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Saturday, February 26, 2011

2011 events I'm attending or speaking at

This is a quick post to list various conferences or other events I'm expecting to speak at or attend, primarily in H1 2011.

Please let me know if you're interested in meeting at one of these, developing custom material such as research studies or white papers, or indeed you're looking for a speaker or moderator for your own event. Email:  information AT disruptive-analysis DOT com

14th March, London: TEN (Telecom Executive Network) Next Generation Mobile Broadband

30th-31st March, London: Next Generation Core Networks

5th-7th April, Palo Alto: Telco 2.0 New Digital Economics Americas

11th-13th May, London: Telco 2.0 New Digital Economics EMEA

17th-18th May, Amsterdam:  LTE World Summit 

23rd-25th May, London: Managed Services & Network-Sharing

24th-26th May, London: Avren Connected Home Global Summit

14th-16th June, Berlin: Mobile Data Offloading

22nd-23rd June, Singapore (tentative) Telco 2.0 New Digital Economics Asia Pacific

27th-29th June, San Francisco (tentative) eComm Emerging Communications

In H2 2011, I'll probably be at another couple of Telco 2.0 events in Europe & the US, plus at least one of the IIR Broadband Traffic Management series of conferences.

Thursday, February 24, 2011

1000th post - a retrospective. What I've got right, and what I've got wrong....

I started this blog about five and a half years ago, in October 2005. At the time, I said that "I specialise in looking for "failures of consensus" - either positive or negative" - and that is still true now.

Having watched various areas of the telecoms and IT industry for almost 20 years, it saddens me that that there is still a tendency towards "groupthink". I genuinely enjoy the speed of technological progress, yet it often amazes me that huge amounts of time and money are wasted going down obvious blind alleys. Too often, nobody stands up and says "No! You're all wrong!" - or just points out that a seemingly good idea will encounter a huge stream of "gotchas" that will derail its progress.

Conversely, there are sometimes new trends and truly disruptive opportunities that remain unexploited.

Flattening the "hype cycle"

We're all familiar with the famous Gartner "hype cycle" about technologies. I'd like to flatten it out, by alerting people to the inevitable "second order" problems well in advance, rather than suffering delays and disappointments because those issues are not pre-empted. They're not all predictable - but many of the most disruptive are, especially if you look at adjacent sectors and parallel trends.

Hype costs money. The whole process of innovation ---> unrealistic expectations ---> disappointment ---> renaissance ---> eventual success is deeply inefficient. It is driven by many understandable human psychological effects, especially around the fear of missing out on something. Yet this same herd-mentality and refusal to assess future problems can be catastrophic - especially if upcoming substitutes are evolving faster. 

I've got a few standard questions I use in my research, to see how clearly ideas have been thought out. For example: "will it work indoors?", "what's the impact on the battery?", or "does that proposition make sense for prepay users?". But sometimes there are bigger issues that are lurking like elephants in the room.

Five years ago, for example, I wrote a research report examining why the notion of using IMS for next-generation operator-controlled mobile services would likely fail, because nobody had worked out what an IMS-capable handset was, or had recognised the scale of the challenges involved in creating one. When the wheels finally started turning a few years later, it was fairly obvious that the RCS variant was also lacking both technically and in terms of user appeal. In the meantime, Facebook has 200m mobile users, while mobile IMS has (essentially) zero.

(Incidentally my most-read, most-circulated post is the one in which I re-wrote the script of the famous Monty Python Dead Parrot sketch as a discussion about IMS and LTE - it's here)

My 2005 predictions and their outcomes

I'm a big fan of looking back at the accuracy of predictions. I reckon I've scored quite a lot of "I told you so's" over the years, although I've called a few things wrongly as well. Going back to my very first post, I said that the following were over-hyped and wouldn't live up to expectation, as at late-2005. Let's see how I fared. (2011 comments in italic)

Overhyped in 2005 #1) UMA (unlicenced mobile access)  - Yes, absolutely spot-on. Never got traction outside T-Mobile US and Orange France. Still trickling on with Kineto's WiFi offload client.

