What is SDN Good For?

At least in some quarters, we are in a growing hype cycle related to software defined networks. As I simplistically understand it, SDN is about separating the "control plane" from the "data plane." 

In a probably over-simplistic way, that means putting intelligence in a headend or central office location, while using much-simpler, cheaper devices "out in the network" that only have to deal with "data," while the centralized controller does the computation that formerly was "out in the network."

The broad analogy will be familiar to those who once worked with "client-server" computing architectures. It isn't a case of "mainframe-dumb terminal" models, because the SDN clients are not "dumb" devices. But the big computation loads are handled centrally (control plane) while the many distributed data plane devices can work fast because they don't have to deal with local computing chores, and just handle the data.

As we typically do, there will be years of wrangling over "what SDN" really is, and how it is implemented. There will be many attempts to graft SDN onto the existing base of platforms that actually have intelligent devices scattered all over the network.

What probably will be lost is the "so what" part of the discussion, for service providers or their customers. 

Most lost in the discussion will be the end user benefit. But some might argue that's what we really should be talking about. 

It is perhaps not required that SDN be used to provide a user-defined set of policies relating to use of bandwidth. That could logically be provided other ways, including the use of intelligent devices scattered throughout the network.

But it might arguably be much easier, much faster, more dynamic and more affordable to supply end-user define policies on an SDN network than it is today. 

For service providers the advantages might be even simpler. SDN might enable "bandwidth on demand" in a reliable, robust, affordable way. 

But all that will likely be lost in the wave of hype we are about to start hearing. 

2 LTE Air Interfaces for China?

China Telecom's chief executive officer says China Telecom prefers the frequency division flavor of Long Term Evolution rather than the time division flavor chosen by its rival China Mobile. 

If China Telecom does opt for frequency division (FDD-LTE) rather than China Mobile's TD-LTE, it would mean the Chinese market would feature two distinct air interfaces for Long Term Evolution networks. 

Some might say that is not such a good outcome, as handsets might be incompatible. But the choice of FDD-LTE also would mean that China Telecom has immediate access to devices already developed for North American markets, where FDD-LTE is the air interface.

China Mobile already has committed to build its 4G network based on the TD-LTE standard. 

U.K.'s EE Launches Fixed LTE Service

U.K.-based EE is launching  a "4G fixed and mobile broadband service" in Cumbria, said to be one of the most rural areas of the United Kingdom.

The launch will offer many Northern Fells residents access to average upload and download speeds between 8 Mbps and 12 Mbps, with "headline speeds" over 20 Mbps.

The region, covering almost 100 square miles, also is said to contain the highest concentration of homeworkers in the UK.

The move obviously has implications. The Cumbria area is so rural that fixed networks are quite expensive, a situation not restricted only to Cumbria. The new 4G network will offer faster service than fixed networks can, in that area. 

In a sense, 4G LTE therefore competes directly with satellite broadband and terrestrial fixed wireless methods of providing Internet access. AT&T and Verizon, it is fair to say, will be testing those notions in the U.S. market, at some point.

In Europe, in some countries, mobile substitution already runs in the mid single digits to high double digits range, providing some indication of how much adoption fixed versions of LTE could attain.

To really do so requires a change in "universal service" regulations, though, allowing the providers to use any available and feasible technology to serve customers. 

Chrome, Android OS Will Not Merge, Google Chairman Says

Chrome and Android operating systems will remain separate products, although there could be more "commonality" between them, Executive Chairman Eric Schmidt said. 

Speculation about such convergence has been an obvious subject of speculation as tablets and phablets blur the lines between "phones" and "personal computers," raising the possibility that a common operating system could evolve out of the separate Android and Chrome environments.

It still is possible something like that might happen in the future, but the current thinking probably is that merging the two operating systems would result in a creation with too much overhead and "weight," making the resulting OS sub-optimal compared to distinct approaches optimized for the PC and smart phone-tablet environments.

YouTube Now Gets 1 Billion Users a Month

YouTube now has more than a billion unique users users:  every single month, representing about half of all Internet users globally. What isn't yet so clear, as with Android, is how widespread usage will lead to business benefits for Google, especially revenue. 

Current thinking probably revolves around advertising, a logical enough line of thought. But most media-related businesses have multiple sources of revenue (subscriptions, advertising, promotion and marketing services, research, conferences), so it is possible other sources ultimately could be important as well. 


