Service Providers See AI Helping Most with Customer Interactions

A TM Forum survey suggests service providers already are using artificial intelligence to support chatbots for customer service, network automation and service management, while 70 percent of service provider executives are conducting “proof of concept” trials.

At least so far, improving customer experience is top reason for AI interest, followed by reducing operating expenses.

The survey of 187 executives from 76 communications service providers operating in 51 countries, and 115 executives from supplier companies also suggests some problems.

Since AI is designed to augment human intelligence and processes, reaping value presupposes that organizations actually understand their core processes well enough to augment them, and can do so, as a practical matter. The history of enterprises applying information technology and reaping rewards is spotty, though.

source: TM Forum

The Internet Era is Fundamentally Different

The internet era is fundamentally different from all prior eras of telecommunications. “Telecom” once was the center of its own universe. These days, telecom is part of the internet ecosystem. And some of us would argue telecom essentially is a tail on an internet ecosystem dog.

In large part, that means the industry cannot independently determine its own destiny, but supports, reflects upon and builds on other key trends in consumer behavior, device use, app use and enterprise priorities.

For that reason, argues the GSMA, “it is no longer appropriate to develop corporate strategies, or to assess policy situations, with a narrow focus on a single segment of the value chain.” In other words, the business context has changed. Boundaries between formerly-distinct industries have become porous, and actors in one part of the value chain now routinely expand into additional roles.

The implications for service providers--at least tier-one providers--are clear: movement beyond the access and transport function are within the realm of necessity and reason. You might compare such options to the older notions of vertical integration. The business logic is the same.

Sometimes revenue growth, profit or cost control is enhanced when firms operate across more of the value chain.

source: GSMA

There is an important caveat, though.

It might not be possible for small service providers to contemplate strategies that include operations across multiple parts of the ecosystem. Large entities, whether app providers, device suppliers or access providers, can reasonably expect to have the scale necessary for success across multiple roles.

Smaller providers, for reasons of scale (or lack of scale), will have to adapt to more specialized roles, as smaller participants in the core telecom ecosystem always have done.

That does not mean awareness of the trend is unimportant. Small providers have to understand where opportunities exist within the larger ecosystem, and as potential partners for tier-one actors who do operate across multiple roles.

Precisely how many tier-one telcos actually might envision a substantial role across multiple areas of the ecosystem (apps, services, devices, access, advertising) is unclear, but it will be a relatively small subset of the universe of service providers.

When researchers at Nokia Bell Labs predict a consolidation of some 810 global service providers to perhaps 105 within a decade, that gives you some idea of the universe of possibilities. As only the largest app providers are able to occupy meaningful positions across the ecosystem, so only a few of the largest service providers can contemplate similar moves.

source: GSMA

The internet value chain has almost trebled from $1.2 trillion in 2008 to almost $3.5 trillion in 2015, a compound annual growth rate of 16 per cent, according to the GSMA. So the ecosystem has grown substantially. So has the gross amount of revenue earned by the global service provider industry. But the percentage of total value earned by service providers is dropping.

The implications are perhaps obvious.

We sometimes forget that the global telecom business had, for most of its history, been about the sale of apps (services), not “access” to such apps. In other words, consumers and businesses bought the right to make phone calls, and not the right to access a network to make phone calls.

The difference is subtle, but crucial. “Phone companies” were in the “make a phone call” business, not the “network access” business. In the internet era, the value proposition flips.

If access to the internet now is among the primary values, if not the exclusive value, service providers now are in several businesses. “Access to the internet” (dumb pipe) drives significant revenue. But so do “apps” (voice, messaging, video entertainment).

So a core part of strategy is to grow the portion of the business related to apps or services, compared to lower-value “access.” That especially is true if one believes there are clear limits to the amount consumers ever will spend on access services.

The point is that growth options for providers that remain in the access services business (voice, messaging, video, internet access) are probably limited, going forward. Gaining scale (making acquisitions, especially outside the existing geography) will help, for a while. The limit there is the availability of capital and acquisition targets.

As always, that will spur a search for niches. As in the past, those niches will tend to be smaller or specialized segments that a tier-one service provider simply cannot support and make a profit. Rural geographies, local geographies and specialized business services have provided opportunities in the past. That should continue.

In the internet era, successes in other areas are harder to identify, with few clear sustainable advantages for carrier-supplied voice or messaging apps or app stores. There might be new advantages for some carrier-supported devices in some markets, especially where a service provider can use its own branded handsets to drive market share gains.

