Cdmagazineapril2014

April 2014 • Published by Decisive • A CommsDay publication

NETWORK FUNCTIONS VIRTUALISATION Not just a mouthful but a new way to operate networks

The rise and rise of TD-LTE WhatsApp gets into voice Has the time of the content bundle arrived?

Will the cloud save video conferencing?

Telcos get the start-up bug

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Behind Network Functions Virtualisation

Published several times annually.

CONTRIBUTIONS ARE WELCOME GROUP EDITOR: Petroc Wilton FOUNDER: Grahame Lynch COVER DESIGN: Peter Darby WRITERS: Geoff Long, David Edwards, William Van efner, Grahame Lynch, Tony Chan ADVERTISING INQUIRIES: Sally Lloyd at sally@commsdaymail.com EVENT SPONSORSHIP: Veronica Kennedy-Good at veronica@mindsharecomms.com.au ALL CONTENTS OF THIS PUBLICATION ARE COPYRIGHT. ALL RIGHTS RESERVED CommsDay is published by Decisive Publishing, 4/276 Pitt St, Sydney, Australia 2000 ACN 13 065 084 960

Features 5 FIRST: What’s happening with What’s App? 15 Broadband’s battle for the bundle 19 Making money out of mobile 23 The future of video-conferencing 27 Australian telcos get the start-up meme 33 AT&T plots the end of wireline 37 The rise and rise of TD-LTE

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22/01/14 3:19 PM

FIRST

What’s up with WhatsApp

When Facebook spent US$19 billion on WhatsApp, a company with slightly over three dozen employees, it was hard not to react simply to the enormity of the whole thing – and many people did just that.

While Facebook founder Mark Zuckerberg defended the deal, saying WhatsApp is “worth more than US$19 billion,” initial reaction wasn’t so positive.

Zuckerberg’s reasoning was based on the fact that WhatsApp is “on a path to connecting a billion people” and that “there are very few services in the world that can reach that level and they’re all incredibly valuable.” Analysts’ comments tentatively backed his thinking, with several justifying the price on the assumption that a US$0.99 cent annual charge for the use of the WhatsApp app would make it a hugely profitable business.

However, users were not so convinced. Just days after the announcement of the deal, LINE, a Japan-based messaging app, issued a press release saying it has seen a surge in new user sign ups.

“In some regions, up to 10 times as many users have joined per day since the weekend of February 23, 2014,” the company said. Facebook announced the WhatsApp deal on February 19.

Over in Russia, indigenous app Telegram Messenger also saw an influx of users, bringing on 5 million new users on the weekend following Facebook’s announcement. According to online reports, Telegram also became the number 1 social networking app download in some 46 countries, including the US. Telegram’s success was no doubt helped by its extra level of security, which was designed to evade eavesdropping by the Russia secret service. Nevertheless, the timing of Telegram’s spike,

together with LINE’s announcement, suggested that at least some WhatsApp users were looking to try other services after they found out that WhatsApp was no longer an independent company.

Meanwhile, a misunderstanding in Singapore poured some cold water on WhatsApp’s prospect of monetising its service, at least in its current form. When rumours spread online that SingTel wanted to charge users extra for the use of WhatsApp, it spurred a wave of dissention among bloggers and consumer advocates.

As it turned out, SingTel CEO Chua Sock Koong was only commenting on the possibility of charging content providers for traffic on carriers’ networks, rather than end-users. SingTel clarified the situation, pointing out that it has a WhatsApp plan that allows users without data plans to access the service rather than charging for use of the app itself, and even issued an apology.

But the damage was done, at least for WhatsApp. Multiple articles appeared in the Singapore media and popular websites, pointing users to WhatsApp alternatives such as Viber, Telegram, and WeChat. The misread clearly demonstrated the likelihood of a widespread backlash against paying more for what is free today.

VOICE: These setbacks, of course, don’t change the fact that WhatsApp has some half a billion subscribers. As multiple analysts have pointed out, there is plenty of room for the platform to expand into areas such as such as games, extra (paid) features such as stickers, e-commerce and so on, which could open up new avenues of revenue. They point

to such activities on LINE – which actually has its own theme park in Taiwan – and WeChat which, among other applications, now lets users book taxis in major Chinese cities.

All these are valid arguments.

But these kinds of features are not what WhatsApp is about today and, perhaps, not what it is good at. LINE, with its Japanese ethos, has cultivated an association with a long list of anime characters – which in turn can which help populate a theme park. WeChat, with its close ties to Chinese online giant Tencent, can tap into the local community for services like taxi ordering. But WhatsApp, with its global user base and simple messaging interface, will likely find it hard to develop such synergies even with the backing of Facebook. In fact, many of the enhanced features that analysts point to would probably be better suited for Facebook’s own messenger than for WhatsApp. However, one initiative that is well underway and expected to launch imminently is WhatsApp voice. Company founder Jan Koum announced the initiative back in February and leaked screenshots have confirmed that WhatsApp will be delivering voice services.

With its tight integration with smartphones, WhatsApp voice will likely impact international calling services as all its subscribers will be able to call each other for free.

It also stands to make money from calls to conventional telephone numbers, in the same way as Skype Out. And with so many users on its service, a small percentage in takeup could equal a major source of revenue – if not profit.

Perhaps more importantly, the voice offering will help the company convince users to actually sign up for an account that is linked to paid credits, from where other paid services can be charged.

Tony Chan

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ALL ABOUT NFV The networking industry has been buzzing about two different three-letter acronyms in the past year: SDN and NFV. But while software defined networking, backed by industry organisations such as the Open Networking Foundation, OpenStack and OpenDaylight, is now a well understood concept, the idea of network functions virtualisation is only beginning to enter the collective consciousness of the networking community. Tony Chan reports.

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cronyms often end up meaning different things to different people. Certainly, there is still plenty of contention around a precise definition of NFV, though most of the industry have at least agreed that it stands for network functions virtualisation.

According to the European Telecommunications Standards Institute, which hosts an industry specification group on NFV, the concept leverages “standard IT virtualisation technology to consolidate many network equipment types onto industry standard high volume servers, switches and storage, which could be located in data centres, network nodes or end-user premises.”

“It involves implementing network functions in software that can run on a range of industry standard server hardware, and that can be moved to, or instantiated in, various locations in the network as required, without the need to install new equipment,” says ETSI. Another common description for NFV is the decoupling of functions and services on a network from previously proprietary platforms and re-crafting them in software running on commoditised, or ‘high volume’ in NFV speak, hardware – i.e. Intel processors. Both definitions are accurate, but sufficiently vague to leave a lot of room for different interpretations. So what is NFV? VIRTUAL ROUTERS: Is NFV about the network? The simple

answer is actually no. NFV calls for the replacement of existing network devices with software, but it doesn’t change how a network operates, or what functions are carried over it.

According to Brocade’s vice president of Asia Pacific Adam Judd, NFV is actually about replacing dedicated hardware boxes with software inside commoditised servers.

“NFV is taking all the physical components, all the functionality and services that are in a machine today, either a custom built box or router, a firewall, a switch, a load balancer, a VPN device and many other things, and putting them in software,” Judd says.

But while it doesn’t add any new functionality to networks, the NFV model does have significant impact on the cost of net-

working, as well as performance and manageability – particularly inside data centres.

“This is the US$40,000 piece of router, [turned] into an instance that cost US$400 – that’s the difference. We are going to do that systematically over every single piece of technology that we find that is functioning today.

Today, we do routers, we do firewalls, we do VPNs, we do load balancing, we do layer 2 switches – we have already virtualised all that functionality and from a cost to performance perspective, that is unbelievably compelling,” says Judd.

NFV doesn’t just save costs; it can also increase performance.

While dedicated hardware may feature more powerful processors in the form of applications specific integrated circuits,

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it still requires traffic to enter and exit each box individually. Even within a data centre environment, where distance is limited to a matter of metres, the extra wiring to connect together boxes could result in a significant percentage increase in latency, according to Judd.

With NFV, the traffic actually runs on software staying inside a physical server, eliminating any latency between different network services. And because it is software, it is also easier to manage, maintain, and control, Judd adds.

In this way, NFV is about the network, but it doesn’t actually change the nature of networking like, say, software-defined networking.

SOFTWARE AND SERVER ARCHITECTURE: So is NFV basically about software? Because they are typically mentioned in the same breath, NFV and SDN are often conflated. After all, both are based on taking something that traditionally relied on specific hardware, and turn it into software.

For NFV, however, that means taking network features and turning them into software – but not just any software, specifically software that is accessible from a common platform and can run on common hardware.

Establishing such a common software layer is one of the main challenges highlighted by a recent network virtualisation research project jointly launched by NTT, Fujitsu and Alcatel-Lucent. Interestingly, the three companies don’t even use the NFV moniker.

Instead, the companies dubbed their research project a “collaborative study on server architecture for future networks.”

But when it comes to the details, the project’s description reads like a NFV brochure.

“This project aims to realize a server architecture which maximizes the common part of various functionalities of communication network with reliability, scalabil-

ity, and maintainability which are cultivated by telecom carriers and partners,” says the project website. “Using this architecture, service providers can develop their services efficiently by focusing only on their logic. In this server architecture, all network functionalities are realized on network-wide virtualized hardware in order to prevent variety of devices from spreading.”

