Farewell to the Noughties, a decade sandwiched between two crises: The dotcom bust and the current – but sputtering – downturn.  In that time, Europe accomplished much: The Euro was adopted, DSL went mainstream and telcos went NGN.

Not least, consumers woke up to the pleasures of mobile content, although it’s questionable whether MNOs will ever see a fair return for their expensive 3G licenses. Roaming charge crackdowns and market saturation haven’t helped financials either.

Time again to put a nebudchadnezzar on ice? There’s plenty under the tree for 2010:

1. Ethernet will be everywhere. Ethernet is in the LAN, it’s in the WAN, it’s transforming mobile backhaul economics, and it’s converging the datacenter. Fiber remains best, but clever vendors (see Hatteras, Actelis) are delivering copper-bonded Ethernet in the first mile. And new Ethernet exchanges (see CENX and Equinix) aim to speed order to cash with their interconnect services. Want a unifying communications fabric? Well duh!

2. The CDN bubble will burst. Telco CDNs can offer compelling features, but how many service providers can the market sustain, even if video traffic is exploding? Many partnerships are already in place: Tata Communications with BitGravity, Verizon with Velocix, Deutsche Telekom with EdgeCast and Global Crossing with Limelight Networks and EdgeCast. If you’re not in the game now, you’ll need deep pockets to buy in.

3. The cloud’s hot air will expand. Resilient, liquid (and probably Ethernet-based) connectivity is going to save the outage-prone cloud. To invest in cloud services enterprises require robust network as well as applications-specific SLAs, as well as network redundancy, say Yankee Group enterprise surveys. Offering on-demand VPN connectivity to cloud services (on a wholesale or retail basis) could help defuse concerns about their security and resilience.

4. Equipment vendors will want to be your new best friend. The ratio of CAPEX to revenue currently stands at 12.6 percent among European operators, according to Yankee Group analysis. It’s not going to recover much. That’s why European equipment vendors like Alcatel Lucent, Ericsson and Nokia Siemens Networks are on a charm offensive with managed services propositions and aims to transform telco business models. Listen to their pitch. And talk to Huawei:  With a new SDP partner program and growing software division, it’s got more in its arsenal than cheap kit.

5. Smart wholesale will become sexier than dumb wholesale. Get big, get niche or get out. Embrace revenue-sharing models with non-traditional partners. And work mobile angles: International remittances, GRX to IPX interconnect, content transcoding, white-label mobile UC and M2M are among many rich avenues of investigation.

Best wishes for the New Year – and decade – look forward to continuing the conversation!

The economic crisis proved a major obstacle for consumers, enterprises and network builders, and each has had to evolve to survive. The changes from 2009 will create new opportunities in the Anywhere ecosystem, especially in the areas of cord-cutting, devices, cloud computing and network innovation.

Earlier today, I was joined by my colleagues Jon Paisner, Camille Mendler and Josh Holbrook to unveil Yankee Group’s top predictions for the 2010 communications industry. We discussed six of our eleven published predictions and took questions live from the audience. Check out the webinar replay below. You can also register as a Guest on the Yankee Group Web site to get the full report for free.

The webinar runs about an hour: audio (mp3) and slides (pdf).

Calling all marketers: How do you sell a network?  While operators fear their offering being reduced to nothing more than dumb transfer of bits, the actual internal complexity of their infrastructure gets more impressive every day. But I’m a geek. That stuff doesn’t lend itself to mass-market messaging.

Talking the other day about the most important attributes of networks, I said they were reach (where does it go), capacity (how much traffic can it support) and intelligence (how much software in the network helps bits move around with other useful stuff to the right places at the right time).

Verizon Wireless is doing a yeoman’s job of talking about reach and capacity. With Google taking over our map consciousness, who’d have thought that it would be a network taking over the use of maps in marketing?