Language-specific content also could be promising.

The larger point is that, in the internet era, opportunities often are shaped by what other segments of the value chain will allow.

Vint Cerf on Where the Internet is Going

Internet pioneer Vint Cerf talks about where the internet might be going.

Are We in the Pipe Business? If Not, What?

Dean Bubley, Founder, Disruptive Analysis, and Connie Wightman, CEO and Chairman of Interserra Consulting Group, interviewed by Gary Kim, trying to think seriously about the future. Sources of value, roles and functions, prices trending to zero and other hairy challenges.

Part of the problem is that customers "want as little as possible, and don't want to pay for it," said Bubley.

“Voice mail is irrelevant,” says Wightman. “I don’t think telecom is a separate sector, anymore.” And eventually, app interfaces will be as ubiquitous as electrical outlets.”

“There are many more blurred boundaries,” says Bubley. “That makes it hard to classify things with a bright line.” Basically, the old monopoly on creating “telecom services” is over, and “anybody” can create communications features. In other words, private communications networks will be possible and common.

“Telecom is a tail on an internet dog, and cannot determine its own fate,” Kim said. “What drives value,” in that context?”

Cable Dominates U.S. Internet Access

It is hard to overestimate the impact cable TV companies have had in the U.S. internet access business. At every speed tier, cable operators have overwhelming market share, as you immediately can tell from the following graph, where “red” represents cable market share at various speeds. At the higher end, cable has well over 80 percent of sold connections operating at a minimum of 100 Mbps.

But even at the low end, at speeds less than 3 Mbps, cable has 60 percent share.

For better or worse, those adoption statistics reflect deliberate capital investment decisions by U.S. telcos other than Verizon. Basically, many independent telcos have been financially unable to invest faster, while AT&T arguably has made a priority of mobile capital investment.

Verizon “benefits” from having made most of its fiber to premises investments a decade ago.

What comes next is not so clear. Some argue cable operators are in position to leverage their market control to raise prices.

Others might argue that telco fixed wireless is part of the strategy for catching up with cable. And AT&T recently has stepped up investment in gigabit services where it believes their is a business model.

Others might argue that at least AT&T and Verizon are looking past fixed segment competition and hoping to lead in the future mobile and untethered markets. That is part of the interest in both mobile video and fixed wireless built on the mobile network.

Yet others might argue that  apps and services beyond internet access will drive revenue in a decade, not access, per se, reducing the value of access investments, in any case.

Still, the market impact cable TV has had is foundational. Its reliance on its own facilities, using different platforms than telcos use, has allowed it to upgrade faster, at lower cost, than telcos have been able to do using fiber to the home.

But most of the share losses have come from telcos other than AT&T and Verizon, which in recent years have been holding their own. In other words, you might argue both those firms have invested enough to get by, while prioritizing investments in mobility that clearly has driven revenue growth for both firms.

The issue now is how much investment has to be tweaked to maintain the “just enough” capex. Many would argue it does not make sense for either AT&T or Verizon to overinvest in fixed network internet access, as the financial return simply will not be there.

source: FCC

At this point, the fixed network internet access market is nearly a zero-sum game. That means most of the market share gains will have to come from other competitors. Such markets are tough.

The total number of U.S. internet connections increased by about six percent between December 2015 and December 2016, reaching 376 million, the Federal Communications Commission reports. So there was growth, but at low and slowing rates.

source: FCC

With the caveat that speeds offered by some providers seems to be increasing about 50 percent per year,  the 106 million fixed connections at the end of 2016 included 37 percent (39 million connections) operating between 25 Mbps and 100 Mbps, while 23 percent (or 25 million connections) offered speeds of at least 100 Mbps.

That suggests the policy of gradually investment by AT&T, for example, is largely defensive. That makes sense, one might argue, in the context of a business driven by mobility or video services, not internet access.

In the fourth quarter of 2017, for example, AT&T earned 85 percent of revenue from apps, not internet access.

Keep in mind that the FCC  figures also represent consumer buying choices, not the services available to buy. Consumers make rational choices about internet access, buying services that provide the best perceived value proposition, not necessarily always the “fastest available” tiers of service.

They buy what is “good enough,” more often than they buy what they deem “best.”

So 62 percent of consumers chose to buy services running faster than 25 Mbps.

Some 38 percent of consumers bought services operating at slower speeds, though it is impossible to say for sure whether those customers were unable to buy faster services, or chose to buy slower services even when faster alternatives were available.

