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Sunday, December 30, 2012

My 2013 Telecom Industry Anti-Forecasts

In the past, I've followed industry-analyst convention in December, and usually put out predictions for the year ahead. (This was last year's set - I reckon I've done pretty well)

This time around, I'm going to focus on what's NOT going to happen in 2013, despite the consensus (or a good chunk of it) saying otherwise. Some of these are standard fodder for regular readers, and others are new ideas. These are things for telecom operator & vendor execs to avoid wasting time, effort and resources on. Either they're not going to happen at all, or everything is going to be later than expected.

So without further ado, these are Disruptive Analysis' Top 10 Telecoms Anti-Forecasts for the coming year...

1) RCSe / RCS5 / Joyn won't gain meaningful user traction...

... and not much more operator support either. Apple won't play ball. Google and Microsoft will be ambivalent at best. There's no clear business model beyond "adding value" to bundles, which depends on the service being valuable in the first place. There's a high chance of execution risk that could make it worse-than-useless. I have seen no arguments about how to win back users from WhatsApp, Line, KakaoTalk etc, all of which are better and faster-evolving than RCS. The argument of RCS adoption by the non-OTT-using laggards first is ridiculous - basically it suggests "crossing the chasm" backwards (on a unicycle). Markets with little operator control of handset distribution won't get RCS-capable phones in high enough concentrations.

There is more of a case for RCS as an API rather than an app (eg for rich B2C messaging beyond text), but I'm not convinced that likely to be successful either, although the US might be an exception. Elsewhere the low penetration and growing number of alternative paths will limit an opportunity. We'll see a few telcos trying out cloud-based or wholesale-based RCS platforms rather than buying their own, which is sensible as it just makes it cheaper (and hopefully faster) to fail. If there are more than 30 live networks or 20 million regular users of RCS in its various guises by December 2013 it'll be a miracle.


2) NFC payments will continue to struggle.

Over-complex value chain (with too many participants contributing no, or negative, value). No support from key players like Apple or PayPal. And above all, no meaningful benefits for the end-user, despite considerable behaviour change required and numerous risks. As just one minor example, consider the number of times you're doing something else on the phone, at exactly the same time you'd be asked to tap it on something. NFC also suffers from almost the same level of irredeemably geekiness which means QR codes hardly get used - it's just not something that a "normal" person would want to be seen doing.

The jury is still out on non-payment applications ("interactions", not "transactions"). The only cool thing I've seen is Blue Butterfly's "tap to connect to WiFi" for hotspots. Unless and until NFC becomes "just another feature and API" for Android and iOS developers to play around with easily and freely, wide adoption and usage just won't happen. It also needs to be completely decoupled from SIM cards as authentication/security tools.


3) Broad adoption of VoLTE won't occur in 2013

This one shouldn't be too contentious, given that even GSMA presentations I've seen envisage 2014 as a target for mass adoption. There are numerous reasons for this, not least is that current incarnations of CSFB (circuit-switched fallback) are working OK, VoLTE appears to eat batteries at a serious pace, and the patchy nature of many LTE networks mean calls will either drop or need in-call handoff from VoIP to circuit (SR-VCC technology). Oh, and of course Apple doesn't support it, as it needs IMS capability on the device, which they're clearly unwilling to countenance.

More generally, expect tuning and tweaking to take a long while yet. VoIP is hard enough to tame on a gigabit corporate LAN, let alone with mobility and the vagaries of RF thrown in for good measure. The cellular industry doesn't have much experience in dealing with the acoustic complexities of VoIP either - echo cancellation, noise suppression, packet-loss-concealment and so forth. Add in trying to get the network to provide some sort of QoS without knock-on effects on other services for good measure. Lastly, the conversation with the CFO that suggests expensive investments in new infrastructure, for a declining market with cratering prices, might prove challenging. We're past "peak telephony" in many countries, and VoLTE doesn't offer anything to stem the tide. Worse, it might even accelerate the move by consumers away from telephony, if it works worse than a $20 GSM phone.


4) WebRTC won't take over the world in 2013

This might surprise a few people. While I'm hugely enthusiastic about WebRTC's medium term prospects, I'm a little worried that expectation might get ahead of itself, while the bugs and wrinkles are being ironed out. It's definitely a "fantastic idea" (unlike things like RCS and NFC) but it is going to need careful execution, especially in mobile.

