It is the End of the Line for TELCOs

The telecom industry has reached its peak. This is it. Look around you. Whatever you are doing in telecom, however you are making money in the field, it isn’t going to get better than this. This industry has acquired its maximum share of the economy. We are the digital railroad business at the height of the railroad barons. The only way now is down. We’ll see maybe one or two more mini-booms, a few more troughs, but the long-term trend has just gone into reverse.

What’s going on? Let’s gather the evidence

The telco voice and messaging business is on the verge of going into meltdown. Since this is where the margins come from, the problem is hard to exaggerate. The drip-drip of articles about declining voice and messaging volume and revenue is becoming a small stream. Even mobile telephony is losing ground in competition to asynchronous messaging. Twitter and Facebook message volumes are exploding, and SMS is beginning to sink. Termination and roaming are endangered species, hunted by packs of voracious regulators. There is no way back. When I started writing Telepocalypse back in 2003, the only thing I got wrong was the timing.

The traditional vendors are dying, and this is disrupting the telco supply chain. Their multi-year cycle times are hopelessly mismatched to the environment. The federated, standards-based, interoperable services game is coming to a close. Huawei is mopping up the bloody remains from the battlefield. Time to pack up. A raft of “internet-time” startups are taking their place, filling in the missing features that decades of neglect of the voice and messaging business have left behind. (You mean I still can’t record and search my calls in 2012? Wow!)

If you can’t join them, beat it

Meanwhile, telcos are launching over-the-top services to gain and retain customers. For example, check out Bobsled from T-Mobile, Jajah from Telefonica, and 050 Plus from NTT. There’s about to be an all-out war to become one of the surviving voice and messaging platforms. (Hint: Telefonica is ahead. Everyone else is playing catch-up.) The Global System for Mobile Associations’ Rich Communication Suite initiative is in intensive care, and relatives are inquiring about local funeral directors. Senior execs say it privately. Nobody wants to alarm the investors by letting them know that those future cash flows aren’t so secure after all. VoLTE and 4G voice is a mess that preserves the worst of GSM telephony, without giving the user any upside, and leaves an open goal for over-the-top alternatives like Skype.

I strongly believe the business model for voice and messaging is about to go into reverse. The value is going to drain out of minutes and messages charged to users. Instead, enterprises will pay for features that make customer contact efficient, effective and secure. Where Facebook has fumbled, others will fill that gap and become fit-for-purpose B2C channels. Voice and messaging won’t just drop to a price of zero. It will go negative. Users will be courted to lodge their identity and presence with new communications and commerce intermediaries, who make money “upstream.” Once the process starts, it will become unstoppable.

Telcos won’t get a chance to deploy the next-generation free phone product unless they act fast.

Video and data: volume without profit

Video is booming, but there’s no money in it for telcos, except for a lucky few who grabbed the sports rights. The cable business model is now being unbolted from its foundations too. The talents of acquisition, bundling and distribution will serve the cable companies for a few more years, but they know the score.

Whether it’s voice, messaging or video, the money chain from application to transmission to infrastructure is breaking down.

Data volumes are soaring, but again telcos have failed to master the brilliant packaging of voice and SMS with internet services. Apps stores aren’t services stores. Costs are out of whack with revenues, because pricing and network policy is managing “bandwidth.” But that is not the real issue. The real issue is how customer experience is linked to contention, and no telco knows how to manage that adequately today. Given high fixed costs and low marginal costs, some player will always want to offer unlimited plans at unprofitable prices. It’s a not-for-profit business keeping iPhones and iPads connected.

So where’s all the money gone?

For sure, Apple is surging. Apple may only have 20 percent of the smartphone volume, but they have a huge share of the profit. This is a fundamental shift in the balance of power in telecoms. All the APIs that really matter are going to be decided in Cupertino. Don’t be deceived by Android’s volumes. There’s no money there — it’s a dollar-destroyer.

Although Apple is the star around which much will orbit in future, Google is growing too, as long as the PC platform holds. And Amazon is showing how it’s hard to fake infrastructure, and nobody is going to challenge them anytime soon.

