Readout: Ericsson's Mobility Report June 2024

 

It has been a few years now, since Ericsson has taken to provide a yearly report on their view of the evolution of connectivity. Alike Cisco's annual internet report, it provides interesting data points on telecom technology and services' maturity, but focused on cellular technology, lately embracing fixed-wireless access and non terrestrial networks as well. 

In this year's edition, a few elements caught my attention:

• Devices supporting network slicing are few and far in-between. Only iOS 17 and Android 13 support some capabilities to indicate slicing parameters to their underlying applications. These devices are the higher end latest smartphones, so it is no wonder that 5G Stand Alone is late in delivering on its promises, if end to end slicing is only possible for a small fraction of customers. It is still possible to deploy slicing without device support, but there are limitations, most notably slicing per content / service, while slicing per device or subscriber profile is possible.
  
  
• RedCap (5G reduced Capability) for IoT, wearables, sensors, etc... is making its appearance on the networks, mostly as demo and trials at this stage. The first devices are unlikely to emerge in mass market availability until end of next year.
  
  
• Unsurprisingly, mobile data traffic is still growing, albeit at a lower rate than previously reported with a 25% yearly growth rate or just over 6% quarterly. The growth is mostly due to smartphones and 5G penetration and video consumption, accounting for about 73% of the traffic. This traffic data includes Fixed Wireless Access, although it is not broken down. The rollout of 5G, particularly in mid-band, together with carrier aggregation has allowed mobile network operators to efficiently compete with fixed broadband operators with FWA. FWA's growth, in my mind is the first successful application of 5G as a differentiated connectivity product. As devices and modems supporting slicing appear, more sophisticated connectivity and pricing models can be implemented. FWA price packages differ markedly from mobile data plans. The former are mostly speed based, emulating cable and fibre offering, whereas the latter are usually all you can eat best effort connectivity.
  
  
• Where the traffic growth projections become murky, is with the impact of XR services. Mixed, augmented, virtual reality services haven't really taken off yet, but their possible impact on traffic mix and network load can be immense. XR requires a number of technologies to reach maturity at the same time (bendable / transparent screens, low power, portable, heat efficient batteries, low latency / high compute on device / at the edge, high down/ up link capabilities, deterministic mash latency over an area...) to reach mass market and we are still some ways away from it in my opinion.
  
  
• Differential connectivity for cellular services is a long standing subject of interest of mine. My opinion remains the same: "The promise and business case of 5G was supposed to revolve around new connectivity services. Until now, essentially, whether you have a smartphone, a tablet, a laptop, a connected car, an industrial robot and whether you are a working from home or road warrior professional, all connectivity products are really the same. The only variable are the price and coverage.
  
  5G was supposed to offer connectivity products that could be adapted to different device types, verticals and industries, geographies, vehicles, drones,... The 5G business case hinges on enterprises, verticals and government adoption and willingness to pay for enhanced connectivity services. By and large, this hasn't happened yet. There are several reasons for this, the main one being that to enable these, a network overall is necessary.
  
  First, a service-based architecture is necessary, comprising 5G Stand Alone, Telco cloud and Multi-Access Edge Computing (MEC), Service Management and Orchestration are necessary. Then, cloud-native RAN, either cloud RAN or Open RAN (but particularly the RAN Intelligent Controllers - RICs) would be useful. All this "plumbing" to enable end to end slicing, which in turn will create the capabilities to serve distinct and configurable connectivity products.
  
  But that's not all... A second issue is that although it is accepted wisdom that slicing will create connectivity products that enterprises and governments will be ready to pay for, there is little evidence of it today. One of the key differentiators of the "real" 5G and slicing will be deterministic speed and latency. While most actors of the market are ready to recognize that in principle a controllable latency would be valuable, no one really knows the incremental value of going from variable best effort to deterministic 100, 10 or 5 millisecond latency.
  
  The last hurdle, is the realization by network operators that Mercedes, Wallmart, 3M, Airbus... have a better understanding of their connectivity needs than any carrier and that they have skilled people able to design networks and connectivity services in WAN, cloud, private and cellular networks. All they need is access and a platform with APIs. A means to discover, reserve, design connectivity services on the operator's network will be necessary and the successful operators will understand that their network skillset might be useful for consumers and small / medium enterprises, but less so for large verticals, government and companies." Ericsson is keen to promote and sell the "plumbing" to enable this vision to MNOs, but will this be sufficient to fulfill the promise?
  
