Should regulators forfeit spectrum auctions if they cant resolve Net Neutrality / Fair Share?

I have been writing about Net Neutrality and Fair Share broadband usage for nearly 10 years. Both sides of the argument have merit and it is difficult to find a balanced view represented in the media these days. Absolutists would lead you to believe that internet usage should be unregulated with everyone able to stream, download, post anything anywhere, without respect for intellectual property or fair usage; while on the other side of the fence, service provider dogmatists would like to control, apportion, prioritize and charge based on their interests.

Of course, the reality is a little more nuanced. A better understanding of the nature and evolution of traffic, as well as the cost structure of networks help to appreciate the respective parties' stance and offer a better view on what could be done to reduce the chasm.

1. From a costs structure's perspective first, our networks grow and accommodate demand differently whether we are looking at fixed line / cable / fibre broadband or mobile. 
1. In the first case, capacity growth is function of technology and civil works. 
1. On the technology front, the evolution to dial up / PSTN  to copper and fiber increases dramatically to network's capacity and has followed ~20 years cycles. The investments are enormous and require the deployment, management of central offices and their evolution to edge compute date centers. These investments happen in waves within a relatively short time frame (~5 years). Once operated, the return on investment is function of the number of users and the utilisation rate of the asset, which in this case means filling the network with traffic.
2. On the civil works front, throughout the technology evolution, a continuous work is ongoing to lay transport fiber along new housing developments, while replacing antiquated and aging copper or cable connectivity. This is a continuous burn and its run rate is function of the operator's financial capacity.
2. In mobile networks, you can find similar categories but with a much different balance and impact on ROI.
1. From a technology standpoint, the evolution from 1G to 5G has taken roughly 10 years per cycle. A large part of the investment for each generation is a spectrum license leased from the regulating / government. In addition to this, most network elements, from the access to the core and OSS /BSS need to be changed. The transport part relies in large part on the fixed network above. Until 5G, most of these elements were constituted of proprietary servers and software, which meant a generational change induced a complete forklift upgrade of the infrastructure. With 5G, the separation of software and hardware, the extensive use of COTS hardware and the implementation of cloud based separation of traffic and control plane, should mean that the next generational upgrade will be les expensive with only software and part of the hardware necessitating complete refresh.
2. The civil work for mobile network is comparable to the fixed network for new coverage, but follows the same cycles as the technology timeframe with respect to upgrades and changes necessary to the radio access. Unlike the fixed network, though, there is an obligation of backwards compatibility, with many networks still running 2G, 3G, 4G while deploying 5G. The real estate being essentially antennas and cell sites, this becomes a very competitive environment with limited capacity for growth in space, pushing service providers to share assets (antennas, spectrum, radios...) and to deploy, whenever possible, multi technology radios.

The conclusion here is that you have fixed networks with long investment cycles and ROI, low margin, relying on number of connections and traffic growth. The mobile networks has shorter investment cycles, bursty margin growth and reduction with new generations.

What does this have to do with Net Neutrality / Fair Share? I am coming to it, but first we need to examine the evolution of traffic and prices to understand where the issue resides.

Now, in the past, we had to pay for every single minute, text, kb received or sent. Network operators were making money of traffic growth and were pushing users and content providers to fill their networks. Video somewhat changed that. A user watching a 30 seconds video doesn't really care / perceive if the video is at 720, 1080 or 4K, 30 or 60 fps. It is essentially the same experience. That same video, though can have a size variation of 20x depending on its resolution. To compound that issue, operators have foolishly transitioned to all you can eat data plans with 4G to acquire new consumers, a self inflicted wound that has essentially killed their 5G business case.

I have written at length about the erroneous assumptions that are underlying some of the discourses of net neutrality advocates. 

In order to understand net neutrality and traffic management, one has to understand the different perspectives involved.

• Network operators compete against each other on price, coverage and more importantly network quality. In many cases, they have identified that improving or maintaining quality of Experience is the single most important success factor for acquiring and retaining customers. We have seen it time and again with voice services (call drops, voice quality…), messaging (texting capacity, reliability…) and data services (video start, stalls, page loading time…). These KPI are the heart of the operator’s business. As a result, operators tend to either try to improve or control user experience by deploying an array of traffic management functions, etc...
• Content providers assume that highest quality of content (8K UHD for video for instance) equals maximum experience for subscriber and therefore try and capture as much network resource as possible to deliver it. Browser / apps / phone manufacturers also assume that more speed equals better user experience, therefore try to commandeer as much capacity as possible. 

