Most IoT Industry Narratives Are Wrong!

Yes, it’s true; Internet of Things (IoT) is caught up in the whirlwind of hype, exuberance and outright giddiness. It will be a sad day when neophyte IoT enthusiast wake up and realize this. You can’t blame the younger crowd from behaving this way as it’s probably their first tech hype cycle (documented by The Gartner Hype Cycle). Anyone over 30, however, should know better. 

Hype cycles are a fun ride and ironically, many entities and people make a lot of money in the exuberant whirlwind as enthusiast entrepreneurs and innovation ecosystem participants race to be part of next unicorn or the next Google, Facebook, etc. The first to make money are the highly respected market research firms. It’s a $9 trillion dollar market, no it’s a $14 trillion market, no wait let’s call it the Internet of Everything and call it an $18 trillion market. If it’s everything why is it only $18 trillion. The first question to ask them is “are you sure it’s not $14.7652497 trillion?” Guess their dart board doesn’t have that kind of resolution. Yet, people buy these reports to show internal and external investment sources that their idea is a slam dunk. Ten percent market share is still $1.4 billion dollars, right.

The next to make money in hype cycles are the trade show and conference companies. There are global, national and regional IoT conferences every month. Companies pay to speak to position themselves as thought leaders and people pay to attend to get smart. Note to self, next time I pay a hard-earned dollar to attend an IoT event please assess me with a $1,000 stupidity tax. The topics covered in these shows haven’t evolved in two to three years. By the way, in a few years there WILL NOT be IoT conferences as the topics will be covered in the appropriate vertical market conference: cloud, big data and analytics.

These two early money makers are what’s driving the erroneous narrative of IoT. Why is it wrong? Let’s take an end-to-end view of a solution utilizing IoT technologies (note phrasing). First, we’ll normalize the intelligence throughout the system to 100. The current narrative looks at the IoT equation as this:

In many discussions even Ithing is extremely small and most of the intelligence is located in the cloud and includes “big data” and “analytics.” Isn’t there a glaring omission in this narrative formula? By this definition Inetwork is zero:

Thus, the network must be always there, instantly accessible and, of course, free. The current narratives imply that network intelligence is zero. Isn’t the “I” in IoT the “Internet”? Perhaps for many IoT enthusiast the network is zero since they don’t care about:

1. Cost of transmission (it’s not always free)

2. Cost and power consumption of the modem/radio in the thing

3. Bit rates: maximum, minimum, average peak, average, symmetry (upstream/downstream)

4. Distance verse throughput

5. Latency, round trip delay, connection set up time.

6. Jitter, congestion, dropped packets, availability,

7. Security

There are many markets under the IoT hype umbrella (note phrasing again) where the network can be zero. However, for most markets the network cannot be a ZERO! The correct formula and the correct industry narrative is:

It’s open to an interesting discussion of how the 100 units of intelligence are distributed. Yet, one thing we know for certain is:

Therefore, service providers (telco, cable, wireless) need to take action to change the industry narrative or risk becoming a commodity bit pipe providers. The longer Inetwork is zero the more challenging it will be to overcome this perception. Networking solution vendors need to actively participate in changing this narrative as well or they risk selling commodity solutions to the commodity bit pipe providers.

If you would like to discuss this in more detail contact Greg at gwhelan@acgcc.com.

Greg Whelan
gwhelan@acgcc.com
acgcc.com

Wi-Fi: The Toy that Grew Up

Historically, mobile network operators (MNOs) looked at Wi-Fi as a toy, a low-end technology that was great to off-load data from networks. Now Wi-Fi is having a strategic impact on MNOs across the globe. Now the question is LTE or Wi-Fi: remind me which one’s for off-load?

Yet, as with many technical innovations, the low-end always wins. Wi-Fi is a classic example of this theory. Through a combination of Moore’s Law, economies of scale, R&D investments and free market dynamics Wi-Fi is king of the hill. In most developed countries people and things can access a Wi-Fi network in 80% of locations. Companies, such as Devicescape, have created virtual networks based on “ambient’ Wi-Fi networks. Hotspots are so ubiquitous that Opensignal launched an application to find the best one out of the many available. Read more.

