I’ve got good news for providers of wireline broadband services and their equipment vendors: Mobile isn’t going to destroy wireline!
Actually, nobody who took the time to think about the reality of mobile infrastructure ever really believed that. But the comment does offer some opportunity to look at two aspects of broadband evolution—and “two aspects” is relevant, because it’s become clear we have two interdependent broadband futures and not just one.
Mobile services are an RF-based extension to metro infrastructure. You pipe bits to a tower and beam them into space, and because of fundamental physics, you can’t push infinite bits over RF. That means you need to have multiple towers to serve a large population of users; even then, a large concentration of users in one geographic area will limit what you can deliver to them.
A Long-Term Evolution (LTE) cell might support 100 Mbps of aggregate bandwidth, which means 20 streaming HD videos even in a smallish form factor would totally consume the capacity. To supply more, it’s more antennas and more backhaul. To illustrate the point, if you wanted to offer the hypothetical 100 Mbps per home capacity using wireless, you’d have to give every user an antenna and a backhaul, and the result would look suspiciously like wireline broadband with a Wi-Fi in-home network.
So we aren’t going to replace our streaming 3D TV wireline feeds with mobile. But obviously we’re not going to drag fiber optics behind us as we commute or go out to dinner, either. Continued »
Ericsson deciding to buy Telcordia and Amdocs agrees to acquire Bridgewater suggest that vendors are starting to get a clue about the service layer. Level 3 working to become a content delivery networking play suggests that it understands it has to step its game up to remain competitive in the new networking world.
So where does this leave us with Ciena?
Here’s a company that, any way you look at it, is just a bit-pusher. The lower layers of the network can’t be convincingly linked to personalization—they can’t afford to be made aware of users and activities or they won’t scale and contain transport costs. That means that they’re on the road to even deeper commoditization, and that’s problematic.
It’s particularly so for Ciena because they told the Street they planned to increase margins significantly over Street estimates. Sure, they didn’t offer an aggressive or firm timeline, but they’re making a promise that they cannot possibly keep unless they plan to either buy or build their way out of the optical layer. So where would they go? They couldn’t expect to climb up to Ethernet and IP. First of all, there are a million big incumbents there; secondly, that space has its own margin/features problem.
Oh, well. At least they’ll have company from RIM—the classic example of how a company can stick its head in the sand and accomplish nothing, other than perhaps getting infested with ants.
RIM had an absolute lock on business mobility because they had a lock on the handset/appliance space for businesses with BlackBerry. But they dawdled and fiddled and let their edge slip. They watched Apple take market share, and Android come on even stronger in terms of unit volume, and Microsoft and HP try to ignite their own business appliance programs. RIM’s counter? A shortsighted, ineffective, uninteresting tablet, which it gave an insipid launch.
So what do they do to recover? Nothing. It’s too late.
Level 3 has been gradually morphing itself from being an Internet backbone play to being a CDN play. Backbone revenue per bit is almost at the vanishing point, and that was the driver for the CDN role. Now the CDN role at Level 3 is changing into a broader role of content monetization support.
With network operators all targeting content monetization, you might think Level 3 is getting ready to be their partner. That would be a bad move for the operators in our view. Content monetization is a low-margin business, and you can’t afford to be sharing the wealth there. It’s also true that content monetization and overall service personalization are converging, which means that operators would need to share more and more of their other service data with a monetization partner to stay up with the market.
What’s likely to be happening here is simply a Level 3 reaction to an onrush of operator interest in “full monetization,” which would threaten Level 3’s CDN business if it didn’t augment its own features to match those of the operators. So we’re seeing a competitive move to validate our thesis that content monetization is not only coming, it’s rushing.
An interesting potpourri of tech events might be telling us something about the business future of tech in general and the networking space in particular.
Didn’t Ericsson just decide to buy Telcordia? Now we have Amdocs, the other giant in the OSS/BSS space buying policy-management player Bridgewater. On the surface, just like with Telcordia, this seems one of those enormous yawns. After all, Bridgewater makes policy stuff for mobile/IMS applications, and we all know what Amdocs does. But what makes this not only interesting but potentially earth-shaking is that OSS/BSS activities are SERVICE MANAGEMENT, and Bridgewater makes components for SERVICE LOGIC.
