A few decades ago, the telecom industry was all about voice calls; now voice uses only a small amount of bandwidth that was deployed to handle data. Mobile services have gone from an extravagance to the main service option for the masses. And regulatory policy appears to be teetering between total deregulation and re-nationalizing the telecom industry. Although these telecom trends come from different segments of the telecom industry, we’re headed for Convergence 2011, where their effects will be felt throughout the year.
Here are the top five 2011 telecom industry trends we see shaping up.
Trend 1: Mobile broadband and “URL stores” move service layer to the Web. The top trend in 2011 could be called the “webification” of the service layer, particularly for mobile services. While telecom operators have been concerned about being cut out or made irrelevant by over-the-top (OTT) competitors that offer services but don’t own network facilities (the essence of “disintermediation”), the truth is that so far, these competitors have had minimal impact on operators’ revenues. That’s going to change in 2011 because of two important industry shifts: the concept of “URL stores,” and the growth of mobile broadband and 4G.
Google’s Chrome operating system (OS) and Web store is a critical shift in the way we think about services. Because Chrome is simply a browser linked to hardware, it’s the ultimate thin client and draws all of its resources from the cloud through a simple URL. That URL is then “sold” under various financial terms through a Web store. The point is that any current or future service can be conceptualized this way, and service complexity can be hidden in the cloud. URLs can be accessed by any Web-enabled device, which would make the model nearly universal. Operators have been trying to develop their own service layers based on a Web model, with mixed-to-little success by their own reports. The time for experimentation is now gone. In 2011, Google will offer URL stores and other OTT competitors may follow.
Mobile evolution to 4G and Long-Term Evolution (LTE) intersects URL-store development in a number of ways. 4G makes all mobile devices potentially more useful as portals into rich experiences, and the “mobile experience” conduit is the hottest market in telecom. The stakes are high for all competitors in the mobile services space, and the potential for additional revenue is motivating Google and other OTT players. For operators, the challenge is that 4G has always been seen as the path to increased IMS deployment, and IMS clearly plays no part in Google’s plans for a URL store. Unless IMS can be linked to URL-store services in a highly effective way, the new service model may force operators to rethink their vision of IMS for mobile application delivery.
Trend 2: Operators work to monetize content delivery. Up to now, operators have focused their monetization strategies on IPTV delivery. But in 2011 they will expand their content delivery strategies to include screen-switching, special handling of video where permitted, and offering content billing and customer care services from OSS/BSS systems. Mobility is one of the main drivers of these changes, as is the increased use of streaming video to supplement ordinary viewing via channels. Integrating social network with video content is also an operator priority and is an early reality in some proof-of-concept testing.
The focus of competition here is likely to be the content delivery network(CDN). Vendors are already talking about two specific areas of content monetization involving CDNs. First, the use of “in-network” CDNs can provide special handling for operator content. Second, a federation of CDN services among operators could provide greater content reach for mobile roaming customers. A federation could also help customers who access a version of “TV Everywhere” content on a mobile network or use a different Internet provider than their traditional video content provider.
Trend 3: Cloud services are promoted through a new generation of networked appliances. In 2011 we’ll see cloud-services-based content and features battle app-delivered content and features for acceptance. The winner will be in control of the user or customer experience in the future. Smartphones changed the network appliance market, but their small form factors limit their impact on both entertainment and enterprise computing. The larger form factor of tablets and increased competition there will open the door for new applications in both spaces, which creates new opportunities and risks for operators and vendors. The wars between Apple, Google/Android, RIM and even the Intel/Nokia MeeGo alliance will create smarter devices with more service features migrating into applications and GUIs, rather than being supported by in- or on-network servers. HTML5 is particularly likely to be a battleground here.
Mobile apps essentially disconnect the user from the Web, making online applications look like an extension of the device’s GUI. That undermines the incumbency of portal or OTT giants. It also makes it harder for network operators to establish their own brands and introduce new services that end users are willing to pay for. An appliance is also perfect for a “URL store” cloud service, but it may be difficult to reconcile this with appliance vendors’ desires to create applications unique to their devices.
Trend 4: Network operators find growing roles in advertising. Operators know more about the consumer than anyone and are more likely to be trusted to protect consumer information -- in no small part because operators are subject to regulatory oversight. Operators are already considering a new model of advertising where they “pull” ads by category using customer data analytics. This protects customer information far better than syndicating tracking and demographic data to advertisers to permit ad selection.
Advertisers are warming to the idea that network operators can play a greater role in matching ads to consumer profiles. Advertisers fear that the current system, where websites track and potentially syndicate customer information, will lead to regulations and uncertainty about advertising practices at a critical time in the evolving online content market. As a result, operators will have an opportunity to make money in 2011 while supporting an increasingly popular industry view.
Trend 5: The telecom industry faces increased confusion and conflict in regulatory policies. Existing regulations and market practice in the telecom industry are already under scrutiny in three areas: net neutrality and traffic handling, copyright protection and peer-to-peer (P2P) communications, and consumer privacy and tracking. Issues of lawful intercept will also get attention in a world increasingly transitioning to broadband, as will the use of text or other non-voice alternatives that can be used for contacting E911 providers.
It’s clear that the explosion of Internet use and the number of applications for Internet services and connectivity have combined to outrun public policy and regulations. In addition, every stakeholder in the Internet business is looking to gain market advantage through favorable regulatory treatment. In 2011, all of this will be complicated by the uncertain state of the world economy and the political tension resulting from consumer uncertainty.
Under the best conditions, reaching national accord on any one of the three key issues will be difficult, and differences among the world’s major economies in regulations in any of these three areas will create difficulties with online service fulfillment and consumer protection. The U.S. and Europe have taken different positions on net neutrality already, something that could cause disruption among all of the Internet’s players and vendors.
Disorder will also come from the FCC’s legal foundation for its December net neutrality order, which is similar to the one already rejected by the U.S. Court of Appeals. That almost guarantees further legal issues, another possible reversal of the FCC by the courts, and threats of legislation or additional regulation. If this isn’t sorted out reasonably, it could be the top problem of the year for network operators.
About the author:
Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is the publisher of Netwatcher, a journal addressing advanced telecommunications strategy issues. Check out his SearchTelecom.com networking blog, Uncommon Wisdom.