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Greg Whelan
gwhelan@acgcc.com
acgcc.com

Telecom 2025 Looks Like…

We can all to some extent predict the future; some predictions are a hit while most are a miss with lots in the “sort of” category. And when it comes to telecommunication predictions add the N-dimensional perfect storm of innovations, market disruptions, new business models, disintermediation, mega-mergers, etc.

The global telecom market (fixed and wireless) has unique characteristics which make it so fascinating to study. It’s critical to a city and to a country for economic prosperity, it impacts billions of people’s lives, it’s cross border and it’s a trillion dollar market to name just a few. It has also emerged as a key battle space for asymmetric warfare, leveling the battlefield which closes the gap of U.S. global dominance. If you add to the discussion the importance and outright dependence on satellites for an array of commercial and military applications and the deployment of anti-satellite weapons the global telecommunication market gets even more interesting.

That said here are my easy predictions that I think most people will agree with for what telecom 2025 will look like:

1. There will be less and larger global service providers.
    a. Mega mergers are inevitable as traditional carriers need economies of scale.

2. There will be a wider range of service provider business models.
    a. New “service providers” will arise
    b.There will be an Uber or AirBnB carrier, for example, large and successful without owning any network
    c. Intelligence interconnections and federations will be paramount.

3. Security will continue to be a constant and ever increasing challenge.
    a. Akin to 1920 leapfrogging between bank safe companies and back robbers.

4. Access will be thought of as … people and things accessing the cloud and each other.
    a. It will be a near real-time decision of what network

These are the easy predictions. Yet, the implications of them are vast and substantial and will impact billions of people and affect billions of dollars of investments. It’s truly an interesting time to be in this industry.

Send me (gwhelan@acgcc.com) your easy or innovative ideas of what the global telecom market will look like in 10 years and I will aggregate the replies and send them out to all who participated.

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Greg Whelan
gwhelan@acgcc.com
acgcc.com

Verizon: Are Your Future Looking Binoculars Blurry?

The trillion dollar global service provider industry is in a transformative phase. Mega mergers, hyper competition from new, nimble entrants and regulators stuck in a backwards looking time warp are just a few change vectors colliding in this big bang that are affecting carriers and vendor alike.

It’s becoming more challenging for carriers to differentiate bit transport, and they are actually accelerating this by aggressively marketing bits per second. Also, service providers are losing the narrative in IoT where the discussions are all about “the cloud” and “the thing.” Where’s the network in the narrative? Nowhere, hence it must be always there and free of course.

Forward looking service provider management teams with a good pair of future gazing binoculars realize the future is fixed and wireless access. It’s all about connecting people and things to the cloud and to each other regardless of what access network technology they are using. They want to keep people on their network, keep the billing meter running and control the user’s experience. Wireless companies that see this are buying fixed network operations, and fixed network operators are looking to add wireless technologies and services to leverage their embedded assets and subscribers.

Then there is Verizon. Fixed networks are more challenging to build and operate. Did Verizon get tired of getting dirty climbing utility poles and digging up streets? Or did they get tired of antiquated regulations, community quid pro quo (for example, kickbacks), inflexible unions and onerous pension obligations? In any case, they’ve been jettisoning fixed network operations for a while. The company sold Vermont and New Hampshire to Fairpoint and wire line assets in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin to Frontier. Are they paying now for investing in fiber-to-the-home (FTTH, FiOS) too soon? A decade too soon? 

Currently, and for the last 10 years mobile network operators (MNO) have been on a rocket ship of revenue, profit and market sex appeal. However, new, serious threats are emerging: cable voice-over-Wi-Fi and OTT voice and SMS (for example, WhatsApp). This wireless booster rocket is running out of fuel. and MNOs need to jettison this stage of the rocket and start the next rocket or they will level off and at best be stuck in low orbit or worse crash back to earth. What this rocket will look like is anyone’s guess. Yet, it’s a safe bet it will be a combination of 5G, massive IoT AND fixed networks.

Thus, if Verizon’s strategy is to become a global Tier 2 or 3 wireless-only carrier they are on the right track. Perhaps all Verizon needs to do is to use a bit of glass cleaner on their binoculars?

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Greg Whelan
gwhelan@acgcc.com
acgcc.com

Access Insights™: Intersection of SP Business Drivers and Emerging Tech

What is “access”? Simply put, it’s about access to the cloud and between people and things.

