Mobile Market and Network Planning - Part 4

1.4         Shift in Focus from Quality of Networks to Quality of Service

·         Mobile operators in advanced economies have penetrated about as low as they currently can into the marginal user population – growth must come from taking market share away from other carriers while increasing the average revenue per user (ARPU) through new services and new pricing plans. One of the ways that operators have always differentiated themselves is in the quality of their network. Network outages, dropped or uncompleted calls, and poor data transmission speeds are typical issues that cause subscribers to switch carriers. Meanwhile, the expectations of end-users are rapidly rising while consumer barriers to switching have lowered through regulator-mandated requirements for number portability among carriers. Thus, the operators are focusing on quality of service as one of the key drivers of end-customer acquisition and retention (see Figure 3 below).

Figure 3: Growth in mobile data traffic is driving investments in mobile broadband and 4G

Mobile Market and Network Planning - Part 3

1.1         Lagging Revenue Growth

·         To date, operators have been unsuccessful in translating the data-growth into revenue growth resulting in significantly lower top line growth versus data growth. In developed regions, revenue per gigabyte is forecast to fall from USD23.21 in 2010 to USD4.27 by 2015. Moreover, regulatory pressures do decrease roaming prices and mobile termination rates are having a negative impact on voice revenues.

·         Operators are seeking new sources of revenue with changes to current flat-rate pricing to data caps  and tiered-pricing and by introducing a host of new services. New video services, in particular, are popular, but are consuming vast amounts of capacity, requiring the operators to add capacity faster than their revenue is growing.

1.2         Rising Operator Margin Pressure

·         The combination of dramatic traffic growth and slow revenue growth is putting pressure on mobile operator profit margins (see  Figure 2 08D0C9EA79F9BACE118C8200AA004BA90B02000000080000000E0000005F005200650066003200370037003500380031003700310034000000 below) Operators are therefore looking for increased efficiency in capex and opex spend through the optimisation of their networks.

Figure   2: Comparison of the network economics of mobile networks

Mobile Market and Network Planning - Part 2

1           Key Market Trends

1.1         Exponential Growth in Wireless Data

·         Today’s mobile market is undergoing a dramatic transformation driven by the growth in mobile broadband and data-hungry applications such as smart-phones, e-books and i-Pads as well as the introduction of new services, especially video, which consume vastly more bandwidth. Global traffic is forecast to grow at a 48% CAGR from 2010 to 2015, from 225PB per month to 1603PB per month (source: Analysys Mason 2010). This is putting increasing pressure on the network capacity of operators. An example forecast for Western Europe and North America is seen in Figure 1 below. Similar growth pattern is forecast for other regions of the world.

Figure 1:  Mobile Content and Applications revenue by service category and forecast data traffic,
                 2009–2015,  (source: Analysys Mason, 2010)

Western Europe

North America

Mobile Market and Network Planning - Part 1

In 2010, as part of some custom work for a network planning client, I pulled together some information on the overall state of mobile networking and of the mobile network planning business. Now that it is a bit dated, I decided I could release some of this information in my blog. More detailed and updated information is available from Analysys Mason reports (see www.analysysmason.com ).

This is part 1 of a multi-part tutorial on the state of the mobile industry and of mobile network planning.

The mobile telecommunications industry is undergoing a profound transformation driven by a number of underlying industry trends:

·         Tremendous growth in data usage: The rapid growth in data-intensive devices such as smart phones and mobile broadband is driving an exponential surge in data usage and networks are becoming increasingly congested in high-usage urban areas as a consequence.

·         Lagging revenues: Top-line revenue growth is failing to keep pace with this data explosion given the prevalence of “all-you-can-eat” pricing schemes and difficulties in charging for data-hungry applications. The problem is compounded by the negative impact on voice revenues of regulatory reductions in roaming charges and mobile termination rates.

·         Margin pressure: Network costs are outpacing revenue growth and not all forms of data are currently profitable escalating the pressure on operator profit margins and raising the need to justify return on capex investments and reign in opex costs.  

·         Rising end-user expectations: The expectations of end-users around the quality of service and applications are rising in an industry with low customer switching costs; this places competitive pressures on operators to ensure networks have the sufficient bandwidth to deliver high quality data services.

·         Increasing network complexity: The mix in vendor equipment and mobile technologies, compounded by the roll-out of next generation 4G mobile technology due to take place over the next few years, is rendering networks increasingly complex to manage. This is exacerbated by the trend towards network sharing as an effective means of driving down operator costs.  

·         Network management outsourcing shift: The rise in network complexity is forcing operators to outsource network management and optimisation solutions. 

