Sprint Wi-Fi Calling Illustrates Dramatic Change in Voice Value

Perhaps nothing illustrates the extraordinary shift in the value of voice services for service providers than the announcement that Sprint iPhone customers now can make high-quality calls over Wi-Fi networks, while using their own phone number.

In part, Sprint pitches the feature as a way to extend coverage, especially indoors.  

“Wi-Fi Calling is like a major expansion of our network, allowing Sprint customers to get coverage anywhere they have Wi-Fi connectivity,” said David Owens, senior vice president of product development for Sprint. “Traditional wireless technology has some limitations in places like basements and high-rise office buildings.

Such calls do not count against subscriber data usage buckets or voice allotments. In other words, Sprint is enabling customers to use their mobiles to make calls for no additional cost and without using any of their paid-for data or voice calling capabilities. In essence, Sprint now gives away what it used to sell.

There are indirect benefits, even if voice communications is more a feature than a revenue stream. Consumers will be happier because their signal coverage is better. They also will essentially be offloading some amount of voice traffic from the mobile network.

The virtual effect is to improve Sprint’s network coverage at no cost. So losing potential voice or Internet access revenue is balanced by better user experience and mobile network load.

Customers traveling internationally with Wi-Fi access also can use Wi-Fi calling to enjoy free calls from over 200 countries back to the United States.

Wi-Fi Calling also is available at no additional charge when calling to a U.S., U.S. Virgin Islands or Puerto Rico phone number.

What Mobile Niche is Left for New LightSquared to Conquer?

Charlie Ergen appears to be right when he quips about bandwidth being valuable because they aren't making any more of it. Ergen personally was paid about $1.5 billion to relinquish his claims on LightSquared, because of debt he owned in the company.

Now LightSquared asked the FCC to transfer spectrum licenses to the entity to be known as New LightSquared, allowing a new company to try and build a successful business.

But New LightSquared still needs to figure out what lucrative new niche remains unfilled, and try and fill that spot in the ecosystem before a combination of mobile operators, satellite operators, cable TV companies and Wi-Fi-based service providers essentially fill all those unmet needs.

The original business plan was to "re-purpose" satellite frequencies to support terrestrial mobile operations. That plan came undone when claims of signal interference with GPS devices was raised, successfully, an an objection.

It remains unclear whether the new company will try some other form of terrestrial service, without using the GPS-infringing frequencies, or revert back to its old business plans for mobile satellite service.

Ivan Seidenberg, a former chairman of Verizon Communications Inc., and Reed Hundt, a former Federal Communications Commission chairman, have joined the board of New LightSquared, so we might find out whether it is possible to create a successful business out of LightSquared spectrum.

Is there yet a viable niche for a mobile communications service, at a time when terrestrial mobile networks so dominate most communications and new services substantially or completely dependent on Wi-Fi are operating.

There are specialized Long Term Evolution and other networks that specialize in supporting trucking, oil industry and other vertical niches, for example, though some think New LightSquared will go with some sort of niche, vertical market strategy.

Will Mobile be a Full Substitute for Fixed Internet Access in 10 Years?

As crazy as it might seem today, standard mobile networks might in a decade be full substitutes for fixed network access, in terms of delivered commercial bandwidth. If the assumption is that fixed networks might deliver bandwidth up to 1 Gbps or 2 Gbps, then it might be quite instructive to note that suppliers are working to commercialize small cell access systems delivering bandwidth between 2 Gbps and 10 Gbps.

The point is that If you have access to enough spectrum, at high-enough frequencies, plus sophisticated antenna technology, and only need to transmit at close distances, extraordinary bandwidth--fully matching fixed network bandwidth--is possible.

Nokia Networks has shown the ability to transmit mobile signals at 10Gbps peak rates over the air at 73 GHz using Nokia mmWave gear at the Brooklyn 5G Summit, jointly organized by Nokia Networks and NYU.  

