Communications

Another analyst under estimates mobile subscriber growth

From a recent press release

Worldwide mobile subscriptions will rise from 3.9 billion in 2008 to 5.6 billion in 2013, according to a new Strategy Analytics report.

Sorry guys, you're forecast has fallen into the same trap as almost all the five year forecasts I've seen since 1995.  About the only credible analyst's statement in this area is one by Mark Newman, head of research at Informa, who said (in 2007):

The mobile industry has constantly outperformed even the most optimistic forecasts for subscriber growth.

The problem is analysts' forecasts are consistently pessimistic.  Consider Strategy Analytics' numbers.  They project 1.7 billion new subscribers in 5 years (60 months).  By every measurement I've seen, mobile subscription growth has been over 50M per month at least since 2004-2005.  For example, 2 billion subscriptions in September 2005 and 3.3 billion subscriptions in November 2007 comes out at 52 million new subscriptions per month.  If you believe Strategy Analytics' forecast of 3.9 billion by the end of 2008, that's 54 million more per month for the balance of 2008.  If we merely sustain current rates, we will hit Strategy Analytics' December 2013 forecast in just 31 months, i.e. in July 2011.  So they expect current growth rates to decline rather substantially in coming years. 

Why would they think this?  I haven't spoken with anyone at Strategy Analytics, but in discussions with other analysts over the past ten+ years, a frequent answer is "current growth rates will have to slow as we're running out of people who can afford mobile phone service."  Wrong!  This is the view of someone who doesn't understand Moore's law.  Whether it's transistor density or wireless performance, innovation drives exponential improvements in price-performance.  Per-capita GDP is improving slowly, but the cost of mobile phone infrastructure and mobile handsets is dropping substantially every year.  Today, those at the bottom of the pyramid are in a position to at least use a phone and increasingly to acquire their own mobile phone.

In addition to innovation ― at work since the introduction of mobile services ― political obstacles are falling in many countries.  Since 2000 it's become clear, mobile phone adoption brings significant economic advantages, and the best way to get mobile phone adoption is to attract multiple competitive mobile phone operators to your country.  Increasingly, even the most backward dictators are realizing there's more money to be made taxing multiple competitive mobile phone services than in keeping all the profits from one government phone company.  So country after country are encouraging competitive mobile phone operators and allowing substantial foreign investment.  This political trend serves to increase mobile phone adoption rates.

Of course, adoption rates will saturate at some point.  When might that be?  The best evidence we have is for 2G and 2.5G services in developed countries.  It appears things slow down a bit around 120 subscriptions per 100 people.  Of course this may change with 3G.  It's too early to tell.

Technology adoption generally follow an S-curve:

If saturation is at 120 or above, and we're currently around 50, we have at least another five years of rapid growth.  Perhaps a five year forecast made in 2013 will be justified in projecting a decrease in adoption rates.  But by then we'll also understand the impact of 3G.  Who knows? 3G may drive things even faster. 

Or perhaps by 2013, I will have a single mobile data subscription for a gateway device on my body, that in turn provides connectivity for all my other devices.

In any event, I expect 5.6 billion mobile phone subscriptions by the summer of 2011 and more than 6 billion by mid 2012.

Service Creation - Traditional Telecom Still Doesn't Get It

TMCnet is republishing, on their website, articles I originally wrote for my monthly column, "Next Wave Redux", that appears in Internet Telephony Magazine.  Here's from the April 2008 column:

In the late 1980s and through the 1990s the telecom industry defined and then adopted standards for the “Intelligent Network” (IN). The objective was to make it easy to create and deploy new applications and new services. More recently the industry has defined various next generation networks, most notably the IP Multimedia System (IMS). Besides convergence economies (all services on IP), the objective is to facilitate the rapid development and deployment of new applications and new services. Sound familiar? Unfortunately, it’s not going to work any better the second time around.

Go here to read why.

SIP revolution, massively delayed — but there's hope

The SIP Center asked for an article which I finally wrote the weekend before last.  My article was actually rather negative, but they published it anyway.  Now I'm feeling a little guilty as there is an optimistic note I could have used as my conclusion.  So let me try again...

First let me summarize my problem.  When SIP emerged in 1996, it's support for direct connections from one user to another was extremely compelling.  This was the VoIP protocol which would lead to a complete revolution in communications.  Yes, you might refer to a directory service, but you wouldn't need an operator to make a phone call.  You could do it yourself, directly.  Unfortunately, that revolution never happened.

