Un-Carrier 7.0 Relies on Unequal Treatment of One App and its Packets

To provide seamless high-definition call quality and full and seamless interoperability of the T-Mobile US network and Wi-Fi hotspots, T-Mobile US relies on quality of service and prioritization that does not treat all apps and packets equally.

The T-Mobile Un-carrier 7.0 slogan fundamentally is about “transforming all available Wi-Fi locations worldwide into extensions of our network,” according to Neville Ray, T-Mobile US CTO.

Un-carrier 7.0 also is about ways to employ quality of service mechanisms and packet priorities--not treating all bits alike--to enable seamless voice operations across the mobile and Wi-Fi networks.

“We added some T-Mobile secret sauce, our VoLTE (Voice over Long Term Evolution) magic and worked closely with our partner to ensure T-Mobile voice calls over Wi-Fi are prioritized, with seamless and simple setup and support,” said Neville Ray, T-Mobile US CTO.

“On top of all that, our patent-pending quality of service feature is designed so that T-Mobile voice calls maintain their clarity − no matter how much streaming music, video or games are coming through the T-Mobile Personal CellSpot ,” said Ray.

Those of you reading carefully will note the use of the terms “quality of service” and “prioritized.”

That is yet one more example of how the legitimate concern about “Internet openness” has become confused, over-extended and limiting to innovation and end user value.

Some applications--particularly voice and streaming audio and video--are highly susceptible to packet delay (latency and jitter). To preserve fidelity, T-Mobile US is applying quality of service measures using prioritization mechanisms of some sort.

But that does not “treat all packets equally.” As with other pro-consumer measures, such as providing no-incremental-cost access to Facebook or other apps, “not treating all packets or apps equally” sometimes is part of a value proposition for consumers and customers.

It might be subtle, but the new feature illustrates why network management and prioritized packet delivery sometimes are crucial for creating end user value.

“Now for the first time, thanks to our launch of next generation Wi-Fi calling and our use of new capabilities in our evolved Packet Data Gateway (ePDG), we’re providing our customers a seamless HD (high definition) voice calling experience whether they’re connected to a T-Mobile tower or a Wi-Fi connection,” said Ray. “No other major national carrier is doing this with Wi-Fi calling today.”

What that means is that T-Mobile US customers can use a smartphone to start a call on VoLTE and hand off to a connected Wi-Fi network, or initiate a call on Wi-Fi and then migrate to the T-Mobile US network, seamlessly.

“Your call won’t drop,” said Ray. “You won’t even know you’ve switched between networks.”

The new T-Mobile “Personal CellSpot” is an indoors picocell that acts like a small T-Mobile US cell site, boosting signal quality indoors.

The $25 personal Wi-Fi hotspot uses any fixed broadband connection to create a small area of mobile coverage indoors.

“In the age of the mobile Internet and interconnected devices, you simply can’t ignore the Wi-Fi connection,” said Neville Ray, T-Mobile US CTO.

Un-carrier 7.0 refers to value created by extending network coverage, high-definition voice and in-home access points, all tied together by the role of Wi-Fi in the T-Mobile US access architecture.

Notably, effective use of Wi-Fi to support seamless call handoff between Wi-Fi and the T-Mobile US network, and maintenance of call quality, seems to require that all packets not be treated equally.

Apple Both "Listens to Customers" and "Doesn't Listen to Customers"

Nobody "gets it right all the time," not even the late Steve Jobs, who unusually refused to drive new product creation using end user surveys. 

But there is an exception for every rule. And Apple, with the launch of the iPhone 6, and earlier with the launch of the mini version of the iPad, reacted informally to end user preferences as expressed in buying behavior.

An Apple Fy 14 Planning document shows company executives were aware sales trends were lead by products in a segment Apple had eschewed, namely bigger-screen phones costing $300 or less.

Some might argue Apple responded to both issues, over time, by creating the iPhone 5C (lower price) and introducing larger-screen iPhone 6 models. 

To be sure, Apple did not abandon its "premium" positioning, but some studies suggest the lower-priced 5C did attract users who otherwise would have bought an Android.

There is an inherent tension between "listening to customers" and "innovating." Listening to customers tends to produce incremental improvements to products customers already buy.

Creating totally new lines of business and brand new products often requires that firms not listen to customers, instead striving to identify unmet needs. By definition, potential customers cannot always identify what is lacking and unmet.

They can often identify where an existing product or service needs improvement. Apple's customer studies showed that "small screen size" was a frequent complaint. 

But Jobs undoubtedly was often correct in maintaining that consumer surveys were useless for proposed new products they never had seen or used.

Fundamentally, every firm faces the tension. "Listening to customers" will yield incremental improvements in existing products.