I’ve been saying for some time that in the new network, we need to combine these functions in some way, and I noted with the Ericsson/Telcordia deal that Ericsson just might have its eye on the converged service management space. Operators are telling me that they need a single conception of the service layer that integrates logic and operations functions seamlessly. They wanted the network vendors to provide it through a service-layer architecture. The OSS/BSS guys may now have their eye on the prize. Amdocs may also have its eye on becoming the next guy to be picked up by a big network vendor, too.
IBM, a company now known for computers but once in the more pedestrian business of time-clocks and scales, turns 100 years old today. If you consider this for a moment you’ll see that makes IBM perhaps the longest-standing tech success in all of history. Considering the tumult that it’s undergone (you don’t switch from scales to supercomputers without generating some stress), it’s success is even more remarkable. In a time when many tech companies seem to be floundering, it’s worth a moment’s consideration of how IBM managed to do what it did.
I’ve been involved with IBM in some way since 1964, and I’ve seen almost half its corporate life and much more than half of its life as a computer giant, so let me offer some perspectives that might help others who would like to see their own hundredth birthday.
- IBM was never hidebound. Early in its computer age, IBM released a mainframe based on what was the state of the art at the time. Within a year, a revolutionary new option was discovered. So did IBM feed off the revenues of its just-released product as long as it could and then bring out the new? No, it brought out the new immediately and wrote off all it had invested in that older model.
- IBM was always intensely aware of the buyer’s side of the value proposition. At every step in their sales and marketing, they supported the decision process from building the business case to installing the technology. This total-value-chain marketing meant that IBM had a truly unique multi-layered engagement model with the customer, a model that they’ve sustained for 50 years or more. A model that I argue no one else has ever successfully copied.
- Finally, IBM has always known the value of and the need for ECOSYSTEMIC technology. Computers and networks and appliances and other tech elements are not isolated boxes; they’re components of something bigger. A system of devices needs something to systematize it.
Look in contrast at IBM’s competitors. Sperry Rand, then Unisys, isn’t a computer vendor any more. NCR isn’t either. Digital Equipment Corporation was bought by a PC company. Compaq, which was then bought by HP is the only one of the early players still sharing the computing stage with IBM. But everything that IBM has done well, HP has done less well. HP has far weaker strategic relationships with its customers, and it has made what seems an endless series of critical blunders in tech evolution—WebOS might be the latest—and it has mistaken the adoption of a catchy slogan or two as the creation of an architecture and an ecosystem.
You could argue that Cisco, in the network space, is now at a crossroads, a point where it decides whether to be HP or IBM. Both HP and Cisco have expanded their portfolios without having a strong ecosystemic tie to link their broader line with broader value. Both HP and Cisco have hunkered down on low-margin products that are becoming lower-margin all the time, just because they are products they’ve become known for. Both HP and Cisco had charismatic management that everyone knew, but that built sales and company bulk without creating a longer-term model for success. So which road will you take, Cisco? Today would be a nice symbolic day to make that choice.
There was probably joy in finance-land when Ericsson made its move to acquire Telcordia. The company — formerly Bell Communications Research or Bellcore — was at the same time the “labs” of the RBOCs and the foundation for the support of and evolution of the classic vision of OSS/BSS. For years it has struggled with its conservative roots in a market where classic visions were increasingly irrelevant. It was picked up by a private equity player that clearly saw OSS/BSS as more exciting than most of us do. These guys are probably burning incense right now to acknowledge what could well be divine intervention in getting them out of Telcordia alive. They should be.
So does this mean Ericsson was dumb, and that this acquisition is simply a step on the slide of OSS/BSS into strategic irrelevancy? The answer to both questions is “Maybe, but then again, maybe not!” It’s true that there is little in all of networking as boring as an OSS/BSS. It’s true that OSS/BSS gives glaciers a run for their money in terms of inertia. It’s true that the OSS/BSS beat is where reporters go if they don’t believe in hell.
But it is also true that OSS/BSS is the business heart of service providers worldwide. Continued »
Well, Apple had its Worldwide Developers Conference (WWDC) and Steve Jobs was there, and for the Apple aficionados it was pure love. For the less indoctrinated, it was a bit of a yawn. The iCloud — Apple’s online storage and syncing service for music, photos and documents — does offer some new things, the most notable of which is an optional system to match on-system music to the cloud’s (better-quality) copy, and then let users then play the good stuff.
