It’s wait-and-see time for 3G. Outside Japan, Asian W-CDMA and cdma2000 EV/DO deployments are only just starting to gain steam; and even in Japan, despite FOMA’s 1 million milestone, it is too early to judge.
We do know the arrival of a high-speed, packet-based service platform will complete the transformation of cellular; from a vertically integrated whole revolving around a single product into a series of disaggregated service layers with many actors offering diverse products.
Video and the mobile
If there’s one thing that defines 3G, it’s video. Whether it’s streaming, video downloads or P2P videotelephony, the notion of full-motion video plus voice and audio symbolizes the 3G mobile revolution. It’s the real deal.
But it’s not yet a real service. NTT DoCoMo and Hutchison’s 3 UK last month completed the world’s first international mobile video call, but this is only for certain handset models. Hutchison 3 users can confidently call other Hutch customers elsewhere in the world, but that’s because Hutchison actually specified the phones (both models) and the network.
As a result, DoCoMo and Hutchison have indeed created telecom history – but not for the connectivity they provide but for the connectivity they are not providing.
It could be some time before we see genuine compatibility between 3G videophones and networks – a reality that is far removed from Hutchison’s own assertions. “Making a video call is as easy as making a normal phone call from your mobile,” Hutch COO Gareth Jones says in a company press release.
Complaints from customers forced 3 UK to revise one of its TV commercials because it misleadingly gave the impression that its video quality was of the same standard as regular video. “Compared with the commercial, the sound and video image were disjointed and subject to breaking up,” said the Independent Television Commission.
Clearly Hutchison has jumped the gun on P2P mobile video. However, the other mobile video apps – video downloads and streaming – also have issues.
Real Networks has been active in the area, winning pole position as Vodafone’s default media player, and making a number of signings in the region, with CSL and New World Mobility in Hong Kong and Singapore’s M1. These Asian deals haven’t amount to much yet; CSL quietly dropped its RealNetworks trial, while New World Mobility’s video has been reduced to a fixed-to-mobile traffic watch and a homewatch services. M1 won’t supply any detail about its video services.
Sharon Goldstein, director of mobile products and services at RealNetworks, says the video download side is constrained by the absence of digital rights management standards; content owners are reluctant to allow users to save content on their devices. At the same time, the differing memory footprints in handsets makes it hard for networks to guarantee that users will be able to see the content at all.
While there are only two relevant standards – MPEG4 and the H.263-based 3GPP standard – they are still being interpreted differently, warns Eno Tsin, CTO of Sensestream, a Hong Kong company which offers content adaptation server for mobile content.
“There’s a lot of things to do, even for the most simple function,” he says.
Finally, Goldstein warns that the multiple media formats of the desktop world might be replicated in mobile. “Microsoft are not playing nice,” she said. Redmond doesn’t support the 3GPP standard, though so far no vendor has loaded its handset with the MS mobile media player.
Clash of cultures
One of the enduring myths about telecoms and tech in general is the idea of “convergence”. What’s happening in cellular back offices, however, is much more a collision between radically different cultures: the traditional high reliability and hardware-centric world of network engineering is being increasingly occupied by the best-effort culture of the software world.
“Software companies are used to working in a networked environment of high reliability, high bandwidth and with the user’s device powered on all the time,” says Jessica Figueras, wireless software analyst at Ovum. By contrast mobile operators must deal with small devices with uncertain power supply over limited bandwidth and where voice users expect 100% availability.
But it’s more than just differing workplace attitudes. The tight coupling between hardware and software by cellcos also means a lack of scalability and flexibility.
A group of McKinsey consultants says mobile operators need to redraw their IT architecture. In a recent article, Enrico Benni, Klemens Hjartar and Jorgen Laartz argue that mobile operators suffer from “an increasingly complex, spaghetti-like architecture littered with incompatible stand-alone systems, based on software from a number of vendors, and often using a variety of data formats, such as customer databases with different sets of vital statistics.”
In the current era of short planning cycles, this is not sustainable, says Figueras. “We’re moving to a new world, with more services, all different from each other. It’s really important to get time to market right.”