I haven’t seen a network operator in the U.S. or elsewhere yet talk about its network being more intelligent than the other guys’. While networks are indeed getting more intelligent with the addition of technologies like IMS, SDP, DPI and whatever other TLA* I’ve forgotten to mention, it may take another couple of years before operators figure out how to translate those assets into a simple, clearly-articulated marketing message for their clients. So I guess we have to wait for the competitive battle over network IQ.

So what about speed? From gamers to financial services firms, many network users know that they want the fastest possible network. But it might be a case of the positive (going fast) not being as compelling in marketing messages as the negative. Fast is nice — but missing out on something is bad. When offered the chance to pay a higher toll to use a less congested lane on the highway, the most compelling way to get my attention would be to suggest that if I don’t do it, I might be late for my meeting. Put up a clock over the roadway and estimate the arrival time at an exit using the main path versus the low-congestion path.

The way to sell the negative when it comes to network speed, is to talk about latency. But then that’s one of those words we geeks favor that makes normal people’s eyes glaze over.

Akamai, the content and app delivery network people, has struggled with how to talk about this, using words like acceleration. Their messaging includes discussions of latency using lots of facts and figures. Cable operator Comcast takes a softer, more comedic approach, linking slower networks with turtles. These approaches to marketing network speed, or the lack of latency, fall at either end of a spectrum: very techie (which admittedly Akamai’s customers may require) versus very cutesy.

There must be solutions in the middle. The experiences we can all relate to are missing trains and airplanes. The movie image of subway doors closing on the smirking bad guy, just as our hero in hot pursuit rushes down to the platform only to see the train pull away, is familiar yet compelling. Network marketeers need to develop our sense of urgency around the negative impact of slow networks. Missed messages, missed packets, missed trades… lateness means missing out.

*TLA of course stands for Three-Letter Acronym; along with its sibling the FLA, irresistible candy to tech geeks and policy wonks alike.

Given the opportunity to join IBM’s Global Executive Forum again this year, I jumped. Past experience has proven that it’s an intimate, powerful gathering where C-level execs from global communications and media firms convene to mull key questions in leadership.

Last week we convened in the foggy but serene wilds of rural Hampshire, U.K., for two days of discussion about how to succeed in the new economic environment. The challenges offered by IBM were capture in the subtitle for this year’s event: Taking Risk and Finding Opportunity in Unprecedented Times.

My favorite remark of the sessions, one that I’ve repeated several times already, concerned the need for change in our legacy communications networks to embrace exploding demand for video, data, and new services. In the past I’ve heard a defensive posture from network leaders, rationalizing slow progress in the face of rapidly rising threats. But Jean-Philippe Vanot, EVP for innovation and marketing at France Telecom, said, “It’s no longer a question of if, but when.” Amen to that. Eelco Blok, KPN board member and managing director of its business and wholesale operations, talked about the imperatives to change that his firm’s leadership saw as early as 2005, triggering the brave decision to invest in an aggressive move to an all-IP network infrastructure despite a very challenging financial situation.

I shared this slide, from research that YG analyst Camille Mendler did earlier this year with the Telecommunications Executive Network (TEN), surveying network operators. She asked them what they believed the core selling proposition of a network operator is.

What 50+ network operators think they provide

Thank God, I observed, that the most popular answer was the correct one: a service management platform. Operators of networks who see their mission as providing a platform for the creation of network services of any stripe, offered either by them or by third parties, have the best opportunity to contribute to the increase in collective smarts around the world.

(However, the second most popular answer to her question is just total puffery, to put it kindly. Brand is not a selling proposition for any company, whether it runs networks or makes toothpaste. Brand is rather a means to an end. A valuable brand helps a business do things — reach a target market, for instance, or instill confidence in the minds of buyers that this toothpaste will whiten their teeth better. But brand isn’t something valuable on its own. Operators who identify brand as their selling proposition are more likely to invest in brand promotion and identity ahead of the non-trivial work of transforming their core networks. Brand is thus a dangerous red herring in a converging world.)

I like IBM’s Smarter Planet mantra; I believe in it. But to have one, we need smarter networks. In the words and reported deeds of network and media leaders at GEF, coupled with the early, admittedly modest, green shoots in the global economy, I see progress.

