Telco 2.0™ Research

The Future Of Telecoms And How To Get There

Dealing with the Wireless Data Explosion

Summary: As business models evolve to cope with demands on bandwidth, it may be in everyone's interest to allow customers to access, ad hoc, certain resources across any available wireless network.

This is a guest article by Chris Hoover, VP, Product Management at Openet, Platinum partners of the Telco 2.0 Initiative.

A recent Wall Street Journal opinion piece by Andy Kessler calls for operators to provide access to their "airwaves" to anyone. Mr. Kessler's message was that individual subscribers could benefit from expanded choice of service (e.g. by choosing whichever network suited, similar to a Wi-Fi hotspot).

Such a scenario may be good business from a Telco 2.0 perspective. Enabling ad hoc access to networks provides a choice not only for subscribers, it also provides a choice for operators regarding when and how network resources are available. This flexibility and control may be the key to ensuring the QoS and availability guarantees inherent in many next-generation business models.

To understand why, it's useful to first determine the role of network resources as a key to any telco business model.

The Building Blocks of the Telco Business Model

The telecommunication business is built on a model that features three key questions:

  1. What resources? What network resources should be provided to this subscriber, and under what circumstances?
  2. At what cost? How much does consumption of the network resource cost?
  3. How paid?Who is going to pay for the network resource?

This model fits nicely into various standard service offerings:

  • Voice calls (Resource: SS7 connection/Cost: Flat per-minute rate/Paid: decremented from pre-paid account),
  • Data session (Resource: PDP connection/Cost: Included in monthly flat rate/Paid: Post paid by subscriber),
  • Roaming call: (Resource: SS7 connection for roamer/Cost: Per roaming agreement/Paid: Inter-carrier reconciliation)

To date, these business models treat access to network resources as a buffet. By paying, you can eat all you like for as long as you like. As bandwidth becomes a scarce resource, however, it becomes impossible to give everyone carte blanch access to it. Next generation business models are thus more akin to a traditional restaurant model, in which each item is associated with a cost. And sometimes restaurants have invitation-only special events; hungry passers-by must go elsewhere for a meal.

How Resources Relate to Next-Generation Business Models

Skeptical that bandwidth is a scarce resource? Consider AT&T's experience with the iPhone.

According to a recent New York Times article, iPhone use is causing dropped calls, spotty service, delayed text and voice messages and glacial download speeds as AT&T's cellular network strains to meet the demand. Another result is outraged customers.

In Japan, 80% of Softbank's data traffic is people watching YouTube videos on a flat rate iPhone data package. The telco industry continues to experience a dramatic increase in demand for network resources, especially related to wireless data. The revenue associated with that consumption is essentially flat--indeed, it is decreasing as a function of demand.

These - increased demand and flattening revenue - are the two drivers behind Telco 2.0, which is devoted to exploring how the industry can evolve to maintain a healthy business even as the environment in which it operates changes.

Effectively managing network resources is the foundation of next generation business models. These models require an expansion of what is meant by "network resource," as well as flexibility in allocating, rating and paying for these them. In every case, this requires real-time control of both resources and payment, including the ability to selectively allocate resources when they are scarce.

Consider some specific examples of business models discussed within the context of Telco 2.0:

Content Distribution

Networks have much potential in delivery of personalized, on-demand content such as video. The "resource" is not vanilla bandwidth, but QoS; this includes management of such variables as packet forwarding prioritization, maximum and minimum bit rate and RF spreading factor. Poor quality will result in audience abandonment and the failure of the model.

Digital Banking

To provide viable financial exchange services, particularly real-time services such as those targeting the "unbanked," carriers must be able to guarantee access and low latency. If users are unable to access their accounts or reliably exchange funds, the business model will fail.

Bundled Resources

Access can be bundled so that it is an intrinsic part of a purchase; the most familiar example is the Amazon Kindle, with its bundled "whispernet" connectivity enabling users to transparently browse, purchase and download books onto the device. Heavy congestion that inhibits Kindle access directly impacts Amazon's revenue stream -- and the viability of the business model.

Business services

"Cloud Computing" services directed at the enterprise are gaining popularity due to benefits such as scalability, minimized hardware and improved efficiency. These services include data storage services, email and web-based document production and collaboration. They are necessary because mobile carriers are now on the hook for always-on performance to support business applications in the cloud--requiring more network bandwidth and better performance than ever before. Congestion that precludes access to business-critical services will cause the business model to fail.

Implications

Each of these scenarios implies real-time provisioning of resources and real time allocation of charges, depending on the service and the purpose for which it is accessed.

If a network access point is busy serving customers using devices such as the Kindle, delivering on-demand video as part of an agreement with Paramount and supporting access to enterprise services, it may in the best interests of both the operator and the subscriber to enable ad-hoc access to alternative networks for basic data connectivity service. By doing so, they can sell basic connectivity to anyone most of the time, but can selectively allocate resources when demand exceeds supply.

One implication of this is a business model in which some specific services (such as banking, video viewing, email access, etc) are provided with access "built-in." For these services, access is an intrinsic feature with an associated SLA. Services without built-in access (such as general web browsing), are accessed ad hoc through the network that has the best connectivity in a given circumstance.

Using proven methods to open operator airwaves on an ad-hoc basis provides the flexibility for subscribers called for by Mr. Kessler in the Wall Street Journal. But it also provides flexibility for operators, enabling them to compete using a variety of innovative business models. This continued adaption to consumer behavior and evolution of operator business models is the key to continued performance, relevance and ultimately, profit.

Openet's CTO, Joe Hogan, will be among the stimulus presenters at the 7th Telco 2.0 Executive Brainstorm on the 4th-5th November in London.