My suspicions on iPhone delays - chipset integration complexity?

EDIT 1am 6/10/11: RIP Steve Jobs

 So.

Now we know that we're going to get an iPhone 4S, and not an iPhone 5 for now. I'm quite glad that I haven't been speculating about what might or might not be in an iPhone 5, as there are plenty of analysts and other commentators with egg on their faces today.

And so now there are lots of people who are disappointed in the outcome:

"Is that all? It's the same device with a better camera and that voice recognition thingy. Where's our big screen, our NFC, our LTE - what happened to all the leaked designs and mockups of cases for a new device? Why did it take them so long to do this, surely this isn't 16 months work, these changes are minor!"

I suspect that the answer lies under the hood. What Apple has actually been doing is working on a new hardware platform which will probably endure for several generations of its devices. That has likely taken a *huge* amount of work: chipset and hardware level integration is massively complex and needs lots of fine-tuning. It's quite possible to have to start again several times if the outcomes aren't perfect - something that Apple has the unique luxury of doing as it's not really that pressured cashflow-wise to get something out, even if it's compromised. It's worth remembering that the original iPhone only came out when Steve Jobs thought it was up to standard, and I'd imagine that Tim Cook will take the same stance on the '5. Then think of all the other promising devices over the years that have had issues like awful battery life, or which crash all the time - or even Apple putting out the iPhone 4 before getting the antenna properly tested and sorted.

It's worth looking at what's in an iPhone. Most critically, the baseband chipset which is the "modem" which connects to the cellular network. (There's a separate story with the apps processor as well, see below).

In most of the iPhones to date, the 2G/3G baseband has come from Infineon (now owned by Intel), with three generations of silicon. The CDMA-based version of the iPhone 4 was the first to have an alternative chip, from Qualcomm. In theory, this chip could have been used to give the "world-phone" UMTS/CDMA ability touted for the 4S - but it was never actually switched on and used in this way.

While the baseband for the 4S hasn't been announced, I strongly suspect it's also a Qualcomm product, as they pretty much monopolise everything CDMA-related, and so dual-mode GSM/CDMA devices are pretty much a done-deal for the Big Q.

Most critically, not only does Infineon/Intel not support CDMA (critical to keep Verizon and others on-board), it  does not currently have an LTE chipset , although it is working on one for mid-2012 volume shipments. Crucially though, that still doesn't support CDMA, which will likely still be needed for a few years as Verizon and others will not have full LTE coverage and enough capacity until 2013-2014 at the earliest and possibly much later. And of course, regular readers will know that I don't expect VoLTE to be fully ready for prime-time for a long while either, so VZW iPhones will need at least CDMA 1x support for the foreseeable future.

And then there's the processor. The iPad has already been using the A5 chip, so it is natural that the company would like to migrate it down into the phone. The iPhone A4 was used in both the iPhone 4's, with previous phones thought to be using a Samsung chip. But a tablet has a big form-factor and battery, so there doesn't need to be such tight integration between the processor and modem - the baseband can be done as a "module" - which in fact works well, because the iPad has to come in WiFi-only versions anyway. But iPhones all need baseband and processor, fitted into much tighter constraints of space and battery size.

So Apple historically has had:

• A4 + Infineon (iPhone 4 GSM)
• A4 + Qualcomm (iPhone 4 CDMA)
• A5 + optional Infineon (iPad & iPad 2)
• Samsung + Infineon (iPhone 3GS)

But Apple won't want to support multiple hardware platforms unnecessarily if it can avoid it, as it wants to keep up its margins in the face of competition and will want scale benefits and performance optimisation. So there are probably four important hardware integration and evolution exercises that have been occuring at Apple:

• Move the GSM/UMTS platform from Infineon to Qualcomm, with lots of integration with the radio and other bits of the hardware
• Add UMTS capability to the CDMA versions of the device - lots of integration, again. [Note: it's more important to add UMTS to CDMA than vice-versa for outbound roaming, although I'm sure Vodafone likes the idea of being able to roam onto Verizon]
• Shift the iPhone platform from A4 to A5 processor & future descendants AND integrate this with the new (presumably Qualcomm) baseband

(There's also a vague chance that it's migrating away from the Samsung apps processor in newer versions of the 3GS, I guess - especially given the current IPR war between the two companies)


But more importantly I'm expecting that it is also....