Access is no longer fixed or wireless. Access is about connecting people and things to each other and to applications and service in “the cloud.” Thus, access is about fixed and wireless. It’s about having the right combined architecture on a neighborhood-by-neighborhood basis. This “combo” trend is having, and will continue to have, major impacts and disruptions in the access market and in the entire service provider ecosystem. New technologies, architectures and business models will emerge. Market realities are forcing carriers to offer (up to) gigabit speeds and incumbents have billions of dollars in deployed assets and architectures. All this makes Access challenging for both technical/architectural and business decision making.

Top Access Insights to Ponder

• The future of Access is Fixed and Wireless… not “or”;  SPs need to adapt organizations, so do vendors

• Gigabit Deployment Strategy: Is timing everything? Real strategic implications to the @$# Speed Test.

• Next-gen Broadband CPE architecture and business models are being disrupted; a. big risk to incumbent SPs and vendors

• WiFi: The “toy” that grew up; strategic implications abound; Wi-Fi, further proof that the “low end always wins”

• Voice over Wi-Fi: nothing but upside to cable companies; nothing but threats to MNOs.

• LTE versus. Wi-Fi: Which one is for off-load?

• Next Gen Cable Access Networks: PON Greenfield is redundant, DOCSIS Greenfield is an oxymoron

• CPE vs. Carrier Gear (plastic versus metal): Plastic companies building metal?

• SDN-NFV in Access:  It’s coming, contemplation begins

• What’s the value of vendor incumbency at inflection points? Is Access different from any other industry?

Want to discuss these points with the analyst? Contact gwhelan@acgcc.com to schedule some time explore how these insights impact your strategies and how we can create actionable plans to address and exploit them.

Greg Whelan
gwhelan@acgcc.com
acgcc.com

1Q15 Worldwide Video Infrastructure Markets at Crossroads: Where to Invest

Video impact on both fixed and wireless networks key driver for new deployments

The Worldwide Video Infrastructure markets decreased revenue in Q1 and year over year because of a general slowdown in service providers’ capital expenses, uncertainty with mega-mergers and accelerated competition. The Q1 Total Worldwide Video Infrastructure market posted revenue of $3 billion. Set-Top Box Worldwide Market Shares, which includes IPTV STBs, Cable STBs, and DTAs, increased 3.3% quarter over quarter but decreased 12.0% year over year. Cable Set-Top Box Worldwide Market Shares, which includes SD, SD+DVR, HD, HD+DVR, and Hybrid STBs, increased 8.6% Q-Q but decreased 15.5% Y-Y.

U.S. capex was down 14 percent in 1Q and is projected to be down 10 percent in 2Q. The second half of 2015 is expected to be positive, with capex ranging from 2 to 6 percent, but overall for 2015, U.S. capex is projected to decline 4 percent. Europe is projected to increase approximately 5.8 percent, APAC will be up 6 percent and CALA, which was down 4 percent last year, will grow 2.2 percent.

Service providers are at inflection point as to what to do and where to invest and are debating about staying with current infrastructure solutions, adding incremental features and capacity to current installed base. “The realization that video is just packets, albeit a lot of packets, is impacting video specific investments,” states Greg Whelan, video analyst, ACG. “Service providers are driven by content acquisition as OTT momentum continues and access network upgrades to address real and imagined gigabit competition.”

TREND and DRIVER HIGHLIGHTS

• Service providers are reluctant to make major investments in current technologies as market uncertainties weigh heavily; this is illustrated in the CMTS market, down 15% q-q and y-y. New deployments are minimal with most being upgrades and additions. New architectures such as CCAP, DOCSIS 3.1 and Remote PHY are very appealing, causing MSOs to be hesitant to commit CAPEX to existing technologies.

• The industry is doing itself a major disservice by selling on bit rate and not the value and experience of the services they provide; it is akin to digital camera megapixels. More the better? Consumers do not understand that beyond 6 Meg it really does not matter for 99 percent of the use cases; the huge file size of 10+ megabit images is less desirable and arguably useless to consumer. Same is true with gigabit.

• Content acquisition is top video priority: Big issues are all about providing compelling content and “skinny bundles” emerging as key force in industry.