Apple and Microsoft browser support timelines are vague, while putting WebRTC in smartphones has all sorts of UI and power-consumption risks. There will be plenty of early examples where it will make a major impact, but prognostications of it killing either telcos' traditional phone business or the app-based OTT model are premature. Stand by for an upcoming report which will outline the early winning use-cases and longer-term roadmap and scenarios. (Now, as to whether WebRTC takes over the world in 2014 or 2015 - that's a different question)

**NEW Feb 2013 - Disruptive Analysis WebRTC report - details here**

5) Nokia won't be acquired

And especially not by Microsoft. If it's going to succeed at making Windows Phones, it will do so independently; if it's going to fail, it doesn't matter who owns it. The Asha and low-end product lines would be a poor fit for Microsoft, too. It's conceivable that Microsoft might provide some sort of financing, eg through a loan - after all, that's what rescued Apple in the 1990s. I guess some sort of private equity buyout isn't inconceivable either.


6) LTE won't replace fixed broadband.

I'm really impressed by the way LTE works in practice. People I show it to are wowed by the speeds, albeit on a fairly empty network (EE's in the UK). Its adoption rate in Korea, Japan and the US has been surprisingly swift. Its growth in subscriber numbers and revenues in 2013 will be impressive. BUT.... it won't make any meaningful dent in use of fixed broadband, and especially FTTx.

It's dependent on (expensive) handsets & other devices, the economics are too different, the prices to consumers are miles apart when you consider volumes, and speeds are likely to drop as networks load up. Ultimately, the (shared) speed of a cell-tower is essentially the same that can be delivered (dedicated) by a single fixed connection. Realistically, even with a lot of spectrum, several operators and a fairly dense cell-grid, LTE is going to struggle to offer more than an aggregate 5Gbit/s per sq km. That's not going to support people watching Netflix on HDTVs in their living room, especially if the TV is behind a couple of walls. Most of the use-cases I see for LTE metrocells are about outdoor / high footfall areas - not trying to service high-density residential population.

That said, there are niches where it will be more important - notably in rural areas outside the reach of copper/fibre, or for prepaid users who don't want broadband based on monthly contracts. On the other hand, the proliferation and demand for WiFi is going to drive fixed connections, as will high-end home uses such as IPTV and gaming. It's notable that even LTE-advocating vendors like Ericsson project fixed broadband traffic volumes to remain at least 10x cellular loads for the foreseeable future


7) OTT traffic on broadband won't be "monetised"

Yes, I know the fairy stories that DPI vendors tell their operator clients at bedtime about "monetisation" of Internet companies' traffic. But we simply won't be seeing so-called OTT players paying telcos  either through "1-800" business models for apps, or - more generally - paying for access-network QoS. Even where it's legally permissible, it's still technically doubtful, commercially impossible and culturally anathema. (Zero-rating partnerships, on the other hand, are more realistic).

Every time I've met vendors and operators in this space for the past 3-4 years, I've asked if they are aware of any app/content companies paying "cold hard cash", either for enhanced access network quality "delivery" or for some sort of "sender-pays" carriage fee on the part of subscribers. Doesn't matter if it's fixed or mobile, the answer is the same: an unequivocal "No". Since then, we've had the ridiculous and unworkable sender-pays proposals defeated in the ITU WCIT debate in Dubai as well. The French operators are about to get a hard lesson in trying to force the issue too - bafflingly, they've tried to pick a fight with Google/YouTube over peering. It will not end well - I can think of at least 5 ways in which Google can run rings around them on this.

I've discussed the difficulties in many previous posts and reports, so I won't rehash them here. Either way, 2013 isn't going to see Netflix, Facebook, Google or any of the operators' own Telco-OTT content businesses start writing cheques for "delivered" traffic. The whole metaphor of sending, delivering, "distribution" and "digital logistics" is broken and needs to be retired. (Note: there is a very small chance that some corporate cloud IT companies might pay, eg for home-workers on fixed broadband. But I'm still doubtful - more probable is a distribution deal rev-share on the telco actually selling the cloud service in the first place).


