5 worst bitpipe nightmares

The taxi world was unchanged for years until innovators took an interest in it. Hailo made it super easy to get a taxi. Uber makes taxis irrelevant. The worst thing for taxi drivers is that they were out of control of their own destiny. What would be the worst nightmares for telecom operators and traditional network equipment providers?

1) voicemails and millions of VAS that customers love

Why would this be a nightmare? Simply the fact that the most likely provider of millions a really valuable communication services is unlikely to be a traditional telecom provider. They haven’t been able to do it for years. Cloud providers or challengers are ideally positioned to add customisable cloud communications to their portfolio. Salesforce already offers WebRTC.

2) Chatty IoT

Billions of dumb and smart things will be connected to the Internet in the next 12-24 months. What if IoT hardware providers see the internet as a free transport layer and share useless data? Any device that sends 200 bytes every 5 seconds and of which 1 million get deployed, provokes 3 petabytes of useless data every day. After 10 days it would have produced an equal amount of data as the total combined literature in any language from the beginning of time until some years ago. There are many devices that could be chatty, e.g. heartbeat monitors, temperature and other sensors in home appliances like fridges, etc.

3) Cheap 4K security cameras

As soon as 4K cameras become cheap (<$50) then a tipping point will push lots of homes and businesses to install them. One cloud company is enough to provoke broadband hell. There is not a single broadband network that can handle 4K video upstreaming at large scale.

4) Mexico’s community mobile operators being successful

In Mexico there are several remote regions that were not served by traditional mobile operators. The Mexican government allowed anybody to use spectrum in these regions to build alternatives options. The innovators have moved in. What if they become too successful and customers like their services more than what traditional mobile operators are providing?

5) An innovator that uses technology to provoke telecom havoc

Until now over the top players have ignored telecom operators and are trying to eat their lunch. What if the next innovator designs solutions in such a way that operators can choose between the stick and the carrot? Ignore them and suffer or play according to their rules. It is easier to do than operators think…

Several telecom operators to run into financial problems in the next three years…

In 2017 several telecom operators will run into financial problems, with Vodafone being the most known, unless they start changing today. Why?

The telecom business is a very capital intensive business. Buying spectrum, rolling out the next-generation mobile networks and bringing fiber connections to each home and business is extremely capital intensive. Traditionally operators were the main users of their networks and got large margins on the services that ran on top of them. The truth today is that telecom operators have been completely sidetracked. They no longer have any control of the mobile devices that are used on their networks and neither the services. Data is growing exponentially and is already clogging their networks. A data tsunami is on the horizon. Operators see costs ballooning and ARPU shrinking. There is no way they can start asking substantially more for broadband access. Obama just killed any hope of adding a speed tax on the Internet. The EU wants to kill juicy roaming charges. However the future will be even worse.

New disruptive competitors have entered the market in recent years. Google Fiber is offering gigabit speeds both for uploading and downloading. Youtube and Netflix are generating the majority of Internet traffic in most countries.  Most streaming videos are broadcasted in SD quality. However Netflix is already broadcasting in 4K or ultra high-definition quality on Google Fiber. This means traffic volumes of between 7 to 19GB per hour depending on the codec that is used. Take into account that often different family members can be looking at two or more programmes at the same time. The end result is that today’s networks and spectrum are completely insufficient. Now add the nascent IoT revolution. Every machine on earth will get an IP address and be able to “share its feelings with the world”. Every vital sign of each person in the richer parts of the world will be collected by smart watches and tweeted about on social networks. 90% of the communication that is running inside Facebook’s data centre is machine to machine communication, not user-related communication. Facebook hasn’t even introduced IoT or wearables yet. You can easily imagine them helping even the biggest geek with suggestions on which girl to talk to and what to talk about via augmented reality goggles and with the help of smart watches. Yes it is a crazy example but which telecom marketing department would have given even $1 to Zuckerberg if he would have pitched Facebook to them when it was still known as TheFacebook. It is the perfect example of how “crazy entrepreneurs” make telecom executives look like dinosaurs.

