Archive for April, 2006

INTERNET MEDIA BYPASSING THE TELCOS

Tuesday, April 18th, 2006

The battle between the Internet economy and the incumbent telcos is going to heat up even further. Around the world the telcos are boycotting the use of their networks for the new emerging Internet economy led by companies such as Google, Yahoo, MSN, AOL, News Limited and many others.

Most countries still don’t have proper wholesale regimes which would enable companies to build new innovative services over the existing networks. For content and service providers ready to participate in the new Internet economy, these new Internet services are, because of the lack of proper wholesale services, economically unviable (this applies in particular to the mobile market). Telcos aren’t providing them with the network facilities needed to build their new services (for example, by limiting the speed on their networks – Telecom New Zealand and Telstra are classic examples here).

Building alternative (wireless) networks is one possible way to overcome the problem, but this will take a long time. In most situations government policies will be needed to secure the country’s future in the Internet economy.

The United Kingdom is leading the charge, with BT showing a cooperative approach. In Australia a similar regime has been introduced but Telstra is taking the opposite position, fighting the government all the way on operational separation and wholesale issues. In other words, it is employing the usual delaying tactics that have proved successful all around the world – strategies used by most of the incumbent players in developed markets.

Internet companies, however, can’t just wait for the various governments to get their telcos to cooperate – they are also looking at other alternatives. They are involved in building alternative wireless and BPL networks.

Peer-to-peer approaches, borrowed from the file-sharing world of Kazaa and BitTorrent, are also being used by these companies to deliver quality Internet video to consumers.

In an attempt to deal with the potential bottleneck in the last mile Internet – companies plan to borrow space on their customers’ PCs to store video content at the edge of the network. As customers begin ordering video content, small parts of the files are cached on their hard drives. When a consumer orders a video, it is pieced together from PCs (peers) nearby on the network, avoiding the need to push the entire file out from a central server.

AOL’s video service, called ‘In2TV’, and the BBC’s trial of an ‘Interactive Media Player’, which used BitTorrent P2P technology to offer free access to archived TV programs, are among the first cabs off the rank.

See also the analysis in this week’s Report of the Week: Australia – Digital Media – Analyses, Issues, Developments – 2006

3 page Analysis:
It’s worthwhile fighting for open networks
Structural changes to the industry are overdue
Alcatel puts its weight behind the monopoly
The farce of infrastructure-based competition
We should stand firm on open networks
The telcos failed for 30 years – Internet succeeded in 10
Open networks engine for innovation and growth
Large economic benefits
BT leading the way
Safe harbours undermine the Internet economy
Bill of Internet Rights

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Mobile content, a market kept hostage

Monday, April 17th, 2006

Not much progress in almost a decade.

Last week I chaired a mobile content conference.

What really excites me about this market is that it brings a whole new group of players into the mainly engineering-dominated telecoms market – content providers, content designers, advertisers, all contributing to broadening the scope of the market. Last week I chaired a mobile content conference.

The sad part is that nothing much has changed since I first addressed this emerging industry group in the late 1990s.Last week I chaired a mobile content conference.What really excites me about this market is that it brings a whole new group of players into the mainly engineering-dominated telecoms market – content providers, content designers, advertisers, all contributing to broadening the scope of the market.

At one of my first meetings with them I introduced the slogan WAP=CRAP. In the intervening seven years mobile data/content has not been able to grab more than between 3% to 5% of the mobile market. During that time financial and other analysts have persistently maintained that the market needs to move into value-added services, in order to stop eroding ARPUs; at that same time I was arguing that 3G would not do that trick, since it would not be able to offer much more than the 2 services.

Still no open networks

Unfortunately the mobile operators are still not serious about opening up their networks for mobile content. Their charges to the content providers of between 20% and 60% of the revenues they generate for their services over their networks are far too high. They should be more like those charged by the credit card companies. However, one of the main reasons the operators are so reluctant to open up their networks is that the mobile technology is not well-suited to the delivery of what the market calls ‘rich experience’ content (multimedia, video, etc).

The operators can’t go all-out on mobile data because their networks would simply collapse.

When I was driving to the conference I became stuck in a traffic jam and for an hour I couldn’t use the mobile phone because of network congestion. Imagine what would happen with mobile networks if large number of people would be using ‘rich media’!

Dramatic changes are needed in mobile infrastructure and spectrum management in order to facilitate mass market, rich media services. It is estimated that such changes, and the related standards, are still some two years away. Very few large-scale developments will happen without international standards.

Untapped potential

Furthermore, the reality is that 90% of the revenues of the mobile operators come from voice services and they therefore want, first of all, to protect these revenue streams before getting too excited about mobile data.