·         Need for effective network management, end-to-end solutions and self-organising networks: The trends outlined above are raising the demand for efficient and effective network planning, management and optimisation. Moreover, the boundaries between planning, optimisation and the delivery of quality of service are blurring, creating a currently unmet need for holistic end-to-end solutions as well as a vision of “self-optimising / self-organising network” (SON) solutions as the future of the industry.

Decreasing BSS/OSS “integration tax": Part 3 - SOA and data models complete the current picture

This BLOG post is the third, and last, in a series of short articles on the changes in BSS and OSS architectures arising from the changing underlying data communications, middleware, and data modeling software technology. In the last posting, I described how IP and middleware dropped the cost and complexity of integration by an order of magnitude.

About the turn of the century, a new concept (which was really an old concept) appeared on the software scene - what became known as Service Oriented Architecture (SOA). The concept is simple - design software so that the functionality is not only available to a human via its associated user interface, but to another system via a simple, stable interface. In reality, the concept is very similar to the time-honoured remote procedure calls (RPC) of yesteryear (send in some data and define what predefined procedure you want to run, and then get a response). And the interface became to be based on human-readable code - XML (eXtensible Markup Language). But more importantly, the SOA model meant having a design goal of not breaking the interface with later generics (there also are some technical aspects of the interface that makes it easier to add data elements without breaking the interface).

When SOA is combined with the use of a standard meta-model for the data, it becomes even more useful. And when even more specificity is supplied, as in the use of the TMF's Shared Information and Data (SID) model, interfaces become even easier to build and maintain. The SID has been used by many OSS and BSS system vendors and is the preferred data model for nearly all systems integrators and ISVs.

These innovations of the past three decades have brought the cost of interfacing modern software systems from large fractions of a million dollars to a few tens of thousands of dollars and enabled multi-system architectures and automatic flow-through of information, orders, and network control unheard of when I first began my career.

Will this revolution cause the industry to move away from the current "best of suite" architectures, provided bydo-it-all vendors such as Amdocs and Oracle, and towards best-of-breed architectures? Perhaps. It certainly provides some new options and gives the systems integrators, whose influence in BSS/OSS architectures has waned in the last five years, a new set of systems to put into their preferred suites.

Decreasing BSS/OSS “integration tax": Part 2 – IP and middleware make things better

This BLOG post is the second in a series of short articles on the changes in BSS and OSS architectures arising from the changing underlying data communications, middleware, and data modeling software technology. In the last posting, we looked back on the early days of OSS and BSS – in the 1970s and early 1980s when only huge systems, architected by the same group, and implemented and tested by a single vendor, could hope to work together.

During the 1980s and 1990s, while the technical world was focusing on the X.25 standard for system interoperability (and good old Bell Labs, never an organization to go with ‘good enough’ created its own improved version, BX.25), the TCP/IP protocol was coming into its own. It was not endorsed by any standards organization. It wasn’t owned by anyone. The group that agreed to it documented the agreements by something they call RFCs – ‘Request for Comments.’ But it was simple. It was open. And it could be easily implemented on a wide variety of hardware. It became the de facto worldwide standard, essentially solving the problem of system interoperability at the lower levels of the protocol stack.

At the same time, ‘middleware’ raised its head in the BSS/OSS industry. Vendors such as TIBCO had their software ‘busses’ that could be implemented to bind together software systems. All you had to do was to build to their API (and have an agreed-to mapping of the internal data models of the various systems to an intermediate language, with interfaces to the API implemented in every system) for systems to ‘talk’ together. The TMF created its NGOSS architecture around this ‘bus’ concept, and many modern systems were built around one of the busses available in the market. This made integration MUCH easier and cheaper, as seen below. For a mere half to one million dollars you could have a systems integrator interface two systems together.

The effect was that systems that were formerly ‘islands’ of automated systems started to be hooked into each other, creating ‘flow-through provisioning’ and an end-to-end ‘trouble process,’ among other work flows. So, if you wanted a good multi-OSS or BSS system, you would go to a systems integrator (SI), choose a bus, choose the new OSSs you wanted to implement, decide which legacy systems needed to be hooked into, and sit back and wait a couple of years for the SI to do its magic.

Mark H Mortensen

Decreasing “integration tax" has radically changed BSS and OSS architectures and business – and will change them more in the future [Part 1]

This BLOG post starts a series of short articles on the changes in BSS and OSS architectures arising from the changing underlying data communications, middleware, and data modeling software technology. Today we look back on the early days of OSS and BSS in the 1970s and early 1980s.