Overhyped in 2005 #2) Cellular operator IM - With a couple of niche exceptions, again absolutely on-the-money. RCS is just the latest version of failure here.

Overhyped in 2005 #3) Near-term massmarket WiMAX - Yes. 'Nuff said

Overhyped in 2005 #4) Free wireless VoIP - Also true. Starting to happen more now (as predicted in my VoIPo3G report in 2007), but has been a distraction not major cannibalisation.

Overhyped in 2005 #5) Dual-mode WLAN/cellular phones - OK, I got this one rather wrong, at least in the mid-term after the iPhone's launch 18 months later. Although that said, globally WiFi is probably present in less than 30% of new shipped handsets because of the sheer volumes of low-end devices.

Overhyped in 2005 #6) Wireless presence - Yes. Still very little use of PC-style presence engines on phones. A bit of Skype, maybe the next rev of Facebook on mobile. RCS failure unsurprising.

Overhyped in 2005 #7) Smartphones - Sort of. In terms of 2005-era definition of smartphones, as just phones with an open OS, I wasn't too far wrong - as the Nokia/Microsoft deal has proven. The *new* definition of smartphones that act as part of an ecosystem had not been invented at that point, and only started to become *really* important from 2008 onwards.
Overhyped in 2005 #8) "Seamless" roaming (especially WiFi to cellular) - Correct. We're still talking about it today as if WiFi / 3G (or 3G / LTE) handover is some sort of magical Holy Grail. Classic case of technologists solving the wrong problem, and not realising that "seams" are actually important.

Conversely, at the time I thought some other things were being *under-hyped* and would get more attention from vendors, investors or operators in coming years:

Underhyped in 2005 #1) PBX/cellular integration - Fair. A lot more attention, but still never really got to the stage I'd hoped. Too much futile focus on cellular substitution of PBXs instead, with a variety of pointless and niche hosted "mobile PBX" solutions.

Underhyped in 2005 #2) Poor indoor performance of 3G, WiMAX and other services - Absolutely right. I said in 2005 that nobody paid attention to indoor coverage, especially for data. It was indeed a problem that has since had much more attention...

Underhyped in 2005 #3) Novel in-building wireless coverage solutions - ... especially around innovations such as femtocells, which I was the first analyst to discuss and cover.

Underhyped in 2005 #4) "Single-mode" (non-cellular) VoWLAN phones - OK OK, I was flat out wrong on this. So much for DECT-replacement spurring demand for cheap cordless WLAN phones in-building. Although there *is* a lot of VoIP over WLAN from PCs and now tablets.

Underhyped in 2005 #5) Impact of VoIP on cellular pricing - Difficult to distil out the impact of VoIP vs. impact of regulation vs. market saturation. But there's certainly be a broad decline in per-minute pricing, especially for roaming. I think that VoIP will impact cellular telephony pricing more from now on, as it enables "non-telephony voice" applications to substitute for expensive proper phone calls.

Underhyped in 2005 #6) Upgrading cellular network backhaul - Absolutely right. Easily identifiable as a bottleneck in 2005, even with HSDPA still only just appearing over the horizon.

Underhyped in 2005 #7) Difficulty of integrating & testing new features on mobile handsets - There *still* isn't a proper IMS-capable phone. And Apple proved that good integration/testing was *hard* and expensive if done right. Getting much easier now with Android and Appstores, but 6 years ago nobody (especially network vendors) appreciated how much of a tough problem the little UE box on the end of the chart actually was.

Underhyped in 2005 #8) The impact of a lack of "email portability" on FMC business models - I had to look this one up & remind myself what I was talking about. Essentially I was saying that the stickiness of ISP email addresses would mean a reluctance to switch ISP to one offering an FMC-style voice service. I hadn't accounted for the fact that FMC-style services would be so poor, that few people got to a decision point around email anyway.