  
• Network APIs are a possible first step to open up the connectivity to third parties willing to program it. Network APIs is notably absent from the report, maybe due to the fact that the company announced a second impairment charge of 1.1B$ (after a 2.9B$ initial write off) in less than a year on the 6.2B$ acquisition of Vonage.
  
  
• Private networks are another highlighted trend in the report with a convincing example of an implementation with Northstar innovation program, in collaboration with Telia and Astazero. The implementation focuses on automotive applications, from autonomous vehicle, V2X connectivity, remote control... On paper, it delivers everything operators dream about when thinking of differentiated connectivity for verticals and industries. One has to wonder how much it costs and whether it is sustainable if most of the technology is provided by a single vendor.
  
  
• Open RAN and Programmable networks is showcased in AT&T's deal that I have previously reported and commented. There is no doubt that single vendor automation, programmability and open RAN can be implemented at scale. The terms of the deal with AT&T seem to indicate that it is a great cost benefit for them. We will have to measure the benefits as the changes are being rolled out in the coming years.

2015 review and 2016 predictions

As is now customary, I try to grade what I was predicting for 2015 and see what panned out and what didn't. I'll share as well what I see for 2016.

Content providers, creators, aggregators:

"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.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." 

On that front, I think that both predictions held true. I was envisioning encryption to jump from 10 to 30% of overall data traffic and I got that wrong, at least in many mature markets, where Netflix is big in mobile, we see upwards of 50% of traffic being encrypted. I still claim some prediction here, with one of my first post indicating the encryption trend 2 years before it started in earnest.

The prediction about segmentation from pricing as OTT services mature has been also largely fulfilled, with YouTube's 4th attempt, by my count, to launch a paid service. Additionally, the trend about content aggregators investing in original content rights acquisition is accelerating with Amazon gearing up for movie theaters and Netflix outspending traditional providers such as BBC with a combined investment by both company estimated in the 9$Bn range. Soon, we are talking real money.

In 2016, we will see an acceleration of traditional digital services that were originally launched for fixed line internet transitioning to predominantly mobile or mobile only plays. Right now, 47% of Facebook users are exclusively through  mobile and account for 78% of the company's revenue. More than 50% of YouTube views are on mobile devices and the corresponding revenue growth is over 100% year on year. 49% of Netflix' 18 to 34 years old demographics watches the service on mobile devices. We have seen signs with Twitter's vine,  and Periscope as well as Spotify , MTV and Facebook that the battlefield will be on video services.

Network operators: Wholesaler or value providers?
The operators in 2016 are still as confused, as a community as in 2015. They perceive threats from each other, which causes many acquisitions, from OTTs, which causes in equal measure many partnership and ill-advised service launches and from regulatory bodies, which causes lawyers to fatten up at the net neutrality / privacy buffet.

"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 spoke about encryption, the OTT going full MVNO was somewhat fulfilled by Google's disappointing project Fi launch. On the cooperation front, we have seen a flurry of announcements, mostly centered around sponsored data or zero rated subscription services from Verizon, AT&T.

"We will probably also see the first lawsuits from OTT to carriers with respect to traffic mediation, optimization and management. " 

I got that half right. No lawsuit from content providers but heavy fines from regulators on operators who throttle, cap or prioritize content (Sprint, AT&T, ...).

As for digital service providers, network operators are gearing themselves to compete on video services with services such as mobile TV /LTE broadcast (AT&T, EE, Telekom Slovenje, Vodafone), events streaming (China Telecom, ), sponsored data / zero rated subscription services (Verizon, T-mobile Binge On, Sprint, AT&T, Telefonica, ...).

"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."

I got that dead wrong. Despite interest and trials, operators are not ready to go into open battle with OTT just yet. Decrypting encrypted traffic is certainly illegal in many countries
or at the very least hostile and seems to be only expected from government agencies...

Mobile Networks Technology

"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."

Check and check.

"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."

I maintain the view that SDN is still too immature for mass deployment in mobile networks, although we have seen encouraging trials moving from lab to commercial, we are still a long way from a business case and technology maturity standpoint before we see a mobile network core or RAN running exclusively or mostly on SDN.

"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 have seen many examples of that this year with various levels of industry and standard support from Connectem, Affirmed Networks, Ericsson, Cisco and Huawei.