During my 30 years in the telecoms industry, I have seen a radical change in the cost of developing interfaces among BSSs and OSSs. Before the wide adoption of standard data communications protocols such as X.25, the development costs of interfaces between systems was easily $500,000 or more. Then multiply that by the old magic 2.7 to get the cost to the customer, and it meant well over a million dollars. The adoption of data communications interfaces such as X.25 and the old IBM FCIF (used in TIRKS and other IBM 3270-era systems) dropped the costs somewhat. But it only really attacked part of the problem. I recall once in my testing systems days (SARTS, for the old-timers out there) one US RBOC customer who wanted us to implement an X.25 interface on the system. When quizzed as to why they wanted it, they replied that they wanted to ‘plug it into’ another system and exchange data in real time. They were quite disappointed when they were informed that implementing a data communications protocol in two different systems did not mean that they could ‘talk’ together – you needed to actually do some more work. We also had another problem in those days – the X.25 protocol stack implementation was different in every different computer hardware system. So every time you offered the software on a different hardware platform, even from the same manufacturer, you had to re-implement the protocol stack.

The effect on the architecture was that only huge systems, architected by the same group, and implemented and tested by a single vendor, could hope to work together. Interfaces between disparate systems were few – and very expensive to build and maintain.

Next time – IP and middleware make things better.

(As usual, comments welcomed.)

Mark H Mortensen

Intelliden - Evangelism to White-Shirt-Button-Down IBM

In the last BLOG posting here, I identified a number of companies who were attempting to "cross the chasm," including one, Intelliden, that has now been purchased by IBM for an undisclosed sum. Intelliden's products aimed at configuration management of telecoms equipment. Looks like IBM is taking a product concept that is still evangelistic in the telecoms space, but proven in the IT space, and repositioning it.

This kind of crossing of the boundaries of IT and telecoms is going to be happening more and more, as the equipment and software that provides telecom services evolves to be just like that in a data center - optical transport equipment with Ethernet interfaces, routers, computers, SANs and specialized software for voice, data, video - and OSS/BSS functions!

Evangelistic OSS Products - An Introduction

As anyone who has read the book Crossing the Chasm by Geoffrey A. Moore (or even heard about the concepts) knows, there is a point at the early evolution of a new product that is in a new space when the company has to do an "evangelistic sell." No one knows that they need that product (i.e. there is not an established market with a set of vendors providing somewhat the same thing to a defined set of customers). But a few brave customers (usually ones who love technology, in the case of OSSs and BSSs) are willing to take the gamble - these Moore called the 'innovators.' Then there is a gap (or 'chasm') as the 'early adopter' customers, usually looking for competitive advantage, begin to implement the product and see if it lives up to its potential.

Many products fall into that chasm, never to be seen again - but those who cross the chasm usually begin to experience that heady 'hockey-stick' sales curve that companies crave.

In a series of BLOGS this year, I'm going to take on the task of describing some of whom I see as the companies and products in the BSS/OSS space who are crossing the chasm, or aspiring to.

I'll be covering companies like:

• Aria, attempting to change the way CSPs plan networks
• Celona, with new techniques for data migration
• Intelliden, tackling configuration management of CSP equipment
• Tribold, with a master catalog that seeks to dramatically decrease the time for new services to be introduced in BSSs
• Ontology, looking to bring the benefits of new bottoms-up patterning technology from biology to telecom to make database interfaces easier
• RateIntegration, bringing real-time marketing information to CSPs

Others have been suggested, such as Irdeto, GreenPlum, OSSTree, RiverMuse, and Quantellia, which I'll take a look at.

Comments and suggestions welcomed.

Mobile app stores - nice, but where's the money?

I love app stores! I used to (try to) use one back in the early days of mobile phones being able to run other applications - but it was hard! Now I'm a committed Apple iPhone app store customer!

But, even as I use these, I realized that many of the phone manufacturers and mobile carriers, as they rush to create their own app stores, may be missing a larger picture. An app store where you sell 99 cent applications and keep a few cents each -- unless you’ve sold over a billion from a selection of 65,000 , as Apple has recently done -- is a big ho-hum (or, at best, a “that’s nice”) to the CFO of a major carrier or manufacturer. Plus, one more online app store in the cloud is nice, but hardly revolutionary. But carriers, especially mobile operators, who are looking to implement both truly usable customer self-care as well as provide platforms for the “double sided business models” that we have all been talking about should look again at the app store platform. It is, as AT&T recently showed, an excellent way of distributing its customer self-care software (see http://www.billingworld.com/blogs/nextgen/blogdefault.aspx).

And, what better channel to offer services to consumers and a platform for transactions with the businesses they deal with every day? Then, combine it with mobile financial services and transactions – killer.