This brings us to the internals on how telecom operators are ran. Marketing departments decide what customers MUST like. Often based on more than doubtful market studies and business plans. In contrast the mobile app stores of this world just let customers decide. Angry Bird might not be the most intelligent app but it sure is a money maker. Procurement departments decide which network and IT infrastructure is best for the company. Ask them what NFV or SDN means and the only thing they can sensibly response is an RFP identifier. Do you really think any procurement department can make a sensible decision on what network technology will be able to compete with Google? More importantly make sure these solutions are deployed at Google speed, integrated at Google speed and scale out at Google speed? If they pick a “Telecom-Grade Feature Monster” that takes years to integrate, then they have killed any chance of that operator being innovative. With all the telecom-grade solutions operators have, why is it that Google’s solutions are more responsive, offer better quality of service and are always available? Vittorio Colao, the Vodafone CEO, was quoted in a financial newspaper yesterday saying Vodafone is going to have to participate in the crazy price war around digital content because BT has moved into mobile. So one of the biggest telecom operators in the world has executive strategies like launching new tariff plans [think RED in 2013], pay crazy money to broadcast football matches, bundle mobile with fixed to be able to discount overall monthly tariffs and erode ARPU even more, etc. If you can get paid millions to just look at what competitors are doing and just badly copy them and dotcoms [the list is long: hosted email, portals, mobile portals, social networks, virtual desktops, IaaS, streaming video, etc.] then please allow me to put your long term viability into question.

So can it actually be done differently. YES, for sure. What if operators would enable customers to customise communication solutions towards their needs. Communication needs have not gone away, if any they augmented. Whatsapp, Google Hangout, etc. are clear examples of how SMS and phone calls can be improved. However they are just the tip of the iceberg of what is possible and what should be done. Network integrated apps via Telco App Stores would give innovators a chance to launch services that customers really like. Hands up who would pay to get rid of their current voicemail? Hands up who really loves their operator’s conference bridge and thinks it is state of the art? Hands up who is of the opinion a bakery is absolute not interested in knowing what its customers think about its products after they have left the shop?

Last week the TAD Summit in Turkey had a very special presentation from Truphone, one of the few disruptive mobile operators in the world. No wonder it won the best presentation award. Truphone, with the help of partners, deployed a telecom solution in minutes that included key components like IMS, SDP, HLR integration, one hundred numbers, dashboards, interactive voice responses, etc. Once deployed, the audience could immediately start calling and participate. All numbers of the people in the audience, their home operator, the operator that sold them their SIM initially, their age and responses to interactive questions were registered and results shown on a real-time dashboard. If the audience would have been in different locations, they could have been put on an interactive map as well. The whole solution took only a few weeks to build with a team of people that all had day jobs. The surprising thing is that it was all build with open source software. It is technically possible to innovate big time in telecom and bring to market new services daily. All at a fraction of today’s cost. The technology is no longer a limiting factor. Old-school thinking, bureaucracy and incompetence are the only things that hold back operators from changing their destiny. Whatever they do, they shouldn’t act like former-Nokia executives in some years and tell the world that Android and the iPhone took them by surprise. Dear mister operator, you have been warned. You have been giving good advise and examples of how to do it better. Now it is time to act upon them…

My telecom assets are under attack. What should I do?

The last player to join the attack on the telecom operator’s business is Apple: How to bypass carriers, Apple-style? (Special thanks to Dinesh Vadhia).

Apple never played according to the telecom rules in the first place. They have been the only mobile hardware vendor that could set the rules instead of negotiate them.

Who is attacking my assets?

So which telecom assets are currently under threat:

1. SMS – instant messaging has been attacking SMS for years but now with the next generation of smart phones the number of SMS killer apps has exploded.
2. Voice – Skype and VoIP providers have been attacking voice calls for years. However also here smart phones are accelerating decline.
3. Roaming – Apple’s independent SIMs could easily attack the roaming segment. Also VoIP on Smart Phones will.
4. Billing – Micropayment solutions from Paypal and Google Checkout are trying to enter this domain. Squared from a former Twitter-employee is attacking the mobile payment terminals in shops.
5. Spectrum – Google’s CEO is the chairman of the New American Foundation that is trying to convince the American government to open medium-distance spectrum for free. Sort of WiFi but with kilometers reach.
6. High-speed interconnect networks – Google is paying part of some of the under-sea links that connect multiple Asian countries.
7. Fiber to the home – Google is rolling out fiber to the home.
8. VAS – mobile apps are taking over from the value-added services.
9. PBX like Business solutions – on-site premise equipment is being substituted by virtualized Cloud-based solutions.
10. The telecom network – telecom operators are becoming bit pipes. New bit-pipe-only companies however are trying to specialize in this domain, making it hard for communication service-oriented operators to keep on making the same profits.

What should operators do?

