Telco 2.0

Symbian goes open — or does it?

JoshG1 — Thu, 03 Jul 2008 16:21:00 GMT

The big news in mobile this week is that Nokia has bought Symbian, the mobile operating system provider, so that it can give it away. In the first article on this news we looked at the deal from the view of the shareholders and competitive threats. In this second article we take an in-depth analysis of the nuts and bolts of software licensing and governance, to see if Symbian really lives up to its ‘open’ headline.

Symbian: open in parts

With operators being pushed towards ‘open’, what can they learn from Nokia and Symbian’s approach?

A ship with a small hole still sinks

Like it or not, technocratic choices of licensing schemes really matter. The plan is to release the entirety of the Symbian OS and S60, UIQ, and MOAP under the Eclipse Public Licence by the end of 2009. What is an Eclipse Public Licence? Well, it’s a development of IBM’s Common Public Licence, originating when IBM Canada released the software development environment known as Eclipse. It differs from the purist open source GNU General Public License in that it doesn’t require work released under it to be purely open-source. For example: you can build something containing both Eclipse-licensed code and code you wish to keep as your intellectual property, and release the whole thing under Eclipse.

This implies that you can’t include anything licenced under EPL in a “more open-source” project — the GPL bars you from imposing restrictions on the user beyond the requirement to maintain the GPL status of the work, so the fact Eclipse licensing permits IPR restrictions would preclude it. Similarly, as you cannot legally assert restrictions on GPL code, you can’t include it in an EPL project. You must choose.

So, this is somewhat less open than Google’s rival OS, Android, whose guts are subject to the Apache licence. It is also significantly less open than the mobile Linux OSes LiMo and OpenMoko. Both of these are GPL, and the latter is open enough to satisfy the most rigorous free software fundamentalist. It’s glatt kosher software. On the other hand, though, it’s a big step forward in terms of openness from most vendor OS so far.

Even if only a very small part of the code is tainted with restrictions, it is likely to be a new and important feature with IPR held by some third party. As Linux users know to their cost, it doesn’t matter if every other part of your PC is working if you can’t get a driver for your particular network or graphics card.

Who is really steering the ship?

Software licensing and IP law, despite or even because they are the sexy issues here, are far from the whole story. There are a lot of other questions. Governance of the project is one, and another is the status of the developer infrastructure around it. The Nokia announcement allows us to know quite a lot about the organisation structure…

The members of the foundation’s Board of Directors will also have seats in each council, with additional seats in the councils available for other foundation members. The foundation will operate as a meritocracy [sic]. Device manufacturers will be eligible for seats based on number of Symbian Foundation platform-based devices shipped, with the other board members selected by election and contribution. The initial board members will be AT&T, LG, Motorola, Nokia, NTT DOCOMO, Samsung Electronics, Sony Ericsson, STMicroelectronics, Texas Instruments and Vodafone.

That’s certainly an interesting definition of ‘meritocracy’, one you could easily mistake for ‘plutocracy’. Note the detail that, as well as shipments, you can get on the board by “contribution” - this seems to mean that the more lines of code your developers check in, the better you are. (All the traditional objections to measuring code value by the line are well and truly in effect here.) And what are Moto doing in there, as a company that has a proprietary OS, some Windows Mobile products, and a major role in LiMo — but is about to sell its handsets division and cut half its R&D staff?

It’s also worth noting that two pureplay chip makers are involved; perhaps their low-level microcode is the proprietary treasure the Eclipse licence is meant to protect.

Who is navigating the ship?

So what will this big carrier/big vendor/big software house club be responsible for?

The foundation will be responsible for managing the software roadmap and releasing the software platform, with the source code available to all foundation members. The development of the platform will be the responsibility of the foundation members, with the foundation coordinating development projects and managing the master code line.

So, not that open; if you’re not on the board, it doesn’t look like you’ll have much input, even if you’re an important stakeholder, like the operator who has to subsidise these products. And does the provision regarding the source code being “available to all members” only last until the 2009 release to Eclipse? Or will there be chunks that the Foundation keeps to itself? It’s been pointed out that most Symbian Foundation people will be Nokia employees, but this doesn’t worry us much — OpenOffice, various Linux distributions, and Sun’s Java are all maintained to a large degree by Sun, Novell, and IBM coders.

Keeping the ship sea-worthy

A huge issue in all open-source projects is the status of the developer infrastructure. Things like standardisation working groups, the process through which new software releases and updates are handled, preparation of things like software installation packages and Windows installers, tech support, and the tool chain — software development kits, documentation, IDEs, debugging tools and compilers — often define their culture and success as much as the headline stuff about GPL & Co. In fact, a large part of the very first Free Software Foundation project, GNU, was the development of free utilities in order to make GNU independent of proprietary software throughout.

The Platform will be completely free and open to developers whether enthusiast, web designer, professional developer or service provider. Of course, membership is not required to develop services and applications on the platform. The Symbian Foundation’s developer program will provide a single point of access for developer support, providing a wide offering of tools and resources - most available free - including:
Software Development Kits (SDK’s)
Documentation
Sample code
Knowledge base
Application signing program
Incident based technical support

Well, that sounds pretty good — except for the “most” tools and resources. Which ones won’t be? We suspect it’s probably the Symbian Signed process, which isn’t free (either in terms of free beer or free speech) today, and is widely hated by developers. Symbian, or should we say Nokia, is keen on keeping it going as a barrier to mobile malware, but it’s hard to see how it fits in an open-source project that’s a development platform rather than an application. Think of it like this: obviously, open-source means that I can do anything to my copy of Firefox or Linux I damn well like, and further that I can submit the alterations to the Mozilla Foundation.

Beware of customs checks and duties on arrival

Obviously Mozilla is within its rights to make me go through its development process before they let any of my code into the version that is available to the public, and certainly no-one would expect them to let J. Random Hacker offer their version of Firefox as an official Mozilla product through their release process. If I really wanted to, I could fork the project, and offer my own browser under some other name.

But the Symbian signing process doesn’t just apply to changes to Symbian itself — it applies to all applications developed for use on Symbian, at least ones that want to use a list of capabilities that can be summed up as “everything interesting or useful”. I can’t even sign code for my own personal use if it requires, say, SMS functionality. And this also affects work in other governance regimes. So if I write a Python program, which knows no such thing as code-signing and is entirely free, I can’t run it on an S60 device without submitting to Symbian’s scrutiny and gatekeeping. And you though Microsoft was an evil operating system monopolist…

May require proprietary fuel to operate

What else should a Symbian developer be careful of?

Furthermore, the platform will embrace the runtime technologies already used by the developer community allowing for efficient use of existing assets and skills. The platform will support an extensive offering of development environments including native Symbian C++, POSIX C and C++, Python and Web Runtime based on WebKit.

Webkit is open; so is Python, although the Nokia-contributed bits like the GUI toolkit and the wrappers for the Symbian API are debatable. There’s no mention of the Carbide IDE in there, or the standard Symbian C++ developer toolchain. It’s also not clear what influence the Foundation’s directors will have on the signing process.

Curiously, the mobile industry is adopting this sort of semi-open model just as the IT industry has given up on it. Sun has just finished open-sourcing the entirety of the Java world, and has even chosen to use the open-source version of Solaris instead of its own. But both Google and Nokia are choosing to be slightly less than open, or not quite the same way. Criticisms of Google over Dalvik (their homebrew Java virtual machine, which underlies Android, but unlike Java itself isn’t GPL-licenced) are perhaps overdone - Dalvik is covered by the Apache Public Licence, and nobody really doubts the openness of Apache.

But Symbian could be much more open, in more ways than one. Is Nokia under pressure from the chip vendors or the carriers to maintain certain special restrictions? And what would have happened if Psion had gone open source back in 2001?

This Blog is republished from www.Telco2.net/blog. The Telco 2.0 Initiative is a new industry program focused on helping with this thorny question: "How do we (telcos, handset manufacturers, Media companies, IT players, NEPs, etc) make money in an IP-based world?"