• (I'm really hypothesising here) Developing a single LTE platform consisting of A5 (or A6 etc) processor and a CDMA/UMTS/LTE baseband, usable in iPhone, iPad and iImagineSomethingElse. This is probably a *huge* development project which probably faces a ton of horribleness in everything from power consumption to radio performance. I'd guess there's perhaps a fallback plan of going to separate UMTS/LTE and CDMA/LTE platforms if it faces insuperable problems, especially given the range of frequencies that will need to be supported. I suspect Apple would rather have two or three variants of the same core platform, rather than totally divergent solutions.

I'd guess that just doing the first three have involved a Herculean effort, which we now see the results of in the 4S. If that means that Apple has to disappoint some of its more ardent fans clamouring for new stuff... well, I reckon they took they realised that doing everything in one go was impossible, and decided to take the pain now. 

It's also possible that Apple sticks with another iteration of the current 4S platform for another year, before adding in a "perfect" LTE option in 2013. My prediction from June 2010 was that Apple support LTE was most likely in 2012 or 2013 (I'm glad I dodged the bullet on the 5% 2011 chance). An October 2012 launch would make sense - and would also fit in with future timelines of both Qualcomm and Intel (and possibly others like nVidia).

Edit: there's also a chance Apple will do something truly disruptive with its LTE implementation, and move to a full dual-radio SVLTE approach, keeping telephony on circuit-based radio connections rather than relying on VoIP on LTE or the uber-clunky, worse-than-useless circuit-switched fallback option. Interestingly, Huawei has now started floating dual-radio as a possible option (ZTE has for some time). Hat-top to Zahid for spotting this, I'll follow up another time in depth - and it's also covered in the Future of Voice workshops' section on LTE.

To sum up - in my view, the iPhone 4S is all about the hardware platform shift. Stuff like Siri is window-dressing in comparison, to give the fans at least something visible. LTE support was completely unrealistic (as I've said before) given the other more important and urgent changes going on with the platform. It's also another reason why fripperies like NFC have been kicked further down the road - especially as I imagine Apple knows very well that it's being overhyped.

This might be disappointing for some, and could possibly give Microsoft and Nokia an opportunity to profit from a temporary lull in external iPhone evolution, but it's likely set the scene for continued growth and profitability from Apple's mobile devices for a few more years.

3GPP gets serious about the Future of Voice beyond telephony?

Some of the themes that Martin Geddes and I cover in our Future of Voice workshops (sign up now for Oct 27th!) are that:

• Voice is much more than the basic 100-year old product called "telephony", or even the 30-year old product called "telephony while walking about"
• There is a need for more cleverness in acoustics, especially for Mobile VoIP & VoLTE
• In the network, there is a need for more “cure” as well as "prevention" when it comes to QoS and QoE, eg packet-loss concealment for when packets do (inevitably) get dropped

I've also been quite vocal for some time that bodies like 3GPP and GSMA have largely ignored these issues for now. The very term VoLTE (voice on LTE) tells you all you need to know - it's basically just Telephony 1.1 intended for LTE, not a generalised Voice platform technology. It's ToLTE, not VoLTE. There is also not much in the specs about acoustic requirements on devices, nor about ways to manage the user experience when problems occur.

Certainly, I've not seen anything from these type of organisations asking more fundamental questions like "What is voice communications anyway?", or "Why exactly do people make phone calls, and how is that changing?". Asking these questions and digesting the answers would drive a better understanding of exactly what mobile operators should be doing with voice services to protect against inevitable revenue erosion in the coming years. 

These type of things are not unimportant. There are technical, commercial and human-behavioural reasons to consider - and it is too late now to start thinking about merely replicating "old telephony" on LTE (or more generally), when others are defining the new user experiences and sources of value in voice communications. The right time to have started work on "vanilla mobile VoIP telephony" was four years ago - the world has moved on since then rather a lot, and fixing yesterday's problems (badly) is an exceptionally risky way to deal with a critical market transition.