In other words, it is not enough to turn existing hardware into software, but that software also need to interact on the common hardware platform. And the motivation is not just about the ability to use cheap high volume hardware, but to enable rapid ser-

““Using this architecture, service providers can develop their services efficiently by focusing only on their logic. In this server architecture, all network functionalities are realized on network-wide virtualized hardware in order to prevent variety of devices from spreading.” vice deployment.

“Telecom network systems consist of various network devices, each of which is sufficiently sophisticated to ensure highly reliable and available network services. This means that different types of platform software and hardware are selected for each network device, and reliability and scalability are achieved within each application. Consequently, it takes time to develop service applications, building equipment, and setting up management systems,” says NTT. “For future networks which would provide various kinds of services and promote network functions realized by software, it is expected that the software development scale for service applications would be larger and larger because of var-

ied and numerous network devices. We have to solve this problem as a carrier service provider.”

VIRTUALISED EVERYTHING: But while Brocade and NTT highlight two different aspects of NFV – software enabling network services and consolidating software and hardware platforms – their definitions still fall short in detail and scope.

For starters, there are more components within a carrier network than just services. In launching a NFV strategy, Alcatel-Lucent breaks down the carrier network into three distinct components – the IP multimedia subsystem, the core network, and the radio access network.

According to Alcatel-Lucent networks group VP for high leverage network Manish Gulyani, each part of the carrier network environment has hardware components that can be turned into software, and hence can be NFVenabled.

In Alcatel-Lucent’s vision, virtualising the IMS means abstracting the hardware platforms that support core services, apps, and operations into software. At the same time, the core network can be abstracted through virtualised gateways, virtualised policy and charging engines, virtualised signalling and mobility infrastructure, while there is also the opportunity to virtualise the radio access network.

For Gulyani, all these components are taken as parts of the same journey towards a fully NFV-enabled carrier network.

But virtualising everything isn’t the end of the road either. A no less important part of that journey is what follows after each component is virtualised. According to Gulyani, the whole point of virtualisation – the transition from hardware to software – is to leverage the performance, cost efficiencies and adaptability of cloud technologies.

CARRIER GRADE: So is NFV about cloud-enabling the carrier

infrastructure? Anyone who has read anything about NFV would have come across references to the importance of leveraging cloud technologies, but most definitions today neglect a fundamental issue – that the infrastructure is supporting a carrier.

According to Gulyani, one of the key challenges of NFV is not only virtualising the infrastructure, but doing so with carrier-grade reliability.

As carriers begin to test NFV inside their networks, “they realise that some of the servers that they are working with today, don’t have the performance yet to do all the things to support real time communications, the kind of very high processing that is required,” he says.

At this point, the IMS component of a carrier’s network can be addressed by NFV because it is “computation centric,” so someone like Alcatel-Lucent knows how to “optimise” systems to deliver the required performance, but support full network virtualisation through standard hardware is still in the early working days, says Gulyani.

ALL ABOARD: While all these

viewpoints on NFV have their own merit and form parts of the overall NFV story for carriers, it is also clearly evident that the journey is just getting started.

Some areas, such as Brocade’s virtual routing and network appliance virtualisation, are well underway.

In fact, Brocade’s Judd asserts that the company has already licensed over a million virtual routers from its acquisition Vyatta.

Vendors are piling onto the NFV bandwagon, with Huawei, Nokia Solutions and Networks, Ericsson and others all jockeying for mindshare with a slew of press announcements hitting media outlets.

But in other areas, such as NTT’s work with Fujitsu and Alcatel-Lucent, the surface has only been scratched. In fact, the stated goal of the NTT project is “creating advanced technology, increasing its level of sophistication, and achieving early feasibility checking” for its server archi-

tecture, and “to see this technology spread and become a global standard.”

That said, NFV is clearly a technology on the horizon with demonstrable benefits to carriers.

Like SDN, there will no doubt be teething problems such as reliability – but also like SDN, it seems everybody is onboard.

Vendors are piling onto the NFV bandwagon, with Huawei, Nokia Solutions and Networks, Ericsson and others all jockeying for mindshare with a slew of press announcements hitting media outlets.

So far, however, there is the real challenge of fragmentation as each vendor is seemingly developing its own version and implementation of NFV. So while Brocade might have a virtual router on the market, there is little indication that it will work within a virtualised environment made up of other routers.

And without industry champions to ensure multi-vendor interoperability – such as OpenFlow, OpenStack and OpenDaylight for SDN – at least some of the potential benefit of NFV could get lost in the translation between vision and reality.

What NFV means for industry As the NFV hype machine starts to pick up steam, what do the vendors and operators on the ground believe it might mean in practice for their businesses? David Edwards reports from Barcelona.

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FV was one of the most discussed topics at Mobile World Congress in Barcelona last month, with network operators looking at it as a way to cut costs while seizing on new revenues opportunities. But is the telecommunications industry’s latest acronym just the latest in a long line of buzzwords? Or will NFV prove to be the game-changer that it’s being talked up as, enabling operators to optimise their networks and achieve unprecedented levels of innovation?

Alcatel-Lucent’s Dor Skuler, who is VP and GM of the firm’s CloudBand business unit, certainly subscribes to the latter train of thought. He says that network functions virtualisation marks a completely different way of thinking about telecommunications infrastructure.

“Until NFV, the way we would do any network function is where [we] would build a network function from firewall to IMS to packet core, to, you name it,” he explains. “All of these

[functions] came on dedicated equipment, which means that the vendor would fine-tune it, it would then need to pass acceptance test by the carrier, and deployment would take anywhere from 3 to 6 months to 36 months.”

Should telcos wish to grow the scale of their service by adding capacity to the network, they’re looking at a process that can take up to 18 months, according to Skuler. “So that’s the situation we’re in. If telcos want to launch

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a new service it takes around three years – and it’s extremely expensive to maintain the network. If you look at the total cost of ownership, about 20% is capex and 80% is operations. And then you have to have capacity managers to guess how much capacity you’ll need from a year from now because it takes that long to add capacity, etc,” he adds, somewhat breathlessly.

For his part, Ericsson’s director of application and ecosystem Mats Alendal, believes that while many operators wish to reap the benefits of NFV, they’re nonetheless cautious of taking things too fast for fear of losing performance in the network they have today. “No operator wants to read an article saying network performance has deteriorated owning to the introduction of new technology, so we’re working carefully with operators to ensure network reliability… stays the same,” he says.

A number of service providers unveiled their NFV plans at this year’s Mobile World Congress.

Telefonica announced that it will commence phasing in virtualised functions as soon as June – under an initiative it is calling ‘Unica’ – in a bid to make its networks more efficient. In the first phase, Telefonica will virtualise customer premises equipment, evolved packet core and IP multimedia subsystem.

Another big announcement on the service provider side came from AT&T, with the firm tapping Boston-based startup Affirmed Networks to help it develop a virtual EPC. Affirmed reportedly edged out a number of big infrastructure vendors, including Alcatel-Lucent, Cisco and Ericsson, for the gig.

Informa analyst Dimitris Mavrakis, who attended MWC, says that tier-1 infrastructure firms Alcatel-Lucent, Ericsson Huawei and NSN are, at the moment, proving best in practice for NFV. He selects Intel, HP and Dell as the pick of the IT vendors, with Juniper Networks and Cisco leading the networking vendor pack.

“[But] there are also many startups and smaller companies involved too, including Tail-F, Affirmed Networks, Metaswitch, and many others,” he adds.

“Every company dealing with telecom network infrastructure currently is in the process of launching – or already has launched – NFV-compatible products.”

Mavrakis says that based on

“No operator wants to read an article saying network performance has deteriorated owning to the introduction of new technology, so we’re working carefully with operators to ensure network reliability” Telefonica and AT&T’s announcements at MWC, it is likely that we will see NFV activity “in real networks” as early as the end of 2014 to early 2015.

“However, I wouldn’t expect mass market for 2-3 years at least,” he adds.

Skuler and Alendal agree on that timeline, with the latter adding that 2014 will be a year marked by “pre-commercial deployments” in both NFV and software defined networking.

“We are running a number of trials and proof-of-concepts in NFV right now and… this is the year of experimenting before seeing growth in 2015, 2016,” he says.

At MWC, Telstra and Ericsson announced the completion of a year-long SDN trial across the telco’s live mobile network.

Telstra networks MD Mike Wright says the Australian firm is interested in exploring whatever it can do – by way of technology trials and future NFV deployments – to make its network smarter.

“The network is something that has been really static for a long time, but we’re entering a pretty exciting phase where we’re seeing the ability to do more dynamic things with the network as these technologies emerge,” he

says. “But they’ll probably emerge in niche locations rather than a complete overnight transformation.”

Wright says that further up in the network, Telstra sees things like firewalls being more dynamically provided through Network Functions Virtualisation technology.

“If we can get this right for a firewall, rather than with an IPVPN with a customer having to go and create the route and some of the functionality, we can more dynamically route some of these things in and out of the network with our service chaining capability we can do with SDN.”.

Another specific use case for NFV, according to AlcatelLucent’s Skuler, is voice over LTE. Last month the firm released NFV technology that enables mobile operators to virtualise parts of the network in order to provide VoLTE services over the cloud.

“As customers deploy LTE, [operators] are starting to migrate their users to VoLTE – but they don’t know how fast this will pick up because you need a new capability on your device to make it VoLTE-enabled,” Skuler says.

