Communications

The Dumb Pipe Paradox ― How open access networks build shareholder value

On more than one occasion, "natural monopoly" arguments have been used to obtain, and/or hold onto, a government granted monopoly,  This is definitely true of access networks where the physical right-of-way to any specific real estate parcel is a limited resource, but the economics of what you put in it have changed over time.  At one time it made sense to consider telephone service a natural monopoly.  And for most of the twentieth century, telephone service was operated that way (think Bell System in the US and government run PTTs in most of the rest of the world).  In the latter 20th century, cable TV became a second such monopoly.  Today, it's increasingly clear that telephony and television are higher layer services, not inherently tied to the access network.  Yet our laws and regulation have barely evolved ― each access network is still regulated as a different vertically integrated monopoly.  And, managers in each business focus on preserving their historic monopoly even as market forces or government regulations force them to also offer Internet access.

So it's interesting to see solid economic analysis showing that access network shareholders would make more money if management was willing to open up their access networks, i.e. become "dumb pipes."

The first such argument I encountered was by Craig Moffett and Amelia Wong of Bernstein Research who wrote an interesting paper The Dumb Pipe Paradox, early in 2006.  The original paper is not on line but I have some quotes here and there are some other comments here.  Craig and Amelia were looking at Cable TV's hybrid fiber-coax networks and concluded that cable companies could make more return on investment if they were in the pure dumb pipes business.

More recently, I reported on a speech given by Benoît Felten of Yankee Group and Fiberevolution in which he argued that new fiber to the home (FTTH) investments could be paid back more rapidly if the FTTH network were open, i.e. offered to competitors at attractive wholesale rates.

Now Benoît has written a detailed report describing his findings.  Although the report is for Yankee Group subscribers only, Benoît is also giving a webinar on the subject next Tuesday and that's open to all.  Register here.

I particularly liked the polite suggestion near the end of Benoît's report:

Recommendations for Incumbents
• Re-examine your economic fundamentals in light of the FTTH business model. It’s irrational to cling to antiquated business practices if new approaches, no matter how disruptive, deliver better shareholder value.

Shareholders should demand phone companies open their fiber networks

A few weeks ago, Benoît Felten of Yankee Group and Fiberevolution gave a speech at a New Zealand Commerce Commission event which included a fascinating argument.

He points out that receiving a return on the substantial capital investments that a fiber to the home (FTTH) project requires is much more dependent on takeup rates than on the average revenue per user.  

Single player large scale deployments usually achive only 20%-25% initial adoption after which growth is exceedly slow.  On the other hand, systems which are open to competitors, i.e. with viable wholesale services, attract many more players who market, sell and deliver new services thus dramatically increasing adoption and accelerating the wholesaler's return on investment.

In short, obtaining a regulatory holiday so you can run your new fiber network as a monopoly is actually bad for your shareholders!

Benoît's speech was filmed.  For the full presentation (in four segments of < 10 minutes each on YouTube) see Benoît's post.

If you want just the essence, listen to the first three minutes of this:

Here is an enlarged version of the chart that Benoît is using while he speaks:

More cloud-based telephony services

One thing (of many) that struck me during this morning's session at eComm 2009 was multiple companies going after cloud-based communications platform services.  Three which had their public launch announcements today were Grid.com, Tropo.com from Voxeo and Mobivox.  They're not the first to tackle this area and they each have a somewhat different focus, but there's a clear interest in producing Web 2.0 service platforms that developers can use to access communications services without hassle.

Grid.com is from a couple of developers who were frustrated that they could mash up an application quickly but then had to spend months getting SMS short codes and other communications services.

 

Tropo.com is an offshoot of Voxeo and makes the underlying Voxeo platform services available to Web 2.0 developers.

 

Similarly, Mobivox has launched a cloud services platform based on the platform they build for the Mobivox service.

There is certainly room for someone to get this right.  On the other hand, there must be a dozen companies going after portions of this space.  The first round were telephony calling platforms like CallFire, Angel.com and five9.com focused on allowing developers to access traditional calling, switching and IVR platforms - call centers and business process automation were early targets.  It will be interesting to watch the evolving focus of this new round of entrants.

Where's the money in Communications for 2009 & beyond?

Sorry, no magic answer.  But I look forward to eComm 2009 to provide a lot of ideas in the first week of March.  The speaker lineup is posted and the list is both impressive and diverse.  Like last year, the format is a single track with a veritable firehose of information, mostly in 15 minute and 5 minute talks.

Based on last year and what I know of the speakers on this year's list, it fair to say Lee Dryburgh has done an excellent job of picking interesting and bleeding edge speakers.  I'm also on the speakes' list and I have to say I'm working hard to make sure my 15 minutes lives up to expectations.