Looking for unmet needs will lead to uncovering new lines of business or product categories. Apple historically has excelled at creating new categories.

But some also would note that Apple has tended not be "first to market" in any category. Instead, it has tended to try and figure out the best way to create a product for a category.

But in doing so, it has often come to dominate and define a category it did not actually create.

So there's the paradox: listening to customers is good--but so is not listening to customers.

Are 20 Channels the New “300?”

Consumer dissatisfaction with packages of linear video can be summed up in the phrase “500 channels and nothing on.”

Count Dish Network and Verizon among the firms that think the answer is 20 channels, delivered over the Internet or a mobile network.

Skeptics have estimated the market for a 20-channel streaming video service is only about five million customers in the U.S. market. Of course, that would be understandable from suppliers of the traditional linear video packages sold to well over 80 percent of U.S. households.

Verizon seems to believe the primary market is Millennials who do not subscribe to traditional linear video subscription services, and particularly single-person households.

Dish Network, on the other hand, which plans to launch its service late in 2014, seems to be focusing more on sports, entertainment and children’s programming appealing to young adults who love sports and have kids but won't pay $100 a month for TV.

Dish has been aiming at a service costing perhaps $20 to $30 a month.

As always is the case, success hinges on willingness of the content owners to license rights to Verizon and Dish, followed closely by the value-price proposition. But Verizon expects to launch a 20-channel streaming service in 2015.

Verizon says it will offer major broadcast channels plus some custom channels, such as DreamWorks Annimation’s AwesomenessTV targeted at Millennials.

As you might guess, mobile delivery is a key channel for Verizon, in part because that allows Verizon to market nationwide to a hard-to-reach customer segment while adding distinctiveness for its mobile offering.

“No one wants to have 300 channels on your wireless,” Lowell McAdam, Verizon CEO said. The issue is what a transition to full a la carte access might look like.

But count Verizon in the camp that believes early audiences will include Millennials accustomed to viewing video on smartphones and tablets.

Verizon also believes it will make better profit margins, longer term, on Internet access services than video entertainment.

“Nobody makes much money at this point in distributing content,” McAdam argued.

AT&T has a contrary view, of course. AT&T’s bid to buy DirecTV is a big bet on the continued viability of linear video.

Sprint Will Prune Products and Segments to Focus on Value, Price Attack

Sprint likely is going to abandon some services or business segments, relatively quickly, as part of Sprint’s effort to supplant T-Mobile US as the price disruptor in the U.S. mobile market.

"In times of turnaround, we will focus on must-haves,” said Sprint CEO Marcelo Claure. “Nice-to-haves will have to go.”

And Claure appears to believe many Sprint currently operates in many such segments where it underperforms, and are not core assets or lines of business, perhaps. “We have an extensive line of nice-to-haves,” Claure said.

Moving fast, Claure appears to have looked quickly to an audience he understands very well, Sprint dealers. What he heard quickly convinced him that the “Framily” shared data plan was not resonating with consumers.

"Dealers said it was hard to sell,” Claure said. “We are marketing a hamster talking to people."

The big problem was that the plan was more expensive than plans offered by the other three national providers, with a consumer experience perceived as less desirable.

The new Family Share Pack offers a simple value proposition: more data for less money. Sprint’s value brand Boost also moved quickly to adopt the same posture for consumers preferring prepaid services.  

And while disclosing no specific numbers, Sprint’s new price attack is working, Claure said. Even after a short period of literally weeks since revamping pricing, Sprint has seen some days when it gained net customers, instead of losing them.

“Value” appears to be key, as Sprint has been emphasizing.  "We are now the disrupters in the industry," Claure said.

Gigabit Business Model Changed with "Neighborhood" Approach

There is one thing executives at Verizon Communications, AT&T and Google all seem to agree upon concerning gigabit networks that require fiber to the home networks: the business model varies neighborhood by neighborhood, even within larger metropolitan areas that are promising.

Verizon, for example, continues to maintain that further deployments of Verizon FiOS, though conceivable, will require a fairly-stringent financial viability test.

Google made a key breakthrough in convincing local governments that the traditional criteria--universal access--was not optimal for getting rapid deployment of gigabit networks.

The change in thinking, one might suggest, is something that has grown organically since passage of the Telecommunications Act of 1996.

In legalizing local competitive communications services for the first time, the Act allowed U.S. service providers to experiment with revenue models that served businesses only, for example, not “all locations.”

The enduring examples have been out of region services sold only to business customers of some size. That approach has allowed a few firms, including Frontier Communications and Windstream, to dramatically reshape their customer profiles and revenue sources.

Where both firms traditionally have earned most of their revenue from rural and smaller market consumer customers, both now earn substantial revenues (more than half) from business accounts.