Clearly, NFV can provide mobile operators with more efficient and cost-effective networks, while enabling faster service creation and delivery. However, Mavrakis says that while there are strong arguments for NFV, the challenge for operators is to find a “tangible and clear business case apart from just cost savings and network efficiency.”

He adds that replacing equipment that is yet to reach end-oflife may prove an additional challenge for the time-being, given the tough economic environment.

But Alcatel-Lucent’s Skuler is confident that operators understand the clear-cut benefits of an NFV deployment. “They have to drive costs out of their network.

And the only way you do that while capacity is growing… is to do a radical change,” he says.

Broadband’s battle for the bundle As fixed broadband subscriber numbers plateau, telcos are increasingly looking to content and IPTV bundles for the next phase of growth, Geoff Long reports.

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arriers across the region are arming themselves with content bundles and IPTV offerings to capture the next phase of subscriber growth. In many developed economies, the fixed broadband market has neared its peak and one of the most successful strategies to either retain customers or to grow them has been to offer a bundled service. As a result, major carriers including Telstra, Singtel-Optus, and Telecom in New Zealand are increasingly focussing their marketing efforts on the content at the heart of the broadband bundle. However, as well as competing against each other, they know they also have to battle another formidable foe – the over-the-top plays from the likes of Apple, Google, Netflix and others.

Scott Lorson, CEO of wholesale content provider Fetch TV, describes IPTV as “the sword and shield” for telcos, allowing them to protect their market from overthe-top players as well as to target new customers with bundled offerings. “TV is a highinvolvement product so if you put TV on broadband, people will engage and you can convert it to the “hero” product in your bundle,” he says. “Telcos need a new trick and IPTV provides them the opportunity to recontract their fixed customer base

with a lower cost of acquisition.”

Lorson notes that Fetch TV is well funded and has significant infrastructure in both Australia and the Asian region as well as access to the majority of content from the US movie studios. The company is privately-held, with Malaysian subscription TV provider Astro All Asia Networks

will be the price point Fetch TV is offered at – around $10-$15 per month.

As has been seen overseas, the key for telcos is the ability to provide added value to their broadband bundles, which has led to a willingness to accept low margins on their IPTV offerings.

In a fixed broadband market

one of the major shareholders.

FetchTV has been in the Australian market for two years and recently passed the 100,000subscriber mark for its Fetch-TV bundles, which are distributed currently by both Optus and the various iiNet group of companies. That figure is expected to ramp up significantly this year, driven by a refresh of its technology platform, a range of new content and the expected addition of new carrier customers.

Lorson believes that one of the main weapons that will keep foreign intruders such as Netflix at bay as well as stoke the competitive flames among rival carriers

that is nearing its peak, there are not too many ways to attract new customers and reduce churn. Lorson believes a so-called “Pay TV Lite” offering is one method carriers have been eyeing, providing a relatively low acquisition cost for new customers and providing an incentive for existing customer to re-contract. The carriers also have the benefit of being able to offer un-metered content – a key advantage over non-telco players.

Australia has one of the lowest penetrations of pay-TV in the OECD – and some of the highest prices – so the addressable market is massive, estimated at

around 6.5 million customers.

Another segment that hasn't escaped the notice of FetchTV is for foreign language content. Of the 6.5 million potential subscribers, around 1.5 million are estimated to speak a language other than English; FetchTV already boasts around 100 foreign language channels and has plans to add more.

There has also been speculation that US-based Netflix will enter the Australian market directly. However, Lorson suggests that the main competition locally will be from Telstra/Foxtel on one side, and a growing “coalition of partners” powered

by Fetch TV on the other.

Foxtel has recently detailed its plans for triple-play bundles of broadband, TV and voice this year following approval from shareholders Telstra and News Australia. The move has already drawn a positive report from analysts at Goldman Sachs, which believes Foxtel is well placed to compete given its brand, scale and existing capabilities including marketing and distribution.

The triple-play move is also seen as a compelling opportunity for Foxtel to generate incremental revenue streams, lower churn and lift pay TV penetration in Australia, says Goldman Sachs, describing it as the “unshackling of a major competitor.”

Goldman Sachs cites the example of BSkyB in the UK as an indication that Foxtel stands to benefit through lower churn and new revenue streams. It notes that six years after launch, fixed line services had driven an incremental 15% to BSkyB revenues and EBITDA. Across the ditch in New Zealand, Telecom has also announced its plans to make digital content the centrepiece of the organisation, rebranding to become Spark and launching an IPTV service called ShowMeTV. As

well as taking on local TV rivals Sky TV, Television New Zealand and MediaWorks, the company wants to position its service as “the Netflix of New Zealand.”

Telecom will face competition from the OTT players and existing competitors in its own market. MediaWorks and TVNZ are reportedly looking at their own Netflix-style services, with both having trialled delivery of ondemand content via broadband through MyFreeview boxes. Australian subscription TV provider Quickflix is also a growing player in the New Zealand market, offering a $14.99 per month subscription service with TV and movies.

Despite the opportunities in bundling content with broadband bundles, Informa Telecoms

“We have already seen from the early deployment of multiscreen TV services by operators that many subscribers are highly resistant to paying extra for new services” warns operators that the bundling market is changing rapidly.

A recent report suggested that operators will have to offer a whole range of new content and applications within their bundled products – including OTT content from companies like Netflix and Spotify and even VoIP from providers like Skype – to keep their

subscribers happy.

Informa senior analyst Tony Brown, lead author of the report, says that the next-generation bundling market will be a challenging one in which operators will not necessarily reap direct financial rewards from the new products that they include in their bundled offers.

“We have already seen from the early deployment of multiscreen TV services by operators that many subscribers are highly resistant to paying extra for new services – so many of these new services really have to be included as part of the existing bundled price,” he says.

“Operators need to see the addition of these new services, such as cloud storage or OTT content, as something that brings extra value and increases customer loyalty – and go at least some way to neutering the threat posed by OTT players in a number of fields,” he adds.

Brown also notes that some global operators are now revamping their customer loyalty programs to make sure that their bundled subscribers are well rewarded, a trend that Telstra has taken up here in the Australian market and one that is expected to continue.

“This is a strategy we expect to be more widely adopted by other operators to reward their most valuable subscribers,” he concludes.

Putting our Technology Vision 2020 into practice

Š2014 Nokia Solutions and Networks. All rights reserved.

Making money out of mobile Mobile operators are under pressure from tight revenue, growing costs and competition from the likes of over-the-top players. They need to find new ways to make money out of mobile – but is the answer in new applications, new pricing or old-fashioned customer service? David Edwards reports from Barcelona.

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obile operators have been feeling the pressure for a while now. Revenues from voice calls and SMS are down in many cases and likely to stay that way, while data is proving harder to monetise than was perhaps first thought. Equipment upgrades are neither negotiable nor cheap, particularly with many operators still building out their 4G networks.

And don’t get them started on those pesky over-the-top players who, with their IP-based applications and relentless innovation, are proving perennial thorns in the side of traditional telcos all around the world. The mobile operators need to find new ways to make money.

The explosion of mobile data traffic has been flagged for a while, with Cisco’s Visual Networking Index perhaps the most widely quoted regular forecast.

The firm’s latest VNI report found that global mobile data traffic swelled 81% in 2013 to hit 1.5 exabytes per month. In fact, last year’s mobile data traffic was nearly 18 times the size of the entire internet in the year 2000, according to Cisco. The VNI projects monthly mobile data traffic to surpass 15 exabytes by 2018, representing an approximate 11fold increase on 2013’s traffic.

Part of that is expected to come from the expanding

SingTel CEO Chua Sock Koong

‘internet of things’, a topic that generated a lot of talk at this year’s Mobile World Congress in Barcelona.

On the consumer side, a number of firms launched wearable connected technology products, while others spoke more expansively of their role in creating smart cities in which sensors collect a wide range of data designed to better the lives of citizens.

And the conference itself took place just days after Facebook announced its US$16 billion deal with WhatsApp – a bold move that reminded operators of the strength of OTT players in both messaging and voice.

As such, telcos will be forced to ‘sleep with the enemy’ by forging partnerships with OTT providers, according to Deutsche Telekom CEO Timotheus Hottges.

But Hottges says that telcos inherently “lack the DNA” to develop internet of things applications. Instead, he sees the role of the telco as the “plug” for OTT players, who can use that infrastructure to help grow connectivity and digitalisation into the fu-

ture. “First, [telcos] are more focused on their infrastructure business and are not as strong in applications; second, this ecosystem of applications is developed in smaller companies… in another environment to that of the classical telco,” says Hottges.

“So what the infrastructure companies have to do is develop the ‘socket’ for these type of applications, which make the digitalisation and the network a kind of working ecosystem. That sounds easy, but it isn’t.”

Ovum says that operators face two choices when it comes to OTT players: partner up in order to create “more valuable, monetisable products for their customers,” or quickly launch their own services that leverage operator strengths. “[These include] billing, customer information, and the customer relationship to offer product bundles that help to increase loyalty and reduce churn,” says the analyst firm.

SingTel CEO Chua Sock Koong argues that operators must differentiate their services to avoid simply becoming “commoditised utilities competing just on price.” In a keynote address at MWC, she explained that this differentiation will come via functionalities built into the networks, analytics capabilities used to provide customised offer-

ings, and customer experience.