Telcos aren’t going to be able to divide-and-conquer these platforms. The locus of power has shifted fundamentally. The value creation is outside the network.

It gets worse.

These players may start to aggregate assets and wholesale access to build AppleNet, GoogleGlobe and AmazonRiver to connect merchants to eyeballs and wallets, without any other gatekeepers, such as a telco retail bundle, in the way.

It gets worse.

Telcos as profitable networked cloud services providers? You’ve got to be kidding me.

It gets worse.

Ericsson has positioned itself as what my colleague Dean Bubley refers to as a dominant “under the floor” player. It is potentially a king-maker for telcos, controlling the delivery platform from which their operations have to be run. Networks are just large, distributed supercomputers — and Ericsson is the new IBM. Nobody got fired for choosing them. Their power is ominous for operators.

It gets worse.

Home networks don’t need service providers. You just buy a box and plug it in. Street-level networks don’t either — you can build a simple resilient mesh. Nor do town networks that join the kids with their school. We fundamentally don’t need communications service providers to manage data transmission. As long as we have a means to fund infrastructure, just as we manage with roads, we can do it for ourselves.

This is the beginning of the end of the Information Superrailroad, where all the bits are scarce and billable. Broadband ISP service is a branch line to nowhere.

Unlicensed wireless is the automobile, and local open fibers are the roads. It doesn’t carry very much very far right now, but it will. And with it, the fate of the telecom industry as constituted today is sealed. Like with the railroads, telcos will carry ever more traffic, and will protect themselves with political power. But their heyday is over, and a new disruptive model has emerged.

Welcome to the real Information Superhighway. I hope you like your iCar.

Martin Geddes is founder of Martin Geddes Consulting Ltd. He runs public workshops on voice innovation and strategy. This article was originally published on Geddes’ site, Future of Communications.

Korea Telecom Reviewing Network Fees on OTT Providers

(Reuters) - South Korea's top Internet provider, KT Corp plans to charge data-heavy content providers such as Google's Youtube and Internet-enabled TV service operators to subsidize costly network upgrades, a KT executive said on Thursday.

KT fired its first salvo on "free riding" Internet services earlier this month by blocking access to certain TV applications offered by Samsung Electronics Co, the top manufacturer of Internet TVs, with the burgeoning TV industry set to generate profits from advertising and applications at the expense of heavy investments by network operators.

"We want to set a rule that we can equally apply to every platform operator that offers data-heavy content as those services threaten to black out our network. They should pay for using our network," Kim Taehwan, vice president of KT's smart network policy task force, told Reuters in an interview.

"Payment could take various forms, from sharing a portion of advertisement revenues or profits to settling network usage fees. We are open to discussing that and are focusing our efforts on Internet TVs for a start before broadening our target to other data-heavy services such as Youtube."

Such moves could have wider implications for the likes of Apple and Google, which are trying to replicate their enormous success in the smartphone market in the living room by offering services such as high-quality videos, movies, games and social networking via TVs.

"Once we set a rule with Samsung, we will apply it to other Internet TV operators, be it Apple or Google," Kim said.

Apple is in talks with Canada's two biggest telecom firms about launching iTV, a device combining the features of the wildly popular iPad tablet with those of a TV set, according to Canada's Globe and Mail.

Google is also preparing revamped Google TVs through alliances with firms such as LG Electronics Inc.

Telecoms operators, under growing pressure to upgrade their networks to support increasing data traffic, have already seen free Internet phone and text message services such as Kakaotalk and BlackBerry Messenger hit steady and superbly profitable sources of income.

Hardware manufacturers like Samsung, which hopes to build on its dominance of the TV market in the Internet TV segment, argue networks should not discriminate against content or services and that applications do not cause massive traffic slowdowns.

(Reporting by Miyoung Kim; Editing by Jonathan Hopfner Reuters.com)

Net Neutrality - Shareholders support

By Natalie Apostolou

Posted in Networks, 17th February 2012 00:22 GMT

Beastie Boys chief protagonist Mike D has put his weighty beats into the net neutrality debate, forcing US wireless carriers to allow shareholders to vote on the issue.