8) Handset purchase patterns won't change that much

There's a lot of discussion at the moment about operators ending subsidies, to reduce operating costs. T-Mobile in the US is going that direction, and assorted other telcos have discussed something similar. Various commentators have suggested that this might impact Apple and to some degree Samsung, as many of their devices in certain markets attract sizeable subsidies. Others have suggested that this might lead to greater spend on services, as users hang on to old devices longer when they realise what the "real price" of phones is.

I don't really buy this, even though the idea has some elegance and appeal. In those markets in which subsidies are prevalent (mostly post-paid centric markets like the US and Northern Europe), end-users have become habituated to getting free or heavily-discounted phones. But the quid pro quo is that operators have become habituated to getting 18 or 24-month contracts. Both of those habits are going to change only slowly. Telefonica and Vodafone tried abandoning subsidies earlier this year in Spain, but had to row back when they lost market share to Orange (which kept them) and found post-paid subscribers moving to prepay or 1-month rolling deals.

What we might see is some operators moving from subsidies to some form of installment/credit scheme for buying phones, separate to the service tariff. That also helps them get around increasingly tight accounting rules that frown upon blended service/equipment packages, especially in terms of reported revenue allocation. However, the elephant in that room is that reported service ARPU will take a nosedive, when handset-subsidy "repayments" are stripped out of future reported revenues.

Users are also unlikely to move to buying phones from new retail sources very quickly. While the "cognoscenti" already get unlocked "vanilla" handsets in those markets (and clearly 70% of the rest of the world already does anyway), it's going to take a long time for retail distribution channels to shift away from operator-controlled retail outlets. One other thing to ponder here: do operators really want to reduce their ability to preload apps and configurations into devices (think content apps, policy, RCS, VoLTE etc), because customers buy them vanilla elsewhere? If users buy and own their own phones independently, they are likely to be unwilling to load telco bloatware onto those devices.


9) WiFi won't be "seamless" or tightly coupled to mobile network cores

I've written and spoken widely about why mobile operators' (and their vendors') dreams of fully integrating WiFi in their networks are implausible. There's too much non-operator WiFi out there, and too many other participants and stakeholders in the value chain (users themselves, fixed operators, venues, brands, device & OS suppliers, employers, government authorities etc).

In general, WiFi in most countries is moving to a model of being "free at the point of use", available widely in cafes, airports, shops and even on the streets. (In some markets like UAE or China, controls are tighter and there is much less open/free WiFi). End users connect at home, in their local Starbucks, at conferences with a free code from the organisers, and so forth. They use phones as tethers, connect regularly at home and at work. While many users do want assistance with the clunkier aspects of logging on to WiFi, they are unlikely to be willing to pay (even implicitly) for this. Attempting to bundle WiFi traffic into cellular data caps won't fly - and neither will exerting onerous policy controls, when the same venue allows "non-seamless" access to the whole Internet. Yes, there will be a couple of exceptions - eg parents locking down WiFi access for children, but that's a corner-case.

I still meet many in the cellular industry who treat WiFi as "just another access" that should be treated as part of a HetNet, with traffic and authentication unified with 3G/4G. This is palpable nonsense - WiFi is inherently different in many important ways - not least of which is users' expectation of how it should work. We'll see more "WiFi pain-reduction" solutions like DeviceScape', but the key thing to think of is "frictionless" not "seamless". Seams are borders, and nobody wants to have their data knocked over the head & smuggled across the frontier in the back of a SIM-powered truck.


10) No operator will make a bold acquisition of a major Internet player

So far, telcos have passed on buying multiple obvious Internet winners, that could have parachuted them straight into the OTT top-tier. Skype, Yammer, Instagram etc. have all been game-changing innovators that could change the game in either consumer or business services, with assorted synergies to existing telco properties or aspirations. LinkedIn and Twitter and Tumblr are now probably too expensive, despite being obvious targets for years. I know that several telcos sniffed around Skype before Microsoft stepped in.

Instead, telco M&A teams tend to prefer safe bets - consolidation among their peers, maybe a systems integrator or two, mobile handset retailers and so on. CFOs funnel cash towards new spectrum, instead of new applications.

