Tuesday, April 14, 2015

Nokia and Alcatel-Lucent: Who Should Buy Who?

Seeking Alpha reported that Nokia confirmed it is in talks to acquire all or part of Alcatel-Lucent and it is no surprise the companes are quibbling over valuation. Alcatel-Lucent has gone through some tough times and appears to be executing well on its Shift plan. Arguably, they are undervalued but investors are waiting for more tangible results, which will indicate that the plan is working. Current shareholders and employees can sense this positive momentum and are remiss to “sell-out” before the results of their hard work and commitment are fully realized. 
Consolidation in the equipment market is not unexpected. Communication service providers are consolidating too and are getting bigger. When this occurs large equipment providers tend to consolidate as well as they have fewer large customers and need economies of scale to be successful. This is truly a zero-sum game. Either you get 70 percent of the business, 30 percent as a second, keep the first one honest, source or you get zero percent. With the inherent complexities of SDN, NFV and virtualization, particularly in multi-vendor integration, it may be years before the “second’ source is even added.
Driving this buyout could be Huawei. The company is disrupting the entire global telecommunication equipment market. The industry has been aware of the company’s “grey area” business practices such as outright appropriating technology and intellectual property to giving eNodeBs away for free, with customers just paying the yearly maintenance fees (with a bonus of dozens of undocumented back doors). Although this is disturbing to the industry what really is of concern is Huawei’s huge product portfolio, their ability to throw “armies” at initiatives and their ability to take a long-term view to market (and global) domination.
The big issue for either Nokia or Alcatel-Lucent is who is going to compete with Huawei? Communication networks are a fundamental asset to nation states. They drive economic development, entertainment, education, national security, etc. Perhaps it’s time all governments treat them as national assets.

Wednesday, April 1, 2015

Voice over Wi-Fi: Cable versus LTE: Part II

In my previous post  “How Big a Threat Is VoWi-Fi to the LTE Operator?”  I illustrated the potential threat cable voice-over-Wi-Fi is to the mobile network operator. In Part II of the LTE threat I look at this issue from the CxO’s point of view of each organization.

Cable executives see VoWi-Fi as “nothing but upside.” VoWi-Fi enhances customer bundles, adds new revenue opportunities and is technically achievable. From a network perspective, their HFC networks are widely deployed, minimize access point backhaul issues, and have a presence in millions of homes and small/medium businesses. This physical presence gives them instant Wi-Fi access points on which they can add voice services. Additionally, they have a voice backend, and they are well positioned to handle the additional voice traffic throughout their network. Given these strengths, they can and will move fast, hence, “nothing but upside.”
Mobile network operator (MNO) executives see Voice over Wi-Fi as “nothing but threats” to subscriber relationships, top-line revenue and profits and CAPEX flexibility. These threats are visualized in a number of ways. MNOs lack a physical presence in the home beyond the end-user devices with most users already off-loading to broadband delivered Wi-Fi for performance and data cap reasons. Although LTE backhaul networks have substantial capacity it is questionable whether they can gracefully cope with an onslaught of Wi-Fi data traffic. No company will deploy a voice-only Wi-Fi network. MNOs that do not own fixed network assets have a more daunting competitive environment; however, those that do have fixed network assets still have substantial challenges.
Cable is not without its own challenges. Given that they will be a new entrant to the mobile voice market they must meet certain baselines of quality of service, which will add to the deployment time, cost and complexity. Cable companies will never build out an LTE network. Never is a long time but, this is a safe bet. True, they can become MVNOs or be bold and buy Sprint or T-Mobile. Without LTE cable companies will not be able to offer the coverage MNOs can.
New Wi-Fi voice and data technologies are under development. Improvements to the over-the-air protocols to address fairness and contention are emerging but VoWi-Fi technologies are nascent and standards take time. All of this will delay cable’s first mover advantage.
MNOs have advantages as well. The biggest, as well as the most technically challenging, is intelligently leveraging their fixed and mobile networks to gain real-time insights of both networks’ end-to-end conditions such as congestion. Then, using these insights they can provide a superior quality of experience to their subscribers, particularly those deemed as high-value subscribers. For example, a default “off-load-to-Wi-Fi” strategy may not make sense for all subscribers if the Wi-Fi network is congested and the LTE network is not.
MNOs with small cells sites can upgrade them with LTE/Wi-Fi combo devices. The MNO has already solved the tough small cell site problems (real estate, backhaul, powering, etc.) so swapping out devices is manageable. Keep in mind that these small cell sites are not randomly dispersed. They are located in high-traffic, high-value locations. This enables the MNO to quickly expand its Wi-Fi network presence in these and high-value locations. Even more powerful is the ability to add Wi-Fi to its Self- Optimizing/Organizing Network investments.
The MNOs have a bold strategy available to them. They can move fast too, and because they have a carrier-class LTE network on which to fall back they don’t have to start with a gold plated Wi-Fi network. They state that they want to be more like web companies and deploy services fast and improve them over time. On this point, they can walk the talk and rapidly deploy a data-only Wi-Fi network that’s “good enough” and let their subscribers use it for free until they attain the level of quality they really want. A lesson from the web world is capturing customers quickly, which is paramount to success.
Voice-over-Wi-Fi has the real potential to be a major disruption to the service provider industry. Cable companies see this as nothing but upside, whereas mobile network operators see this as nothing but threats. Both have advantages and challenges. Cable has the footprint, voice backend and potential first mover advantage. Yet, as a new mobile voice entrant they have minimum quality thresholds they must meet to be credible. MNOs, on the other hand, lack a strong physical presence in the home and may face network capacity challenges with the addition of massive amounts of Wi-Fi data traffic. However, they have the ability, if bold enough, to take a page out of the web company playbook and move even faster to deploy a “good enough” data-only Wi-Fi network using today’s technologies and their current installed infrastructures.
Want more information or to discuss strategies to dominate the game changing market of voice-over-Wi-Fi? Cable companies, mobile network operators and vendors to both industries contact greg whelan  (gwhelan@greywale.com)
To watch my video please see 

