Keith Willetts' Blog

All Change - New Initiatives from the Forum

Keith Willetts — Thu, 28 Aug 2008 09:21:00 GMT

For years now I've been preaching that the way to profit growth for service providers was to concentrate on the ‘golden triangle' of driving up new revenues from new services; driving up customer care levels to retain business and focussing on driving down operating costs. A lot of companies have got the message and we see ‘transformation' programs running in many communications service providers around the world.

But one bit of it is wrong. Driving up revenues doesn't actually help if they don't deliver a healthy margin. Many new services involve sourcing content or information from 3^rd parties taking a big slice out of the revenue meaning they are very thin margin services if the cost base is not razor thin – Welcome to the world of retailing ! - the real approach is driving up contribution from new services i.e. the profit.

Negotiating hard with the content owner is one way of course, just like Wal-Mart or Dell does every day. But they also have superb and ultra low cost supply chain management. The medicine of taking costs out of service delivery doesn't just apply to traditional services where margins are falling; it applies to new services where margins must start off being razor thin. Have you bought a CD or DVD lately? It's not just the price of phone calls that's going through the floor and prices of media goods continue to drop sharply. Digital content services like IPTV or mobile TV is subject to the same pricing pressures and the costs of delivery need to be very low if the service is going to return a positive margin after the ‘upstream' partners like content aggregators get their slice.

Right now loads of communications companies are doing deals with loads of media providers with a lot of various intermediaries in the picture too. Mostly these are ‘hand crafted' deals with the emphasis being put on the price of the content, not on developing a really slick and low costs delivery chain. The costs of handling issues such as order handling, customer care, problem resolution, payments /settlements manually across multiple trading boundaries will kill the margins on any service. While customer volumes of services are quite low, maybe people can get away with it but as the services scale, meltdown will quickly follow. A business plan that relies on the service not selling in order to keep costs under control isn't much of a plan!

About a year ago, the TM Forum launched an initiative to look at how to automate business processes across trading boundaries, to solve just this kind of problem. The first step was to build an incubator to flush out the issues. Called the Content Encounter, it's a state of art, live technology consortium of companies working together to deliver content based services at least cost with the highest quality that can be seen for real at some of our conferences around the world.. From that beginning we recently launched the Value Chains Initiative to agree standard business-business interfaces to automate basic inter-company functions, taking costs and hassle out and providing a better end-end service. After all, the end customer sees the amalgam of all of the players in the value chain and if the end customer isn't happy, nobody in the value chain makes any money.

To add to that and ensure that those interfaces have a rock solid enabling technology foundation to build on, we've launched another initiative to ensure that our work is as relevant to other players in the value chain as it is to our core communications and cable membership. Any industry has a way of looking at things and its own special jargon, but if the Forum's work is going to be relevant and adopted by players all the way along the value chain, the work needs to be as easy to understand as possible, based on approaches common throughout all industry sectors yet farming the expertise and skill that service providers have built up over years in delivering high service volumes at low cost. We're taking all of the core frameworks and standards that we've developed for the communications industry and overhauling them to make them relevant to the services that are emerging today and will emerge over the coming years. The Service-Oriented Enterprise Blueprint is a unified, more tightly integrated and industry neutral set of building blocks for and enabling platform for creating, delivering and monetizing digital services. It combines the best of what the communications industry has pioneered with other industry best practices like Service Oriented Architectures and common IT business processes such as ITIL. Work is underway right now fleshing out this Blueprint and early realises will be available later this year.

As communications and cable companies start to invest billions of dollars transform themselves into providers of a wide portfolio of digital media services, it's timely that the Forum is launching its Transformation Resource Center aimed at building a library of relevant information and best practices relating to transformation topics. The Center will be undertaking original market research work and has already attracted a number of seasoned industry professionals with a significant track record in market research. The aim is to help our members reduce risk on major transformation programs by sharing best practice and ideas between providers and their suppliers around the world.

Finally, the Forum itself is undergoing a transformation of its own. With over 80 technical projects running, our collaboration program is world class and many of its deliverables have been adopted by many service providers and suppliers around the globe. But times are changing. Timescales for developing solutions for our members are forever speeding up. With more and more companies implementing the Forum's work, much of our emphasis is changing from developing common approaches and standards to working with companies to implement them and ‘farm' the experience they gain in doing so.