I don't think this will change. We'll see a few smaller innovative buys (similar to SingTel/Amobee or Telefonica/TokBox) but those will feed into operators that are already grasping the Telco-OTT nettle and need some tactical knowledge or assets. Strategic-scale acquisitions will be deemed too risky. To be fair, it's not clear that most "cool" startups would fare especially well inside a telco's rigid structure and stodgy conservative culture. There is also a wariness of repeating expensive mistakes in content, ten or so years ago.

It's a shame, though, as a Verizon/Netflix, China Mobile/Line or Vodafone/LinkedIn combination could be pretty potent if managed well.


Conclusions

I hope that a few of these have given pause for thought. Obviously, there's a bunch of things I am a lot more positive about as well, but I'll keep those for regular readers and customers rather than put them on this post.

One thing I'd like to see more of in 2013 is for conference organisers to be more bold and specifically seek out contrarian views and "heretical" speakers. Yes, your sponsors may prefer a more consistent brainwashing of positivity and spin. But your delegates deserve to see both sides of a debate, robustly argued. Events should not be purely cheerleading and wishful thinking - let's see more challenge to separate the wheat from the chaff.


Bonus!

A couple of other, shorter, extra anti-forecasts for 2013:

- Cellular M2M connections will start to lose out to WiFi, Zigbee, private radio and others for connections to devices that don't actually move about
- LTE roaming will be widely ignored because of bill-shock risk, spectrum mismatch in devices and issues around supporting voice
- Nobody normal will be using mobile phones to unlock doors of homes, cars or hotels instead of keys or cards
- Mobile video-calling/sharing will remain almost irrelevant, and generate way more PR puff than it deserves. Some other embedded-video apps might make more sense, though.
- Augmented Reality is mostly touted by people with a limited grip on non-augmented reality. It won't be meaningfully important in 2013, if ever.
- Everyone will hate the new venue for MWC13. I'm not going - if I fancied a week on an industrial park next to IKEA, I'd go to Neasden as it's closer.
- The Internet will happily go about its merry monoservice business, despite the apocalyptic predictions of my colleague Martin Geddes. I won't be waking from nightmares shouting "Non-stationarity!!!"
- Outside of the Galaxe Note-style "phablet", few tablets will have 3G/4G modems embedded, and even fewer will have them regularly used
- We won't see much change in Internet Governance, despite lots of noise and thunder from those mostly-thwarted at the ITU WCIT conference
- White-space technology won't evolve as far, as fast or as disruptively as many people hope
- We probably won't see Software-Defined Networking (SDN) proceed as fast as many hope, but that's an area for me to research a bit more fully before nailing down that conclusion

Have a Happy New Year. Be Disruptive.....

7 comments:

Dave Wright said...

Dean,

These all sound like very reasonable contra-casts for 2013. Wanted to comment on two:

-Handset Subsidy model: I agree that change only happens glacially in the traditional cellular models. There are some signs in the US that consumers are more open to alternate models as the costs on the traditional post-paid plans continues to increase rapidly. The real change could come about if a major device manufacturer decided that the MNO-distributed, subsidized model was no longer the best way for them to continue growing the market for their devices. I'm not saying that such an outcome is likely in 2013, but I do think that is the one scenario that could quickly disrupt the subsidized model here in the states.

Wi-Fi / Mobile Core integration: I continue to be amazed by the papers I read from cellular I/F vendors (recently AlcaLu, Ericsson and ZTE), MNOs and some industry associations promoting a fully integrated model. Most want to take it even further than mere integration and in fact give the mobile core control over the Wi-Fi connection mgr in the device (ANDSF). You used the phrase "culturally anathema" above, which I believe is an apt description of how such a vision would be received by the large percentage of Wi-Fi users. Carrier Wi-Fi is indeed only going to be a "drop in the bucket" of the overall Public Wi-Fi market (Thomas Wehmeier's phrase). To think users will acquiesce to their mobile operator controlling their Wi-Fi experience is a clear reflection how little some people understand the Public Wi-Fi landscape.

I also agree with your comments about industry events that present all sides of a topic. I find the "kool-aid festivals" to not only be wastes of time, but also serve as conditioning sessions where like-minded people convince themselves of the validity of bad ideas because "everyone is saying it, so it much be true".

Best wishes for 2013,
Dave

Sami Jokinen said...