Underhyped in 2005 #9) The role of "service enabled" home gateways for FMC - True up to a point. Again, 2005-era voice FMC as espoused by the UMA or SIP voice advocates, never really took off. The home gateways, like email, weren't really the weak points of the proposition - it was the business model. On the other hand, the gateway/STB market has certainly evolved to support some cool services such as IPTV and FON.

More recent "I told you so" and "OK, mea culpa" moments

Looking back at some other predictions from the past 1000 posts, I've got quite a few other things spot-on - but I've also made a couple of howlers as well.

Back in 2006, I noted that operators'  "pipe" revenues from mobile broadband were going to be much more important than other supposed value-added services such as content downloads or mobile TV. Other analysts at the time were advising against open-Internet access, while my view was that it was an inevitable consequence of consumer demand.

Also in 2006, I laughed at the notion of the phone as "mobile wallet" . It still hasn't happened in the last 5 years, and phones still won't replace cash in the next 5 either, no matter how hard some other analysts blow that NFC-enabled trumpet.

On the other hand, I wasn't a believer of the Amazon Kindle in 2007.  It's been moderately successful, especially in more recent versions, so I'll hold my hands up and admit I mis-judged the e-book phenomenon a bit.

More accurate was my prediction about "multiplicity" - that people would have multiple SIMs, multiple devices, multiple service providers and so on. It's a theme I've expanded upon several times and is why I have such as negative view on concepts like "family plans" for mobile. The future is going to get more heterogenous, not consolidated.

Later in 2007, I published a report which suggested that by end-2012, I was expecting to see as many as 250m users of mobile VoIP over 3G/LTE networks. Given that there are now various 3G-capable VoIP clients for Android, Symbian and iPhone - plus heavy use of VoIP among dongle-connected laptop users - and likely more coming in the next 2 years of LTE, I reckon the top-level numbers were prescient. On the other hand, I'd been expecting operators to have developed a workable carrier-grade LTE VoIP solution by now, as long as they had got some "practice" in tuning it on older HSPA networks first. I also suggested they should work with Skype, Fring and others in the meantime, getting experience in real-world mobile VoIP. It hasn't happened, and so one of my predicted scenarios is now happening - Skype, Google and others will take the lead, not the operators. The operator community's over-focus on slow-moving standards like IMS and VoLTE/MMTel allows swifter alternatives to gain a foothold.

In 2008, I pointed out that while embedded-3G notebooks and netbooks seemed to be "elegant", the business model and economics didn't stack up. Users prefer the flexibility of dongles (which can be prepaid as well as contract), PC OEMs don't want to wear the cost of a module which costs a sizeable % of the device gross margin, and retailers would much rather stock a 3-inch stick than a large laptop box in their store-rooms. Today, only a small % of laptops have 3G built-in, and only a small % of those are actually activated ("attach rate").

My predicted timing on femtocell market evolution has been pretty decent as well, despite more bullish forecasts from some of my peers. From early 2008 "Some niche success, but practicalities will mean it's H2'09 or 2010 before massmarket deployment."

One topic where I have to admit defeat is in my effort to get the telecoms industry to abandon the term "Over the top" (OTT) to refer to Internet or other access-independent service providers. I still think it's a stupid and derogatory term for companies that should be considered as respected and equal peers, or potential partners/customers. In my view, this attitude symptomises the problems of the traditional telecoms industry today. It's also utterly hypocritical, given that virtually ever operator is developing its own portfolio of OTT-style services. Meanwhile, there is a larger threat emerging from "under the floor" providers such as wholesale networks or vendor-outsourced infrastructure.

The next 1000 posts

I'm obviously not going to go through every post I've made to date, and it's certainly possible to find more examples of things I've got wrong. But on balance, I'm pretty pleased with the calls I've made - but somewhat saddened that I have not managed to stop some of the more predictable mistakes.

Going forward, I can see other imminent issues with technology and business models. I think that current forms of mobile video optimisation are likely to face severe push-back from regulators, customers, content companies and competitors. There is a huge amount of wishful thinking about "monetising" and "personalising" services based on the network trying to decode application flows and treat them differently. They won't work - the network doesn't and cannot understand applications from a user's perspective, and they are inherently game-able.

