January 1, 2010

More Momentum for Mobility

Consumer demand is driving infrastructure, services and competition.

By Jonathan Tombes

Operators are angling for customers, coping with traffic and looking at alternative business models. Mobile advertising waits in the wings.

The two telco giants — Verizon and AT&T — strive to position their nationwide wireless coverage in the best possible light, while continuing to shed landline subs and bracing for increased traffic. For their part, MSOs are launching wireless product offerings that leverage their own footprints.

And multichannel video providers of all stripes are trying to extend their offerings to multiple devices through "TV Everywhere" initiatives and new partnerships with content providers.

Whether the Comcast NBCU deal meets regulatory approval remains to be seen. But it’s worth noting that others are betting heavily on mobile plays, as well.

Cisco’s announcement in October 2009 of its plans to acquire Starent Networks for $2.9 billion extends the networking giant’s mobile Internet reach. (Starent’s technology happens to be key to Cox Communications’ wireless build.) And in November 2009, Google announced its purchase of mobile ad technology provider AdMob for $750 million, making it Google’s third largest acquisition.

Comcast, Cablevision, Cox

Investment from Google — and Comcast, Time Warner Cable, Bright House and Intel — figured in $3.2 billion funding that led to the merger between Clearwire and the WiMAX assets of Sprint Nextel in late 2008.

Over the next 12 months, Clearwire began lighting up service across the country, with the Portland market being the first to launch the "Comcast to Go" product. As noted in our November issue (see CT’s 2009 System of the Year), even without touching the WiMAX infrastructure, the regional market added value by equipping techs with 4G devices, all the better to identify dead zones and create more granular maps than their competitors.

On the Wi-Fi front, exploiting its compact footprint, Cablevision set a fast pace in 2009, increasing the number of times its high-speed data customers has accessed the Internet over Optimum Wi-Fi from 1 million in April to 5 million in October.

In yet another approach, Cox Communications is partnering with a mobile carrier (Sprint) and building its own wireless infrastructure. Cox has underscored its intention to offer a unique product.

"We’re not standing up an independent, voice-only wireless network," Scott Hatfield, Cox EVP and CTO said in the 2009 issue of CT’s Communications Executive. "Our goals are to create product integration across a four-product bundle."

The business models vary. On the offensive side is customer acquisition and new revenue. Comcast, for instance, is bundling WiMAX as a part of a "Fastpack" wired and wireless service offering. The Cox model, which puts the operator in direct competition with other wireless carriers, is a bold attempt to build additional revenue generating units (RGUs). Yet mobile broadband — certainly free Wi-Fi — may also be an attempt for MSOs simply to remain "attached to the user," suggested Tom Gruba Motorola senior director, marketing, for wireless broadband, LTE and WiMAX.

"(Without such WiMAX service) your affinity for Comcast and Time Warner Cable and Bright House begins to wane when you’re outside the home," Gruba said.

Either way, the wireless business is becoming a tricky proposition for many parties involved.

Coping with the boom

Simply put, ten years after first launching 3G, operators are in danger of becoming victims of their own success.

"The killer application was the killer device, and the killer device was the iPhone," Andre Mechaly, VP wireless strategy for Alcatel-Lucent said. "The traffic is booming, which is good. (But) it’s becoming a bit scary for some."

While Apple’s June 2007 launch of the iPhone precipitated the boom, it was not the only cause of it. "You had the Web sites, the devices and the ease of use of the Web," Motorola’s Gruba said. "The Web simply became much more ingrained in daily habits."

In any case, the upshot is stressed networks. And that’s today. The future looks even more daunting.

Mechaly said that forecasts have mobile data traffic multiplying 10 to 40 times over the next five years. The driver is not only more subscribers, but also the burgeoning business-to-machine market: GPS devices, e-books, digital signage, automobiles, utilities, etc.

Mobile operators are coping in various ways. In a study of global Wi-Fi hotspot usage released in November 2009, In-Stat analyst Fran Dickson said that mobile operators have become increasingly involved in Wi-Fi as a way to offload traffic from crowded 3G networks.

AT&T alone increased the number of its hotspot sites 500 percent in 2009 over 2008, according to In-Stat. In mid-2009, Verizon announced free Wi-Fi service for all FiOS high-speed Internet customers through a partnership with Boingo, which offers access in thousands of locations throughout the U.S.

"Not all applications are created equal, and not all times of day are the same." Randy Fuller, Camiant

Then there are infrastructure upgrades, which offer some consolation.

"By this time next year, LTE (long-term evolution) will be deployed in several countries, including Verizon," Camiant VP Business Development Randy Fuller said. "It is certainly more efficient in higher bandwidth than existing services. It does not mean the end of congestion."

New terms, conditions

Even as more efficient technologies are rolling out, Fuller said that service plans, especially the terms and condition surrounding mobile data, are in flux: "Things will probably not stay the same."

Results of a study commissioned by Camiant, conducted by Heavy Reading and released at the Broadband Traffic Management conference in London in November 2009 pointed to a "high level of interest by consumers in alternative rate plan structures." Rather than the traditional "cap" plus "overage" plans, European consumers favored similar base rates, with the understanding that service speeds would be slower for data over the monthly limit carried during peak hours.

"When you peel back the covers on the gap between bandwidth and revenue, you find that not all subscribers are created equal, not all applications are created equal, and not all times of day are the same," Fuller said.

The shift makes sense, while respecting what Alcatel-Lucent’s Mechaly termed "a brutal law," namely: "People are not willing to pay for something that has been free of charge."

Mobile advertising is destined to be part of the revenue dilemma. (For more click here). But Motorola’s Gruba cautions: "It’s never going to be a one-trick pony that you make money just off of advertising. It’s also going to be able to offer something of value to subscribers.