Gaming the new peering arrangements - will non-neutrality really work?

I'm hearing a lot of discussion at the moment about peering being the new battleground for "non-neutrality" of networks, and especially a mechanism for operators to try and monetise traffic from Internet/video providers.

In theory, the argument goes along the lines of "symmetrical peering is fine, but if there's heavy asymmetry, eg mass downloads outweighing uploads, then we've got a right to renegotiate our deals with our Internet peers".

Surely, this is just going to result in Netflix, Google, BBC and others developing new services that are predominantly upload-centric, to try and redress the balance of traffic? Rather than either reducing downloads, or actually paying cold hard cash?

So instead of combatting traffic load, this surely just encourages Google to offer realtime augmented reality with video-processing in the cloud, clogging uplink as well as downlink? Or for the BBC to archive your old VHS tapes somehow? Or for Apple to push an audio "black box" that records all your ambient sounds during the day & streams them to a server? Or for all of them to start using peer-to-peer techniques for content distribution? (all of this encrypted and hidden from DPI, obviously).

This is just an idle musing for now, and I've never seen the details of a peering arrangement. I guess there could be some way of tying it to actual congestion (eg traffic from YouTube that gets downloaded in busy cell / busy hour is accounted for differently to that during quiet periods). But in that case, there would need to be some serious OSS/BSS integration work to actually be able to *prove* this

Future of Voice Masterclasses: June 30th Santa Clara, July 14th London

NEW: Download the Future of Voice flyer here

Regular readers of this blog and my Twitter stream ( @disruptivedean ) will have noticed an increase in focus on voice and communications services and applications in the last couple of months. I've also written a guest post for Visionmobile on The Future of Voice, and last week spoke at the LTE World Summit in Amsterdam about Voice, VoLTE and the Future of Personal Communications. (A copy of my presentation can be downloaded here)

So, I am pleased to formally announce the first Future of Voice masterclass, which I am launching in collaboration with Martin Geddes. The event will be held at Intel's headquarters in Santa Clara on 30th June, the day after the eComm conference (which I would exhort people to make every effort to attend - I'm speaking about telcos' own-brand OTT services)

To book a space for the first event on June 30th, click here

The event is not going to be a one-way bombardment of slides, but will instead be a mix of presentation, collaborative group exercises and realtime consultation with Martin & myself. We are aiming for 20-25 people with a diverse mix of operators, vendors, Internet companies and other market stakeholders.

In terms of themes, we will be covering new business models and delivery technologies for voice, including:

• The difference between "voice" and "telephony" - and what that means for telco and Internet companies
• Delivering voice on LTE and "direct-to-cloud" voice on fixed networks
• Understanding "voice as a service" and the new fragmented voice landscape - particularly after the Microsoft/Skype deal.
• How to make money from free voice and messaging with B2C unified comms

For details of the event, please contact me at information AT disruptive-analysis DOT com, and I can send you a copy of the event flyer, and pricing information.

If you can't make it to California, then there is an event in London on 14th July (venue TBC) and US East Coast, probably the week after Labor Day.

To book a space for the second event in London on July 14th, click here

I look forward to seeing some of you there!

Download the Future of Voice flyer here

Thoughts from the LTE World Summit

Earlier this week, I spent two days at the LTE World Summit in Amsterdam. More than 2000 great & good members of the telecom industry, including a ton of operators and most of the major vendors. Multiple streams of presentations, a decent-sized exhibition show floor and “big conference” production rather than a small meeting room in a hotel. I was hosting an analyst roundtable on Voice, VoLTE and the Future of Communications, and also presenting a 30 minute presentation on similar topics.

Those of you following my Twitter stream (@disruptivedean) will have seen a fair amountof  ongoing commentary, but I thought a few issues were worth drilling into here. I'll be writing a separate post about the Future of Voice, and my upcoming workshops with Martin Geddes, so I won't overdo the VoLTE analysis here.

Overall though, I’ve come away rather pessimistic, despite all the bombastic hyperbole I’ve heard. I’m hearing the same old stories I heard at last year's event – and a lot of them are getting worse rather than better. Loads of hoary old clichés about peak rates and “exponential” data growth. How flatrate plans don’t cut it, long after most of them have been phased out anyway. A ton of unrealistic vendor hype about application-specific policy and charging “business models”.