For example, an increasing proportion of users now feel that unsolicited phone calls - even in business - are rude. It's a source of irritation - why is this person phoning me when I'm busy?! They resent being made to interrupt their day - or their more important data applications - for intrusive and unwanted calls that force them to divert 100% of their cognitive load (and device activities) to something that is perhaps of no value. The notion that "voice always come first" harks back 100 years, to the days when voice services were so expensive that all calls were de-facto important, and you dropped everything when the phone rang, with a live operator connecting the call. Those days are gone - this is why the escalation method via IM or SMS ("OK for a call now?") is becoming more prevalent. 

And then there's a whole plethora of non-telephony voice apps - I've seen a Skype slide with a VoIP-based baby monitor, for example. That's not a phone call (it's built into dedicated hardware for a start), and neither is in-game voice chat or a hundred other innovations with mashups and interesting hybrid forms of voice. 

Think of it in human speech terms - only a certain proportion of vocal activity is in the form of two people having a protracted, two-way conversation. There is singing, arguing, presenting, mumbling, rapping, acting, announcing, mimicking, being part of multiple conversations, interrupting and numerous other "use cases" of speech besides a conversation session. The same is true of electronically-communicated speech.

Browsing through the new work items for 3GPP R11, there are some interesting items, notably "Extensions of Acoustic Test Specifications", and "Codec for Enhanced Voice Services"

I'm not going to do a full analysis of these, but here's a couple of choice quotes from those:

• “Enhanced quality for mixed content and music in conversational applications (for example, in-call music), leading to improved user experience for cases when selection of dedicated 3GPP audio codecs is not possible”
• Robustness to packet loss and delay jitter, leading to optimized behaviour in IP application environments like MTSI within the EPS.
• Acoustics and speech processing in terminals have a strong impact on the perceived quality of voice services. The audio test specifications in TS 26.131 and TS 26.132 do not completely reflect all aspects influencing user experience

The good news is that (a) the 3GPP recognises that what we have today isn't the last word in voice communications, and (b) that all of this is perhaps only 2 years late, rather than 3-4 years as we've seen in the past (maybe someone's been reading this blog or attending some of my conference speeches). 

But the bad news is that the context in which all this is taking place is itself evolving. The goalposts are moving very quickly, with problems in multiple parts of the ecosystem - the core, the radio, the device, interconnection points, BSS/OSS and so on. 

Not only that, but the very notion of "quality" is itself shifting quickly from the narrow network observable of QoS, to a much richer notion of QoE. If mobile operators are to retain or grow their 100's of billions of dollars of telephony revenue in the IP era, they will need to demonstrate value at the experience level, which isn't necessarily measureable in terms of 3-9's or 5-9's of availability.

Technically, there will be much more variable loss and delay to deal with because of faster networks, high definition audio, with complex interactions between flows at every layer. It's not the absolute loss and jitter that is going to be the problem, but their variability over time. 

We are also seeing the extension of voice to new acoustic environments, such as "ambient voice" in the home, devices with different form factors (e.g. smartphones with speakers on the back vs front), in-vehicle systems, "social voice" based around integrating the TV experience with voice communicatiosn and so forth. Consider what happens when you hit the 'speakerphone' button in some of these context - should this be a receiving device problem, or should there be a signal to the sending device to also do microphone audio processing differently?

The example 3GPP cites of hold music is a good one. Things like pre-recorded announcements might also be better sent using TCP and then played, rather than a single non-reliable audio stream. So future audio processing of, say, an interaction with a call centre might use a number of different audio processing strategies at different times in the interaction, depending whether you are talking to the IVR, person, voice authentication system, hold music, etc.  [Credit to Martin Geddes for this point]

The bottom line is that voice and future telephony - is not a "solved" problem, especially with LTE.

It's good that 3GPP is aware of some of the issues and is addressing them, but Martin and I are unconvinced that the scale of the problem has yet been fully grasped, nor how compressed the timelines are before third parties solve them (better) first. We'd like to see much more open and clear discussion of future voice use-cases, and a clear roadmap to go from Telephony to The Future of Voice.

And with that - a final plug for the next Future of Voice workshop on October 27th in central London, where we cover all of these themes and many more. It will be an excellent introduction to all these areas, with plenty of scope for networking and collaborative discussion and problem-solving. Details are here.

Use the promo code VIP25 for a discount on the pricing if booked online, or email information AT disruptive-analysis DOT com for more information or invoice-based payment options.