Even though this is a terrible time for conferences, eComm has signed up an impressive list of sponsors.  The facility (The San Francisco Airport Marriott Hotel) is larger this year and so there is still room for additional attendees, but early bird prices end this week.  Also the extra 20% off you can get my mentioning my name ends this Friday, so if you are thinking of attending sign up this week.

So here's the deal, if you mention my name you get 20% off.  More specifically, if you enter the promo code "BroughTurner" (case-sensitive) at the appropriate point during registration, you'll get 20% off the registration fee.

Best conference bet for 2009 ― eComm 2009, March 3-5, San Francisco

I attended a number of conferences in 2008, both interesting and not so interesting.  One conference stands out, for the range of interesting speakers and the variety of interesting people I met.  That was the first Emerging Communications Conference, eComm 2008, organized by Lee Dryburgh.  Many of talks from this conference are available on Slideshare and as podcasts on IT Conversations.

eComm 2009 is scheduled to take place at the San Fransico Airport Marriott, March 3-5, 2009.  I highly recommend you check it out.

This is not a trade show with vendors hawking today's products and multiple tracks full of vendor product pitches. 

Presenters have been chosen for the quality of their proposals:  is it new?  is it disruptive?  what will the audience learn?  (As an adviser, I've been in on those discussions).  Like last year, the format is one track spread over three days, with 15 minute presentations, 5 minute lightning presentations, panel discussions and social time.  It all adds up to a veritable fire hose of information.

There's a list of speakers here.  Major topics for 2009 (so far) include:

* Mobile Social Networking (MoSoSo)
* Open Handsets & the Open Ecosystem
* Both Voice and Video Evolution
* Convergence of Media with Personal Communications
* Open Spectrum
* Open Communication Platforms
* Leveraging Cloud Computing
* Social Computing
* Towards 4G Wireless
* P2P and Decentralization of Telecoms
* Communications enabling business processes, especially B2C
* New Forms of Contactability and Connectability
* Emerging Markets

And last, but by no means least, if you mention my name you get 20% off.  More specifically, if you enter the promo code "BroughTurner" (case-sensitive) at the appropriate point during registration, you'll get 20% off the registration fee.  This works now, while early bird rates are in effect, and I'm told it will also work right up to the last minute ("late", not on-site registration), although then it's 20% off the full conference rate, and only if the event is not sold out!

I hope to see you there.

2G, 3G, 4G Wireless Tutorial

Recently I put a lot of effort into updating an earlier wireless tutorial.  Part of the resulting material was presented at the Communications Developer Conference in Los Angeles in September 2008.  Other versions have been used internally at NMS Communications.  Last week our marketing team recorded me presenting the tutorial and, today, the complete Wireless Tutorial:  2G, 3G, 4G and beyond became available as a slide deck and as three recorded segments of audio with slides (.wmv files).  Here's the abstract:

This comprehensive tutorial is designed to benefit both the technical and general telecom audience. Brough Turner reviews the history and evolution of mobile radio, evolving network architectures, services, applications, and business models; considers alternative 4G paths and the potential for convergence of GSM/LTE and WiMAX; and discusses the longer term impact of new WiFi standards on fixed and mobile wireless services. In this wireless tutorial, Brough also covers core network architectures and their evolution to all-IP, new wireless applications and application frameworks, spectrum licensing and more.

This work started as a 3G Tutorial that Marc Orange and I put together back in 2002.  Although the 3G Tutorial has not been updated since early 2003, it has remained one of the most frequently accessed pages on the NMS website.  So clearly there's interest.  Hopefully this new version will be even more useful as it covers the whole range from pre-mobile radio days to the latest 4G proposals.  Here's the outline:

• History and evolution of mobile radio

• Brief history of cellular wireless telephony
• Radio technology today: TDMA, CDMA, OFDMA
• Demographics and market trends today
• 3G, 3.5G, WiMAX, LTE and 4G migration paths

• Evolving network architectures

• GSM-MAP (EU) and IS-41 (US) origins
• Softswitches, VoIP and SIP in NextGen Networks (NGN)
• 3GPP and NGN convergence: releases, features and schedules

• Evolving services

• SMS, MMS, location, rich presence, video
• IP multimedia subsystem (IMS) vs. “dumb pipe”

• Applications and business models

• Killer applications & killer platforms
• 2-sided business models

• Related technology, Issues and Futures

• WiMAX, Backhaul, Bluetooth, NextGen WiFi
• Mobile device diversity / application environments

But there's still more needed...