While we successfully introduced our training and education services a few years ago and these services play a major part in that information sharing, it's still not enough. Webinars are another great tool and we now run a large number of these on a variety of topics. The web is a great tool for people to access and share in our work and, building on last years' success in launching online user communities; we are now moving much of our collaborative development work into an online approach and significantly changing the way our collaborative program works. Just like Wikipedia or Google's Knol, members will be able to interact with Forum documents and software directly, online, making changes and adding what they are learning in the field. A new range of levels of maturity of Forum outputs will ensure that ‘hot off the press' issues are readily available to members worldwide while retaining the integrity and quality of our formal standards program.

To get a better view of all of the latest initiatives that the Forum is driving, click here.

Jaw Jaw, Not War, War

Keith Willetts — Mon, 09 Jun 2008 03:50:00 GMT

The decision this week by BT to charge for otherwise free BBC content on its IPTV service highlights the sharp contrast between business models for delivering content. Content owners increasingly cut out (or not even consider) the distributor and adopt the Over-The-Top (OTT) web route to their customers, riding the internet infrastructure for free. Verizon, Comcast and MTV also came out this week hitting at the ‘free’ model of content distribution by companies who don’t have to pay for transport cost.

At the Advertising 2.0 conference in the US last week, Terry Denson, Verizon's vice president of programming and marketing for FiOS TV, said that the industry is evolving "two competing programs, two competing ad models, two competing consumption models that are going to collide on the same screen."

In the UK, the BBC’s web-based TV replay service called iPlayer has become increasingly popular but has been causing major issues for ISP’s as traffic generated has lept to almost 10% of UK internet traffic within 6 months of its launch. It is causing other internet traffic to suffer and ISP’s are having to invest in more capacity but without any increased revenue. In return, BT claims the charging for the replay capability on its IPTV service is reasonable given that it offers a much higher high quality service than the basic web service offered by the BBC. All of that revenue goes to BT, none of it back to the BBC - in other words this is a charge for superior carriage, not for content.

This increasing stand-off does not bode well for industries that actually need each other and need to work together. Either web based players naively regard the net as a birthright and aim to just keep pumping content across it as long as someone else (the ISP) pays for the infrastructure, or maybe they are just taking a first mover approach to ensure that they don’t get their position threatened by communications companies. As Carolyn Everson, executive vice president at MTV said, "They've got it for free -- we're training them to get it free”. Given free content available on the net, will IPTV service providers be able to persuade many people to pay for something that is available free elsewhere, even if it is better quality?

There is an underlying reality here: both sides of this debate are symbiotic and need each other to survive. Content distributors need good quality distribution which involves significant capital investment and distribution companies need useful content to drive new revenues. If the infrastructure companies are cut out of the revenue stream, they are unlikely to dip their hand in their pockets and pay for upgrade of networks to deliver very high speed services – to the detriment of digital content distributors.

Squaring this circle brings another value chain layer into the frame – the advertiser. The advertiser can provide the money to pay for both the infrastructure and the content, provide that there is a business model that makes sense – to the advertiser that means access to eyeballs and the better targeted and profiled they are the more they will pay. Just ask Google.

But what keeps going missing in all of these debates is that all of these players are dependent on each other. Advertising can’t work without a delivery mechanism and content: content needs someone to pay and users are reluctant; communications companies need to move on from just basic voice and messaging services. Guys, you all need each other but to make it work there needs to be a fair and equitable sharing of risks, costs and revenues.

Trying to leverage benefit from the other or invading each other’s turf may be a part of daily business in open economies – so an economist might say:” let the market decide”. But to me the whole digital content sector might stall because of the clumsy baby steps that the parties are making. There is a lot of new revenue in here for everyone if only people would get round a table and look at how to make it work – not technically but in sustainable business terms.

The TM Forum’s role has always been to help business work more efficiently and effectively. We stand ready to help foster this debate, so everyone can make money.

Recipe for an Information Poor Society

Keith Willetts — Mon, 14 Apr 2008 08:38:00 GMT

Several recent articles and news reports over the past week or two made me again ponder on the future of ‘bit pipes’. Long the fear of many operators that they would be commoditised into a ‘mere bit pipe’; I’ve long wondered why it would be so bad, after all. Lots of other industries do well out of commodities, provided they understand the rules: – high economies of scale, low operating costs.

But that’s applying market logic to the communications industry where economic logic and regulation long ago parted company. CEO designate of BT, Ian Livingstone, this week called for UK regulators to rethink the universal service obligations on BT before he would consider a ubiquitous fibre access network rollout; the Net Neutrality debate continues to run and run in the US; “structural separation” becomes the new toy of regulators everywhere.

A few years ago, commenting on the ludicrous £24 billion tax take of 3G spectrum actions in the UK, digital guru Nicholas Negroponte commented “All we have achieved is condemning our children to an information poor society”. Given the lack of speed of broadband mobile rollout, the taxman’s gain is society’s loss – and like a boomerang it turns all the way back to impacting business efficiency and in turn the taxman.

