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

In the article “How Big a Threat Is VoWi-Fi to the LTE Operator?”  (Video: https://www.youtube.com/watch?v=o8hgAzT073Q) 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 ACG at sales@acgcc.com to schedule an appointment to discuss these issues with our analystGreg Whelan.

The Future of Broadband CPE: Part I

At Stake: Who Controls the entire home, the service provider or the web company?

The network-terminating CPE device provided by the access network service provider is at an inflection point: it’s at the intersection of service providers’ business drivers and emerging technologies. What’s at stake is control of the entire home and all the revenue generating up-sell opportunities, including emerging Internet of Things services. Access network service providers must decipher this paradigm or risk being usurped by the web companies.

Customer Premise Equipment or CPE historically meant customer owned equipment. In the case of a T1 circuit the service provider would terminate the network with a CSU/DSU and would connect to the customer-owned access router. If there was an issue, the SP would perform a loop-back test to the CSU/DSU and if it passed the test they were done with support. The same is true with legacy home telephony. If there’s a dial tone at the Network Interface Device, the gray box attached to the outside your home, the telco is “done.” If you still have issues beyond that it’s your home wiring, which the ILEC’s no longer manage (for free anyway).

In the early days of broadband, the service provider, telco and cable company would terminate their connections with a DSL or cable modem. The premise facing interface was Ethernet (Layer 2 interface). When consumers wanted to connect more than one device to the Internet they would acquire a Wi-Fi router (Layer 3) through the retail channel.

Today, service providers are combining the modem functionality with the Wi-Fi routing functionality in to a single device. Interesting to note is the SP is taking ownership of the Wi-Fi network, something historically they were loathed to do and could not do for regulatory reasons. The more functionality an SP takes ownership of the more they are responsible for. This leads to the inevitable increase in help calls.

Competition is forcing them take ownership of the total customer experience. A poor experience combined with lackluster customer support is the number one reason for customer churn. Now the CPE or broadband gateway is taking on the dual role of terminating the network and controlling the home network and ultimately the devices and things in the home.

This is not without precedence. The set-top box has always had this dual personality. It terminated the SP’s video network and controlled the home video experience. This is even more prevalent with whole home DVRs. As far as cable companies were concerned the STB was part of the network when it was convenient and CPE when that was convenient.

Now and in the future the SP provided CPE device needs to do two things well. First, it must terminate the access network (Layers 1 and 2), hence the term “network terminating CPE”. Second, it must control and manage the entire home experience (Layers 3-7+). It can and will do the network terminating part well, but it also MUST do the home experience well or risk churn where competition exist or having a web company usurp them.

In future articles I will address numerous issues including:

1. Virtualization Options and Realities
2. IoT and Smart Home Implications
3. Distribution of Intelligence (Cloud, Network and CPE)
4. Distribution of Intelligence (CO/HE, Outside Plant and CPE)
5. Wi-Fi & LTE Convergence
6. Business Models, Value Chains and the N-Dimensional Ecosystem Dynamics

If you would like us to help you navigate the future of broadband CPE industry-wide dynamics and opportunities contact Greg Whelan at gwhelan@greywale.com

Wi-Fi – “the toy that grew up”

Reprinted from the Wireless Broadband Association: Industry News Roundup

Wi-Fi – “the toy that grew up”

Historically, Mobile Network Operators (MNOs) looked at Wi-Fi as a toy, a low-end technology that was great to off-load data from networks. Now Wi-Fi is having a strategic impact on MNOs across the globe. Now the question is LTE or Wi-Fi: remind me which one’s for off-load?

Yet, as with many technical innovations, the low-end always wins. Wi-Fi is a classic example of this theory. Through a combination of Moore’s Law, economies of scale, R&D investments and free market dynamics Wi-Fi is king of the hill. In most developed countries people and things can access a Wi-Fi network in 80% of locations. Companies, such as Devicescape, have created virtual networks based on “ambient’ Wi-Fi networks. Hotspots are so ubiquitous that Opensignal launched an application to find the best one out of the many available.