I'm running the next Future of Voice Workshop in London, on the 27th October

The next in the series of ground-breaking workshops on The Future of Voice is taking place on 27th October in a central London venue.

Associate Martin Geddes and I ran previous successful public events in London and California over the summer, and we've also been privately advising various operators and others market participants about the current state of telephony and messaging.

The public events have featured a really broad cross-section of the voice ecosystem: we've had Tier 1 operators' strategy groups, start-up 4G network operators, vendors from hardware & software domains, regulators, Internet VoIP specialists, voice-centric developers and investors. We've even had some of the internal "Telco-OTT" skunkworks divisions of major telcos join the discussion.

The workshop format is designed for interactive learning and networking, with a maximum of just 20 attendees. Martin and I try to "curate" the group for optimal discussion and differences of viewpoint, as we've seen that generate the most interesting and unexpected debate and alignment.

The timing for Future of Voice is particularly exciting. Whilst I've been following and commentating on voice and VoIP for years, it's only really in the last 6 months that I've seen a sudden ramp-up of concern and attention from operators, as they realise that some major tectonic shifts are occurring, especially in mobile. Core revenues now look under threat, and the need for both defensive and offensive action is urgent.

Some of the areas we'll be covering on the day include:

- Why do people make calls anyway? What's the underlying psychology of human communication, that's driving the fragmentation of mechanisms by which we reach each other?
- What's the difference between "voice services in general" and classical "telephony"? What other formats and business models are there for voice comms, beyond the familiar 100-year old "call"?
- How should telcos' respond to OTT voice and messaging providers? Should they try to block them, beat them, buy them, or copy them?
- What exactly is a "voice application"? How are they enabled by "voice platforms"? And who is in control, the telcos, Internet VoIP players, developers..... or nobody at all?
- What's going on with messaging and social networking? Is SMS revenue about to fall off a cliff.. and can the telcos' preferred answer of RCS be the saviour (I think my regular readers will know my answer about that one, but something different may come out in discussion)
- What are the organisational challenges for telcos in coping with voice? Who "owns" the core voice and messaging portfolio within operators, and what should they be thinking about?
- What differences does LTE make to the telephony marketplace? Is VoLTE the answer?
- How does the enterprise and B2C/customer-care communications fit into all of this?
- Will be still be paying per-minute and per-message in the future? Will it all have been competed away to zero, or given away by Apple or Google or Skype? Or are there other potentially successful business models to consider?

This is going to be a busy and intense day. If your company or livelihood depends on understanding where voice service is going, and you want to know what you peers are thinking, you should be there.

More details are at futureofcomms.com

You can book online here, or contact me via information AT disruptive-analysis DOT com to inquire about invoicing or private internal events.

Who's driving policy within operators?

Last week I chaired sessions at two co-located conference in Berlin - Policy Control, and Mobile Broadband. Some of the sessions involved the usual handwringing about data "explosions" and so-called OTT providers, but others posed some really interesting issues about how and where control over mobile broadband gets instantiated in operators' infrastructure and businesses.

I was particularly struck by a couple of operator speakers coming from very different perspectives - the IT and Network sides of two telcos. It is no news that there is still something of a gulf between these these two worlds, but I hadn't realised quite how vigorously that plays out in the policy management space - and by extension, in congestion/traffic management as well. Together with a very detailed interview I did with a vendor, it's led me to a few observations and conclusions.

In a nutshell, network-oriented policy is about controlling costs, while IT-based policy is about revenues. Yes, there are many nuances and shades of grey, but that simple observation has helped clarify a lot in my mind.

In particular, it encapsulates why I find it hard to buy into the "monetisation" stories from many of the network-side vendors: in general, those pitches involve trying to define plans and tariffs based on what the network can see on its own, with minimal integration into the billing/charging side of the house. This is why so many network vendors are adamant about application-based charging - their boxes have visibility of packets, flows and so forth, and they are looking for a reason to extend from basic control (eg throttling P2P) to more value-added capabilities, such as driving tariffs. But many of those processes have unacceptably high levels of false-positives and false-negatives, and are at the mercy of shifts in application structure and user behaviour that are hard to discern from inside the network. (For example, the mashup phenomena I've discussed many times before). This means that superficially good ideas have a credibility gap when viewed through the lens of practicality.

