Global mobile app downloads will reach nearly 18 billion this year with sales of $15.1 billion, nearly triple last year’s revenues, according to Gartner Research. How much of that $15.1B went into the pocket of carriers (vs Apple and Google)? We would expect that number to be close to zero!
Having missed the first wave of mobile ecosystem value creation, global telcos are coming to Silicon Valley and SF in droves, looking to partner with entreprenurial companies that are developing innovative technologies that might complement their networks. 15 of those telcos disclosed what they were looking for at the Sept 15, 2011 Telecom Council Carrier Connections (TC3) meeting in Mt. View, CA. Several of the telcos presenting were paired with partner companies they are doing business with. This provided the audience with selected case studies of how start-ups could work with carriers to pursue meaningful partnership opportunities. The TC3 Agenda can be viewed at:
The TC3 conference was moderated by Derek Kerton, whose Kerton Group specializes in telecom strategy, marketing, business development, and consulting services. Always a very skilled and market savvy moderator, Derek was in top form at this conference. He often asked probing questions that were out of the comfort zone of many of the panelists he was interviewing. Indeed, the mobile Internet is an area outside of the telco’s domain of expertise and comfort zone. Their inability to move quickly in this growing market is a primary reason they are seeking relationships with Silicon Valley entrepreneurial companies ((like web software start-ups) that can accelerate time to market for their solutions.
Mr. Kerton pointed out that while the larger telcos have a “long pipeline,” requiring a lot of testing and high reliability for hardware/software (not something web software companies pay much attention to), they offer unmatched leverage and distribution for the small number of companies they partner with. That represents a huge revenue opportunity! On the other hand, the smaller telcos (e.g. Jersey Telecom), don’t have the massive distribution network, but they may be a whole lot easier to do business with. They also may be more nimble and faster to market with a 3rd party solution.
Telcos in the SF Bay Area (Santa Clara County & San Francisco):
The following telcos have established a presence in Silicon Valley (please see next section for a description of selected telco innovation activities noted here):
-Orange-FT has had a research lab in South San Francisco for over 10 years.
-NTT DoCoMo established its USA Labs in Palo Alto and also has a VC fund- DoCoMo Capital
-KDDI Labs in Palo Alto has expanded their “scouting activities.”
-Swisscom has a small office in Palo Alto and a Venture fund. They have made a “social community” partnership with Lithium Technologies and are looking for innovation in several new areas.
-LightSquared has opened a “Developers Sandbox” for innovators in Mt View, in conjuntion with Nokia Siemens Networks. For more information please refer to this article:
-Verizon recently opened an Innovation Center in San Francisco (home to many web software companies, including Twitter). More information at: www.innovation.verizon.com, www.developer.verizon.com, and www.verizon.com/ventures
-AT&T just opened a Foundry in Palo Alto with Ericsson of Silicon Valley. This incubation center is focused on consumer technology and products. It is the third Incubator that AT&T has opened in 2011 (other two are near Tel Aviv, Israel with Amdocs and Plano, TX with Alcatel-Lucent). The company says, “The AT&T Foundry™ innovation centers represent a $80 million investment from AT&T and technology providers.”
For more information, please see: http://www.att.com/gen/press-room?pid=2949
-Comcast has a R & D lab in Sunnyvale. They presented many interesting areas of innovation they are investigating there.
-Singtel (did not present at TC3) added a venture capital fund
-Deutsche Telekom (did not present at TC3) has opened a Lab and Advanced Technology Department in Palo Alto
-Vodafone (did not present at TC3) just established a R&D center in Redwood Shores, which it will use as an incubation center for helping local startups develop and test products that operate on its world-wide wireless network.
-China Telecom and NTT also have operations in the South Bay SF Bay Area.