Wi-Fi and Hotspots are becoming strategic to all carriers (fixed and mobile) as they have realized the importance of keeping traffic on their network for quality of experience and billing purposes. The market for carrier Wi-Fi gear continues to grow as carriers look to exploit these opportunities.

Today, high- speed access to the Internet is as fundamental as indoor plumbing. People expect it and city and national governments view it as mandatory for many economic development and quality of life issues. With the ubiquity of Wi-Fi enabled devices and the simplicity of Wi-Fi deployments it is no surprise that Wi-Fi is a leading candidate to achieve this. Even in remote,rural and under-developed regions, Wi-Fi leads the ways.

Even with fierce competition from ZigBee and other alternatives Wi-Fi is also a leading network technology for applications using IoT technologies. Wearables are no exception. LG smart watches use Wi-Fi and researchers are looking to Wi-Fi for an entire body network. We could all become Wi-Fi access points.

Yet success breeds challenges. Wi-Fi uses attractive unlicensed frequency bands and the licensed crowd wants in as the LTE community is looking to use the same 5 Ghz frequency band. Trying to head off a battle royale, the U.S. FCC has already entered the fray.

Wi-Fi, the toy that grew up, continues its momentum to solve real problems for consumers, businesses, service providers and governments. It was often said never to bet against Ethernet, I’d like to add never bet against Wi-Fi.

Greg Whelan, ACG Research

To discuss this and other strategic technology issues impacting the global service provider market please contact me

Access Insights™ At the Intersection of Service Provider Business Drivers and Emerging Technologies

What is “access”?  Simply put, it’s people and things accessing the cloud and each other. 

Access is no longer Fixed or Wireless.  Access is about connecting people and things to each other and to applications and service in “the cloud”.   Thus, access is about Fixed and Wireless.  It’s about having the right combined architecture on a neighborhood-by-neighborhood basis.  This “combo” trend is having, and will continue to have, major impacts and disruptions in the access market and in the entire service provider ecosystem.  New technologies, architectures and business models will emerge. Market realities are forcing carriers to offer (up to) gigabit speeds and incumbents have billions of dollars in deployed assets and architectures.  All this makes Access challenging for both technical/architectural and business decision making.    

I’ve determined that attention deficit disorder (A.D.D.) is a truly global phenomenon.  Therefore, I will present my points in terse salient bullets :-)

Top Access Insights to Ponder

1. The future of Access is Fixed and Wireless… not “or”
   1. SPs need to adapt organizations, so do vendors!
2. Gigabit Deployment Strategy
   1. Is timing everything? Plus...real strategic implications to the @$# Speed Test.
3. Next Gen Broadband CPE architecture and business models are being disrupted...
   1. Big risk to incumbent service providers and Vendors
4. Wi-Fi: The “toy” that grew up: Strategic implications abound
   1. Wi-Fi: Further proof that the “low end always wins”
5. Voice over Wi-Fi
   1. Nothing but upside to Cable Companies. Nothing but threats to MNOs.
6. LTE vs. Wi-Fi
   1. Remind me which one is for off-load?
7. Next Gen Cable Access Networks …
   1. PON Greenfield is redundant, DOCSIS Greenfield is an oxymoron
8. CPE vs. Carrier Gear (Plastic vs. Metal)
   1. Plastic companies building metal?
9. SDN-NFV in Access
   1. It’s coming… contemplations begin…
10. What’s the value of vendor incumbency at inflection points?
    1. Is Access different from any other industry?

There’s, hopefully obviously to the reader, a lot of thought behind each of these points.  I’d welcome the opportunity to discuss them in more detail.  Please contact me if you’d like to schedule some time explore how these insights impact your strategies and how we can create actionable plans to address and exploit them.

Greg Whelan gwhelan@greywale.com

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Broadband Regulations: Be Careful What You Wish For!

Regulations are a critical factor in the access network. Unlike the “rest of the network” the access network is burdened with federal, state and local regulations and this is only getting worse. I’ve written extensively in the past that net neutrality is a bad idea and that Title II is a gigabit killer.