Some are touting this as a way of getting people to pay for pirated material, though 25 bucks a year per person won’t exactly stir the heart of the recording industry. Some think it rewards piracy by giving somebody a good set of songs instead of amateur-ripped copies for a low annual rate. And functionally, iCloud is still more of a locker. It’s not designed to stream stuff as much as to store it. And while it will make songs available to all a user’s devices, it downloads them on demand rather than streaming them.
The most interesting thing announced wasn’t really even iCloud, it was the addition of iMessage to the new version of iOS. This will let all Apple device users message each other in encrypted format, with receipts and so forth. There’s also improved technology to find others who are online, and if anything in the announcement could directly lead to a new service-layer threat, it would likely come from here. Continued »
This is the week of Apple’s WWDC, and everyone is watching to see what Steve Jobs will say about “iCloud”, Apple’s next-gen network service that might be anything from a simple music streaming strategy to an enveloping cloud concept for the consumer. While iCloud is critical to the future of network services in general and mobile services in particular, it’s not the only issue that’s exploding in the face of the operators.
Disney, for example, is going to start streaming content, and more cable MSOs are lining up to endorse the inevitability of usage pricing for wireline broadband. We’re at the beginning of what one of our survey operators (quoting Winston Churchill) said was “the end of the beginning” of the golden age of online content.
End? Aren’t we just getting started? No according to most operators and interestingly to some of the OTT players we’ve talked to. Pretty much everyone will acknowledge (in private, of course) that streaming media in any form is a play on the artificial pricing plan for consumer broadband. It makes no sense to charge zero for incremental usage of something that’s not incrementally free. Continued »
In the media space, Alcatel-Lucent has announced a tool that’s designed to help operators tune their delivery infrastructure to video needs. AppGlide Video Analytics is a combination of analytic tools and a pair of probe options, one of which is on the client device as a player plugin and the other at the server end.
Operators may or may not be able or willing to use the player plugin, but if they do, they can get specific information on how the video stream performed right to the point of consumption. The goal is to track video performance and fix problems that might impact video viewing quality and abandonment rates, both of which could be very important to commercial OTT content providers like Netflix or Hulu or to advertisers.
The way AppGlide is positioned makes it clear that Alcatel-Lucent is working hard to present its CDN strategy to operators and to help them differentiate operator-owned CDNs from the big commercial players. The former step is very logical; operators in our survey have made it clear that they believe that an internal CDN is an essential part of their content monetization strategy.
Based on the same survey, I’m of the view that differentiating versus commercial CDNs is less of an issue. Operators think CDN operators have their own monetization goals that are competitive with those of the operators. In any event, what I’m seeing in the operator world is an increased determination to deploy CDNs on their own, and that makes a vendor CDN strategy potentially important, even critical, if they hope to support operator content trends.
Cisco is announcing a new white-label managed service offering that’s designed to be resold by network operators (presumably Cisco customers) to rebrand for the SMB space. Cisco would provide the actual remote management resources. The move is yet another interesting slant on how Cisco thinks it can help operators, make more money for itself, and perhaps pull through more equipment sales. The question is whether it will work, and as you’ll see below we may have to wait for the precise details in order to tell.
It’s not that managed services are a bad idea, or that having vendors provide a white-label service or take a cut somehow from transactional services is untried. Alcatel-Lucent, for example, has promoted its Open API program as a means of supporting developers across provider boundaries without requiring special per-developer-per-provider relationships. It takes a cut of the fees associated with the APIs that the developers use. And managed services are on the rise, particularly for SMBs that can’t possibly retain a skilled staff when there’s so much competition for network experts. The problem is whether the operators see this as help or competition.
Most operators have their own plans for managed services for SMBs, and many have already offered them. They may well see Cisco’s offer as simply a way for Cisco to grab a piece of the revenue stream, a revenue stream the operator is fronting in retail terms. Cisco is likely to say that the deal will reduce operator costs and improve time to market, but the real question will be whether the cost reductions justify the revenue reduction, and whether the selling issues with the service overcome the time-to-market benefits.
The challenge here is that everyone wants to make more money in a market where both services and products are commoditizing. Services are a way to do that, but the buck starts (to play with words) with a single buyer. Users don’t build networks to consume products or services, but to fulfill their needs. Network vendors have been much worse than IT vendors at figuring out how to support the users’ value propositions in a way that’s also profitable for them.