Dean,

As you say, no big surprises for regular reader, except for one: “current incarnations of CSFB (circuit-switched fallback) are working OK”. Given your earlier position on CSFB, this is a major acknowledgement. Perhaps 2013 brings more positive surprises.

Regards,
/sami

Dean Bubley said...

Dave - I could potentially see Apple moving to "iFinance" for unlocked iPhones sold through their stores, perhaps even charged to the user's iTunes account. But I don't see Samsung, HTC, Motorola wanting to completely change their US distribution strategy - or being able to do it quickly. It's easier for operators to reduce credit risk because they've already got fraud management software, and also have the ultimate sanction of disconnection for defaulters.

On WiFi - I agree, with the possible caveat that there's quite a lot of the world which has a more proscriptive attitude towards WiFi use today, eg user registration. Also markets like India, which doesn't have much fixed broadband / WiFi at all, where carriers could exert greater control as people don't have so many pre-existing expectations. I could see a few corner-cases for on-device remote connection manager control (eg on a Kindle) but in general it's pure wishful thinking.

Sami - yes, CSFB is better than I initially expected. Partly because it has been tuned a lot over the last 3 years, and also because people seem to be less-bothered: perhaps because they don't use telephony that much anyway. That said, extra delay will be another thing contributing to the subconscious perception that phone calls are old and clunky, so perhaps it's a negative after all.

Telebloke said...

Hi Dean, thanks for your relentless work this year in discerning hype from the reality. Such work really helps cutting dead branches. For example in practice, this year we closed down our NFC payment activities. (Personally I don't make such calls)

As you probably know I'm employed by one of the vendors Dave mentioned and I'd like to comment on CSFB, VoLTE and Operator Wi-Fi, perhaps starting with the latter. Indeed 2013 is too early to see significant Wi-Fi traffic conveyed through the EPC (PDN gateways). Mobile network operators will spend the coming years building up the E-UTRAN & EPC, and tuning the features in there (PSHO, PCC, CSFB, SRVCC, ...). ANDSF (Dave) is not even on their radars.

To me 2012 has been the year of offload to Wi-Fi. Consumers, devices and even voice have massively moved from cellular data, smartphones and calling/texting to "free" Wi-Fi at home and in hotspots, WiFi-only (mini)tablets, and apps including IM/VoIP. Kudos to Skype, Libon and other OTT voice providers. Even phablets will struggle in 2013.

In defining our job ahead in 2013 we need to listen to these new users' needs (not : subscribers'). Today's Wi-Fi login experience is terrible, e.g. tonight my kids (15 and 12) will ask for my niece's home Wi-Fi password and she'll feel like they're not interested in being there. That's because she has a different ISP than ours (Telenet, a Cable MSO) - no roaming yet between homespot federations. What will they do online? No idea but for sure their tablets won't send "Happy New Year" SMSes.

Telenet, Ziggo and TWC are just some of the 50 homespot/hotspot networks we helped deploy in 2012. In Belgium, my wife & kids can use their phones & tablets on 600K Wi-Fi homespots and it's included in in our home broadband package.

I consider it our industry's duty to secure their online experience (a.o. with 802.1x/802.11i), prevent viruses, DDoS attacks, adult content, phishing, identity theft and other stuff I don't want them to worry about. I'm not worried about SP Voice there - no CSFB, no SRVCC needed. Libon (OTT voice) will do...

That's my wish for 2013, to remain at the service of our young new users, and of the elderly (who love their quickly starting tablets instead of old Windows laptops),

All the best,

Thierry

Dave Wright said...

Thierry,

Here are some of the papers I was referring to on ANDSF. There's an awful lot of talk about it for it not to be "on the radar".

http://www.ericsson.com/res/thecompany/docs/publications/ericsson_review/2012/er-seamless-wi-fi-roaming.pdf

http://webform.alcatel-lucent.com/res/alu/survey/alu2CustomForm.jsp?cw=alu2CorpDocDownload&LMSG_CABINET=Docs_and_Resource_Ctr&LMSG_CONTENT_FILE=White_Papers/BT_Alcatel-Lucent_WhitePaper.pdf

http://wwwen.zte.com.cn/endata/magazine/ztetechnologies/2012/no6/articles/201211/t20121121_370651.html

I agree that the Wi-Fi selection and connection function could work much better than it does currently. I believe that in a few years 802.11u with ANQP will largely automate this. However, I don't think the MNOs will be the only (or even largest) identity/auth providers for 802.11u Public Wi-Fi. I agree with Dean and other analysts that users are not so inconvenienced by the current Wi-Fi connection experience that they are willing to pay for a more "seamless" experience. One of the great appeals of Wi-Fi is its very low(no) cost relative to cellular data. Operators talking about direct monetization are out of touch with the market, IMO.