So far, no revolution

The biggest change in telecommunications in the past 12 years has been the global deployment of three billion mobile phones, all based on conventional circuit-switching and Intelligent Network technology — nothing to do with SIP. And arguably, the most interesting telephony service enhancement, after mobility, came from Skype with its seamless integration of presence, instant messaging, wideband audio and video. But Skype is based on proprietary protocols, not SIP. Finally, VoIP technology has helped drive down the cost of international calling, but using MGCP, H.248 &/or H.323 protocols much more than SIP, at least so far.

SIP has been adopted by PBX manufacturers in recent years, but this doesn’t seem to have changed business practices at all. The IT department still buys the PBX and the telephone sets from a single vendor and then contracts with a service provider to handle calls outside the enterprise.

And then there's IMS

SIP has been adopted for use in the IP Multimedia Subsystem (IMS), but this completely warps the original SIP vision.  IMS is a centralized system — a next generation network for mobile and fixed operators.  It's the complete opposite of the original vision for SIP.

Why have things gone so far astray?

SIP assumed an end-to-end Internet

SIP assumes it's possible to make end-to-end connections over the Internet and therefore a SIP session can know about and use globally valid IP addresses.  That was a naive assumption, even in 1996-1999 when SIP was being defined.  The real Internet contains firewalls, network address translators (NATs) and other "middle boxes."  They are not going away, it's only getting worse over time.  Today, applications must be aware of and able to work around middle boxes and other network problems. 

Many middlebox issues can be overcome with the help of client software and central servers implementing Interactive Connectivity Establishment (ICE), a recently completed IETF proposed standard that in turn relies on STUN, TURN and/or RSIP.  A continuing obstacle for direct user-to-user connections is the need for central servers for STUN, etc..

So it there no chance for the original SIP vision of direct user-to-user communication?

P2PSIP — a reason for optimism

Actually, there is some reason for optimism.  The advent and widespread adoption of Skype showed what was possible and suggested how one might distribute central services among peers, potentially avoiding the need for an explicit service provider.  The past few years have seen rising interest in peer-to-peer SIP which has resulted in an IETF working group under the name p2psip.  Their goal is "to leverage the distributed nature of P2P to allow for distributed resource discovery in a SIP network, eliminating (or at least reducing) the need for centralized servers."

Assuming this is completed (during 2008 & 2009), we'll have the elements with which one could make a SIP-based open peer-to-peer communications system.  It will be interesting to see actual software implementing the ideas of the p2psip group.  We may yet see a revolution!

Monopolists, caught in a time warp

This afternoon, I was in a local shopping area and noticed a new storefront advertising Verizon FiOS service.  I've been a FiOS subscriber for two years now, but I'd never seen a FiOS storefront.  Unfortunately, the store wasn't open.

There was a T-Mobile store 50 feet away and a Verizon Wireless store two blocks away.  They were both open, as was an AT&T store about a half mile away.  The Verizon Wireless store hours were typical of all the mobile phone stores, i.e.
  M-F    10am-8pm
  Sat      9am-8pm
  Sun   10am-6pm

Indeed, these hours are typical of retail stores in the neighborhood.  Weekday openings are at 9:30am or 10am and closing times are 8pm or 9pm.  And all retail stores are open at least a half day on Sunday.

The Verizon FiOS store hours:
  M-F   9am-6pm
  Sat   9am-1pm
  Sun    closed

I remember when retail stores were closed on Sundays.  It was a long time ago.  I even remember, as a child, when some neighborhood stores were only open a half day on Saturday.  That was a very long time ago.

Apparently the FiOS store was opened because Verizon is now competing with Comcast for TV subscribers in our neighborhood.  Comcast is another long term monopolist, so it was interesting to drive (about a mile) to ther retail storefront.  It was also closed on Sunday.  In fact their only store hours were M-F 9-5.  Wow!

I suppose two sources of wired TV services is better than one, but this is another case where it's clear a duopoly provides very little competition (for example, compared to our mobile market with 6+ players).

3G's biggest success is as a dumb pipe

Thanks to Dean Bubley for pointing out this presentation by Antero Kivi on the use of 3G mobile networks in Finland.

92% of all data traffic is from PCs

Furthermore, of the 4% of traffic from Symbian devices, 79% of that is for web access and 10% is for email.  So users are paying for mobile data for the sole purpose of connecting to the Internet.

Put another way, mobile operators have failed to provide any operator-specific data application of any relevance.

Why invest another penny in IMS?

