Saturday, October 07, 2006

Telco 2.0 day two

I'm running behind on posting my impressions and the main messages coming from this unusual event - my wife has gone away for a long weekend with a friend, and I find it difficult to blog with small children climbing on my head. My intention at this point is to cover my experience of day two, followed by a post dealing with general impressions and messages of the entire event, and then a summary of my two presentations (hopefully cross-referenced to the presentation slides themselves).

On day two we broke into three separate workstreams: voice and messaging 2.0, advertising funded content, and broadband access. I personally have trouble seeing these three as separate issues, but I can see how conference organizers, and many attendees, would want to have some segmentation. Anyway, I was somewhat disappointed, but not surprised, to find that broadband access was the least subscribed of the three. Harking back to my experience in San Jose, I found it odd (particularly with an IMS conference taking place next door) that more people concerned about the implications of new third-party applications and content would not grasp that the likely key ingredient to innovation was unfettered access to true broadband. Anyway, the 25 or so of us grouped in the breakout room (with a disproportionately large representation from the Netherlands - arguably the testbed for a lot of what is to come) were treated to some amazing presentations.

I opened with a presentation covering the potential drivers of bandwidth demand in future, and how these didn't seem to match up very well with the more conservative views of consumer needs, particularly on the uplink, where all the interest is currently, thanks to the influence of user generated content and P2P. I went on to discuss a number of real-world examples (no doubt familiar to readers of this blog) where municipalities, regional development agencies, construction companies, housing companies, and utilities all pose challenges to the fundamental ideas underlying the traditional access model, and also raise potentially thorny regulatory issues.

I was followed by John Watlington of France Telecom (who it turns out was two years behind me at Central High School in Memphis, though we don't seem to have ever crossed paths), who gave two interesting presentations: one on the broadband incentive problem (i.e., the crunch faced by network operators in investing more in capacity for non-revenue generating bandwidth when declining revenues outstrip declines in costs - a point graphically illustrated on day one by Berit Svendsen of Telenor), the other on emerging concepts for "personal broadband", i.e., a way for consumers to access broadband in ways which are contextually appropriate to their location, financial parameters, personal preferences, and technical constraints. This slide pack from earlier this year gives some flavor of what he talked about, albeit in less detail.

John Waclawsky, chief software architect at Motorola, next gave a compelling presentation entitled "From POTS to PANs," dealing with the migration of value and context in communication to the edge, often in unpredictable ad-hoc groupings of persons and/or devices depending on the task or subject at hand. This man is a very engaging presenter, and I think his session was among the best I saw, though the concepts and illustrations were too rich for me to do justice to here after the fact. I did get a few messages in my notes which seem to sum his message up pretty well:

The challenge is not just about connecting 6bn people on the planet. It's about connecting them and all their devices. You can't swim upstream towards centralized services when the growth is going to be in distributed networks, some of which might be highly localized and dynamic in nature. If I were a network provider, I would concentrate on being the lowest-cost dumb pipe and deploy my services around the edge, just as the internet players do. These shifting ad-hoc networks are going to take shape anyway, we might as well draft a strategy to deal with them.

While his view of the future could be construed as Telepocalyptic, John had a number of illustrations of potential failure points in this looser network topology where telcos might be able to insinuate themselves to generate value: identity management, managed services, storage, admin and billing. I found John's presentation to be one of the most compelling in the two days, as it combined both some very advanced thinking about the future nature of the market as well as some pragmatic ideas around how this can be something more than a total loss to traditional players who spot the opportunities.

UPDATE: John has since posted his slides OPLAN Foundation. Those not familiar with his views might do better to do some background reading and save me the potential embarrassment of attempting to paraphrase him. There were some great moments in his talk, however. In describing the open network model, he likened the 15 - 25 year investment horizon to a mortgage on a house. The difference, he remarked, was that "I don't get charged every time I walk up and down the stairs, even though the bank owns the house." Another gem was his assertion that telcos, in seeking to define their role in providing/controlling content flows, have forgotten their 100-year legacy. In the era when the only content traversing the network was voice, the creators and consumers of content were the subscribers themselves - a situation the telcos were perfectly happy with. They have now lost this understanding of their position in the equation in the rush to become something else. Perhaps most interestingly, in light of what I see as a growing politicization of broadband globally, was his parallel with Lyndon Johnson's rise to power based on rural electrification - the message being that people are growing concerned enough for this to be an election issue in some places.

In the feedback/Q&A session which followed, one participant sought to draw a parallel between broadband and metered utilities such as water or electricity, wherein users are billed both for access and usage. One friend and long-time Palladium Class mega-uber value reader in the room immediately challenged this, making one of the best points of the two days, in my view. His assertion was that the water/electricity analogy was flawed, because in the case of broadband a large part of the value in the bits actually derived from what he himself contributed, rather than what he consumed. This got me thinking about the value of the intangibles derived from broadband: both the trivial, such as the global entertainment value of user-generated content, and the profound, such as grid-computing-based research, enabled by contributions from broadband users, rather than "consumption" of broadband, a unidirectional value flow, as telcos often tend to see it. As many have observed, the value is not in the bits, but rather in the context around the bits. I guess the only corollary in utilities may be the very small number of people with solar panels who contribute excess energy to the grid. This may strike some as hippy-ish, but if we are trying to rigorously assess the impact of broadband on all stakeholders, then we have to consider the wider definitions of value transfer.