The industry still isn't thinking about the big-picture impact of Moore's Law (hints: intelligence moves to the edge, while applications-oriented standards reduce in importance as inter-working boxes improve in capability). There is also too much legacy thinking about links between access and service - operators should be spending more effort on creating their own OTT-style services, and less on vertical integration. There is still a "them and us" stance between traditional operators and new incumbents such as Google and Facebook. They are competitors, yes - but also peers, and equally deserving of customer respect even if they do not own (or pay for) physical networks.

I hope that my next 1000 posts help to flatten out the telecoms hype curve in coming years. I'm intending to continue giving early warning of avoidable problems - and highlight new opportunities that have not been addressed. I will call out bad ideas - or ineffective companies - even if they are my clients. And I'll try and add a dose of humour, irreverence and fresh air. And maybe even another Pythonesque satirical post....

The sales pitch

While I enjoy writing and being opinionated anyway, the main reason I write this blog is to drive consulting & advisory business for my company Disruptive Analysis and its partners. The blog posts illustrate areas of knowledge and expertise, as well as the type of research, critical thinking and challenging stance I employ.

Much of Disruptive Analysis' consulting work involves critiquing business plans & propositions, or helping firms find new addressable markets and business models that fit with their capabilities. Often, I will "stress test" ideas against plenty of possible "gotchas".

Similarly, my published research tends to focus on contrarian themes - there's a ton of larger research houses looking at mainstream and uncontroversial topics and I see little value in adding my own "me too" reports.

If you find this blog interesting & useful, then please get in touch with me. As well as in-depth consulting assignments, I also do more free-form brainstorm workshops and public presentations.

Email information AT disruptive-analysis DOT com

Monday, February 21, 2011

MWC 2011 round-up: Smartphones, Policy/Offload and VoLTE/RCS

I've now had a chance to gather my thoughts about last week's Barcelona Bunfight. I can't say I enjoyed the trip this year (having only grudgingly decided to go right at the last minute), but it was nonetheless productive and informative. That said, it's still got to have been better in Barca, than if it was held in the other 2013-2017 MWC candidate cities of Paris, Munich or Milan.

For me, there were three standout themes:

- Handset OS's and ecosystems, especially the rise of Android, and the Nokia/Microsoft fall-out
- Ongoing discussion about the 3G/4G data traffic "problem", and how to add capacity, manage traffic and hopefully generate new revenue opportunities
- The future of personal communications, especially around VoIP on 3G/4G networks and the evolution of social networks and messaging.

Of course, there was a ton of other stuff going on as well - such as a lot of hype about mobile money / payments, the reality-distortion field around NFC, zillions of identiclone tablets, assorted fluffy apps/content things, and an absolutely bubble-tastic fleet of private jets at BCN airport.

Android gave everyone something to talk about & play with, while conveniently ignoring that the people with money (and especially discretionary technology income) still prefer Apple, while BlackBerry seems to be winning the hearts and minds of the next generation better than either. Nevertheless, the Android zone in Hall 8 was pretty much a full-on party, and maybe free smoothies can start to catalyse a sense of "cool" around the brand over time.

For me, perhaps the most interesting thing about Android isn't the high-end but the opposite. The sheer volume of designs and OEMs involved is driving the inevitable downward pressure on phone prices and margins. We can't be too far away from having a "good enough" smartphone at $100 price points - which then opens the market up to the vast prepay subscriber base. It also makes it harder for the operators to convince users to go for long contracts with subsidised devices - who's going to sell their soul for a 24-month contract (and a possibly locked-down device), just for the benefit of a $100 loan?

I'm not going to re-hash all the arguments about Microsoft / Nokia (apart from anything else, my input is going into something soon to be published by my friends over at Telco 2.0) but it was certainly on everyone's lips throughout the week. Overall, I'm cautiously positive, although the killing of Symbian seems to have been done a bit too abruptly. There's certainly going to be an uncomfortable transition period before any WP7 Nokia devices ramp up to take its place, plus the company seems to have lost an awful lot of developer goodwill. On the other hand, not dashing after the unproven non-Apple tablet space immediately seems very wise. My view is that there's going to be at least a year of disappointments around Android / WebOS / whatever tablets, and Nokia/Microsoft might be better off waiting to pick up the pieces in 2012 after the inevitable short-term bloodbath.