NTT Docomo and Nokia Networks earlier had shown the ability to transmit at 2 Gbps rates in the 70 GHZ band, using Nokia Networks mmWave technology, in an indoor setting.

“Utilizing higher frequency bands including millimeter wave  is key to deliver extremely high performance in 5G,” said Seizo Onoe, NTT DOCOMO CTO. “We believe that high-frequency spectrum shall be used not just for small cells as a means to complement the existing network, but also for building solid area coverage through coordination with existing lower frequency bands.”

IoT, Big Data, Cloud Computing are One Trend Pointing to Next Era of Computing

It increasingly is going to be hard to separate the Internet of Things from cloud computing from big data, since the value of all those sensors and apps will be the ability to pluck trends and meaning from a bewildering amount of raw sensor data.

Think about Waze, the social driving app that crowd sources the observations of drivers about traffic, for example.

The sensors now are smartphones, but the value is the insight about traffic slowdowns and jams. That requires use of sensors (smartphones as the “things,” in this case), the global positioning satellite system, the Waze and Google Maps apps, the cloud computing infrastructure and the ability to process tons of data in real time.

If you wanted to start looking for leaders in the next era of computing, you would do much worse than to look for firms that will dominate the horizontal roles in IoT-centric computing.

IoT Requires Lower Latency, Probably Fog Computing

The Internet of Things is going to add so many connected devices, appliances and sensors that the architecture of computing to support IoT operations will necessarily have to rely on more edge processing than has been useful up to this point.

Both latency issues and the sheer volume of data generated by all those devices will require more distributed computing closer to the edge, instead of the relatively more centralized computing that has been typical of cloud computing.

At least as some envision it, fog computing would pre-process raw data using an edge server, before forwarding a summarized set of data to cloud data centers.

So aside from additional bandwidth, latency considerations will become more important as IoT services, devices and applications proliferate.

In a real sense, the objective for fog computing is to produce latency more like that of a LAN than traditionally has been associated with cloud computing.

Is AT&T Wrong about DirecTV?

It is not hard to find critics of the business strategy AT&T has in buying DirecTV. Subscription TV is a mature business, in decline, even if DirecTV is a well-run company throwing off lots of cash flow.

Critics say the other satellite provider, Dish Network, also sees the danger inherent for a satellite video provider, and is itself potentially aiming to become a mobile service provider, in some way. Dish Network CEO Charlie Ergen has said that, if  he were entering the subscription video entertainment business today, he might well not use satellite for delivery.

Instead, he’d do something like Sling TV, an over the top, Internet-delivered service.

AT&T has argued it gains a nationwide video footprint, adds scale efficiencies in its purchasing of content and creates a national triple play or quadruple play capability (video, Internet access, mobile voice and messaging).

Some of us would say those are helpful, but not decisive. Instead, DirecTV is an important tactical move. First of all, AT&T alway has grown primarily by acquisition.

So DirecTV grows free cash flow and revenue.

But what if the gains are not necessarily permanent? No problem. Nothing is permanent, for any service provider. In the meantime, AT&T gains needed free cash flow, while it is in the process of building the new lines of business to replace declining voice, messaging and eventually video revenues.

Transitions matter, especially for large firms such as AT&T that have been through large transitions before, such as the shift from long distance voice to mobility as the strategic growth driver.

But those transitions can take a decade to play out fully. During the transition, cash flow matters.

Gigabit Speeds Don't Improve Experience, Content Delivery Networks and Caching Does

According to a study by Mike Belshe, “if users double their bandwidth without reducing their Round Trip Time (RTT), the effect on Web browsing will be a minimal improvement (approximately five percent).”

“However, decreasing RTT, regardless of current bandwidth always helps make web browsing faster,” Belshe argues.

Faster local Internet access connections do help, up to a point. After about 10 Mbps, no single user is likely to see much improvement, if at all, in page load times, for example. The U.S. Federal Communications Commission and U.K. Ofcom agree: beyond 10 Mbps per user, experience is not measurably improved--if at all--by faster Internet access speeds.