We were next treated to two very different models of local activism in broadband access, both from the Netherlands. First was Herman Wagter of Citynet Amsterdam, who once again gave a very compelling case for why another model is required. Readers of this blog will be familiar with much of the background involved, but one slide in his presentation seemed to cut straight to the heart of what seemed to be on the mind of other attendees at this conference - the upper echelons of telco management are effectively shielded from the street-level realities of the lives of customers, or "revenue-generating units," as they are often characterized. Another significant point raised by Herman was that the muni-broadband issue historically had gotten backing from both ends of the Dutch political spectrum, and he fully expects that it will come onto the national election agenda within four years. Next came Anton Visser of OnsNet Nuenen, which I have written about previously. This is an interesting case of a local project funded by the local housing corporation, Domotica, Rabobank, and Dik Wessels-backed Reggefiber, in which service provision is driven by local residents. Interestingly, even after local cable incumbent UPC cut prices by 50%, making it slightly cheaper than OnsNet (literally "our net"), there was no noticeable churn. This is probably a function of the symmetrical connection afforded by fiber, as well as the locally-specific nature of some services (live feeds from the local church, a webcam featuring goings-on in the local street market - both of these may seem odd to the outsider, but Nuenen has a high proportion of elderly residents).

There were some interesting contrasts raised in the Q&A about the Amsterdam and Nuenen approaches. Nuenen can maintain an integrated access/services model based on a high level of home ownership and an older, more stable and affluent population, whereas Amsterdam opted for a layer one, open-access model partly due to a lower level of home ownership (c.10%), and more generationally diverse population.

After a short break, we heard from Colby Goff of WiFi access point aggregator Boingo Wireless, who had some stunning figures on growth in sessions and also session durations at its sites. Based on data collected in its network in August, session length is up by 25% since March, at 103 minutes on average, versus 81 minutes in March. Over the same period the number of sessions is up by 196% at Boston Logan Airport, by 55% at Charles de Gaulle, and 22% at Copenhagen International. Clearly, as more people have WiFi at home, they are coming to expect it as a natural feature of the landscape when travelling, and do appear to be willing to pay for it.

Lastly, we were treated to a pretty stunning product demo from Stuart Collingwood of Sling Media. He went straight for the jugular at the beginning, showing some very nice streams to a mobile handset over a questionable 3G connection, from a Comcast box in San Diego and a Viasat box in Sweden. He then showed us the laptop client in Slingbar mode, which virtually replicates the remote control of the appropriate service, covering a wide range of pay TV providers. "We even included HomeChoice, just to be thorough," which provoked laughter from those resident in the UK or otherwise familiar with that company's unfortunate failure to gain significant market traction. There were some intriguing statements in his presentation about the wider range of application which the box is seeing - remote head end monitoring for cable companies, CCTV monitoring, BBC World Service using Slingbox to monitor studios around the planet, even remote monitoring of babysitting/childcare services via a webcam. Stuart also remarked that, in his view, this was the first example of an application which could actually glue together the disparate elements of the triple/quad play, i.e., pay TV talks to the broadband connection and can extend it to the mobile phone. He claimed that this was a contribution to lower churn rates among Slingbox users, provided that service providers kept up their levels of reliability in other areas. There were also some classic telco executive quotes from recent meetings with Sling Media, including one senior exec who, having seen the Slingbox in action, demanded to know why he was currently constructing a DVB-H network. Stuart's summary comment was that many players, both telco and media, are building internet content strategies around technologies which have already been superceded. Perhaps unsurprisingly, along the way there were references to some broadband service provider partnership announcements in the pipeline.

We all reassembled at the end of day two in a closing plenary session, during which each of the workstreams, as well as the sister IMS event next door, reported their findings. As the audience entered its feedback into the system, Tomi Ahonen stood up and gave an extemporaneous and very animated pep talk to the audience, which probably would have gotten a more enthusiastic hearing if it had been a rebuttal to my opening presentation on day one. It was raining and miserable outside, the attendees were bleary-eyed and probably wanted to go home. Yet what he said made perfect sense. He spoke about the huge amounts of money spent within social networks and virtual worlds, as well as in viewer-driven programming such as Pop Idol and its variants, a recurring theme of many other presentations (including mine), but he made the case that telecom can capture some of this value via its own legacy assets. He specifically mentioned the case of the public backlash against the Finnish Pop Idol contestants, which resulted in twice as many people voting for the alternative performer. Rather than seeing user generated and driven content and trying to play in this arena themselves, telcos needed to be aware of what was in the ether around them and figure out how to insinuate their core legacy assets into the equation. It was a relatively upbeat final message at the end of two days of uncomfortable home truths, but one the audience probably needed to have in mind as they walked out into the rainy streets of London.

No comments: