Friday, December 30, 2011

Generation Text

The first SMS message was sent nineteen years ago by Neil Papworth to Richard Jarvis on December 3, 1992. It read - Merry Christmas - and was sent using an Orbitel 901 handset and a personal computer. As with many new services texting had a slow start.

A decade later the popularity of SMS was spurred-on because many young people were already familiar with online chat. Thanks in part to price reductions and bundle deals the ubiquity of SMS rocketed, making it a cash cow for mobile operators throughout the world.

According to the latest report from Nielsen the average teen now sends and receives seven messages, for every hour that he or she is awake.

That’s a total of 3,417 messages a month. OMG!

When surveyed, the top three reasons teens said that they prefer messaging to calling was because it is faster (22 percent), easier (21 percent), and more fun (18 percent).

ABI Research anticipates 5 trillion SMS messages will be sent before the end of 2011. On an earlier post we stated Ovum Research forecast it to be even higher - 7.5 trillion. Regardless of the exact volume, a huge number of SMS are sent every year.

Some analysts claim there are signs in mature markets such as Western Europe – that volumes are in decline, and revenues might follow suit.

Most of them agree this phenomenon stems from the popularity of third-party messaging apps triggered by rising smartphone penetration.

As wonderful as these apps are did you use WhatsApp to send grandmother a photo from Christmas dinner last week? Will you log in to Skype at midnight to wish your friends and family a Happy New Years on Dec 31? And on Valentine’s Day how will you woo your nearest and dearest?

Data connections are growing in affordability and will soon become ubiquitous. This means messaging services (WhatsApp, Apple’s iMessage etc) will increase competition so there is a need to evolve from the limitations of SMS.

However, SMS will continue to rule the roost as long as it is provided at a price people are prepared to pay and can be used to reach almost everyone, at any time on almost every phone.

That’s why I’ll be communicating my best wishes by SMS this New Year’s Eve.

With millions of messages being sent during the festive season – I won’t be alone just yet.

The following graphic created by Tatango depicts the history of SMS over the last 19 years:

Thursday, December 22, 2011

Video calling steps into the spotlight

It’s time for us all to get ready for our close ups. Because after decades of false steps and delay, it seems like video calling (or whatever you want to call it - video conferencing, telepresence or unified communication) might finally be ready for the spotlight, so to speak.

Communicating by video has always been a natural – a staple of science fiction and the popular imagination. More than that, it touches on the most basic ways humans communicate – whether dancing by a fire or acting out a funny story or teaching a boy how to hunt.

And it will only get better. Bell Labs is working on a host of innovative ways to make visual communication even more like face-to-face interactions.

But visual communication has been held back by some intractable problems – from compatibility to poor quality to prohibitive expense. In fact, pretty much the same problems people likely dealt with in the early days of voice communication. On top of that, video is also more sensitive than voice to tradeoffs between bandwidth and quality within a network.

Of course, over the top (OTT) video has been big for a while, with Skype, Apple’s FaceTime and Google Talk. But that has not really translated either to widespread enterprise adoption or to any significant revenues for operators or providers.

Until now. While the consumer market remains relatively far off, Ovum predicts that that the enterprise-grade telepresence market is going to boom, with spending rising to USD 1.1 billion in 2016, with a compound annual growth rate (CAGR) of 19.5 percent from 2011 to 2016.

That’s a lot of growth for just one part (albeit a large one) of the video conferencing market.

In fact you can say there are three markets – telepresence, video conferencing and collaboration tools – slowly converging into one grander video market, each segment with its major players from Microsoft and IBM in collaboration tools to Lifesize and Radvision in video conferencing and Cisco and Polycom in telepresence.

Between the high end of this bigger market – exemplified by TANDBERG, now part of Cisco – and the low end – think Microsoft Lync –there seems to be an opportunity for operators to stake a position in the middle and take advantage of their advantages in network infrastructure.

So there is no guarantee that telecom companies will be at the center of video. This is reflected in a quote from Ian Jacobs, the co-author of the Ovum report:

"Businesses will face a difficult task in deciding on the right vendor in a particularly rapidly changing supplier marketplace.

They may return to their legacy video conferencing vendor for telepresence or look to new-breed video specialists. They might make the choice as a stand-alone decision or as part of a broader enterprise communication strategy."