I stopped off to see HP and its new WebOS phones & tablet. Seem to be nicely engineered, although without *quite* the level of UI intuitiveness I might have expected, but I suspect that would change with practice. The larger phone with the QWERTY was quite appealing - the sort of thing I'd consider replacing my iPhone with next time, as it has a hint of individuality about it. In fact, I thought much the same about some of the WP7 devices as well.

(With impeccable timing, my iPhone black-screened and refused to restart, while I was standing at the Microsoft booth. Either the iPhone has a hidden "tantrum" feature triggered by detecting potential disloyalty from its owner, or else the guys from Redmond have special competitor-disruptor rays mounted on their stand).

One of my largest research themes in the last year has been around mobile data traffic management. It was at MWC in 2010 that I realised quite how many silo solutions there were - everyone had an answer to the "data tsunami" generated by dongles and smartphones, but there was no consistent approach to stitching together the various bits. Various flavours of offload, optimisation, policy, charging, connection managers, protocol tweaks and assorted other were around, but there was a lack of any "holistic" approach to blending these intelligently. I published a research note on this theme last May.

Since then, I've been continuing to see the evolution of the space, which has been fuelled by many operators' short-term needs for a "quick fix" to their data problems, coupled with some longer-term strategic thinking. I've been pretty vociferous about the claims of video optimisation as "the answer", in particular where it's done way back in the network without any decent awareness of the radio. I also have a lot of doubts about so-called "application-based policy", whereby operators can supposedly create "personalised" mobile data plans which include/exclude/prioritise specific traffic types or web destinations.

This trip to Barcelona enabled me to catch up with some of the latest developments around sub-topics such as offload and connection-manager software on devices, which I see as more strategic for overall traffic management than core-network heavy machinery. I was also struck by the fact that the largest believers in the "holistic" approach are actually the largest traditional network vendors, not some of the startups.

Ericsson's deal with Akamai looks truly important here, as in theory it should be able to combine video optimisation / caching with the ability to tweak policy right the way down to the scheduling algorithms in the base stations. All the boxes sitting in the core network or out on the Gi interface have a critical flaw - they neither understand the radio domain very well (eg is the user temporarily out of coverage, rather than in a congested area?), or else aren't in a position to "enforce" anything sufficiently granular to deal with the problem. Alcatel-Lucent is also tying various bits of its policy and content portfolio together - it bought CDN vendor Velocix last year, and also has some probe/DPI cleverness in the RAN.

More importantly, getting a firm like Akamai involved in video optimisation and policy is important, because unlike the operators, content publishers actually trust a CDN not to mangle or degrade video content without permission. Unnecessary transcoding or compression of video, without the awareness or permission of the producer, is extremely unpopular. While "in extremis" it may be necessary in times of congestion, it would still be better done with the involvement of the originator, not by the operator's network operating autonomously. I'm expecting to see some smarter content companies put notifications in their apps that monitor when telcos are "fiddling about" with their traffic, and inform the user of who is to blame if "artistic integrity" is compromised.

Among the policy & DPI vendors, I was particularly impressed by those that are offload-centric (eg Bridgewater), rather than those that are app-centric (eg Sandvine). I also saw some neat on-device software from the likes of Roke, which also optimises for cost/battery life as well as radio bearer availability.

It's time for an over-generalisation with a large kernel of truth here: network people don't *really* understand applications. They don't understand how users perceive applications, they don't understand how apps evolve and interact, they don't understand the limitations of their own boxes, and they don't understand the difference between an application and a traffic flow.