Conversely, the IT-integrated policy functions are much more oriented around users - who the subscriber is and what they're entitled to, rather than trying to decode what they're doing on an instantaneous basis. And in that circumstance, there is much less vagueness to contend with. If data consumption is associated with me or you, there's no 95% confidence interval - it's known to 100% accuracy.

Now obviously the network-side policy & DPI infrastructure still has to be the measurement and enforcement point - for example ensuring that traffic is counted and caps or tiers are enacted - but that's driven by the user and data-plan, rather than a complex internal feedback loop based on realtime interpretation of the user's activities.

I agree with the vendor I spoke to that this will change over time - but the key dimension will be around the network identifying when there is actual congestion occurring. "If a cell is actually full with data traffic, then take actions XYZ, starting with those subscribers that are both lower priority and who are doing something like video streaming". This will need to come from the radio as well - simply looking at TCP from back on the Gi interface by the gateway won't cut it.

In a way, I suppose you could rephrase the cost/revenue description above as being: "Charging-based policy is about prevention. Network-based policy is about cure". In other words, the IT-based approach attempts to moderate users' behaviour in advance, through segmentation and templating. The network-based approach is there to fix things, when problems occur - especially congestion. Over time, the cures will become much more granular and targetted, while the prevention strategies will become more subtle and sophisticated.

Related to this is the observation that IT departments are often more responsive to the needs to operators' marketing functions than networking groups. Rather than forever trying to standardise, they tend to have a more pragmatic view towards customisation and flexibility - something that is much-needed with controlling mobile data. There is also much more likely to be a willingness to involve the end-user in the process, for example through a trend towards on-device self-care portals for visibility and tariff upsell.

I'm still trying to get my head fully around all this - but distilling all the conversations I've had recently I am moving to the view that charging-driven policy use cases are, on the whole, more plausible and workable than those that are purely driven by the network. This is also true of issues around dealing with mobile video - transparent "optimisation" of content, without reference to user details is only ever going to be a partial (and often unsatisfactory) solution.


EDIT - within hours of posting this piece, I saw this news item about Verizon, which seems to underscore my point. Although implementation details are thin, it sounds like the company is using a combination of network-based congestion detection, plus subscriber records to pick out the "usual culprits" as warranting throttling. Being in the US, Net Neutrality obviously plays an important part in the approach, and this appears neutral in terms of content/service differentiation.

Great example of a mashup creating a network-policy failure

A very quick post.

I've got the My Vodafone application downloaded onto my iPhone. To the basic function of reporting usage against data/voice/caps (which works only sporadically anyway), they have now added a WiFi finder, presumably to encourage use of the BT Openzone option that's bundled into the package. The finder part of the app helps you locate your nearest hotspot, so you can get online - and implicitly, so Vodafone can benefit from offloading your data.

However, there's an amusing little "gotcha" hidden away in the terms:

"Access to the My Account part of this app is not chargeable. However, if you use the WiFi Finder section, it will access Google Maps, which will fall into the same category of data usage as accessing Facebook or Twitter, and you will be charged for data usage"

In other words, you have to pay extra, in order to help Vodafone offload traffic. (Separately, the VF app also wants me to download a configuration file of some sort for WiFi. Not a chance, as I don't trust it to mess up the settings for my BT-Fon and Onavo connectivity clients. WiFi Neutrality rules....)

As I've said numerous times before, web mashups fit exceptionally badly with DPI and application-specific policy or charging approaches. Vodafone can't even zero-rate its own application - either because the policy engine can't distinguish which device-side app that a particular Maps session appears in, or because it can't/won't pass that information back from the app to the billing system.

And even if it could zero-rate that bit of maps usage, it would then have to hack the application and it use of the Google API, to stop users just using the WiFi finder version of Maps as a general navigation application.

This goes along with another example I'm using at the moment - Facebook can now render web pages inside the app and also keep YouTube videos within that window as well - still with the blue Facebook bar across the top of the screen. So when the mythical "Facebook data plan" gets launched, will I still be able to watch the embedded videos? Especially if FB puts up its own video streaming service at some point in the future?

More thoughts and observations on WiFi Neutrality

I wrote a month ago about the importance of "WiFi Neutrality" - that users should not face unreasonable blocks on which WiFi networks they can access, especially where a mobile operator attempts to force them towards "preferred WiFi networks", and stops (or makes it hard for) that decision being over-ridden by the customer.