“Our ambition as operators must be to become differentiated and ultimately preferred by endusers and even by the over-the -top partners,” she says.

With 5G still many years away, mobile operators are looking at their existing assets and wondering what they can do to keep those revenues flowing in.

And Chua says that pricing itself is a concern for operators, admitting that the telco industry has been unable to monetise the increased demand for data.

According to Chua, ARPUs in developed markets have “actually declined over a three-year period.” “The challenge we face… is really developing sustainable pricing models. Let’s not repeat the mistake when we had 3G networks that were empty and we [offered] unlimited data packages to fill the capacity,” she warns.

“Smartphones have significantly increased data [consumption]… and wearable devices and other connected devices could become the catalysts that choke our 4G networks. So we need to put in place pricing structures that better match revenues with underlying use of our infrastructure and spectrum – both to end customers and our service providers using our mobile networks.”

One such mobile network “choke” could come in the form of video, which Cisco expects will account for some 69% of total mobile data traffic in 2018. Open Wave Mobility CEO John Giere says that operators simply cannot afford to continue providing video services at a price below their carriage of service. Put simply, traditional business models have to change, given that customers themselves are changing.

“When I talk to my customers, their top priority is how to service and manage this explosion of video content. And at 69% growth, this phenomenon will overwhelm us very soon – and if we don’t act, we’ll be toast!” he told the MWC audi-

ence.

But let’s trek back to the thorny issue of pricing. Giere says that while operators started out 3G with “tonnage” – voice and minutes, putting together bundled packages – they’re now moving to tiered data plans. “But we’re now in an LTE video era – and those [pricing strategies] are not going to be enough. We’re going to have to learn how to [provide] pay-per-services – and how the revenues align with the costs,” he explains.

US wireless provider C Spire, for example, has positioned video streaming as a ‘premium’ service’ in its drive to deliver a “sustainable ‘unlimited’ data plan.” It’s a move that somewhat defies Chua’s warning operators not to repeat the “3G mistake” in offering unlimited data packages.

C Spire CEO Hu Meena says that the company has recognised, via data analysis, that customers have been using their smartphones for email, file downloads, web surfing and music streaming; in other words, nondata intensive activities. As such, the firm – in partnership with Open Wave – moved to carve digital streaming out of its

“When I talk to my customers, their top priority is how to service and manage this explosion of video content.” ‘unlimited’ plans as a premium service. The ‘Unlimited Lite’ plans include unlimited messaging, web downloads and online music, with ‘optional’ online video data passes sold in hourly increments.

“This enables C Spire to deliver a sustainable unlimited data plan,” he says. “And we believe an unlimited plan is a wonderful experience because it’s simple – and customers crave simplicity.”

According to Meena, one in four unlimited customers went on to purchase a video pass, with 70% choosing the two-hour pass priced at US$5. “These plans use

nearly 50% less data than plans with video streaming. Also, this has led to 20% reduction in churn among that part of our customer base – and we all know how important customer retention is to the bottom line.”

But if there’s one thing that all operators agree on, it’s that customer experience matters now more than ever before. Telefonica CMO Marieta De Rivero says that the firm has tasted recent success, in different markets, by “listening to what our customers want.” A simple strategy, sure, but one that she says has paid dividends.

She gave the example of how UK consumers wanted a “different service” from Telefonica’s subsidiary, O2, which led the firm to launch ‘GiffGaff’: a ‘budget’ MVNO which she says was recently tagged “the best mobile operator in the market.”

Conversely, in Spain, Telefonica customers wanted a single relationship from whom they could receive all products and services – including fixed-line, mobile, internet services, etc – which led to the launch of the integrated telecoms offering, ‘Movistar Fusion’. “And now, more than 40% of customers use this product,” she adds.

SingTel’s Chua freely admits that telcos need to offer new services in order to remain relevant in this “intermediated world.”

However, telcos can be soothed by the fact that, by their very nature, they have unique assets in addition to the network itself – namely, the “massive amount of data we collect every day.” This information, she says, is providing telcos with “pervasive customer touch points.”

“But above all, there’s the trusted relationship we have with our customers. And as people become more concerned about [the] use of their personal data, this trust and [reliability] will become a key asset to us to strengthen our relevance to our customers,” she adds.

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The future of video-conferencing Since its arrival in the 1930s, video conferencing has always been on the cusp of mass acceptance. Can a move to the cloud spur it on? Geoff Long investigates.

T

here is no shortage of commentators and vendors ready to talk up a new wave of video conferencing. In fact, since the 1930s – when AT&T promoted its “video for telephone” service at the World Fair in New York and the German post office launched, in 1936, the world's first public video telephone service – video conferencing has been “the next big thing.”

And it renews its next big thing status as every wave of fuel shortage, economic crisis and virus outbreak arises.

That said, some trends in video conferencing are worth talking up. It is now becoming both cheaper and more pervasive at a rapid rate, driven by low-cost hardware end-points and a move to the cloud. There is a glut of companies right now providing video conferencing to both consumers and the business sector alike. And the newcomers are not only cost effective, they are disruptive to a well-established industry of telcos, specialised conferencing providers and their vendors.

Take the example of the emerging WebRTC technology, which allows video conferencing sessions to be done through a web browser, with no extra hardware or software needed. Video conferencing vendors will play down the emergence of WebRTC, arguing that it has not been finalised yet and that it's just one of many technologies that have sprung up around vid-

eo communications. That's true, ferencing market is Google, but there are now more than 350 which has just launched a hardcompanies coming out with ware and service package in the WebRTC-related products or serUS called Chromebox for Meetvices – not unimpressive for a ings, costing $999 and including technology just two years old.

Independent consultant and WebRTC expert Tsahi LeventLevi claims that WebRTC is poised to disrupt the market for unified communications and enterprise video conferencing.

Commenting after FaTelstra’s Will Irving cebook's US$19 billion acquisition of Whatsapp, he noted that the disruption is the first year of management and imminent. support fees. It marries its Google “Whatsapp doesn't do Hangout service with its reach intelepresence in full HD. It to the enterprise through Google doesn't even do voice calls. But Apps. Of course, Google has somehow, people find ways to tried and largely failed in the unicommunicate with it – a lot more fied communications market bethan they do with their expensive fore – its Google Talk, for examUC systems,” he wrote in a reple, never really took off – but it cent commentary. And he is an indicator of the type of acclaimed that WebRTC is likely to tivity that is happening. make things “much worse” for inAnd that activity is happening cumbent players in the market, at a rate that is hard to monitor. particularly given the massive deThere are hundreds and hunveloper community around it. dreds of cloud-based and over-the “They can now add video call-top services that are appearing, ing in real time to their mobileranging from seeming veterans first or mobile-only apps. And it such as Skype and Yammer to will cost them less to build it newcomers like Fuzebox and from scratch than it would to an UberConference, to services from incumbent to add it as just anothestablished incumbents like Ciser access point,” Levent-Levi sugco and Polycom, to branded ofgested. ferings from the carriers themAnother noted market disrupselves. tor with its eye on the video con-

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So what do specialist video conferencing providers and carriers do to compete? In the case of Telstra, it has decided to join forces with one of the newcomers and offer its own cloud-based service. In February this year it announced a tie-up with Californian startup Blue Jeans Network, a cloud-based video conferencing provider that claims to work with most of the available video systems and devices.

Telstra will offer the Blue Jeans service in Australia to the business sector on a monthly subscription plan – one of the key features that telcos like about the new cloud-based services: recurring revenue.

It also provides compatibility with most of the other video conferencing services in the boardroom, thus protecting existing investments and making it an easier sell. For years, high-end systems from the likes of Cisco and Polycom did not talk to each other, and now the new players are turning that to their advantage by offering compatibility with any system and any device.

But how do Telstra and other carriers compete against systems where the price is approaching zero? Telstra Business GMD Will Irving says that low-cost services like Skype and Google Hangout are a great starting place for businesses exploring the use of video conferencing. However, he says that some of these businesses will find that some of the “free” services will lack the professionalism or additional features that a product such as Blue Jeans can provide.

Where Blue Jeans wins over its customers, continues Irving, is in the quality of image and stream, the ability to integrate multiple locations into one call, share documents or screens and, perhaps most importantly, the fact that it doesn’t require all users to be using the same system.

“Some customers find it can be a false economy to use a cheaper video solution where this means they are sacrificing other benefits,

such as quality and reliability, which can lead to a poor customer experience, wasted time or missed opportunities,” Irving says.

Telstra also points out that Blue Jeans can integrate with existing investments in systems from traditional vendors such as Cisco and Polycom. And Irving suggests that in the case of large enterprises, they would most likely stick with their enterprise-level systems.

“I certainly see Blue Jeans being a great fit for that small to medium business market, however for some larger corporations, Blue Jeans may not meet their needs for all purposes. For instance, the board or senior leadership team meetings are more suited to the high end quality and real time presence of a Polycom or Cisco Live,” says Irving.

“The thing about video conferencing is that it is becoming mainstream and I predict will be one of the next boom areas of technology for business.”

Another company that has decided to partner with a cloudbased newcomer for video conferencing is Sydney-based Broadreach Services. Broadreach has been providing high-end video services to the corporate and carrier market since 2001 and has its own dedicated video network operations centre for video conferencing staffed around the clock.

It recently tapped Norwegian headquartered Videxio as its partner for cloud-based services, which will be targeted at large enterprises.