GupShup — ad-funded mobile services done right

JoshG1 — Thu, 03 Jul 2008 03:23:00 GMT

In our Voice & Messaging 2.0 Report we listed over 70 new services we’d come across in our travels. One that’s come to our notice since publication is SMS GupShup. Whilst there were many ‘me too’ Internet messaging services we reviewed, this US/Indian start-up is noteworthy for its business model.

As operators find voice and messaging markets mature and revenues stagnate, they are looking for new growth. One route is to try to create elaborate new services and persuade consumers to part with money for them. The other is to find ‘upstream’ parties willing to pay to interact with telco retail customers directly with the telco as an intermediary. Advertising is the starting place for many such initiatives, and GupShup as a template for this begs the question: what is the role of the operator? Bit pipe, enabling platform or complete services provider?

Humans are tribal creatures — hairless monkeys with a grooming instinct

Today’s core telephony and messaging products suffer from many limitations, but perhaps the most central is that humans live and interact in groups, and that these products don’t support such activities well. Conference call systems are notorious for their poor user interface, and your phone’s address book never seems to learn that you message the same three people over and over.

But perhaps the most critical limitation is pricing: telcos are determined to scale price linearly with the number of participants in the conversation, but the sender of a message doesn’t see the value scale the sale way. In emerging markets, where alternative Internet and PC-based forms of communication are much more limited in penetration, this forms an important barrier to usage.

Fixing the pricing problem with adverts

GupShup is an SMS (and Web) based group messaging service available only in India, and with 7 million active users. Superficially the functionality is similar to Web 2.0 poster child (or enfant terrible) Twitter, minus the downtime. Users can send messages to a group, and can choose to follow up subscribe to multiple groups. Messaging is push-pull — you send the message into the cloud, but recipients can total control over what they receive. Like Twitter, the result is a stream of banal human existence. Fortunately, that’s what the users want, and is the basis for an SMS industry worth approaching $100bn/year.

The service has a diversified revenue model, comprising:

Premium content services, with GupShup handling the billing and payments.
“Business class” service, with priority message delivery and fewer restrictions.
Ad-funded service.

What makes it special is how the advert is managed and how every advert immediately provides value to the user. Group messages are limited to one hundred characters, with the remaining 60 in an SMS given over to brand advertisers. Sending a message costs the same as your usual mobile rate for one message, but the cost of forwarding that message is then picked up by the advertiser. Everyone wins, and unlike media advertising’s bait-and-switch, there’s a powerful social driver behind it, and the potential for personalisation and innovation.

With ads, everyone really must win prizes

This approach contrasts with the greedy attitude of carriers in the developed world. Many are trialling ad-serving technology that personalises adverts based on the user’s demographics and click stream. Such trials have been secretive, and failed to get user opt-in. Most importantly, they never answer the user’s issue: so, what’s in it for me? The user feels they’ve already paid the full rate for a broadband connection, and what are you doing wiretapping my Web browser and fiddling with the ads?

No wonder the result is a PR disaster and carriers are back-peddling fast.

The lesson is simple. You want to use the customer’s data and the customer’s device and create new revenue streams from them. Note the apostrophes — it’s not ‘customer data’. You’ve got to offer something in return for what you take. And there’s nothing better than the reward being immediate.

So what should carriers do?

As we wrote in our report Telcos’ Role in Advertising Value Chain, overall we are sceptical of operators trying to provide completely ad-funded services, or generate their own advertising inventory. Operators like Blyk are addressing a narrow, high-risk market. That said, as GupShup only cannibalises a rarely-used feature — messaging to multiple recipients — and is likely to stimulate new usage, it could be one worth emulating.

Alternatively, we would consider differentiating our retail pricing by (at least pretending) there’s no more cost to sending to multiple recipients than one (with the reality being you’d probably drop your bucket size). Another approach would be wholesale deals with online services that are heavy SMS users, again to facilitate some creative retail pricing to undo the “group penalty”.

However, a more Telco 2.0 approach is to ask not how to compete with such services, but how to become a supplier to them. Indeed, those very same ad-serving technologies become a lot more attractive in this scenario. Services like age verification, cash collection, credit management, customer care — there is a long list far beyond just the bit pipe. [Ed - which of course you can read all about in our report on The 2-Sided Telecoms Market Opportunity.] It just requires a new mindset around high volumes, ‘horizontal’ business process and value creation — not rent-seeking on the underlying access assets, or dazzling media services.

Telco 2.0 Use Case: Trading Hub for the Transport Industry

JoshG1 — Wed, 02 Jul 2008 21:31:00 GMT

Telco 2.0 readers will be well aware that we’re very keen on any application that uses telco capabilities to remove friction and inefficiency from the wider world of business - perhaps the fundamental insight in the 2-sided business model is that the telco doesn’t only sell telephone calls as a finished product to end users, but also a much wider range of functions for upstream businesses to integrate into their production process. In terms of economics, these communications-enabled business processes usually exist to reduce transaction costs and thus facilitate trade that would otherwise not happen. Alternatively, they help larger enterprises to overcome their internal diseconomies of scale.

This use case is of the first kind; the telco platform as a trading hub, allowing the many companies that would never be able to build the mass-production IT systems that their bigger competitors use to benefit from increasing returns to scale.

You’d be surprised how significant backloads are for the transport industry and the economy more broadly. At first sight, the economics of a truck route would seem trivially simple; you pay for diesel and wages and capital, collect rates from customers, and costs scale by the mile - right? But it becomes a lot more interesting when you realise that the profitability of a marginal load is highly dependent on whether it is carried on the way out or back; as the truck has to come back anyway, the costs of both trips must be accounted for in the price of the trip out, so the margin on the trip back can be 100%.

This can have profound consequences - the phenomenon of fresh fruit and vegetables from eastern Africa showing up in European supermarkets, for example. Airlines providing cargo service to Kenya and other places noticed that the return trip tended to be empty, and unsurprisingly the answer was to drop freight rates dramatically. Any price at all was better than simply shipping air. It therefore became possible to export produce on a large scale, which has become one of these countries’ biggest sources of foreign exchange.

At a more micro level, the problem for an individual firm or owner-driver is finding a backload in the first place. Unless you can arrange it in advance, this is a major source of uncertainty, and one that may grant bigger companies increasing returns to scale - they can afford a monster IT system to track all their vehicles and customers and match them up, and they have more locations, staff, and vehicles out there looking for backloads. They can dedicate salesmen full-time to searching out and buttering up regular backload customers.

The text-book approach to this is to start an exchange; if everyone brings their supply (i.e. trucks looking for loads) and demand (i.e. loads looking for trucks) to the same place, the chances of a good match are dramatically increased for everyone. The more business the exchange does, the better it gets; prices are more stable, the range of deals on offer wider, and you can have greater confidence that you can buy or sell when you need to. Liquidity goes to liquidity. This dynamic is well-known, and can be perceived in stock markets, Internet exchanges, ports, produce markets, Web search engines, and dive bars. It’s interesting that some of the very first commercial exchanges of this kind were for freight - specifically shipping. There’s a good reason why the London freight bourse is called the Baltic Exchange when it trades in shipping to every port on the planet; when it started, that was where the trade went.

Telcos might create such an exchange, have a share in it, or simply be suppliers to it - this will vary between markets and territories, just as it makes sense for an operator to be a bank in Kenya but not in Germany, or it’s possible to make money from MMS in a human-machine application but not in a human-human one.

But doing this raises some big technical challenges, as set out in this slide from the 2-Sided Business Model report.

If you’re Maersk Logistics, these aren’t such big issues. You can afford to build this kind of capability, and you can pay IBM Global Services to do a lot of it (which is what Maersk did). And you’re a big enough customer that your friendly local telco is likely to be receptive to a wholesale deal. If you’re Charlie Cox, not so much. But Telco 2.0 could change this. It’s all about commercialising the core telco assets by making the key capabilities that spring from them available in forms which allow third-party businesses to use them in new ways, right? In this case, we’re using the telco’s secure messaging capability, its location capability, its identity capability, and its payments capability, just as all of these would be used to deliver an SMS message; we’ve just taken apart that finished product and built something new out of the parts, which we can only do if the telco doesn’t supply it in a sealed box.

