AT&T is touting the value of home networking standard G.hn in supporting self-install home networks for triple-play. The real value of the standard lies in its ability to not only help reduce spurious field service dispatch where no carrier-equipment problem exists, but also in the possible support it could bring to managed home electronics services.
Operators like Verizon have already begun to offer users managed PC support. All forms of customer support are valuable and profitable immediately only if they can produce good support economies of scale. That means a lot of automated problem analysis and isolation, and that demands on-premises management agents.
We believe that the trend in the industry—both for consumers and enterprises—is toward managed services and that on-premises surveillance is key to making them work. There is also some interesting convergence between the Customer Experience Management activities, in which Telcordia has recently made an investment, and the broader issue of home network management and surveillance. It’s all likely related to the simple fact that surveillance might stop a truck roll.
The impending LTE rollout is creating questions about how voice will be handled, and the answer may have a big impact on the fortunes of vendors. There are three basic approaches being proposed by some operators: IMS/VoIP, using the 2/3G network for voice and 4G for data only (multimodal handsets), and a circuit-over-IP architecture called Voice over LTE via Generic Access(VoLGA).
Obviously the IMS approach would favor the big telecom equipment vendors while the others might admit a broader range of bidders. We’ve heard many operators voting for the fallback-to-3G approach because it would make handset transition easier since current smartphones could continue to operate on the current network, but there are potentially spectrum and cell issues to be resolved.
The IPO success of OpenTable last week may be an indicator that the Internet advertising bubble is bursting. There have been a host of ad-related IPOs this decade following up on the ever-popular “you don’t have to pay for…” theme that was briefly tried for Internet services in the late 1990s.
The economic downturn is blamed by many for the fact that nobody seems to be able to make the ad model work, but we believe that the initial bad experiences of advertisers with things like click fraud created a skepticism that manifest itself in demands for better metrics. That, in turn, has made advertisers wonder if they get what they pay for even where there’s no fraud involved, and that’s not an easy issue to resolve. More people are now stepping up and suggesting that people are going to have to start paying for stuff, something people actually resist less than the VCs do. Pay-for-service models look an awful lot like a service provider business model, after all.
Alcatel-Lucent is supplying technology for a new mobile advertising mechanism based on location and opt-in messaging. The idea is to locate users within a specified distance of a retail location and then send them text messages about special sales, etc.
This is a very positive development for Alcatel-Lucent because it demonstrates the company is prepared to take on service-layer issues on behalf of its customers and also to step in to help prevent disintermediation of operators by OTT players (Google Latitude comes to mind).
The LTE transformation appears to be gaining momentum, even though it still looks like no significant investment will be made until 2010. We believe that a major factor in this is the decision by service providers to adopt a smartphone-pull model for data revenue, a model that relies on the Internet and handsets to drive data growth and shift revenue to data-centric plans.
Unlike some previous walled-garden service plans, the smartphone model needs a lot of users and capacity to create additional revenue, and thus may be best approached with LTE. Too much near-term push on data, one operator tells us, would confront operators with the choice of either staying with 3G and risking an explosion in the number of cells, or forcing the buyers of 3G smartphones to upgrade en masse to 4G.
Femtocell plans are likely a good barometer here; operators have been talking up 4G femtocells and Motorola has now announced it’s focusing its femtocell work there. Our model says that 2011 will be the big year for 4G, which means that it will be important for equipment vendors to both prepare for that and address how to keep infrastructure spending up in the meantime.
Microsoft and HP announced a major partnership in unified communications (UC) building on HP’s ProCurve blades and Microsoft’s UC and collaboration software tools. The two companies articulated a vision of communications as something more virtualized than tied to an appliance, a story that’s not unlike that being told by Cisco and one likely to be advanced further by Oracle. The deal is most likely a part of the overall trend we’ve discussed before; IT and networking players are fighting for the middle zone of hosted service features where much of the future value of both networking and IT will lie.
AT&T and EMC are partnering to offer cloud storage service based on the EMC Atmos product set. The offering is called Synaptic Storage as a Service and appears to be targeted at enterprise applications like datacenter backup, but it is also likely a step by AT&T into a broader cloud computing offer. We’re hearing that Verizon has similar plans in the US, and that BT, FT, DT, KT, and NTT are also looking at storage and cloud computing internationally.
Cisco, to no one’s surprise, has expanded its Unified Computing System (UCS) positioning to the service provider market, taking advantage of the interest of operators in cloud computing for both a retail service base and as a foundation for creating distributed next-gen service features. Cisco’s positioning is likely to be a response to interest from IBM, Microsoft and HP in the space, but most of all a reaction to what Oracle is likely to do with a Sun acquisition.
The service delivery platform (SDP) market has been hamstrung to date by a lack of a mission beyond voice and a lack of a general feature-friendly architecture at the platform level. Cloud computing can provide the latter, and with a flexible platform, the need to find specific non-voice drivers for deployment is reduced because the architecture can do nearly anything, respond to any trend.
Cox is moving its DOCSIS 3.0 50 Mbps service into two areas where FiOS is available, creating another face-off between fast cable and FiOS. The two are priced similarly (cable is a bit cheaper), but FiOS has four times the upload speed. This creates an interesting dynamic. Verizon might find itself a promoter of the “no-caps” position simply because P2P hurts it far less than it does cable.
There is even some talk that telcos in general will be talking up unlimited access because it favors their architecture, just as higher download speeds favor cable over DSL. The question now is whether both parties will play chicken on capital infrastructure issues, hoping to force the other side into a costly investment they’d just as soon not make, or whether there is actually a longer-term division of customers ahead, where upload-centric users migrate to telcos and traditional downloaders move to cable.
Sprint is rumored to be looking at outsourcing its network management/operations to Ericsson, another data point in the growing number of management outsource deals. While there are certainly some potential savings involved in this sort of thing, we believe it’s actually pretty clear that savings per se are not the driver.
Sprint and other large operators are more than large enough to reach full operations economies of scale internally with the right tools and support. The problem is they don’t have that, and there’s no prospect of such tools arriving on the scene because of logjams in the standards processes. The outsourcing trend, in our view, is the result of long-standing operator angst about escalating operations costs and risk, and the lack of any systematic vendor support for new options to hold down costs.
By negotiating a deal with an outsourcer, operators can let the outsourcer do what’s needed, defying standards and other factors. In the long run, this may create an enormous advantage for vendors like Alcatel-Lucent, Ericsson, and NSN, which have large and successful outsourcing businesses. After all, while outsourcers don’t dictate network purchases, they are certainly in a position to influence them.