And what about those historic barriers, quality and interoperability? Well, with the new mobile broadband networks built on LTE technology, speed and capacity costs are going to go down. That’s the easy part. Interoperability is not as simple. Right now the market can best be described as an archipelago of different islands, where different gateways are used to “connect” the islands. In the long run, this is not the way to turn visual communication into a mass market service for all, like voice today.

Many companies are pushing for industry standards. The TIP standard driven by Cisco has been on the agenda for some time, while Polycom, together with a group of operators, created the Open Visual Communications Consortium (OVCC) earlier this year. However, the only open industry standard is really MMTel based on the 3GPP IMS standard. GSMA is also working towards an IMS-based VoLTE (Voice over LTE) video profile.

Yet this is still a rocky area. Google caused waves in 2010 when it stopped supporting the H.264 video codec – the choice of the telecom industry, essentially – in its Chrome browser. And there are players trying to find ways to support all standards – see BT Conferencing’s latest offering – rather than decide on one standard for all.

Regardless, operators are well positioned in video to compete with over the top (OTT) players, perhaps more so than in voice and messaging. The reality is that real-time video calling needs the audio and video streams to synch, and this requires a high quality, properly managed network. And operators are the only ones with that.

At least for now.

Tuesday, December 20, 2011

Is data the new liquid gold?

Many companies including Facebook, Apple and Google view data - especially mobile data - as liquid gold. And they are probably right, as there appears to be promising ways to monetize data, with operators in an especially strong position to capitalize on this trend.

But are there moral considerations?

At a recent Informa SDM event in London representatives from operators all around the world shared their experiences and strategies on handling the available subscriber data that can be consolidated from their networks.

They discussed the real social graphs versus the Facebook graph, business applications possible with this data, and, of course, the thorny issues related to privacy.

A Swedish newspaper called Dagens Nyheter published a related article recently. The article discusses how 800 million Facebook subscribers receive suggestions about songs to listen to, video clips to watch, games to play, stuff to buy, events to visit and people to get familiar with.

We then “repay” the company with our own updates, invitations, links and photos.

So have you ever discussed your love for Justin Bieber, Bob Dylan or U2 with friends on Facebook?

Ever been surprised when you receive a subsequent offer from CDON to buy their latest signed record?

This is targeted marketing at its best. I think it’s wonderful to finally be reminded about what I like and what I might want to purchase...

Or is it?

Friday, December 16, 2011

Has the OTT threat to telco operators been exaggerated?

What if the over the top (OTT) threat to operator revenue is overstated? What if operators have all the tools they need to transition easily as the dominant players in telco 2.0?

What if?

It seems to be the accepted wisdom that OTT services will dramatically cut into operator revenues not just in the long-run but in the short-term. Think of the effect that WhatsApp had in the Netherlands.

But perhaps this is just an example of disruption in a changing marketplace, one that still favors the operator. We have examined it here before. All but the biggest OTT players face uncertain funding and an unproven revenue model. And despite all the SMS over OTT buzz – including WhatsApp – there is no real answer for the universal interoperability of the simple SMS.

Sure, revenues for voice and texts are going to fall as some minutes and texts go over the top. But bundled with access and bucket plans, voice and SMS can still be an important piece of the revenue puzzle for an operator.

This would all be especially true if operators stop focusing on price as the sole competitive differentiation and start working together to build interoperable services for the next generation. This is an historic strength of the telecom industry and one that should be built on.

There has been a start to this with both the growing adoption of HD voice – which could offset OTT strengths in innovative services – and with the formation of the “Euro-5” group of operators, which announced cooperation on launching Rich Communication Suite (RCS) in February and restated their commitment in November.

This is good sign, regardless of the technology or service.

And maybe if this happens, operators can get as comfortable as Telefónica or France Telecom in playing the OTT game themselves and using OTT to build the brand, not destroy it.

What if?

Friday, December 9, 2011

Voice over LTE is the future. But what kind and when?

We all know that VoLTE is coming. It is crucial to operators, which view the technology as an opportunity to take communication services such as voice and video-calling to the next level in the ‘data-only’ LTE market.

But when is it coming?  And where?

We looked for answers in a couple of recent webinars. Last week leading ICT players including the GSMA, Intel, Huawei and Ericsson participated in an IMTC webinar. Dan Warren from the GSMA said getting SMS and voice to work while roaming was challenging but he expects development of VoLTE to be complete during early 2012.

This is reassuring. After all the One Voice initiative led by the GSMA began leading the mobile industry towards a single, global solution for voice over LTE way back in February 2010.  

