banks and credit card companies were taking a dim view of incremental consumer purchases, mobile operators cleverly managed to disguise loans under the guise of "free" laptops. They have been complicit in pretending that "embedded 3G" was going to be pervasive, despite knowing full-well that most netbooks are sold through ordinary channels to people wanting a cheap PC for use on WiFi at home or in school, or clogging up the 3G networks with commodity traffic supplied via commodity dongles.

Let me switch to the iPad, and by extension other tabletty-type computers that might come next.

Yes, it's pretty. Yes, it's sold to quite a lot of the usual star-struck Apple-istas already. Yes, I'm sure there are plenty of uses for it. But there are plenty of uses for many cool gadgets which make them appealing to gadget-lovers. And I guarantee that every single one of them will own (a) a mobile phone and (b) a computer (PC or Mac) already, and wouldn't give them up if you paid them.

You'll notice that the iPad has been cleverly positioned by Apple so as to avoid any risk of competition with its Mac range. Jobs clearly believes that people will want a fully-open computer as well as at least one locked-down device. How many Macs would he sell, if he prohibited them from running Flash? Or only allowed apps or content that had been vetted by his censorship team? Or restricted the use of external media like SD cards?

Now, I certainly can't blame Apple for trying to create a potential new pool of profit from a cool gadget betwixt Computer and Smartphone. If it takes surplus cash away from people who'd otherwise be buying electric can-openers or new TVs, then fair enough.

But to claim (as some people do) that it either:

- a) renders netbooks and laptops obsolete, or
- b) heralds a mass switch-over from print media

sounds ridiculous to me.

Yes, netbooks are *mostly* used for web-based applications [such as my writing this post on my Samsung], but I definitely want a full suite of native applications as well, which I choose and install myself, not subject to the vagaries of Apple's appstore. I cannot imagine myself with an iPad writing this - with my email, streaming music, Skype and Yahoo Messenger running in the background, working on a number of office files as well.

Now that doesn't mean that I couldn't ever use an iPad myself as well - I already browse the web a fair amount on my iPhone, even though my netbook is just downstairs. So there is an argument that Internet usage will become more segmented by task type. If I want to move pictures from my camera to my hard drive, and selctively upload a few to Facebook, I'll use my desktop. If I'm on a plane, I'll use the netbook. If I'm in bed and want to check my email and overnight SMS's first thing in the morning, the phone.

So maybe it's a device for the 10-20% of Internet usage time when you don't have anything else to hand.

The print media thing is a bit different, and clearly is outside my main domain of industry coverage. And I understand that there's a whole world of pain in that industry at the moment. But I'm unconvinced the iPad is the answer for more than a tiny fraction of readers. I buy a fair number of magazines, a fair number of books, and I read a fair number of newspapers (some of them free and disposable, like London's Evening Standard). I'm expert at folding them to read on the Tube. I usually have reading material for flights. I've got a stack of old Wired magazines around home, and a few copies of Top Gear for anyone desperately in need of reading material in my bathroom. I have a bookcase full of Lonely Planets and Rough Guides - my traveller's equivalent of a trophy cabinet.

Yet I don't have a Kindle, nor have I seriously considered getting an e-reader. I've only ever seen three people with them in London, one of them a semi-famous TV celebrity who was in my local Starbucks, hoping people would first notice it and then recognise him.

I simply cannot see a situation where a large bulk of the world's readers of the FT or Cosmopolitan or Harry Potter go digital *in substitution* of their usual print media. It's not like music, for which the move from CD to MP3 reduced the fallibility and bulk of moving parts, and for which headphones insulate you from the vagaries of the environment. People read in places with no power, bright light, risk of theft, or where comfort and tactility are all part of the experience (armchair + book + whisky, or cafe + cappucino + newspaper in the sunshine). They may want to avoid carrying a bag - or baulk at the need to carry both tablet and PC together.

I can understand the appeal of interactiveness of a connected tablet for media owners and their advertisers. But I am just unconvinced that the user experience and intangible benefits of print has been given as much thought.

In summary, I can see a market for iPad-type devices of a similar scale to (say) personal navigation devices - maybe a worldwide target audience of perhaps 50m people. There are some fascinating niches - perhaps education, or gaming, or a few video applications. But I cannot see them replacing PCs (or Macs or netbooks), nor making a meaningful dent in the consumption of newspapers opr magazines. And outside a few metropolitan hotspots, I can't seem them heavily impacting operators' revenues or their networks either.

[Note: if you represent a company in the mobile industry that wants a contrarian view of device strategy and its impact on business models, please get in touchwith me via information AT disruptive-analysis DOT com]