While we were researching this for the 2-Sided Business Model report, we calculated that improved backload finding could be worth up to £218m a year in the UK, on the basis of a 5% improvement in load factors. So there’s serious money to be had in there. It’s not surprising we also encountered a number of start-up freight exchanges trying to do just that - one of them is even offering an application for Windows Mobile devices in order to mobilise their IT system. That sounds like an ideal partner for a telco.

This is a special case of our general model for the telco future. At the bottom of the stack, telcos own huge legacy assets which we’ve characterised as pipes, packets, and platters. These produce certain functional capabilities that grow out of them - we’ve described those as the seven questions and various other things. Traditionally, these were then combined into a standardised product by telco engineers and commercialised by telco internal marketers direct to end users. In the future, however, we think they will be sold in three ways - as plain APIs for third-party developers, as integrated products created by third parties in partnership with the telcos, and within products the telco offers under its own brand.

Symbian — Its Role in the Mobile Jigsaw

JoshG1 — Wed, 02 Jul 2008 18:32:00 GMT

The recent purchase of Symbian by Nokia highlights the tensions around running a consortium-owned platform business. Obviously, Nokia believes that making the software royalty-free and open source is the key to future mass adoption. The team at Telco 2.0 disagree and believe the creation of the Symbian Foundation will cure none of the governance or product issues going forward. Additionally, Symbian isn’t strong in the really important bits of the mobile jigsaw that generates the real value to any of the end-consumer, developer or mobile operator.

In this article, we look at the operating performance of Symbian. In a second we examine the “openness” of Symbian going forward, since “open” remains such a talisman of business model success.

Background

Symbian’s core product is a piece of software code that the user doesn’t interact with directly — it’s low-level operating system code to deal with key presses, screen display, and controlling the radio. Unlike Windows (but rather like Unix) there are three competing user interfaces built on this common foundation: Nokia’s Series 60 (S60), Sony Ericsson’s UIQ, and DoCoMo’s MOAP. Smartphones haven’t taken the world by storm yet, but Symbian is the dominant smartphone platform, and thus is well positioned to trickle down to lower-end handsets over time. What might be relevant to 100m handsets this year could be a billion handsets in two or three years from now. As we saw on the PC with Windows, the character of the handset operating system is critical to who makes money out of the mobile ecosystem.

The “what” of the deal is simple enough — Nokia spent a sum of money equivalent to two years’ licence fees buying out the other shareholders in Symbian, before staving off general horror from other vendors by promising to convert the firm into an open-source foundation like the ones behind Mozilla, Apache and many other open-source projects. The “how” is pretty simple, too. Nokia is going to chip in its proprietary S60, and assign the S60 developers to work on Symbian Foundation projects.

Shareholding Structure

The generic problem with consortium is typically not all members are equal and almost certainly have different objectives. This has always been the case with Symbian.

It is worth examining the final shareholder structure which has been stable since July 2004: Nokia - 47.9%, Ericsson - 15.6%, SonyEricsson - 13.1%, Panasonic - 10.5%, Siemens - 8.4% and Samsung - 4.5%. At the bottom of the article we have listed the key corporate events in Symbian history and the changes in shareholding.

It is interesting to note that: Siemens is out of the handset business, Panasonic doesn’t produce Symbian handsets (it uses LiMo), Ericsson only produces handsets indirectly through SonyEricsson, and Samsung is notably permissive towards handset operating systems.

SonyEricsson has been committed towards Symbian at the top end of its range, although recently is adding Windows Mobile for its Xperia range targeted at corporates.

Nokia seems almost committed though has recently purchased Trolltech — a notable fan of Linux and developer of Qt.

The tensions within the shareholders seem obvious: Siemens was probably in the consortium for pure financial return, whereas for Nokia it was a key component of industrial strategy and cost base for its high-end products. The other shareholders were somewhere in between those extremes. The added variable was that Samsung, Nokia’s strongest competitor, seemed hardly committed to the product.

It is easy to produce a hypotheses that the software roadmap and licence pricing for Symbian was difficult to agree and that was before the user interface angle (see below).

Ongoing Business Model

Going forward, Nokia has solved the argument of licence pricing — it is free. Whether this passed to consumers in the form of lower handset prices is open to debate. After all, Nokia somehow has to recover the cost of an additional 1,000 personnel on its payroll. For SonyEricsson with its recent profit warning, any improvement in margin will be appreciated, but this doesn’t necessarily mean a reduction in pricing.

It also seems obvious that Nokia will also control the software roadmap going forward: it seems to us that handset operators using Symbian will be faced with three options: free-ride on Nokia; pick and choose components and differentiate with self-build components; or pick another OS.

We think that given the chosen licence (Eclipse — described in more detail in next article), plus the history of Symbian user-interfaces, and the dominance of Nokia, all point towards other handset operators producing their own flavours of Symbian going forward.

Competition

Nokia may have bought Symbian, even without competitive pressures, purely to reduce its own royalties. However, the competitive environment adds an additional dimension to the decision.

RIM and Microsoft are extremely strong in the corporate space and both share two features that Symbian are currently extremely weak in — they both excel in synchronizing with messaging and calendaring services.

Apple has also raised the bar in usability. This is something where Symbian has stayed clear, but is certainly not one of the strengths of S60, the Nokia front end. The wife of one of our team — tech-savvy, tri-lingual, with a PhD in molecular biology — couldn’t work out how to change the ringtone, and not for lack of trying. What do you mean it’s not under ‘settings’? Some unkind tongues have even speculated that the S60 user interface was inspired by an Enigma Machine stolen to order by Nokia executives.

Qualcomm is rarely mentioned when phone operating systems are talked about, and that is because they take a completely different approach. Qualcomm’s BREW would be better classified as a content delivery system, and it is gaining traction in Europe. Two really innovative handsets of last year, the O2 Coccoon and the 3-Skypephone, were both based upon Qualcomm software. Qualcomm’s differentiator is that it is not a consumer brand and develops solutions in partnership with operators.

The RIM, Microsoft, Apple and Qualcomm solutions share one thing in common: they incorporate network elements which deliver services.

Nokia is of course moving into back-end solutions through its embryonic Ovi services. And this may be the major point about Symbian: it is only one, albeit important piece of the jigsaw. Meanwhile, as we’ve written before, Ovi remains obsessed around information and entertainment services, neglecting the network side of the core voice and messaging service. Contrast with Apple’s first advance with Visual Voicemail.

As James Balsillie, CEO of RIM, said this week “The sector is shifting rapidly. The middle part is hollowing — there are cheap, cheap, cheap phones and then it is smartphones to a connected platform.”

Key Symbian Dates.

June 1998 - Launch with Psion owning 40%, Nokia 30% & Ericsson 30%.
Oct 1998 - Motorola Joins Consortium

Jan 1999 - Symbian acquires Ronneby Labs from Ericsson and with it the original UIQ team & codebase.

Mar 1999 - DoCoMo partnership

May 1999 - Panasonic joins Consortium. Equity Stakes now: Psion - 28%, Nokia / Ericsson / Motorola - 21%, Panasonic - 9%.

Jan 2002 - Funding Round of £20.75m. SonyEricsson tales up Ericsson Rights.

Jun 2002 - Siemens Joins Consortium with £14.25m for 5%. Implied Value £285m

Feb 2003 - Samsung Joins Consortium with £17m for 5%. Implied Value £340m.

Aug 2003 - Five Years Anniversary. Original Consortium Members can now sell. Motorola sells stake for £57m to Nokia & Psion. Implied Value £300m.