Voice telephony needs priority, but after that all people want is a dumb pipe. In a competitive market that what they'll get. So IMS is vastly more complex than appropriate.

The cost effective solution is simple (i.e. two) priorities on the radio link, softswitch-controlled circuits-over-packets for voice telephony and straight off-load to the public Internet for everything else. An IP/MPLS core network is more than sufficient.  And existing GSM voice telephony protocols are both adequate and appropriate for voice telephony.  Existing GSM signaling is already being carried over Sigtran over IP, so the pieces are falling in place.

What I've just described matches what I've seen of China Mobile's new 3G backbone.  If true, that means the Chinese network equipment providers (Huawei, ZTE, etc.) are well positioned to win 3G business in high growth emerging markets where costs are key.

It certainly sounds bad for IMS.

NGN ≠ the Internet, and never will

I see and hear a lot of confusion about next generation networks (NGN).  In most cases people are using the term roughly as the ITU-T defines it:

A Next Generation Network (NGN) is a packet-based network able to provide services including Telecommunication Services and able to make use of multiple broadband, QoS-enabled transport technologies and in which service-related functions are independent from underlying transport-related technologies.

but many people don't realize how little this has to do with the Internet.

The Internet is a "network of networks" that includes millions of smaller domestic, academic, business, and government networks interconnected using IP.  It is a hierarchy because there is a backbone of ~28,000 autonomous systems (ASs) which exchange IP packets using routes established by Border Gateway Protocol (BGP).  The remaining millions of networks connect to that backbone via hundreds of thousands of ISPs and other intermediaries who are ASs or connect to an AS.

All of the NGN proposals (Wikipedia has a good summary) involve sophisticated QoS.  But it is well established that there is no technical or commercial requirement for QoS on the Internet backbone (references discussed here and here).

The thousands of organizations that are ASs exist in hundreds of different jurisdictions.  While some ASs are heavily controlled by governments (there is basically one AS for all of China), AS interconnection is independent of any single government.  Interconnections occur based on tradeoffs between the cost of doing business locally and the cost of routes to other locations.

Indeed, to the extent Tier 1 ISPs have attempted to limit free peering, Tier 2 ISPs have established peering agreements that form a donut around the Tier 1s, thus cutting Tier 2s' transit costs to an absolute minimum.  So the effectively unregulated Internet backbone is working remarkably well based on commercial arrangements between thousands of parties, just as it has for 15+ years.

With no technical need for QoS on backbone routes (as discussed here) and no commercial reason that anyone has articulated, it's hard to see how the thousands of parties who make up the core of the Internet would agree to do anything with QoS, ever.

Established telephone companies will deploy NGNs for telephone service.  To the extent they have a monopoly on Internet access, they will be able to use their NGNs to block access to the Internet, but the existence of NGNs won't change the way the Internet core works or the way anyone else's network works.

So NGN's are an evolution path for existing telephony networks, not the Internet, and they will last as long as the existing telephone service model lasts and no longer.

US Mobile Internet access prospects looking up

This is a very good week for the mobile Internet in the US.  Our best prospect for open mobile Internet access is not legislation or regulation, but having four or more competing networks that are technically able to offer mobile broadband access.

We have three such networks today — Verizon, AT&T and Sprint — but three is not enough to break the walled garden mentality.  What's changed?

1.  T-Mobile USA has launched their first 3G service using the spectrum they won in the 2006 AWS auctions.  For now, it's only New York City, but Reuters reports that T-Mobile plans to launch in 20 to 25 new markets by the end of the year and T-Mobile's stated intention is a full national HSPA network. In 2009, this will be our fourth national 3G network fully capable of multi-Mbps down and multi-hundreds Kbps up.

2.  Clearwire has cut a deal to take over Sprints WiMAX network.  As the Wall Street reports (subscription required) today:

Sprint Nextel and Clearwire are close to announcing a $12 billion joint venture that plans to roll out ultra-fast wireless Internet access for cellphones and laptops in coming years, with the backing of an unlikely alliance of technology and cable companies. Sprint has agreed to merge its wireless broadband unit with Clearwire, a Kirkland, Wash., firm founded by cellphone pioneer Craig McCaw. The new company has raised a total of $3.2 billion in outside financing from several heavyweights -- $1.05 billion from cable provider Comcast, $1 billion from Intel, $550 million from Time Warner Cable and $500 million from Internet giant Google. Smaller cable provider Bright House contributed $100 million. The investments value the new company at more than $12 billion.