I think it's also interesting to contemplate the common justifications to integrate the "Wi-Fi RAN" with the mobile core. The two I see listed most are "common service delivery" and "policy enforcement". In a world where services are rapidly shifting away from the mobile operator to 3rd party providers the first has limited (and declining value). And policy enforcement is of no benefit to the user unless it results in a much greater QOE, which has yet to be demonstrated.

I'm impressed by the moves from TefDigital and Orange with TU Me and Libon. Those seem like better responses to where the market is moving.

Regards,
Dave

Telebloke said...

Dave,

Indeed MNOs will never succeed in charging for ANDSF or 802.11u, which is why it's not on their radar screen at all. I know about 1 (!) working ANDSF client for Android, and for 802.11u support on smartphones/tablets there are no plans. Despite Cisco's buzz about it. Any counter-example is welcome...

ANDSF and 802.11u were conceived in a world where each Access Point broadcasts a different SSID, and user devices are searching for "good" SSIDs the whole day long.

The homespot/hotspot federations I'm talking about broadcast the same SSID over a large number of AP (typically over a country). Ideally they're offering the same set of secure authentication methods (802.11x EAP methods). No more Open (non-encrypted) SSIDs with portal-based authentication (such as Fon or Openzone...).

I agree with you, common service delivery and policy enforcement are not the reasons to route the Wi-Fi RAN traffic through the EPC.

Initially you'll be able to access the internet and all services (operator TV, enterprise VPNs) directly from the Wi-Fi RAN, through an Access Controller or WLAN Gateway.

However let me give you 3 reasons to do it in the mid term and for smartphones/phablets only :

1) roaming : mobile EAP-SIM/AKA users visiting hotspot 2.0 federations (different operating entities)
2) IP address continuity when moving from Wi-Fi to 3G and back
3) access to MNO services (TV, IMS, VPNs...) which are only accessible in the home country (through the PGW/GGSN)

Indeed TefDigital and Orange lanched great apps this year for Voice over Wi-Fi. But would you like me to listen to your VoIP call simply because I happen to be on the same Wi-Fi AP? Or would you like me to impersonate Fon and attract you on my AP, where your WISPr client or cookie would even provide me your credentials automatically?

No? Then deploy 802.11i encryption and 802.1x authentication in 2013,

Best regards

Thierry

Dave Wright said...

Thierry,

I think we are agreeing that ANDSF is not going to play a large role in Public Wi-Fi. That is why I'm surprised to continue to hear many players talking about it being a necessary component of "Carrier-Grade Wi-Fi". As you point out, I haven't heard of any device manufacturers working on ANDSF support.

IMO 802.11u will be different. It addresses a real issue (easier and more secure connectivity) and there is a good amount of momentum behind it, certainly on the Wi-Fi infrastructure side. There is growing device manufacturer support with devices and ref designs available today from Samsung, LG, Intel, MediaTek, etc... 802.11u/Passpoint also provides the WPA2-Enterprise encrption and authentication that you metnioned.
(The WFA site has a nice tool showing Passpoint certified handsets and other devices)

I think 802.11u/Passpoint will address the roaming need. Consider an architecture with EAP-TLS/TTLS being used to authenticate against a Google, Apple, Facebook, etc... credential. Moto recentaly announced a Wi-Fi auth gateway, with initial authentication against Google or FBook account, which might be an early view of where we are heading.

IP Session trans-portability for mobile has been talked about since the late 90s. Lack of support for it has not proven to be critical up till now. With voice becoming less important as a service, I see this diminishing even further in value. The need for video continuity is much overstated IMO, as most use is nomadic, not mobile.

As for MNO services, if they are wise they will take the route of TefDigital and Orange and make their services available to any user on any access network. Limiting your service options to only those subscribers on your network puts you at a severe disadvantage relative to the OTT players.

Kindly,
Dave