-Other telcos are investigating a presence in Silicon Valley
In addition to the above mentioned telcos, several smaller (and perhaps more nimble) carriers presented their innovation agendas at TC3. Three standouts were: Jersey Telecom (a UK owned island off the coast of France), Leighton Telecom/NextGen (Australia), and Metro PCS (U.S. 4th largest wireless carrier and first to commercially deploy LTE in the U.S.).
Observation and Reality Check:
We were somewhat surprised that there was no discussion of technologies for some of the hotter areas of telecom research, e.g. For Wireless: nano cells, multi-mode (frequency & RAN) base stations via software defined radio, cognitive radio, self organizing networks, optimized delivery of mobile video, improved microwave backhaul capacity, etc. For wire-line the list includes: 40G/100G Ethernet switching, Optical Transport Network (OTN) multiplexing, Reconfigurable Optical Add Drop Multiplexor (ROADM), WDM Passive Optical Network (PON), DWDM fiber backhaul from/to cell towers, All Optical long haul transport (without OEO repeaters), Optical Fault Detection and Restoration, Faster and longer reach ADSL/VDSL, coax cable & twisted pair HANs, BoPL/ EoPL, smart grid networks, etc.
Instead, the telcos seem to be looking for ancillary technologies (e.g. Real Time Data Analytics/ Big Data, Networked Attached Flash Memory Arrays, Touch Screen Keyboards, Community Wide Social Networks, Innovative Mobile Devices & Services, etc) that complement their broadband wireless and wire-line networks. In fact there was nothing specific to either type of network that was described at TC3.
Violin Memory’s flash memory array (networked attached storage replacing hard disk drives) is a great example of a non-telecom technology being adopted by telcos. It’s used primarily as a Fiber Channel or SCSI attached “appliance” for virtualized servers (when in an I/O wait state mode) and for real time analytics storage. Both Singtel and Rogers (Canada) have invested in Violin Memory. The carriers that are using or plan to use their technology were not disclosed.
Evidently, the telcos still look to their large vendors (Ericsson, Huawei, Alcatel-Lucent, NSN) for almost all of the network resident technology and equipment they need. Of course, this is one reason for the dearth in funding of telecom and networking start-ups – the VCs don’t see any opportunity there so don’t invest in those types of companies anymore. The few that are left have to partner with the larger network equipment companies to get any visibility with the telcos. But that is always a dangerous game, as start-up intellectual property is often at risk.
For more on this dilemma for new telecom technology & networking companies, please see:
It sure looks better to be a start-up that creates value (via software) on top of the underlying transport network, or compliments it with non telecom equipment (e.g. array storage) or customer owned devices (e.g. touch screen keyboards, mobile consumer gadgets) or sensors for M2M communications & Internet of Things.
A longer, more comprehensive version of this article is at:
At Thursday’s Telecom Council’s TC3 Conference, upstart wireless wholesaler LIghtSquared announced the opening of a “Sandbox” or innovation center for 3rd party developers. Located in Mt View, CA, the Sandbox is being hosted by Nokia Siemens Networks, one of LightSquared’s wireless infrastructure vendors.
This new “playground for developers” was said to be the first to offer three types of radio technologies:
- Proximal (NFC, Bluetooth, WiFi),
- Terrestial (2G, 3G, LTE) and
- Satellite based radio
LightSquared is seeking 3rd party software, hardware, and applications for its combined terrestial- satellite 4G-LTE network. The Sandbox team, led by Moe Motamedi, is looking for innovative solutions in any of the following areas: VoIP, video streaming, multi-player gaming, digital advertising, security, Digital Rights Management (DRM), Smart Grid, M2M communications,telematics, Location Based Services (LBS), mobile health/ telemedicine, cloud server virtualization.
Start-ups, entrepreneurs and other interested parties are invited to test and optimize their solutions for these (and possibly other areas) on LightSquared’s terrestial and satellite network. The proximal wireless technologies are also available for testing of technologies in this Sandbox. LightSquared would like to aggregate APIs from several device companies and make them available to developers of mobile apps and other software that leverage its network.