Broadreach Services CEO Matthew Griffiths says that the future of video conferencing is already here, and in the consumer and SME market it's rapidly working on free or at least lowcost models. “There's no question that the future of video conferencing is in the cloud,” says Griffiths. “For the small scale, SME stuff, the future is already here.

In the large enterprise space, however, there is an expectation that there is better management.”

He notes that most of the cloud newcomers offer support on a self-service basis. “We thought that's nice, but as an enterprise I don't want that. We want to take the customer through compliance, security and so on.” As a result, Broadreach has launched its own cloud-based product, MeetSmart, specifically targeting the enterprise and leaving the low-end market to the likes of the Google Hangouts and Blue Jeans of the sector.

MeetSmart comes in three service flavours: a public cloud version available for a flat monthly fee, as well as a hybrid cloud for larger enterprises and a private cloud version for companies and departments with more than 1 0,000 users.

“Unlike traditional public cloud offerings most of us are aware of, MeetSmart provides larger organisations with a fully managed, cloud-based video conferencing solution that removes complexity and allows users to quickly connect from wherever they're located using anything from a room-based system to a mobile device,” says Griffiths.

He points out that MeetSmart’s private cloud implementation ensures corporate security levels are maintained while retaining the benefits of simplified provisioning and monthly billing. The hybrid implementation, meanwhile, combines an on -premise call control platform with additional capability hosted in the public cloud.

Recent research by Ovum suggests that one-third of businesses surveyed are already using professional, business-grade video conferencing services, with an additional 34% expecting to use it in the next 12 months.

Add to that the proliferation of free video offerings in the consumers space, and it would seem that video conferencing could be finally matching its potential with takeup – almost 80 years after it was first introduced.

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The Trojan horse of change: Australia gets on board a global telco startup push Australia’s two largest telcos are publicly stepping up their support for early-stage startups – in common with industry peers across the world. But how can big carriers interface, in practice, with tiny fledgling companies – and how should they measure the success of their investments, when material financial gains could take years to pull through? Petroc Wilton reports.

T

elstra CEO David Thodey last month told a packed meeting of the Australia Israel Chamber of Commerce that the onus was on enterprise, not government, to truly drive the transition to a digital economy. Key to that, he argued, would be telcos and other large companies encouraging startups and entrepreneurial behaviour, leading a cultural shift to drive Australia’s reputation for innovation onto the same page as Silicon Valley and Israel itself.

Thodey’s speech came just a few weeks after Telstra itself launched a new program, muruD, specifically tailored at supporting very early stage startups. And arch-rival SingTel Optus plans this year to step up the activities of its own Innov8 Seed initiative, kicked off two years ago and geared along similar lines.

Australia’s two largest operators join a growing number of telcos across the globe who are either launching new startup support systems or further developing well-established programs.

Telecom Italia announced in February a new seed investment fund of €4.5million, building on an existing program established in 2009. Spain’s Telefonica unveiled a €300m international VC network in 2012.

Each of Thailand’s three big mobile players has their own startup support program; AIS, the largest, brought in representatives from SingTel Innov8 to launch a new ‘Regional Seed Network’ late last year. Telecom New

Zealand’s Digital Ventures arm will this year help back accelerator program Lightning Lab 2014.

In the US, AT&T and Verizon have years of history with startup development. South Korea’s SK Telecom announced last May that it would spend 1.2 trillion won, over US$1 billion, in the ensuing three years to back emerging ICT companies.

Ovum telecoms consulting practice head Nigel Pugh suggests that while telcos are keeping their

AT&T’s Abhi Ingle

standard product development going, they’re decreasing spend on internal research labs and instead investing in these venture arms. Certainly, given the challenges operators now face to their traditional revenues and the beatthem-or-join-them pressure from agile, innovative over-the-top services players – many of whom were themselves startups not so long ago – there’s a clear commercial rationale for an interest in early stage incubation. But how in practice do monolithic national carriers, established over

decades or longer, interface with tiny, agile newcomers to ensure that both sides can benefit?

And, as debated at this year’s Mobile World Congress in Barcelona, how do those carriers measure the success of investments that may not show a short-term material return on a balance sheet or P&L? It’s important to note that telcos buy into new companies at different stages of development, not just at initial germination.

Telstra, for example, has also made larger investments in companies established for several years such as video specialist Ooyala.

But in the critical early startup phase, Ann Parker – co-founder of muru-D and a veteran of Telefonica’s accelerator program in Europe – says that it’s vital not to smother a new company. “[We’re not] going to just slap a Telstra brand on it and make it part of our standard products and services; if we did that, we’d probably kill it within about five seconds,” she says. “What I’ve found from my experience of startups so far is that, within the first year or two of their nascence, what they need the most help with is... proving that their business model works. And the way that somebody like Telstra can get involved with that is to help introduce them to the right potential trial customers... bringing in the expertise that we have within our subject matter expert teams, giving that advice, and then [helping] the staff move on and get to the next stage...

[which] will be a series A round, or maybe even pre-series A. Some of these teams are going to look at something between A$200,000 -500,000 as their next round of funding.”

“We put A$40,000 in, we take roughly 6% equity in each of the businesses and then we spend six months doing that business model proof... that proves their trial or [proves to] their first stage of customers that it really works... to give them enough data points to get another investor to part with their cash.”

Optus Innov8 works at a similar level. As associate director Alfred Lo explains, while it’s part of the SingTel group’s corporate venture fund Innov8 – which typically makes investments globally in the series B or C funding rounds – Optus Innov8 Seed focuses on the pre-series A round.

“What that means is tech startups looking to raise A$500,000-A$1 million in that round of funding,” he says. “Before we got into the space in late 2011, we looked at the ecosystem quite carefully to see what the lay of the land was, who the players were, what the problems were and where we at Optus could best help and fit.

We spent about eight months figuring that out, and it went through a number of iterations where we sponsored events [or] co-working spaces... [but] there was, and still is, a big issue around that A$500,000 phase... we [decided] we could help the ecosystem the best there.”

“We invest up to A$250,000 dollars in that first seed round, we’ll take a minority stake... our investment thesis mandates us to co-invest. I think it’s quite a unique aspect to what Optus Innov8 seed is; seldom are you able, as an angel investor or otherwise, to invest alongside a corporate the size of the SingTel group.”

PICKING WINNERS: Of course, there’s a challenge in picking the right startups in the first place. While Optus and Telstra’s early-stage startup initiatives

are still fairly new, AT&T in the US has a long track record in the space; ecosystem and innovation VP Abhi Ingle explains that the firm’s approach has changed markedly with time and experience. “We initially explored the startup ecosystem by tapping into relationships that we shared with venture capitalists. Our goal was to canvass as much as possible to get a clear lay of the land. We

“We now focus very thoughtfully by vetting each company in detail rather than casting a wide net.” did this by sponsoring many fast pitch-like events where we could meet with many different companies in a short amount of time,” he says. “Over time, we have become much more deliberate and proactive in our outreach approach... as a result, we developed a set of categories of interest that we call “domains” representing strategic areas of importance.

We now focus very thoughtfully by vetting each company in detail rather than casting a wide net. While we still leverage VCs and fast pitch events, we now favour focused discussion with carefully vetted companies. We find by doing this we are able to gain a deeper perspective on each domain/technology, and can react faster with the right business leaders to develop proof of concepts.... we now ‘land’ projects for our core business up to three times faster than we did with our previous approach. This translates into getting solutions to market in weeks or months instead of quarters or years. That’s a big change.”

And while Telstra’s muru-D is only a few weeks old, Parker sees the possibility for future development along similar specific lines. “[There could be] some specific problems that Telstra had within its supply chain or within its retail footprint and [we could say] ‘here’s all the data: go for it,

startups, see what you can come up with in terms of solutions!’” she says.

“So they’d be coming up with solutions to real-life problems that Telstra has today. Or it could go another way; perhaps in we could specifically [run a funding round] for just M2M startups, or startups in the enterprise-grade software space. We might end up looking at specific lines of business that we want to go down.”

THE TELCO EDGE: But are telcos particularly well-suited to help startups – and what can they, in particular, offer that another large enterprise might not?

“Every corporate has a way that they can interact with startups; I guess the core is that you need to make sure that the experience you’re bringing, and the value proposition you’re bringing to startups, is that you genuinely do have experience that can help accelerate them,” says Parker.

“We are specifically wellplaced to help startups in the space of mobility, enterprise solutions that involve ICT in some shape or form; as long as it’s digital, we can absolutely help; we not only have the experience, but the core network to then make the most of innovative digital ideas.”

For AT&T’s Ingle, a key point is access to network functionality and intelligence. “Our value to startups is in helping them use capabilities of our network to enhance the experiences of both their and our customers... AT&T has an open network and set of shared platforms/APIs to complement its technology and services, which is something that makes [us] unique,” he says. “We’re now generating more than 8.75 billion API calls per month (as of Jan. 2014), which is unequalled among telecom carriers.

“AT&T can also provide endto-end dedicated solutions in conjunction with startup solutions.

We can also provide elements such as network, security, virtualized cloud, and/or our open de-

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veloper API platform (exposing technologies such as SMS and speech capabilities) that start-ups can take advantage of – and they are.”

