Mobile World Congress 2009

A few observations from meetings, exhibition and atmosphere at the 2009 Mobile World Congress in Barcelona.

 Main themes

Less hype, fewer people, less money, less WiMax, more of the same.

 Networks

-          Network spending in slowdown; mobile operators looking to get more from existing assets and less capex.

-          More agreement on that the roadmap from 3G through HSPA and its Revisions, then on to LTE (maybe initiall for hotspots, rather like initial 3G).  Much less talk of WiMax as an alternative to LTE in mature mobile markets.

-          Although the direction towards LTE has larger consensus, there is also agreement that capex limitations will push its implementation out further

-          Telstra in Australia making a big play of running 3G over 850MHz, so giving greater coverage, and upgrading rapidly through the gears of HSPA

-          Good explanation by Telstra of cost comparison between LTE and GPRS (LTE is approx 2% cost/bit of GPRS).  Also a possible new measure of base station efficiency:  kilograms per square metre per bit per second!

-          Telstra now claims SMS as less than 50% of data traffic

-          China Mobile pushing their TD-SCMA by trying to stress the importance of a roadmap of unpaired spectrum (on towards TD-LT(E))

-          Femtocells still something of a religion, led by faith rather than (yet by) reason

 Vendors

-          Blood on the carpet – a real sense of space and fewer people in the main exhibition hall for vendors

-          Chinese (Huawei, ZTE) even more of a presence than ever before.  This makes life awfully difficult for western-based vendors.  A quick Porter five-field analysis shows that the combination of intense industry (vendor) competition and strong customer (mobile operator) power puts great pressure on vendors’ volumes and commercial terms

-          Some vendors deciding to save cost and focus their activities via their pavilions, without taking up stand space in the halls (eg Cisco, HP)

 Devices and Operating Systems

-          All the consumer devices still in the shadow of the iPhone – which wasn’t even there.  Samsung (again) had a well set-out exhibition stand by theme (highdef multimedia, camera, music, comms)

-          Nokia starting to take a pop at BlackBerry (eg “BlackBerry tax” [the RIM relay]) to mask its own lagging in push email

-          Microsoft saying (again) it’s about to come good in mobile.  A slight irony that it is promoting itself as the platform of choice (slightly less ironic that a lot of appdev stands said “we’ve got our app working first on Windows Mobile, because that is easiest)

-          MS promoting Windows Mobile 6.5, partly in holding pattern till WM7

-          MS said that RIM’s and Apple’s vulnerability was the integrated nature of their hardware and software, and that the “open” Microsoft approach allowed more and more rapid innovation of device formfactor, price and features

-          MS claiming that Linux Mobile isn’t really “free”:  you incur costs for extra elements of the OS stack, eg photography, instant messaging.  These make it more expensive than paying the WM royalty (“which is less than the cost of the glass on the device”)

-          Market for devices is more sustainable at the moment at>$200 ex-factory cost.  This is growing a lot faster than cheaper featurephones

-          Qualcomm and Nokia have buried the hatchet on patent suits.

-          Hyundai entering the featurephone market??  They had a stand.  Maybe their satnav had broken down on the way to the Frankfurt Motor Show?

 Applications

-          Lots more booths with map-based applications (mainly GPS, rather than network-based)

-          More space (or maybe it seemed like that) with developers and providers of network optimising solutions and products, eg radioplanning, network management, sitebuild – ie reducing networks’ capex and opex

-          A sense that a lot of developers are at the same financial stage as last year

-          The nearest thing to hype at this year’s event was:  if you haven’t got an AppStore of your own, you’re in the wrong gang (at least for this year).

 Overall mood

-          Very quiet on the Monday.  More energy on the Tuesday, mainly in the developers’ halls

-          No sense of any major meaningful announcements

-          Could be some challenges next year for GSMA to persuade sponsors and booth-holders to stump up as much money

-          Very pleasant weather, so a relaxed atmosphere on the main outside areas

Broadband Speed - Disappointment Guaranteed?

An interesting post by Darren Waters, editor of the BBC News website's technology index. He has been monitoring his experience of broadband speeds on his Virgin Media "super highspeed" broadband service. For most applications the actual speed (ie how big the file is divided by how long it takes to arrive) is a lot lower than the headline speed of 50Mb/sec.

http://www.bbc.co.uk/blogs/technology/2009/02/speed_diary_day_five.html

The blog shows that the advertised headline speed is fairly irrelevant to the actual experience of an average customer, even when the provider can actually deliver such speeds reliably within the confines of their own network.

The limitations, especially in the newly designed cable broadband networks, are not at the access layer of the network (the wire from the local network node to the home). They are out in the internet world beyond.

It just goes to show that messages about headline speeds can only disappoint. Maybe it's time for Virgin Media to change their marketing, rather than fiddling further with their technology.

Digital Britain - interim report

Putting the Carter before the horse ?

Lord Carter’s interim report makes a good start at identifying action areas and key issues across the huge and varied arena of communications and broadcasting markets in the UK. But NetStrategics believes he has a long way to go before he can substantiate any real ways forward which will win general support – not to mention suitable funding ! There is more than a whiff of sanctimonious attitudes to digital inclusion and the UK content industry – the market should be encouraged to tackle these issues itself, and overall the report puts the cart of intellectual neatness before the horse of market complexity.

For a detailed critique of Carter's proposed 23 actions, please email me at huw.williams@netstrategics.co.uk

The Future of Communications

Telecommunications are traditionally a good lead indicator for the economy, and yet a recent poll published by BT suggests that broadband, mobile and home phones make up three of the top four things people would hang onto in a downturn.Whether or not this reflects a fundamental shift in cultural attitudes in a 24/7 connected society, the communications industry is faced with some seismic changes in technology, regulation and markets. It is far from clear how it will emerge beyond the current business cycle, but investment payback cycles in this industry can be measured in decades and some big bets are being placed by operators and their suppliers now.