The big story was also much the same as last year, albeit stated a bit more loudly rather than just implied – there are too many spectrum bands for LTE. At least 8 “core” bands, and another 10-20 also being deployed or considered. Europe will probably get by with three mains ones – 800, 1800 and 2600MHz. With perhaps a little bit of 2100. And some use of bits of TDD spectrum knocking around. Then there’s a variety of US bands, Japanese-specific ones, Chinese ones and a variety waiting in the wings to get approved. 

That is *much* worse than 3G, which had one core band for much of the world (2100MHz) and still took a long time to get either coverage or good handset performance.

Bottom line is that LTE spectrum fragmentation is not going to go away. This has a number of implications – firstly, roaming is going to be a real pain when moving “off-net” beyond a single operator’s OpCos, or between regions of the world. In all likelihood, HSPA will continue be used for roaming in a lot of cases. Secondly, handset vendors will likely have to create either regional versions of handset hardware platforms, or make “world phones” that suffer from coverage issues in some markets. Either way, scale economies will be lower, prices higher, testing more problematic and time-to-market longer.

It will not be possible, for example, to have one iPhone variant that supports 3 European FDD bands, Verizon and AT&T 700MHz, the Chinese LTE-TDD variant, something for Japan, and perhaps another US band like AWS or LightSquared. I reckon that Apple will need to create three, possibly four distinct versions of future LTE iPhones.

Now Apple can afford to do that - it only has a single model introduced at a time, it sells in high volumes per device model/version and makes a huge margin on each. In other words, even if each "spin" costs an extra $100m to develop, it's still a drop in the ocean. If it creates three versions and sells 10m of each, it will probably make $2-3bn gross margin on each variant, so it can "wear" the extra hardware development and test cost quite easily.

But it would get very painful for lower-volume devices, or manufacturers that have broad ranges of devices. This in turn means it's probably going to be painful for operators with unusual spectrum bands (eg LightSquared) to get a decent range of decent handsets. 

In Amsterdam, we heard repeated pleading from operators - even DoCoMo - essentially saying "Support *my* band! Please! It's really good, and we can get economies of scale & support from all the vendors!". 

There are going to be some disappointed players left standing in this game of musical frequency chairs. And everyone else is likely to feel the knock-on effects of component suppliers' hesitation and uncertainty. Some operators will likely hold off on LTE decisions until the spectrum situation becomes a bit clearer.

One other option for LTE that got a little exposure - but was obviously still highly contentious - was that of wholesale-only shared networks like Yota (and LightSquared and a couple of others). I think that although that model makes sense in terms of spectrum usage efficiency, it also poses a risk for incumbent operators that will start to lose control over their core business enabler (the network) and may face a future where all differentiation comes in terms of the (often mythical, and always competitive) "services" layer.

I'll be writing more about the threat from "under the floor" players in the coming months - and why shared/outsourced/structurally-separate mobile infrastructure plays are both inevitable and highly disruptive. I'll be at the network-sharing conference in London next week as well.

One interesting angle on voice and VoLTE that is starting to bubble up - and which I've been suggesting / advocating for some time is that of dual-radio phones. We already see dual-radio CDMA/LTE phones for Verizon and Metro PCS, which use CDMA for voice and LTE for data. This has a distinct advantage over the proposed "Circuit Switched Fallback" standard, in that an incoming voice call doesn't switch off the LTE data channel. I'm expecting to see the same approach appear for GSM/LTE dual-radio phones, but that is much more complex as (unlike CDMA) both radios will probably need separate SIM cards, or two IMSIs on one card. At least one major vendor was openly discussing this approach - but at the moment the lack of standards about handling this type of device is a concern for operators.

Like VoLGA before, dual-radio "velcro" GSM/LTE is a solution that *works* conceptually very well, but it will be interesting to see if the politics of the standards world - and some entrenched interests wanting to ensure that nothing detracts from VoLTE/IMS's uncontested anointment as top solution - get in its way. My view is that this should be the main backup plan or straight replacement for VoLTE: as telephony revenues start to fall, why would many operators want to invest in a new core network and applications when their existing GSM telephony works perfectly? 