The flaw here is the assumption that the optimum is the product of many maxima self-regulated by an equal and fair apportioning of resources. This shows a complete ignorance of how networks are designed, how they operate and how traffic flows through these networks.

This behavior leads to a network where resources can be in contention and all end-points vie for priority and maximum resource allocation. From this perspective one can understand that there is no such thing as "net neutrality" at least not in wireless networks. 

When network resources are over-subscribed, decisions are taken as to who gets more capacity, priority, speed... The question becomes who should be in position to make these decisions. Right now, the laissez-faire approach to net neutrality means that the network is not managed, it is subjected to traffic. When in contention, resources are managing traffic based on obscure rules in load balancers, routers, base stations, traffic management engines... This approach is the result of lazy, surface thinking. Net neutrality should be the opposite of non-intervention. Its rules should be applied equally to networks, devices / apps/browsers and content providers if what we want to enable is fair and equal access to resources.

As we are contemplating 6G, and hints of metaverse, augmented / mixed reality and hyper connectivity, the cost structure of network infrastructure hasn't yet been sufficiently decoupled from traffic growth and as we have seen, video is elastic and XR will be a heavy burden on the networks. Network operators have essentially failed so far to offer attractive digital services that would monetize their network investments. Video and digital services providers are already paying for their on premise and cloud infrastructure as well as transport, there is little chance they would finance telco operators for capacity growth.

Where does this leave us? It might be time for regulators / governments to either take an active and balanced role in Net Neutrality and Fair share to ensure that both side can find a sustainable business model or to forfeit spectrum auctions for next generations.

MEC 2016 Executive Summary

2016 sees a sea change in the fabric of the mobile value chain. Google is reporting that mobile search revenue now exceed desktop, whereas 47% of Facebook members are now exclusively on mobile, which generates 78% of the company’s revenue. It has taken time, but most OTT services that were initially geared towards the internet are rapidly transitioning towards mobile.

The impact is still to be felt across the value chain.

OTT providers have a fundamentally different view of services and value different things than mobile network operators. While mobile networks have been built on the premises of coverage, reliability and ubiquitous access to metered network-based services, OTT rely on free, freemium, ad-sponsored or subscription based services where fast access and speed are paramount. Increase in latency impacts page load, search time and can cost OTTs billions in revenue.

The reconciliation of these views and the emergence of a new coherent business model will be painful but necessary and will lead to new network architectures.

Traditional mobile networks were originally designed to deliver content and services that were hosted on the network itself. The first mobile data applications (WAP, multimedia messaging…) were deployed in the core network, as a means to be both as close as possible to the user but also centralized to avoid replication and synchronization issues.

3G and 4G Networks still bear the design associated with this antiquated distribution model. As technology and user behaviours have evolved, a large majority of content and services accessed on cellular networks today originate outside the mobile network. Although content is now stored and accessed from clouds, caches CDNs and the internet, a mobile user still has to go through the internet, the core network, the backhaul and the radio network to get to it. Each of these steps sees a substantial decrease in throughput capacity, from 100's of Gbps down to Mbps or less. Additionally, each hop adds latency to the process. This is why networks continue to invest in increasing throughput and capacity. Streaming a large video or downloading a large file from a cloud or the internet is a little bit like trying to suck ice cream with a 3-foot bending straw.

Throughput and capacity seem to be certainly tremendously growing with the promises of 5G networks, but latency remains an issue. Reducing latency requires reducing distance between the consumer and where content and services are served. CDNs and commercial specialized caches (Google, Netflix…) have been helping reduce latency in fixed networks, by caching content as close as possible to where it is consumed with the propagation and synchronization of content across Points of Presence (PoPs). Mobile networks’ equivalent of PoPs are the eNodeB, RNC or cell aggregation points. These network elements, part of the Radio Access Network (RAN) are highly proprietary purpose-built platforms to route and manage mobile radio traffic. Topologically, they are the closest elements mobile users interact with when they are accessing mobile content. Positioning content and services there, right at the edge of the network would certainly substantially reduce latency.

For the first time, there is an opportunity for network operators to offer OTTs what they will value most: ultra-low latency, which will translate into a premium user experience and increased revenue. This will come at a cost, as physical and virtual real estate at the edge of the network will be scarce. Net neutrality will not work at the scale of an eNodeB, as commercial law will dictate the few applications and services providers that will be able to pre-position their content.