If there was one simple answer, I would not be writing this post but living on my own private island 😉

However if history can be a teacher, let us look at an industry that has been facing similar threats: Hollywood. Prices of distributing digital content have fallen close to zero. However the industry has been trying to keep on charging €12-€30 for CDs and DVDs. They have hardly embraced digital distribution and are now in a negative spiral of demise.

Telecom operators can easily get stuck in this same vicious circle. History has been cruel in the past: extremely lucrative postal monopolies were destroyed by email. There is no rule that states that economic wealth from one business model is substituted by a similar lucrative business model afterwards. Often analogue dollars are traded for digital pennies.

Accept digital pennies but collect them all

The first survival strategy is to embrace change and to go for digital pennies. This is often hard to do within existing companies. As such the proposed strategy is to set-up a parallel organization whose objective is to focus on these new business models and how to make money with them. Let the main company focus on the telecom hits (Voice, SMS, etc.) and the other company on the long-tail telco services.

Long-tail telco services are all about enabling communities of developers and companies to create new and innovative telecom solutions that they can sell to others. The focus should be on enabling others. Not on building them yourself. Being an App Store for telecom network-assets-based applications and not a builder of telecom services.

This parallel organization should be in close collaboration with partners and even dotcoms. If you can´t beat them, join them. Find ways of enabling startups to become successful with your network and other assets, not on building a parallel solution around your assets.

The music industry never understood this message but hopefully the telecom industry does.

Go IP and forget Circuit

Accelerate IP solutions and forget about circuit networks. The speeds at which services are rolled out in a circuit-based network are too slow to fight off competition. Isolate the circuit-based network elements and put an IP-based front-end.

Use the Cloud to quickly launch beta services.

Avoid building infrastructure and use the Cloud to innovate. In the telecom world services are often not launched until they are perfect. But perfect for who? It is better to launch beta services quickly and get real customer feedback instead of marketing-surrogate feedback. Launch multiple services. Check which are the successful ones. Kill the others and heavily invest in the successful ones. Cloud computing and open source can dramatically reduce innovation costs.

Build long-tail services and a common innovation-ready architecture

If you are going to work with hundreds of partners to quickly innovate then the way to interact with them is via self-provisioning. Build billing, telco network app stores, customer care, monitoring, etc. solutions that allow a third-party to automatically provision and test their solutions. Be open with interfaces and light on approval. Let them approve a web-based contract instead of sign a physical paper.

Also enable innovation via the right infrastructure. Let teams focus on the business and services. Not on storing data, managing users, billing, monitoring, etc. Common service APIs to interact with assets and common ways of building new services should accelerate time to market and avoid reinventing the wheel.

This is a time for innovation together with smart partners. Not a time to focus only on CAPEX reduction. Too many effort is spend on operating as cheap as possible and not on generating new revenues. At the end the best CAPEX reduction is to shutdown a telecom company that does not innovate at market speed and became obsolete 😦

 

Infrastructure automation is key to accelerate time-to-market.

Most telecom projects involve installing an Oracle RAC cluster, a SAN, application server clusters, etc. Only the time it takes to procure and install the basic hardware and software takes months. We are not even talking about the costs…

If you want to launch new ideas every month, you have to use Cloud Computing. This can be public cloud, private cloud or hybrid cloud. However even then too much time is spend on installation and configuration of software.

Infrastructure Automation

Infrastructure automation is about making a team productive in quickly launching new services or updating existing services. Infrastructure starts with having a standardized development environment, automated build tools (e.g. Maven or Ant for Java), continuous test automation (junit but also Hudson or Cruisecontrol), etc. The next step would be to also automate deployment (e.g. Puppet & mCollective from PuppetLabs) of server software and Cloud infrastructure.

This type of automation  is often 90% equal so having a standardized framework would extremely shorten the times to get software development up and running as well as deploying it into test and production environments.

This would however only be the start of the journey. Dotcoms launch new features on a weekly or even daily basis. They monitor in detail what users do and often launch multiple alternative versions of a new feature. Gradual deployment of small features allows to see performance problems strait away and avoids extensive regression tests and fast rollback.

Let’s see how this could be applied in telecom.

The key to success is copying Google. Google is having standardized architecture components that are reused among different teams (e.g. BigTable). By building up a shared infrastructure and the tools to quickly deploy new services onto it or update existing features, time to market can be dramatically reduced.  Infrastructure is a secret competitive weapon that too few companies use.

Marketing’s and IT’s loss of power

In Telco 1.0, “marketing” decides what customers want and “IT/Network operations” will take 12 months to roll out the new service.