In my view, operators should invest their future voice/telephony budget in creating new voice products and playtforms - and do the absolute minimum necessary to get decent "old school" telephony working on LTE smartphones. I think the Velcro (yes I know it's a trademark) approach could free the operators to concentrate on creating new and possibly more valuable voice and VoIP applications - before Skype/Microsoft does it for them.

The last comment in this post is about WiFi and LTE. I've had a few conversations recently about the rising star of WiFi usage for offload, onload, roaming and other operator use cases. I think that all of these are extremely important.... but I also sense a dangerous level of groupthink around the "telco-isation" of WiFi. There's a host of new standards and solutions that make bolting WiFi onto 3G/4G networks more "seamless" or more controllable. 

Those of you with long memories will know that I have an intense suspicion of the word "seamless". It represented all that was wrong with the ill-fated UMA technology. More than four years ago, I wrote what I thought was the requiem of seamlessness. But it's back, it seems. In a nutshell - seams are important. They're boundaries. Sometimes I want to know when I reach a boundary, sometimes I don't. Things change at boundaries - speeds, policies, price, ownership, security, latency and so on. In particular with WiFi, it is absolutely critical to enable a good user experience between choosing between "operator WiFi" and "private WiFi". 

I see far too few advocates of the "private WiFi" use cases - there seems to be an asusmption that WiFi access on smartphones will default to being "service"-mode. I think that is a deeply flawed belief, and unless address will come back to haunt some of the new approaches to offload or operator-provisioned WiFi. More to come in later posts, conference presentations and so forth.

A few quick bullet points of "other" interesting items:

• Apparently, TeliaSonera intends to charge extra for VoIP on its LTE network. Good luck with that. Maybe you can start by providing us with a clear legal definition of "voice"? Downloading a spoken poem? Audio telepresence? Skype video with "mute" switched on? Accessing voicemail? Encrypted speech inside HTML streams? If you're a Swedish-speaking telecoms lawyer, you're going to make a lot of money over the next few years....
• Verizon was being very coy about its rollout and recent outage. Its conference speaker was not even from Verizon Wireless but from the EMEA arm of the company which is mostly the former MCI/WorldCom enterprise services division. Unsurprisingly, probing questions about the progress of VoLTE testing were not especially illuminating.
• Apparently, SMS over the SG interface *is* working. Just that vendors haven't bothered to tell anyone about it as it's not considered sexy. Let's see how the full SMS-over-LTE experience works on future phones though.
• It was good to hear an anecdote from T-Mobile Netherlands that the biggest problem isn't "tonnage" of data traffic, but simultaneous signalling from lots of smartphones and apps in the same place. More interesting still was the massive explosion of the SMS-replacing "WhatsApp" service in Holland, which apparently got to 70% penetration (of smartphones I assume) in just 3 months. Hence KPN's profit warning a couple of weeks ago. (It's worth noting that Netherlands is slightly unusual when it comes to messaging, as it's historically been a low-Facebook use country, instead using its own local social network Hyves)

There were certainly more nuances I picked up about LTE, but the overwhelming sense was that, in Europe at least, there is "no hurry" to push it to the massmarket. That's a big contrast to the US, where a 4G marketing frenzy is taking place, dragging network deployment in its wake.

Telcos paying OTT players - balance of payments will look ugly

Through my work with Telco 2.0, I spend quite a lot of time thinking about how telcos can get "two-sided business models" (2SBM) to work. This involves deriving revenues from companies "upstream" of the users themselves, who pay to use the operator as a "platform" for doing business with the users more effectively.

An easy example of 2SBM is advertising, with the telco facilitating a brand by helping it market to the telco's (paying) users. Google does much the same, but only monetises the upstream (ads) and not the downstream (users searching). Another example of existing telco 2SBM is "bill on behalf of" - for example collecting payment for apps through carrier billing, and taking a rev-share from the developer.