"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."

Orchestration, MANO has certainly driven many initiatives (Telefonica OpenMANO) and acquisitions (Ciena acquired Cyan, for example) and remains the key challenge in 2016 and beyond. SDN NFV will not take off unless there is a programmatic framework to link customer facing services to internal services, to functions, to virtual resources to hardware resources in a multi-vendor fashion. I still maintain 2020 as the probable target for this.

In 2016, the new bit of technology I will investigate is Mobile Edge Computing, the capacity to deploy COTS in the radio network, unlocking virtualized services to be positioned at the network's edge, enabling IoT, automotive, Augmented Reality or Virtual Reality services that require minimal latency to access content even faster.

In conclusion, 2016 shows more than ever signs that the house of cards is about to collapse. Data traffic is increasing fast, video is now dominating every networks and it is just starting. With 4K and then 8k around the corner, without talking about virtual or augmented reality, many of the players in the value chain understand that video is going the next few years' battlefield in mobile, OTT and cloud services. This is why we are seeing so much concentration and pivot strategies in the field. 
What is new is the fact that if mobile was an ongoing concern or barely on the radar for many so-called OTT, it has now emerged as the predominant if not exclusive market segment in revenue. 
This means that more pressure will rain on network operators to offer bandwidth and speed. My reports and workshops show that mobile advertising is not growing fast enough in comparison to the subscribers eyeball moving to mobile screens. This is mostly due to the fact that video services in mobile networks are a pretty low quality service, which will get worse as more subscribers transition to LTE. The key to unlock the value chain will be collaboration between operators and OTT and that will only happen if/when a profitable business model and apportioning of costs is worked out.

At last, my prediction about selfie kills seem to unfortunately have been fulfilled with selfies now killing more people than shark attacks. Inevitably, we have to conclude that in 2016, commercial drones and hoverboards will kill more people than selfies...

That's all folks, see you at MWC next month.

LTE World Summit 2014

This year's 10th edition of the conference, seems to have found a new level of maturity. While VoLTE, RCS, IMS are still subjects of interest, we seem to be past the hype at last (see last year), with a more pragmatic outlook towards implementation and monetization. 

I was happy to see that most operators are now recognizing the importance of managing video experience for monetization. Du UAE's VP of Marketing, Vikram Chadha seems to get it:

"We are transitioning our pricing strategy from bundles and metering to services. We are introducing email, social media, enterprise packages and are looking at separating video from data as a LTE monetization strategy."

As a result, the keynotes were more prosaic than in the past editions, focusing on cost of spectrum acquisitions and regulatory pressure in the European Union preventing operators to mount any defensible position against the OTT assault on their networks. Much of the agenda of the show focused on pragmatic subjects such as roaming, pricing, policy management, heterogeneous networks and wifi/cellular handover. Nothing obviously earth shattering on these subjects, but steady progress, as the technologies transition from lab to commercial trials and deployment. 

As an example, there was a great presentation by Bouygues Telecom's EVP of Strategy Frederic Ruciak highlighting the company's strategy for the launch of LTE in France, A very competitive market, and how the company was able to achieve the number one spot in LTE market share, despite being the "challenger" number 3 in 2 and 3G.

The next buzzword on the hype cycle to point its head is NFV with many operator CTOs publicly hailing the new technology as the magic bullet that will allow them to "launch services in days or weeks rather than years". I am getting quite tired of hearing that rationalization as an excuse for the multimillion investments made in this space, especially when no one seems to know what these new services will be. Right now, the only arguable benefit is on capex cost containment and I have seen little evidence that it will pass this stage in the mid term. Like the teenage sex joke, no one seems to know what it is, but everybody claims to be doing it. 

There is still much to be resolved on this matter and that discussion will continue for some time. The interesting new positioning I heard at the show is appliance vendors referring to their offering as PNF (as in physical) in contrast and as enablers for VNF. Although it sounds like a marketing trick, it makes a lot of sense for vendors to illustrate how NFV inserts itself in a legacy network, leading inevitably to a hybrid network architecture. 

The consensus here seems to be that there are two prevailing strategies for introduction of virtualized network functions. 