It's not their fault, to be honest - it's more the paucity of the English language for helping us distinguish between different grades of "things that run on top of platforms". Everything is an "application", from the silicon to the ecosystem as a whole. The mobile industry now has a layer-cake of different platform tiers and applications, and it's not the network vendors' fault that the app-stratum they can watch isn't as useful as the semantics would have them believe.

I lost count of the number of people suggesting that operators could have tiered services, say with one mobile broadband package optimised for "social networking". The descriptions of a theoretical "Facebook data plan" I heard from a few just don't stack up. For example, none of them had a good answer for me when asked what they'd be able to do now that Facebook forces its sites to encrypted SSL. Nor did they have a good answer about whether zero-rating Facebook traffic would include web links shared by friends, which are displayed *inside* the Facebook app on a smartphone. Or what would would happen if the June update of the FB app added something new, like video.

The other theme I was following at the show was the evolution of personal communications, and especially the role of operators and other participants. Various of my clients have been asking me to advise on "the future of voice" and new business models which take account of fully IP-ised networks like LTE. Much of the discussion is around new voice apps and revenue streams, and especially the growing distinction between "voice" in general and "telephony" as merely one specific voice application.

As expected, we heard a fair amount of noise about VoLTE for voice on LTE, as well as the news that T-Mobile was dropping its cherished advocacy of VoLGA. There were also quiet a few companies quietly pitching non-IMS approaches to LTE VoIP, which I think have a strong chance of adoption. I'm extremely skeptical about the suggested timelines I've heard from VoLTE, which seem to be driven by the needs of both PR and the desire to foster consensus through inertia (or at least collectivising the risk of failure). In my view, the likelihood of getting normal handsets into the market, running VoLTE for "primary mobile telephony" with good quality, battery life & mobility, before 2013 is very slim indeed. Yes, even on Verizon. Nevertheless, I do agree that VoLTE will eventually happen, for some operators in some contexts - although it will certainly never be ubiquitous. My post-MWC views are essentially unchanged since the pre-MWC post & lengthy discussion in the comments here.

If VoLTE doesn't deliver, I wouldn't be surprised if VoLGA gets reincarnated at some point - probably with a face-saving rebrand. I'm sure T-Mobile knows this as well. (I tried to come up with an amusing pun for a future DaNUBE or THaMeS acronym for LTE Voice, but I haven't managed it yet - suggestions welcome).

On the messaging and social-network side, MWC included a lot of discussion about integrating incumbent platforms such as Skype and Facebook, as well new telco-centric niche efforts such as the GSMA's RCS-e (a new revised version). My views on RCS have been pretty consistent since its announcement 3 years ago, so it's good to see that finally the GSMA has ditched the focus on presence because it kills the phone battery and floods the network with signalling. I'm still wading through the new specs, but despite the high-profile announcement of future operator support and a few demos, I still think it is too little, too late.

And there's still no involvement from the key players in messaging and social communications such as Facebook, Apple, RIM or Skype - the operators need to stop the ridiculous "them and us" stance and prove their credentials in social communications, interoperating via the web, and gaining viral adoption because users find the services valuable. For RCS to succeed there also need to be a firm commitment to a "freemium" business model, and a route to getting away from the legacy of the "phonebook" - a hundred-year old way of viewing your social affiliations, that is rapidly becoming obsolete. Anyone wanting a full critique of RCS should obtain a copy of my report from the end of last year, available here.

Friday, February 11, 2011

Nokia + Microsoft: is there an effective third silent partner, Qualcomm?

I'm at the Nokia strategy event in London today, listening to Stephen Elop discussing the Microsoft deal & wider issues around the company's strategy for smartphones, mobile phones and "future disruptions".

There's a ton of angles on this, which I've been dropping comments about on Twitter, and which are well covered elsewhere.

But I'm wondering if there's another angle here in the discussion of "the Windows Phone ecosystem". All of the first batch of WP7 devices have been based on Qualcomm hardware and specifically the Snapdragon processor.