Harder examples of 2SBM are where the operator wants to act as an identity/authentication provider, enabling various network-based APIs like location, or where it wants to provide some form of QoS or "slices and diced" bandwidth for fixed or mobile broadband. Notwithstanding the ongoing wrangling about Net Neutrality, operators would dearly love to charge Internet companies such as Google or Facebook or Netflix for using "their pipes". As I've written before, simply acting as a bottleneck or tollgate is improbable - for any chance of getting "cold hard cash" for broadband 2SBM, the operators need to help the so-called OTT players do something extra, which best-efforts connectivity cannot do.

This is proving tricky, because the Internet companies have proven quite adept at making the most of ordinary Internet access connections, while the operators have found it hard to deliver "provable" enhanced QoS, especially in mobile, even where the law permits.

So at present, the amount of revenue flowing from to operators from YouTube, Hulu, eBay and so on is vanishingly small, once you exclude basic connectivity from their servers - and perhaps some newer trends about peering / transit for those generating the greatest volume of video. Many of these companies have developed their own in-house alternatives to operator APIs (location has been the easiest, but others such as messaging and identity are evolving too).

So despite some ridiculous, sycophantic and wishful-thinking "telcowash" (4MB PDF) from the likes of consultants such as ATKearney, the chances of deriving extra revenues from Internet companies, by just sitting in the middle of the network with a couple of DPI and optimisation boxes, seems as hard today as it did three years ago.

Instead, there's a slow trickle of cash going *the other direction*. Operators are paying OTT companies for their unique applications and capabilities. DoCoMo has just cut a deal with Twitter to embed its apps into featurephones, and use its "firehose" feed for location-based services. Verizon has partnered with Skype, as has H3G - something I feel might evolve much further now, given the Microsoft acquisition. Facebook is reportedly charging for bulk access to its own APIs - which makes those RCS visions of handset addressbooks injesting profile pictures and statuses look unlikely. And then we've had the acquisitions - France Telecom buying a major stake in local YouTube rival DailyMotion, Telefonica buying Jajah and so on.

And then of course there's the huge amount that operators spend on Google Advertising.

In other words, despite all the rhetoric, it seems like the OTT players are charging the telcos, not vice versa. The reason is simple - the OTT players are typically selling innovation and new value *first*, not attempting to monetise control. Enhanced Twitter will add value to DoCoMo's customers. Google's clever advertising and analytics help operators sell more stuff.

When the operators can demonstrate that their 2SBM offers add value (and revenue) to upstream players, especially on broadband, they are likely to buy them. But they are unlikely to pay a "control point tax" without upside.

How many operators employee marketing staff to show that they can help Facebook, Google et al make more money if they use the operator APIs or QoS mechanisms?

Until that point, the balance of payments between telcos and OTTs will stay in the red.

Another reason why app / service based pricing for mobile broadband will fail

Imagine, if you will, that you are the CEO of a mobile operator that's just launched a new tiered-pricing model for mobile data on laptops and smartphones. It's based on differential pricing and QoS for different data/Internet applications. You've bought a ton of DPI and policy boxes to detect and enforce traffic, and you've proudly announced a new "menu" of pricings.

$10 per month = email, IM, basic web browsing
$15 per month = adds in social networking & mapping
$25 per month = adds in low-quality video & selected cloud services & basic VoIP
$35 per month = adds in high-quality video & high-quality VoIP

You've nicely defined all the different web services into the different buckets, and set up the T's and C's and the policy boxes appropriately.

Now this morning, you've woken up to find that Microsoft has bought Skype. So now Microsoft has extra IM, VoIP and video-calling, as well as its own way of doing WiFi offload via the Skype/Boingo relationship. There's likely to be a whole host of mashed-up applications, launched over the next couple of years - some fixed, some mobile, some consumer, some business, some free, some paid.

So how exactly does that fit with the carefully-crafted pricing model and network policy setup? What's the business process for evaluating what has to change? What are the technical implications? What are the legal implications? How does it fit with partnering deals? How will users be informed? Does Microsoft have VPN services? What happens to stuff Microsoft / Skype does in the cloud? Does everything look the same on different devices & OS's? And how fast can any updates be made?

The list of headaches is endless. The scope for messing up is huge. And it's all highly dynamic & will change continually.