1. The first one, "cap and grow" sees existing infrastructure equipments being capped beyond a certain capacity and little by little complemented by virtualized functions, allowing incremental traffic to find its way on the virtualized infrastructure. A variant might be "cap and burst" where a function subject to bursts traffic is dimensioned on physical assets to the mean peak traffic and all exceeding traffic is diverted to a virtualized function. 
2. The second seems to favour the creation of vertical virtualized networks for market or traffic segments that are greenfield. M2M and VoLTE being the most cited examples. 

Both strategies have advantages and flaws that I am exploring in my upcoming report on "NFV & virtualization in mobile networks 2014". Contact me for more information.

All bytes are not created equal...

Recent discussions with a number of my clients have brought to light a fundamental misconception. Mobile video is not data. It is not a different use case of data or a particular form of data, it is just a different service. The sooner network operators will understand that they cannot count, measure, control video the same way as browsing data, the sooner they will have a chance to integrate the value chain of delivering video.

Deep packet inspection engines count bytes, categorize traffic per protocol, bearer, URL, throttle and prioritize data flow based on rules that are video-myopic. Their concern is of Quality of Service (QoS) not Quality of Experience (QoE). Policy and charging engines decide meter and limit traffic in real-time based on the incomplete picture painted by DPIs and other network elements.

Not understanding whether traffic is video (or assuming it is video just based on the URL) can prove itself catastrophic for the user experience and their bill. How can traffic management engine instantiate video charging and prioritization rules if they cannot differentiate between download, progressive download, adaptive bit rate? How can they decide what is the appropriate bandwidth for a service if they do not understand what is the encoding of the video, what are the available bit rates, if it is HD or SD, what is the user expectation?

Content providers naturally push a content of the highest quality that the network can afford, smartphone and tablets try and grab as much network capacity available at the establishment of a session to guarantee user experience, often at the detriment of other connections / devices. It is wrong to assume that the quality of experience in video is the result of a harmonious negotiation between content, device and networks.
It is actually quite the opposite, each party pulling in their direction with conflicting priorities.
User experience suffers as a result and we have started to see instances of users complaining or churning due to bad video experience.

All bytes are not created equal. Video weighs heavier and has a larger emotional attachment than email or browsing services when it comes to the user's experience of a network's quality. This is one of the subjects I will be presenting at Informa's Mobile Video Global Summit in Berlin, next week.

How to monetize mobile video part II

These posts are excerpts from my article in Mobile Europe from October 2012.

The Age Of Video: How Mobile Networks Must Evolve

In 3G, mobile network operators find themselves in a situation where their core network is composed of many complex elements (GGSN, EPC, browsing gateways, proxies, DPI, PCRF…) that are extremely specialized but have been designed with transactional data in mind. Radio access is a scarce resource, with many operators battling with their regulators to obtain more spectrum. The current model to purchase capacity, based on purchasing more base stations, densifying the network is finding its limits. Costs for network build up are even expected to exceed data revenues in the coming years.

On the technical front, some operators are hitting the Shannon’s law, the theoretical limit for spectrum efficiency. Diminishing returns are the rule rather than the exception as the RAN (Radio Access Network) becomes denser for the same available spectrum. Noise and interferences increase.

On the financial front, should an operator follow the demand, it would have to double its mobile data capacity on a yearly basis. The projected revenue increase for data services shows only a CAGR of 20% through 2015. How can operators keep running their business profitably? 

Operationally, doubling capacity every year seems impossible for most networks who look at 3 to 5 years roll out plans. A change of paradigm is necessary.

 Solutions exist and start to emerge. Upgrade to HSPA +, LTE, use smaller cells, changing drastically the pricing structure of the video and social services, network and video optimization, offload part of the traffic to wifi, implement adaptive bit rate, optimize the radio link, cache, use CDNs, imagine new business models with content providers, device manufacturers and operators…

Detect

The main issue is one of network intelligence. Mobile network operators want their network utilization optimized, not minimized. Traffic patterns need to be collected, analyzed, represented so that data and particularly video can be projected, but not at the country, multi-year level as of today. It is necessary to build granular network planning capacity per sector, cell at RAN, Core and Backhaul levels with tools that are video aware. Current DPI and RAN monitoring tools cannot detect video efficiently and analyze it deeply enough to allow for pattern recognition. Additionally, it is necessary to be able to isolate, follow and act on individual video streams on a per subscriber, per service, per property, per CDN level, not simply at the protocol level.

