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Telecoms survival guide: From the pipe to the media platform

Telecoms and operators must change – more out of survival necessity. Voice revenues are shrinking and “Over the top” challenges are eating into P2P revenues. Then there are technology disruptions such as Soft SIM. A study from Ovum suggests that by 2016, operators will have lost $54 billion in SMS revenues due to the growing popularity of online messaging.

Looking behind the pipe Business. An essential guide for telecom companies

Looking behind the pipe Business. An essential guide for telecom companies

79% of operators believe that OTT clients on smartphones are a threat to traditional SMS and voice based services.
In 2011, 67.6% of operators identified messaging as the most challenged service by OTT, but that figure has increased to 73.7% in 2012.
43% of operators expect 11% and over of revenues to be impacted by OTT in 2012
52.1% of the operators claim OTT has impacted on 1-20% of traffic in 2012, up from 29.7% in 2011.

The denial charecterestic of operators is slowly on the wane – as operators grapple to hold on to shifting sands. This is reminiscent of the way movie and music industry has been disrupted and laid asunder by the Torrents of the world. The key realization that needs to come through for operators is that they need to realize that they are not in the pipe business – rather they own a significant part of the media business. Realization along these lines, could be critical in opening up thought processes around creation of content and media platforms, leased services on the cloud, location centric services, context awareness, semantics awareness… operators need to pull up the game from the pipe to compelling internet based services.

A part of this new services paradigm would depend on creating platforms that host eco-systems and users co-creating and consuming real time. A lot of the operator mentality is bound around the pipe syndrome with customer ownership. However, an open system/platform is key to creating value in terms of experience, discovery and revenues/profits for the ecosystem. Operators need to graduate from the walled thinking to a shared approach.

Impact Analysis: Google buys out Moto (Part IV- Would the operator become more redundant)

Posted in Mobile Devices and Company Updates by Manas Ganguly on August 21, 2011

Read Part I, Part II and Part III

Google is pulling off an acquisition that is larger than any that Microsoft, Apple, or any of their other main competitors ever have. The Moto acquisition is either the smartest thing Google has ever done, or the dumbest. A $12.5 billion deal in cash, with a $2.5 billion collapse clause? There is no in-between
In a series of blogs over the next few days, I would be analyzing the impact of the Google-Moto deal in terms of:
1. Patents Leverage
2. Platform/Hardware Competence
3. Eco-system view
4. Impact on Telcos

Impact on Telcos

There are some interesting potential side effects of this deal, such as in the broader consumer electronics space. Motorola could help Google turn around the disaster that has been Google TV. Motorola makes a huge percentage of the set top boxes that the cable companies use to push their over-priced content at you.

This then brings us to another interesting fall-out of this deal- How will the telcos react to Google taking over the role of content provider as well as the device maker. Google has long harboured intent of becoming a media business with emphasis on the content delivery. Google would still be riding on the Telco pipes, which would further re-inforce dumb pipe syndrome. This deal is just another blow to the traditional telcos, pushing them further towards commoditization and being a pipe. How will they fight back? Is their future only in providing the connection? This will be interesting.


Telecom Operators primed to benefit from Smart Networks

Posted in Industry updates by Manas Ganguly on August 18, 2011

The profusion of smartphones and other data centric devices are pushing the limits of network traffic and bandwidth. As Mobile networks underwent fundamental changes in the evolution from 1G to 4G. Network speeds, the number of users and the diversity of applications and services have skyrocketed. These changes are forcing operators to rethink their network-management strategies — not a minor tweak, but a major overhaul.

Comprehensive network management strategies and services now enable operators to avoid becoming dumb pipes. The first step is completely rethinking how to manage their networks.

Before mobile data became popular, operators focused on engineering their networks. Now, operators are shifting their focus from networks to traffic. With infrastructure that provides packet-level insights into that traffic, operators now can identify different traffic types and apply a specific policy to each one. For example, operators can dynamically allocate bandwidth and loadbalancing links to improve latency and throughput. As a result, they can use Quality of (network) Services as a powerful market differentiator. The key is to understand how customers use services and the network resources associated with that usage. Hence the differentiator is based on the network’s ability to gather broader, deeper, real-time information about user sessions.

This allows operators to engineer applications, including managing traffic and dynamically provisioning resources, to ensure all applications deliver the best possible performance.

Operators also can use the network’s awareness of user content and context to deliver services tailored to each subscriber’s usage patterns. For example, operators might create a service targeted at parents with family payment plans so they can monitor their children’s activities. Another service might cater to users who watch a lot of video on their devices by prioritizing video over other applications. These are few examples of how application engineering enables operators to reduce costs, create additional revenue streams and improve the user experience.

Thus the concept of smart networks is based on the following 4 main aspects:
• Visibility. See exactly what applications customers use, where the network hot spots are and what’s causing those hot spots.
• Control. Prioritize traffic, set policies and block traffic, if necessary.
• Optimization. There are 2 aspects of optimization. The first is capacity and efficient use of network resources. The second is optimizing the quality of experience for users.
• Monetization. Get new revenue streams from the applications and services on the network

Using an intelligent/smart networks operators can offload up to 70% of Internet traffic at the network edge. That offload increases core network efficiency, improves the user experience and reduces CapEx by up to 50%. This approach enables operators to use their resources more efficiently and apply the packet core platform/network based intelligence to dynamically offload traffic.