For me, this is yet another example of why app-specific pricing & policy is doomed to be limited to a few niches (eg anti-virus, throttling P2P uplink). Never mind the Net Neutrality legal debate - it is practical problems like this that make service-specific tariffs and so-called "personalisation" service menus irrelevant at best, and outright damaging at worst.

Microsoft + Skype + Nokia = NextGen 4G Mobile VoIP & messaging done properly

NOTE: The Microsoft / Skype deal is not yet confirmed, as I write this.

But if it goes ahead "as leaked" this is another major step for Microsoft's aggressive pursuit of Google and Apple, which also may have a secondary effect: further pain for the telcos and especially mobile IMS and its flag-waving applications VoLTE and RCS.

[Plug: I'm running a series of upcoming "Future of Voice" Masterclasses if you want to understand more about the implications & rationale for this. Contact details below to learn more]

I'm pretty sure that a lot of the comment and analysis today will be around whether Microsoft can execute better than eBay, why the price is so high, whether this is "all about Google" and whether Skype would have been better off living inside Facebook.

For me, this actually looks like a near-perfect fit for Skype. The other candidates I had in mind were Vodafone, AT&T, Cisco and Ericsson. No, not the most intuitive choices indeed - but companies with deep pockets, an interest in innovative services models and a willingness to pick and choose among standards vs. proprietary solutions where it suits them.

Some comments that help to explain my conclusions:

• A substantial part of Skype's current user base is from PCs. Although mobile devices get all the glory at the moment, Skype epitomises what's best about desktop VoIP. More importantly, a laptop is probably the perfect device for many video-calling use cases, as the keyboard+hinge and upright camera is much better ergonomically than a propped-up tablet or mobile phone.This would have been lost in a purely handset-focused company (eg Nokia in the past, RIM or perhaps Qualcomm). This may have ruled out Vodafone too, I guess.
• Skype gets widely-used in business - often only semi-officially, but it's a critical tool for many travellers, people doing conference calls and so forth. It is also increasingly working on corporate-grade solutions. This would have been lost inside a Facebook or similar company.
• I think that some of the operators that are less aggressive about deploying LTE - especially for smartphones - are doing so partly because of doubts about getting VoIP to work properly, to a degree comparably-good with GSM telephony today. Skype has a significant chance of being the only massmarket VoIP that has a big user base, and works well on LTE, by 2014. The "option value" for that is potentially huge. Hence AT&T and Vodafone on my "other possible acquirers" list - I also would have added Hutchison 3 and maybe Telenor, but the price is too high.
• Skype is class-leading in terms of understand and helping manage QoE (quality of experience) for IP communications *from the user device*. It doesn't control QoS (in the middle of the network), but involves the user and the device hardware to make the best of what's available, and alert the user not just to problems "in the middle", but also to other things like not having microphone working properly, temporarily poor WiFi or 3G reception, or if your device's processor is running too slow. Both Cisco and Ericsson urgently need device-side expertise to really understand "end to end" performance, but both know how hard it is to get across numerous classes and brands of device.  Skype has that knowledge. They have missed out today - but I suspect that Cisco's investors would have been wary, and Ericsson probably would worry too much about annoying its telco customers. It is also why it would have been a poor fit with Apple, which is much less platform-agnostic than Microsoft, especially in mobile.
• Skype is leading the way on personal video communications. I don't use it personally, but many users do - the % of minutes that are video-based is astonishing. I remember speaking to a friend recently who didn't know Skype could work in voice-only mode. He thought it was JUST a video comms tool. It just works, and is cross-platform unlike FaceTime.
• In the massmarket, Skype is probably the only platform that has (by skill or luck) will worked out a way to get users to adopt "permission-based" voice communications. Many Skype voice or video calls are pre-arranged, or "escalate" from an IM chat and presence in a way that telcos have long dreamed about. Its desktop-first strategy (and timing) has enabled it to do what IMS should have done, had it been universally available and using a Freemium model in 2005. As such, this would have been a near-perfect (if expensive) Telco-OTT proposition - and also help craft a voice experience that is much more than "just telephony", but fits with the Future of Voice vision I wrote about recently for VisionMobile

Would Skype have fitted well inside Google? It's difficult to tell. Google doesn't have much heritage of making and integrating large acquisitions, while Microsoft is "not bad", with some successes (eg Hotmail, Great Plains) and some failures (eg Danger). More importantly, Google has its own voice/VoIP initiatives, and internal politics would probably have been horrible with a Skype acquisition.