Bandwidth (in Mb/s)	Page Load Time via HTTP
1	3106
2	1950
3	1632
4	1496
5	1443
6	1406
7	1388
8	1379
9	1368
10	1360

Although there is a considerable jump in the early bandwidth speed increases, the returns as the pipe gets bigger continue to diminish until they are almost negligible.

The important observation is that the measure of a digital experience isn’t just--or primarily--about the speed of download.

Latency, or round trip delay, is more fundamental, beyond a minimum amount of access speed.

That is one reason so many large application providers use content delivery networks that place content closer to end user locations, in principle improving round trip delay.

Shockingly, and all marketing claims notwithstanding, end user experience of Internet apps is primarily a matter of latency, not access bandwidth. That is because "non-network" sources of delay generally represent an order of magnitude more impairment than local access speed, or even all network delay, taken together.

Connecticut Cities and Towns Ask for Gigabit Speeds; Are Likely to Get Most of What They Want

A gigabit Internet access network serving “targeted commercial corridors as well as in residential areas with demonstrated demand is the goal sought by a consortium of 46 Connecticut cities and towns.

In the end, the municipalities are likely to get what they want, either because incumbents step up, to protect their existing businesses, or because new suppliers, able to operate with lower operating costs, enter the markets.

That doesn't necessarily mean a full potential gigabit at every location. Functionally, the communities will get what they want when anchor institutions and enterprises can buy a full gigabit or even hundreds of megabits per second and consumers in neighborhoods can buy hundreds of megabits per second.

The immediate value of such speeds is most clear for large organizations with lots of users. Individual small businesses or consumers cannot actually gain much.

For incumbents, skinnier profit margins are likely, one way or the other. For at least some would-be attackers, it might be possible to gain entry into the Internet access market.

But a fierce response might be coming. In that instance, the municipalities will succeed in their goal of stimulating investment in faster Internet access. Comcast, which operators in Connecticut, already has said it will upgrade virtually all of its networks to gigabit speeds by the end of 2016.

Whether other major Internet service providers will go that far, or not, is not yet clear. But it would be reasonable to suggest upgrades to hundreds of megabits will be forthcoming, especially where the municipalities really want it: commercial corridors and some residential neighborhoods willing to pay more for higher speeds.

Ignore for the moment the fact that, today, speeds available per user beyond 10 Mbps have negligible to zero additional utility. That is a matter of science. “Gigabit” is about marketing, perceived economic advantage for communities or states and perceived advantages for anchor institutions.

A betting person would guess those demands will be rather swiftly met by firms that face clear threats.

Cable TV Will Take Hybrid Strategy to Make Transition to Streaming

At this point, it is likely a “no brainer” to argue that incumbent providers of subscription TV will have to follow one clear near term strategy, and a different long term strategy. Sound advice for any business in the midst of fundamental technology change is to adopt a “hybrid” strategy, for a time, while preparing for a different future.

Decades ago, U.S. cable TV operators opted for just such a hybrid strategy when shifting to the hybrid fiber coax network architecture.

Now Comcast is on the cusp of signaling a profound shift to all-optical access with its move to make 2-Gbps all-fiber connections available to 18 million of its present customers.

To be sure, Comcast also is moving to make gigabit access services available to nearly all its 21 million customers by perhaps the end of 2016. Comcast probably will be able to provide 1-Gbps services on its existing HFC network.

But the end is in sight.

Where it comes to subscription TV, expect Comcast and other U.S. cable TV operators to use that same strategy, grafting more streaming features onto its existing linear service.

Over the top (OTT) video continues its strong growth, and should see around 26 percent total revenue growth in 2015, with 24 percent compound annual growth rates through 2019, according to ABI Research.

“Comparatively high priced pay TV bundles are losing customers to more inexpensive, IP-delivered content,” says Eric Abbruzzese, Research Analyst.

The other tack is to mimic the “lower price” feature of many OTT video subscription services by creating skinny bundles that cost less.

With a little luck, such strategies will allow more time for transition to a full, streaming only future.