Some four percent of consumers (four million connections) bought services operating slower than 3 Mbps downstream.

Some 14 percent bought  (15 million connections) services operating between 3 Mbps and 10 Mbps. Some 22 percent (23 million connections) purchased services running between 10 Mbps and 25 Mbps.

The median (half of connections faster, half slower) downstream speed of all reported fixed connections was 40 Mbps and the median upstream speed was 5 Mbps.

For residential fixed connections, the median downstream speed was 50 Mbps and the median upstream speed was 5 Mbps.

Most of the growth in total Internet connections is attributable to increased mobile Internet access subscribership. The number of mobile Internet connections increased 7% year-over-year to 270 million in December 2016, while the number of fixed connections grew to 106 million – up about 3% from December 2015.

Jio is Succeeding at "Destroying" the India Mobile Market

By now, telecom executives are well aware of the “disruption” market strategy, whereby new entrants do not so much try and “take market share” as they attempt to literally destroy existing markets and recreate them.

Skype and VoIP provider one example. The “Free” services run by Illiad provide other examples. Most recently, we have seen Reliance Jio disrupting the economics of the mobile market in India, offering free voice in a market where voice drives service provider revenues.

“Free” is a difficult price point in most markets. But free voice forever is among the pricing and packaging foundations for Reliance Jio’s fierce attack on India’s mobile market structure. “Free voice” does not only lead to Jio taking market share, but reshapes the market, destroying the foundation of its competitor business models.

At the same time, Jio hopes to become the leader in the new market, driven by mobile data, with far-higher usage and subscribership, and vastly-lower prices.

source: GSMA

Disruption really is the strategy, not “take market share.”

source: Zee Business

RJio says it will reduce tariffs by another 20 percent whenever a rival matches its offer. You might guess at what will happen. Competitors will drop tariffs, but not to match Jio’s offers exactly, as that will simply trigger another deep discount in retail pricing that depresses revenue for virtually all service providers.

At the end of 2016, Reliance Jio did not appear as a market share leader. Some seven months later, Reliance Jio had taken about nine percent share, and kept growing. By the second quarter of 2018, Reliance Jio might have 14 percent revenue market share.  

Where Jio really dominates is in mobile data, where Jio represents about 94 percent of mobile data usage and 34 percent of mobile data accounts.  

Convergence Means Vertical Integration; Horizontal Role Expansion

Formerly-separate industries--media, telecom and computing--have been converging for the better part of three decades. The industries have not yet completely fused, to be sure. But no longer is it possible to clearly delineate the boundaries.

Google and Facebook are huge ad-supported technology companies (hardware and software; content and access, in Google’s case). Comcast is a content creator, packager and distributor; so is Netflix. And so AT&T wants to be, also.

source: World Economic Forum

Are Netflix, Google and Facebook in the same business as Comcast, AT&T and Verizon? The answer actually matters for government policymakers and regulators, as well as firms and customers.

AT&T Chairman and CEO Randall Stephenson argues that its acquisition of Time Warner, a classic vertical merger, removes no competitors from any of the relevant markets and only positions AT&T the same way as other key competitors such as Netflix and Amazon.

"Reality is, the biggest distributor of content out there is totally vertically integrated,” said Stephenson, referring to Netflix. “They create original content; they aggregate original content; and they distribute original content.”

That is true for other major platforms as well, including Amazon, Google, YouTube and Hulu, he argues.

The issue is that roughly half of internet ecosystem profits now are earned by app providers, content creators and aggregators, device suppliers and others, while perhaps half are earned by access providers.

In the recent past as much as 60 percent of ecosystem profits were earned by access providers. So it is easy to describe the migration of value: it is moving towards apps, content and devices, and away from access.

That, in a nutshell, is why tier-one service providers who hope to survive must do as Comcast has done: transition from access to multi-role firms with assets in content creation and apps.

The Next Big Switch

A new “big switch” is coming for the communications industry. Back in the 1980s, much was made of the idea that former over-the-air (wireless) broadband traffic (TV) was moving to the fixed network (cable TV networks) while narrowband traffic (voice) was moving to the mobile network. That was dubbed the  Negroponte switch.

In more recent years, we have seen something different, namely the shift of all media types to wireless access, starting with voice, continuing with messaging and web surfing, and now video. Mobile bandwidth improvements are part of the explanation. But offload to Wi-Fi also drives the trend.

In the coming 5G era, that trend is going to accelerate, with the role of untethered and mobile networks continuing to grow.

