I spent a day yesterday at Informa’s Industry Outlook – its annual event at which its analysts, and a few chosen operator speakers, outline the challenges for the year ahead.
There were several interesting nuggets.
Dr Kim Larsen, from T-Mobile Netherlands, made the audience gasp by showing a slide that included an icon that said, “SIM RIP” – his point being that the operator-controlled SIM as the start point for mobile services is over, rather than the more radical thought that the SIM is doomed altogether.
He added that in order to meet the EC’s 2020 digital agenda targets, there would need to be a further 30,000 HSPA+ BTS by 2013, and by 2020 there would need to be 200,000 base stations supporting LTE-A!
Further insight came from his view that 80% of a user’s traffic comes from just two sites – work and home – meaning there was a high opportunity for offloading. Larsen also outlined a vision of a network factory, or utility, shared amongst operators – in order to control the spiralling costs of meeting data demand. A shared network doesn’t deal with the spectrum crunch, he said, but would help the economics, if governance could be worked out. He also called for network-aware applications that reduce signalling and traffic load.
He, like many, addressed the threat to mobile operator revenues from what the industry calls “OTT” players. In an app-centric world, he sees SMS revenue disappearing almost completely, and voice revenues being hit hard by OTT competition. The opportunity to make up that shortfall was in the internet of things, where, Larsen said, there would be 20 IoT devices for every one personal mobile subscription. In fact, Larsen said the IoT market would be worth the same, 1.2 trillion dollars, as the entire rest of the mobile market (including devices, advertising, services and apps).
Informa analyst Dario Telmesio, was also raising the spectre of the “no revenue” business model. As operators face the OTT threat (over 50% of respondents to an Informa survey said there had been a moderate or severe impact already), there are five approaches available to them. Do nothing, Fight, Neutralise, Partner or Emulate. Only the last two offer any sort of long term solution in terms of future profit, Talmesio said.
That operators are starting to make their concerns public (Vodafone, KPN and DT have all outlined the revenue share they think are at risk), was confirmed by a small survey from Mobile Squared, which showed that half of 31 operators expect competition from over the top apps to eat significantly into voice and messaging traffic and revenue over the next 5-10 years.
Mobile Squared, commissioned by Mavenir, asked the operators what they thought the impact on their businesses would be from “OTT” applications such as Skype, iMessage and WhatsApp. 32.3 per cent of respondents thought operator traffic (from messaging, voice and video calling) would decline between 11 and 20 per cent and a further 20 per cent expected a decline of 31 to 40 per cent over the next 5-10 year period.
So unless operators can find a business model by partnering with the OTT providers, or acting as OTT providers themselves, then we are seemingly looking down the barrel of a Danny Boy industry (“the pipes, the pipes are calling”).
(An aside: Some people think the move to “the pipe” is inevitable, and nothing to be ashamed of. I dipped out to talk to Northstream analyst Bengt Nordstrom, who was holding court not far from Informa’s bash. Nordstrom said that operators are being forced into the utility model, and that they should embrace it. But wouldn’t admitting the game is up scare investors? There are investors in utilities, Nordstrom said, they’re just different sorts of investors. In fact, the principal drawback, as identified by Nordstrom, of being a low growth, mature utility business instead of a sexy, modern high growth one, is that you cannot get George Clooney to come to your annual industry conference.)
Anyway, back to Informa, where on a panel entitled “Back To Square One: Re-Inventing Broadband for the Modern World”, talk turned to the role of WiFi in relieving and complementing mobile network capacity and coverage.
Virgin Media’s Director of Metro Wireless, Kevin Baughan, delivered a somewhat patronising put-down of BT’s shared WiFi access service FON, as “fun”.
Marjorie Leonidas, Head of Wholesale at BT, had outlined BT’s progress with FON – the service which gives a wireless access point two SSIDs, one private and one public, and lets BT Total Broadband customers access other FON access points when they are out and about.
Leonidas said that there are now three million FON access points in the UK, and that customers can access any one of them, in theory. As the service is provided by FON, an independent company that has other carrier customers (most recently Belgacom), there is the potential prospect of a “global community of FON hotspots,” she said.
But Baughan, whose company is investigating the potential of metro-wide WiFi coverage, using its fibre network for high capacity backhaul, said of FON, “I think it’s fun, but we haven’t concluded it’s one for us, yet.”
Baughan said that with such services “there was a danger that you see a signal but you don’t get the capacity or service. If you are prepared to tolerate the ups and downs of a service, that’s OK. We see our role as a service provider to think through things more systematically and provide coverage in a more systematic way.”
Oooh.
(By the way, Baughan added that with discussions about reusing spectrum in smaller and smaller cells to gain more capacity, cable companies could come into their own. “Watch out for cable companies, because we are RF engineers”)
The Informa event took place just after Nokia Siemens Networks had shown how much this industry is changing, by announcing a much sharper focus of operation, and the loss of 17,000 jobs across the industry. Nordstrom, him again, said that the announcement was further evidence of his theory that European companies are being left behind in the mobile industry, and no longer lead. NSN would dispute that, of course, but Nordstrom said that a lack of harmonisation across European markets, coupled with regulatory insistence in maximising short term revenues from spectrum auctions, were hamstringing an industry that once used to lead.
Again, there doesn’t seem to be a way out of this. The regulatory environment is set, and there are few regulators who would make the case to their Government overlords for an overall growth in GDP by releasing spectrum at much lower prices, but with higher coverage and capacity conditions attached. So it’s on we go, from glen to glen, and down the mountainside.
Send some cheer, please, if you will. I hate Danny Boy.
Keith Dyer
Editor
Mobile Europe
Reasons to be cheerful 1:
Free, interesting, relevant, webinars
Designing high capacity networks in stadiums: challenges & best practices
Making Wi-Fi “Carrier Grade” to Support Cellular Offload
Reasons to be cheerful 2:
Soaraway “Ones to Watch 2012 Survey” – last chance to complete. Only 10 questions. No iPad prize.