Why is regulation bad for everyone, including Google? The regulated monopoly “phone companies” depreciated equipment over 30 years. With asset-based pricing regulations you want to keep your asset base as high as possible. Thus, the innovation cycle of the regulated voice industry was 30 years. In the unregulated data networking industry the desired depreciation cycle is five to seven years with three to five years being a more common life span of equipment. Thus, the innovation cycle is three to five years. Today, service providers want to accelerate their innovation cycle to less than one year and ideally three to four months to be more competitive with the “web companies” such as Google and Facebook.

Until recently the net neutrality debate was focused on adverse traffic impacts such a throttling P2P traffic. It’s widely reported that as few as 10 percent of users consume upwards of 80 percent of capacity. The numbers have changed with the proliferation of streaming video but the issue remains. Mobile network operators have solved this problem with data caps. They also have program where web companies can pay so their traffic doesn’t count against subscribers’ data caps. (This may be illegal soon as well.) When an analogous program (for example, paid fast lane) was implemented in the broadband access market there was outrage.

Traditional content delivery networks (CDNs) can bypass much of the public Internet to improve quality of service. Companies that want to provide a better user experience can use CDNs and cache their content in select Tier 1 locations across the country. This helps; however, from the Tier 1 cache to the user is best-effort delivery. Once the traffic enters the local exchange carriers’ (LEC) network in a large metropolitan area the “last 50” miles are best effort.

With this model OTT companies cannot ensure the quality of their service. Why shouldn’t they be able to pay the LEC for better traffic treatment? The argument is that this benefits the large companies at the detriment of start-up companies. It’s just another challenge innovative start-ups must overcome. This actually benefits consumers as only those companies with a compelling offering will make it over the hurdle. Marginal companies with a marginal offering won’t flood the market and the network with garbage. This is a good thing. Isn’t the FCC all about protecting the consumer?

Can capitalism and the free market address the issue of a “digital divide”? Yes, a case in point is Comcast in the Boston area. The company offers $10/month broadband service to any family that has children on the free or subsidized school lunch program in the city of Boston. No laws, no regulations just a solid business driven move by Comcast.

Service providers have invested billions of dollars deploying and managing broadband networks. Data rates have continuously increased. Gigabit networks are being deployed around the world by a range of companies and organizations. The free market is driving them. It’s counter intuitive to expect them to spend limited CAPEX if their return on investment is regulated or uncertain. Today, regulators are faced with conflicting priorities. On one hand they want to spur gigabit investments but on the other hand they want to regulate broadband access. It’s obvious that you can’t get both.To repeat: Title II is a gigabit killer.

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.

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.

For more information about Greg Whelan, click here.

Virtualization: There’s got to be more!

Virtualization: There’s got to be more!  

Porting to Intel and Virtual Machines is a technical implementation detail not a business solution.  

When vendors are asked about their virtualization strategy you often hear a common answer.  They say they’re “virtual” since they ported their software to Intel.   What’s the value proposition?  Porting to Intel isn’t it. Sure it reduces CAPEX, at the expense of performance.   All it really does is shift industry revenue, power and influence from the Broadcoms of the world to Intel.  Plus, we now know that if CAPEX goes to ZERO less than 33% of CxO’s top of mind business problems are solved.  When pressed for the rest of their virtualization strategy they say the run on virtual machines in a data center.  OK, and then what? 

Let’s assume they perform three functions called A, B and C.  They port them to Intel and then run them on virtual machines (VMs).    Shifting revenue from Broadcom to Intel is a technical implementation detail and not a business solution.  Service providers should be thinking there’s got to be more. 

The logical question to ask is whether A, B and C are the right functions in the virtual world.  Just because they were required in yesterday’s environment does not mean they are required in the virtual world.   Do you really need 20% of A and 60% of B?  Do you really need 150% of C?  You get the picture.

Service providers will be spending billions of dollars moving to the virtual world they should be asking themselves, why?   Sure there’s a benefit to take the A’s, B’s and C’s of today’s world to virtual machines.  But is it really enough?  This is a one in a lifetime transformation and a fight for ultimate survival.  SP’s need to ask for more. 