With an event as transformative and historically significant as the recent electoral unrest in Iran, it is only natural that many disparate elements of life and business are affected. The telecommunications industry is no exception. Yesterday, the Wall Street Journal published a provocative piece examining the control and censorship of the Internet by the Iranian government in an attempt to curtail protests. The crux of the piece is the government’s alleged use of deep packet inspection (DPI) technology acquired from Nokia Siemens Networks in this effort. It is a noble attempt to shed light on censorship and the impediments to free expression in countries such as Iran and China. And it is an unfortunate reminder that in the world of the Internet, true anonymity in personal correspondence or activity is largely a myth. The only problem with the piece is that it is largely inaccurate and misleading.

There are a few qualms that I’d like to get out of the way right off the bat:

• DPI is not what Nokia Siemens Networks actually provides.
• Nokia Siemens provided Iran with Lawful Intercept capabilities designed for voice communications, not DPI technology that is being used for censoring Internet traffic.
• Operators and governments worldwide engage in Lawful Intercept (often by regulatory mandate), which may or may not have DPI as a contributing technology.  In the case of the technology that NSN provides, it is not.
• DPI does not allow for the altering of packet content, as the article suggests, to create disinformation campaigns.
• DPI does not have to be inserted directly into the data flow if it is just engaged in monitoring activities, and even when it is, it does not create a slowdown in network traffic that would be perceptible to a large public audience.

The list could go on.

The main point I would like to make though is that DPI is mischaracterized as a “practice” or an “activity”. DPI is a technology. What the article is describing is one potential, particularly malicious, usage of the technology. Yet many things that are potentially benign can also be potentially dangerous. Just because someone can use binoculars to invade another’s privacy does not mean that they cannot also be used for bird watching. To take a more extreme analogy, just because you can get behind the wheel of a car and run someone over does not mean that cars are inherently violent. The onus is on the user of the technology, rather than on the technology itself, and this is what the article misses. The culprits are not Nokia Siemens (leaving aside that NSN does not actually provide DPI technology) or their peers. The culprits are those that would use the technology for malicious purposes. In this case, the Iranian government.

What DPI does is what it says it does: packet inspection. It is a technology used to gain Layer 3 through Layer 7 packet visibility (from the network layer through the application layer) to determine the source, destination, application type, etc of network traffic. It does not read emails. It does not alter Internet content. It does not slow down the Internet. And, directly to the point about Iran, it does not intercept or block traffic. The Iranian government can choose to take action in these regards based on the intelligence about traffic flows that DPI can provide, but again, that is independent of the technology.

This is actually a more extreme (and more politically charged) example of what got Comcast into hot water last year with how it chose to use network information. For those unfamiliar with the case, Comcast raised the ire of public interest groups and the FCC for blocking BitTorrent traffic that it deemed to be overly burdensome on its network. The FCC deemed this inappropriate not because of how Comcast obtained traffic information (using DPI), but because of what it chose to do with that information. In a similar fashion, a number of operators in the US were chastized by the House of Representatives Subcommittee on Telecommunications and the Internet for using DPI-acquired intelligence to do behavioral-based ad-targeting. This ultimately led to behavioral targeting vendor NebuAd getting dragged before Congress for a tongue-lashing, and ultimately folding in the face of public and legislative pressure. Again though, the issue was how the technology was used by NebuAd and its operator customers, not the technology itself.

The technology itself has a number of legitimate uses that are in line with the public good (and operator profits, for that matter), including security threat detection, threat mitigation, enhanced network management, enhanced quality of user experience, the ability to introduce new services, etc. Yankee Group has written a number of pieces on this issue in the past that examine how operators are using the technology today and what the potential opportunites are in the future. These often go unmentioned though when DPI is reported on, because they don’t arouse public debate the way that “Iran’s Web Spying Aided by Western Technology” does.

