Friday, October 28, 2011

Is LightSquared a wholesale vision of the telecom future?

Is LightSquared the “fat pipe” future for telecom operators?  And a future wholesale partner for internet-based voice players?

It is generally agreed that there are two directions for operators in a future filled with free internet-based voice, video and texting services – the “smart telco” and the “bit-pipe provider.”

Most operators want to be the “smart telco,” maintaining prestige, control and innovation.  But LightSquared – with its history as a satellite-based communications firm – in the US is showing the innovative – and controversial – edge of the “bit-pipe” model.

LightSquared – with close cooperation from Sprint – wants to build a nationwide, wholesale 4G network to compete with Verizon and AT&T based on spectrum previously reserved for satellite phones (this is where both serious technical and political controversy come in), but it doesn’t plan to run it.

If LightSquared ever builds its network, it will be a “white label” provider of network capacity. So far it has signed up a wide array of partners, from big ones with Sprint and Best Buy to small ones serving small businesses and rural consumers, plus chip and device deals with Qualcomm and Sharp.

But what about the over-the-top (OTT) angle?  Could an OTT player, say, Skype, buy capacity from LightSquared for its own network to expand its functionality and free itself from traditional operators? 

In fact, it’s already happened, with the LightSquared deal with VoIP provider NetTALK.

Is that the real future for LightSquared? Could they go with a mobile VoIP company next? And can this model be replicated?

Thursday, October 27, 2011

HD voice gets a new logo and a foothold in Scandinavia

 HD Voice just got its own fancy logo from the GSMA:


The GSA says there are now 32 HD Voice networks in 29 countries total, with more than 50 compatible devices. But HDVoice News asks a good question about whether we’ll see soon this logo pasted on more mobile phones in Scandinavia.

They think we might because of TDC’s recent rollout of HD Voice services in Denmark. From their article:
In addition, Scandinavian operators may start moving faster, now that TDC has rolled out HD voice in Denmark; the operator also has subsidiaries in Sweden and Finland. There’s an irony that the home countries of Ericsson and Nokia don’t have HD voice.
  Hmmm, he has a point.

Monday, October 24, 2011

Is Telefónica going too far into digital with Jajah?

You can’t say Telefónica isn’t trying.

In 2009 it bought the American internet-based voice service Jajah – one of the first major VoIP moves by a major international operator.   
Then in September, as part of a larger restructuring, it created Telefónica Digital – a London-based division with the mandate to take the company beyond mobile into digital. 

And now Telefónica Digital has launched O2 Connect in the UK – a trial internet-based calling service for O2 customers based on Jajah technology.  It’s still a trial – and only works on WiFi – but how many operators are pushing forward into the internet-based, voice over IP (VoIP) world so bravely? Light Reading calls it a direct challenge to Skype and Google.

The new CEO of Telefónica Digital, Matthew Key, spoke earlier this month at the Wired 2011 conference. From Light Reading's article on the speech:
We can't close our eyes to [the impact of over-the-top services]. ... We have to embrace the future and change our raison d'etre. ... We can't operate in a walled-garden environment, Key said.
That's why the new Digital division has been set up as a separate operation -- so that it can behave and develop like a separate organization and then inform the rest of the group and feed it new ideas, business models and services, even those that cannibalize existing revenue streams. That autonomy is important to being able to deliver against its mission, Key noted.
Telefónica has been using Jajah in several different ways.  It provides wholesale VoIP to other companies and operators (including Microsoft Lync Online), it is a brand name for VoIP long distance for 02 subscribers in Germany and the UK, and it maintains its independent apps, like a mobile Facebook integration app that got a lot of attention earlier this year.

In April, Telefónica as a whole estimated that its voice and messaging revenue would go down by 1 to 3 percent by 2013.  Not really that much.  And I am sure the company is not giving up on voice. 

But look, every operator has to come to peace with VoIP sooner or later.  Telefónica has decided to do it sooner.  And it’s a creative solution. It helps the company stay relevant globally.

This is just one model, among several.   So when does it make sense for an operator to partner with an over-the-top company?  And when does it make sense for them to do it themselves?

Thursday, October 20, 2011

Voice vs. data: how does Sprint judge its network?

It still comes down to voice, at least for Sprint in the US.
Sprint CTO Stephen Bye said during a presentation at the Broadband World Forum late last month in Paris that:
"Voice is becoming less relevant in the planning phase of the network. Our focus is on data-optimised networks. That said, people in the U.S. still judge the quality of a network by the voice quality…they're very sensitive to dropped calls."
The headline of the linked Total Telecom article is particularly fun:  Spectre of voice haunts Sprint's network planners.  
Oooh, those scary voice services …
Bye’s comments carry particular weight considering Sprint’s explicit embrace of free internet services, highlighted by its partnership with Google Voice.  The company is also making a huge bet that its unlimited data plan will help it sell the 30 million iPhones it just bought.
So what’s the quality of Google Voice on Sprint?  And are consumer expectations lower for what is known as “over-the-top” services?
How do you as a consumer judge the quality of your operator's network?  Have your priorities shifted to data rates or is it still about voice quality?
To quote the iconic TV ad campaign from Sprint competitor Verizon:  Can you hear me now?

Wednesday, October 19, 2011

Remembering the 20 dollar phone call

A good history lesson as the price of calls keeps heading towards zero.  It is also a good reminder of how badly people actually want to talk to each other, not just write, like a telegram then and an instant message now.