Nokia had a long-running legal spat over patents with Qualcomm, which was resolved in mid-2008. Added towards the traditional antipathy of the GSM community towards CDMA, this meant that Nokia firstly never developed Symbian devices for the broader US market, and also missed Qualcomm's increasing competitiveness in creating 3G basebands and application processors. A year ago at MWC, Nokia announced the first Snapdragon-powered phone would ship by end-2010. It didn't happen. The N8 uses a Texas Instruments apps processor, and the rumoured N9 hasn't appeared.

It's also not clear what's happening now to Nokia's deal with Broadcom for 3G chipset supply - or what happens with its future LTE devices.

I suspect that Qualcomm may - explicitly or implicitly - turn out to be a big winner with today's announcement. It certainly seems likely that for Nokia to get its first WP7 phones to market ASAP ("focus on speed"), it will go down the proven route to get devices out as fast as possible.

The interesting thing here is that the big Q could therefore end up as a pivotal player in Apple, Android and WP7/Nokia ecosystems - although in the iPhone it's on the baseband side than the apps processor.

The big questionmark is around the future role of Intel in mobile. It is clearly now being left out in the cold (again), as Meego is effectively being mothballed, at least from Nokia's point of view. It will be interesting to see its next move - partnership with Samsung on Bada, or RIM on QNX, perhaps? An acquisition of a company like MediaTek? Or a wholehearted move to support WP7 and Android however possible?

Thursday, February 03, 2011

NFC will be about free "interactions", not monetised transactions

One of the mobile operators' big problems at the moment is their inability (or unwillingness) to deal with Freemium-style business models. The sheer "weight" and complexity of operator infrastructure and bureaucracy makes it ill-suited to managing events that are unbilled and non-monetisable. This is especially true in circumstances where free calls/sessions/events massively outweigh paid ones. It's a problem exacerbated by many vendors selling them boxes or software based on usage tiers.

This is almost certainly going to be a problem for operator appstores. A large % of Apple downloads, and a huge % of Android downloads are for free applications. People wanting clients for Facebook, Twitter or a million advertising- or brand-led apps. The implicit (and irretrievable) costs of managing, uploading, storing and delivering free applications is likely to be a significant part of the business model for Apple, Google and others. It will be interesting to see how telcos cope with this challenge.

This problem is likely to arise again with NFC. I suspect that once Apple and Google and RIM and Nokia expose NFC/contactless APIs to their developer communities, there will be a huge rise in the number of transactions that don't involve any form of payment. Many of these will not need the "secure element", which is the focus of much of the political wrangling around NFC.

If someone walks out of a restaurant, and taps their phone on a theoretical Facebook-branded "Like" terminal on the way out, there isn't really a need for an uber-secure back end system. Same deal if I tap my phone at a gig, to get added to a band's mailing list. Or a million other applications and use cases.

The net result is that an overwhelming % of all NFC connections will probably be non-financial. Not mobile payments. Not mobile ticketing with a pseudo-Oyster. Not peer-to-peer money transfer. They will be inter-actions, not trans-actions. Not only that, but these apps will appear much faster, assuming that readers are affordable and easy to use (more on that in a moment).

I know I've been very skeptical about NFC in the past, but that's because the focus was on payments or convoluted operator-inclusive value chains. Not just simple "tap to do stuff" apps - basically similar to 2D barcode use cases but much simpler and far less geeky. In other words, it finally looks like we'll get offline applications for NFC - something that's been key to virtually every handset innovation in recent years.

All of which makes the operator business model around NFC rather tricky, in terms of justifying any additional subsidy or promotion, or somehow taking a margin. All the complex mobile-money, transportation ticket and government projects are huge systems integration and IT minefields, likely to need $$$ being spent with IBM or Accenture and taking years to implement.

The big question is around readers and how they are connected. For big complex projects (eg integration into retailers' point of sale terminals), telcos may have a role to play. But for the Facebook-style touch-to-like concept I mentioned above, it should be possible to get USB-connected standalone readers hooked into a PC for a few 10's of dollars.