The US Security and Exchange Commission announced this week that wireless carriers including AT&T, Verizon Communications, and Sprint Nextel would be forced to let shareholders vote on net neutrality, following a proposal instigated by Mike D, his wife filmmaker Tamra Davis and agent John Silva, whose book includes the Foo Fighters.

The group had submitted a proposal to AT&T arguing for the rights of shareholders to vote on a resolution that recommended the company “publicly commit to operate its wireless broadband network consistent with network neutrality principles.”

The idea was slammed by AT&T but the SEC intervened stating that net neutrality has become a “significant policy consideration,” which can no longer be excluded from shareholder votes.

The proposal from Mike D provides a compelling argument for net neutrality . In the submission from Trillium Asset Management LLC, which has been driving the effort of shareholder groups and the Mike D posse in the matter, the activists state “open (non-discriminatory) architecture of the Internet is critical to the prosperity of our economy and society.

"Network neutrality rules are also needed to "facilitate the growth of the Internet and give private companies the correct incentives to continue investing in this significantly valuable good," according to a January 2010 report by the Institute for Policy Integrity at New York University. The report finds that an open Internet accounts for billions of dollars of economic value for Americans. We believe this economic and social value is an important factor in the growth of our economy and widely diversified investment portfolios.”

The Age of Big Data. The Global Pulse Research

GOOD with numbers? Fascinated by data? The sound you hear is opportunity knocking.

Mo Zhou was snapped up by I.B.M. last summer, as a freshly minted Yale M.B.A., to join the technology company’s fast-growing ranks of data consultants. They help businesses make sense of an explosion of data — Web traffic and social network comments, as well as software and sensors that monitor shipments, suppliers and customers — to guide decisions, trim costs and lift sales. “I’ve always had a love of numbers,” says Ms. Zhou, whose job as a data analyst suits her skills.

To exploit the data flood, America will need many more like her. A report last year by the McKinsey Global Institute, the research arm of the consulting firm, projected that the United States needs 140,000 to 190,000 more workers with “deep analytical” expertise and 1.5 million more data-literate managers, whether retrained or hired.

The impact of data abundance extends well beyond business. Justin Grimmer, for example, is one of the new breed of political scientists. A 28-year-old assistant professor at Stanford, he combined math with political science in his undergraduate and graduate studies, seeing “an opportunity because the discipline is becoming increasingly data-intensive.” His research involves the computer-automated analysis of blog postings, Congressional speeches and press releases, and news articles, looking for insights into how political ideas spread.

The story is similar in fields as varied as science and sports, advertising and public health — a drift toward data-driven discovery and decision-making. “It’s a revolution,” says Gary King, director of Harvard’s Institute for Quantitative Social Science. “We’re really just getting under way. But the march of quantification, made possible by enormous new sources of data, will sweep through academia, business and government. There is no area that is going to be untouched.”

Welcome to the Age of Big Data. The new megarich of Silicon Valley, first at Google and now Facebook, are masters at harnessing the data of the Web — online searches, posts and messages — with Internet advertising. At the World Economic Forum last month in Davos, Switzerland, Big Data was a marquee topic. A report by the forum, “Big Data, Big Impact,” declared data a new class of economic asset, like currency or gold.

Rick Smolan, creator of the “Day in the Life” photography series, is planning a project later this year, “The Human Face of Big Data,” documenting the collection and uses of data. Mr. Smolan is an enthusiast, saying that Big Data has the potential to be “humanity’s dashboard,” an intelligent tool that can help combat poverty, crime and pollution. Privacy advocates take a dim view, warning that Big Data is Big Brother, in corporate clothing.