The point is that Windstream and Frontier have been able to grow revenues, and add new high-capacity facilities, precisely because they had no requirement to serve “everyone” in a particular market.

So the principle that it is lawful for a communications supplier to serve only some parts of a city, or only certain customers, has been established policy for some time.

What Google Fiber did was gain widespread support for the idea that the same principle could expedite gigabit network facilities serving consumers, on a neighborhood by neighborhood basis.

Fundamentally, that is the same logic that other service providers have done in serving the business market. Perhaps it took a new provider such as Google to convince local regulators that consumers would benefit for the same reasons as business customers, by allowing building of facilities that do not serve every location, or every neighborhood.

Both AT&T and Verizon executives have spoken of the change in potential feasibility the Google Fiber model has enabled. And it is no surprise that AT&T already is exploring doing so in scores of metro areas. The economics simply are better when a neighborhood approach is used.

Forethought, for example, is building gigabit networks serving business customers in Denver, building by building, as most competitive local exchange carriers and metro fiber providers have done.

Denver Telecom Company does the same. And CenturyLink recently has announced it will do so for at least some neighborhoods in Denver.

The larger point is that the gigabit business model is a lot more attractive for any fixed network facilities-based Internet service provider when the CLEC model is used: build first in neighborhoods where demand exists, and not everywhere.

Growing Number of Cases Where Mobile Internet Access is a Viable Substitute for Fixed Access

For Deutsche Telekom customers, mobile Internet access speed now is faster than what is available on the fixed network. That raises an important question to a new level.

Under what circumstances can a mobile Internet access offer substitute fully for a fixed network offer?

As mobile voice effectively has become a preferred substitute for fixed network voice, what are the conditions under which mobile Internet access is a functional substitute for fixed access?

Some usage scenarios already are clear enough. Where the cost of fixed network Internet access is non-economical, mobile will be the only form of access.

Where both mobile and fixed access are available, there are more use cases. With the advent of Long Term Evolution, the number of viable use cases has grown, compared to the situation where 3G is viewed as a potential substitute for fixed access.

Low usage, single-user consumers are a generic class of consumers for which mobile access using LTE could be a viable substitute for fixed access. Single-person households or users who do not watch much online video are examples.

On the other hand, multi-user households that watch significant amounts of video almost never are the best candidates for mobile Internet access substitution.

Someplace in the middle are many use cases where mobile offers might compete effectively with fixed network offers on a price-per-gigabyte basis.

It will is tough, but not impossible. Users will have to manage their own behavior, resisting the temptation to use resource-intensive apps when on the mobile network.

Substitution also will be easier in markets where public Wi-Fi or at-work Wi-Fi is plentiful.

We already have seen that in most markets, half to 70 percent of total mobile device usage relies on the fixed network, in the form of Wi-Fi offload.

So service providers with access to their own fixed network assets, plus mobile assets, might try to market usage buckets that incorporate both mobile access with fixed access, when Wi-Fi access is included.

Illiad’s Free Mobile, for example, uses a “Wi-Fi first” approach to support its lower recurring prices, in part because it owns some fixed network assets. Comcast is expected to take the same approach to creating mobile services.

Service providers without fixed network assets will have to leverage public Wi-Fi alone. That is more challenging, but becoming easier.

For mobile operators with some fixed Internet access assets, creating a sense of value is more a marketing exercise and a consumer perception issue than a technology exercise.

When mobiles are connected using any form of Wi-Fi, they have “effective” usage buckets that are almost arbitrarily large, no matter what the formal mobile usage bucket happens to be.

So whether approached from a “cost to supply” standpoint or a “cost to use” basis, an access supplier with both fixed and mobile assets has clear advantages.

From the service provider’s perspective, allowing smartphones to use any Wi-Fi connection dramatically affects the cost of supplying mobile Internet access to customers in a wide variety of stationary usage scenarios.

For consumers, the effective price of Internet access, on a dollars per gigabyte basis, is rarely even understood, on a granular basis.

Typical users never approach the usage limits of their fixed connections, which might have usage caps ranging from 150 Gbytes to 250 Gbytes, when such caps exist.

So the simple value proposition effectively becomes “monthly recurring cost,” not actual price per Gbyte. Effective price always hinges on actual consumption.

In other words, what is the “actual” price, per Gigabyte, of a plan costing $50, with 10 Gbytes of actual consumption? In that instance, $5 per gigabyte.

What is the “actual” cost of 1 Gbyte of usage, on a plan costing $30 a month? In that instance, $30.

So long as the cost to supply mobile bandwidth remains more costly than fixed network bandwidth, directly-competitive offers will be difficult. But “effectively competitive” offers will be possible.