Cable TV operators have used that hybrid approach before.

How to Tell When a Market is Saturated

Even if call volumes still are growing in many countries, the future already is discernible. In most developed markets, “calling” as an activity is dropping. In other words, fewer calls were made in 2013 than in 2008, even as prices continued to fall.

Up to a point, usage or demand climbs for any desired product as prices are reduced. But demand can saturate, at which point not even lower price leads to higher usage. That seems clearly to be the case for voice services.

There are strategic implications. One might well argue it makes little sense to invest too much in a product line that is mature and declining. Instead, investment must be targeted to new products early in their life cycles.

That suggests investment in high definition voice will be largely ineffective as a means of restoring growth in the voice segment. Investment in voice over Long Term Evolution has a different business rationale: it allows reclaiming of spectrum used for 3G.

Only indirectly does VoLTE contribute in a direct way to new voice value.

source: Disruptive Analysis

Bandwidth Soon Will Not be an Issue; Latency Will be the Problem

Pretty soon, consumer access bandwidth is not going to be a bottleneck of any sort. One example: Comcast is upgrading virtually its entire customer base to gigabit speeds by the end of 2016, with some customers able to buy service at 2 Gbps.

The rest of the market is going to move with Comcast.

But latency is going to leap to the top of problems affecting end user experience. That means we will be turning attention back towards the edge of the network, as that is one way to reduce the latency of cloud-based services.

For many of you, latency likely already is the most-noticeable feature of your Internet experience. If you do lots of writing, using a cloud-based document processor, you understand the difference between a locally-resident app and an app being fetched from a distant location.

Ironically, latency is among the issues packet prioritization addresses directly. Edge caching also makes a difference. Sooner or later, “network neutrality” is going to run full on into the other values that must be balanced, including latency.

"Why Didn't Telcos Think of That?"

Over the past decade and a half, we have heard lots of noise, and significant spending, in support of innovation by telcos globally, despite the clear evidence that most innovation now happens in other parts of the ecosystem (think iPhone, or any mobile app).

While it might be useful for executives to talk about innovating “at Google speed,” there frankly is little evidence telcos have, can, or want to innovate at such rates. 

One might charitably argue large telcos should not bother with most "innovation" in the app space.

For any number of institutional reasons (scale, culture, need for global standards, sunk investments in legacy operating systems, regulatory issues, huge needs for investing capital in dividends and physical infrastructure), telcos arguably cannot move that fast, even when they want to do so.

Still, it is instructive to look at ways text message enabled  e-commerce is being enabled by U.K.-based FetchMe. Right now, FetchMe requires minimum transaction amounts (£20), presumably to cover FetchMe’s own costs of acting as a middleman retailer.

In the United States, “Magic” offers a similar feature, acting as a sort of texting-enabled concierge service.  

Of course, there is an obvious reason why a text-enabled concierge service would not be commercialized, even if innovators inside a telco operation wanted to do so. As with many other potential services, it is difficult to scale.

And scale normally is a key requirement for any proposed telco-delivered service. The reason is that processes have to be routinized enough that they are easily repeatable. A concierge service is, almost by definition, going to be “custom.” And that always is difficult for any industrial process, which is what any large telco operates.

So even if e-commerce enabled by text message seems like the sort of thing telcos themselves might have commercialized, they have not done so. One might argue they have good reasons for “not innovating.”

Repeated over enough instances, that reality suggests the fundamental limits to telco innovation. They can handle industrial scale, in fact require it. Customization kills scale advantages, so customization prevents telcos from acting.

The Pareto rule probably continues to operate: 80 percent of the results for telcos will flow from 20 percent of their activities. Those activities will continue to be anchored in “access” operations. Like it or not, that is the specific and unique role they occupy in the broader ecosystem.

Will Incumbents Win Gigabit War in Austin?

If Google Fiber was an effort to spur faster investment by major U.S. Internet service providers, that gambit is succeeding. In Austin, where Google Fiber announced in 2013 it was going to build a symmetrical 1-Gbps Internet access network, progress arguably has been slow.