This also reduces Sprint's financial exposure and hopefully reduces the likelihood they will be taken over or their network consolidated, at least in the short term.  I've been negative on the prospects for WiMAX in the past, but if anyone can make this go, Craig McCaw is good bet.  So Clearwire represents our fifth national network capable of delivering mobile broadband Internet access.

Assuming all this holds together, we will see affordable flat rate open mobile Internet access in the US by 2010.

Talking about Voice SMS, Video SMS and MMS in a webinar tomorrow

Tomorrow (May 6th) at 9 am EDT (1300 GMT) I'm doing a webinar on:

Mobile Messaging- Its Not Just About Texting

Mobile Text messaging has created new opportunities for additional revenue resources for global mobile operators.  Industry analysts predicts mobile messaging to reach $65B in annual revenue by 2010.  As a result of this messaging explosion, operators continue to look for ways to differentiate themselves in messaging services and to increase the revenue realized from text messaging.  Adding voice and video messages to the standard text message service is just one of the services operators are using to enhance the texting experience within their subscriber base. This webinar will examine video and voice short messaging services(SMS), discuss the technical considerations of implementing these types of services and review various operator successes with media messaging services.

Multi-Media messaging (MMS) has been very successful in some markets, e.g. the UK, while in others, like the US, it's used only for sending photos.  In other markets, it's hardly used at all.  Part of the problem is handset interoperability, especially when it comes to exchanging video clips.  In some cases, there are handset-specific user interface issues and in some markets the problem is enabling MMS operation, e.g. roughly half of the MMS-capable handsets in the Philippines haven't been "activated" (as the operator needs an SMS from the customer indicating their handset type).  Finally, there are markets where MMS inter-connection between operators.doesn't work, either technically or commercially.

But where there's a failure, other solutions emerge.  That's what I'll be talking about tomorrow.

I've written in the past about Voice SMS and about Video SMS, two services that fill the gap by being very simple to use and by working with every handset and every operator.

If you're interested, sign up here and listen in tomorrow.

eComm 2008 Panel: What Will Drive Wireless Innovation?

Here's the complete video of the panel discussion I ran at eComm 2008 in March, all 86 minutes.

My panelists were:

• Martin Geddes (STL Partners),
• Stanley Chia (Vodafone),
• Sumit Agarwal (Google),
• Jonathan Christensen (Skype),
• Christopher Allen (iPhoneWebDev.com),
• Benoit Schillings (Trolltech/Nokia)

Time permitting, I'll see if I can index some interesting highlights and have a follow up post with direct links — that's just in case you're hesitant to invest 86 minutes in the whole session...

China's 3G license delay is a smoke screen

Last week there was a flurry of stories about China's 3G plans after Jonathan Dharmapalan of Ernest & Young was quoted as saying he expected it to take 12 to 24 months from the start of China's commercial TD-SCDMA trials, i.e. from now, until 3G licenses were issued.  But there was little analysis or comment on what's really happening.

3G licenses are a formality.  They delay the deployment of 3GSM & CDMA 2000 which could otherwise happen rapidly — just plug new cards into existing radios and offer established handsets (already being manufactured, in China, for the world market).

China 3G is happening, without licenses.  China Mobile Group already has deployment-scale TD-SCDMA radio networks on assigned, but not "licensed" frequencies, in eight cities.  The bottleneck is TD-SCDMA handset silicon.  Commercial trials were finally enabled by the recent delivery of an initial batch of 60K handsets.  This also allows China to meet, at least technically, their pledge to have 3G service in time for the Olympics.

Dharmapalan is speculating that it will take 12-18 months of commercial trials to get the bugs out and the system to scale.  That's plausible.  If so, it will be 12-24 months before "licenses" are granted, i.e. before 3GSM and CDMA 2000 deployments are allowed to proceed in parallel with TD-SCDMA.

The problem is China's patent position.  The core patents for 3G and for 4G are already held by the likes of Ericsson, Nokia, and Qualcomm.  TD-SCDMA provided a way for China to obtain patents on a specific 3G implementation and the size of China's market makes that implementation interesting to Ericsson, etc.  Since China missed the boat on core patents for both 3G and 4G, expect TD-SCDMA and it's 4G successor to exist on a parallel path for the next 10-20 years.

The good new is commercial TD-SCDMA deployments have finally started.

I'm most interested in 3G applications.  China has a vibrant market in value-added services for 2G.  As more and better TD-SCDMA handsets get deployed, we should see some really interesting innovation coming out of China — innovation that will be applicable to any 3G technology, anywhere in the world.