Current mobile network analytics capabilities are mostly inherited from 3G. DPI and traffic management engines rely mostly on protocol analysis and packet categorization to perform their classification and reporting. Unfortunately, in the case of video, this is insufficient. Video takes many forms in mobile networks and is delivered over many protocols (RTSP, RTMP, HTTP, MPEG2TS…). Recognizing these protocols is not enough to be able to perform the necessary next steps. Increasingly, video traffic is delivered over HTTP progressive download. Most current analytics capabilities cannot recognize video as a traffic type today. They rely on url recognition rather than traffic analysis. This leads to issues: how do you differentiate when a user is browsing between YouTube pages from when he is watching a video? How do you discriminate embedded videos in pages? How do you recognize You Tube embedded videos in Facebook? How do you know whether a video is an advertisement or a main programming? How do you know whether a video should be delivered in HD or lower resolution?

It is necessary, in order to categorize and manage video accurately to recognize the video protocol, container, codec, encoding rate, resolution, duration, origin at the minimum to be able to perform pattern recognition.

Measure Experience, not Speed or Size

The next necessary step after identifying and indexing the video traffic is the capacity to grade it from a quality standpoint. As video quality becomes synonymous to network quality in viewers’ mind, mobile network operators must be able to measure and control video quality. Current capabilities in this space are focused on measuring network speed and content size and inferring user satisfaction. This is inadequate

Any hope of monetizing mobile video for mobile network operators beyond byte accounting relies on being able to reliably grade video content in term of quality. This quality measurement is the cornerstone to provide subscribers with the assurance that the content they view is conform to the level of quality they are entitled to. It is also necessary for network operators to establish baseline with content providers and aggregators who view content quality as one of the main elements of pricing.

A uniform Quality of Experience (QoE) measurement standard is necessary for the industry to progress. Today, there is no valid QoE metric for mobile networks, leaving mobile operators relying on sparse proprietary tools, often derived or created for broadcast and professional video, wholly inadequate for mobile networks.  Mobile network operators must be able to measure the QoE per video, subscriber, session, sector, cell, origin, CDN if they want to create intelligent charging models.

Analyze, Segment Consumers and Traffic

Mobile network operators have been segmenting efficiently their customer base, building packages, bundles and price plans adapted to their targets. In the era of video, it is not enough.

Once traffic is identified, indexed, recognized, it is important to segment the population and usage. Is video traffic mostly from premium content providers and aggregators or from free user generated sites? Are videos watched mostly long form or short form? Are they watched on tablets or smartphones? Are they very viral and watched many times or are consumers more following the long tail? All these data and many others are necessary to understand the nature of subscribers’ consumption and will dictate the solutions that are most appropriate. This is a crucial step to be able to control the video traffic.

Control, Manage

Once video traffic is correctly identified and indexed, it becomes possible to manage it. It is a controversial topic as net neutrality as a concept is far from being settled, at least in the mobile world. My view is that in a model were scarcity (spectrum, bandwidth) and costs are borne by one player (operators) while revenue and demand are borne by others (content providers and subscribers), net neutrality is impractical and anti-competitive. Unlike in fixed network, where quasi-unlimited capacity and low entry costs allow easy introduction of content and services, mobile networks’ cost structures and business models are managed systems where demand outgrows capacity and therefore negate equal access to resources. For instance, no one is talking about net neutrality in the context of television.  I believe that operators will be able to discriminate traffic and offer models based on subscribers and traffic differentiation, many already can. It is just a recognition that today, with current setup, traffic gets degraded naturally as demand grows and DPI and traffic management engine are already providing means to shape and direct traffic to everyone’s best interest. No one could think of networks where P2P file sharing traffic could go unchecked and monopolize the network capacity.

Additionally, all videos are not created equal. There are different definitions, sizes, encoding rates. There are different qualities. Some are produced professionally, with big budgets, some are user generated. Some are live, some are file based. Some are downloaded, some are streamed. Some are premium, some are sponsored, some are freemium, some are free… Videos in their diversity bear the key to monetization.

The diversity of videos and their mode of consumption (some prefer to watch HD content in the highest quality, and will prefer download over streaming, others prefer a video that runs uninterrupted, with small load time even with a lesser quality…) is the key to monetization.

Monetize

Mobile network operators must be able to act based on video and subscribers attribute and influence the users’ experience. Being able to divert traffic to other bearers (LTE, Wifi…), to adjust a video quality on the fly are important steps towards creating class of services, not only amongst subscribers but also between content providers.