Exhibit 1 – Mobile facts and figures

  • Mobile revenues – voice 85%, SMS 10%, other services/content 3-5%
  • MMS capable handsets – 35%, less than a third has used MMS, only a fraction is regular users
  • Massive change-over by 2015 – 90% revenues data/content, 10% voice
  • Can only be done on proper wireless networks (WiMAX, 4G)
  • Massive write-offs in 3G are needed

While I have been critical of this market for all those years, for the reasons mentioned above, I do see at the same time the enormous potential of wireless data, mobility services and media rich content. So the industry is correct to pursue this market; however both the business and technical fundamentals of the current marketplace are not conducive to the growth in mobile content.

Think mobile content, think Internet business models – in other words, lots of free content, free services, and very low-cost access.

We are a telecoms industry

If an analysis is made of the various new telecoms technologies and telecoms innovations over the last few decades there can only be one conclusion – that whatever comes out of this industry is communications-based – not entertainment, not information, but communications.

The fax machine, the mobile phone, SMS, email.

This is not going to change, and the killer application on broadband will be video communications – over both the fixed network and the wireless network. However, on both the fixed and wireless networks the operators are putting 90% of their time and resources into content, information, entertainment, etc.

And. as has happened in the past, they won’t be able to crack that nut this time round either. Despite their best efforts, their organisations and their culture continue to be engineering-driven. Their boards and senior executives are not 25-year-old creative people but 50+-year-old technology, financial, legal or accounting managers.

Any attempt such organisations might make to move into entertainment and information will be flawed from the start; yet they can’t help but fall into the same trap, time after time. This will only change once these companies have gone through an deconstruction and subsequent reconstruction of their businesses, realigning themselves with the realities of a converging marketplace.

To highlight the comms-driven nature of our industry . of the 15% non-voice services on mobile phones, 75% is SMS; of the 25% non-SMS mobile data, 80% are pictures and rich media communication messages.

3G is still a voice-driven development

3G is going to deliver some relief, and this is borne out by Hutchison, which is leading the rich media developments over its network. However, with the other 3G networks getting up steam, the focus is rapidly shifting once more to price competition around the voice services (capped prices). While Hutchison’s ‘3’ ARPU is 5 or 6 times higher than that of the other players, that difference will quickly decrease with Hutchison no longer being the sole player in this market.

Until now it was able to attract all the first movers in the market – those who were ready to get a glimpse of the new services. From now on these ‘extra’ revenues will be diluted.

The painful fact is that 3G is too little too late. The consumers are already moving into higher speed data and they are attracted by the rich media that the mobile operators and the handset vendors are showing to them. However, the costs of both the handsets and the use of the services are too high for mass market appeal. With the roll-out of 3G still in the early phase, there is little or no interest in dumping this technology for a better-suited wireless broadband technology, and, like the 2G networks, a range of 3 , 3 and 3 services are already on the drawing boards to compensate for the missing elements of 3G proper.

The question will be whether, this time round, these bolt-ons will do the trick – they failed to deliver in the 2G space.

What do you mean – customer service?

It was quite embarrassing to hear the industry talking about customer service. The argument is that we have to be very careful with our customers, and offer them, initially, services in a walled garden, protected from the evil outside.

At the same time those very players argue that one of the great benefits of mobile content is that it can be personalised, and that this is what customers want. Portals are the very opposite of this customer requirement. What would have happened if the telcos had been able to hold back the Internet in a similar way?

You might recall how rapidly those walled gardens and portals disappeared on the fixed networks. But in that instance customers had a choice to jump the fence. In a mobile world they don’t have that choice.

I am convinced that wireless broadband, in order to become a mass market development, will have to repeat the fixed Internet phenomenon.

Exhibit 2 – What users want

  • more user friendliness in relation to handsets, access to content and the use of content
  • cheaper ‘media rich’ handsets
  • cheaper usage charges

Open up the market and it will very quickly sort itself out. Let customers experience bad services and they will soon vote with their feet. Let advertisers try good and bad services and a similar shake-out will take place there as well. We don’t want mobile operators as our ‘protectors’ and gatekeepers. Of course, we all know that these concerns are totally false – the only reason for their ‘concern’ is to retain control of the market via their vertically-integrated organisations.

The operators have no real intention of changing their present attitude, unless pressed by competition. One successful attempt at change was made in Europe, when the advertising industry (combined) argued for more off-net facilities, and in the USA, Verizon was one of the first companies to give in to that demand on that side of the Atlantic.

It is clear that for this market to develop the mobile operators must step out of the way.

At the conference the presentations by Robbee Spadafora from the Seven Network, Daniel Burton from Two Way TV and Adam Dunne from Aura made it very clear to me that there is no doubt whatsoever that we will have exciting and innovative applications, based on very sound business models. These companies only need the opportunity to move freely into this market.