Could Japan’s NTT DoCoMo be the first out of the gate? It was an early adopter of LTE technologies. Although its LTE applications are data-only and no voice traffic is carried over the 4G network conflicting reports online state the operator has plans to introduce VoLTE services as early as March 2012.

Conversely, John Donovan, AT&T Chief Technology Officer, announced the operator will wait until 2013 to launch its VoLTE service - after the standard has had time to strengthen.

Regardless of exactly when it happens, what will ordinary people get out of VoLTE?

During another webinar broadcast by Light Reading yesterday, Gabriel Brown a Senior Analyst from Heavy Reading, said that even though the definition only specifies a minimum set of services that must be supported, there are also opportunities to support HD voice, video calling and a lot more.

Brown said VoLTE is the target voice solution for virtually all operators with LTE networks. If he’s right and VoLTE is the foundation service for all-IP mobile networks it should continue to grow in utility and functionality over time.

Carl Anderson from Anritsu said the GSMA recommendations are being addressed by many different companies, in a much more coordinated approach than we have seen with earlier technology deployments. 

The webinars presented a compelling argument that VoLTE will revolutionize telephony, though it will be much easier to get people to believe in the message once it is available in the market.

Friday, December 2, 2011

Telefónica takes another step over the top with fonYou

For a major operator, Telefónica is bold. We  wrote in October about Telefónica and its moves into digital, from buying – and making use of – American OTT voice provider Jajah to creating an entire stand alone division called Telefónica Digital.

Now Telefónica is the first operator to a mobile app from Spanish cloud telephony provider fonYou (the service has been in testing since the spring). Telefónica is calling it Segunda Línea Movistar, and it is available only in Spain.  From the article on the launch:

[The] XtraLine solution is now available to mobile operators as a white-labelled iOS and Android app … The solution … enables mobile operators to provide consumers with a second phone line bundled with a range of rich services like visual voicemail, call registers and advanced voice screening.

There is a lot of value to this:  a second number on your SIM card, protecting your primary number, and managing services “in the cloud.” 

Still, it is a move into OTT, which might make many operators nervous.  Here is a quote from fonYou CEO Fernando Núñez-Mendoza from the article:
“The initiatives that we see that are quick and courageous are coming form the mid-sized operators,” he said. “The large ones need a lot of time and processes to make decisions. That’s bad news for them; they have still not re-engineered the innovation process.”
Telefónica has made prominent its intentions to take the OTT players on in the market and is perhaps not typical of the large operator, Núñez-Mendoza said.

Thursday, December 1, 2011

Can operator billing expertise fill the "empty chair" in the OTT value chain?

Who do you trust to bill you properly?  The latest startup messaging company?  The four-month-old mobile over-the-top voice (OTT) player? 

Probably not. But chances are that you do trust your mobile phone operator.

The accepted view is that OTT companies and operators are locked in a fierce battle for consumers’ voice, messaging and video business.  But why can’t operators take different approaches on different fronts?  Why can’t they make money by working with OTT companies on billing, especially when giants like Google, Nokia and Research In Motion are encouraging it?

From a post at Connected Planet, based on a new white paper commissioned by Vesta Corporation:

Photo by me and the sysop via Flickr 
Over the top players are looking to telcos to provide the billing for their customers, and there is an empty chair in the value chain for them to fill. With a trend towards personalization and true customer focus, this position in the value chain can only get stronger – as long as telcos focus on customers rather than court-rooms.

Much of the debate centers on firms like Facebook, Amazon and Apple that do, actually, have quite good billing relationships with their customers.

But most people in the world do not have credit cards and are either too young or too poor to pay through bank accounts or on credit.  For these people, mobile billing is the most convenient way to buy content or services of all kinds.  From the CoreSite Newsletter:
Operator billing is known to be accurate, known to be supported in the call center, online and on the high street. In addition, operator billing enables users to be billed by a single entity for their monthly consumption of multiple services and applications.

Now the Vesta white paper and most articles on this topic focus more on m-commerce and on companies like Nokia that run app stores (and there is some data that shows that operator billing drives sales in app stores).  And Tony Poulous at TMForum is down on the whole concept, more or less conceding defeat on services, including billing for them (though he has other interesting ideas at the end of his post).

But is it really so gloomy? This is a potential new revenue for operators, who should not be afraid of at least exploring the full use of their capabilities.
And it’s a good message for startups too – there are potential partners out there (operators) who have the billing capabilities who need to succeed.