There are many other issues to explore around the Microsoft/Skype deal - especially the missed opportunity for one of the telecom operator community to "escape the herd" and lead the emerging Telco-OTT space with a head start.

But it's worth stepping back and focusing here on the impact on IMS, VoLTE and RCS. I still take the view that VoLTE is "necessary but not sufficient" - it's very late in coming, but there definitely needs to be a "simple circuit telephony replacement" technology for 3G/4G networks. GSMA and its partners are heavily focused on getting VoLTE working, especially focusing on interoperability and familiar themes like roaming. However, there also needs to be a focus on two other things that I reckon are being overlooked:

• There needs to be a view about the Future of Voice angle. If VoLTE had started as VoHSPA 5 years ago, it could have just been Telephony v1.1 and that would have been fine. But the timing now is wrong - LTE is a key transition point, further catalysed by the smartphone explosion. In the next few years, voice *will* change irrevocably, expanding well beyond mere telephony to a huge diversity of applications and use cases. If VoLTE gets delayed, it will have missed its window of opportunity - and I think that's a significant risk.
• More practically, I think that VoLTE will have to content with a ton of real-world horribleness about getting VoIP to work while mobile and on cellphones. RF issues, battery issues, echo, poor acoustics, sound glitches, codec choices, packet-loss concealment and so forth. QoS only gets you so far - and then you need software and proper audio expertise to fix what's left. The network companies and standards bodies in VoLTE aren't really focused on microphones and sound volume levels - they're hoping that the handset companies will fix all that. Have a look back at the history of fixed-line VoIP to see how "easy" all that is to get right, even on relatively predictable home broadband or corporate LANs. Skype has been doing mobile VoIP for many years - and while it's not perfect, it's got a huge head-start.

In other words, Microsoft is buying a $8bn option on the future of the mobile telephony industry. If we get to 2014 and VoLTE isn't working as well as it should - Microsoft (and its partners like Nokia) will have both an OTT option and a "white label" proposition for operators. Also, don't forget that Microsoft also sells IP-PBX functionality in its Lync / OCS product - it doesn't think that all call control should reside in the operator domain.

As for RCS.... well I think this is just another nail in an already well-sealed coffin. Microsoft has never really bothered to grasp IMS ("Oh, that's just SIP isn't it?" was one response I got in a interview at MWC a few years ago) and it's now looking even more of a poor fit when combined with MSN, Live, corporate UC products and so forth. It seems likely that none of the big smartphone OS providers - Apple, Google, RIM or Microsoft will be particularly well-disposed to RCS. Sure, there will be various third-party add-ons for Android and perhaps other platforms, but it's unlikely to be a key priority for Windows Phone now.

I'll try and update this post or add another later on, after some reflection, but this should be enough to catalyse some discussion.

Also, now seems like a good time to highlight some upcoming events on "The Future of Voice" I'm running together with Martin Geddes. These will be small-group collaborative Masterclasses, drilling into the use cases, technologies, applications and user behaviour for voice communications, as we pass the point of "peak telephony" and move on to other modes of B2B, B2C and C2C interaction. The first one is in Santa Clara on June 30th, followed by London on July 14th. Martin and I will also be conducting customised private workshops for specific clients. Email information AT disruptive-analysis DOT com for details.

My Top 10 blog posts from the past few years

I don't check Google Analytics that often for this blog - most of the time I write what I want, and don't stress about the levels of readership beyond a link on Twitter or two. I'm not selling advertising space, and much of my "target audience" seems to find the blog anyway, so why bother with all that SEO nonsense?