So we recently got together with SAMI Consulting (St Andrews Management Institute), specialists in scenario planning, or “future-proofing”, as they would say. Together we mapped out some scenarios based on the world in 2015, which we summarise below.

The many interlocking trends and developments boiled down to two main dimensions of uncertainty: investment intensity (the amount of investment, or financial incentive to invest) and network fragmentation (how far networks and the industry nationally and globally continue to consolidate and work together).

Some trends seemed to us to be pretty inescapable, for example the move towards higher speeds of mobile and fixed broadband – we felt that 24Mbps+ would be pretty universal in the richer countries and many of the poorer ones too, whether the business case stacks up right now or no, just because there seems to be such a head of steam behind it. We couldn’t see a halt to the spread of pro-competitive regulation, with the European model and variants of it the dominant pattern. We also felt that the big infrastructure investments (particularly access networks) would gravitate towards the utility model, with regulation ensuring steady, if unspectacular, returns, though who would making the investments and reaping the rewards was less clear.

That still left many factors that seemed to us to be important, but uncertain. For example, will the arms race with the spammers, spitters, phishers, fraudsters, terrorists and other malware merchants escalate costs and disaffect people with the networked world? Would privacy issues lead to all kinds of fire breaks and fire walls, or even to activities moving off net? Would the content industries (music, film, sport, TV) get their acts together and evolve business models that enable them to be profitable and to drive consumer network use? What are the limits of advertising as a money source?

All this coalesced, with a bit of expert technical help, into four distinct stories for how the industry moves through and beyond the current recession and into the next business cycle around seven years from now. We’ll be picking up some of the themes in future posts, but if you would like to learn more about the scenarios, and what they mean for your business, please drop us a line .

Tiscali closes IPTV service - or services ?

Slow take-up of its IPTV service in Italy has forced Tiscali to close it down. Its difficult financial position and failure to agree a deal with BSkyB on its UK operations will no doubt have contributed to the decision.

So what is the future for Tiscali's UK IPTV service, based on the venerable HomeChoice offering it acquired back in 2006 ? Competition from Sky, Virgin Media and even BT Vision makes its prospects look rather bleak - maybe the HomeChoice guys would fancy buying it out again.

But what everyone must also be wondering is whether the lack of enthusiasm for IPTV in Italy will be replicated here. The answer will depend on how innovative the providers can be - simply copying Sky+ services will not be enough. How about "theme nights" - a package of Rocky movies and Muhammed Ali documentaries, or a ChickLit movies?

Huw

Virgin launches 50Mb/s service – first real test of NGA demand

Virgin Media has launched the first 50Mb broadband service in the UK, bringing the much-heralded world of Next Generation Access nearer. At around nine times the average headline broadband speed in the UK and over twice the previous highest 24Mb/s service, the launch of the 50Mb service offers the first chance to assess whether there really is demand for such ultra-high speed services. Clearly wedded to a “build it and they will come” strategy, Virgin Media are trusting that the early demand for their 10Mb/s and 20Mb/s services will translate into profitable demand for the even faster service.

But even Virgin seem to be struggling to imagine what customers will use such high speed services for. They suggest that shared accommodation of students would find it useful, that video-rich entertainment and social networking websites will require it or homes needing multiple HDTV channels. But surely that’s not enough to support such an expensive solution. And in a recession is £51/month (over £600 a year) really going to sell (when there are already early signs of people downgrading service), especially when you still have to pay for movie and sport content on top ?

The 50Mb is based on an upgraded network with current 10Mb and 20Mb users being moved onto the new "DOCSIS3" network, freeing up capacity for increased traffic on the existing DOCSIS 1.0 network. Quite what that means for the cost equation is debatable, but with luck it may be possible to regard this as an incremental spend and justify a business case on that basis.

Roll-out to the 12.6 million homes covered by Virgin Media's fibre optic network is expected to be complete during the Summer of 2009. So at the very least Virgin Media have put down a marker which may spur others to respond.

KPN moves closer towards FTTH

Back in May, KPN announced that, subject to regulatgory approval, it would take a 41% shareholding in Reggefiber, the open-access fibre network provider in Holland. This signalled that KPN was considering a move to an FTTH strategy - an investment that it is suggested could reach €6-7 billion over 5-7 years.

That regulatory approval is now likely to be granted, according to local newspaper Trouw, paving the way for investment in an FTTH network that covers the vast majority of the Netherlands.

Reggefiber, founded in 2005, is a stakeholder in several local initiatives (such as OnsNet and AlmeerNet) and also operates its own network, Glashart, which is currently present in 15 different Dutch communities. In Q3 2008, the company claimed to have connected about 150,000 homes.

So what lessons does this give us about the UK position ?

Firstly, it is essential to recognise that the competitive dynamics in the Netherlands are very different from the UK - cable TV is a near ubiquitous player, community-based services are well advanced, and Reggefiber itself was building a position. KPN are faced with a challenge way beyond anything that BT is likely to be looking at for some time.

Also the population densities are such that the cost equation will look more promising than in the UK, apart from green field sites like Ebbsfleet.

So the main learning will be around the demand side. Will extensive deployment of FTTH actually stimulate the wide range of novel services proponents often claim, and thereby provide more confidence to the business case ? Or will we be looking at something more like the 3G debacle - lots of money spent on providing the same thing cheaper ?

Huw Williams