Mobile Edge Computing provides the ability to deploy commercial-off-the-shelf (COTS) IT systems right at the edge of the cellular network, enabling ultra-low latency, geo-targeted delivery of innovative content and services. More importantly, MEC is designed to create a unique competitive advantage for network operators derived from their best assets, the network and the customers’ behaviour. This report reviews the opportunity and timeframe associated with the emergence of this nascent technology and its potential impact on mobile networks and the mobile value chain.

All you need to know about T-Mobile Binge On

Have you been wondering what is T-Mobile US doing with your video on Binge On?
Here is a small guide and analysis of the service, its technology, features and limitation.

T-Mobile announced at its Uncarrier X event on November 11 the launch of its new service Binge On. The company's CEO remarked that video is the fastest growing data service with +145% compared to 2 years ago and that consumers are increasingly watching video on mobile devices, in wireless networks and cutting the cord from their cable and satellite TV providers. Binge on was created to meet these two market trends.

I have been previewing many of the features launched with Binge on in my video monetization report and my blog posts (here and here on encryption and collaboration) over the last 4 years.


Binge On allows any new or existing subscribers with a 3GB data plan or higher to stream for free videos from a number of apps and OTT properties. Let's examine what the offer entails:

1. Subscribers with 3GB data plans and higher are automatically opted in. They can opt out at any moment and opt back in when they want. This is a simple mechanism that allows service transparency, but more importantly underpins the claim of Net Neutral service. I have pointed out for a long time that services can be managed (prioritized, throttled, barred...) as long as subscribers opt in for these. Video optimization falls squarely in that category and T-Mobile certainly heeded my advice in that area. More on this later.
2. Services streaming free in Binge on are: Crackle, DirecTV, Encore, ESPN, Fox Sports, Fox Sports GO, Go90, HBO GO, HBO NOW, Hulu, Major League Baseball, Movieplex, NBC Sports, Netflix, Showtime, Sling Box, Sling TV, Starz, T-Mobile TV, Univision Deportes, Ustream, Vessel, Vevo, VUDU.
3. You still have to register / subscribe to the individual services to be able to stream free on T-Mo network.
4. Interestingly, no Google properties (YouTube) or Facebook included yet. Discussions are apparently ongoing.
5. These OTT video services maintain their encryption, so the content and consumer interactions are safe. 
6. There were mentions of a mysterious "T-Mobile proprietary streaming technology and video optimization" that requires video service providers to integrate with T-Mobile. This is not transcoding and relies on adaptive bit rate optimization, ranging from throttling data to transrating, to manifest manipulation (ask video providers to enable un-encrypted manifest so that it can be edited and limited to 480p definition).
7. Yep, video is limited at 480p definition, which T-Mobile defines as DVD quality. It's going to look good on a smartphone, ok on a tablet and bad on anything bigger / tethered.
8. I have issue with the representation "We've optimized streaming so that you can watch 3x more video" because mostly it's: 



File size per hour of streamed video per definition

1. Inaccurate (if this is unlimited, how can unlimited be 3x what you are currently watching?); 
2. Inexact (if they are referring to the fact that a 480p file could in average be 1/3 of the size of a 1080p file, which is close enough), they are assuming wrongly that you are only watching HD 1080p video, while most of these providers rely on adaptive bit rate, therefore varying the video definition based on the networks' conditions.
3. Wrong since most people assume watching 3X more video means spending 3X the amount of time watching video, rather than 3X the file size.
4. Of bad faith, since T-Mobile limited video definition so that users wouldn't kill its network. Some product manager / marketing drone decided to turn this limitation into a feature...
9. Now in the fine prints, on the rest of the video you watch that are not part of the package, expect that "Once high-speed data allotment is reached, all usage slowed to up to 2G speeds until end of bill cycle." 2G speed? for streaming video?  like watching animated GIF? That's understandable, though, there has to be an carrot (and a stick) for providers who have not joined yet, as well as some fair usage rules for subscriber breaching their data plans - but 2G speed? come on, might as well stop the stream rather than pretend that you can stream anything on 128 kbps.
10. More difficult to justify is the mention "service might be slowed, suspended, terminated, or restricted for misuse, abnormal use, interference with our network or ability to provide quality service to other users". So basically, there is no service level agreement for minimum quality of service. Ideally, if a video service is limited to 480p (when you are paying Netflix, etc. for 1080p or even 4K, let's remember), one should expect either guaranteed level or a minimum quality floor?
11. Another vague and spurious rule is "Customers who use an extremely high amount of data in a bill cycle will have their data usage de-prioritized compared to other customers for that bill cycle at locations and times when competing network demands occur, resulting in relatively slower speeds. " This is not only vague and subjective, it will vary over time depending on location (with a 145% growth in 2 years, an abnormal video user today will be average tomorrow). More importantly, it goes against some of the net neutrality rules. 