Over the past few weeks, I've been speaking to a variety of operators and vendors in more depth about this issue. I'm seeing something of a polarisation:

• There are some who understand that the WiFi genie is well and truly out of the bottle, and that (perhaps grudgingly) users need to be given tools to set their own preferences and policies, and that the operator's / network's role is in helping make the telco-preferred WiFi easier and safer to use, when that's appropriate. Ideally over time, a greater proportion of WiFi usage will occur on the operator's own or partnered networks, and more control can be exerted, or unique services offered.
• There remain others who are either hostile to WiFi on smartphones entirely, or who believe that it can/should be strictly controlled by the operator, even to the extent of greying-out menus or features on connection manager software that allow user choice to be exerted.

My view is that the latter group are in for an extremely hard and unpleasant surprise, especially if they operate in competitive markets. There are probably now a billion or more regular users of WiFi, who understand it well, deal with occasionally-clunky authentication, but who like the freedom to choose when and where they connect - especially if it's free. Taking that choice away from them, when they have already come to expect WiFi Neutrality on their smartphones, is unlikely to be received positively. Even changing the connection experience to add in more clicks/swipes to get to what used to be easy is likely to be anathema.

It's also important to note that about 2/3rd of WiFi users (in the UK at least) *never* use public hotspots at all. This is something I backed-out of some recent Ofcom data about Internet usage, devices and locations: the proportion using hotspots is tiny compared to the total "wireless" use on laptops, even when you factor in some of them using 3G dongles. Conclusion - the bulk of WiFi usage is in homes or offices - "private WiFi", not offload or anything to do with the operator.

As I've been saying for years, WiFi is actually WLAN, or Wireless Ethernet. You wouldn't expect a service provider to manage the RJ45 socket on your laptop, nor for that matter the USB ports or Bluetooth. Exactly the same deal with WiFi - it's a general-purpose utility for laptops and smartphones, with many use-cases, only a small proportion of which are anything to do with "services".

There is one large exception here - China - where WiFi has always been a lot more tightly regulated and controlled than in much of the rest of the world, for both public and private use. Like other countries with restrictions on their citizens' use of technology, I can accept that a more proscriptive approach to on-device WiFi connection management is likely.

But more generally, I still believe that operators need to balance their own uses of WiFi on consumers' devices with their users' other applications of the technology. If they don't they will likely catalyse a shift towards "vanilla" devices bought through retail, just using an operator SIM and minimal app/branding customisation. These will be owned by the user, who will then obviously be able to use WiFi however they wish, just as they do today on laptops.

Operators need to encourage on-net WiFi use (ie their own / partners' WiFi) by making the experience and performance better. The opposite strategy - trying to make the experience worse for off-net WiFi - is not tenable.

Deciphering the Orange Sosh proposition

I've just seen that FT/Orange France has announced a new brand/proposition called Sosh, aimed at "hyper-connected" youth segment, majoring heavily on data and bundled SMS.

I'm a bit confused by the press release though - it's not obvious that the 2-hour, 5-hour or 24/7 product names refer to telephony minutes, or data time allowed online. There is a reference to "All of the Sosh offers are commitment-free, and they give users access to all of their content and digital services, including social networks, videos, e-mail, internet and VoIP." ... but I'm not sure how that squares with 2/5 hours. It would be bizarre if you could use Facebook and Twitter for 2 hours a day, as it's not clear how long a "session" lasts, especially if you've got a background app open on a phone sending keep-alives.


On the other hand, €20 a month sounds quite a lot for a 500MB/120 mins plan that doesn't include a handset, even if it does allow you to use VoIP and Orange's WiFi hotspots. Same for the 1GB/300mins for €40 plan.


Interestingly, handsets *are* available, bought separately, and with 12/24 month payment plans. That's very interesting as it fits in with some earlier posts of mine about the accountancy grey-zone of handset subsidy/loan repayments being counted as part of ARPU.
 
The press release also has logos from Youtube, Twitter and Facebook, as well as Orange's 50%-owned Dailymotion videp service. It's not clear if these are official endorsements, if there are commercial agreements in place, special content/deals/pricing or anything else.