Optus Innov8’s Lo notes that telcos are already well-used to a mix of competition and cooperation with partners such as online players, which translates readily into the startup arena. “We play on a similar playing field – you could call it co-optetition – with a lot of the things we do in telco land,” he says. “By doing our corporate venture activities, we can only strengthen our ability to play and to be relevant, and form partnerships – and hopefully come out on the other end a stronger organisation.”

Perhaps the biggest challenge for telcos backing startups, though, is getting internal buy-in across their own organisations – and for initiatives that may not yield big results, in financial terms, in the near term. At MWC this year, Google Ventures partner Rich Miner was quoted

by Australian media as warning that telcos’ venture funding would not result in significant balance sheet benefits – unless they were prepared to significantly disrupt their traditional revenue streams.

Optus’ Lo certainly agrees that, a few years in, it’s too early for Optus or its SingTel parent to have seen a material gain from Innov8’s activities. “The benefits have [so far] been more on the side of the startup, not just through our money but also through our connections and so on. Early-stage startups aren’t going to be quite ready to interface with a corporate just yet; Optus or the SingTel group really haven’t benefited materially,” he says.

But for Lo, it’s a longer-term game, with some of the rewards coming from agility and innovation in a rapidly changing business environment. “I believe that all corporates, in the future, will have some form of corporate venture functionality in their busi-

ness – just as business as usual. I think all business models are being affected, and disrupted to a certain extent,” he says.

Nor, for that matter, is the telco’s end of the deal necessarily measured on the same ledger as more traditional investment.

“We have found that collaborating with established and startup companies to rapidly prototype is more beneficial to all parties than

“We have found that collaborating with established and startup companies to rapidly prototype is more beneficial to all parties than financial investments” financial investments,” notes AT’T’s Ingle. “ In some instances, where a start-up may not be core to an area of AT&T, we assist in introductions to our collaborators or VC contacts so they may consider investments. In fact, we will take warrants in companies that we do early stage work with on a case by case basis but that’s a side consideration and not the core reason why we work with them. Our involvement with startups tends to be more handson, so the value we provide to the startups is not just potential to buy their product but meaningful product design feedback that can help them build truly best-in-class products.”

Muru-D’s Parker suggests that the metrics for evaluating the success of telco startup programs need to be different across the board, in order to get crucial internal support from the top down that’s ultimately necessary. “We do have all of the board fully behind this; it’s a multi-year business case and I’m not being measured on the standard, core things that you would expect” “When we get into the third year of the program, I would be disappointed if those metrics haven’t changed – I would

change them for myself! Three years in, we should have upwards of sixty startups in the program... [we would look at] how many were still going, how many had secured significant rounds of funding and how many were actually growing without the need of funding.” “[But] what you can do [in the meantime] is measure the value that a muru-D adds in different ways... we can point to not just the nine startups that we’ve invested in so far, but the 25 that we took through two days of coaching before we selected the final nine, the top 50 that the Muru-D management team met face-to-face... we helped [those] startups to refine their pitch, refine their product, refine who they are and what they do. On top of that, we’re galvanising more mentors to get involved in the startup scene, which is also a great thing for the other startups that already in the space... and if we can inspire other corporates to get involved in startup-land, then again, everybody wins.”

And ultimately, adds Parker, the benefits aren’t just in the products or services that might eventuate, but in a cultural shift within the telco itself.

“What happens when these [mentors] come in from [Telstra’s] cloud services team, or the M2M team, or the cloud services team... is they spend two hours with extraordinary people, people who have no concept of ‘fail’! They are extraordinarily motivated and passionate to want to change the bit of the world they’re passionate about,” she says. “That is infectious; when those Telstra folk then take that experience back into their day jobs, that sort of things spreads.

If we can spread that culture... that drive to want to be better and make a better Australia, that’s a fantastic thing for us to foster within our company as well. That’s obviously harder to measure – I talk about it as a Trojan horse of change!”

Hold the line?

AT&T has taken a significant step away from the legacy of copper-based fixed-line telecoms, submitting a plan to the federal regulator to trial the decommissioning of the copper-based network.

William van Hefner reports.

A

T&T has submitted a plan to the Federal Communications Commission for trials set to simulate what tomorrow's telecom landscape may very well resemble, as existing wireline carriers abandon their copper networks in favour of fibre optic and wireless deployments.

For the trials, two communities were hand-picked by the company for transition from existing copper TDM networks to a combination of offerings that represent both AT&T's most advanced FTTH products and least advanced (and least expensive) fixed wireless offerings.

AT&T has stated that the communities of Carbon Hill, Alabama and West Delray Beach, Florida were picked largely due to being located in states that are lightly regulated. Each community also provides a sort of bestworst case scenario in terms of profitability. Carbon Hill is a rural community with a low population density, challenging terrain, high unemployment and most likely nominal profitability. West Delray Beach, by comparison, is a more affluent retirement community that has already attracted competition from a number of providers due to its greater potential for profitability.

But the trials may very well highlight the stark contrast between future telecom consumer ‘haves’ from the ‘have nots’ – and

indicate just how far the Commission will allow wireline carriers to go when it comes to cherrypicking their most profitable customers while leaving less fortunate ones in a position of losing access to telephone service altogether.

Phase one of the project is scheduled to be completely voluntary, with no consumers being forced to switch from currently offered services. Phase two, which will only be implemented after

the FCC itself has not yet indicated whether such promises will become policy. In a recent statement on the trials, AT&T federal regulatory VP Hank Hultquist stated that “we will not move to Phase 2 until everyone has a solution.” However, AT&T lawyer Christopher Heimann quickly added “that solution may not come from us.”

One number that clearly stands out in AT&T's ‘Proposal for Wire Centre Trials’ is that of

the FCC's review of phase one results, will gradually allow the phasing-out of current TDM voice and data services offered by the company in favour of exclusively IP-based offerings.

Although AT&T insists in its proposal that it wishes to leave no current consumers behind,

existing customers in the Carbon Hill area that it has no plans to continue servicing. At 4%, the projection only takes into account how many customers will not continue to be offered phone service, rather than how many can actually still afford it. Unlike traditional wireline services,

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AT&T's-IP based services are not subject to state regulation or price controls.

In fact, AT&T plans to discontinue offering state-subsidized Universal Lifeline Service as soon as its customers have access to the new offerings. With 21% of the area's residents currently living below the national poverty level, the number of those who will be left in the dark for all practical purposes will likely be substantially higher than the 4% projected.

While AT&T cites a number of licensed carriers in the area that offer potential competition via wireless service, despite its status as the nation's second largest wireless carrier AT&T itself finds it impossible or impractical to serve this last 4%. Assuming other wireless players are similarly unable to reach them, the only possible solution for those who want to maintain basic voice services (or data) in these areas would be satellite-based telephony. However, at present, satellite telephone service is beyond the economic reach of the vast majority of American households.

PHASE TWO: While phase one of the proposed trials will be aimed solely at solving marketing and technical issues, phase two should shift the trials squarely into the arena of politics. The Federal Communications Commission, which is staffed by White House political appointees, has not yet indicated whether or not it will allow wireline providers to permanently discontinue service to existing customers.

With the vast majority of those losing access to phone service likely living in rural or economically disadvantaged areas, politicians are hardly in a hurry to confront this issue. With midterm elections in 2014 and an election for a new president in 2016, it is perhaps not surprising that AT&T has chosen 2020 as its target date for permanently decommissioning all services on its copper-based network.

While traditional roles of the FCC have included safeguarding

consumers, preventing monopolies and granting frequency spectrum assignments in a manner keeping with the public good, over the years the commission has largely become a revolving door for high-powered telecom industry insiders, well-connected presidential campaign donors and registered lobbyists. The current chairman of the FCC, Larry Wheeler, has the distinction of

Over the years the commission has largely become a revolving door for high-powered telecom industry insiders, wellconnected presidential campaign donors and registered lobbyists. not only being one of the current president's largest campaign contribution bundlers, but of having formerly acted as a registered lobbyist for both the cable and cellular telephone industries.

Wheeler is also one of the greatest proponents of moving forward with trials such as the one submitted by AT&T. The overall Commission unanimously approved plans to move forward with these trials by a 5-0 vote in January 2014.

While those who fit into AT&T's plans for fibre expansion are poised to gain access to a wide array of additional services, increased speed and proven reliability, the company's fixed LTE phone service has yet to be proven a reliable alternative to POTS. A long list of potential technical problems regarding the company's proposed fixed home wireless service have yet to be ironed out. Emergency 911 location standards have not yet been established, hearing aid compatibility is largely untested, interfaces that work reliably with home alarm systems, medical equipment and fax machines are sparsely available and previous attempts at implementing similar technology by the nation's largest wireless carrier Verizon have had

mixed results, at best.

There is another limiting factor on AT&T's fixed wireless service: speed. The company projects that its new fixed LTE wireless service can provide maximum broadband speeds for data subscribers of 5-12Mbps. But unlike DSL, which is already offered at similar speeds across most of the company's existing wireline network, AT&T's current LTE plans impose much higher fees, significant caps on usage and pervasive bandwidth throttling for those attempting to use the service as a primary internet connection.

With cable companies in the United States commonly offering broadband speeds of 20100Mbps, AT&T's fixed LTE service would seem to be a dead-onarrival product for any household with access to competition. For those left without access to any other form of basic telephone service though, it could well prove to be a long-term goldmine for the company.