There is much more I could add.  The current tutorial barely touches on mobile handsets, handset software and handset applications frameworks.  There's also a lot more to say about WiFi evolution, but I don't want to promise an update that could be significantly delayed.  After all, it did take me five years to get around to updating the original 3G Tutorial.   :-)

MMS has missed its window

Multimedia Message Service (MMS) is the mobile industry's successor to SMS.  MMS goes beyond texting to support pictures and graphics, voice messages and video clips sent as messages.  Unfortunately MMS was a technology design not a service design.  It can support a variety of services but the specific services are not standardized and thus not widely adopted.

Of course the much simpler Short Message Service (SMS) also took a while to be adopted, but MMS services are more diverse and they have a shorter window of opportunity.  Now there are signs that window is about to close.

A few weeks ago MobileIN asked me for an article on this subject which I wrote last Friday while flying back from AstriCon.  My article has been published so click through for the details.

eComm 2009

The eComm 2009 website is live.

As some of you already know, the date was picked through a feedback process conducted on Facebook.  It's March 3-5, 2009 in California.

I attend a lot of conferences and trade shows and, as I look back at the past year, the most interesting conference I attended was eComm 2008.  Typically conference organizers start with a list of sponsors and/or exhibitors and then do their best to build an interesting conference, given their primary objective of facilitating sponsors' and exhibitors' promotional efforts.

For eComm, Lee Dryburgh (the principal organizer behind eComm), started with an idea ― emerging communications ― then went after speakers who had something relevant to say and were known to be good at saying it, finally he sought sponsors and attendees interested in discussing emerging communications.  The result was a really interesting set of talks and a fascinating set of people in attendence.

If you are at all interested in where communications is going, subscribe to the eComm 2009 blog and think about attending eComm 2009.

African telecom: corruption mostly limited to publicly run operators

The latest issue (#421) of Balancing Act News Update has an interesting story based on the prosecution (in the US) of former sales agents for ITXC found guilty of bribery in arranging VoIP connectivity contracts.

Six of the seven telcos involved were state owned businesses and in the one with private ownership (Sonatel, the PTT in Senegal that's partially owned by France Telecom), it was France Telecom that got suspicious.  Balancing Act News goes on to point out the problems with bribery:

It will be clear from the summary of the available public documents that this approach to business has a number of pitfalls. The bribed employees in two instances subsequently had to sort out “cost disputes” which were the pretext for asking for more bribes. In one instance, the bribed employee failed to share his gains with the managing director. In the only company with a private shareholder (which also sells wholesale minutes), the bribed employee became isolated under commercial questioning: this provides a strong if not always decisive argument for privatisation.

Based on their conclusion, it appears there is no viable way to do business with the state controlled Telcos in Africa:

From the telco side, what has been known privately for years is now revealed clearly and publicly by the Rwandatel and Sotelma examples. Corruption is systemic and goes right to the top and bribes are expected to be shared with the boss of the organisation and woe betide anyone who tries to keep the money to themselves.

Luckily, the mobile telecom industry in Africa is mostly private and increasingly competitive, with the result that mobile phone adoption is soaring in Africa.  It would be nice to think the PTTs will be cleaned up, but in any event, the benefits of telecom are reaching African citizens via mobile phone services.

Why the Danes text while the US talks

Recently I can by some interesting data on monthly voice and SMS usage in Denmark.  But first let me set the stage.  It's well known that people are price sensitive ― as per minute prices fall, telephony usage goes up.  It's also true that people prefer flat rate pricing as it reduces their mental transaction costs.  This graph (from Andrew Odlyzko) shows what happened to mobile minutes of use when flat rates were introduced in the US.

AT&T launched their Digital One-Rate plan in 1998 offering a block of minutes for one monthly fee with no long distance or roaming complications.  This plan was so popular that all operators were forced to respond, with the results visible in the graph above.

Today US mobile voice usage is approaching 800 minutes per month and that's average.  Leap Wireless and MetroPCS subscribers use 1500-2000 minutes per month.  One wonders how much time people can spend on the phone...

So here's the new (to me) data from Denmark.

The Danish regulator has a wonderful set of statistics available in half-year increments.  Those above are from 2H02 thru 2H07.  Voice minutes are out-going traffic in millions of minutes per period (6 months).  The population of Denmark is 5.5 million (82% are over the age of 14) so this represents ~330 voice minutes and ~225 messages per person per month.

Wireless minutes of use continue to rise, but fixed line minutes are falling faster so total voice minutes are falling.  But total person-to-person communications is still increasing because SMS and E-Mail usage has soared, growing to roughly 40% of all communications.

This is very interesting as flat rate pricing for monthly bundles of SMS messages was introduced in Denmark in 2002.  Meanwhile, Danish mobile voice calls are mostly charged per minute (very typical in Europe) and are expensive compared to the US.

So price matters, but flat rate monthly bundles (rather than per minute or per message charges) is even more important in driving usage.