BSS/OSS Sales vs. Revenue During a Recession – A Simple Model and Explanation

As industry analysts, we at always do our best to forecast accurately the market size for various Billing and OSS markets and do so in our yearly Market Reviews and our special Outlook reports. Besides the normal issues of trying to be accurate in the present market size and shares of the software providers, we also forecast the growth (or diminution) of each sub-segment of the market. To do this, we take into account vendor-supplied data, macro-economic forecasts, CSP spending patterns, historical trends, and other, softer data. But what is it we really forecast? Revenue or sales? It’s actually revenue – we try to put everything in generally accepted accounting principles (GAAP) revenue terms. These are the kinds of numbers that are reported by public companies in their annual reports – they are what companies call the “top line.”

CFOs and product managers in software (and all other) companies spend a lot of time worrying about revenue, which is related to sales, but is not at all the same. Sales are “booked” when the customer signs a contract. Revenue is “recognized” in a way that is much more complicated – especially for software sales. During times of relatively smooth growth, yearly revenue (roughly, from sales of products this year + sales of products contracted for some time in the past, and now fully delivered + maintenance for that year + other professional services contracts completed this year) lags yearly sales (of new products, maintenance, and services) by some time – perhaps by a few months (for simple product sales that are delivered and accepted quickly) or perhaps by a few years (if it is a large, complex contract with multi-stage delivery, none of the revenue can be booked until ALL of the items have been delivered and accepted, and the customer has signed off on all services – in other words, everything in the contract has to be completed and signed off on before any of the revenue can be recognized).

So what does this mean? In the case where there is a recession, there is a flywheel effect on the revenue (or hysteresis, for the engineers and physicists out there) that smooths it out. Take a simple case of a company whose sales are growing by about 14% per year, before and after a two year recession. As seen below, the revenue is rising yearly, along with the product revenue and the total revenue. (I’ve assumed a simple model here where half the projects are completed within the year they are sold, and half the next year. Maintenance is assumed at 20% of purchase price.). Then along comes a recession, where sales drop to only 85% of the previous year’s sales and stay there for two years. Of course, the new sales curve drops. But the total revenue still continues to climb, although at a much smaller rate due to the smoothing effect of revenue recognition and the increasing maintenance base.


The smoothing effect is larger for larger companies, in general, since they tend to take on large, multi-year projects whose revenue is often deferred for some time. The effect is especially large for companies whose revenue includes a large fraction of services or custom work, like Amdocs and Telcordia (such companies also have the ability, during a sales downturn, to focus their development and delivery resources on completing contracts that may be lingering, boosting revenue) For smaller, very product-focused companies, who may be deriving 80% or more of their revenue in-year, a recession can be devastating to their “top line.” But, when times get good, their numbers recover more quickly, while the smoothing effect for the larger companies mean a longer recovery time for their numbers.

Why this complex relationship? Why does a company have to deliver it ALL to recognize ANY revenue? Because regulations were put into effect after the excesses of the dot-com era where some software firms were recognizing revenue when very little of the work had been done on the contract, then something would happen, and the contract was not completed. So now, a company may find itself in the strange situation of having delivered almost all of the components of a contract, perhaps even having been paid most of the money, but unable to “recognize” any of the revenue. Of course, revenue recognition is much, much more complicated than I’ve described here, and varies among the countries of the world, so if you are further interested, talk to your product manager or CFO.

If you want to play with this simple model of sales and revenue before, during, and after a recession, please e-mail me at mark.mortensen@analysysmason.com and request a copy of the spreadsheet that generated the chart above.

A new telecom analyst and the process of forcasting

I just finished up my first major report since joining Analysys Mason, it's description is located at http://www.analysysmason.com/Research/Programmes/Telecoms-software/Service-Fulfilment/ . It is almost 50 pages of text, diagrams, and charts that show my projections of the market for systems in the Order Management, Inventory, Activation, and Engineering Tools markets.

It was a fascinating experience to make such projections, and to gather information about the current sales and strategies of the various vendors. Most of the public company vendors are too large to report at the detail that I needed while the small companies are private, and often do not report any financials. So how do we do it? A number of vendors give us reasonable access to data on their sales at a remarkable level of granularity - all under tight non-disclosure, of course. These data serve us well as we try to put together the puzzle of the market size, along with estimates of revenue we can make ourselves, sometimes just from the number of employees of a company! It's actually rather scientific, but with a fair amount of windage - that's why industry analysts tend to be people who have been around an industry for a long time.

Customer Self-Care Done Right!