Overall, it's all a bit confusing - possibly because there's less English-language info published about what is initially a France-only service. Hopefully, we'll get some clarity on this soon.

Edit: mystery solved. Apparently French mobile operators often quote talk-time in hours and not minutes. Still seems weird that they're calling Sosh a proposition for hyper-connected, social-networked youth, and still using voice as the primary way of segmenting the pricing tiers.

The fallacy of "monetising OTT" against the greater threat from Under the Floor (UTF) players

As far as I know, I was the first to coin the term UTF (Under the Floor) player in telecoms. It's simple really - that's where you put the pipes in most buildings, under the floor. Initially, I used it as a light-hearted riposte to the derogatory use of the term "OTT", and I though it might get adopted by Internet companies as a way to sneer at telcos.

Although I now grudgingly say OTT as well, I cringe inwardly every time I do - it has become an industry-standard term, unfortunately. But in my mind it just highlights the confrontational "them vs. us" of telcos and many of their suppliers. I confidently believe that no operator will make "cold hard cash" or otherwise monetise OTTs - insulting your potential customers is never a winning strategy. Vendors that spout this type of #telcowash by perpetuating these epithets will also likely suffer over time; pandering to your customers' crude prejudices is not a mark of strength and vision.

Conversely those companies (operators and vendors) that take a softer line dealing with companies that they genuinely and sincerely see as their peers and equals - perhaps referring to them as Content & Application Service Providers - have a better chance of commercial success. That said, my experience tends to be that operators divide on departmental or even individual lines. Some of the more forward-thinking marketing or product staff understand the value of Internet-based applications and seek to work collaboratively. Conversely, the traditionalists who believe that everything should be a centralised and interoperable standardised "services" - or who pretend to misunderstand the selling of vanilla Internet access - are the true dinosaurs.

But all this masks a more subtle - but perhaps ultimately larger - threat. It actually suits many vendors' wider purposes to cast so-called OTT players as the villains, posing an existential threat to operators. But all the time, another source of value erosion is occurring beneath the surface - quite literally under the flooor.

So over the last couple of years, I've had a bit of a rethink on the use of the term UTF. While from the content/Internet perspective, operators are indeed "underneath" them, they don't really pose a particular threat except in cases of egregious abuse of Net Neutrality, or where they are protected by competition law.

What's at the bottom of the stack from the telco perspective is a collection of true UTF players, that are eating away at the underpinnings of value for the telecom industry: the network itself, and the supporting OSS/BSS systems. Outsourcing, managed services, and especially wholesale networks operated by governments or infrastructure-based telcos are the perpetrators here.

I've talked before about the roles and risks of wholesale-centric networks (see this piece I wrote for Telco 2.0) in LTE, but it's worth drilling into the outsourcing side of UTF in more depth.

Now, I need to qualify this. Clearly, some things are indeed often best outsourced (eg maintenance), and in some cases hosted services can enable telcos to reduce upfront capex and risk when launching a new offering.  And in some cases, structural separation is forced on unwilling telcos, or governments such as Australia invest in a universal broadband infrastructure. In other instances, wholesale-centric wireless networks are being built because that's the strategy of a new entrant (eg LightSquared) or because of - one again - government intervention (eg Yota in Russia).

But collectively - and especially with the conscious, full-scale outsourcing of mobile network build and operation - I see a substantial risk. Nobody knows what business models might be found appropriate in 2 years' time, with LTE or other wireless networks. Nobody knows what applications may prove important, or where/how they are used. Nobody knows what the effects of Apple, Google or others spending their war-chests of cash might be, and what strategic responses are appropriate.

The basics of the mobile communication industry - and the basis for network capex and opex - is shifting. In the past, we knew that next year would basically be like this year, with a bit more traffic and some more users. That's easy to plan for, and can potentially be handed over to a third party for an extended contract, if you do your sums correctly.

But now, flexibility and responsiveness are key. Think back just 3 years. Who predicted traffic growth from PC dongles? Who predicted usage patterns of iPhones and Androids? Who thought seriously about WiFi offload? Who talked about signalling load breaking networks? Who thought about innovative wholesale approaches? Who thought about localised mobile services in sports stadia or retail outlets? Indoor data coverage, hotspots and not-spots? Who thought about all the various use cases for mobile policy management, and the formats of mobile data and application they might apply to?