I have a hunch about this. Sooner or later (sooner?) Apple will put not just the NFC chip into phones, it will put the *readers* into next-gen iPads. I've already had an experience in a restaurant where the host came around with an iPad for people to enter their email addresses for the mailing list. Touching the phone could be to a tablet (or a USB-connected reader to a PC) should be a no-brainer, especially if it allows the user to decide whether to provide specific information sets (name, email, phone-number.... or just a Facebook ID or even a pseudonym).

The question will then be how operators manage to regain relevance for their role in NFC transactions (which will come later, if at all), when the first trillion NFC interactions will have bypassed them.

My guess is that Apple and Google will (initially at least), focus on using NFC as just another tool to entrench their developers and extend their ecosystems. Apple isn't especially bothered about really monetising apps - its own profit on the Appstore is peanuts - it just uses it as a way to add utility to its hardware and sell more units. If NFC-capable iPhone 5's and iPad 2/3's help it sell another 50 million units @$300 gross margin a time, it really doesn't need to care about slicing 2% off of the handful of financial transactions it might facilitate. And Google, Facebook or others could subsidise readers for a variety of advertising / marketing purposes.

So what should operators do about this?

One thing is to have some "skin in the game" in terms of interactions as well as transactions. That will mean acting just like all the other developers and exploiting the NFC APIs on all the various handset platforms. Potentially, they could act as an interaction clearing-house, or even adding value through other internal APIs and assets. They should NOT assume that the key identity layer is around the SIM card, but should look to develop OTT-style applications that can be downloaded to any handset running on any operator's network.

I have other thoughts on this as well, but I'll reserve those for other channels and paying clients. This is my own freemium strategy....

Tuesday, February 01, 2011

New stats from Cisco on mobile data traffic

Cisco's VNI data traffic forecasts are quoted almost ubiquitously by vendors and operators in the industry.

They've just released some new mobile-specific figures and breakdowns - http://bit.ly/aFcWYa . I haven't had a chance to go through everything yet, but some initial highlights that jumped out at me:
  • Top 10% of mobile users=60% of data and falling quickly, Top 1%=20%. Now similar to fixed. Panic over - and any vendors still citing scaremongering "data hog" slides at MWC will look rather silly. My view on the reason for this: a year ago, the semi-mythical 10% were almost all PC users with dongles. Now the smartphones have caught up a bit & evened things out.
  • Offload is already diverting 31% of smartphone mobile data traffic to WiFi or femtos. Many of the other stats I've seen don't count or cover offload in their discussions of capacity use. Edit: on the other hand, the offload stats are still a bit vague. They don't distinguish between real offload substituting directly for macrocell data, vs. the incremental amount of traffic which would never have been used on the cellular network because of speed/price/coverage (ie elasticity effects).
  • By 2015, M2M data will exceed tablet-based traffic, 295 vs 248 PetaBytes/month . That is hugely significant, because a lot of M2M stuff needs different business models, core architectures etc. Edit: my analysis is that because many of the use cases (eg CCTV) will be *upstream*, M2M will have an even more disproportionate impact on the cellular network.
  • At end-2010, there were only 14m mobile-only Internet users, but this will grow to 788m in 2015. I've been saying for ages that the true importance of mobile-only was being overstated. I might have to have a closer look at their definitons & methods for forecasts, but nice to have 3rd-party corroboration of the current reality. Edit: looking at the stats, this seems to exclude non-Internet mobile data. It also appears to assume most users have at least *some* fixed web access, eg through schools or cafes.
  • Laptops will still account for more than 50% of mobile data traffic in 2015
  • Wireless home gateways generate mobile traffic than tablets - and still will in 2015. Edit: that's a fascinating insight, reflecting the importance & challenges of fixed wireless broadband beyond the "sexier" mobility-enabled devices like iPads. I'd be unsurprised if such users are far bigger generators of mobile video traffic, when connected to TVs and STBs.
Unfortunately, no mention in the study of signalling load - it's all about MB/GB of "tonnage".It's also not 100% clear if the figures are inclusive / exclusive of "optimisation" - ie whether it is data volumes actually flowing to & from the user device, or which comes in via the Gi Interface

More to follow when I get a chance