Not only would a move to fixed wireless sharply reduce existing network repair costs, but the lack of any serious, existing government oversight in regards to pricing or reliability will allow the company to maintain the country's traditionally high wireless rate plans while shedding itself of thousands of unprofitable customers.

Once the trials begin, only the Federal Communications Commission itself would be poised to step in and provide a lifeline to those who’d be sure to lose telephone service otherwise. With the Commission currently being stacked with leaders who have strong political and economic ties to the telecom industry, though, it seems likely at this point that poor and rural consumers could be at risk of being left with few, if any, options when it comes to retaining access to even the most basic of services.

AT&T hopes to gain final FCC approval to begin phase one testing as early as May of 2014.

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The rise and rise of TD-LTE TD-LTE has gained solid traction in the industry as a contender for the 4G market, promising easier access to spectrum, potentially superior performance, and the backing of the world’s largest mobile operator China Mobile. But while on the one hand TD-LTE represents the real potential to tap into new spectrum to add fresh capacity to existing 4G networks, most investments into TD-LTE and even hybrid TD/FD-LTE networks have yet to deliver on those promises. Tony Chan reports.

W

henever there has been more than one standard in the mobile industry, it’s always been a high stakes game, with both winners and losers.

Remember the first digital mobile systems? Remember TDMA verses CDMA verses GSM? Remember the 3G wars between cdmaOne and cdma2000 and WCDMA? Remember WiMax? Standards that gain the backing of the industry gain market traction and become booming businesses ecosystems for those companies that back them.

Standards that don’t make it usually end up wasting huge industry investments in research and development, network deployment and, ultimately, failed services.

For vendors, it’s a high stakes game with billions of dollars on the table. Back the wrong standard and they risk heavy losses or even bankruptcy.

Even those companies that can afford to back multiple standards end up having to write off hundreds of millions of dollars when a technology – WiMax being a prime example – heads towards obscurity.

The place at the table for operators costs no less. Not only could they lose hundreds of millions of dollars betting on the wrong technology with network rollouts that fail to attract customers, but they could be left behind in the market as their competitors come to market with superior services, more device selection and cheaper handsets.

The challenge is that the game isn’t always played with a single deck. A standards war is not always about the technical merits of the technology; the winner is often not the system with the best performance on paper, but the backer with the most money in the bank, and the widest influence in boardrooms and governments.

The cards were shuffled once again when two modes of LTE emerged on the market, both intended to provide 4G services.

On one side of the table is the frequency division duplex mode of LTE, essentially an evolution of existing cellular systems, which relies on two different frequency bands for the downlink and the uplink. On the other is the time division duplex mode, with its roots in WiMax and China’s own 3G standard TD-SCDMA. While both modes of LTE use orthogonal frequency-division multiplexing as the modulation method on the radio network, and have adopted the same IP core network architecture, the competition for industry mindshare, government support, and influence on spectrum policy has been very real It wasn’t much of a game at first. The FD mode of LTE quickly gained acceptance across the whole industry, including government regulators, vendors R&D, and operator commitments, stacking the chips heavily against TD-LTE. Even today, any reference to simply “LTE” typically re-

fers to the FD version, while the TD version of LTE requires the mandatory prefix “TD.” In this particular hand, TD-LTE was severely short-stacked in chips, while FD-LTE held a pair of pocket aces.

BIG STAKES: That was when TD-LTE pulled a joker out of the deck. China Mobile, which sat on the peripheral of the mobile industry because its third generation system was TD-SCDMA, began betting on TD-LTE. While China’s previous standards ploy – to get TD-SCDMA adopted outside the country– didn’t pan out, it was abundantly clear this time around the Chinese operator wanted in on the game.

The difference this time around was that China Mobile had become the largest mobile operator in the world. Its 800 million or so subscribers represent more than 10% of all global connections. Together, it and its two rival Chinese mobile operators account for 1.2 billion mobile connections, or over 17% of all global connections – a huge potential market for vendors in a time of rife uncertainty in the global economy. Suffice to say that when China Mobile came to the table, everybody knew the ante was going to go up.

All of a sudden, the TD-LTE camp – which had previously consisted mainly of the WiMax community that was still around as well as global vendors who

were hedging their bets on both sides of the competition – was rejuvenated. The game was on!

BIG BACKERS: In February 2011, China Mobile, Bharti Airtel, Softbank Mobile, Vodafone, Clearwire (now Sprint, which is in turn part of Softbank), E-Plus, and Poland’s Aero2 formed the Global TD-LTE Initiative, not only to give an official voice to TD-LTE, but also to make sure they got as much support from vendors as the FD camp.

Each member of the GTI had vested interests in seeing TD-LTE become a commercial 4G system.

China Mobile saw a migration path aligned with its TDD-based 3G network. Other members had large swathes of TD spectrum, some from previous WiMax ventures, and wanted to ensure a future roadmap for those assets.

More importantly, their voices were not just based on theories on paper. Many of the GTI’s members had deep technical roots stemming from years of working with WiMax, as well as a thorough understanding of both sides of the story via affiliates backing the other flavour of LTE. What they saw was a perfect storm. The skyrocketing adoption of smartphones was driving data traffic to new heights, while networks were struggling under the constraints of spectrum scarcity.

TD-LTE promised to solve both problems.

One of the key messages that came out of the first major GTI conference in November 2011 was the superior characteristics of TD technologies for supporting data. Because data traffic is often asymmetrical – skewing heavily on the download side – the GTI argued at the time that FD-mode networks’ use of symmetrical spectrum was inefficient for supporting data.

The group pointed out that TD-LTE could configured to allocate more resources to the downlink, hence matching more closely emerging user profiles.

At the same time, the adop-

tion of TD-LTE promised to open up new spectrum bands for the operator community to add fresh capacity on their networks.

More importantly, the GTI preached convergence and synergy of the two LTE modes, unlike the previous winner takes all approach. So instead of looking to take the entire pot, GTI members laid out a roadmap that coupled what they saw as the technical

“One of the factors in TDLTE’s success has been the fact that it has grown beyond being ‘China-only’ tech” and commercial benefits of TDLTE with the industry momentum behind FD-LTE. A year after it was formed, the GTI was able to garner enough support to announce multi-mode chipsets that supported both modes of LTE. By the end of 2012 – scarcely a year after the formation of the GTI – the world saw the first converged TD/FDLTE network from China Mobile’s Hong Kong subsidiary, using equipment from Ericsson and ZTE. BEYOND CHINA: TD-LTE and the GTI have had a tremendous run since, succeeding far beyond the requirements of the original membership list, or even those of China, the world’s biggest mobile market.

“One of the factors in TDLTE’s success has been the fact that it has grown beyond just being a ‘China-only’ technology. Indeed the first commercial TDLTE networks did not come from China, but from operators in Japan, Europe, and the Middle East,” says the GM of AlcatelLucent’s LTE business unit Glenn Booth. “What is clear is that TD-LTE is a global technology driven by new players coming to the market, existing operators looking to augment FDD spectrum, and existing operators finding a synergy of TD-LTE with ex-

isting networks.”

According to the Global mobile Suppliers’ Association, there are now 30 commercial TD-LTE deployments in 21 countries with an additional 45 TD-LTE network commitments planned. On top of that, there are now over 300 TD-LTE devices on the market, including smartphones, dongles, portable hotspots, and tablets.

TD-LTE’s raw numbers still pale in comparison to those for FDLTE – launched by over 250 operators in close to 100 countries and supported by over 1,000 devices – but they nevertheless represent an ecosystem.

“While it is true that TD has a smaller ecosystem compared to FD this is in part due to the head start that FD-LTE deployments have had,” says Booth. “We are already seeing strong device support and wireless technology adoption in support of these TD networks. Chipset and device vendors have come out in support of the technology.”

That said, it’s clear that TD-LTE still needs to prove itself in the real world. So far, deployments have been piecemeal, often involving isolated networks launched inside a single market by operators testing the waters in performance and market feasibility. At this point, TD-LTE is very much in the experimental stages and still waiting for a major commercial success.

FDD/TDD CONVERGENCE: One experiment that might yield such a result is China Mobile HK’s converged TD/FD-LTE strategy; the operator has built an overlay TD-LTE network on top of its FD-LTE network.

The idea is to allow its subscribers to access the network with the best performance under any given conditions, according to Ericsson CTO for Hong Kong and Macau Michael Lee. Ericsson is the supplier for China Mobile HK’s dual-mode LTE network along with ZTE. On paper, this should allow

China Mobile HK to offer superior data speeds compared to other FD-only 4G services in the market, since it now has extra capacity to deliver to users, who in turn can automatically access the best performing network. In reality, the converged FD/TD-LTE feature – the ability to dynamically switch between the two modes – is supported by a single commercially available handset, which has so far left the TD-LTE network more or less empty.

The handset situation will definitely improve, though. China Mobile HK’s mainland parent’s launch of a massive nationwide TD-LTE network is expected to generate shipments of up to 100 million TD-LTE handsets this year, including a TD-LTE version of the iPhone 5S. Whether or not these handsets will support both FD-LTE and TD-LTE might not even matter to China Mobile HK, since the ability to support incoming TD-LTE roamers from its parents might already justify the investment – both internally to keep China Mobile subscribers on its own network across Hong Kong and China, as well as commercially, in potential profits.

And few operators have the luxury of having the world’s largest mobile operator in the adjacent market guaranteeing an influx of TD-LTE users, and footing the bill at the same time.