My goal here is not just to argue with the Wall Street Journal though (an argument I’m sure I would lose) or point out inaccuracies in the article. It is to underscore the consequences of misrepresenting something like this. In the past two years, DPI providers have run afoul of issues around privacy, net neutrality and now censorship, due to the ways in which customers have chosen to use the technology. These issues have attached a scarlet letter to a technology and companies that can provide legitimate value to operators and consumers, when used properly. Instead though, competitors have been forced to retreat from the market, the maturation of the technology has stalled, and operators have turned towards potentially less efficient solutions for network visibility, security and traffic management for fear of igniting a firestorm amongst those that would misconstrue their intentions.

It is a fine line to walk in regards to what is and is not acceptable in the world of traffic inspection, to be sure. But that’s all the more reason why the technology must be accurately understood and represented, rather than demonized off-hand.

Remember that scene in the The Graduate, where the older guy whispers in Dustin Hoffman’s ear? He’s revealing where future riches lie. What he says is: “Plastics.” Not a bad steer in 1967.

Today, the word in your ear is – wait for it – interconnect. Wikipedia claims that interconnect is the “physical linking of a carrier’s network with equipment or facilities not belonging to that network.” Oh yawn, right?

In fact – as a raft of CTIA Wireless and VoiceCon-linked announcements from Cisco, GSMA, Telcordia and others underscore – our industry’s current and future revenues critically depend on supply-side ‘interconnect’ mechanisms that go far beyond physical network infrastructure.

Although superficially fragmented, the crowded landscape below needs to merge fast to monetize the much-touted benefits of hyper-connectivity.

Read the rest of this entry »

The downturn is forcing tough decisions about what remains core. In the past week, three telecom operators made their choice: KPN’s Belgian subsidiary BASE is outsourcing network operations to Alcatel Lucent; Nokia Siemens Networks will run Orange’s UK and Spanish networks; and Vodafone UK will hand over network maintenance and operations to Ericsson along with 350 employees.

They are not alone: Globally, deals are escalating in size, scope and length, according to our historical analysis of more than 800 telco outsourcing transactions since 2002. Operators will double annual expenditure on outsourced and managed services from $16 billion today to $32 billion by 2013, as noted in my report, Redefining the Core: Outsourcing and the Virtual Telco.

But let’s not get carried away. Outsourcing can bring rapid balance sheet results, but that doesn’t automatically translate into long-term business value. There’s a vast difference between externalizing to achieve financial re-engineering versus business transformation. Yet this is exactly where many operators and their investors are getting confused.

Scattergun usage of outsourcing as a weapon to cure all corporate ills is more than unwise, it’s dangerous. A vendor can nearly always be found to undercut internal operational costs – and how attractive if they can also rebadge employees, or pay a success fee up front to win the business.

While this might improve the bottom line, it won’t drive top line growth. That’s the real issue that operators must address – with or without external help.

There was a wolfish grin on the man’s face, and I swear he licked his chops.  “Oh yes, there’s going be a lot of money, really quite a lot, in presence brokering,” he said.

It was a conversation that I had at Mobile World Congress in Barcelona. I’ve been mulling it over ever since.

If you’re a fan of Charles Dickens, you’ll remember Mr Micawber, a character from David Copperfield. Despite a spell in debtor’s prison, Mr Micawber remained the eternal optimist. His catchphrase: “Something will turn up.”

Presence brokering is another manifestation of a global pursuit for monetizable assets. Telecom operators are rummaging through their asset base to see how the pieces might fit. Put together a subscriber database, geo-location information and some comms applications and hey presto!

The thinking goes that quite a lot of network horsepower will be needed to figure out where a subscriber – let’s call her Miss Jones – is at a given time, how and when to reach her (maybe with a targeted ad), and how to share her personal information with various contacts. Because Miss Jones might want to discuss her bra size with her friends, but not with her clients. Or is it the other way around?