It is important as well to enable subscribers to select specific quality levels on the fly and to develop the charging tools to provide instant QoE upgrades.

With the capacity to detect, measure, analyze, segment, control and manage, operators can then monetize video. The steps highlighted here provide means for operators to create sophisticated charging models, whereby subscribers, content providers and aggregators are now included in a virtuous value circle.

Operators should explore creating different quality threshold for the video content that transits through their network. It becomes a means to charge subscribers and / or content providers for premium guaranteed quality.

How to monetize mobile video part I

These posts are excerpts from my article in Mobile Europe from October 2012.

Video is a global phenomenon in mobile networks. In less than 3 years, it has exploded, from a marginal use case to dominating over 50% of mobile traffic in 2012.

Mobile networks until 3G, were designed and deployed predominantly for transactional data. Messaging, email, browsing are fairly low impact and lightweight in term of payload and only necessitate speeds compatible with UMTS. Video brings a new element to the equation. Users rarely complain if their text or email arrives late, in fact, they rarely notice. Video provides an immediate feedback. Consumers demand quality and are increasingly assimilating the network’s quality to the video quality.

With the wide implementation of HSPA (+) and the first LTE deployments, together with availability of new attractive smartphones, tablets and ultra book, it has become clear that today’s networks and price structure are ill-prepared to meet these new challenges.

From value chain to value circles: the operators’ broken business model

One of the main reasons why the current models are inadequate to monetize video is the unresolved changes in the value chain. Handset and device vendors have gained much power in the balance lately and many consumers chose first a device or a brand before a network operator. In many cases, subscribers will churn from their current operator if they cannot get access to the latest device. Additionally, device vendors, with the advent of app stores have become content aggregators and content providers, replacing the operators’ traditional value added services.

In parallel, the suppliers of content and services are boldly pushing their consumer relationship to bypass traditional delivery media. These Over-The-Top (OTT) players extract more value from consumers than the access and network providers. This trend accelerates and threatens the fabric itself of the business model for delivery of mobile services.

Mobile video is already being monetized by premium content vendors and aggregators, through subscription, bundling and advertisement. Mobile network operators find themselves excluded from these new value circles overnight while forced to support the burden of the investment. In many cases, this situation is a self-inflicted wound.

Operators have competed fiercely to acquire more subscribers when markets were growing. As mature markets approach saturation, price differentiation became a strong driver to capture and retain subscribers. As 3G was being rolled out in the mid 2000’s, the mobile markets were not yet saturated and mobile network operators business model still revolved around customer acquisition. A favourite tool was the introduction of all-you-can-eat unlimited data plans to accelerate customer acquisition and capture through long term captive contracts. As a result, the customer penetration grew and accelerated with the introduction of smartphones and tablets by 2007. By 2009. Traffic started to grow exponentially.

Data traffic was growing faster than expected: AT&T data traffic grew 80x between 2007 and 2010 and is projected to grow another 10x between 2010 and 2015. Korea Telecom traffic grew 2x in 2010, Softbank (Japan) traffic doubled in 2011, Orange France traffic doubled in 2010 and doubled again in 2011. In 2012, mature operators are trying to acquire smartphone users as it is widely believed that the ARPU (Average Revenue Per User) is much higher (nearly twice) than the one of traditional feature phone subscribers.

The cost to acquire these subscribers is important, as many operators end up subsidizing the devices, and having to significantly increase their network capacity.

At the same time, it appeared that increasingly, consumer data consumptions was changing and that the “bandwidth hogs”, the top 1% that were consuming 30 to 40% of the traffic were now consuming about 20%. They were not consuming less, the average user was consuming a lot more and everyone was becoming a voracious data user.

The price plans devised to make sure the network is fully utilized are backfiring and many operators are now discontinuing all-you-can-eat data plans and subsidizing adoption of limited, capped, metered models.

While 4G is seen as a means to increase capacity, it is also a way for many operators to introduce new charging models and to depart from bundled, unlimited data plans. It is also a chance to redraw the mobile network, to accommodate what is becoming increasingly a video delivery network rather than a voice or data network.

Policy driven optimization

The video optimization market is still young, but with over 80 mobile networks deployed globally, I am officially transitioning it from emerging to growth phase in the technology life cycle matrix.


Mobile world congress brought many news in that segment, from new entrants, to networks announcements, technology launches and new partnerships. I think one of the most interesting trend is in the policy and charging management for video.