Feb 2004 - Original Founder Founder Psion decides to sell out. Announces to Sell 31.7% for £135.5m with part of payment dependant of future royalties. Implied Value £427m. Nokia would have > 50% control. David Potter of Psion says total investment in Symbian was £35m to-date, so £135.5m represents a good return.

July 2004 - Preemption of Psion Stake by Panasonic, SonyEricsson & Siemens. Additional Rights issue of £50m taken up by Panasonic, SonyEricsson, Siemens & Nokia. New Shareholding structure: Nokia - 47.9%, Ericsson - 15.6%, SonyEricsson - 13.1%, Panasonic - 10.5%, Siemens - 8.4% and Samsung - 4.5%.

Agree to rise cost base to c. £100m/per annum and headcount of c. 1,200.

Feb 2007 - Agree to sell UIQ to SonyEricsson for £7.1m.

June 2008 - Nokia buys rest of Symbian with Implied Value of €850m (£673m) with approx. payout of - Ericsson - £105m, SonyEricsson - £88.2m, Panasonic - £70.7m, Siemens of £56.5m and Samsung £30.3m. Note, Symbian had net cash of €182m. The price quoted by Nokia of €262m is the net price paid by Nokia to buy out the consortium not the value of the company.

Ring! Ring! Hot News, 30th June 2008

JoshG1 — Mon, 30 Jun 2008 15:25:00 GMT

In Today’s Issue: WiFi in your car; connectivity included with O2UK iPhones; Nokia buys Symbian and gives it away; LiPS and LiMo; OpenMoko ships; Sony Ericsson struggling; Reding terminates 70% of termination fees; France Telecom hits the silk from the Telia deal; T-Mobile USA launches femtoVoIP; FemtoForum+NGMN=sense; where is the network API? probably not in the IMS; Blyk expands; FISA fight goes on; T-Mobile UK goes down; Vodafone to buy Ghana Telecom?

Just what I always wanted — WiFi in the car. Chrysler’s UConnect product will essentially give some vehicles a WLAN router with a 3G radio modem for the backhaul. The interesting question will, of course, be the business model. Chrysler says there will “be no tie-in to long term contracts”, but it’s going to be hard to get this off the ground without some element of two-sidedness — perhaps by bundling connectivity in the car as an optional extra, or doing something clever with GPS and localised ads.

You’d better hope the WLAN is encrypted by default, or the term “wardriving” will take on a whole new layer of meaning as hackers chase open WLAN vehicles down the freeways of California, trying to stay in range just long enough to finish that torrent download, or to spork the satnav display with a specially crafted packet. All your SUV are belong to us.

That’s if their attention isn’t distracted by one of this week’s wave of shiny gadget developments. For a start, pricing and launch details of the 3G iPhone are leaked; it looks like O2 in the UK will bundle data connectivity with the prepaid version for the first six months. It’s astonishing; you show a carrier an iPhone and they’ll sign anything.

More seriously, Nokia spent the equivalent of two years’ Symbian royalties buying out the other partners in Symbian, before immediately promising to transform the software house into an open-source foundation. We’d say more about it here, but we’re saving ourselves for a much more detailed post on the issue, so watch this space. It’s an interesting thought, however - what would have happened had Psion decided to open-source the whole thing when they gave up on mobile back in 2001? Another one for the “great moments in the failure of British industry” file.

Almost immediately, there was more mobile open source activity — the LiPS (Linux Phone Standards) Forum has merged with the slightly better-known LiMo Foundation. It’s a sensible move on the face of it - LiMo’s membership contained more carriers and developers, whereas LiPS had more hardware vendors, so the merger will help to provide a comprehensive Linux environment from the silicon up.

Compared to LiMo, the plans for the Symbian Foundation look…not very open at all. But there is one mobile-Linux group who are even open-er than LiMo - yes, up to 1000% more bigger openosity now! It’s the OpenMoko community, makers of the Neo1973 and FreeRunner all-open-source, glatt kosher mobile phone. Well, it’s in the shops, or rather, available through a group of selected e-tailers. Pricing in the UK is around £272 from Truebox. We’ll see your iPhone and raise you…

No wonder Sony Ericsson is looking green at the gills. It’s profits warning time; apparently the economic downturn has hit its speciality of midmarket fashion gadgets disproportionately hard. Smartphone sales are holding up reasonably well, cheaper devices are benefiting from trading-down, but the midmarket shinies suffer.

And the carriers have no business smiling, either; here comes Viviane Reding again. The European Commission has published more details of its plans on mobile termination fees — it wants them cut by around 70 per cent. Ouch! It’s enough to make you abandon a misguided monster merger. Like France Telecom just did. We didn’t think much of the attempt to buy TeliaSonera to begin with, and now it looks like it’s a dead’un. It just wasn’t a good idea in the first place…after all, you could be improving your crucial voice and messaging products, like T-Mobile USA. They’re offering a $10/month unlimited VoIP service to all their cellular customers, on condition they get a “router” which we think is probably a femtocell.

It’s a smart move; not only are they competing sharply on price, they’re doing so using their competitors’ costs. And, as we’ve often pointed out, CPE is an underexploited opportunity for fixed operators to astonish their customers and mobile operators to infiltrate the fixed subscribers’ front rooms. So we’re also pleased to see that the NGMN, the carriers’ talking shop on 4G, is talking to the Femto Forum about including femtocell support in the LTE or WiMAX standards.

As well as improving your core voice and messaging products, what else should you be doing? That’s right, exposing key enablers as APIs so third-party developers can create interesting new services, while redesigning your business to gain upstream revenues. Gary Kim of IPCarrier asks where the network API is. He seems to reckon IMS might help. And Blyk has announced its ad-funded virtual operator is expanding into Germany, Spain, and Belgium.

Finally, thanks to Senator Chris Dodd, the FISA fight goes on; T-Mobile UK’s data service goes down, hard; and Vodafone may buy into Ghana Telecom.

Are faster mobile networks worth the effort?

JoshG1 — Mon, 30 Jun 2008 15:23:00 GMT

We were asked to present on a panel at the private marketing innovation conference of a UK mobile carrier last week. The subject was the “Need for Speed”: what are the real drivers for network capacity and speed, and thus where should an operator focus its investments?

Since our answers are generic to all mobile carriers, we thought we’d share them with you here. The format was five questions, addressed by all the speakers:

What user behaviour is driving the demand?
Which access technologies to invest in?
What kind of devices will absorb this capacity?
Does wireless displace fixed access for data?
How does the customer relationship evolve?

What user behaviour is driving the demand?

The first question noted that customers’ demands for increased speed and capacity appeared never-ending. But what exactly is driving the customer’s seemingly unquenchable thirst for more speed?

We took the view that you have to examine this issue from the perspective of value, not volume. There are three fundamental modes of communication: information-based applications; real-time personal communications; and entertainment (more depth, as always, in our Voice & Messaging 2.0 Report).

The Internet, and especially the Web, is shifting in role from a way of distributing stored information/documents (i.e. hypertext) to a way of interacting with applications. This is evidenced by the general “cloud” trend of software-as-a-service, Akamai’s Edge Computing initiative, online multiplayer games and virtual worlds. Related to this, the bandwidth requirements of common applications are storming up. This is particularly true for the uplink: every photo and video captured disappears into the cloud at full resolution, but not all are ever viewed, and those that are may only be viewed in thumbnail or extract form.

However, it’s not primarily about information, but about ‘presence’ — the sense that you’re with someone despite not actually being physically there. Communications systems try to replicate this ‘being there’. It should feel very strange talking to a lump of plastic at the side of your head that whispers back in your ear. Yet our brains are surprisingly good at smoothing out audio and video artifacts, and the illusion we’re really talking to someone else is maintained. However, consider when you want to share that 10Mb Powerpoint deck half way through the Skype conversation. This is the digital equivalent of pushing a document across the table in a meeting room. To make the illusion work you can’t have a pause. Therefore we tend to need very short bursts of high speed.