Irrespective, exchanging rich presence information across global networks requires technical brilliance. But who will collect the value in such transactions? And as the telcos seek new client types, what’s the likely backlash from Facebook’s recent actions: A blanket attempt to assert ownership and distribution rights on any content and personal info you have uploaded – whether or not you are still a Facebook member?

If you’ve worked in aerospace, you’ll have heard of TCAS, the Traffic Alert and Collision Avoidance System. It’s what planes use not to crash into each other. Let’s make a bet that instead of presence brokering, the real killer app – for us privacy-loving citizens at least – will be presence avoidance brokering.  Caveat emptor.

I spent the past few days at a conference for Procera Networks, a provider of deep packet inspection-based solutions for network monitoring and service control. There was talk of the direction of the DPI market, the overall direction of service provider investment in the current economic climate, and how network intelligence can work in conjunction with other distinct network elements to improve efficiency. But the biggest question on everyone’s minds (mine included) was when will operators finally wake up to the need to change their subscription service models?

For years now, there has been discussion from the vendor, service provider and analyst community about movement towards tiered services and premium priority-based charging. It’s a tried and true story. Operators must avoid relegation to the dreaded DUMB PIPE OF DOOM (apologies for the emphasis, but this expression has become so over-saturated that it has taken on the life of a catch phrase). The opposite of a dumb pipe is a “smart pipe”. Ergo, operators must invest in technologies that provide greater network intelligence, and this will allow them to provide differentiated service to subscribers based on subscriber priority, application, time of day, location, etc, as well as implement convergent charging models that incorporate both pre-paid and post-paid. Easy, right?

Actually, no, it hasn’t been. Operators have been strikingly slow to implement priority-based or tiered subscriber plans. This despite the fact that in just about all discussions with the operators, they say this is what they ultimately want. And Yankee Group’s survey data bolsters this as well. Operators know that flat-rate business models aren’t sustainable, and they want to move beyond them (our resident network software systems guru, Ari Banerjee, just published a report detailing these operator preferences and how to address them).

But when you search out models that are already out there, they are few and far between. The one that always jumps to mind belongs to PlusNet in the UK (now part of BT). You can view some of the details here, but this actually doesn’t show all of the depth in the tiers that PlusNet has created. Subscriber plans are tiered by price, bandwidth, particular application allowance and expected quality of experience (QoE). And PlusNet has been remarkably successful with this model since its introduction. They’ve received positive customer feedback for it. They’ve won industry awards for it. Most importantly, they’ve made money with it. But other than a few limited deployments and endless trials and rumors, we’ve seen few operators introduce something similar. And this was something that was first constructed four years ago! What is beyond the bleeding edge? The hemorrhaging edge?

So do we see this changing? Ultimately, yes. Operators will eventually move away from flat-rate and embrace more personalized service models, but due to necessity rather than foresight. There is a tipping point at which bandwidth constraints and the economic burden of over-provisioning the network will reach a level where operators will be compelled to act (where exactly it is, no one knows). We are already seeing the beginning stages of this as operators such as AT&T, Comcast, Time Warner and T-Mobile play around with bandwidth caps. There is talk that mobile operators are being more progressive in constructing service plans than their fixed-line brethren, and that this community of operators will evolve before they absolutely have to. But again, this is mostly talk with little concrete evidence of commercial deployments to date. So we are left waiting for the point at which a good idea becomes a business imperative. And when we ultimately cross this threshold, operators will be forced to evolve and they’ll be pushed into a more profitable and efficient business model, kicking and screaming all the way.

Last Thursday, Alcatel Lucent was holding its Innovation Days 2008 in Paris. This is, as the name suggests, an annual event which gives Bell Labs the opportunity to present to Alcatel Lucent customers, employees, analysts and the press a set of technologies, applications or service concepts that it thinks are the most promising.

As an analyst, part of your job is to anticipate future trends, but it’s not always easy because few vendors and/or telcos are as open about their own approach to the future as you’d like. To me, this was a nearly unique opportunity (as far as I know, none of Alcatel Lucent’s competitors hold similar events) to actually see and form an opinion on what may shape the telecom landscape of tomorrow.