(Video: https://www.youtube.com/watch?v=o8hgAzT073Q

How Big a Threat is Cable VoWiFI to the LTE Mobile Network Operator?

For years Wi-Fi was looked upon as the off-load network. MNOs were glad to off load massive amounts of data traffic onto these low-end, best effort, “free” networks, providing, of course, that their LTE networks were at or near capacity. Priority one, keep the billing meter running and only off load once the meter is maxed out. How could these $100 access points running off consumer-grade best-effort broadband become a threat? After all, MNOs have spent 10s of billions on a carrier-class LTE infrastructure.
The cable operators realized that they have a near ubiquitous high-capacity network and adding Wi-Fi access points was an opportunity. As we have seen numerous times in the past, when cable companies see they have an opportunity they quickly take advantage of it. Today, Comcast claims to have more than four million access points, which will grow to eight million by the end of the year. Yes, about half of these are in subscribers’ homes where (unbeknownst to them) they are a public access point for their neighbors.
Now, along comes voice over Wi-Fi (VoWi-Fi). This solves one of the age-old industry dilemmas: Great mobile voice outside OR great mobile data inside. Small cells and DAS are solving the indoor voice problem today; however, they are starting from an installed base near zero, and deployments are nontrivial and customized per venue. Outdoor small cells also face the added challenges of power and backhaul.
Wi-Fi is as close to a ubiquitous technology you will find. Enterprises, small business and residential consumers all have become accustomed to having access to Wi-Fi everywhere. There are clearly technical challenges to deploying quality carrier-class VoWi-Fi, but these are all solvable. After all they have been solved in the LTE market. Examples include MIMO antennas, seamless roaming and improved Doppler tolerances.
Thus, one can assume that VoWi-Fi will work and will “off-load” a significant percentage of indoor voice calls from the LTE network. Should MNOs be concerned? Let’s do some simple math to try to answer this question. It’s widely reported that approximately 80% of mobile traffic originates indoors. In five years what percentage of indoor voice traffic will be on the Vo-Wi-Fi network and not on the LTE network? Let’s assume 50%. This is reasonable because iPhone and Samsung smart phones support VoWi-Fi calling, and mobile subscribers are very aware of the cost of exceeding their mobile data caps. Therefore, the MNO will see a 40% reduction in voice traffic over the RAN and EPC. The BIG question is what the impact on revenue will be. If we assume that the revenue impact is only 5%, a $20 billion/year MNO would see a $1 billion reduction in cash flow. If the cable companies only see 25% of that amount, that’s $250 million in cash to them. The difference is assumed to be lost to price reductions.
MNOs, MSOs and service providers looking at offering VoWi-Fi services will need help to address this threat and opportunity and develop winning deployment and go-to-market strategies. Likewise, vendors in this ecosystem need to be cognizant of the multidimensional dynamics of the VoWi-Fi opportunity.  Contact me for help develop your business and marketing strategies. We can provide a range of services from complete strategy development to creating high-impact differentiated messaging to product launch support.
How big a threat is VoWi-Fi to the LTE operator? Today, the answer is not much. Tomorrow, the answer is simply when is tomorrow.
Contact gwhelan@greywale.com for more information about our products and services.