Tuesday, October 18, 2011

WhatsApp, net neutrality, and overreacting in the Netherlands

We’re getting a peek at the future in the Netherlands these days – the future fight over net neutrality.  

It’s all here – public anger at operators, plummeting voice and texting revenue, operators protesting against free internet services, and, finally, the world’s second net neutrality law.

It started in April, when leading operator Royal KPN announced poor first quarter earnings. This was largely driven by smartphone users – who make up 40 percent of the Dutch market – switching to a free texting app called WhatsApp.  In response, KPN announced plans to charge users extra for WhatsApp and Skype, as well as for high-bandwidth video.

How did that go?  From the Associated Press:
The move backfired spectacularly. 
Customers were outraged, and many began questioning for the first time how the company even knew which applications they were using on their phones.

 A few months later, reading the political mood, the Dutch parliament passed the world’s second net neutrality law (Chile was the first).  It takes effect in January and goes significantly further than EU guidelines – known as the European telecoms framework – that went into effect in May. 
Months later, the fallout continues. 

KPN and the other two dominant operators – Vodafone and T-Mobile – have raised the price of mobile broadband by cutting data allowances across the board.  In neighboring Belgium three political parties have proposed a net neutrality law, and net neutrality groups are using it as a model for countries around the world. 

Meanwhile the European Union's commissioner for the digital agenda, Neelie Kroes, said a while back that she “regrets” the Dutch law and that it “could kill innovative new offers. Even worse, it could mean higher prices for those consumers with more limited needs who were ready to accept a cheaper, limited package."

Of course, the real winners in all this will likely not be Skype-using consumers but, as the Associated Press put it in its article, big software and content companies that want to push data-heavy internet services, notably Facebook, Google and Skype’s owner, Microsoft.

So did the Dutch market really need this law?  Sure, markets should be regulated, but only if necessary, if something is going drastically wrong.   

Net neutrality advocates would disagree, but this was not a market out of control. Each operator – in the Netherlands and elsewhere – needs to be able to ensure that its network performs at the highest level possible.  This does not mean blocking all free internet services, but it does mean some level of operator control.

This leads us to the big questions: What do we regulate in telecom and what are the actual impacts of regulation, or the lack of it? 

And will this new law benefit consumers and the market as a whole? 

Friday, October 14, 2011

Are free voice and messaging startups looking to succeed … or get bought out?

It is inevitable.  Free voice and messaging services are going to transform the way we talk and text on our mobile phones.  And they will change the way operators do business, how governments regulate the internet, how we are billed for our data usage.

But not quite yet.  And probably not by the current crop of competitors.

Because while companies like Viber, Tango and fring might pose an existential threat to traditional operator-driven voice and messaging revenues, most of them have limited funding, no profitbability and face a brutal competitive climate.

In other words, yes, they are a threat as an industry, but, individually many of them are doomed to failure. To succeed, “over-the-top” companies need high smartphone market penetration, flat mobile broadband fees, operator partnerships and an enhanced user experience, says the management consulting firm Arthur D. Little.

And all that will likely happen. In a base case growth scenario from 2010 to 2015, Arthur D. Little projects that the mobile voice “over-the-top” players could grab up to 10 percent of the overall mobile voice market. But their curve doesn’t really get steep until 2013.

So who’s going to make it to 2015? Or even 2013?  

The bulk of funding for this sector is coming from rather wary venture capitalists, with other institutional players slow to invest.  And listed companies have underperformed compared with the S&P 500 since 2006.  Even a strong customer base is no guarantee of success, with a very low barrier for customers to switch between free services. Of course, this analysis does not apply to the heavyweights, like Google Voice, Skype or Jajah, all of whom are part of strong, well-positioned companies (Google, Microsoft and Telefonica, respectively). But for the smaller players, it is still the Wild West.

And like in the real Wild West, the smaller companies will have to rely on their strong ability to innovate, to develop new products and to navigate a shifting marketplace. And many of them seem to have these skills.  But that raises another question:  To what end? To succeed on their own?

Or is it more likely they are in a window of opportunity to partner with operators or be incorporated into established communities like Google or Facebook, all of which have the resources and big picture skills to succeed in a world of easy connection?

What do you think?  Are we overestimating or underestimating the disruptive potential of these internet-based voice providers?

Wednesday, October 12, 2011

Can trillions of text messages sustain mobile operator revenue?

A trillion is a really, really big number. 

For instance, there are a trillion stars in the Andromeda Galaxy:

Photo by write_adam on Flickr

So don’t give up on text messaging just yet – especially in the Asia-Pacific region.  In 2011 there will be 7.5 trillion text messages sent, up from 6.7 trillion in 2010, says Ovum Research. Revenue is growing too, up 8 percent year on year to USD 153 billion.

Great news, right?  

Well, the Ovum report was actually a downer.  From

An Ovum analyst stated that consumers are expected to prefer Internet-based messaging over traditional modes, and the trend is expected to be driven by various factors, including rise in smartphone penetration, low-cost data plans, increasing third-party messaging providers, and messaging services from device vendors such as RIM, Apple and Nokia.

But trillions of messages do not disappear overnight, especially in an Asia-Pacific region that accounts for almost half of the world’s texts, with no decline in sight.

So there remains time both for making traditional texting profitable and for operators to “claw back” market share in internet-based messaging.