Over the course of one morning, I was subjected to dozens of demos or concepts, and it was as exciting as it was brain-frying. I’m not going to go through the whole list of them, but just highlight those which I thought were promising, exciting, or thought provoking. The floor was organised in eight sections. Four of these were applications put in a usage context, namely home usage, mobile usage, enterprise usage and green Alcatel Lucent. The other four sections were more “under the hood” approaches to traffic management (control), communications, data speed and quality (bytes) and services.

The environment that I was most interested in was the home, but I didn’t find there an answer (or parts of answers) to my big question which is: which are the services that are going to drive the demand for next-generation access. They did have a 3D TV there, which unfortunately is something I can’t quite enjoy since I only see from one eye. But apart from that the mock home environment was not all that impressive.

On the mobile side though, there was some really cool stuff on display:

• the most impressive and immediately applicable was the Mobile Embedded Laser Video Projector. Bell Labs is not quite there yet, but had a working demo of a projector the size of a mobile phone and showed us how small the laser component to be embedded in a mobile was. Ranked really high on the “I want it now” factor!
• the other really cool app that they had was Tikitag, an RFID system where actions on a PC are associated with a tag. The reader is plugged into your PC and you decide what the PC does when a given tag is passed on the reader. One of the examples shown was how a tag stuck on a teddy bear’s leg would start children music and the tag on the other leg stop it. The tags were everywhere in the floor, for us to request info on a given demo, exchange contacts, etc. This is commercially available already.

In the “Transforming the World” section we saw a couple of really interesting innovations, and perhaps more importantly a concept that Alcatel Lucent wants to supersede “Always On” which is “On When Needed”. Its not the first time I hear about this from a vendor, but that doesn’t make it less crucial. The idea is that the network has to become a lot more elastic, being able to accomodate instand needs of a lot of capacity but also to be able to switch off when not needed. More concrete applications were:

• 3D Heatsinks promise to reduce the energy needed to cool IT components by up to half. When you consider that cooling accounts for 30-50% of energy consumption in IT, the potential impact is huge.
• Bell Labs also works on Wind Powered Basestations. Full independance from the electrical grid is not quite achieved yet, but improvements in wind power efficiency and in energy requirements for base stations make this a promising proposition.

The rest of the floor was devoted to various demos, all very different in nature. Here are three that jumped at me:

• Encrypted Traffic Identification is an interesting alternative to DPI. It uses statistical flow analysis to define a behaviour of a certain type of traffic (P2P, http, voice, etc.) and can identify the nature of a flow with a 2% error without deep packet inspeaction. I think a non-intrusive alternative to DPI is an interesting consideration from a privacy point of view. Of course, if you object to any form of traffic shaping, this is not going to be please you anyway!
• I expected not to be particularly interested in the Personal Content Manager, based on the name alone, but actually I found it one of the more promising services on the floor. I wrote recently about how the trend in telco replication of over the top services baffled me. Personal Content Manager could be a way out of that conundrum: what this does is to aggregate all the content available on all of a user’s content storage areas (whether in the cloud, on the PC or on other connected devices) and make it taggable and searchable. The clever bit is that this aggregation role is actually a lot more legitimate for a telco than for an over the top player…
• I also thought that Contact Me My Way was a really interesting app. Essentially, what it allows a user to do is to embed a clickable communication button in any document online or offline and associate a communication method to it. Say that I give a presentation at a conference and include such a button. I decide that it allows people to call me. When someone clicks on the button, the call is established and I know before I answer that the call was established based on that presentation at that particular conference. And if I don’t want to be bothered anymore, I can just deactivate the button or change the communication method to email. You can find more about this here.

All in all, this was a very interesting event to attend. I also felt that this heralded a change of approach to the market from Alcatel Lucent, another way of engaging their traditional telco customers which, perhaps, is the early result of the new management taking over. Alcatel Lucent is to announce its new strategic plan on Dec. 12th, which will undoubtedly give us a better feel for where they are going!