The smart networks take the operators out of the unsustainable dumbpipe business. and helps them reduce expenses, create new revenue streams and strengthen profitability. Just as important, it makes it possible to engineer and optimize the user experience. That translates into stronger customer loyalty.

Mobile Operators: From Dumb Pipe to Nightmare Scenario

Posted in Industry updates by Manas Ganguly on August 8, 2011

A new Juniper report estimates that while global operator-billed revenues will exceed $1 trillion annually by 2016. This would be something to celebrate were it not the case that costs are forecasted to rise in accordance with revenues — and exceed them. Mobile network operators (Telcos) face the prospect of a “nightmare” scenario under which operator costs will exceed revenues within four years unless remedial action is taken.

Smartphones contribute to 25% of the global mobbile phone sales. Smartphones are to become the highest-selling consumer electronic device category in 2011.Cellular data traffic doubled in 2010.The Coda Research Consultancy predict global smartphone sales of some 2.5 billion over the 2010-2015 period, and also suggesta that mobile Internet use via smartphones will increase 50 fold by the end of that period.Gartner expects over 500 million smartphones to sell in 2012.

As revenues begin to flatline – the result of market saturation allied to declining ARPUs – and the surge in data usage pushes backhaul costs ever higher,operators margins and profits will increasingly get squeezed. This is called the Nightmare scenario.

There is no one-size-fits-all solution for Telcos, simply because the circumstances of individual operators differ widely, even within the same market. To survive this nightmare scenario, Telcos will need to offer integrated rate plans, while also providing a wide range of segmented postpaid and postpaid tariffs.The potential for double-sided revenue streams in areas such as cloud, M2M and mobile financial services where Telcos can leverage their existing assets.

Second tier networks (those with lower traffic) could be poised to gain significant advantage by retaining flat rates for data bundles. Likewise, Integrated Mobile Broadcast represents a new 3G standard that has the potential to add infinite capacity to 3G for popular content, offering a solution to the impending capacity crunch. \

Lastly, as the cost of fossil fuels continues to increase, transition to green networks and base stations is beginning to “represent both an environmental and economic imperative”.

Why Operators have lost the consumer?

Posted in Industry updates, Revenues and Monetization by Manas Ganguly on April 15, 2011

Operators are like dumb pipes, carrying a lot of data and not understanding how to monetize it”

This statement which has become a cliché acquires a new dimension when Illja Laurs, CEO of Getjar says it because of the simple fact that Getjar was the alternate app store to those of the big platform providers that Operators have been banking on to do “things” with the traffic. Laurs states that operators have absolutely no influence over their customers when it comes to where they go on the mobile Web and what they download. Essentially, customers are ignoring the carriers in terms of where to be headed through the mobile web.

Laurs’ testimony is critical considering that he has been instrumental in building a thriving application portal independent of Google.GetJar storefront is handling more than 100 million app downloads a month, which could make it the second most trafficked store on the mobile Internet behind iTunes.GetJar has revenue share and promotion agreements with more than 50 operators globally on its store front. Even with large accounts like Vodafone, Sprint and AT&T, Getjar gets only 10% of its downloads from Operators and the revenue is lower. Meanwhile, GetJar’s direct-to-consumer business is booming to the point that it has almost completely written off the carrier partnership completely.

Quoting Laurs: “Once we realized this wasn’t a fast way to scale, we gave up on it. We still have those deals in place, but we don’t promote the opportunity at all anymore. … We learned that it would take 1000 carrier deals to double our profits. The return on investment is way less than our direct-to-consumer effort.”

No mincing words there…. it says it all.

Reasons for Operators for not being able to do a meaningful lot with their subscribers are as follows

1. Half Measures: Only a handful of operators are fully integrated with Getjar platform. Very few of them took full advantage of the integration opportunities

2. Operators are deeply abhorrent of surrendering ownership of its subscribers to any other stakeholder. They have can network location and presence engines, they can offer carrier billing, they have detailed information on their customers—all potential goldmines for a developer hoping to make its mark. Such data would be goldmines to developers and App Store makers. The catch however remains that while most of the operators swear to open alliances, the fact remains that in terms of sharing customer data and profiling, operators are taking up walled garden approach.

3. There are 200 major wireless carriers worldwide, and they all have different sets of APIs, resulting in an enormous level of fragmentation. If a developer is presented with the opportunity to build a location feature into a single Google API rather than code to 200 disparate APIs, he’ll always choose the former.

Initiatives like the Wholesale Application Community (WAC) and the GSMA’s OneAPI program are trying to address those issues, but regional and business differences between the world’s operators will still leave plenty of room for fragmentation in a supposedly common API framework. It is very sceptical that 200 different carriers can agree on common frameworks.

4. Another fall out of the operator walled garden approach is that Operators are likely to seek exclusive partnerships, which developers won’t be so keen to lock themselves into.

5. Fifth is the mindset problem. Operators are largely clueless when it comes to monetizing non-telecom services. The operators are slowly expanding their vision and expertise beyond the gateways and routers of the network. But according to Laurs, they’re doing it too slowly.

Thus, operators are being marginalized by their customers when it comes to mobile apps and how there’s little hope of getting them back.

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