T-Mobile innovates again with a truly new approach to video services. Unlike Google's project Fi, it is a bold strategy, relying on video optimization to provide a quality ceiling, integration with OTT content providers to enable the limitation but more importantly an endorsement of the service. It is likely that the service will be popular in terms of adoption and usage, it will be interesting to see, as its user base grows how user experience will evolve over time. At least, there is now a fixed ceiling for video, which will allow for network capacity planning, removing variability. What is the most remarkable in the launch, from my perspective is the desire to innovate and to take risks by launching a new service, even if there are some limitations (video definition, providers...) and risks (net neutrality).

Want to know more about how to launch a service like Binge on? What technology, vendors, price models...? You can find more in my video monetization reports and workshop.

Building a mobile video delivery network? part III

Part I
Part II

Content providers and aggregators have obviously an interest (and in some case a legal obligation) to control the quality of the content they sell to a consumer. Without owning networks outright to deliver the content, they rent capacity, under specific service level agreements to deliver this content with managed Quality of Experience. When the content is delivered over the “free” internet or a mobile network, there is no QoE guarantee. As a result, content providers and aggregators tend to “push the envelope” and grab as much network resource as available to deliver a video stream, in an effort to equate speed and capacity to consumer QoE. This might work on fixed networks, but in mobile, where capacity is limited and variable, it causes congestion.

Obviously, delegating the selection of the quality of the content to a device should be a smart move. Since the content is played on the device, this is where there is the clearest understanding of instantaneous network capacity or congestion. Unfortunately, certain handset vendors, particularly those coming from the consumer electronics world do not have enough experience in wireless IP for efficient video delivery. Some devices for instance will go and grab the highest capacity available on the network, irrespective of the encoding of the video requested. So, for instance if the capacity at connection is 2Mbps and the video is encoded at 1Mbps, it will be downloaded at twice its rate. That is not a problem when the network is available, but as congestion creeps in, this behaviour snowballs and compounds congestion in embattled networks.

As more and more device manufacturers coming from the computing world (as opposed to mobile) enter the market with smartphones and tablets, we see wide variations in the implementation of their native video player.

Consequently, operators are looking at way to control video traffic as a means to maybe be able to monetize it differently in the future. Control can take many different aspects and rely on many technologies ranging from relatively passive to increasingly obtrusive and aggressive.

In any case, the rationale for implementing video control technologies in mobile networks goes beyond the research for the best delivery model. At this point in time, the actors have equal footing and equal interest in preserving users QoE. They have elected to try and take control of the value chain independently. This has resulted in a variety of low level battles, where each side is trying to assert control over the others.

The proofs of these battles are multiple:

• Google tries to impose VP9 as an alternative to H.265 /HEVC: While the internet giant rationale to provide a royalty-free codec as the next high efficiency codec seems innocuous to some, it is a means to control the value chain. If content providers start to use VP9 instead of H.265, Google will have the means to durably influence the roadmap to deliver video content over the internet.
• Orange extracts peering fees from Google / YouTube in Africa: Orange as a dominant position for mobile networks and backhaul in Africa and has been able to force Google to the negotiating table and get them to pay peering fee for delivering YouTube over wireless networks. A world’s first.
• Network operators implement video optimization technologies: In order to keep control of the OTT videos delivered on their networks, network operators have deployed video optimization engine to reduce the volume of traffic, to alleviate congestion or more generally to keep a firmer grip on the type of traffic transiting their networks.
• Encryption as an obfuscation mechanism: Content or protocol encryption has traditionally been a means to protect sensitive content from interception, reproduction or manipulation. There is a certain cost and latency involved in the encoding and decoding of the content, so it has remained mostly used for premium video. Lately, content providers have been experimenting with the delivery of encrypted video as a means to obfuscate the traffic and stop network operators from interfering with it.
• Net neutrality debate, when pushed by large content providers and aggregators is oftentimes a proxy for commercial battle. Th economics of the internet have evolved from browsing to streaming and video has disrupted the models significantly. The service level agreements put in place by the distribution chains (CDNs, peering points...) are somewhat inadequate for video delivery.