So why are legislators trying their best to disincentivise ubiquitous fibre roll out. If you or I had a few billion in the bank and someone came across an investment plan that tried to persuade us to invest in a major capital program with little or no ability to get any return from it, we would tell them where to get off. But that’s what legislation like universal service mandates; controls over what services can be put over networks (like entertainment); or the inability to charge more for providing a better grade of service do. They set up a situation where investments can’t make an economic rate of return and so guess what – investments aren’t made.

Legislators are good at stopping things. They are much less good at making things happen. So the controls brought in to cramp the style of ex monopoly carriers might have been valuable at one time but right now, the vast majority of the world’s fixed access networks are decades old copper with ADSL go faster kit on it to give broadband in the low megabits range. I get about 600K/bits/ sec on a good day when the farm next door’s electric cattle fence is not switched on. Some lucky people in towns get up to 8 M/bits. But with a theoretical upper limit of about only about 25Mbits on a very good local loop, the world will run out of capacity much faster than it takes to re-engineer it with ultra high bandwidth fibre.

Not so long ago the cry was “what would we fill all of those hundreds of megabits with even if we had it”. Now we know. Bandwidth hunger is following Moore’s law norms. Just last week UK ISP’s were bemoaning the fact that the BBC’s iPlayer ‘play-it-again’ web TV service had been so successful since its launch a few months ago that it now consumes about 5% of all UK internet bandwidth. And rising fast.

So my beef of the week is for all of those helping hands (or helping snouts in troughs!) to butt out of getting in the way of getting the kind of infrastructure we need to support the kind of information society people wrote dizzying essays about a few years ago that is finally becoming reality.

Buyers want to buy the fruits of that capability. Investors want to invest. It’s just all of the stuff in the middle of sectional interests, out of date regulation and short term thinking that’s stopping it.

Remember Negroponte’s words.

Credit crunch or golden opportunity?

Keith Willetts — Tue, 18 Mar 2008 11:12:00 GMT

So its official, the world’s worst financial crisis since 1929. As we speak, bankers are hurling themselves out of tall buildings in New York, London Frankfurt and Tokyo. Are we talking ourselves into a recession by the hour? Is it all self induced delirium caused by dodgy financiers lending money they did not have to people who could not afford to borrow it.

It took the web and telecom industries years to recover for the dot com and telecom crashes around the millennium but now both are on a roll with the industry investing billions into new service delivery platforms, networks and systems to deliver faster, better and cheaper services. So what does it all mean? Does it mean a slowdown in transformation to the kind of services we keep seeing at trade shows but continue to elude us like mobile TV and mobile advertising? When we are finally getting the kind of access network speeds that support the new breed of services does it all slow down again? What happens to industry consolidation and major M&A activities like Microsoft / Yahoo?

Or is credit crunch actually good news for cash rich players? Telecom and cable players are usually big cash generators. Does the credit crunch give them an advantage over rising stars whose value is all on their stock price rather than their earnings? Will the world’s financial crisis throw another joker into the pack of who wind and who loses in the great service convergence race?

Answers on the back of a used $100 dollar bill please - to be kept under my mattress!

Yahoo - the federation strikes back

Keith Willetts — Tue, 05 Feb 2008 09:50:00 GMT

Well a few weeks break from blogging clears the mind I hope.

So Microsoft fires its canons at Jerry Yang in an attempt to catch Google. Nothing like a $44bn bid to get the pulses of bankers racing. But what does it mean for those of us in the web and communications business? I suppose it means that Microsoft has figured out what Google's strategy is and has a cunning plan to outwit them. But you have to make a lot of assumptions if that's the case.

First you have to assume that Google has a master plan, secondly that Microsoft + Yahoo would have an answer. Just because you are mega rich, doesn't mean you are mega smart. Countless marriages (remember AT&T and NCR; Time Warner and AOL?) end in divorce and acrimony. Clearly Yahoo doesn't like the cut of Mr Ballmer's' jib and is casting around for more acceptable suitors. A telco maybe – AT&T keeps getting mentioned. Erm.

So what is the master plan? Well, as I've said before, all of that investment in processing power, storage and now bandwidth and device resident software has to be going somewhere other than just faster search tools for more people. I think it's about providing an end-end, managed platform on which Google and anyone else can mount applications and seamlessly get to most of the population on the planet through a variety of devices – PC's TV's mobiles and so on with Google in ringmaster seat handling all of the money flows, transactions settlements etc whether ad based or subscription based. At least that ought to be their plan.

