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.