We could go on and on listing all the ways that content providers and network operators are probing each other’s capacity to remain in control of the user’s video experience. Ultimately, these initiatives are isolated but are signs of large market forces trying to establish dominance over each other. So far, these manoeuvres have reduced the user experience. The market will settle in a more collaborative mode undoubtedly as the current behaviour could lead to mutually assured destruction. The reality is simple. There is a huge appetite for online video. An increasing part of it takes place on mobile devices, on cellular networks. There is money to be made if there is collaboration, the size of the players is too large to establish a durable dominance without vertical integration.

Building a mobile video delivery network? part II

Part I

Frequently, in my interactions with vendors and content providers alike, the same questions are brought up. Why aren’t content providers better placed to manage the delivery of the content they own rather than network operators? Why are operators implementing transcoding technologies in their networks, when content providers and CDN have similar capabilities and a better understanding of the content they deliver? Why should operators be involved in controlling the quality of a content or service that is not on their network?

In every case, the answer is the same. It is about control. If you look at the value chain of delivering content over wireless networks, it is clear that technology abounds when it comes to controlling the content, its quality, its delivery and its associated services at the device, in the network, in the CDN and at the content provider. Why are all the actors in the delivery chain seemingly hell-bent on overstepping each other’s boundary and wrestle each other’s capacity to influence content delivery?

To answer this question, you need to understand how content used to be sold in mobile networks. Until fairly recently, the only use case of “successful” content being sold on mobile networks was ringtones. In order to personalize your phone, one use to go to their operator’s portal and buy a ringtone to download to one’s device. The ringtones were sold by the operator, charged on one’s wireless bill, provided by an aggregator, usually white-labelled who would receive a percentage of the sale, and then kick back another percentage of their share to the content provider itself who created the ringtone.

That model was cherished by network operators. They had full control of the experience, selecting themselves the content aggregator, in some case the content providers, negotiating the rates from a position of power, and selling to the customer under their brand, in their branded environment, on their bills.

This is a long way from today’s OTT, where content and services are often free for the user, monetized through advertisement or other transparent scheme, with content selected by the user, purchased or sourced directly on the content provider’s site, with no other involvement from the network operator than the delivery itself. These OTT (Over-The-Top) services threaten the network operator’s business model. Voice and messaging are the traditional revenue makers fro operators and are decreasing year over year in revenue, while increasing on volume due to the fierce competition of OTT providers. These services remain hugely profitable for networks and technology has allowed great scalability with small costs increments, promising healthy margins for a long while. Roaming prices are still in many cases extortionate. While some legislators are trying to get users fairer prices, it will be a long time before they disappear altogether.

Data, in comparison, is still uncharted territory. Until recently, the service was not really monetized, used as an appeal product to entice consumers to sign for longer term contracts. This is why so many operators initially launched unlimited data services. 3G, and more recently LTE have seen the latest examples of operators subsidizing data services for customer acquisition.

The growth of video in mobile networks is upsetting this balance though. The unpredictability and natural propensity of video to expand and monopolize network resources makes it a more visible and urgent threat as an OTT service. Data networks have greatly evolved with LTE with better capacity, speed and latency than 3G.  But the price paid to increase network capacity is still in the order of billions of dollars, when one has to take into account spectrum, licenses, real estate and deployment. Unfortunately, the growth in video in term of users, usage and quality outstrips the progress made in transport technology. As a result, when network operators look at video compounded annual growth rate exceeding 70%, they realize that serving the demand will continue to be a costly proposition if they are not able to control or monetize it. This is the crux of the issue. Video, as part of data is not today charged in a very sophisticated manner. It is either sold as unlimited, as a bucket of usage and/or speed. The price of data delivery today will not cover the cost of upgrading network capacity in the future if network operators cannot control better video traffic.

Additionally, both content providers and device vendors have diametrically opposed attitude in this equation. Device manufacturers, mobile network operators and content providers all want to deliver the best user experience for the consumer. The lack of cooperation between the protagonists in the value chain results paradoxically in an overall reduced user experience.