And mobile and tablets figure into the discussion in a big way. For the first time, an entire generation has grown up watching content using the Internet, mobile, and social apps, consuming content when and where they want. 

Nielsen calls this group "Generation C" because they are not just defined by their age group, but by their connected behavior. In part, that means they watch on multiple devices, though in linear fashion. 

But the deeper  changes pertain to "sharing" behaviors. Generation C creates videos, and does not simply watch them. They share what they like and curate content for others. All of that means YouTube could have monetization opportunities of several types, eventually. 

At least some of those opportunities will flow from the use of mobiles with highly contextual location capabilities. 

Amazon Gets CIA Cloud Computing Deal

The Central Intelligence Agency reportedly has agreed to a cloud computing cloud computing contract with Amazon Web Services that could be worth up to $600 million over a decade. 

The deal adds some luster to AWS, the market leader in cloud computing, as a vote of confidence in Amazon's ability to provide a highly reliable and highly secure private cloud computing environment. 

But the deal might also suggest that the CIA sees cloud computing as a more cost effective way to take advantage of the latest developments in commercial technology and rapid innovation, compared to older ways of creating information technology assets, especially developing key systems "in house."

Instead, the CIA seems to be sending a clear message that commodity hardware platforms, married to software as a service, are not only more effective (works better), but also more efficient (costs less).

One would suspect the deal increases the likelihood of additional wins in the federal government segment of the communications and IT business. Perhaps oddly, most of the estimate revenue in the cloud computing business might not come from core "computing" services, but from the purchase of cloud-based applications (software as a service). 

When Reporting Metrics Change, the Business is Changing

Verizon doesn't think it makes sense to keep measuring its wireless business using the traditional "average revenue per subscriber," especially as an increasing number of subscriptions are machine-to-machine connections. 

In fact, Verizon no longer reports average revenue per user (ARPU). Instead, it reports average revenue per account (ARPA). That is in large part a response to the company's "Share Everything" plans, which have multiple devices on one account. 

There are other future changes coming as well. Assuming machine to machine services become widespread, the notion of revenue per account might likewise have to be revised. 

A typical "human" account will typically represent much more revenue than an M2M connection, often amounting to an order of magnitude to two orders of magnitude difference. 

A single "account" might represent a utility with hundreds of thousands of "users" in a single area, so neither revenue per "user" or revenue "per account" might be too meaningful, when mixed with average revenue per account for consumer mobile users.

The point is that when an industry starts arguing that traditional metrics are losing their value, and starts using new measurements of business success, it is a sure sign that the business model for that industry is changing.

By September 2013, when the next TV season begins, Nielsen expects to have in place new hardware and software tools to capture viewership not just from the 75 percent of homes that rely on cable, satellite and over the air broadcasts but also viewing via devices that deliver video from streaming services such as Netflix, Amazon, X-Box and PlayStation.

In part, that change is due to pressure from networks that believe their audiences are undervalued by the current ratings system. At some point, observers believe, Nielsen will try and move in the direction of ability to measure video viewing from any source, and any device.

Changes in metrics are not unusual in the telecom business, either. Around the turn of the 20th century, when telcos routinely were measured by access lines, new alternate access businesses were selling high capacity data circuits, not voice lines. So in an effort to highlight the value of such businesses, firms began reporting access line equivalents.

Few bother to do so, anymore, as financial markets seem to grasp the concept of an IP bandwidth provider quite well. But, for a time, firms reports such bandwidth equivalents of voice lines as a metric of growth. Of course, to be sure, the measurement also was faulty.

It was used by some executives to demonstrate business value growth pegged to an older and higher multiple method, rather than a new method that might not value the revenue streams so highly.

But the problem is real enough. As service providers in the fixed networks business started to sell large quantities of new products, the older metrics began to make less sense. That is why the concept of “revenue generating units” has displaced use of “lines” or “basic cable subscribers” as meaningful measuring tools.

These days, what matters is the sale of new units of something, whether voice, messaging, video, data access or something else is less significant. The other more prosaic issue is that since executives cannot demonstrate organic growth of their legacy product lines, they’d rather create new metrics that highlight growth in the new lines of business.

The bottom line is that when the measurements start to change, it is a clear sign that the business already has started to change.