RISKY BUSINESS: For other operators considering TD-LTE, however, the business case remains unclear. Most TD-LTE network rollouts today are motivated by spectrum availability rather than genuine commercial drivers, Ericsson’s Lee continued.

“Operators who have TD (unpaired) spectrum and no FD spectrum will have to roll out TD -LTE as their primary 4G network, while those that have both types of spectrum may consider doing TD-LTE next to their FDLTE network – like China Mobile,” he said. “So far, there are no operators that have elected to

go with TD-LTE as their primary 4G network over a FD-LTE network if they have a choice.”

Even major TD-LTE backer Softbank in Japan, which actually did launch TD-LTE before migrating its 3G network to FDLTE – mostly for regulatory reasons – has switched its focus back to FD-LTE as its main 4G offering. This is partly because FDLTE is typically seen as an evolu-

“Operators who have TD (unpaired) spectrum and no FD spectrum will have to roll out TD-LTE as their primary 4G network, while those that have both types of spectrum may consider doing TD-LTE next to their FD-LTE nettion of existing 3G systems, while TD-LTE services are often isolated by an ongoing dearth of multimode devices.

As such, it is typically easier for operators to convince their 3G subscribers to take on a FDLTE plan because the handsets are backwards compatible and work seamless with existing networks. With TD-LTE, users must be convinced to put their faith in a new network, one that is supported by a limited selection of devices, carries a high risk of spotty coverage, and offers significant challenges for international roaming in many areas.

Interestingly, one of the key advantages of TD-LTE – spectrum availability – is also its Achilles’ heel. In the past, voicecentric services generated symmetrical traffic, which was more efficient over paired spectrum. By the time TD systems arrived, FD systems such as GSM and WCDMA already claimed much of the lower frequency bands, which had the added benefit of better wide area coverage.

The majority of today’s TDLTE networks are deployed on the 2.3GHz, 2.6GHz, and even

the 3.5GHz frequency bands, which reduces the propagation distance of signals and further impacts the business case for a TD-LTE-only network, Lee added.

So not only are operators faced with a new technology, but they must roll out more base stations for the same coverage as most FD-LTE nets, pushing up cost and complexity in the initial deployment.

PERFORMANCE BOOST: However, all those impediments to TD-LTE might not matter because its primary purpose has evolved. For the vast majority of the industry, TD-LTE will be used to supplement existing 4G networks.

According to Alcatel-Lucent’s Booth, TD-LTE is “suitable for augmenting wide coverage provided by FDD networks… and for providing capacity in hot spots which fit well with small cell solutions.”

Indeed, this ability for TDLTE to supplement the capacity and improve the performance of existing 4G services is a key driver for operators.

A Nokia Solutions and Networks demonstration for offloading traffic from FD-LTE onto TD -LTE and load balancing the two networks shows marked improvements in user experience.

According to NSN head of TD-LTE marketing Ashish Dayama, users were able to enjoy as much as a 4x improvement in peak throughput with a TD-LTE traffic offloading solution working alongside a FDD LTE network.

More importantly, Dayama points out that TD-LTE’s use of unpaired spectrum means its brings up to 150MHz of new spectrum for 4G services in many markets.

The extra spectrum and the capacity it enables can dramatically change the competitive landscape for 4G, which relies heavily on spectrum for capacity, according to a recent report by Strategy

Analytics.

The researchers highlighted this trend in the US with Sprint, which launched the Sprint Spark in the hope of supplementing its FD-LTE network with TD spectrum it got through the Clearwire acquisition.

“Before the Spark program launched, Sprint was lagging behind its competitors in the race for speed and capacity since it had only limited spectrum in the FD bands – only 2x10MHz at 1900MHz and even less in the 800MHz band from the old Nextel iDEN network – for LTE deployment. This initially made Sprint less competitive than its rivals in terms of coverage, data speed and network capacity,” wrote Strategy Analytics senior analyst Guang Yang.

“The TD spectrum in the 2.5GHz band that was previously owned by Clearwire… now becomes a powerful resource for Sprint to catch up to its competitors. Sprint can use this band – all 160MHz available – to provide super high speed data connections.”

2GBPS: As pointed out by Yang, the potential impact of TD-LTE doesn’t stop with extra capacity.

TD-LTE can actually tilt the field in favour of some operators. Because of the lacklustre success of previous TD-based technologies, TD spectrum was not only cheap, but more abundant. Carriers who have invested in TD technologies previously are typically sitting on a large block of unpaired spectrum.

With the continual evolution of LTE towards LTE-Advanced, the emergence of carrier aggregation and multi-carrier aggregation means that all those spectrum assets can be brought to bear on an operator’s 4G service.

Already, operators have rolled out dual-carrier aggregation for FD-LTE and have partnered with vendors to demonstrate multicarrier, dual-mode carrier aggregation. NSN and Huawei have shown that operators can com-

bine different FD and TD spectrum blocks into a single LTE network.

For Korean operators, it was a matter of staying ahead of the competition. While both SK Telecom and KT took pride in leading the world in launching carrier aggregation on their FD-LTE networks, both had access to limited FD spectrum. In the case of SKT,

“The TD spectrum in the 2.5GHz band that was previously owned by Clearwire… now becomes a powerful resource for Sprint to catch up to its competitors.” it owned a total of 80MHz of paired (2x10MHz, 2x10MHz, 2x20MHz) spectrum, which when combined would yield a top download speed of 300Mbps.

Without the ability to combine TD spectrum into the mix, SKT would have been stuck at their current level unless they’d been able to get their hands on more FD spectrum. Multi-mode carrier aggregation means SKT can now tap into new spectrum – and additional network carriers – to boost speeds, which was exactly what the carrier demonstrated with NSN. For someone like Sprint – and its new parent Softbank – meanwhile, the emergence of TD/FD carrier aggregation could yield a massive competitive advantage.

By aggregating over 100MHz of TDD spectrum, Sprint can theoretically offer speeds far beyond the scope of existing 4G services.

In trials with NSN, Sprint has achieved data speeds as high as 2.6Gbps by leveraging 120MHz of its spectrum. That kind of speed is unattainable for traditional FDD LTE networks since the typical spectrum allocation for most FDD licenses is set at 40MHz, or 2x20MHz paired – and would put a pair of aces in Sprint’s hand if it were able to actually commercialise such a service. But in any high stakes game,

a pair of aces doesn’t automatically guarantee the pot.

The fact remains that Sprint and its parent Softbank still need the support of the rest of the industry. Carrier aggregation is still in its nascent stages, with only a handful of handsets that can actually tap its full potential at the moment. And while multi-carrier aggregation and multi-mode carrier aggregation have been demonstrated in the lab, it will be a long time before the capability is incorporated into handsets.

While there is every reason for the industry to support these evolved technologies, Sprint’s situation is still pretty unique. Few carriers in the world have that kind of spectrum to play with – only a handful of carriers around the world have anywhere near 100MHz of TDD spectrum.

So even if Sprint invests the money to roll out such a highspeed network, it still needs to convince someone to invest in the chipsets and the handsets that can actually take advantage of it. And even if it succeeds, the price and selection of handsets may prove an impediment since devices would likely cost more, and be fewer in selection. More importantly, it is highly unlikely that Sprint will be able to charge more for the capability, at least for the mass market.

CHECK, BET, OR ALL IN: In fact that is the important question surrounding TD-LTE. Can it justify the investment, give operators an edge in the market, and generate a return? Most vendors say it is a given.

Yes, the technology is still evolving and its potential benefits are well documented, at least on paper, but just because a player gets dealt a pair of aces doesn’t guarantee they will win the pot.

After all, the table hasn’t yet seen the flop and anything can happen. For operators, this is the time to read the market and decide, “check, bet, or go all in?”

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Yes, I/we want to attend the CommsDay Summit, Futures Workshop and RockAid events. MEGATICKET has a value of $A1507, but costs just $A1177 including GST, a 22% discount.

This ticket gives me: * admission to CommsDay Summit including lunches on 8 and 9 April * admission to 20/20 Telecom Futures Workshop on 7 April * admission to Telco Together's RockAid event on 11 April evening at Bristol Arms Hotel, Sydney

[ ] MEGATICKET Registration per delegate: A$1177 inc. GST OR

[ ] Yes, I/we want to only attend the CommsDay Summit on 8/9 April. Registration per delegate: A$1097 inc. GST [ ] Yes, I/we want to attend the 20/20 Telecom Futures Workshop on 7 April Price PER DELEGATE Registration per delegate: A$397 inc. GST

AND [ ] I would like to attend the CommsDay annual dinner at 7pm Tuesday 8 April: A$187 inc. GST

Name ____________________________________________________________ Company _________________________________________________________ Phone No ________________________ Email ___________________________ Address ___________________________________________________________ __________________________________________ Postcode _______________ Names of other delegates _____________________________________________ __________________________________________________________________ I want to pay by: [ ] Mastercard [ ] Visa [ ] Amex [ ] Diners [ ] Invoice me Name on card ______________________________________________________ Card Number ______________________________________________________ Expiration Date _______________________ Signature _____________________

TO REGISTER:   

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Fax this form to 02 9261 5434 (+612 outside Australia) Phone Sally Lloyd at 02 9261 5435 Email Sally at sally@commsdaymail.com Register online for CommsDay Summit at http://bit.ly/TqNFRu

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