Entertainment is all about filling the void in between bouts of communication. It might be able to absorb network capacity, but it won’t be what drives the business model. Furthermore, such traffic is often best delivered by other means — broadcast, edge cached, or sideloaded — and competes against low-cost distractions such as games. Tellywood alone won’t pay your bills.

Which access technologies to invest in?

Next we considered the plethora of different technologies available to fixed and mobile operators (e.g. 3G, HSDPA, ADSLx, Femtos, WiFi, Wimax, LTE, Fibre etc.). Which ones should mobile operators care about most?

Here, the job of the telco splits into two: the wholesale telco, that aggregates networks and provides the ‘logistics platform’; and the retail services provider who integrates and promotes the end user experience. Defining the products and services themselves is slowly migrating away from today’s operators towards other players (e.g. Nokia Ovi, Apple iPhone, Amazon Kindle). Many of today’s operator functions such as billing and customer care may become white-label inputs into these other businesses.

In choosing a network strategy, operators should prefer breadth over depth — coverage always wins. Verizon Wireless trounced Sprint, with identical technology, by emphasising network coverage and quality, whilst Sprint pushed advanced application services. Customers care little or nothing about network data speeds per se. Since femtocells and home hubs extend in-building coverage, and boost speeds too, we’d say that’s where the future lies. Furthermore, most of the ‘dead time’ filled with bulky low-value entertainment also occurs in the home, which makes it all the more important to lower your network costs there.

The wholesale platform needs a wide range of delivery capabilities, just as a physical-world logistics company needs road, sea, rail and air freight assets. This again points towards building ‘edge’ assets through the retail side, which can then be used to create wholesale solutions for partners wishing to cheaply and effectively deliver content and services to users.

The trick is to integrate all the various access technologies to present an experience to users that matches the capabilities and limitations of the different bearer technologies.

What we certainly wouldn’t be doing in mature, highly teledense markets, is rushing out to build new WiMAX macro networks.

What kind of devices will absorb this capacity?

Next we considered what kinds of devices that customers will use to quench their thirst for increased speed and capacity.

The hardware form factor of user devices will change least of all — because much of their design is determined by human ergonomics. Their software, however, is a different question.

The focus will slowly move away from the device onto the data it carries and can capture or display. Wireless Grids is an example of a company that lets you use the displays, input devices, printers, and other resources around you. For this to work, there will be an increasing emphasis on short-range communications and personal area networks. Synchronisation between devices is current a nightmare part of the user experience - solve this and print your own currency. Your ‘phone’ might be a primary source of data, identity, authentication etc. to lubricate these interactions.

Does wireless displace fixed access for data?

For the fourth question, it was noted that the last decade had shown that the “gap” between fixed and mobile networks in terms of data speed and capacity of retail propositions is closing fast (even if the fundamental technology gap remained, as optics leap ahead). The same decade saw an equivalent trend in quality and convenience of voice calling gap close, and displacement occur. So, will the need for fixed broadband data products “disappear” in the same way?

In general, we think not. The comparative advantage of fixed networks will, however, slowly erode without a fibre build-out. In some rural and dense urban areas we may see a switch to fixed wireless. Yet absent some leap in mesh networking, wireless doesn’t look like having the capacity or economics for video delivery. As we noted before, there is also more dead time in the home and therefore the consumption of fat video products will always be higher there.

The focus, however, needs to be on getting a lot more out of the infrastructure we have. Femto roaming, for example, could become a big deal — where carrier A recompenses carrier B for using your neighbour’s femto when you’re down the end of the garden.

How does the customer relationship evolve?

Finally, the mobile business is shifting from selling voice calling and text messaging to connecting customers to the Internet in better and faster ways. Where does this leave the operator’s role in the customer relationship in the future?

Ask your customers — do any of them want a ‘relationship’ with their phone company? Consumers don’t get excited about who supplied the batteries in their phone, so why should they be worked up about the radio network?

Ideally telcos should become better retailers — category management, packaging, promotion, segmentation, distribution. This is hard, as they lack many of the necessary skills and assets. For example, the ‘one size fits all’ mobile retail store doesn’t match the segmentation needs of an increasingly fragmented marketplace.

In reality the game is all about gaining a larger slice from the device makers and upstream players. This will only be done by offering services they both value and struggle to replicate in scale. This is best done by creating two-sided markets (see our report here for more information) to exploit the telco assets better. (It was clear in discussion afterwards that they see limited mileage in trying to squeeze consumers for more value-added content services, and that the growth will have to come from elsewhere.) Otherwise, the best relationship is no relationship, and become a specialist wholesale-centric carrier.

[Ed - We’ll be covering some of these issues in more depth at the 4-5 November Telco 2.0 event in London. Agenda now available here]

Next Generation Access Networks - International Perspective

JoshG1 — Thu, 26 Jun 2008 17:57:00 GMT

Following the popular article last week on FTTH prospects for the UK, Benoit Felton of Fibrevolution sent us some excellent material looking at the issues from a more international perspective. He says:

In April this year I attended a very interesting conference in Stavänger, Norway, organised by the OECD on Next Generation Access Networks where I conducted a number of interviews with experts. The end result is two podcasts:

The Stavänger Show - Part One: FTTH Policy focuses on the challenges raised by next generation access when it comes to government policy and regulation. The people interviewed are:

Marvin Sirbu, Prof. Engineering and Public Policy at Carnegie Mellon University; Antony Walker, Head of the Broadband Stakeholder’s Group; Grant Forsyth, Head of EMEA Regulatory Affairs at BT Global Services; Dimitri Ypsilanti, responsable for the OECD Working Party on Communications

The Stavänger Show - Part Two: Deployment Models focuses on the various approaches to NGANs, from municipal open access to incumbent vertical integration. The people interviewed are:

Herman Wagter, CEO of Glasvezelnet Amsterdam; Dennis Weller, Chief Economist at Verizon; Christian Berg, Consultant at Dansk Energi; Richard Clarke, AVP of Regulatory Planning and Policy at AT&T

Ring! Ring! Hot News, 23rd June 2008

JoshG1 — Mon, 23 Jun 2008 14:50:00 GMT

In Today’s Issue: 60 years of computing - our Mancunian future; 25 years of DNS, 10 years of a post-Jon Postel world; securing the root DNS; Yahoo! loses clue to the wider environment; Apple’s outrageous iPhone margins; iPhone-RAZR culture shock; 1st VZ ODI gadgets; Moto tries to slim itself fat; Huawei handsets up for grabs; Telefonica leads misguided acquisition rush into China; Chinese bank buys Poland; first WiMAX.eu; Sprint XOHM goes live in September; Sprint offers enterprise e-mail; Nokia builds mapping capabilities; “IMS light”, again; communicating non-neutrality; Isenberg makes stabby over FISA

It’s been sixty years since the very first computer that accepted a stored program, Manchester University’s “Baby”, successfully determined the prime factors of a given number. The beginning of computing is one of those events it’s hard to date - in the UK alone, you’d have to consider the rival claims of the Cambridge Maths Lab, NPL, and Manchester, to say nothing of the code-breaking COLOSSI (although they weren’t capable of re-programming in memory), the US’s ENIAC, or Konrad Zuse’s work in Germany. But Baby’s special claim is because it was both a digital computer, and one which could read a stored program; you can date the beginning of the primacy of software to this point, and hence essentially everything that defines the IT industry and its distinctive culture.

Whilst we’re on the topic of history, it’s been 25 years this week since the first DNS server went on line, just one of the many contributions of the late Jon Postel as co-author of RFC882, which specifies the DNS, administrator of the .us TLD, president of the Internet Assigned Numbers Authority, and editor of the RFCs. This is a fine excuse to link to RFC2468, the tribute to Postel written into the Internet’s standardisation process (Postel’s own invention) by none other than Vint Cerf. And yes, that is as in “2,4,6,8, who do we appreciate?” More practically, the Renesys blog has some thoughts about the problems of securing the root servers, with a handy list of where they should be.