Operators understand that charging models based on pure data consumption are doomed to be hard to understand for users and to be potentially either extremely inefficient or expensive. In a world where a new iPad can consume a subscriber's data plan in a matter of hours, while the same subscriber could be watching 4 to 8 times the same amount of video on a different device, the one-size-fits-all data plan is a dangerous proposition.


While the tool set to address the issue is essentially in place, with intelligent GGSNs, EPCs, DPIs, PCRFs and video delivery and optimization engine, this collection of devices were mostly managing their portion of traffic in a very disorganized fashion. Access control at the radio and transport layer segregated from protocol and application, accounting separated from authorization and charging...
Policy control is the technology designed to unify them and since this market's inception, has been doing a good job of coordinating access control, accounting, charging, rating and permissions management for voice and data.


What about video?
The diameter Gx interface is extensible, as a semantics to convey traffic observations and decisions between one or several policy decision points and policy enforcement points. The standards allows for complex iterative challenges between end points to ascertain a session's user, its permissions and balance as he uses cellular services. 
Video was not a dominant part of the traffic when the policy frameworks were put in place, and not surprisingly, the first generation PCRFs and video optimization deployments were completely independent. Rules had to be provisioned and maintained in separate systems, because the PCRF was not video aware and the video optimization platforms were not policy aware.
This led to many issues, ranging from poor experience (DPI instructed to throttle traffic below the encoding rate of a video), bill shock (ill-informed users blow past their data allowance) to revenue leakage (poorly designed charging models not able to segregate the different HTTP traffic).


The next generation networks see a much tighter integration between policy decision and policy enforcement for the delivery of video in mobile networks. Many vendors in both segments collaborate and have moved past the pure interoperability testing to deployments in commercial networks. Unfortunately, we have not seen many proof points of these integration yet. Mostly, it is due to the fact that this is an emerging area. Operators are still trying to find the right recipe for video charging. Standards do not offer guidance for specific video-related policies. Vendors have to rely on two-ways (proprietary?) implementations.


Lately, we have seen the leaders in policy management  and video optimization collaborate much closer to offer solutions in this space. In some cases, as the result of being deployed in the same networks and being "forced" to integrate gracefully, in many cases, because the market enters a new stage of maturation. As you well know, I have been advocating a closer collaboration between DPI, policy management and video optimization for a while (here, here and here for instance). I think these are signs of market maturation that will accelerate concentration in that space. There are more and more rumors of  video optimization vendors getting closer to mature policy vendors. It is a logical conclusion for operators to get a better integrated traffic management and charging management ecosystem centered around video going forward. I am looking forward to discussing these topics and more at Policy Control 2012 in Amsterdam, April 24-25.

Mobile video optimization 2012: executive summary

As I publish my first report (description here), have an exclusive glance with the below summary.

Executive Summary

V

ideo is a global phenomenon in mobile networks. In only 3 years, it has exploded, from a marginal position (less than 10%) to dominating mobile traffic in 2012 with over 50%.

Mobile networks until now, have been designed and deployed predominantly for transactional data. Messaging, email, browsing is fairly low impact and lightweight in term of payload and only necessitated speed compatible with UMTS. Video brings a new element to the equation. Users rarely complained if their text or email arrived late, in fact, they rarely noticed. Video provides an immediate feedback. Consumers demand quality and are increasingly assimilating the network’s quality to the video quality.

With the wide implementation of HSPA (+) and the first LTE deployments, together with availability of new attractive smartphones, tablets and ultra book, it has become clear that today’s networks and price structure are ill-prepared for this new era.

Handset and device vendors have gained much power in the balance and many consumers chose first a device before a provider.

In parallel, the suppliers of content and services are boldly pushing their consumer relationship to bypass traditional delivery media. These Over-The-Top (OTT) players extract more value from consumers than the access and network providers. This trend accelerates and threatens the fabric itself of the business model for delivery of mobile services.

This is the backdrop of the state of mobile video optimization in 2012. Mobile network operators find themselves in a situation where their core network is composed of many complex elements (GGSN, EPC, browsing gateways, proxies, DPI, PCRF…) that are extremely specialized but have been designed with transactional data in mind. The price plans devised to make sure the network is fully utilized are backfiring and many carriers are discontinuing all-you-can-eat data plans and subsidizing adoption of limited, capped, metered models. Radio access is a scarce resource, with many operators battling with their regulators to obtain more spectrum. The current model to purchase capacity, based on purchasing more base stations, densifying the network is finding its limits. Costs for network build up are even expected to exceed data revenues in the coming years.