Visa, MasterCard Strike Back at Competitors Like PayPal

PayPal has big ambitions in the mobile payments space. Visa and MasterCard have no intentions of ceding their current roles to any new providers. So it is not surprising that Visa CEO Charlie Scharf suggests Visa may impose a digital wallet fee on digital wallet suppliers like PayPal that use the Visa transaction clearing and settlements network.

MasterCard already does so. 

The charges would apply when branded Visa or MasterCard bank cards are used to fund a PayPal transaction. 

Granted, it may take some time before mobile payments, mobile wallets and mobile commerce assume relatively stable future forms. 

Technology adoption, though we sometimes believe otherwise, can take quite a long time, even for innovations that wind up being quite useful and ubiquitous.

Telephone and electricity took decades to reach significant penetration. The PC, the Internet (Web, at least) and mobile phones were adopted much faster.

Given the current interest in mobile payments, mobile banking and mobile wallets, it might be worth remembering that innovations related to payments and money often take decades to reach significant penetration.

The point is that it would not be unusual for a decade to pass before we even get to the inflection point for adoption, often said to be 10 percent of households.

Visa and MasterCard are not simply "resisting" change; they are trying to shape the evolving mobile payments in ways that ensure they both still have important roles. Raising costs for potential competitors is just one way to do so.

Verizon Wants to Change the Way it Pays to Acquire Channels for FiOS TV

Verizon wants to change the way it pays networks for carriage rights. Today, affiliate fees are paid based largely on the number of subscribers a video distributor has on its most popular and widely viewed tier of service. But Verizon wants to do something different, and tie affiliate fees to viewership.

There would be many winners and losers, if Verizon were to make headway with some of the programming networks and gain permission to pay affiliate fees based on actual viewership. Some networks, such as USA Networks, might actually wind up being paid much more. 

Other networks, such as TNT, might wind up being paid less. 

Tensions between programming networks, which always seek higher carriage fees (affiliate fees) from video distributors, and cable TV, satellite and telco TV providers, have been mounting in recent years as profit margins in the once-comfortable business have dropped from a routine 40 percent to today’s more typical 20 percent profit margins.

Add in the growing ability consumers have to cut the cord and substitute a range of online sources, and ever-growing subscriber prices, and distributors have reasons for concern.

Derek Blaine, SNL Kagan senior analyst, illustrates the cost of channels, using 2011 figures for annual affiliate revenue, divided by their average daily viewership.

That is one way of matching the cost of a network with the number of people watching those channels.

ESPN, the number one channel, earns more than five times as much per household as the Style Network at number 20.

1	ESPN	$7,368
2	NBC Sports Network	$5,956
3	NBA TV	$5,622
4	NFL Network	$5,540
5	MLB Network	$5,095
6	GolTV	$4,167
7	ESPNews	$3,489
8	FOX Soccer Channel	$3,366
9	Golf Channel	$3,348
10	ESPN2	$3,196
11	VH1 Classic	$2,971
12	CNBC	$2,217
13	Velocity	$2,029
14	SPEED	$1,788
15	CNN	$1,740
16	BBC America	$1,519
17	TNT	$1,468
18	Fuse	$1,460
19	Fox Deportes	$1,442
20	Style Network	$1,420

Mobiles Directly Drive 9% of Fixed Network Bandwidth Consumptiion

Mobile devices roaming at home on Wi-Fi connections now account for nine percent of monthly data on North America’s fixed access networks, according to Sandvine.

Mobiles roaming on Wi-Fi also represent 15.6 percent of real-time entertainment consumed on fixed networks and 27.8 percent of all YouTube traffic.

Those statistics illustrate the growing role played by fixed networks in supporting mobile data applications.

Typical Smart Phone User Consumes 1 Gbyte or Less a Month, Study Suggests

For all the concern about the end of "unlimited" mobile data plans, the typical user still does not use all that much data on a monthly basis.

At least one study by NPD Connected Intelligence suggests that smart phone users on U.S. mobile networks are using up to 1.2 Gbytes of data on a monthly basis. That is higher than other studies suggesting “average” or “typical” users consume about 300 Mbytes to 400 megabytes a month.

But all such studies need to evaluated carefully, as the data is not uniform and consistent. Some studies suggest Android users consume less data than Apple iOS users. Other studies suggest Android users consumer more data than iOS users.

Probably every study conducted over time would show typical usage growing, over time, though.

Mobile Data is 40% of Total Revenue

Global mobile data service revenue, made up of mobile internet and messaging revenue, will rise by 21.4 percent between 2012 and 2014 to represent 40.4 percent of total mobile service provider revenue, ABI Research analysts now predict.