Vendors on the other hand need to be asking themselves similar questions.  Is porting to Intel enough?  What can we do that’s game changing in the virtual world?  The answer, IMHO, to the first question is No Way.  The answer to the second question depends on the vendor’s core competencies, ecosystem presence, business strategy et al.    The good news is that ACG Research can help you answer this second question.  Give us a shout.  

Cord Cutting/Shaving Discussion

Cord cutting or cord shaving is when consumers drops their paid video service and purchase a broadband-only service from their local access SP, telco or cable. In the U.S., numerous estimates show more than 300,000 subscribers switched to broadband only in 2Q14. This is significantly lower than previous quarters. Yet it is still significant. SPs need to monitor this trend to see of it is in fact slowing or grow.

The economic impact of cord cutting has reverberations throughout the ecosystem. For the SP it merely shifts revenue and margin to the broadband business. For the ecosystem, revenues and margins are shifted to the OTT player such as Netflix and adversely affect the traditional “upstream” value chain including channels, for example, ESPN, TV and movie producers and advertisers.

This trend is impacted by consumer viewing habits. The younger generations are more mobile and are less likely to spend limited discretionary dollars on a large-screen TV and also to pay for a subscription video service. Video subscriptions are also impacted by macro economic trends. Broadband has become the last service to be eliminated.

Tomorrow's "real cord cutting" refers to consumers who completely stop all services from a wired service provider and go completely wireless. We have seen the prequel with the elimination of a "home phone." This next-generation cord cutting has consumers relying on their 4G/LTE/5G service for all broadband applications. This can be accomplished by simply turning their smart phone into a Wi-Fi access point when in their home. The economic impacts of next-generation real cord cutting are severe. The fixed access service providers not only lose all service revenues but also lose customers entirely. This will be particularly painful for cable MSOs that lack integrated wireless services.

As 4G/LTE and eventually 5G deployments expand and as more small cells get deployed the average bandwidth per device will increase substantially. Slowing down real cord cutting will be the price of mobile data plans and data CAPS, which will eliminate the intended savings in the first place. Service providers with wireless assets will be in a strong position to succeed in this future scenario. Other, such as cable MSOs, will need to address their pricing plans, which are driving customers away in the first place. They can also compete with unique content, primarily "sports and wars," (for example, live programming) and push for better quality video, such as emerging 4K technologies.  

To discuss this please email me at gwhelan@acgresearch.net 

Cloud (Network) PVR Discussion

After a delay due to legal review, which was settled favorably to the SPs’ network, DVR/PVRs (N-PVR) are being deployed in earnest by all SPs. N-PVRs are becoming mainstream: In addition to improving the consumers’ experiences they also offer numerous business values to the SP. N-PVRs are also a great step toward virtualization and the move to everything on demand. Simply put, an N-PVR is a DVR that resides in the cloud. When a viewer stores a program, instead of it being stored on a hard disk drive located inside the set-top box, the program (or metadata) is stored on a server or CDN cache located in the service provider’s network.

N-PVRs benefit both the service provider and the consumer. Service providers benefit substantially on both CAPEX and OPEX. Service providers have a love-hate relationship with the set-top box. They love them because they provide a managed service enablement platform in each home, yet they hate them because they account for about 50% of total CAPEX. Interesting to note is providers argue they are part of the network when it is convenient and argue that they are CPE when it is not. The latter is because of regulator ambiguity of TITLE VI in the U.S.

By eliminating the hard drive from every set-top the cost of the box is reduced, directly impacting CAPEX. Hard drives, being mechanical devices, will fail. The elimination of the drive thus increases the reliability of the box and reduces angry customer support calls and truck rolls. This directly impacts OPEX. Without a hard drive the set-top box will consume less energy, supporting the SPs’ goal of meeting the voluntary energy reduction agreement the industry and the U.S. Department of Energy (Note, not the FCC) signed in early 2014.