On the technical front, many operators are hitting the Shannon’s law, the theoretical limit for spectrum efficiency. Diminishing returns are the rule rather than the exception as RAN become denser for the same available spectrum. Noise and interferences increase.

On the financial front, should an operator follow the demand, it would have to double its mobile data capacity on a yearly basis. The projected revenue increase for data services shows only a CAGR of 20% through 2015. How can operators keep running their business profitably? 

Operationally, doubling capacity every year seems impossible for most networks who look at 3 to 5 years roll out plans.

 Solutions exist and start to emerge. Upgrade to HSPA +, LTE, use femto cells or pico cells, change drastically the pricing structure of the video and social services, offload part of the traffic to wifi, implement adaptive bit rate, optimize the radio link, cache, use CDNs, imagine new business models with content providers, device manufacturers and operators… All these solutions and other are examined in this report.

Video optimization has emerged as one of the technologies deployed to solve some of the issues highlighted above. Deployed in over 80 networks globally, it is a market segment that has generated $102m in 2011 and is projected to generate over $260m in 2012. While it is not the unique solution to this issue, {Core Analysis} believe that most network operators will have to deploy video optimization as a weapon in the arsenal to combat the video invasion in their network. 2009 to 2011 saw the first video optimization commercial deployments, mostly as a defensive move, to shore up embattled networks. 2012 sees video optimization as a means to complement and implement monetization strategies, based on usage metering and control, quality of experience measurement and video class of service delivery.

How to charge for video? part 3 - Pros and Cons

Here are the pros and cons from the methods identified in the previous post.

	Pros	Cons
Unlimited usage	Customer friendly, good for acquisition and churn reduction	Hard to plan network capacity
	Will be a real differentiator in the future	Expensive, if data usage continues doubling on a yearly basis
Fair Limit	Provides some capacity planning	The limit tends to change often, as the ratio of abuser vs. Heavy users goes down.
Hard Cap	No revenue leakage	Not customer friendly
	Easy network planning (max capacity needed = max number of users x caps)	Does not allow to capture additional revenue
Hard cap with overage fee:	Can be very profitable with a population that has frequent overage	Many customers complain of the bill shock.
Soft cap	Customer friendly, easy to understand	Not as profitable in the short term
Soft cap with throttling	A better alternative to hard cap in markets where video usage is not yet very heavy	Becomes less and less customer friendly as video traffic increases
Speed capping	Very effective for charging per type of usage and educating customers	Requires sophisticated network (DPI + Charging + subscriber management)
Application bundling	Popular in mature market with high competition, where subscribers become expert at shopping and comparing the different offerings.	Complex requires sophisticated network, requires good understanding of subscriber demographics and usage to maximize revenue
Metered Usage	Very effective way to ensure that capacity planning and revenue are tied	Not very popular, as many subscribers do not understand Megabytes and how 2 minutes of video could “cost” from 1 to 10 times .
Content based charging	Allow sophisticated tariffing that maximizes revenue	Complex requires sophisticated network, requires good understanding of subscriber demographics and usage to maximize revenue. Technology not quite ready.
Time of day charging	For operators who have a “prime time” effect with peaks an order of magnitude higher than average traffic, an effective way to monetize the need to size for peak.	Not very popular. The network is still underutilized most of the time.
Location based charging	Will allow operators with “hot spots” to try and mitigate usage in these zones or at least to finance capacity.	Most subscribers wont accept having to carry a map to understand how much their call/video will cost them.

As with many trends in wireless, it will take a while before the market matures enough to elaborate a technology and a business model that is both user-friendly and profitable for the operators. Additionally, the emergence of over-the-t0p traffic, with now content providers and aggregators selling their services directly to customers, forces the industry to examine charging and tariffing models in a more fundamental fashion.

Revenue sharing, network sharing, load sharing require traditional core network technologies to be exposed to external entities for a profitable model where brands, content owners, content providers and operators are not at war. New collaboration models need to be thought of. Additionally, while the technology has made much progress, the next generation of DPI, PCRF, OSS/BSS will need to step up to allow for these sophisticated charging models.