At the same time, there is no way that their services and models can be fully developed while the mobile operators keep on throwing up all those obstacles.

All we need is competition

Around the world, and in Australia also, the various mobile oligopolies in this market can only be changed by competition; and this might come from new wireless broadband developments. While this technology (WiMAX) still has to prove itself, it has the potential to shake up the mobile markets and thus finally open up the market for wireless content – something we have been talking about for a decade, but which market segment has not been able to grow during that time to more than 3% to 5% of total mobile revenues.

While WiMAX will not necessarily dethrone the mobile operators, at a minimum it will force them to include wireless broadband in their technology mix and consequently make them to change their business models to facilitate the growth of wireless broadband and finally open up the market for personal broadband based for mobility services.

Paul Budde

I invite you to discuss these issues with myself and a range of hand picked experts at the next Roundtable

Roundtable with Paul Budde and Industry Experts

Wednesday 19th April 2006

Theme: Wireless broadband battles: WiMAX vs. 3G HSPDA

With Intel’s investment in Unwired and the alliance with Austar we expect a wireless broadband to boom in Australia. On the other side Telstra’s new UMTS 850 network is totally 3G HSDPA based – ready for broadband delivery later on this year and the company is already planning for the Super 3G evolution.

WiMAX initially launched itself as a potential alternative to fixed broadband services. There are still opportunities to challenge fixed networks in niche markets and regional markets; the government’s regional fund is certainly going to boost these developments.

However, the next big opportunity is to develop a 4G solution, combining mobile technologies and wireless technologies to address markets such as wireless data, telemetry, RFID and a range of new personal broadband services that will emerge around this 4G concept.

We predict that 3G and HSDPA are just stepping stones to a deployment of true wireless broadband in late 2007. Will Super 3G (100Mb/s) here finally merge with WiMax?

This will create a totally new infrastructure well beyond the current fixed and mobile limitations. Together with new developments in consumer electronic devices, increased storage and parallel processing, the wireless personal broadband network will become the core of a new phenomenon which I call the AI (artificial intelligent) network brain; linking people, devices, data bases, networks, services and applications all together in an integrated, interactive wireless environment. Still a few years to go but we surely are starting to see the new direction this market is taking.

This event is a must for all of you who want to be part of the wireless broadband bonanza. I will explain this further at the Roundtable

AGENDA

09.30 10.00 Arrival and coffee
10.00 10.15 Welcome, introduction of delegates
10.15 11.15 The personal broadband network of the future.Paul Budde
11.15 11.45 Morning coffee
11.45 12.05 WiMAX Ecosystem, Products and DeploymentsIntel
12.05 12.25 ‘The Road to Rev E’Frank Louwdyk, Business Development Manager, Wireless, Alcatel
12.30 13.30 Light lunch
13.30 13.50 Making the case for 3G HSDPA and Super 3GGeoff Schomburgk, Managing Principal, Business Consulting – Ericsson
13.50 14.10 WiMAX for Regional AustraliaDeanne Weir, Austar

Sai Subramanian, EVP of Product Marketing, Navini

14.10 14.40 Afternoon coffee
14.40 16.30 Roundtable discussion with presenters
16.30 Close

More details will be provided closer to the date

Cost: $395 per person (excluding GST) – this includes morning/afternoon coffee and lunch

Venue: The Observatory Hotel, 89-113 Kent Street, Sydney

Booking: For online registration

Alternatively call or email Christine Lewis to make your booking

Telephone: 02 4998 8144 Email:pbc@budde.com.au

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FTTX KICKED OFF

Tuesday, April 11th, 2006

FTTx kicked off by utilities & local councils
At last months FTTH Council Europe ‘s annual convention in Vienna, there was a palpable sense that the atmosphere had changed, generating more buzz than any event I’ve attended in the past year.

But the agents of change in Europe are not the incumbents, but the public utilities and municipal authorities, which have been busy creating an alternative blueprint for Europe in which a fibre-based, open-access next-generation network (NGN), equally available to all citizens and service providers, replaces the current model of vertically integrated or imperfectly unbundled networks and limited facilities-based competition.

The new players enjoy four key advantages over incumbents:

First, because they are built from the start as open-access networks in which the builders and operators have no interest, they lead to a far broader palette of services and more choice for consumers-

Second, builders can take full advantage of the very low operating costs that are now becoming possible. One of the most mature municipal networks in Europe – in Vasteras, Sweden – currently serves 50,000 ports with just four operations staff.

Third, utilities and municipalities are taking a long-term view of payback and return on investment – something that most incumbents can no longer do.

Also the good news from the conference was that there seems to be no shortage of investors lining up to take a share in these new fibre initiatives.