On the second day of the TelesStrategies conference on Customer Self-Care and Customer Experience Management was a wonderful talk by cBeyond. They are a VoIP and It provider to SMBs in selected cities in the US. They REALLY provide self-care! User interfaces to allow the customers to do almost anything themselves. But what really set cBeyond apart was its approach to training their customers to use the self-care facilities. The first month after a customer signs up for service, they send out a CSR to the customer premises to train the customer on how to use the self-care interface! Then they give their CSRs a method of remotely controlling a computer on the customers' premises so that they can see what the customer is doing and help them - or even do it for them! Bravo cBeyond!

Customer Self-Care - "You're on Your Own" or "You Asked for It!"?

This week I'm at the TeleStrategies conference on Customer Self-Care and Customer Experience Management. There have been a lot of good talks, mostly from the carriers. I picked up some good date - peak of self-care use is in the 28 year old crowd, dropping off fast with age after that - self-care users are 14% less likely to churn - only about 13% of self-care users are web, with IVR much more - when a customer has a good experience, they tell, on average, 3.5 people. If they have a bad experience, they tell 7! - electronic bill presentment is about as important to medium to large businesses as on-line service ordering is. But what is really striking is the attitude of many of the carriers. While companies such as Allstate, Zappos, Netflix and others talk about how to enhance the customer experience through self-care and good CEM, many (but certainly not all) of the carriers use words more about how to move customers to self-care because it is cheaper. One speaker for a major mobile carrier was actually brave enough to describe an abortive program where they charged their low-end prepaid customers $2 to call a CSR! That didn't last long - it immediately increased their defection rate! Maybe more good stuff today.

Mortensen's Law of Maximum Ambiguity

I'm taking a break from writing a large report for Analysys Mason: "Service Fulfillment Market 2008 to 2013." So I thought I would share something I've quoted occasionally to my friends - a "law" of nature that has some remarkable predictive abilities. I've somewhat immodestly named it "Mortensen's Law of Maximum Ambiguity " (been searching for a pithier name - any ideas?).

MORTENSEN'S LAW OF MAXIMUM AMBIGUITY
In any situation, what will happen next is whatever will leave you maximally confused as to what the best course of action is.

Simple example:
You know that if "A" happens, you know you should do "Z." If "B" happens, then "Y."
What will happen will be a strange admixture of "A," "B," and "C" (maybe something you did not even think of) in precisely the combination that leaves you the most confused as to what is best to do next.

Try this out and see if you agree - many have reported that its predictive powers are amazing!

The TMF Certification Program – It Does What, Exactly?

The TeleManagement Forum recently announced its Compliance Certification Program, and announced that Tribold was the first company to have a product certified. The TM Forum says that the program “enables industry suppliers to test and certify their adherence to individual TM Forum frameworks and standards. Through a combination of prescribed self-testing and external verification, compliance is assessed on a graduated scale to show the level of adoption of the elements of each framework. Products which meet the rigorous standards set by the compliance tests are awarded the TM Forum Compliance Mark for each framework they successfully adopt.”

Now I understand why that’s a good thing for the TMF – revenue for the organization, more “oomph” behind their very good work on projects like MTOSI, OSS/J, their NGOSS framework, and the SID, just to name a few. These quasi-standards have been more successful (although not nearly as successful as they should be – but more on that in another BLOG later) than any other set of telecommunications industry-created standards I have seen in my 30 years in the industry. But what, exactly, will the certification mean for the buyers and users of the systems that will be conforming? Ensuring interoperability with other that meet the standard? Certainly not without rigorous testing and integration work - there’s no such thing as blind plug-and-play in interfaces as complex as they are. For the ISVs, another hurdle to get over, and another cost (and become the 21st Century equivalent of Telcordia’s old hated OSMINE program? Hmmm.).

Let’s remember that the most successful standards have been set as de facto standards in the competitive marketplace, and then “standardized” later. And, somehow, the IETF doesn’t have a certification program and seems to be getting along just fine.

Machine to Machine Mobile Interfaces - Coming faster than you think

Information Week had a good article on the new Coke Freestyle Dispenser ( see www.informationweek.com/?articleID=172301630 ). It is the best example I have seen so far of a Machine-to-Machine interface over, in this case, the Verizon Wireless network.
(Short version - dispenser with water and flavor, mixes the requested drink in real time, giving over 100 possibilities. RFID-tagged flavor cartridges. Software built on Microsoft CE, communicates daily via Verizon Wireless network with dedicated IP range to a Microsoft System Center Configuration Manager for Mobile Devices. Info on sales and re-order of supplies directly to Coke's SAP CRM system.)

Of course, as most of us believe, M2M interfaces over mobile networks are going to be a big thing in the future, representing, I believe, a great growth opportunity for the mobile operators (or maybe new, specialized operators?) over the next decade.