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.....