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Greg Whelan
gwhelan@acgcc.com
acgcc.com

Arris-PACE: Consolidation, Set-top Box Domination and Tax Avoidance

Arris (USA) has agreed to acquire Pace (UK) for $2.1 billion. According to Arris the key benefits of the deal are to accelerate growth and to improve finances. The growth part is driven by the enhanced international presence and the large-scale entry in to the satellite TV market. The finance part is driven by accretive earnings and corporate taxes.

SP video is still a top five CxO top-of-mind but it’s number five; they still need a compelling video offering to complete a competitive bundle. The driving issue is access to content not number of channels. Ask 100 random people what’s the problem with TV and no one will say resolution. Sorry 4K TV manufacturers. IP video, like IP voice, is just packets, albeit a lot of packets. The impact of video delivery to all devices on all networks is much more interesting to ponder.

With the Arris-Pace deal we have the Number 1 and Number 2 global providers of set-top boxes (STB) combining. If this deal goes through the combined company will have almost 60 percent market share in Cable STBs and 44 percent of the IPTV market. The next vendor, Cisco, will have 10 percent and 15 percent of these markets, respectively. It appears Arris is intent of being the dominant provider of STBs globally.

Set-top boxes have been and continue to be a tough market to sell to. The service providers constantly demand price concessions while at the same time demanding new features. No surprise gross margins are challenging. Cisco realized this late after buying Scientific Atlanta and adopted a “high-end” STB only strategy. As I predicted two years ago this was doomed since high volume is required in this type of market. Simply put, there’s not much of a difference in semiconductor content of a low-end and a high-end STB. Those participating in the low-end, high-volume market thus have a substantial price advantage at the high-end lower volume market because they are receiving substantial volume pricing from all silicon vendors.

Beyond challenging margins, the STB market is facing technical and architectural disruptions. The traditional functionality of the STB is being repositioned between the residential gateway and the cloud, TV manufacturers want a piece of this too, and over-the-top services continue to exert pressure on the legacy linear TV functionality as well. Arris will receive some immediate near-term benefit of entry into the satellite market and will increase its international presence. The value in the long term is less clear as the set-top as we know it is in a state of flux.

On the finance side the deal is accretive: “an increase by natural growth or by gradual external addition: growth in size or extent.” According to the press release the new Arris will be based be “incorporated” in the UK but based in Suwanee GA, USA. Transactions of this ilk, where the acquirer reincorporates to the target country, are not new. You can’t fault U.S. companies from wanting to avoid excessive U.S. corporate taxes. The fundamental of micro economics encourage this.

So, I see marginal long-term strategic benefit in the set-top box area that’s outweighed by the broader portfolio synergies and financial tax gains.

 

For more information about ACG's video services, contact sales@acgcc.com.

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Greg Whelan
gwhelan@acgcc.com
acgcc.com

Alcatel-Lucent Raises the Broadband CPE Bar

Announces a new ONT with advanced Wi-Fi and ties in Motive to streamline smart home deployments.

On April 20, 2015, Alcatel-Lucent announced its new broadband residential gateway the 7368 Intelligent Service Access Manager (ISAM) optical network terminal (ONT). The 7368 incorporates dual-band Wi-Fi (802.11ac/n on 5GHz and 802.11b/g/n on 2.4GHz) with enhanced signal strength (Up to 500mW) to deliver better in-home coverage.

Aside from the awkward product name, it addresses a real issue in the broadband and specifically the gigabit industry: namely, delivering gigabit speeds beyond the threshold of the home. In the early days of broadband consumers’ connections from their PC to the CPE devices was greater than the broadband access connection (10 Mbps feeding 1.5 Mbps). With the deployment of gigabit networks (or more accurately “up to a gigabit networks”) the reverse was true, with 802.11n feeding 300 Mbps to the gigabit access link. Alcatel-Lucent has evened out this equation.

The images provided by Alcatel-Lucent showed the new product as a wall-mount device. Aside from looking sleek this has a number of nontechnical barriers to adoption. The big one being home decor aesthetics. Based on a limited sample, my wife, adding anything to precious wall space is a nontrivial exercise. Plus, any device added to a home has to cope with the issues of batteries (power) and backhaul. It would seem that a management interface on a smart-phone, tablet or any existing screen would be more suitable for whole home management.

The second part of the announcement was the incorporation of Motive™ customer experience management solution. ONT Easy Start” streamlines the ONT activation process and performs service orchestration between the Motive care applications and network element managers. This too solves a real business issue of gigabit deployments by reducing the time and cost of activating each subscriber.