“So far most of our installs are in apartments,” in two neighborhoods, said Mark Strama, head of Google Fiber Austin.

AT&T, Grande Communications and Time Warner Cable also have announced or begun to implement much-faster access services. Both AT&T and Grande have said they will offer gigabit services in some neighborhoods where there is demand.

So Google Fiber already is succeeding, to the extent part of its mission is to spur competitive upgrades. But Google Fiber might not be moving fast enough to head off preemptive moves by its main competitors in the Austin market.

Ironically, a company known for moving fast is not moving fast enough to gain market share before its competitors have crafted their own competitive offers.

For Google Fiber, which essentially offers only one retail offer, uptake of gigabit services matters.

For the other competitors, which offer packages at a range of speeds, what will matter is retained customer base, on any retail package, not the uptake of gigabit offers.

In other words, for AT&T, Grande or Time Warner Cable, if the upgrade projects simply allow the incumbents to maintain current share, they win, at some level, even if they have been forced to spend more money on infrastructure.

Consumers will win. Google Fiber will have achieved a strategic objective. And even the incumbent ISPs might “win” if their own competitive offers manage to stave off customer chrun to Google Fiber.

New Airtel Zero Program Perhaps Will Offer Use of 100 Apps Without Data Charges

Bharti Airtel has introduced a new program Airtel has launched “Airtel Zero,” offering users free access to certain mobile apps, with no usage deducted from data plans, or perhaps no requirement for a data plan at all.

Airtel now believes it will launch with 100 apps as part of the program.

Zero rating--the practice of offering consumers access to some Internet apps without requiring a data plan or deducting usage from a data plan--is viewed by some as a violation of network neutrality principles.

The fear is that zero rating creates more Internet service provider gatekeeper power and could therefore reduce innovation.

Others might simply see it as a useful way to provide value to consumers who haven’t begun using the Internet because they haven’t been able to sample it.

The analogy often made is that zero rating  is like toll-free calling: some businesses or organizations pay for calls on behalf of customers and prospects.  

But the program is expected to be popular, and experience elsewhere suggests Bharti Airtel will find that the program encourages non-users to try mobile Internet apps, and will drive faster mobile Internet adoption.

That clearly was the experience in the Philippines, where Globe Telecom launched a program offering “no data plan required” access to Facebook.

Over the course of the first phase, the number of data users on Globe’s network doubled, and the portion of Globe’s prepaid subscriber base who were active on mobile data expanded from 14 percent in September 2013 to 25 percent in November 2014, Facebook and Globe say.

Globe’s Free Facebook campaign (and similar internet outreach efforts by other players in the market), led to a six million  increase in the number of active mobile internet users in the Philippines.

During the first phase of the trial, Globe’s user base increased by 17 percent. Along with continuing to use data, these users also shifted core telco spend over to Globe’s network, growing voice and text messaging revenues by five percent.

By the end of the first campaign, prepaid mobile data users grew from 4.8 million to 9.7 million, more than a twofold increase.

Whether zero rating is bad or good for innovation is debatable. Zero rating does increase use of the Internet. And for some, that is the point.

Google Mobile Service Wants to Offer Free International Voice, Text, Data Roaming

Google reportedly is in talks with Hutchison Whampoa about roaming agreements allowing its U.S. mobile customers to talk, text and use the Internet internationally, erasing the difference between local and international tariffs.

The deal presumably would be reciprocal, allowing Hutchison Whampoa Three customers to roam on Google’s U.S. network without additional charge.

If that is correct, it is likely Google would seek additional agreements with other carriers willing to forego international roaming revenue to gain market share.

Google also is expected to experiment with other innovations, possibly including the ability for a customer’s mobile device to register on a local Wi-Fi network or pick the best mobile operator signal (Sprint or T-Mobile US) available at the moment.

All past mobile virtual network operator and facilities-based mobile networks have used only a single network for access.