Execs Think "New IP Services" Will Drive Revenue in 2013. Really?

There is something a bit more than a little familiar about the ways surveyed industry leaders are thinking about Long Term Evolution and 4G services. Namely, polled executives logically, but perhaps somewhat critically, seem to believe that “new IP-based services” will be a “main driver of revenue for operators in 2013.”

The SAP sponsored survey of attendees to the GSMA Mobile World Congress found that 36 percent of respondents believe “improved data speed” were among the reasons to offer LTE, while 30 percent believed  “offering new IP-based services” was a primary driver for launching LTE.

No rational person would deny the soundness of those opinions. But some might recall what people were saying about 3G, and recall that exactly the same things were said.

It isn’t that the hopes are unrealistic, or out of place. But it would also be fair to say that it is unlikely “new IP-based services” really will become a “main driver of revenue for operators in 2013.”

That, some of us might say, is completely wishful thinking, unless people start defining “old things as new things” so that legacy revenue is counted as “IP new services revenue.”

Some 58 percent of respondents believe that “new offerings, including rich communication services (RCS) and 4G/LTE and increased data usage by smartphone users, will drive operator revenue.”

And there you see the problem. Many service providers are going to offer RCS services at no charge. So there is no new revenue. For those who do plan to charge, one might predict, with no further information, that any such new revenue will be rather small in magnitude.

Defining “4G/LTE” as a “new IP service” really only substitutes 4G broadband access for 3G-based broadband access. You can call the 4G services “a new IP service” in the same way that service providers define 20 Mbps “standard access” and 50 Mbps or 100 Mbps as “gold service.”

Is that really a “new IP service,” or a different tier of the same service. Sure, there are different product codes, but you get the point.

About a third of respondents based in Europe and North America expected that “new services” such as video broadcast and movies on demand would be the key to generating revenue in 2013.

To be fair, a service or product is “new” for a particular service provider who hasn’t offered it before. But do you really consider entertainment video to be a “new IP application?” It might be an “existing IP app we haven’t sold before,” but it isn’t quite what some might have in mind.

But 40 percent of Asia-based respondents placed much greater significance on increased data usage by smart phone users.

Don’t get me wrong. It’s a good thing to make more revenue by selling faster broadband access. Personally, I hate having to use 3G when I am used to 4G.

But I wouldn’t say 4G is a “new IP service.” It’s a better version of an access service.

Will “new IP services” generating significant revenue emerge? Eventually. Will truly “new” services generate significant revenue in 2013. That is doubtful. People are having a hard time demonstrating something truly new.

Faster is better. Lower latency is better. Better experience is also worthwhile. But some might argue the really new things are off in the distance someplace.

New Ways Milliseconds Can Matter

Milliseconds long have mattered for high frequency traders, since a time lead of that magnitude can translate into hundreds of thousands of dollars of extra profit on a trade.

Such algorithmic trading is handled by computers, not live humans, so trading speeds  are limited by processors, software and sometimes even the distance between two computers that are parties to executing a trade.

But Adobe now believes such differences of milliseconds might someday be important for digital marketing platforms as well. It is a bit of hyperbole at the moment.

But Adobe argues that such speed advantages may separate winners and losers, according to Brad Rencher, Adobe SVP.

Adobe is aiming to build a millisecond of a lead on the competition.  It turns out that the millisecond is the one that occurs between the last piece of data a consumer “gives“ a system and the content with which the system responds.   

What happens in that millisecond?  The system needs to correlate, manipulate, measure and analyze all the various pockets of data is has on the consumer and then choose, assemble and display the relevant content to her.  

The content that these algorithms choose and that the infrastructure renders, must encourage the consumer to take a preferred action, especially buying something.

The analogy is not quite perfect, since milliseconds are not relevant for human cognition or perception. But milliseconds might be a reasonable of describing latency as computers experience it when crunching enormous quantities of data before presenting some sort of solution in a marketing context.

In other words, in the big data environment, when evaluating data and then assembling offers, for example, milliseconds might matter when trying to find meaningful signals about what people are doing right now, where they are, and what device they are using, and what they might want.

So milliseconds might matter if that data has be correlated with what is known about the customer from all available sources of data (CRM, social) to create a more granular view of a particular person’s values, past behavior and buying preferences. Then the objective is to use that understanding to predict what content must be delivered, immediately and in context to achieve a commercial objective.