Telecoms and software worlds also differ markedly in their approach to standards. Whereas standards are the cornerstone of telecoms, in IT standards are more of an “afterthought”, says Figueras.
“In the IT world, at the end of the day, there are ways to get around the fact that things are not totally standardized – because it’s software. In telecom, it’s all hardware. Now we are seeing more of the IT approach leading through.”
It’s an irresistible opportunity for large IT vendors, who have refashioned some of the solutions and approaches that have already been deployed in the enterprise world.
IBM is one. It has been offering its SPDE (service provider delivery environment) solution for telcos for the past 18 months. In one case, Big Blue claims a 40% reduction in product development time and cost since implementation at Taiwan operator FarEasTone.
Oracle is another, with customers such as Verizon, NTT DoCoMo and Taiwan’s Trans-Asia.
“The platform needs to be open because a lot of the content has to be used, also because of the service delivery side,” said Ash Khalek, from Oracle’s Asia-Pacific communications, media and utilities group. “Today PDAs are popular, but I don’t know what will be used in a couple of years, so you need to have that kind of open-ness.”
It might promise the excitement of new services like high-speed multimedia, but a good deal of the success of 3G will involve doing the same things, but better. Like roaming.
Sure, roaming, and MMS and video roaming in particular, need to work seamlessly. But the main issues here are business, rather than technical.
Roaming is the great USP of the GSM operators and the single biggest generator of premium revenue. Roamers tend to be high-end data users; operators who can attract roaming customers are building the kind of base they need for 3G apps.
More than that, argues Justin Jameson, a consultant with Spectrum Strategy, roaming partnerships go straight to the bottom line – by as much as 25%.
According to his calculations, presented to the 3GSM Asia-Pac conference last month, an operator with $100 million in inbound roaming revenues can increase profits by $20 million through preferential roaming agreements. A smaller gain can be made on outbound roaming through lower costs, or inter-operator agreements.
There’s also a strategic case for roaming alliances, Jameson says.
This is partly because of the unusually large number of players in cellular – more than 500. Additionally, despite liberalization, the regional M&A market in wireless is constrained in many ways. Hence, a roaming alliance offers the best way forward for Asian GSM operators.
Alliances operate at several levels. First, involving preferential roaming and charging – perhaps flat rate – and other services, like a standard home environment and IDD. It can also mean sharing of information and procurement, and in some cases sharing of IT infrastructure, like CRM or billing platforms.
When it comes to mobile alliances and partnerships, Europe leads the way. Indeed, Vodafone runs less an alliance than a virtual cross-border cellco. Through its subsidiaries it has been offering its “Eurocall” roaming package for two and a half years, with an 0.80 per minute euro flat rate a global service platform.
Its rivals Telefonica, T-Mobile, TIM and Orange, have only just agreed their defensive alliance, offering limited flat roaming rates and MMS roaming. The latest grouping, unveiled early this month and led by the UK’s mmO2, involves mostly smaller cellcos such as Wind in Italy and Norway’s Telenor, and a similar product range, including GPRS/MMS roaming and short dial services.
Asia is some way behind. The one explicit regional alliance is the Telstra-led Asian Mobility Initiative (AMI), but this is devoted almost solely to data services. It’s a non-exclusive alliance, aimed at not cutting across existing roaming arrangements, and at present involves no sharing of procurement or meshing of IT infrastructure.
Rival SingTel operates a quasi-alliance among its investees. They share procurement, some short message codes and, probably, what are known in the trade as “bilateral non-disclosed discounts,” – or secret discounts not offered to anyone else, according to Jameson.
He argues that despite the limited nature of such partnerships in Asia, “they are also the foundation for future cooperation.”
They are also important for operators at the execution level, where main skill involved is not running networks or services but partnerships.
Says Tim Kaye, who manages Telstra’s relationship with its Hong Kong mobile subsidiary, CSL: “I think the real trick in these partnerships is to actually manage the pace of development – appropriate to the opportunities and the needs of the partners. You have to make sure they’re not going too slowly or too quickly.”