For more information, please visit: http://www.lightsquared.com/what-we-do/applications-and-services/
On July 28, 2011, LightSquared agreed to pay Sprint $9 billion to build a 4G-LTE network using its L-Band spectrum. That terrestial network will use Sprint’s cell towers and nex-gen, multi-mode Base Stations to be deployed in its “Network Vision” plan. LightSquared also will be able to fallback to Sprint’s EVDO based 3G network in areas where terrestial LTE is not available. (We wonder how roaming/ handoff will work between satellite-LTE, terrestial-LTE, and terrestial-3G? And how will it be decided to roam to 3G or satellite based LTE when terrestial LTE isn’t available?).
LightSquared plans to wholesale the combined 4G/3G terrestial network (built and maintained by Sprint) along with its own LTE satellite network. However, U.S. Federal regulators are hesitant to allow LightSquared to use its satellite-based spectrum, because of claims it interferes with GPS frequencies.
Proposed tour of Sandbox Facility:
IEEE ComSocSCV is talking with LightSquared management to arrange a tour of their Mt View Sandbox for interested hardware and software developers. Please contact this author if interested: email@example.com.
According to the Financial Times (FT):
“Almost half of companies in the global telecoms and technology industries face the risk of financial distress owing to more challenging markets and high levels of corporate debt, according to new research.
AlixPartners, the global business advisory firm, found that 44 per cent of companies in the sector were at risk of default or bankruptcy within two years. It pointed to particular distress in the hardware sector, and especially in the consumer electronics industry, where as many as nine out of 10 companies were at risk owing to thin profit margins as a result of weak demand and fierce competition globally.”
In the telecoms sector, about three-quarters of companies were deemed at risk due to high levels of debt taken on to expand technological infrastructures and to fund acquisitions.
AlixPartners said that this trend was underpinning the recent spate of M&A deals such as Hewlett-Packard’s $10.2bn proposed acquisition of Autonomy and its planned divestiture of its personal computer business, as well as Google’s $12.5bn proposed acquisition of Motorola.”
Comment: This is no surprise to us, as top line growth has not kept up with profit growth for a very long time. Cost cutting can go only so far in increasing the bottom line (earnings). And the competition is fierce, especially with all the consolidation in telecoms and price pressure from Chinese equipment vendors Huawei and ZTE. Huawei claims they are the #2 world wide vendor (closing fast on #1 Ericsson) in wireless infrastructure and #1 in optical network equipment (ahead of Ciena, which recently acquired bankrupt Nortel’s optical networking/ metro Ethernet business unit).
“More than just about any other industry, much of high tech faces a vicious cycle of the constant need to invest capital to drive product innovation and differentiation, and to keep up with the pace of new technology,” said Eric Benedict, managing director at AlixPartners. “In particular, the seismically disruptive effects of global adoption of high-speed mobile internet may well be the single biggest factor affecting not only high tech companies, but many other sectors over the coming 10 years.”
Verizon has announced that it is now running traffic at 100 gigabits per second on a portion of its Chicago-to-New York optical backbone. The mrga-telco, which was the first to trial 100 Gbps in 2007, debuted the technology in Europe on its Paris-to-Frankfurt link using an optical-transport solution from Ciena. Verizon said it plans to expand the technology to more than 10 additional routes by year’s end.
Similar to the routes Verizon has already incorporated–100 Gbps into Europe and in other parts of its U.S. backbone network–the latest 100 Gbps route also leverages the provider’s existing fiber network infrastructure. In addition, Verizon can carry traffic on a single 100 Gbps wavelength versus multiple 10 Gbps wavelengths.
Ihab Tarazi, vice president of global network planning at Verizon, said that their drive to deploy 100 Gbps in the U.S. is a response to “not only growth in traffic, but also in the need for immediacy from our customers that are managing financial transactions, health care data exchange, energy services and entertainment on-the-go.”
Out of the major telcos, Verizon has arguably been one of the most aggressive purveyors of 100 Gbps optical technology.