The addition of Motive to the total offering is noteworthy. It’s always great to see large companies integrate solutions from separate product lines and business units to offer a greater solution that solves real business issues. 

Alcatel-Lucent has raised the bar in the broadband CPE market. They’ve matched the in-home speeds with the access network, improved in-home Wi-Fi coverage and simplified deployment of gigabit services to the residential market. The company solved real service provider business problems with innovative technologies.

To discuss the implications of this and other issues in the broadband access space on your company and product strategies contact ACG (lleone@acgcc.com) to schedule a briefing.

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Greg Whelan
gwhelan@acgcc.com
acgcc.com

Nokia and Alcatel-Lucent: Which Should Buy Which?

Seeking Alpha reported that Nokia confirmed it is in talks to acquire all or part of Alcatel-Lucent and it is no surprise the companies are quibbling over valuation. Alcatel-Lucent has gone through some tough times and appears to be executing well on its Shift plan. Arguably, they are undervalued but investors are waiting for more tangible results, which will indicate that the plan is working. Current shareholders and employees can sense this positive momentum and are remiss to “sell-out” before the results of their hard work and commitment are fully realized. 

Consolidation in the equipment market is not unexpected. Communication service providers are consolidating too and are getting bigger. When this occurs large equipment providers tend to consolidate as well as they have fewer large customers and need economies of scale to be successful. This is truly a zero-sum game. Either you get 70 percent of the business, 30 percent as a second, keep the first one honest, source or you get zero percent. With the inherent complexities of SDN, NFV and virtualization, particularly in multi-vendor integration, it may be years before the “second’ source is even added.

Driving this buyout could be Huawei. The company is disrupting the entire global telecommunication equipment market. The industry has been aware of the company's “grey area” business practices such as outright appropriating technology and intellectual property to giving eNodeBs away for free, with customers just paying the yearly maintenance fees (with a bonus of dozens of undocumented back doors). Although this is disturbing to the industry what really is of concern is Huawei’s huge product portfolio, their ability to throw “armies” at initiatives and their ability to take a long-term view to market (and global) domination.

The big issue for either Nokia or Alcatel-Lucent is who is going to compete with Huawei? Communication networks are a fundamental asset to nation states. They drive economic development, entertainment, education, national security, etc. Perhaps it’s time all governments treat them as national assets.

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Greg Whelan

gwhelan@acgcc.com

acgcc.com

Regulations: Be Careful What You Wish For

Regulations are a critical factor in the access network. Unlike the “rest of the network” the access network is burdened with federal, state and local regulations and this is only getting worse. I’ve written extensively in the past that net neutrality is a bad idea and that Title II is a gigabit killer.

Why is regulation bad for everyone, including Google? The regulated monopoly “phone companies” depreciated equipment over 30 years. With asset-based pricing regulations you want to keep your asset base as high as possible. Thus, the innovation cycle of the regulated voice industry was 30 years. In the unregulated data networking industry the desired depreciation cycle is five to seven years with three to five years being a more common life span of equipment. Thus, the innovation cycle is three to five years.  Today, service providers want to accelerate their innovation cycle to less than one year and ideally three to four months to be more competitive with the “web companies” such as Google and Facebook.

Until recently the net neutrality debate was focused on adverse traffic impacts such a throttling P2P traffic. It’s widely reported that as few as 10 percent of users consume upwards of 80 percent of capacity. The numbers have changed with the proliferation of streaming video but the issue remains. Mobile network operators have solved this problem with data caps. They also have program where web companies can pay so their traffic doesn’t count against subscribers’ data caps. (This may be illegal soon as well.) When an analogous program (for example, paid fast lane) was implemented in the broadband access market there was outrage. 

Traditional content delivery networks (CDNs) can bypass much of the public Internet to improve quality of service. Companies that want to provide a better user experience can use CDNs and cache their content in select Tier 1 locations across the country. This helps; however, from the Tier 1 cache to the user is best-effort delivery.  Once the traffic enters the local exchange carriers’ (LEC) network in a large metropolitan area the “last 50” miles are best effort. 