In that sense, milliseconds might matter, even if humans cannot apprehend delays that small.

That might also imply that milliseconds could matter, in new ways, for communication networks other than those supporting high frequency trading systems.

Kentucky Deregulates, AT&T Invests

Some observers do worry that a growing wave of deregulation regarding universal service obligations on dominant telcos is going to be bad for consumers. In Kentucky, for example, Senate bill SB88  repeals statewide service obligations on incumbent telcos regarding landline services, which formerly had to be provided statewide.

Under provisions of the new bill, incumbents must continue providing basic local exchange services to residences where those residence currently exist, and when such residences are located in areas with less than 5000 housing units.

Incumbents do not have to provide basic local exchange services when the carrier offers an alternative telephone service, when there are at least two providers offering telephone services in the area or when there is at least one provider of broadband service that is capable of delivering telephone service.

It might not be coincidental that AT&T has announced it now will spend between $600 and $800 million during 2013 to 2015 to support its current network capabilities and expand access to broadband services in Kentucky.

Perhaps observers should not worry so much. There appear to be no shortage of third party, independent service providers more than happy to compete for customers in Kentucky and elsewhere.

If the fear is that AT&T will withdraw from some markets, that only increases the market opportunity for other providers eager to fill the gap. One only has to spend time with wireless ISPs to understand that.

Reliance, Samsung to Attempt LTE Disruption in India

Reliance Industries reportedly is working with Samsung on a plan to disrupt the Indian smart phone market with a new Long Term Evolution device priced at 3G device levels as low as $100, plus service plans that include data packages starting at as low as Rs 100.

To help, the new devices will be sold with minimum down payments and installment payments with no interest.

That would be significant enough. But there are rumors that Samsung might eventually wind up as an equity partner in some way in the venture with Reliance.

That would be equally interesting, if also politically delicate.


But some amount of ecosystem tension seems difficult to avoid, in the mobile or Internet spaces.

Asus Fonepad Fully Merges Smart Phone, Tablet

It has been inevitable for some time that at least some suppliers were going to push the boundaries between smart phones and tablets, reaching some point of convergence.

Count Asus as the first to do so. Its “Fonepad” is a device with seven-inch screen that doubles as a tablet and a smart phone, having 3G voice and mobile data.

In some sense, the Asus device is the first phablet device that fully combines a seven-inch screen with smart phone capabilities. Reportedly, it will be initially selling for about 265 euros.

That means the device still is too expensive for widespread use as a converged device in many developing markets, but that is only a matter of time. No doubt pundits will find much to criticize. But that would be true of any device intended for mass market use, especially in markets where affordability is a key concern.

The issue is more than simply the availability of the first device that really blends smart phone and tablet in one device. The issue is whether, over time, such devices will be useful in many emerging markets where device cost and service cost are important barriers to be overcome.

Some skeptics have argued that in many such markets, many consumers will opt for a phone only, and not be able to afford a tablet. That assumption remains to be tested, especially over time, as prices for these sorts of combination units or phablets decline.

It might be an important new device category, for such markets.

Fonepad can be used for voice calls using the built-in noise-cancelling digital microphone or an optional Bluetooth headset, and Asus suggests the device can help users by operating with a single mobile data plan.

This Simple Chart Shows Where Broadband Growth Is Going to Happen

While it took 20 years for the first two billion people to connect to the Internet, the next two billion users will be coming online in only five years, according to Gary Kovacs, the CEO of Mozilla. 

That is a breathtaking speed of adoption. 

Average revenue per user will not be as high as in the developed regions, and access speeds might not always be as high, either. 

But the Internet-using population of the planet could double in just five years. Asia will be the global center or gravity in terms of gross subscriber additions, but Africa's growth rate will be faster. 

Will Apple and Samsung Hit the Wall?

As much as device suppliers ranging from Nokia to BlackBerry to LG to Motorola are trying to survive, not necessarily catch Samsung and Apple in the market share race, even Apple and Samsung face key issues. 

The primary problem for Apple is that the market for high-end smartphones is nearing saturation, according to Adnaan Ahmad at Berenberg Bank. 

As a result, demand for the newest iPhone, which was the main driver of Apple's growth, is softening. 

Citigroup, for example, has updated its revenue growth model for Apple, predicting single digit growth.

Samsung is going to face the same problem, some would argue.