At Yahoo!, the problem is increasingly that executives who should be inside the building are not. Since the collapse of the Microsoft bid, people have been leaving in numbers, starting with the founders of the numerous whizzy start-ups they bought over the last five years - the founders of Flickr and Del.icio.us being the most senior to walk so far. (Can anyone imagine what the walk-out rate would have been like if Microsoft had bought the company?)

Yahoo! might, however, find some relief in the fact that the majority of mobile search requests come from iPhones (German link); perhaps they might cuddle up to Apple. That’s if Apple actually wants them - the latest forecast for the iPhone bill of materials puts its cost at about $100, which implies an outrageous profit margin.

It turns out that a quarter of all iPhone users switched from a Motorola RAZR, by far the biggest single group among them. It seems exactly the same gadget hipster twits who bought iPhones were the ones who flocked to RAZRs three years ago. No wonder they love the things - the RAZR V3 had some of the worst figures in industry history for customer satisfaction, and a reputation for poor quality control to boot. The comparison with Apple’s optical glass, burnished aluminium, and Unix can only be telling.

Verizon, meanwhile, has homologated the first ODI device.

Motorola, meanwhile, reached for the classic response to hard times - sack half the R&D lab. This is now the second major cut in product development and research at Motorola since the crisis began; it’s not the most obvious strategy for a company whose problems stem from a lack of good products. Perhaps they assume that whoever buys the handsets operation will already have their own lab? (hint - Nokia?)

If you want a spare handset factory, though, Huawei is selling a large chunk of its devices operation. The leading Chinese vendor is far better known for its network infrastructure products, and it looks like they are planning to specialise in them, like so many other NEPs. But however low the margins on Huawei gadgets are, you can bet their problems aren’t as bad as Moto’s.

We mentioned that the reorganisation of the Chinese telecoms industry is likely to trigger a rush by essentially all the NEPs to sell them CDMA2K and UMTS gear, and all the major telcos to try to buy into the new big three converged operators. Telefonica kicked it off this week, angling to come out of the China Netcom/China Unicom merger with a 10 per cent stake. There’s something slightly worrying about this business of very expensive minority stakes far from home - it sounds a lot like being a Western oil investor in Russia, and you have to remember the sad tale of BT’s Japanese investments.

Interestingly, this works both ways: here’s a Chinese bank funding a greenfield mobile operator in Poland. In fact, it’s more of a monster vendor financing deal than anything else, as all the equipment is coming from Huawei.

Europe’s first mobile WiMAX net launches in Amsterdam; Sprint confirms that its first commercial WiMAX network will be live in September in Baltimore. More usefully, perhaps, they also started offering MS Exchange and Lotus Notes e-mail for nonfancy devices.

Nokia, meanwhile, opened yet another web storefront; more interestingly, they also bought a rather impressive social mapping application, Plazes.

NEC launched something called “IMS light” (again) at NXTComm - about all that’s interesting here is that the applications they are pitching for it are mostly unified comms. A couple of years ago, the first thing any IMS person wanted to show you was an “interactive video-sharing” service, which were uniformly dire. I remember vividly the one the GSMA showed off with Nokia at 3GSM 2006, which was reduced to semi-functionality by latency - especially amusing due to the number of people involved busy explaining how only they could guarantee acceptable quality-of-service for video streaming.

Relatedly, Telephony Online asks how carriers who want to offer multiple levels of service by application will communicate this to their customers, given the number of people who complain of “slow” broadband within the first month of getting it.

And finally, the US carriers were officially shriven of responsibility for their part in illegal surveillance operations. David Isenberg is furious.

Prospects for FTTH in Britain: considered slow

JoshG1 — Thu, 19 Jun 2008 15:50:00 GMT

So, with two major US carriers rolling out fibre to the home, a string of European cities doing the municipal-fibre thing, Iliad fibreing-up their own network in France, and Japan and Korea having long started wiring up whole apartment buildings, how soon will the UK get cracking? Telco 2.0 went to the Broadband Stakeholder Group’s conference to find out.

Background to the issue

The broadband incentive problem tells us how there’s little incentive for network owners to invest in networks when they can’t capture much of the incremental value of the traffic. One way out would be to make a radical cut in the underlying incremental costs of bandwidth, and to stretch budgets further. And that’s precisely what we’re seeing all over the world, as operators upgrade in order to substitute new CAPEX for old OPEX.

There are many ways of doing this: deploying fibre, DOCSIS 3 cable systems, and advanced wireless in the access loop; moving to technologies like Carrier Ethernet inside their networks; and substituting peering for transit whereever possible. Mobile operators are increasingly pulling fibre to their cell-sites in order to cope with a rising tide of data traffic encouraged by the arrival of megabit-plus radio links.

Verizon estimates that it saves up to 70% of OPEX on every link it converts to FiOS. So you’d think the pressure would be on to get the fibre out there in Britain, a country criss-crossed with high-maintenance copper in a damp climate. The UK is also perhaps the guinea pig for the broadband incentive problem. But FTTH is further behind in the UK than almost anywhere else in Europe. So far there is literally no SOHO fibre access anywhere in Britain. What’s going on?

Correlates of Success

The first problem with a UK national FTTx roll-out is that nothing like that has been done before, so no-one really knows what is going to happen, who will benefit, or how much it costs. The BSG, however, has commissioned some research into experience from the existing fibre deployments.

You can draw a number of conclusions from this, although it’s worth noting they didn’t include the major PON deployments in Japan, Korea or the US. For a start, it seems clear that locally-owned fibre is more likely to succeed. Relatedly, the crucial variable in the success or failure of a deployment is take-up; there is a strong link between community ownership and adoption.

Secondly, open access is correlated with success. The most successful fibre builds are the ones that practice open or shared access at a low level in the protocol stack. Thirdly, Ethernet is to be preferred to GPON, etc. — it’s not clear whether this is inherent in the technology, or whether it is because the successful open-access, locally-owned builds chose it for other reasons. And finally, layer zero is king. Perhaps the defining factor is how easy it is to get access to civil works, which represent around 70% of costs. It’s easiest to deploy fibre by linking up apartment blocks, especially new buildings where the infrastructure can be put in during construction.

Unfortunately, this is much more helpful in Paris or Amsterdam than it is in a sprawling British suburb. Here, it’s unavoidable that anyone deploying fibre will have to cover a lot of trench mileage - so who’s going to pay for that? The owners of the existing infrastructure are of course BT and Virgin Media. BT has been politicking with the government for years about the fibre question, and we’ll come to that later. But first, let’s put on record that Virgin didn’t come to the BSG. With their own infrastructure, and no annoying open access requirements, plus a permit from OFCOM to call their co-axial network “fibre optic” in adverts, their plan appears to be simply to ignore the issue. So much for that option. And to be fair, the Virgin Media network seems to be excluded from the options considered in the Plum Report commissioned by the BSG.

The Politics of Openreach

The other national network is of course that of BT Openreach, chartered steward of the copper wires. In their role as wholesaler to all the ISPs and alt.nets, they are the obvious choice. But Openreach, and BT more broadly, is in a very strong bargaining position — and they are determined to extract a high price, in terms of regulatory concessions, State funding of the deployment, and actual pricing of both the future network and their existing one. BT shareholders would expect nothing less. There is a two-level game in progress, on the upper level of which OFCOM, DBERR (the Department of Business, Enterprise and Regulatory Reform - the former Department of Trade and Industry), and Openreach are negotiating about fibre, and on the lower level of which OFCOM, Openreach, and Openreach’s customers are negotiating about Openreach’s regulated pricing. This obviously strengthens the hand of BT, as it can play the two levels off against each other, by demanding higher prices in exchange for fibre deployment or holding fibre hostage to pricing negotiations.