And who thought about the impact these could have on network design, architecture, dimensioning and operational priorities? Operators have been forced to react to these changes, and will likely to continue to face uncertainty and a dynamic landscape for mobile data in the future.

How much damage would be done, if an outsourcing deal had been written insufficient flexibility and response-times to cope with these issues? Even the basic metrics ("subscribers", "traffic") are becoming irrelevant or in need of more granularity.

How much inherent value is there to the operator in being able to make their own decisions, differentiate and manage their own network in the way they see fit? In my view, that is at the core of being a responsive, profitable operators. Yes, it's possible to construct some managed service contracts to build in flexibility, but ultimately, how well does that work, when the really unanticipated occurs?

It is interesting to read that Sunrise, the Swiss operator, is cancelling an outsourcing contract [original press release PDF here ] This is a telling line "In view of the future modernization of the mobile network and the large upcoming investments in the next mobile generation LTE, Sunrise is dependent on great flexibility." There is also a reference to wholesale as a driver for more flexibility.

In other words - Sunrise wants to become a UTF player itself, not be supported by one.

Somehow, I don't see the vendor community being as keen on the UTF acronym as they are about OTT. Operators should ask themselves why that is. My view is that it serves UTF providers' purposes to push operators into believing that all the value is in chasing end-user services - even if yesterday's services are now turning into applications or mere features.

Footnote: if you'd like to see a (rather contrarian) presentation on the UTF threat I gave at a recent conference on network-sharing, it's viewable here

Vodafone zero-rating Facebook traffic on its new FB-specific device?

I've just had a poke around my local Vodafone store in central London.

Most interesting thing I saw was a display for its new HTC ChaCha phone and plan. The phone itself is a small touchscreen + QWERTY device which has a dedicated Facebook button and branding. The point-of-sale material contains the phrase "An extra 250MB of free UK data for Facebook".

Now the interesting question is exactly what that means, and how that policy is constructed / enforced. Is it an "application-specific" charging mechanism, or perhaps more "device-specific", similar to a BlackBerry plan?

Some supporting evidence comes from the brochure. "We've created a special Pay Monthly price plan just for the HTC Cha Cha, that lets you access Facebook more often".

That raises a whole set of questions. I didn't have a chance to play with the device so I'm not sure exactly how the Facebook experience works, but it seems to be deeply integrated into the phone. The FB button "pulses whenever you do something that provides an opportunity to share content or updates" with one-touch uploads. Does the Facebook app display "shared" content from elsewhere, eg web pages or videos? Do these count in the 250MB? And is that 250MB actually dedicated to Facebook (however defined) or have they just increased the normal allowance of 500MB to 750MB and just assumed that most will be Facebook anyway, given the nature of the device? The brochure has a slightly different wording: "extra 250MB of free UK data that you can use on Facebook". There's no word "only" in there.

Asking the shop assistant didn't clarify much. She initially said "Yes, you can use it for Facebook, Twitter, whatever!". When asked again, and more specifically, whether it was just zero-rated for FB, she seemed less certain "Er, I'm not sure of the details".

It's also unclear whether this only refers to the in-built Facebook client. What happens if FB releases any other apps that get downloaded separately, such as its new Instant Messenger service?

Another interesting observation: there is no mention of the word "Android" anywhere in the paper marketing material that I could see, although on the website it's clearly marked as a GingerBread device. There's no extra clarity on the Facebook-specific data plan terms though.

I'll have a punt that the shop assistant is right, and that there's no clever DPI-based filtering of Facebook traffic vs. other websites.

If anyone from Vodafone would like to comment (anonymously or otherwise), please feel free.

EDIT 11th August: I've had some feedback about this post now, and about the ChaCha's data plan. My guess was correct - it's not based on DPI filtering and prioritisation, or even formal "zero-rating". It's a device-specific tariff including an extra 250MB of data, useable however the user wants, not just for Facebook. This notion that a device-specific tariff could be a sort of “back door” way of doing app-specific policy without falling foul of Net Neutrality, was something I’d floated in a white paper last year: http://www.scribd.com/doc/45784876/Policy-Mgmt-Paper-1-Role-of-DPI-and-Device-Awareness

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