Mobile video 2015 executive summary

As is now traditional, I return from Mobile World Congress with a head full of ideas and views on market evolution, fueled by dozens of meetings and impromptu discussions. The 2015 mobile video monetization report, now in its fourth year, reflects the trends and my analysis of the mobile video market, its growth, opportunities and challenges.

Here is the executive summary from the report to be released this month.

2014 has been a contrasted year for deployments of video monetization platforms in mobile networks. The market in deployments and value has grown, but there has been an unease that has gripped some of its protagonists, forcing exits and pivot strategies, while players with new value proposition have emerged. This transition year is due to several factors.

On the growth front, we have seen the emergence of MVNOs and interconnect / clearing houses as a buying target, together with the natural turnover and replacement of now aging and fully amortized platforms deployed 5/6 years ago.

Additionally, the market leaders upgrade strategies have naturally also created some space for challengers and new entrants. Mature markets have seen mostly replacements and MVNO green field deployments, while emerging markets have added new units in markets that are either too early for 3G or already saturated in 4G. Volume growth has been particularly sustained in Eastern / Central Europe, North Africa, Middle East and South East Asia.

On the other hand, the emergence and growth of traffic encryption, coupled with persisting legal and regulatory threat surrounding the net neutrality debate has cooled down, delayed and in some cases shut down optimization projects as operators are trying to rethink their options. Western Europe and North America have seen a marked slowdown, while South America is just about starting to show interest.

The value of the deals has been in line with last year, after sharp erosions due to the competitive environment. The leading vendors have consolidated their approach, taken on new strategies and overall capitalizing on installed base, while many new deals have gone to new entrants and market challengers.

2014 has also been the first year of a commercial public cloud deployment, which should be followed soon by others. Network function virtualization has captivated many network operators’ imagination and science experiment budget, which has prompted the emergence of the notion of traffic classification and management as a service.

Video streaming, specifically, has shown great growth in 2014, consolidating its place as the fastest growing service in mobile networks and digital content altogether. 2014 and early 2015 have seen many acquisitions of video streaming, packaging, encoding technology company. What is new however, is that a good portion of these acquisitions were not performed by other technology companies but by OTT such as FaceBook and Twitter.

Mobile video advertising is starting to become a “thing” again, as investments, inventory and views show triple digit growth. The trend shows mobile video advertising becoming possibly the single largest revenue opportunity for mobile operators within a 5 years timeframe, but its implementation demands a change in attitude, organization, approach that is alien to most operators DNA. The transformation, akin to a heart transplant will probably leave many dead on the operating table before the graft takes on and the technique is refined, but they might not have much choice, looking at Google’ and Facebook’s announcements at Mobile World Congress 2015.

Will new technologies such as LTE Multicast, for instance, which are due to make their start in earnest this year, promising quality assured HD content, via streaming or download, be able to unlock the value chain? 

The mobile industry is embattled and find itself looking at some great threats to its business model, as the saying goes, those who will survive are not necessarily the strongest, but rather those who will adapt the fastest.

2014 review and 2015 predictions

Last year, around this time, I had made some predictions for 2014. Let's have a look at how I fared and I'll risk some opinions for 2015.
Before predictions, though, new year, new web site, check it out at coreanalysis.ca

Content providers, creators, aggregators:

"OTT video content providers are reaching a stage of maturity where content creation / acquisition was the key in the first phase, followed by subscriber acquisition. As they reach critical mass, the game will change and they will need to simultaneously maximize monetization options by segmenting their user base into new price plans and find a way to unlock value in the mobile market." 
On that front, content creation / acquisition still remains a key focus of large video OTT (See Netflix' launch of Marco Polo for $90m). Netflix has reported  $8.9B of content obligations as of September 2014. On the monetization, front, we have also seen signs of maturity, with YouTube experimenting on new premium channels and Netflix charging premium for 4K streaming. HBO has started to break out of its payTV shell and has signed deals to be delivered as online broadband only subscriptions, without cable/satellite.
Netflix has signed a variety of deals with european MSOs and broadband operators as they launched there in 2014.
While many OTT, particularly social networks and radio/ audio streaming have collaborated and signed deals with mobile network operators, we are seeing also a tendency to increasingly encrypt and obfuscate online services to avoid network operators meddling in content delivery.
Both trends will likely accelerate in 2015, with more deals being struck between OTT and network operators for subscription-based zero-rated data services. We will also see in mobile networks the proportion of encrypted data traffic raise from the low 10's to at least 30% of the overall traffic.

