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.

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.

Is VoLTE Worth the Investment?

Mobile network operators across the globe are moving to deploying VoLTE (Voice over LTE) systems.  The reasons for this are as expected.  They include:

1. Better voice quality
2. Protect voice revenues
3. Leverage IMS investment
4. Be able to provide billing services (Leverage their billing system)
5. Migrate 2G and 3G voice services to LTE

However, given the successes of over-the-top (OTT) services over wired broadband and in current wireless networks is this billion dollar investment prudent?  Consider the following:

1. OTT has won, or is winning, the battles.  Skype and Netflix are two good examples.  WhatsApp is another case in point of OTT success. 
2. OTT services are “good enough”.  The majority of the market is unwilling to pay for QoS when a free, or near free, service is sufficient.
3. When a consumer experiences poor quality for an OTT service they blame the service provider and not the OTT provider.
4. QoS can only be guarantee when the “call” is completely on-net.  As soon as the voice call leaves the originating SP all bets are off.  Why spend the $ billions only for a subset of calls?
5. Voice revenue and now SMS Text revenues are crashing.   Why spend $ billions to chase a losing battle?
6. Service providers are moving away from call-based billing (i.e., CDRs (Call Detail Records)).  Although the NSA loves them.  Unlimited calls and texts are the norm. 
7. Data limits are prevalent.  A few Youtube videos or one Netflix movie will dwarf a month’s worth of phone calls from a data usage perspective. 
8. When Google deploys their fiber optic networks (e.g., Kansas City) they do not offer voice services.  The reason is to avoid the mountains of regulations required when offering voice services.    Does that mean people in Kansas City don’t make voice calls?  

It is understandable why a service provider with decades of legacy voice experience would want to consider VoLTE.  After all, they have decades of legacy voice experience.   Similarly, it’s not surprising that service providers that have spent $ billions and years deploying and perfecting IMS want to leverage that investment in time, money and careers.  It’s difficult to face reality that IMS is a “sunk cost” and therefore should not be factored in when evaluating VoLTE investments.

The OTT trends and successes cannot be refuted.  Service providers continue to face the fact that they cannot compete effectively against every segment of OTT services.  The $ billions they would spend on VoLTE would be better spent on: 

1. Increasing bandwidth per subscriber
2. Providing industry leading network security to protect their subscribers
3. Fighting the short sighted Net-Neutrality laws that make regulators “feel good” at the expense of long term viable markets.
4. Creating an infrastructure where OTT’s want to pay them for QoS in a fair, open and non-discriminatory manner. 

I’ve spent 20 years working on technologies with the goal to ensure service providers do not become a “dumb pipe”¹.   I am fully biased toward ensure the success of SPs and believe that “net neutrality” is unfair to them².  However, SPs should not spend $ billions on VoLTE just because it’s voice.  High speed, high quality broadband is the future.  Don’t fight it.

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

 Notes:       

1.  http://greywhalemanagement.blogspot.com/2012/07/if-sps-become-dumb-pipe-everybody-loses.html
2.  http://greywale.blogspot.com/2014/02/net-neutrality-overruled-win-for.html

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Network PVR a Win for SPs and Consumers

Moving the "storage" function out of the Set-top box and in to the network is a win for both the service provider and for the consumer.  This article, written in ADD solving terseness,  will give the read an overview of the salient points of the benefits of deploying a network-based DVR or N-PVR.  Comments/corrections/suggestions are always welcomed.

What is N PVR?

1.       Network Personal Video Recorder (a.k.a. Network DVR)

2.       A DVR in the Cloud

3.       A user’s programming or content is stored on a server located within a service providers facility instead of stored on a hard disk drive embedded in a set-top box.

Benefits for Service Provider and Consumer

1. Enables SPs to remove costly storage in every STB.
1. One less device to fail.
2. Reduces cost per STB,  less stranded capital
3.  Reduces power consumption of STBs
1.   Helps achieve goals set in voluntary agreement (see: http://greywale.com/wp-content/uploads/2013/09/greywale-communique-STB-010614.pdf)
2. Makes whole home DVR simpler
1.  All traffic originates from the network to any device (TV, PC, Tablet, Smart phone et al.)
2. Transparent to user
3.  Simplifies home networking, re-use existing networks such as WiFi,  No need for a new technology.
3. Enables TV-Everywhere or video everywhere and advanced video services
1. A single seamless video experience across all devices/screens.
2. Pause on one screen; resume on another screen is simplified.
3. Watch “save” programming on any device at any location.
   
4. Enables location-based targeted advertising
1.  Ads can be “re-inserted” to location user is actually watching stored content.
2. No need to play Boston Ads if user is watching Red Sox game in San  Francisco.
3. Enhances advertising packages to ad buyers.
4. Enhances viewing experience of consumer since ads are more relevant.
5. Increases ad revenues
5. Reduces usage and congestion of upstream bandwidth
1.  Eliminates the need for Sling Box
1. Sling box clogs limited upstream last mile channels
2. N-PVR eliminates Sling Box zero revenue traffic
6. Enables SPs to take advantage of innovations in Content Delivery Systems and advanced caching technologies.
1. May already be implemented for Video on Demand.
7. Enables smart phone to become DVR controller
1.  Guide on smart phone delivered from network
2.   “record” in network
8. Leverages investments in cloud infrastructure
1.  ROI of data centers investment will be enhanced with the addition of N-PVR application. 
9. CAVEAT
1.  As N-PVR rolls out, cache’s and servers may find themselves in facilities that aren’t as friendly as purpose built data centers.  These may include regional and local facilities such as central offices and head ends.
2.  Energy issues (e.g., heat) should be addressed.
10. LEGAL Issue
1. The Cablevision litigation in the U.S. has been resolved in Cablevision’s favor.
2. Content providers argued it violated copyright laws.
3. Cablevision argued it’s the same as a DVR just a different location.
4. After a number of rulings and subsequent appeals the U.S. Supreme Court refused to hear the case ending the litigation.
5. Recommendation to SPs…Deploy! 
11.  Technical Issues
1.  SP’s will need to have the stored programming in numerous formats applicable to specific devices.  i.e., different resolution and data rates for an HDTV verse a smart phone via 4G/LTE.
2. Do you translate and transcode on demand or ahead of time? 

   To discuss these issues please contact me at gwhelan@greywale.com

   For a list of previous articles please see   http://greywale.com/articles

Net-Neutrality Overruled! A Win for Everyone!

Why this is good for everyone?

1. Market Reality
1. Service Providers are public companies
2. Broadband is not classified as a "common carrier"
1. If it was it wouldn't have been deployed
3. Google, et al, get a free ride and they generate tons of cashs
1. No one seems to complain about this.
2. It's not unfair to the small company
1. No difference than numerous other industries
1. Not everyone can afford to, or wants to, buy a Superbowl ad.
1. No outrage here?
2. This will force small companies and strat-ups to innovate harder
1. The consumer will benefit more.
1. FCC is all about protecting the US consumer
3. Service providers will have the incentive to invest in last mile bandwidth
1. They will get a fair return on their investment
2. Consumers will benefit again
1. So will Google
4. Consumers will benefit
1. More bandwidth
2. Better services
5. Yet, FCC must TRUST but VERIFY
1. FCC needs to ensure policies and "tariffs" are fair, equitable and non-discriminatory

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