That implies mobile data revenues of about $404 billion of the US$1 trillion mobile customers globally will be spending on their mobile phone services.  

North America will be the first region to see mobile data service revenue eclipse voice revenue in 2016, ABI Research now projects.

“Mobile internet service revenue is very much the main driver of revenue growth,” said Jake Saunders, ABI Research VP. “As smart phones have become the entertainment hub in our lives, music, video and TV streaming’s contribution of mobile internet service revenue has jumped to 26 percent in 2012.”

About 85 percent of the traffic traversing the four nationwide U.S. mobile operators networks is data, according to wireless analyst Chetan Sharma. Data accounted for 39 percent of all mobile data revenues carriers collected in the fourth quarter of 2011.

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T-Mobile 'UnCarrier' Plan: Nice Language, Less Substance

T-Mobile USA has adopted an aggressive marketing tone lately, emphasizing that it will be an  "uncarrier." In other words, T-Mobile USA wants to grow by proving to users that it is not like a mobile service provider, in serious and relevant ways.

It is, to be sure, a bold ambition. Whether it can succeed is perhaps the bigger question. There already are signs T-Mobile USA might not be prepared to do enough in furtherance of that ambition, though. 

A memo suggests that T-Mobile is revamping plans in the near future to make unlimited talk and text a de facto part of the experience, where data is the variable cost.

Whether  T-Mobile USA actually is doing enough to back up its "uncarrier" claim is the issue. Verizon Wireless and AT&T already offer similar plans that make voice and texting (unlimited in the domestic market) a simple fixed cost, while it is the amount of Internet data access that is the primary variable cost.

So in that sense T-Mobile USA is copying the other carriers it wants to distinguish itself from. The moves by T-Mobile USA to "abandon" device subsidies likewise have gotten lots of attention. 

But T-Mobile also is offering installment plans that blunt the difference between device subsidies and installment plans. A more radical move might have been to end device subsidies and not offer installment plans, a route T-Mobile likely rightly decided was too risky. 

At the same time, T-Mobile USA will, at some point, face a Sprint that probably will try in its own way to further destabilize the U.S. mobile market as well. 

Perhaps the initial information is incorrect. Perhaps T-Mobile USA will produce something that has more impact. If T-Mobile USA wants to shake up the business, it will have to do so. 

Content Consumption Shifts to Tablets, Smart Phones

Content that was once primarily accessed by consumers on their PCs, is shifting to mobile devices, according to the NPD Group. Some 37 percent of consumers who used to access content access content on their PCs switched to their tablets and smart phones.

The top two activities that consumers are shifting from their PCs to their tablets and smart phones are web browsing and use of Facebook.

Among tablet owners, 27 percent say they are using their PC less frequently for accessing the Internet and 20 percent say they are using their PC less frequently for accessing Facebook.

Some 27 percent of smart phone owners have decreased both their Internet and Facebook usage on their PCs because they now use their smartphone for these activities, NPD Group fins.

Internet browsing is still highest among PC owners at 75 percent, smart phones at 61 percent, and tablets at 53 percent.  

Facebook usage follows the same pattern, with use of Facebook by PC owners at 63 percent, use of Facebook at 55 percent for smart phone owners and Facebook activity at 39 percent among tablet owners.

Top Activities Where Mobile Devices Mitigate Computer Usage

European Commission Still Wants to Unify 27 Telecom Markets

The European Commission still is working on a blueprint for a single telecoms market in the EC states, a move some tier one service providers want, but which national regulators and smaller service providers might fear.

The issue is how to create one market from 27 distinct national frameworks, as well as how to harmonize investment and operating rules across the different countries. It is not clear that such a move, if successful, actually would create a single regulator across all 27 countries. 

For a few tier one service providers, common rules and a single market would allow a more efficient and profitable approach to providing communications services across Europe. Many smaller providers would find they do not have scale to continue competing successfully, though. 

In fact, the plan might initially entail easier competitor access to tower sites, ducts and other forms of infrastructure. The objective would be to enable some European service providers to achieve greater scale. 

Many would likely argue that the reason AT&T and Verizon Wireless are doing so much better, on a financial basis, than European mobile service providers is that both those firms enjoy a large, continental-sized internal market. The EC moves aim to replicate such advantages in Europe.