Wholesaler or Value provider?

The discussion about the place of the network operator and MSO in content and service delivery is still very much active. We have seen, late last year, the latest net neutrality sword rattling from network operators and OTT alike, with even politicians entering the fray and trying to influence the regulatory debates. This will likely not be setted in 2015. As a result, we will see both more cooperation and more competition, with integrated offering (OTT could go full MVNO soon) and encrypted, obfuscated traffic on the rise. We will probably also see the first lawsuits from OTT to carriers with respect to traffic mediation, optimization and management. This adversarial climate will delay further monetization plays relying on mobile advertisement. Only integrated offering between OTT and carriers will be able to avail from this revenue source.

Some operators will step away from the value provider strategy and will embrace wholesale models, trying to sign as many MVNO and OTT as possible, focusing on network excellence. These strategies will fail as the price per byte will decline inexorably, unable to sustain a business model where more capacity requires more investment for diminishing returns.

Some operators will seek to actively manage and mediate the traffic transiting through their networks and will implement HTTPS / SPDY proxy to decrypt and optimize encrypted traffic, wherever legislation is more supple.

Mobile Networks

CAPEX will be on the rise overall with heterogeneous networks and LTE roll-out taking the lion share of investments. 

LTE networks will show signs of weakness in term of peak traffic handling mainly due to video and audio streaming and some networks will accelerate LTE-A investments or aggressively curb traffic through data caps, throttles and onerous pricing strategies.

SDN will continue its progress as a back-office and lab technology in mobile networks but its incapacity to provide reliable, secure, scalable and manageable network capability will prevent it to make a strong commercial debut in wireless networks. 2018 is the likeliest time frame.

NFV will show strong progress and first commercial deployments in wireless networks, but in vertical, proprietary fashion, with legacy functions (DPI, EPC, IMS...) translated in a virtualized environment in a mono vendor approach. We will see also micro deployments in emerging markets where cost of ownership takes precedence over performance or reliability. APAC will also see some commercial deployments in large networks (Japan, Korea) in fairly proprietary implementations.

Orchestration and integration with SDN will be the key investments in the standardization community. The timeframe for mass market interoperable multi vendor commercial deployment is likely 2020.

To conclude this post, my last prediction is that someone will likely be bludgeoned to death with their own selfie stick, I'll put my money on Mobile World Congress 2015 as a likely venue, where I am sure countless companies will give them away, to the collective exasperation and eye-rolling of the Barcelona population.

That's all folks, see you soon at one of the 2015 shows.

Building a Mobile Video Delivery Network?

Part II
Part III
In 2014, mobile video is a fact of life. It has taken nearly 5 years for the service to transition from novelty to a growing habit that is quickly becoming an everyday occurrence in mature markets. Nearly a quarter of YouTube and Netflix views nowadays are on a tablet or a smartphone. Of course, users predominantly still stream over wifi, but as LTE slowly progresses across markets, users start to take for granted the network capacity to deliver video.

Already, LTE networks start to show signs of weariness as video threatens the infrastructure and the business model of mobile content delivery.

For those who are familiar with my blog, I have been complaining for a while that mobile carriers are not doing enough to make their networks more video capable. You would think that with anywhere between 40 to 70% of the data traffic, video would warrant more interest and effort than what we see today. Many studies show that although video is the dominant and fastest growing application in mobile, its service quality is mediocre. Conviva claims that about 15% of videos in wifi and cellular networks never actually start, while Skyfire shows that close to 50% of consumers experience video problems “often” or “all the time” in the US.

Of course, part of the issue here is that 85% of these videos streamed over mobile networks are from OTT properties. In many cases, network operators and content providers are at odd when it comes to managing the service. Mobile carriers essentially see these services as non-paying passengers on their transport networks and are either looking at encouraging the offloading of this traffic or to at the very least limit the space that they occupy, particularly in congested areas.

Content providers are predominantly designing services for the internet. It just happens that some of its delivery (increasingly) occurs on mobile devices in cellular networks. The technology and economics of their service is based on the internet model, where bandwidth is plentiful and they are already paying for reach (CDNs) and access (transit and peering). Paying wireless carriers for essentially the same services was  a no-starter until a significant part of their customer based started accessing their services wirelessly on smartphones and tablets. As multiscreen and mobile becomes an important use case, content providers are downloading a streaming player into your devices when you start playing web video on your browser or are enjoining you to use their apps. These are defensive moves aimed at extending the control of the user experience. The reality today is that there are too many players with diverging controlling interests in the delivery of mobile video to make it a good experience. Soon, one will hope, the actors will recognise that no one can control the mobile delivery service end-to-end, forcing cooperation. We are starting to see signs of this with announcements such as Vodafone UK and Netflix exclusive partnership.