N-PVRs store consumer “save” programming in the cloud. This simplifies whole home DVR and video everywhere service offerings. With N-PVR all consumer playback originates in the network and not the primary set-top box. Although newer homes have coax cable widely installed throughout the home the bulk of homes do not. All in-home technology deployments are challenging to the SP because of the high variability in both the housing stock and in consumer sophistication. With the N-PVR all video streams are delivered from the network as “just another” channel.

N-PVRs benefit the move to TV everywhere or TV to all devices. In the home consumers watch TV programming on all of their devices. Because Wi-Fi is the common fabric connecting every device, N-PVR based video programming can be sent via the broadband connection and over the Wi-Fi network to all devices. Thus, consumers can view stored programming on all their devices, and the SP does not have to contend with home networking issues.

The N-PVR takes this concept out of the home as well. Consumers can view stored program from anywhere on any device with a broadband connect. This also applies to the delivery of programming on smart phones via 4G/LTE connections. In each of these cases, the stored SP programming is treated as over-the-top (OTT) and facing the same challenges pure OTT suppliers face such as quality of service and data usages. Equally, they can benefit from the innovation in the OTT marketplace.

This everywhere DVR experience also presents a new revenue opportunity to the SP. Targeted advertising and local ad insertion take on new meaning. For example, if a Boston-based consumer is watching a stored program from San Francisco, why show the ad Boston-based car dealership? Similarly, with smart phone location-based services being widely deployed, the SP can insert a targeted ad based on the user’s real-time location.

As illustrated, N-PVRs not only offer consumers a better video experience, they offer the SP real business value: reduction of both CAPEX and OPEX and creation of new revenue generating opportunities. Properly deployed, the N-PVR infrastructure will create the foundation for everything on demand and the move to virtual set-top boxes. Given these factors, SPs should deploy N-PVRs aggressively with the caveat that they must take a long-term strategic approach of viewing N-PVRs as the first application of the platform and not the only application. 

To discuss this please contact me at gwhelan@acgresearch.net

Does Anyone Doubt IoT is at the Peak of the Hype Curve?

Yikes!  That's all I need to say about the excessive hype of anything and everything IoT these days.  From the connected refrigerator, the connected car, wearables, et al the hype in this market is out of control.  Every industry leader from Cisco, Microsoft, Intel, Facebook, Google, Apple, Amazon is staking their claim as the industry thought leader.  The same is true for hundreds of smaller companies.  The only thing clear is that IoT is at the peak of the hype curve.

M2M (Machine-to-Machine) applications have been around for decades and have been and are quite successful.  Many are based on industry standard protocols and millions of "things" are connected via the cellular network.  Nothing new here.  Remote sensors connected via some network to a centralized location where the sensor's data is aggregate, analyzed and acted upon.

Once the hype "bubble" crashes many real markets will be widely successful.  You will know what markets they are since they will not include the acronym IoT in their description.


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IoT Success: Batteries & Backhaul...& Transparency

The Internet of Things (IoT) is riding high at the peak of the Hype Cycle.  Is it a $17 Trillion market or merely a $10 Trillion market?  Depends on what you include in your definition of a "thing".  The more you include the bigger the market.  

IoT applications have a basic common architecture as shown in Figure 1. IoT digitizes some analog parameter and sends it to the "cloud" for analysis and possible action.   The primary factors that all IoT or M2M applications must address are Batteries, Backhaul and Transparency.   

Let's address the transparency issue first.  In quantum physics there's the "uncertainty principle".  Simply put is says that whenever you measure a system you disturb it.  Since most IoT applications measure a real world analog phenomena (e.g., temperature, pressures, et al) the "thing" must do so with minimal impact on the system you are measuring.   Transparency parameters include cost (CAPEX and OPEX), size, weight, aesthetics etc. 

Batteries, or more generally power, is a critical parameter within IoT applications.  If you require grid power you lose some transparency and limit your ability to deploy the thing.  Not every location will be close enough to the grid to be able to be powered by it.  Remote sensors will require batteries.  These batteries must last many months and even many years.  