What is Big Data? A meme and a marketing term, for sure, but also shorthand for advancing trends in technology that open the door to a new approach to understanding the world and making decisions. There is a lot more data, all the time, growing at 50 percent a year, or more than doubling every two years, estimates IDC, a technology research firm. It’s not just more streams of data, but entirely new ones. For example, there are now countless digital sensors worldwide in industrial equipment, automobiles, electrical meters and shipping crates. They can measure and communicate location, movement, vibration, temperature, humidity, even chemical changes in the air.

Link these communicating sensors to computing intelligence and you see the rise of what is called the Internet of Things or the Industrial Internet. Improved access to information is also fueling the Big Data trend. For example, government data — employment figures and other information — has been steadily migrating onto the Web. In 2009, Washington opened the data doors further by starting Data.gov, a Web site that makes all kinds of government data accessible to the public.

Data is not only becoming more available but also more understandable to computers. Most of the Big Data surge is data in the wild — unruly stuff like words, images and video on the Web and those streams of sensor data. It is called unstructured data and is not typically grist for traditional databases.

But the computer tools for gleaning knowledge and insights from the Internet era’s vast trove of unstructured data are fast gaining ground. At the forefront are the rapidly advancing techniques of artificial intelligence like natural-language processing, pattern recognition and machine learning.

Those artificial-intelligence technologies can be applied in many fields. For example, Google’s search and ad business and its experimental robot cars, which have navigated thousands of miles of California roads, both use a bundle of artificial-intelligence tricks. Both are daunting Big Data challenges, parsing vast quantities of data and making decisions instantaneously.

The wealth of new data, in turn, accelerates advances in computing — a virtuous circle of Big Data. Machine-learning algorithms, for example, learn on data, and the more data, the more the machines learn. Take Siri, the talking, question-answering application in iPhones, which Apple introduced last fall. Its origins go back to a Pentagon research project that was then spun off as a Silicon Valley start-up. Apple bought Siri in 2010, and kept feeding it more data. Now, with people supplying millions of questions, Siri is becoming an increasingly adept personal assistant, offering reminders, weather reports, restaurant suggestions and answers to an expanding universe of questions.

To grasp the potential impact of Big Data, look to the microscope, says Erik Brynjolfsson, an economist at Massachusetts Institute of Technology’s Sloan School of Management. The microscope, invented four centuries ago, allowed people to see and measure things as never before — at the cellular level. It was a revolution in measurement.

Data measurement, Professor Brynjolfsson explains, is the modern equivalent of the microscope. Google searches, Facebook posts and Twitter messages, for example, make it possible to measure behavior and sentiment in fine detail and as it happens.

In business, economics and other fields, Professor Brynjolfsson says, decisions will increasingly be based on data and analysis rather than on experience and intuition. “We can start being a lot more scientific,” he observes.

There is plenty of anecdotal evidence of the payoff from data-first thinking. The best-known is still “Moneyball,” the 2003 book by Michael Lewis, chronicling how the low-budget Oakland A’s massaged data and arcane baseball statistics to spot undervalued players. Heavy data analysis had become standard not only in baseball but also in other sports, including English soccer, well before last year’s movie version of “Moneyball,” starring Brad Pitt.

Retailers, like Walmart and Kohl’s, analyze sales, pricing and economic, demographic and weather data to tailor product selections at particular stores and determine the timing of price markdowns. Shipping companies, like U.P.S., mine data on truck delivery times and traffic patterns to fine-tune routing.

Online dating services, like Match.com, constantly sift through their Web listings of personal characteristics, reactions and communications to improve the algorithms for matching men and women on dates. Police departments across the country, led by New York’s, use computerized mapping and analysis of variables like historical arrest patterns, paydays, sporting events, rainfall and holidays to try to predict likely crime “hot spots” and deploy officers there in advance.

Research by Professor Brynjolfsson and two other colleagues, published last year, suggests that data-guided management is spreading across corporate America and starting to pay off. They studied 179 large companies and found that those adopting “data-driven decision making” achieved productivity gains that were 5 percent to 6 percent higher than other factors could explain.