One possible approach for a mobile service provider is to market effective usage buckets using all access methods, both mobile and fixed. In that case, the blended access cost, per device or per user, across fixed and mobile networks might be quite effectively comparable.

To be sure, full “mobile access” will remain subject to relatively stringent usage caps, compared to fixed access. But marketers might be able to create a perception of value by touting total monthly usage buckets that are effectively equivalent to fixed offers, because Wi-Fi consumption, which might be half to 70 percent of total usage, is available at “no incremental charge.”

For Deutsche Telekom, Mobile Internet Access Now is Faster than Fixed

It is something of a truism that fixed network Internet access is "faster" than mobile Internet access: except where that is not the case.

In the German communications market, mobile Internet access speeds arguably exceed fixed network access speeds on a national basis. That is the impact Long Term Evolution fourth-generation networks have had, at least for Deutsche Telekom.

Consider the latest Deutsche Telekom retail packages. Deutsche Telekom’s “MagentaEINS,” (Mobile One) consumer packages combine mobile and landline services in three basic packages.

But note how the offers supply Internet access across the fixed and LTE networks. The most-affordable MagentaEINS S package costs EUR 49.90 per month for the first seven months, EUR 54.90 per month thereafter, and offers Internet access at 16 Mbps on the fixed network.

MagentaEINS M costs EUR 59.85 per month (EUR 69.85 per month from the seventh month on) and features “iMagentaEINS S Entertain,” adding 100 linear TV entertainment channels, over 20 of which are provided in high-definition format.

Fixed network Internet access is at speeds up to 50 Mbps, with Long Term Evolution access at speeds up to 150 Mbps.

That is the first example of inverted capabilities. Normally, one expects the fastest speeds in a market will be provided by a fixed network. For Deutsche Telekom, the LTE network is fastest.

That might not be the case for every contestant in every market, though. Cable operators might argue they can--or will--top 150 Mbps in the future.

The largest package, MagentaEINS L, sells for EUR 64.85 per month (EUR 79.85 per month from the seventh month on) and features mobile communications, landline and Internet up to 100 Mbps, plus “Entertain Premium” with more than 45 HD channels.

In that case, fixed network speeds operate up to 100 Mbps, while LTE still offers speeds up to 150 Mbps.

One might argue Deutsche Telekom is trying to avoid the market realities in Austria, where mobile Internet access has proven to be a widely-accepted substitute for fixed network services.

As early as 2009, mobile access represented 38 percent of all broadband connections in Austria.

One service provider response is to improve the value of the fixed network offer by combining fixed and mobile services and features in ways that blur the line between fixed and mobile resources, and create a unified experience that draws on each network’s advantages.

For Deutsche Telekom, and, arguably other providers such as AT&T, the new strategy is to create retail packages combining features of fixed and mobile networks as seamlessly as possible.

LIkewise, some service providers such as Free Mobile, and cable operators, leverage fixed network assets (Wi-Fi) to create mobile experiences and value.

As foundational as triple-play offers have become for fixed network providers, a growing number of tier-one service providers now are starting to bundled access across fixed and mobile networks.

One characterization is that the quadruple play now becomes the new offer. A different characterization might be that the new effort is not only to essentially blur the difference between network access methods, but create different experiences where the “network access” is invisible and irrelevant.

Many mobile service providers have attempted to create mobile substitutes for fixed products.

They have largely done so for voice. In messaging, mobile services have surpassed fixed services as well.

Internet access and video are the new battlefields.

In Germany, Deutsche Telekom will try to head off substitution by combining a faster mobile Internet access offer with other fixed network features.

In the U.S. market, T-Mobile US already offers 150 Mbps Long Term Evolution speeds in Dallas.

Sprint has recently argued it will introduce 200 Mbps LTE service, using its new Spark network.

AT&T also has talked about launching 100-Mbps LTE in the U.S. market as well.

To be sure, many will argue mobile and fixed Internet access offers are not directly comparable, given the huge difference in usage buckets (5 Gbps might be typical for a high-end mobile user, where 150 Gbps is standard for fixed network customers).

That difference in usage buckets (two orders of magnitude) might also represent a similar gap in effective price-per-gigabyte actually consumed.

On the other hand, on the metric of access speed, it already is possible to argue that T-Mobile US service in Dallas, for example, might be faster--at 150 Mbps--than what consumers generally have access to on either telco or cable TV networks.

T-Mobile US  has said that it will bring LTE that fast to 90 percent of the top 25 markets by the end of 2015, which means that 23 of the 25 most populous cities in the country will have it.

That means T-Mobile US would be offering 150 Mbps in 23 of the biggest U.S. metropolitan areas.

So add LTE speeds to the business pressures convincing telcos and cable companies they now must boost access speeds. It isn’t just Google Fiber.