The good news is that Openreach CEO Steve Robertson, going by his contributions at the BSG, is conscious of the telecoms industry’s crisis. Openreach (and BT Wholesale) face a complex optimisation problem in the lower level of the game. They quite reasonably want to maximise their revenue, and doing so requires first of all that they square the regulator. But if they push the price up too far, they will kill the ISPs, even if they don’t fall out with OFCOM first. So Steve Robertson has to simultaneously pursue a maximal regulatory goal whilst also persuading OFCOM that if they give him the pricing power, he won’t push it too far. He appears, fortunately, to be aware that there is a significant risk of ISPs collapsing, which would leave Openreach faced with perhaps two national ISPs, and thus be put in a very difficult negotiating position.

Customers, however, much as they would love to have fibre access, are not being heard in the upper level of the game, so they have no other option than to oppose any increase in regulated prices and hope that something will turn up. OFCOM is marginally more sympathetic to them than DBERR. The worrying thing is that unlike BT, neither Government agency seems to be aware that there is anything wrong. Both OFCOM and DBERR representatives at the BSG seemed to believe that the ISP market is currently in a stable equilibrium with genuine competition, rather than its costs exploding (and being substantially determined by a monopolist), while a price war holds down their revenues to unsustainably low levels.

The Broadband Crisis

A British DSL provider can be modelled as having two substantial costs — BT, and everything else — and one source of revenue, subscribers. Under BT there is the cost of IPStream service, which is billed per-bit, or LLU rental, and BT Wholesale backhaul (which also scales with usage). Under ‘everything else’, we have the costs of electricity, salaries, rent, and capital. Given that there is little difference in the CAPEX requirements of any two DSL providers of the same size, that their requirements for premises and power are essentially the same, and there is a free market in network engineers, it’s fair to assume this will be much the same for everyone. Similarly, the BT bill is largely determined by two factors — the OFCOM-regulated price, and usage. (There is potential for some variation due to different cost-structures, for example the proportion of LLU versus IPStream lines, and the fraction of backhaul which is subject to actual competition. However, these are in the nature of a one-off shift.)

With a small number of ISPs in the market, we have the classical conditions for oligopolistic price stability. Whoever raises prices first, or fails to match a price cut, loses customers to the others. Whoever cuts first will gain volume, but only by losing margin. In the absence of collusion, there is no force for rising prices, but there is the temptation to initiate a price war. So the price tends to be a) stable, b) identical, and c) held down by occasional price wars. (This is not a unique phenomenon to telecoms, and is observed across a wide range of network industries from airlines to power generation, and may be an inherent feature.) The low cost of bandwidth to the end-user encourages soaring usage, so the BT bills go up - but revenue doesn’t. Cost and income are diverging like the blades of a pair of scissors. Hence our argument that the only way out of the crisis is to separate out the access layer through shared, community-owned, or structurally separated ownership, and to create new sources of income through two-sided business models.

It was precisely this that was missing from much discussion. The social and economic welfare benefits of fibre remain unclear, despite much research. Solid data is hard to get. There is little or no discussion at all about the fundamental premises of the ISP business model. Discussion of the costs of fibre was more substantial, but we have little or no confidence in any number whose variance spans from £5bn to £20bn. Customers and FTTH advocates have obvious incentives to low-ball the costs, and Virgin and BT have equally obvious incentives to be very conservative. Also, these estimates only cover the cheaper, urban and suburban 80% of the country, and they are based on data from the US, where the relevant law is different and land is cheap.

From Diagnosis to Treatment

The only way to clarify this is to test reality through an experiment — actually lay some fibre and find out. Francisco Caio’s government review, it is said, may conclude that duct sharing could dramatically cut the civil works requirement, but then again no-one really knows. OFCOM is arranging for a sample of BT’s assets to be audited, which should throw some light on the subject but will also raise the problem of the terms on which such sharing would take place.

Unfortunately, the only actual deployment going on is likely to tell us next to nothing. The build at Ebbsfleet New Town is, as the name suggests, part of a new town, so the fibre can be installed while work on other services requires trenches to be dug. Therefore, the civil works costs will be minimal. As always in Britain, though, the vast bulk of the work will require the upgrading of old infrastructure, of the Victorian legacy — which can’t be done without digging up the wires specifically for this purpose. We’ve faced the issue with our crumbling water infrastructure, and the answer has proven to be extremely costly. Emma Gilthorpe of BT pointed out that even the idea of a local exchange is one of these legacies. They were after all created and sited to provide voice service only, as far back as the days of manual frame switches. KPN, for example, are busy getting rid many of theirs, and moving to street cabinets.

The good news is that some people are experimenting — notably the community and municipal fibre guys. Rural broadband activists who successfully pressed for the deployment of ADSL to their areas are now part of an informal coalition with open-access advocates and some of the UK’s city councils, regional development agencies, and devolved administrations. As a Cumbrian community broadband activist pointed out, during the fight for ADSL, it was routine to find that once the equipment was installed in a local exchange originally considered uneconomic, the demand would follow. And further, if you found it difficult to get ADSL, you’re the last person a hypothetical private-venture build would serve. Reasonably large community projects which should provide more meaningful data than Ebbsfleet are now in the works, including South Yorkshire, an EU-funded project covering about 3% of UK lines, and Cornwall, although this one is in the very early stages.

One, Two, Many FTTHs? A Local Solution

This brings us to a major constraint on the debate. OFCOM, DBERR, BT and many other people, mostly in London, are thinking purely in terms of a massive national network managed by one regulated organisation. They can’t decide what its scope-and-scale should be, who should finance it, how it should repay them, or on what terms it should deal with others. The Telco 2.0 solution is to turn away from the idea that the fibre build must be one ring to rule them all; instead, what kind of a solution would work best for an incremental deployment (like this post), encouraging community, public-sector, or independent business actors to contribute?

BT has expressed a willingness to extend backhaul fibre to reach community-owned local access networks, so it shouldn’t be that hard. Perhaps, at a minimum, BT should create the interconnect option for cities, co-ops, ISPs, universities, government, property developers, or indeed anyone else to go further and pioneer FTTH? It might not be an ideal solution — but it might well be the best one on offer.

Apple’s iPhone: Beware of Poisonous Pips

JoshG1 — Tue, 17 Jun 2008 13:30:00 GMT

Amygdalin may sound like a Star Wars character, but in fact it’s a precursor to cyanide found in apple pips. And your daily Gala, Fuji, or Cox’s Orange Pippin isn’t the only fruity offering with a potentially harmful ingredient inside.

The Apple iPhone might just look to some like a dodgy cameraphone that you can’t operate one-handed. But lurking under those curvy plastic corners lies an assault on the pulsating the heart of the mobile operator.

Bypassing operator charges for services has been a pastime for hackers and users since the first networks were deployed. With the arrival of the Internet, going ‘over the top’ is perfectly legitimate. However, there are serious limits to what can be achieved. Sometimes this is because the handset is locked down — e.g. the application can’t access the voice processing path, radio or address book. [There’s a deeper analysis of this in our Voice & Messaging 2.0 report.] But more fundamentally, mobile phones aren’t just little shrunk-down PCs. They have to live with severe constraints, most importantly battery life.

This is important as many of the ‘over the top’ alternatives to traditional telco voice and SMS messaging have foundered on this rock. The application needs to keep activating the radio to poll for new messages.

Radio networks carrying phone and SMS traffic are very efficiently crafted to avoid waking the end user device unnecessarily. When a call comes in a special paging channel is used to signal ‘Wake up number 787919823239832, it’s your turn!’. The phone is an ‘always off’ device, unlike a wired PC which is ‘always on’ as far as the rest of the world is concerned. (SMS manages to get the whole messaging stuffed down this side channel.)

Apple have resisted calls to allow what are known as ‘background apps’ on the iPhone. Letting applications run continuously in the background can suck up battery power, deplete memory resources, and generally make things treacle slow. Instead, Apple have launched a Push Notification service to wake up the phone, and you have to initiate that request through an Apple platform.

Operators should tread very carefully here. Apple could easily offer to integrate with the paging feature of host networks (or kludge it with SMS) to increase the efficiency of this process. The telco then has no monopoly over reaching to the user and activating the phone using the paging service. Apple can bunch notifications from many applications, since they control the whole application ecosystem — and future presence-driven apps are likely to be very chatty. And you don’t have to be too bright to realise that one of the most likely things to be pushed to a phone in future is an advert, mediated again by Apple.