But that's a big trick and it takes more than just assembling the raw materials and throwing them together. It's going to take an awful lot of managing across many underlying technologies, countries, legislation; regulatory boundaries. And with fare paying customers whose business will depend on the underlying platform, it will all get very serious when it comes to quality of service and great customer support.

So where are the people who do that for a living today - the world's communications providers? Is this battle of the titans something to watch from afar or is it their livelihood that's being fought over here? What, if anything, can they do about it?

Quite a lot actually. Google and Yahoo, plus Myspace, Facebook etc have all worked out that providing services on a country level doesn't make sense. You have to have a regional or preferably global service play. Provide services that earn small amounts of money from a very large number of people and you make a lot of profit. They have also worked out that consumers prefer to pay nothing, so money has to come from business that want to reach those people – advertising is the most obvious but there are lots of others, governments, health sector companies and so on. That's where the communications business, both telecom and cable fall down. They only usually only provide services where they have network infrastructure – usually a single country or a handful at best. Even multi country giants like Vodafone don't actually provide seamless services – they just happen to be the same owner or part owner of many fragmented providers around the world.

Bad news for fighting players with global markets and stratospheric stock prices. That's because the people who pay Google (the advertisers not the Google users) want access to global markets. So do lots of other people like content providers and so will all sorts of upstream service providers who want to access certain market sectors divided not necessarily by geography by lifestyle, age, needs, wants and so on. Among 6 billion there is probably a perfectly viable market selling special edition woggles to 4 feet tall, left handed, 45 year old ex boy scouts with orange hair. If only you could find them and reach them simply and cheaply wherever they were.

But hang on a minute; don't communications networks cover the entire planet these days? Can't you make a sat phone call from the North Pole if you want to? Yes of course, networks and call services do cover the planet in a grand federation of thousands of service providers. But go beyond that lowest common denominator of voice calls and you‘re screwed. Try lunching content or advertising based services out over the fragmented zoo that is today's mobile and fixed networks. Every service provider works in a different way with different business processes,; different information formats; different screen formats; different commercial arrangement; different quality of service levels and so it goes on. Google' master plan relies on the establishes competition being hopelessly divided – all content providers and advertisers want is an easy life, not hacking though a jungle of technologies, contracts, processes, prejudices and regulations.

So what is the key ingredient if the world's communications and cable companies wanted to provide such a service platform? Getting their act together and wanting to do it is the first step but coalescing on a common approach which would allow a seamless global, high quality service platform to be built would be second. How? By federating the underlying fragmented infrastructures and gluing them together with a set of standards that cover not just connectivity (that's the easy bit) but standards for signalling and management. It's not as if they haven't done it before – they just did it for voice calls, not today's converged services. I don't mean at the connectivity level – that's IP and that debate is over. |I mean all of the hard, enabling and management stuff that wraps around that to make a service work. Much if this technology exists but today its focus is to help service providers transform their internal operations to be slicker than before. But this is a big step beyond – we're talking about the glue between service providers that allows a global platform to exist to carry emerging content, location and advertising based services to anyone, anywhere anytime on any device.

Service Delivery Platforms are a relatively new concept. They have grown from the basic notion that to be a service provider in today's fast moving market you need to be able to build services from reusable components – assembling them as required. These are components like bandwidth, presence, location, billing, security, authentication and so on. To make that work has meant a marriage between the ‘communications up' view of life ( NGN's IMS et al) and an ‘application down' view of life ( SOA, PLM etc). I'd like to think the TM Forum has helped play cupid to that. But we are talking 2 steps beyond that position. The big realisation beyond the notion of rapid service assembly from SOA based components is that those components can be (web service) exposed to third parties to build new, novel services on top of your infrastructure and thus allow the component owner to share in some of the revenue that today goes ‘over the top' of most communications providers.

But the third step in this realisation is that if you can share exposed components with 3^rd party application / service developers (i.e. the next Stanford students on their way to becoming zillionaires),why not use that capability between service providers to provide that global, seamless service platform?

Some players are seeing the light. At TM Forum we are working hard on the business and technology frameworks need to make that happen. It's complicated but it's not rocket science either. The main barrier is getting everyone on the same page and having a common vision.

Fear of a common enemy is a good catalyst for forging a common view even if the common enemy is intangible and simply the fear of being relegated to by-standing bit haulers in the emerging digital marketplace. Does that turn into a “service providers of the world against Google” strategy. No, I don't think so. As soon as Google does start acquiring bandwidth big-time or even makes a play for some communications companies, they get to be in the same boat. Everyone needs everyone else.

Especially when you can avoid wiring up the planet twice or 3 times over.