But I thought it was interesting to look at the most popular posts I'd written and see if there's a pattern somewhere. Over the past 3 years or so, these are the ones that come out on top:

1. A post about sharing 3G dongle modems via a docking-station and WiFi. Not sure why this was so popular, except for the fact I coined the term "Dongle Dock". They never really took off as a concept, as MiFi-style products make for a simpler solution of 3G over WiFi.
2. My (in)famous post re-writing tbe Monty Python dead parrot sketch - in which the deceased Mobile IMS has been nailed to its LTE perch by the 3GPP/GSMA pet store owner. I know this one got very widely circulated - I still get comments about it today - so no surprises there.
3. A complaint about poor customer service I got from Carphone Warehouse. "Personal" rants tend to get seen by large numbers of similarly-dissatisfied people looking for others who share their pain. In fact, this would probably be at #1 as it was written in 2006, but I only started tracking hits this way in 2008.
4. Back to IMS, LTE and VoIP, with a post discussing the original announcement of GSMA OneVoice (now VoLTE)
5. This was a very short post from 2006, talking about how to integrate SMS into IP and IMS. It's notable that I still haven't seen any live demos (or even major announcements) about getting SMS over SGs working in LTE.
6. An ongoing theme of mine is about the over-hype of NFC and mobile payments. In particular, I expect NFC is going to be about interactions not transactions. One of my first & best-read posts on the theme was a couple of years ago. A more recent analysis is here
7. LTE voice once again - and specifically looking at the ill-fated VoLGA. I still think that it makes sense - and if VoLTE encounters the problems I anticipate, I wouldn't be surprised to see it get reincarnated somehow, perhaps as the basis for a Telco-OTT VoIP service on other telcos' LTE phones.
8. Another post stemming from personal frustration - this time about Vodafone's egregious data roaming pricing strategy about a year ago. Who knows, maybe I contributed to their eventual decision about adoption of the £2/day plan.
9. And *another* post on IMS, LTE, VoLGA and SMS. I hadn't fully realised how much traffic this discussion had got. For all those interested in my views, I'm hosting both a breakfast session on LTE Voice (Tues 17th at 8am), and an Analyst Spotlight on VoLTE and the Future of Voice (Weds 18th at 11am) at next week's LTE Summit in Amsterdam.
10. And finally in the Top 10, my predictions for 2010, from the perspective of end-2009. Not too bad on the whole. But yes, I know I'm still complaining about Twitter despite using it for a year now. It's still awful, but unfortunately essential. I'm @disruptivedean.

Business model innovation in mobile broadband - the insurance model?

At the recent Telco 2.0 event in Palo Alto, I was on the panel discussing mobile broadband economics.

I had an idea there, on the spur of the moment, that I haven't had a chance to write up until now. It's still in "prototype" form and definitely not 100% practical straight away, but nevertheless represents the sort of lateral thinking I have yet to see in the mobile industry.

I pay my car insurance based on an annual premium payment. I phone around (or look online) for quotes, which typically ask me for my age, address, type of car, security I use, history of accidents or convictions, some evidence of history of my actual insurance usage (ie claims) and a bunch of other questions that help them categorise my risk level with some very complex software. Some specialist insurers target particular demographics, or have detailed underwriting expertise that allows them to provide custom quotes, taking into account unusual circumstances. I also get a discount if my previous year's driving didn't result in excess "usage" - ie a no-claims discount.

It got me thinking - why don't we price for mobile data in a similar way? A 37yo male living in central London with an iPhone 4, commuting during busy periods, with a history of video downloads & obsessive Facebook use might get quoted £500 a year for mobile data, while a 57yo female with a BlackBerry living in a rural area and working from home might get a quote of £200. And if someone "abuses" the service, the operator has the right to decline to quote them for a continuation of service next year - or raise the premium considerably - so there's an incentive to be sensible.

Now clearly, this would need a major change to IT and billing systems - as well as some interesting discussions with regulators and re-training of customer service. I'm certainly not saying it's easy. But leave that aside for a second - do you really believe that if the *insurance* industry (hardly the most dynamic group of companies....) can do something like this, then the telecoms industry couldn't as well?

The nice thing about it is that the actual metrics that the telco uses to estimate risk are hidden privately inside the system. It might be a measure of GB data "tonnage". It might bias against people who use lots of signalling-intensive applications. It might involve clever location-based algorithms. It might give discounts for people who have use of 2+ phones. It might discount people prepared to accept a higher "excess" (eg policy management downgrades during busy periods). There's an infinity of clever ways to tweak the system.