With this model OTT companies cannot ensure the quality of their service. Why shouldn’t they be able to pay the LEC for better traffic treatment?  The argument is that this benefits the large companies at the detriment of start-up companies. It’s just another challenge innovative start-ups must overcome. This actually benefits consumers as only those companies with a compelling offering will make it over the hurdle. Marginal companies with a marginal offering won’t flood the market and the network with garbage. This is a good thing.  Isn’t the FCC all about protecting the consumer?

Can capitalism and the free market address the issue of a “digital divide”? Yes, a case in point is Comcast in the Boston area. The company offers $10/month broadband service to any family that has children on the free or subsidized school lunch program in the city of Boston.  No laws, no regulations just a solid business driven move by Comcast. 

Service providers have invested billions of dollars deploying and managing broadband networks. Data rates have continuously increased.  Gigabit networks are being deployed around the world by a range of companies and organizations. The free market is driving them. It’s counter intuitive to expect them to spend limited CAPEX if their return on investment is regulated or uncertain.  Today, regulators are faced with conflicting priorities. On one hand they want to spur gigabit investments but on the other hand they want to regulate broadband access. It’s obvious that you can’t get both. To repeat: Title II is a gigabit killer.  

For more information about ACG's services, contact sales@acgcc.com.

Greg Whelan

gwhelan@acgcc.com

acgcc.com

Voice over Wi-Fi: Cable versus LTE: Part II

In the article “How Big a Threat Is VoWi-Fi to the LTE Operator?” (Video: https://www.youtube.com/watch?v=o8hgAzT073Q) I illustrated the potential threat cable voice-over-Wi-Fi is to the mobile network operator. In Part II of the LTE threat I look at this issue from the CxO’s point of view of each organization.

Cable executives see VoWi-Fi as “nothing but upside.” VoWi-Fi enhances customer bundles, adds new revenue opportunities and is technically achievable. From a network perspective, their HFC networks are widely deployed, minimize access point backhaul issues, and have a presence in millions of homes and small/medium businesses. This physical presence gives them instant Wi-Fi access points on which they can add voice services. Additionally, they have a voice backend, and they are well positioned to handle the additional voice traffic throughout their network. Given these strengths, they can and will move fast, hence, “nothing but upside.”

Mobile network operator (MNO) executives see Voice over Wi-Fi as “nothing but threats” to subscriber relationships, top-line revenue and profits and CAPEX flexibility. These threats are visualized in a number of ways. MNOs lack a physical presence in the home beyond the end-user devices with most users already off-loading to broadband delivered Wi-Fi for performance and data cap reasons. Although LTE backhaul networks have substantial capacity it is questionable whether they can gracefully cope with an onslaught of Wi-Fi data traffic. No company will deploy a voice-only Wi-Fi network. MNOs that do not own fixed network assets have a more daunting competitive environment; however, those that do have fixed network assets still have substantial challenges. 

Cable is not without its own challenges. Given that they will be a new entrant to the mobile voice market they must meet certain baselines of quality of service, which will add to the deployment time, cost and complexity. Cable companies will never build out an LTE network. Never is a long time but, this is a safe bet. True, they can become MVNOs or be bold and buy Sprint or T-Mobile. Without LTE cable companies will not be able to offer the coverage MNOs can.

New Wi-Fi voice and data technologies are under development. Improvements to the over-the-air protocols to address fairness and contention are emerging but VoWi-Fi technologies are nascent and standards take time. All of this will delay cable’s first mover advantage. 

MNOs have advantages as well. The biggest, as well as the most technically challenging, is intelligently leveraging their fixed and mobile networks to gain real-time insights of both networks’ end-to-end conditions such as congestion. Then, using these insights they can provide a superior quality of experience to their subscribers, particularly those deemed as high-value subscribers. For example, a default “off-load-to-Wi-Fi” strategy may not make sense for all subscribers if the Wi-Fi network is congested and the LTE network is not. 

MNOs with small cells sites can upgrade them with LTE/Wi-Fi combo devices. The MNO has already solved the tough small cell site problems (real estate, backhaul, powering, etc.) so swapping out devices is manageable. Keep in mind that these small cell sites are not randomly dispersed. They are located in high-traffic, high-value locations. This enables the MNO to quickly expand its Wi-Fi network presence in these and high-value locations. Even more powerful is the ability to add Wi-Fi to its Self- Optimizing/Organizing Network investments. 