We are now at the crossroads where the penetration of mobile devices, the ubiquitous access to fixed and mobile broadband have redefined how video is produced and watched, but not yet how it is delivered.

What would be the attributes of a Video Delivery Network?

Well, ideally it would be designed for both mobile and fixed IP delivery. If we look first at the services it will enable and the business models it is likely to foster, such a network will need to be able to accommodate both live linear video, as well as on demand streaming. It will have to be designed to unlock advertising in a contextually relevant manner and provide frictionless compensation and service level agreement (SLA) management between the actors. Furthermore, models such as pay per use, duration passes, service vouchers, gift cards and sponsored usage will also have to be built in. The corollary from these assumptions is that, in essence, a collaborative service management method is necessary between consumers, announcers, networks and content providers.

What would this network look like, from a technology standpoint?

We have some examples today of partial implementation of these services, in a disjointed, vertical manner. Netflix has transitioned from using commercial CDNs to implementing their Open Connect network. Google Global Cache is extending the content provider’s reach into carrier networks. If we draw this trend to its logical conclusion, a well managed video network will need to have end-to-end managed quality of experience. The only way to achieve this is to integrate player/app/browser/user experience with Radio Access Network (RAN) congestion management, which itself provides explicit data to the Core network for active traffic management that is policy-managed by a negotiated SLA/QoE between content provider, announcer and network. Effectively, this would force network operators to open APIs for announcers and content providers to control the delivery of the content from a quality/speed standpoint. This is the carrier’s contribution to the bargain. The resulting quality of delivery for premium services will be a negotiation in real-time between the demand (content provider and announcer) and the supply (network conditions) at this point in time, for that service, for this user in a specific location. The quality rating at the end or throughout the session should be used as a metric in the calculation of the transfer price of the service. All this can be arbitrated and managed by SLA as it is the case on the internet today.

For freemium, free to air and advertising based services, privacy and regulatory provisions would warrant that each party involved in the ad targeting would retain the use of the data they collect and provide a geographic / demographic / contextual abstraction layer to determine the ad selection. As a result, carriers will need to fundamentally change the way data is collected and analysed, transitioning from operational to marketing view if they wish to monetize the user segmentation. The ad insertion itself should occur as close to the user as possible to enhance contextual and individual granularity. This requirement implies that for encrypted traffic, encryption as well occurs at the point of ad insertion and not before to enable targeting. Technologically, the delivery method should rely on adaptive bit rate DASH to make best use of the network resources, but the encoding should occur in the carrier’s network, with mezzanine files pre-cached and controlled by the content providers.

That ad insertion, encoding and encryption location has been a moving target in the past years because it is where the control point is from a content provider’s perspective. They have allowed CDNs in the past to perform these tasks because they had no other choice, they will need to allow carriers to perform the same to unlock this jigsaw. This is the content provider’s contribution to the bargain.

Inevitably, announcers will have to create an inventory of ads that are mobile specific, not only targeted at devices but at contexts of mobility. Measured quality, high engagement rate and hyper targeted segmentation should help raise CPM in that market.

At last, at the device and radio level, there is no reason that content that is popular would have to go all the way to the content provider’s origin servers to be delivered. An intelligent video service would be able to detect if the service requested is live and linear and watched by others in the area and switch to a broadcast delivery. If the service is on demand, but the content exists closer to the user’s location that is where it should be served from, being from someone else’s device, a network PVR or a cache in the RAN or the core network. There is where network virtualization will take its full capacity, when virtualized storage and networking function can be pushed down to the device level, peer-to-peer transmission will become possible.

What these trends indicate is that a video delivery network will need to be vertically integrated. The boundaries between devices, radio, core and content provider networks will subside, with automation, programmability and virtualization enabling the efficient delivery and management of highly reliable and profitable video service. These questions and more are reviewed in details in my latest reports "Video Monetization and Optimization 2014" and "SDN - NFV in Wireless Networks".

Originally published in The Mobile Network in September 2014.