After initially deploying 100 Gbps in some early trial networks and on two routes in Europe, Verizon has been tactically deploying the technology on segments in the U.S., including segments in Chicago to New York, Sacramento to Los Angeles and Minneapolis to Kansas City.
Veizon is using optical networking gear from long time DWDM leader Ciena (which acquired bankrupt Nortel’s optical network division last year).
Read more: Verizon to deploy 100 Gbps optical on 10 U.S. routes this year – FierceTelecom http://www.fiercetelecom.com/story/verizon-deploy-100-gbps-optical-10-us-routes-year/2011-09-12#ixzz1XtkHc6pw
Note: IEEE ComSocSCV’s July 13, 2011 meeting was on 100G bit/sec transmission systems. THe presento can be downloaded (free) from: http://www.ewh.ieee.org/r6/scv/comsoc/ComSoc_2011_Presentations.php
And you thought Sprint-Nextel was just a wireless carrier? The company, thought of primarily as a 3G/mobile WiMAX provider, has just announced that it will add Ethernet service to 25 new U.S. markets by the end of 2011 and expand the service into additional global regions next year. The carrier offers Ethernet to businesses and wholesale partners in 40 American markets and 37 countries. Sprint said it recently expanded the service by adding additional speeds, ranging from 2 to 10 Gbps.
Enhanced Ethernet access coverage for Sprint Global MPLS and dedicated internet access provides businesses and wholesale partners to maintain multiple types of technologies. Sprint Ethernet access is offered in 40 markets nationwide and 37 countries globally. Sprint plans to launch domestic markets in existing markets by end of year, as well as expand availability globally next year. Sprint has enhanced its service by adding speeds to current aggregated speeds, with ranges of 2-10 Gbps, subject to market availability. Businesses can select from eighteen aggregated speeds and sixteen dedicated speeds, choosing the port speeds that fit their network needs. Aggregated Ethernet access can provide an alternative to traditional TDM access, while Dedicated Ethernet access expands to meet specific customer bandwidth needs, offering fixed-rate and fractional billing.
Comment and Analysis
We expect that Sprint will compete in the U.S. with Comcast Business, Verizon Business, AT&T, Century Link, Megapath and XO Communications. We’re not sure about who they’ll compete with outside the U.S.
A key issue is whether Sprint will extend its fiber plant to commercial buildings and offer Optical Ethernet. It’s that techology that offers customers “liquid bandwidth,” i.e. they can upgrade their access speed without having the carrier deploy a new facility. For example, a customer could initially order a 10M bit/sec Ethernet Private Line or Virtual Private Line service and then upgrade to 50M or even 100M bit/sec by simply using more of the bandwidth available in the fiber access link. Of course an automated provisioning/ re-provisioning system is needed to be in place at the carrier’s Central Office (where the Ethernet link access is terminated) to realize such “liquid bandwidth.” Ethernet over copper (DS1/E1, nx DS1/E1, bonded DSL, etc) can not generally support this capability.
Perhaps, the expansion of Sprint’s metro Ethernet service will provide a lifeline for the company in view of its challenges and difficulties in the 4G market.
If the U.S. Justice Department succeeds in blocking the $39 billion merger of AT&T and T-Mobile, Sprint – the nation’s 3rd largest wireless carrier- will be very pleased. The company would then not face competition from an even larger #1 wireless carrier in its major markets. But Sprint still faces daunting challenges. Its market share of subscribers on contracts dropped to 13 percent in 2010, down from 17 percent in 2008, according to Barclays Capital. The company reported a net loss of $847 million in the second quarter of this year.
Christopher King, an analyst with Stifel Nicolaus said that Sprint has already lost to Verizon Wireless and AT&T. Sprint itself has acknowledged the difficulties it faces when competing against companies whose scale will allow them to secure better deals on hardware. The company has also argued that the amount of spectrum that a combined AT&T and T-Mobile would control would be anti-competitive.
But even without the AT&T-T-Mo merger, Sprint is being left in the dust by VZW and AT&T primarilly for picking the WRONG “4G” network (mobile WiMAX rather than LTE). . As LTE has become the defacto “4G” industry standard, there are and will be many more devices for it than for WiMAX. That gives the customer much more choice. That is a huge disadvantage for Sprint now that mobile data service is what wireless customers care most about now. Rolling out LTE over one year after Sprint offered mobile WiMAX (as a Clearwire MVNO), Verizon Wireless has now overtaken Sprint as the nation’s largest “4G” network provider.
Mobile data service is becoming increasingly important to a wireless industry that is experiencing declining revenue from voice traffic. Data charges will account for more than 41 percent of the revenue from contracted wireless subscribers in 2011, according to James Ratcliffe, an analyst at Barclays. That compares with less than 30 percent in 2009. And all the mobile data subscribers want a lightening fast “4G” service for their smart phones, tablets and notebook/ netbook PCs.
Sprint is planning to disclose its new strategy for its 4G network October 7th at its investor conference in New York. Everyone expects that strategy to be based on LTE- either on its own, with Clearwire or with LightSquared.
With respect to the latter option, LightSquared agreed to pay Sprint $9 billion to build a 4G network using its spectrum.
But Sprint hit yet another barrier. Federal regulators are hesitant to allow the companies to use this spectrum because it interferes with GPS frequencies.
Between Clearwire and LightSquared, Sprint should have the spectrum it needs to build its network, analysts say, but it is unclear how it will be able to make the investment to take advantage of this. There is speculation that Sprint will have to buy Clearwire outright, or assemble a consortium of other companies to help it do so. Another option would be a collaboration with cable companies that control spectrum and could be willing to work with Sprint.
The only advantage Sprint seems to have today, is that it offers unlimited data plans, while both VZW and AT&T have instituted “tiered pricing” with data caps.
For more information, please see:
Steve Elfman, Sprint’s president and head of network operations recently met with a reporter from the Seattle Times. Among the looming changes that Elfman sees from his perch are phones with newer multimode radios that do a better job seamlessly shifting across different networks, including 3G and different flavors of 4G.
One of the challenges to getting there is figuring out how to put enough antennas onto a phone to work with all the different bands of spectrum that are available, he said.
Also in the works is new software that does a better job of orchestrating the handoff when you move across networks.
Elfman explained that this software isn’t just embedded in the handset or part of the operating system. It extends from there through the network and into the carrier’s billing systems.
For more information, please see:
Note that there’s a lot of speculation that Sprint will announce availablity of Apple’s iPhone 5 on its network, but that would probably be for LTE and not WiMAX. Deutsche Telekom (but not T-Mobile) has already started to take orders for the iPhone 5. DT has no plans for WiMAX and supports a GSM based technology called HSPA for 3G, while Sprint supports WiMAX (as a Clearwire MVNO) and CDMA based EVDO as its 3G mobile data network.
Building a Platform for the Emerging M2M Dialogue
Upcoming International Conference in Atlanta Will Highlight M2M Advances
“Numerex is honored to have been chosen to organize this important event in the global M2M arena, which will feature international Standards Development Organizations, various standards alliances focusing on specific vertical markets, and companies that are leaders in their field,” said Stratton J. Nicolaides, chairman and CEO of Numerex, in a statement.
“The effective collaboration with TIA (News – Alert) and Georgia Tech, in particular GTRI’s Information and Communications Laboratory has contributed to make this premier international M2M gathering a required stop for any M2M player interested in keeping current with the latest M2M developments,” Nicolaides added.
Jeff Smith, Numerex CTO, presented at IEEE ComSocSCVs M2M/Smart Grid workshop in Sept 2010. His presentation is at: http://www.ewh.ieee.org/r6/scv/comsoc/Workshop_092510_M2MStandards.pdf
Alan J Weissberger
IEEE ComSocSCV Chair