The MNOs have a bold strategy available to them. They can move fast too, and because they have a carrier-class LTE network on which to fall back they don’t have to start with a gold plated Wi-Fi network. They state that they want to be more like web companies and deploy services fast and improve them over time. On this point, they can walk the talk and rapidly deploy a data-only Wi-Fi network that’s “good enough” and let their subscribers use it for free until they attain the level of quality they really want. A lesson from the web world is capturing customers quickly, which is paramount to success. 

Voice-over-Wi-Fi has the real potential to be a major disruption to the service provider industry. Cable companies see this as nothing but upside, whereas mobile network operators see this as nothing but threats. Both have advantages and challenges. Cable has the footprint, voice backend and potential first mover advantage. Yet, as a new mobile voice entrant they have minimum quality thresholds they must meet to be credible. MNOs, on the other hand, lack a strong physical presence in the home and may face network capacity challenges with the addition of massive amounts of Wi-Fi data traffic. However, they have the ability, if bold enough, to take a page out of the web company playbook and move even faster to deploy a “good enough” data-only Wi-Fi network using today’s technologies and their current installed infrastructures.

Want more information or to discuss strategies to dominate the game changing market of voice-over-Wi-Fi? Cable companies, mobile network operators and vendors to both industries contact ACG at sales@acgcc.com to schedule an appointment to discuss these issues with our analyst Greg Whelan. 

Greg Whelan

gwhelan@acgcc.com

acgcc.com

How Big a Threat Is VoWi-Fi to the LTE Operator?

For years Wi-Fi was looked upon as the off-load network. MNOs were glad to off load massive amounts of data traffic onto these low-end, best effort, “free” networks, providing, of course, that their LTE networks were at or near capacity. Priority one, keep the billing meter running and only off load once the meter is maxed out. How could these $100 access points running off consumer-grade best-effort broadband become a threat? After all, MNOs have spent 10s of billions on a carrier-class LTE infrastructure.

The cable operators realized that they have a near ubiquitous high-capacity network and adding Wi-Fi access points was an opportunity. As we have seen numerous times in the past, when cable companies see they have an opportunity they quickly take advantage of it. Today, Comcast claims to have more than four million access points, which will grow to eight million by the end of the year. Yes, about half of these are in subscribers’ homes where (unbeknownst to them) they are a public access point for their neighbors.

Now, along comes voice over Wi-Fi (VoWi-Fi). This solves one of the age-old industry dilemmas: Great mobile voice outside OR great mobile data inside. Small cells and DAS are solving the indoor voice problem today; however, they are starting from an installed base near zero, and deployments are nontrivial and customized per venue. Outdoor small cells also face the added challenges of power and backhaul.

Wi-Fi is as close to a ubiquitous technology you will find. Enterprises, small business and residential consumers all have become accustomed to having access to Wi-Fi everywhere. There are clearly technical challenges to deploying quality carrier-class VoWi-Fi, but these are all solvable. After all they have been solved in the LTE market. Examples include MIMO antennas, seamless roaming and improved Doppler tolerances.

Thus, one can assume that VoWi-Fi will work and will “off-load” a significant percentage of indoor voice calls from the LTE network. Should MNOs be concerned? Let’s do some simple math to try to answer this question. It’s widely reported that approximately 80% of mobile traffic originates indoors. In five years what percentage of indoor voice traffic will be on the Vo-Wi-Fi network and not on the LTE network? Let’s assume 50%. This is reasonable because iPhone and Samsung smart phones support VoWi-Fi calling, and mobile subscribers are very aware of the cost of exceeding their mobile data caps. Therefore, the MNO will see a 40% reduction in voice traffic over the RAN and EPC. The BIG question is what the impact on revenue will be. If we assume that the revenue impact is only 5%, a $20 billion/year MNO would see a $1 billion reduction in cash flow. If the cable companies only see 25% of that amount, that’s $250 million in cash to them. The difference is assumed to be lost to price reductions. 

MNOs, MSOs and service providers looking at offering VoWi-Fi services will need help to address this threat and opportunity and develop winning deployment and go-to-market strategies. Likewise, vendors in this ecosystem need to be cognizant of the multidimensional dynamics of the VoWi-Fi opportunity. ACG Research can help develop your business and marketing strategies.  We can provide a range of services from complete strategy development to creating high-impact differentiated messaging to product launch support. 