Fourth, but not least, local politicians are waking up to the central importance of high-bandwidth networks for their economies.

Internet economy companies such as Walt Disney indicated that they would be able to use whatever bandwidth they got.

Dutch broadband mission to Australia
It is 400 years ago this year that Willem Janszoon, skipper of the Dutch East India Company (VOC) ship Duyfken, became the first documented European to come into contact with, and map, Australia, when he landed on the western portion of Queensland’s Cape York Peninsula, near the modern-day town of Weipa.

This historic event marks the beginning of Dutch relations with Australia.

Plenty of celebratory activities are taking place during 2006 – events with a cultural, social, diplomatic, sports and trade focus. Late last year, at a dinner at the Prince of Orange winery in Orange, I had a discussion on this topic with the former Dutch Ambassador to Australia Hans Sondaal. This led to my suggestion to my friend and colleague, Fred Kappetijn, in the Netherlands that we should try to include a ‘broadband’ theme in the celebrations. He made contact with the Dutch Ministry for Economic Development (EVD). This department has taken up the idea enthusiastically, and a serious effort is underway in the Netherlands as we speak to get a group of interested Dutch ICT people to participate in the official trade mission, which is planned for 1 – 8 April.

Acting Minister for Foreign Trade, Mrs.Ross-van Dorp, will lead the trade mission, which will coincide with an official visit to Australia by the Dutch Prime Minister Jan Peter Balkenende. The Prime Minister, who is also the chairman of the Innovation Platform in the Netherlands, will give a lecture about innovation which also will address the impact and possibilities of broadband.

The Netherlands has the second-highest penetration of broadband in the world and is a leader in digital media developments (Premier League football is exclusively on broadband TV in the Netherlands). In Australia more than $6 billion will be invested over the next few years in broadband infrastructure (equally split between the government and Telstra). The Netherlands is also the leader in fibre-to-the-home deployment in Europe.

So obviously there are interests from both countries in each other’s markets.

At the moment we are concentrating on the Dutch component of the mission, as we need at least 5 – 10 top ICT people to participate. I would appreciate it if you could pass this information on to anyone you think might be interested in participating. Equally, if you, yourself, are interested, we would be pleased to hear from you.

Please contact me for more details. Participation in the trade mission includes a number of official meetings, with access to key political figures in Australia, the broadband Roundtable, match making, networking meetings, etc.

As soon as participant numbers have been organised we will work further on the Dutch-Australia Roundtable –planned between the 4th and 6th of April.

Paul Budde

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Frost & Sullivan Australia Broadband forecast 2005

Tuesday, April 11th, 2006

Australia’s "at home" broadband market is set to reach $1.3 billion in access revenues by the end of 2005, up 36% over 2004, according to a study from Frost & Sullivan Australia. Industry revenues are forecast to reach $2.5 billion by 2010.

The company defines the "at home" broadband market as all broadband access connected to a "household residency". This includes households purchasing broadband, as well as broadband purchased by a business for home offices.

The researchers estimates that by the end of 2005, 69% of households will be online, with 35% using a broadband connection. This equates to a total of 1.9 million "at home" broadband connections.

The survey also found the majority (83%) of "at home" broadband products are purchased by households, with the remaining 17% purchased by home-based businesses with an ABN.

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Ericsson broadband survey

Tuesday, April 11th, 2006

In November 2004 Ericsson released the results of its Death of Dial-up study. With the support of the Melbourne Business School, Ericsson commissioned a study in Australia and New Zealand to identify the date when the number of broadband Internet subscribers will overtake dial-up subscribers.

The study predicted that more than 50% of Australian Internet users will have rejected dial-up and moved to broadband by mid-2006. In New Zealand, broadband will overtake dial-up in early 2007.

As anticipated, the key drivers for switching to broadband in both Australia and New Zealand include the higher data transfer speeds and stopping the Internet blocking the phone line. Previous experience of broadband is another apparent driver. The research showed that consumers also consider the cost of monthly fees as the most important factor when choosing a broadband connection. Installation fees and download limits are moderately important, while contract length and charges for excess downloads are less important.

A key to structuring broadband packages lies in offering affordable broadband subscription fees without overly restrictive download limits.

The majority of broadband subscribers use the Internet more often since switching to broadband from dial-up. On average, Australians spend 17 hours per week if using dial-up access, but 23 hours per week if they are on Broadband. In New Zealand, the average for dial-up users was 19 hours per week, while Broadband users averaged 22 hours per week.

Australian and New Zealand broadband subscribers noted downloading music and films/video as a popular activity following the move to broadband. Instant messaging and online games are also prominent. The survey showed us that once users switch to broadband, they won’t go back to dial-up.

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