The predictive power of Big Data is being explored — and shows promise — in fields like public health, economic development and economic forecasting. Researchers have found a spike in Google search requests for terms like “flu symptoms” and “flu treatments” a couple of weeks before there is an increase in flu patients coming to hospital emergency rooms in a region (and emergency room reports usually lag behind visits by two weeks or so).

Global Pulse, a new initiative by the United Nations, wants to leverage Big Data for global development. The group will conduct so-called sentiment analysis of messages in social networks and text messages — using natural-language deciphering software — to help predict job losses, spending reductions or disease outbreaks in a given region. The goal is to use digital early-warning signals to guide assistance programs in advance to, for example, prevent a region from slipping back into poverty.

In economic forecasting, research has shown that trends in increasing or decreasing volumes of housing-related search queries in Google are a more accurate predictor of house sales in the next quarter than the forecasts of real estate economists. The Federal Reserve, among others, has taken notice. In July, the National Bureau of Economic Research is holding a workshop on “Opportunities in Big Data” and its implications for the economics profession.

Big Data is already transforming the study of how social networks function. In the 1960s, Stanley Milgram of Harvard used packages as his research medium in a famous experiment in social connections. He sent packages to volunteers in the Midwest, instructing them to get the packages to strangers in Boston, but not directly; participants could mail a package only to someone they knew. The average number of times a package changed hands was remarkably few, about six. It was a classic demonstration of the “small-world phenomenon,” captured in the popular phrase “six degrees of separation.”

Today, social-network research involves mining huge digital data sets of collective behavior online. Among the findings: people whom you know but don’t communicate with often — “weak ties,” in sociology — are the best sources of tips about job openings. They travel in slightly different social worlds than close friends, so they see opportunities you and your best friends do not.

Researchers can see patterns of influence and peaks in communication on a subject — by following trending hashtags on Twitter, for example. The online fishbowl is a window into the real-time behavior of huge numbers of people. “I look for hot spots in the data, an outbreak of activity that I need to understand,” says Jon Kleinberg, a professor at Cornell. “It’s something you can only do with Big Data.”

Big Data has its perils, to be sure. With huge data sets and fine-grained measurement, statisticians and computer scientists note, there is increased risk of “false discoveries.” The trouble with seeking a meaningful needle in massive haystacks of data, says Trevor Hastie, a statistics professor at Stanford, is that “many bits of straw look like needles.”

Big Data also supplies more raw material for statistical shenanigans and biased fact-finding excursions. It offers a high-tech twist on an old trick: I know the facts, now let’s find ’em. That is, says Rebecca Goldin, a mathematician at George Mason University, “one of the most pernicious uses of data.”

Data is tamed and understood using computer and mathematical models. These models, like metaphors in literature, are explanatory simplifications. They are useful for understanding, but they have their limits. A model might spot a correlation and draw a statistical inference that is unfair or discriminatory, based on online searches, affecting the products, bank loans and health insurance a person is offered, privacy advocates warn.

Despite the caveats, there seems to be no turning back. Data is in the driver’s seat. It’s there, it’s useful and it’s valuable, even hip.

Veteran data analysts tell of friends who were long bored by discussions of their work but now are suddenly curious. “Moneyball” helped, they say, but things have gone way beyond that. “The culture has changed,” says Andrew Gelman, a statistician and political scientist at Columbia University. “There is this idea that numbers and statistics are interesting and fun. It’s cool now.” (source: Steve Lohrs - The New York Times)

Indonesia Telecoms: A growth driver or a cash cow

What will Indonesia’s telecom industry look like in 2011?

According to Fitch ratings agency, the picture is likely to look quite rosy. Subscriber numbers are expected to grow by 25 to 30 million this year, although it will not be the steepest annual growth the country has experienced. Other factors will help improve the landscape, as there is still plenty of room for growth in the broadband market. Indonesia’s Internet penetration is still less than one percent.

Ben Verwaayen, Alcatel-Lucent’s current CEO, seems to share this optimistic outlook on the country’s telecom industry.

“Telecom users in Indonesia are enjoying the lowest ARPU [average revenue per user] in the world. The growing middle class is tech-savvy, and Indonesians are known for their propensity to communicate,” he said during a limited media interview here in Jakarta last week. That is why Indonesia is an important market for his company.