I'm sure that there are other industries whose pricing schemes might be borrowed as well - energy, airlines, hotels and so on. Once again, it's about getting rid of the notion that "subscriptions" - especially monthly-based - are the only way to bill or market for telecoms services.

There's lots of nonsense being talked at the moment about "personalisation" fo mobile data - picking from a menu of apps and other such implausibilities. *This* is an example of true personalisation - a unique price and policy, just for you, calculated by examining your individual "risk" characteristics based on network cost and contribution to congestion.

Is KPN about to hit the Net Neutrality "suicide button" in the Netherlands?

According to this article on TelecomTV, the Dutch incumbent operator may be about to try to attempt the so-called "personalisation" approach to mobile broadband, charging "per-service" for Internet functions, in an effort to stem the rising use of 3rd-party applications that are substituting for SMS - behind last week's surprise profit warning.

Disruptive Analysis' view is that most app-specific personalisation concepts for mobile data charging are deeply flawed, and will likely lead to churn, counter-measures and outright animosity from otherwise neutral Internet players, as well as probable regulatory intervention. They will also most likely have significant problems with "false positives" and "false negatives". In other words, they will make a bad problem even worse. I wrote a blog post detailing some of the complexities a few months back - here. Although details are still sketchy, it looks like KPN's management may have made a knee-jerk reaction to its poor figures in an attempt to reassure investors.

Although this is in essence a "Net Neutrality" issue, it's not really something where I feel the issue is the principle at stake. It's more that it's a tactic that just won't work - and may quite possibly backfire to the extent it becomes suicidal.

To recap, KPN explained last week that its Dutch consumer wireless revenue shortfall in Q1 2011 was because:

"accelerated changing customer behavior became visible amongst smartphone users. New popular ‘apps’ on smartphones offer alternative ways of communication beyond traditional voice and SMS. The increased usage of these ‘apps’ lead to decreasing SMS and voice usage resulting in lower service revenues."

It further said that "Short term measures are taken to mitigate the impact on service revenues from these trends; these measures include personalized ARPU optimization and reduced discounts on data."

The accompanying presentation to the results shows the icons of Viber, WhatsApp and another service I'm not sure of (on slide #22). I suspect that KPN picked some relatively-minor examples rather than stir the pot by blaming Facebook or BlackBerry Messenger straight away. In other words, what many people have long, long expected has finally started to come true - SMS is starting to be eroded by alternative IP-based messaging firms. I described SMS as a "sitting duck" as long ago as November 2006.

Given that the writing has been on the wall for that long, you might have reasonably imagined that operators and their standards bodies might have thought about creating newer, better versions of messaging to compete. And that doesn't just mean relying on the pipe-dream of IMS RCS or old-style mobile IM - but actually creating something innovative that has the appeal of FB or BBM. Yet KPN only invested €82m in R&D in 2010 in total, against revenues of €13.4bn, much of which probably went on testing LTE and new fibre systems, developing back-office systems and so on. I'd be surprised if more than €10m went into trying to invent new services and applications, either solo or collaboratively. By way of comparison, one of the companies that has KPN scared has only just raised $8m - and so has presumably spent less than $5m so far.

But no.

KPN seems about to try to bill "per-application" for things that compete with SMS. Even leaving aside the inevitable use of email as a work-around, there are dozens of gotchas relating to mashups, VPN tunnels, or even hiding messages steganographically inside images. Will it block PCs from accessing parts of the web as well? What about prepaid data users? Roamers? MVNO subscribers?

I got upgraded to the new Facebook messaging platform the other day, which blends email, IM and FB messages. All inside an SSL tunnel to facebook.com. Packet-inspect that...

Now it's possible that KPN is going to try and do this in a more sensible fashion - perhaps zero-rating "friendly" sites, and increasing data prices for everything else. White-lists are sometimes easier to manage than black-lists.

But I have a sneaking suspicion that KPN has been over-sold on "personalisation" capabilities, and is about to bite off more than it can chew. Becoming "part of the problem" and taxing innovative substitutes will not succeed in competitive markets. Operators need to become "part of the solution" and offer something better. Despite the appealing Dutch folklore, this is not a hole in a leaking dyke than can be plugged by a small boy's DPI-enabled finger.