In Telco 2.0, the marketing department no longer decides what customers want and IT/Network operations have 3 months to roll out hundreds of new services.

Impossible?  What is Telco 2.0?

Telco 2.0 is the age where Internet technologies and business ideas meet the telecom world. What are these new ideas?

1. The customer is always right

No group of marketing experts is better able to predict what customers want then the customers themselves. In the dotcom world, customers are in control. They get an avelanche of services and options and via other people’s rating, comments and collective intelligence are able to decide what best suits them. Instead of launching one new release every 6 months, dotcoms launch new incremental features on an hourly, daily or weekly basis. Often several alternatives for the customer to pick from. It is the customer that decides what is right for them and what can be killed quickly due to lack of interest.

2. Give the customer control

If the customer knows what they want then they should be able to get it and if it is not available build it themselves. The explosion of Appstore apps shows that different customers like different things. In the next 12 months we will see VAS stores and build your own VAS designers allowing users to build or configure their own value-added services.

3. Allow the customer to make money

Whoever builds a great VAS should also see an abundant reward for it. High revenue shares for innovative thinkers are becoming the trend. Consumers selling solutions to consumers is no longer an exception.

4. Be the enabler instead of the break

Trying to stop innovation is useless. The Skype’s, Google Voice’s, Twilio´s, Tropo´s, Ribbit’s, etc. are unstoppable. Join the enemy and enable people to use your assets. Otherwise they will find ways around your assets, sooner than later. Think about what happened to location-based services…

5. Think Global and Volume

Local solutions are likely to be copied by others. This is a winner takes it all market. Think global. If you are not global, find a global partner and non-competing other operators and join hands. The money is in the volume. With 1M VAS people are likely to communicate more than before.

6. Analog dollars for digital pennies

The “Free economy” is changing more than one existing business model. Don’t think that because in the circuit world you can charge 15 cents/message that in the IP world you can charge the same. The music labels have found out that if you keep on charging a high price, piracy will rule. Does it mean that everything has to be free or losses are guaranteed? No, also not. However history has shown that technology (r)evolutions can destruct a business model without replacing it with an equal lucrative one:  think stamps and emails. The new economic rules dictate that scale and long tail attrack money. Google changed the ad industry from high priced TV ads to low priced adwords. However since they fully automated the process, the scale is enormous and so are the gains. So to be successful in the new telco 2.0 world, you need to offer thousands of services and make money with volume not with individual services. Who better can dominate a world for nano payment then the world leader of micro payments a.k.a. billing and charging.

The new role of marketing

Marketing will no longer be about evaluating which services customers might like and at what price.

Instead the focus will be on finding the right enablers for customers to build and configure the services they want. Afterwards these services can be offered on an open marketplace for others to buy and sell them.

Listen to what customers say on social networks.

Use number crunching on large volumes of data to understand hidden trends.

The new role of IT and operations

A telecom architecture is one of the most complex architectures to explain to non-telecom experts. A new generation of dotcoms are coming up with alternative architectures that separate execution from data and application logic. If you don´t know Google App Engine, take a look how applications are deployed onto a “virtual” application server and data is stored in a “virtual” database. Exactly this concept is what is needed for the next generation of telco services. You deploy telco apps on to a “virtual” service delivery framework, with access to telco assets via APIs and to unified subscriber data in a “virtual” datastore. IT should be the enabler of launching services and not the one that focus on building the services.

Long-Tail Telco Services

We have gotten accustomed to having to choose between 5 to 10 tariff plans. However what would happen if we would have liberty to define our own tariff plans. A simple application with sliders could allow everybody to build their personalized tariff plan:

• Which hours in the day you want an all you can eat and which hours you want to pay per minute or second?
• How many minutes, mega-bytes, SMS, MMS or video calls you get included in your tariff plan?
• Do you prefer a low call set-up fee and higher tariffs or the reverse?

Moving the sliders will have an impact on what you pay fixed per month.

However why stop with the personalized tariff plan? Why not allow users to define lists of friends, family and colleagues and have their own short code dialing plan for them (VPN)? Of course also here we can add a personalized dialing plan for friends, family and colleagues…

To really hit the long tail we need an infinite list of services users can pick from. In previous posts you can read about Net App Stores.  They are stores that sell telco network-based applications. With an open market for these net apps, there could be thousands or even millions of them. Since the long-tail says that 98% of the applications will sell at least once per month or quarter, operators should try to have the most extensive library possible…