The other notable change is that the distinctions between narrowband or wideband and broadband also have shifted. As we continually revise upwards the minimum speeds dubbed “broadband,” more and more use cases and traffic are actually no longer broadband in character.

When a high-definition streaming session only requires 4 Mbps to 5 Mbps, while broadband is defined as 25 Mbps, HDTV has become a wideband--not broadband--application.  

Consider the performance characteristics of most networks. Wide area networks mostly will support applications requiring 10 Mbps or less. That is, by definition, no longer “broadband” use cases.

That also will be the case for most untethered networks as well.

source: Nokia

In other words, most apps driving revenue (direct subscriptions) or value (indirect revenue streams) will operate in either narrowband or wideband speed ranges.

We might be in a “gigabit” era, but most apps will generate value and revenue in narrowband or wideband use cases.

"Back" to the Narrowband Future

“Voice” has been steadily losing value  as a revenue driver for communications service providers.

Still, voice will matter more in the future, but not “people talking to people.” Voice will be a key interface for interacting with computing resources. In many ways, that is an analogy for what will be happening in other areas of communications as well.

To be specific, even if industry revenue in recent decades has shifted from narrowband to broadband, in the next era revenue growth is likely to shift substantially back to narrowband.

That might seem crazy. It is most eminently realistic. Keep in mind that our old definitions of narrowband, wideband and broadband have evolved. Traditionally, narrowband was any access circuit operating at about 64 kbps. Wideband was any circuit operating between 64 kbps and 1.5 Mbps.

Broadband was anything faster than 1.5 Mbps.

These days, almost nothing matters but the definition of “broadband,” now defined by the U.S. Federal Communications as a minimum of 25 Mbps in the downstream. Using that definition, and recognizing the floor will keep rising, most of the coming new use cases will be “less than broadband, and many will be classically narrowband.

Consider the mix of existing and “future” applications. With the salient exceptions of 360-degree video, virtual reality and augmented reality and some autonomous vehicle use cases, virtually all other applications useful for humans (using smartphones, watches, health monitors, PCs, tablets) or sensors and computers (internet of things) require bandwidth less than about 25 Mbps to 50 Mbps.

source: Nokia

The somewhat obvious conclusion is that most of the use cases and potential revenue will be driven by use cases that do not require  “broadband” access speeds. Once upon a time, video was the classic “broadband” use case. These days, even high-definition video requires a few megabits per second support.

In that sense, using the 25-Mbps floor for defining “broadband,” even video has become a wideband app, requiring about 4 Mbps to 5 Mbps.

The big switch is coming.

Intel Launches Xeon D-2100 Processor for Edge Computing: IoT Implications

Intel has introduced its new Intel Xeon® D-2100 processor, a system-on-chip processor supporting edge applications, data center or network applications constrained by space and power.

The new processors will help communications service providers offer multi-access edge computing (MEC).

MEC is viewed by many as a way service providers can create a new role in cloud computing, focused at the edge, and supporting local content and real-time information about local-access network conditions.

MEC, in turn, is viewed as a strategic growth area precisely because it supports many internet of things apps. In other words, IoT might well hinge on edge computing.

source: Business Insider

And many of those apps are expected to arise in the smart transportation or smart cities areas, as well as healthcare and manufacturing, with 60-percent compound annual growth rates.

Notably, the biggest current market for edge computing is North America, the highest growth rates for edge computing are expected to occur in Asia.

source: Technavio  

That would also be a platform for third party customers who want to reduce both latency across core networks and WAN operating costs as well.

Lead use cases range from connected cars to smart stadiums, retail and medical solutions, where either low latency or high amounts of fresh content need to be supplied, and where traversing core networks is either expensive or latency-inducing.

The Intel Xeon D-2100 processors include up to 18 “Skylake-server” generation Intel Xeon processor cores and integrated Intel® QuickAssist Technology with up to 100 Gbps of built-in cryptography, decryption and encryption acceleration.

The new system on a chip also can play a role in enhancing performance, drawing less power in virtual customer premise equipment used to support virtual private networks.

To be sure, there are other key applications, including storage networks, content delivery networks and enterprise networks.

The new processor also are related to another set of key trends. The entire communications industry now arguably is a tail on an internet dog, and an integral building block of modern computing, which is cloud based at the moment, and increasingly is viewed as transitioning to edge computing (also called fog computing by many).

Decentralized computing, even more than cloud computing, shapes and requires communications facilities.

source: Wikibon