Tuesday, February 9, 2016

What's wrong with the mobile value chain

I have been compiling quarterly reviews for the retainer clients of my mobile video and SDN/NFV practices and it is clear that there is big gap between consumers interests and the mobile industry revenue model.

Video apps T-Mobile customers can stream for free.Mobile data traffic continues to grow unabated, fueled by social media, and web service providers moving towards a mobile first and in some cases a mobile only strategy.
Did you know that close to half of Facebook users are exclusively mobile generating over 3/4 of the company's revenue? That half of YouTube views are on mobile devices? Nearly half of Netflix under 34 members watch from a mobile device?
Most of these services are free, or adverting or subscription-based. They do not rely on usage (time or Gigabytes or access) for monetization. As they transition to mobile networks, they do not change their business model and mobile network operators are left bereft trying to figure out how their traditional per byte/minute/message model fits in this new paradigm.

... well, here is a hint: it doesn't.

We have seen recently how T-Mobile in the US is now allowing zero rated video streaming in exchange for a quality cap at 480p in its Binge On service. Verizon has answered in kind just this week with its go90 service.

These might appear as popular and innovative moves, but their are just "tricks" to acquire and secure high ARPU postpaid LTE subscribers, akin to the unlimited voice / data packages we see flourish every time a challenger MNO with an empty network tries to aggressively churn its competition.

These tricks are shortsighted and won't help MNOs reconcile the fact that their costs keep increasing and their revenue from traditional services decrease. I am convinced that by 2020, we will see operators or MVNO with free, or close to it, voice, data and messaging services. What will they do then?

Most MNOs have identified that mobile video and Internet of Things are their largest revenue making opportunity in the medium term. 
Internet of Things can be a lot of different things but seems too uncertain and immature to build a solid strategy for a while. There are too many conflicting standards and initiatives from too many established vendors and start ups to make sense of it and create a mass market business in the short term.
Mobile video, by contrast is close to a mature market and technology. It is appalling that most network operators have such a poor grasp of it. Take mobile advertising, for instance.
We have just established that nearly half of all digital content is consumed on a mobile device.
2015 was the first year digital advertising spend exceeded broadcast with 42 billion $ vs 40. Mobile barely registered with only 7 billion$. Although growing, mobile advertising is only 21% of the global advertising spend in the US. Announcers have identified that mobile video is their largest medium opportunity to reach their most important target demographics (high net worth + youth).
How is it that you have 50% of eyeballs on a service that draw only 21% of ad spend?
Well, there several reasons for that, but first and foremost, it is because mobile video is such a poor service. With many vendors and observers reporting slow start time, between 3 to 5 seconds on cellular and WiFi, with an abandonment rate ranging from 15 to 25%. Network operators' poor understanding of video as a technology and advertising as a model, leads to poor video service quality, which yields poor video advertising returns. There are potential strategies that could help there, but there isn't much movement on the MNO's front. Most initiatives in this space are from OTTs and vendors. 

In any case, if mobile video advertising is supposed to reach its potential (80% of mobile advertising, which should be at least equal to digital) and create 33 billion $ of spend, MNOs better start treating it seriously. Measuring, managing video QoE becomes key and while you are at it, if your network transports video for 75% of its traffic, might as well build a video network that happens to do voice, messaging browsing, rather than the other way around... Just saying. 

In the future, consumers, service providers, OTT will value much more a network that can deliver and guarantee the best video quality than anything else.

Tuesday, February 2, 2016

How to Binge On?

So... you have been surprised, excited,. curious about T-Mobile US Binge On launch
The innovative service is defining new cooperative models with so-called OTT by blending existing and new media manipulation technologies.

You are maybe wondering whether it would work for you? Do you know what it would take for you to launch a similar service?
Here is a quick guide of what you might need if you are thinking along those lines.

The regulatory question

First, you probably wonder whether you can even launch such a service. Is it contravening any net neutrality rule? The answer might be hard to find. Most net neutrality provisions are vague, inaccurate or downright technologically impossible to enforce, so when launching a new service, the best one can have is an opinion.
MNOs have essentially two choices, either not innovating and launching endless minute variations of existing services or launching innovative services. The latter strategy will always have a measure of risk, but MNOs can't aspire to be disruptive without risk taking. In this case, the risk is fairly limited, provided that the service is voluntary, with easy opt in /  opt out. There are always going to be challenges - even legal - to that operating assumption, but operators have to accept that as part of the cost of innovation. In other words, if you want to create new revenues streams, you have to grow some balls and take some risks, otherwise, just be a great network and abandon ambition to sell services.