As a by product of having Apple in the middle, it could also solve a lot of privacy problems associated with background applications running, such as location data being passed without your real knowledge. There’s also the potential to filter noxious or intrusive messaging.

In addition, Apple can data mine the application message stream — and it’s been a telco’s dream for years to mediate such flows (what else is IMS for?). No doubt the first use of such data will be to optimise both their own application portal, which incidentally obsoletes the telco’s own efforts and eliminates that as a VAS revenue stream (and turns it into an all-you-can-eat data cost centre instead). If iPhone users do really generate three times the browsing traffic of other smartphones, and a zillion times that of featurephones, then it doesn’t take massive market share (stimulated by the new low price point) for the iPhone to de facto become the mobile web.

On top of this, the MobileMe data synchronisation services captures lots the key user data which could be the foundation for future 2-sided market models.

So Apple have an interesting solution to a real technical problem with their push messaging, coupled to a powerful back end. But under that tasty, shiny skin lies a potentially bitter taste for the operators who swallow the fruit. And Nokia — are you ready to finish your back-end platform yet? The telcos need an alternative, quick!

But, it is not all doom and gloom for operators as Apple has provided a rubber stamp to the subsidy-driven business model. They’ve also ceded pricing power back to the operator: that headline price drop for the device masks a hefty price rise for the service. We are firm believers that control of edge devices — handsets, home hubs, set top boxes, media gateways, home automation systems — is vital for both fixed and mobile operators. The easiest way of achieving this control is by paying upfront for the device and recovering the cost over a subscribers lifetime.

There has always been a fierce debate as to the extent that individual handset demand is driven by the handsets themselves and the attractiveness of the features within them, or operator subsidies and length of contracts. It is a complex relationship with many variables playing a part, and at least now in the Apple ecosystem the chosen operators have one variable firmly within their control.

The other important area of the control is the applications (and most importantly revenue stream from them) that run on the handset, and Apple seems to be firmly in control here and probably more so than either the operator or upstream application developers or content providers currently realise (see above). The operator secures the basic voice and data revenues, but the handset is capable of much, much more - witness the tension between the Nokia Ovi services and the operators.

A key battle ground here appears to be music: it seems these days that everyone under the sun has their own music store, with iTunes being the runaway market leader. However, Apple does not currently have permission here from the major labels to provide over-the-air music downloads, and therefore music for the iPhone currently will have to continue to be sideloaded from the PC. This is a major hole in iPhone functionality, especially when compared to the Nokia Comes with Music or white-labelled Omnifone service,

This just shows that tension does not only exist between the handset players and the operators, but also the content providers want a “reasonable” slice of the action as well. In this case, the music companies probably have a long shopping list of requirements gathered from their years of experience with iTunes.

To their credit, Apple has shown through the acceptance of subsidies that their business model is flexible. We believe that Apple will have to show a lot more flexibility in the future if the iPhone is going to be a real mass-market mobile device rather than the healthy niche it currently occupies.

Ring! Ring! Hot News, 16th June 2008

JoshG1 — Mon, 16 Jun 2008 14:57:00 GMT

In Today’s Issue: Mobile spam horror looms; Gyahoo will eat your ad business anyway; Nokia starts its own ad platform; open-source unicomms for prison warders shames telco engineers; roaming in Africa; Reding on the rampage again; Swedish military intervention; MTN-Reliance sporked by brothers’ brawl; Clearwire’s world domination plan; Nortel ducks for LTE; Sprint-powered jukebox; the end of WAP; Carphone in trouble; AT&T caps hogs; BT fibre - not all it’s cracked up to be; when number portability works too well

Computerworld asks - are we on the edge of a mobile advertising disaster comparable to the spam phenomenon? A close reading of the story would suggest that their definition of a disaster might be quite close to a mobile advertiser’s definition of success - however, Telco 2.0 would point out that in telco terms, advertising alone is just not that big a deal and operators need to look to facilitating a far wider set of interactions between users and enterprises.

Rich Karpinski of Telephony Online says the Google-Yahoo cooperation means that Google will end up dominating the entire field of online advertising, and telcos had better look to an agreement with Google. He also wonders how telcos might work with Microsoft’s efforts in this field - regular readers probably know we think they’d be better off working with Microsoft’s core enterprise applications to provide better voice and messaging and communication-enabled business processes.

Meanwhile, Nokia starts its own ad platform, which along with the Nokia Maps 2.0 features they showed at Mobile World Congress this year could be a major challenge to Google’s efforts at location-based advertising.

Speaking of enterprise voice and messaging, there are reasons to think Microsoft’s unified comms efforts aren’t the last word. Here’s a specialist appliance for the open-source IP-PBX, Asterisk, so clueful enterprise IT departments can roll their own. Its makers say that quite a lot of customers wanted to replace their expensive NEP-made boxes with something running on a commodity PC-based server, but struggled to achieve reliability — so only ones with very special requirements found it worthwhile to date. Oddly enough, the examples given were prisons.

This quote about it should scare you though:

Kerravala said that the open-source and development aspects of the product could be a bit daunting for a telco operative within the company. He suggests that, for the product to work best, IT and the telco expert should work together to make it work best, as an IT manager would be better-versed in open source and would be able to craft the code necessary.

Isn’t there some kind of hate speech anti-discrimination law against such dated Bellhead stereotypes?

Vodafone’s Receiver magazine is off doing a little social anthropology around mobile phones in Africa. Interestingly, the example of Celtel’s abandonment of on-network roaming in favour of integrating all its African networks is used to hint at something similar in Europe. Well - why not? It’s not as if Viviane Reding is going to let you keep a roaming premium much longer.

The Swedish army has decided that, yes, a merger between TeliaSonera and France Telecom would be tolerable. Told you this deal would be complicated. It’s slightly amusing that the Swedish military has pronounced just as France Telecom backed out, but considerably more amusing than this proposal to data-mine all telecoms traffic in Sweden. Even though Telia runs the armed forces’ communications network, it’s apparently moving servers out of Sweden in order to avoid being spied upon…by itself.

In other megamerger news, the MTN-Reliance deal is threatened by a dispute between the brothers who own Reliance Industries. One of them claims he has a right of first refusal over Reliance Communications, dating from when it was spun off from Reliance Industries, and he expected he could place more reliance in his brother’s word… oops.

US WiMAX operator Clearwire has been pushing optimistic numbers around Wall Street. Now the long-rumoured cableco+Sprint+Intel joint venture is ready, they reckon they’ll cover between 60-80 million people by next year and 220 million by 2017, aiming for 30 million subs by then, with ARPU of $49. The stock market isn’t so sure: Nortel shares leapt after the company said it was concentrating on LTE. Well, they also said they would resell Alvarion WiMAX gear.

However, Sprint is signing up wholesale mobile-data customers: meet the mobile broadband-powered jukebox.

T-Mobile, meanwhile, announced the switch-off of its circuit-switched data WAP service. Not a moment too soon…but perhaps charging users by time, with swingeing overage rates, might be the wave of the future. After all, there’s bad news at Carphone Warehouse as growth in DSL tails off and all those free laptops come home to roost, and AT&T is looking at capping its DSL users.

According to the BBC, BT’s Ebbsfleet fibre trial seems to have some sort of differential quality of service based on content:

BT pointed out that while 10Mbps would be a baseline minumum for customers, download speeds would increase depending on what the user was doing, such as downloading a movie. And while the capacity is shared, customers would still get speeds of more than 50Mbps when required, said BT.

OK, but we liked this:

But a BT spokesman said that the speeds would be “very decent”. “Higher in fact that anyone currently needs,” he added.

After all, how long can it take to download 640Kb of data to the world’s five computers?

Finally, a Vodafone Ireland customer has discovered a way of porting anyone’s number. Fun, and games.