During the interview, Verwaayen, who has lived — on and off — in Indonesia for many years, made a very important statement. He said every government had to decide whether it wanted to leverage telecommunications as a growth driver or a cash cow. Indonesia, according to him, has not really made up its mind yet, and this makes the country’s telecom environment one of the most challenging.

If telecommunications is to become one of the engines of economic growth, then the government should take steps that are more supportive to the industry. It should consider lowering the license fees for the use of frequencies and rates for interconnection.

Regulations should be made friendlier to the industry (unfortunately, Communication and Information Technology Minister Tifatul Sembiring’s recent demands from Research in Motion did not reflect a favorable stance toward the industry — and telecom users).

However during the interview, we did not touch upon Indonesia’s brawl with RIM. I, as well as the three other journalists from leading publications who were present during the interview, was more interested in what Alcatel-Lucent is doing in Indonesia and elsewhere and what its major contributions to the industry are.

The company, as stated by the affable CEO, is currently focusing on a couple of things including application enablement.

“If you can create open applications that operators can use, we will work together with the operators and provide the common platform for your applications,” he said. The investment would be the initial implementation, but the rest will be revenues.

One of the important contributions was the research done by Bell Labs published last October. The research, which involved 4,500 consumers and 850 enterprises in France, UK and Germany, pointed out that there is a strong demand for applications enabled by Long-Term Evolution (LTE). LTE is a wireless broadband technology designed to support roaming Internet access via cell phones and handheld devices.

Alcatel-Lucent has been an avid proponent of LTE. It is a strategic move, as devices such as the tablets and the smartphones’ demand for bandwidth continues to rise.

“As you can see, we now no longer communicate with words, we communicate with pictures and videos. We communicate through various sizes and types of screens,” Verwaayen said.

“Besides, we will soon have cloud services. Telecommunications will fulfill the delivery need,” he added.

By the way, Alcatel-Lucent is one of the world’s top telecommunications infrastructure vendors. In the past, it was the only vendor that had the three different types of communication technologies — satellite, terrestrial and submarine. It sold its satellite business a long time ago.

Other global players include Ericsson, Nokia Siemens Network, Huawei and ZTE. Competition between them and between the European and Chinese players, is fierce, because there is considerable overlap among their products and services.

Alcatel-Lucent’s projects encompass the whole lifecycle of a telecommunications network, starting from the preliminary network design phase and extending to the network dimensioning, architecture, deployment, planning and optimization, in addition to quality assessment and improvement and customer trainings.

The Paris-based company acquired Bell labs, the research arm of Lucent, when it merged with the latter four years ago. Today, the combined company serves both the operators and enterprises. It exited WiMAX two years ago and is now concentrating on LTE because, like most other global telecom vendors, it believes that LTE is the right option for the future.

The company is also strong in IP, thanks to the acquisition of Lucent and Bell Labs. “There is no question about it,” said the CEO, “the world has moved from analog to digital to IP.” In 2007, the company won a contract to provide VoIP for 1,600 users in the new terminal of the Dubai International Airport.

Apart from the airport project, which was won in 2007, Alcatel-Lucent has been busy with others such as the National Broadband Network rollout in Australia and 15 LTE trials across the Asia-Pacific region with operators including China Mobile, Singtel, Chunghwa Telecom and Maxis, it will be working with China Mobile, China Telecom and China Unicom to build fixed and mobile telecom networks.

Does he have any important message for Indonesia? Yes, he strongly believes that, given the tremendous potential it has, Indonesia should aspire to become a knowledge-based society and for that, its people must be connected.

“I think, for Indonesia, ICT is a massively important success factor. How can you be a knowledge-based society if you are not connected to the rest of the world,” he said.

Hopefully, this is a message our telecom regulator bodies will finally grasp.

Indonesia has not really made up its mind yet, and this makes the country’s telecom environment one of the most challenging.

By:Zatni Arbi Source:thejakartapost