The service

For those not familiar with Binge On, here is a quick overview. Binge On allows any new or existing subscribers with a 3GB data plan or higher to stream for free videos from over 4o popular content providers including Netflix, Hulu, HBO and ESPN.
The videos are zero rated (do not count towards the subscriber's quota) and are limited to 480p definition.
The service is free.

The content

Obviously, in the case of Binge On, the more content providers with rich content sign on for the service, the richer and the more attractive the offering. T-Mobile has been very smart to entice some of the most popular video services to sign on for Binge on. Netflix and HBO have a history of limited collaboration with few network operators, but no MNO to date has been able to create such a rich list of video partnerships.
Experience proves that the key to successful video services is breadth, depth and originality of the content. In this case, T-Mobile has decided not to intervene in content selection, simply allowing some of the most popular video services to participate in the service.
Notably, Facebook, Twitter, Google, Apple and Amazon properties are missing, with YouTube claiming technical incompatibility to participate.

The technology

What does the service entails technically? The first functionality a network needs to enable such a service is to discriminate content from a participating video provider versus other services. In some cases, when traffic is not encrypted, it is just a matter of creating a rule in the DPI or web gateway engine to apply zero rating to a specific content / origin. 

Picking out Netflix traffic out of the rest of the videos is not necessarily simple, since many premium video service providers deliver their service over encrypted protocols, to avoid piracy or privacy issues. The result is certainly that there is a level of integration that is necessary for the network to unambiguously detect a video session from Netflix. 

In this case, unencrypted metadata can be used in the headers to identify the service provider and even the content. That is not all, though as conceivably, some services might not be exclusively video. If we imagine a service like Facebook being part of Binge one, the network now needs to theoretically separate browsing traffic from video. This can be achieved with traffic management platforms that are usually deploying heuristics or algorithm to segregate traffic from a same source looking at packet size, session duration, packet patterns, etc.

Now that you are able to discriminate the content from participating partners, you need to tie it to subscribers that have opted in or opted out for this service. This usually is performed in the PCRF charging function or in the EPC where the new service is created. A set of rules are assembled to associate the list of content providers with a zero-rated class of service and associate a subscriber class with these services. The subscriber class is a toggled setting in the subscriber profile that resides in the subscriber database. As a subscriber starts a HBO episode, the network detects that this service is part of Binge on and looks up whether that user is subscribed or not to the service and applies the corresponding rate code. As a result, the amount of data consumed for this session is either accumulated and deduced from the subscriber's quota or not depending on whether she is a Binge On user.

We are almost done.

The big gamble taken by T-Mobile is that customers will trade unlimited quality for unlimited content. Essentially, the contract is that those who opt in Binge On will be able to stream unlimited video from participating providers at the condition that the video's definition is limited to 480p. In many cases, this is an acceptable quality for phones and tablets, as long as you do not hotspot the video to a laptop or a TV.
That limitation is the quid pro quo that T-Mobile is enforcing, allowing them to be able to have cost and service quality predictability.

That capability requires more integration between content provider and T-Mobile. 480p is an objective video display target that is usually describing a 640 x 480 pixels picture size. Videos encoded at that definition will vary in size, depending on the codec used, the number of frames per seconds and other parameters.

Most premium video providers in Binge ON are delivering them using adaptive bit rate, essentially delivering a number of possible video streams ranging from low to high definition. In this case, T-Mobile and the content provider have to limit the format up to 480p. This could be done by the content provider, of course, since it has all the formats. They could decide to send only 480p and lower versions, but that would be counter productive. The content provider does not know whether the subscriber is opted in to Binge On or not and that information that belongs to T-Mobile cannot be freely shared.
As a result, content providers are sending the video in their usual definition, leaving T-Mobile with the task to select the right format.

There are several ways to achieve that. The simplistic approach is just to limit the delivery bit rate so that the phone can never select more than 480p. This is a hazardous approach, because 480p encoding can result in bit rate delivery demand ranging from 700 to 1.5 Mbps depending on the codec being used. This is too wide to provide any guarantee by T-Mobile. Set the setting too low and some providers will never achieve 480 p. Set it too high and subscribers will have fluctuating quality with even 720 or 1080p formats.
The best way to achieve the desired result is to intercept the adaptive bit rate manifest delivered by the content provider at the establishment of the session and strip out all definitions above 480p. This guarantees that the video will never be delivered above 480p but can still fluctuate based on network's congestion. This can be achieved either with a specialized video optimization platform or in some of the more advanced EPC.

As we can see, the service is sophisticated and entails several steps. A network's capacity to deploy such a service is directly linked to its ability to link and instantiate services and network functions in an organic manner. Only the most innovative EPC, traffic detection and video management functions vendors can provide the flexibility and cost effectiveness to launch such a service.