Even IoT applications within the home must address the battery issue.  Take a simple motion detector.  The ideal placement is in the corner of the room near the ceiling.  Not many power outlets near by.  Thus the customer can either install an outlet close by, move the sensor close to the outlet (i.e., near the floor) or have to see the wire dropping down to the nearest outlet.  Batteries solve this problem.  However, if they need to be replaced every month the value and transparency quickly depreciates.  What if this motion detector is part of a security perimeter for a high value asset (e.g., power plant).  If the good guys need to replace the batteries periodically it will show the bad guys where these "hidden" sensors are.  Thus, batteries are critical to the success of the application and can make or break a business case.  

The "I" in "IoT" is for "Internet", meaning internet protocols (IP).  The digital data of the analog phenomena must be sent to the cloud via some type of network. This is referred to as Backhaul.  Networking options are plentiful  and include 2G/3G/4G/LTE, Wi-Fi, Zig-Bee, Satellite, Blue Tooth, Ethernet and local broadband options.  The technology selected depends on the application and on parameters such as data rates, latency, cost and what's available.  The more remote the thing is the less options are likely available.  The selection of a backhaul solution must address both transparency and battery issues discussed above.  

There are other issues and parameters that need to be address to make an IoT application successful.  For example, the cloud solution (e.g., "big data" base, analytics, heuristics, et al) are not trivial yet they are solvable engineering problems.  The same is true for the "thing" or sensor. For most all you have to do is go to the Analog Device catalog and select a chip.  Again, non trivial but solvable.  Thus, batteries and backhaul and transparency are critical make-or-break parameters to ensure success of your IoT application.

To discuss this please email me at gwhelan@greywale.com

Other articles can be found at greywale.com

The Next Cord Cutting: Real Cord Cutting

Today "cord cutting" refers to consumers who stop paying for TV and go broadband only from the cable or telecom company.  This is more accurately called "cord shaving".  The economic impact is significant but it's more of a redistribution.  More money to "Netflix" and less to the service provider for video.  Yet, more to the latter for higher capacity broadband that provides higher margins.

Tomorrow's "Real Cord Cutting" refers to consumers who completely stop all services from a wired service provider.  The go completely wireless.  We've seen the prequel with the elimination of a "home phone".  This next generation cord cutting has consumers relying on their 4G/LTE service for all broadband services.  This can be accomplished by simply turning their smart phone into a Wi-Fi access point when in their home.  The economic impacts of next generation real cord cutting are severe. The fixed access service provides not only lose all service revenues they lose customers entirely.

As 4G/LTE deployments expand and as more small cells get deployed the average bandwidth per device will increase substantially.  When the Netflix threshold (e.g., when the quality of streaming video is acceptable) is only a matter of time.  Slowing down real cord cutting will be the price of mobile data plans which will eliminate the intended savings in the first place.   Service providers with wireless assets will be in a strong position to succeed in this future scenario.  Other, such as cable MSOs will need to address their pricing plans which are driving customers away in the first place.  They can also compete with unique content, primarily "Sports and Wars", (i,e., live programming) and push for better quality video such as emerging 4K technologies.

Today's cord cutting is growing significantly especially in the under 30 demographic.  Tomorrow's real cord cutting will occur and will have substantial economic disruption for the entire ecosystem.


For past article please visit greywale.com 

The Last Mile.. All local loops are local.

This is a great quote that captures the real challenges of the last mile.  Notice these challenges are not technical.  To adapt a quote from Tip O'Neal (Speaker of the U.S. House (D-MA)  circa 1980s) ....  All local loops are local. 

"The last mile. It sounds easy, it's only a mile, after all – but the problem is, there are just so darned many of them. Wireless or Fixed, the last mile is a massive, poorly-scaling problem that manifests itself with trucks, cherry pickers, tower climbers, backhoes, manholes, labor unions, vandals, and byzantine local regulations and by-laws. What's to love? But as wireless modulation schemes approach the Shannon-Hartley limit, the last mile will increasingly be where we see networks scale to meet the surging demand for mobile capacity. "

From a meeting notice of the Telecom Council of Silicon Valley.