How big a threat is VoWi-Fi to the LTE operator? Today, the answer is not much. Tomorrow, the answer is simply when is tomorrow. 

Contact ACG for more information as to what we can do to help you at successfully offering VoWi-Fi services.

Greg Whelan

gwhelan@acgcc.com

acgcc.com

Virtualization: There’s got to be more!

Porting to Intel and virtual machines is a technical implementation detail not a business solution

When vendors are asked about their virtualization strategy you often hear a common answer. They say they’re “virtual” because they ported their software to Intel. What’s the value proposition? Porting to Intel isn’t it. Sure it reduces capital expense but it does so at the expense of performance. All it really does is shift industry revenue, power and influence from the Broadcoms of the world to Intel. Plus, we now know that if capex goes to ZERO less than 33 percent of CxOs’ top of mind business problems are solved. When pressed for the rest of their virtualization strategy they say they run on virtual machines in a data center. OK, and then what?

Let’s assume they perform three functions called A, B and C. They port them to Intel and then run them on virtual machines. Shifting revenue from Broadcom to Intel is a technical implementation detail and not a business solution. Service providers should be thinking there’s got to be more.

The logical question to ask is whether A, B and C are the right functions in the virtual world. Just because they were required in yesterday’s environment does not mean they are required in the virtual world. Do you really need 20 percent of A and 60 percent of B? Do you really need 150 percent of C? You get the picture.

If service providers will be spending billions of dollars moving to the virtual world they should be asking themselves, why? Sure there’s a benefit to take the As, Bs and Cs of today’s world to virtual machines. But is it really enough? This is a one in a lifetime transformation and a fight for ultimate survival. SPs need to ask for more.

Vendors, on the other hand, need to be asking themselves similar questions. Is porting to Intel enough? What can we do that’s game changing in the virtual world? The answer to the first question is no way. The answer to the second question depends on the vendor’s core competencies, ecosystem presence, business strategy, etc. The good news is that ACG Research can help you answer this second question. Contact us to find out how at sales@acgcc.com.

Click for more information about Greg Whelan.

Greg Whelan

gwhelan@acgresearch.net

acgresearch.net

Demand for All Things Video, the Implications

Although video has transformed public and private networks and continues to drive network deployments it also dwarfs all other network traffic types, for example, Netflix can account for upwards of 40 percent of local Internet traffic. The massive amount of bandwidth required drives the need for capacity in all parts of the end-to-end network. If you solve this problem for video all other traffic, voice, email, web and even IoT benefits as well.  

Consumers have an unending appetite for all things video. They are watching TV shows, movies, YouTube, Vines, Facetime or Skype on every device they have. Advertisers are increasingly moving to video ads and away from static banners. Truly live TV is exclusively sports and news. Appointment TV is a thing of the past. Everything is becoming on demand.

The implications of these trends cannot be underestimated. Not only do they impact all aspects of the telecommunication and Internet ecosystem, they impact the movie and television industries in a major transformation way. As these businesses struggle to adapt to overwhelming innovative forces they only know one thing for certain: They don’t want video assets to go the way of music.

Service providers, facing a hypercompetitive zero-sum market, are attempting to adapt and upgrade their physical networks, data center, core, metro and access to support video traffic. The race to 1Gbps per home is well underway. Back office systems are adapting as well. Marketing departments are creating new service bundles with higher data caps and source funded noncap traffic, such as taking an order to sending a bill, all of which need to be supported. Legal departments are impacted too. Issues such as net neutrality, asymmetrical interconnects, must carry and spectrum acquisition are just of few of the array of legal issues facing service providers globally.

Mobile operators are in no way immune from video. As they address their coverage and capacity issues video traffic is front and center. More smart phones mean more handheld video screens, which use more bandwidth and have much longer connection times. Here too, all aspects of the mobile operators business are impacted. Small cell deployments, WiFi integration and SON plus the emerging requirements of 5G must address the demand for video.

Video might just be a lot of ones and zeros, but the impact of massive amounts of video is disrupting the entire telecommunication industry. It is safe to say that decisions made by the entire ecosystem, service providers, equipment vendors, software vendors, semiconductor vendors, must address the onslaught of video traffic.

Click here for press release information about Greg Whelan. 

Greg Whelan

gwhelan@acgresearch.net

acgresearch.net