Guest post on Visionmobile about Future of Voice

I've written for many years about the future of VoIP and personal communications. Recently, I've been mentioning terms such as "non-telephony voice" and the need for service providers to understand that the historic concept of the "phone call" is only one way of interacting with another person using speech.

Last week's profit warning from Dutch operator KPN highlights the fragility of "old" telecoms communications services such as telephony and SMS, as newer applications better-customised to the idiosyncracies of human behaviour start to emerge. An open question is how well platforms such as IMS can cope with new modes of communication - especially those that aren't based on "sessions", but more fluid forms of interaction.

This is a broad theme I'm going to be addressing in some depth over coming months, through a variety of publications and events.


EDIT: If you are interested in learning more about the Future of Voice, I will be running a series of small-group Masterclasses together with Martin Geddes, as well as providing private internal workshops. Email me at information AT disruptive-analysis DOT com for more details

For now, however, please check out the guest post I've written for fellow analyst Andreas Constantinou's blog, VisionMobile on the Future of Voice, and the challenges being posed for "your grandmother's telephony service".

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Is mobile data roaming structurally flawed?

Fascinating article by David Meyer at ZDnet, as part of his ongoing coverage of mobile data roaming.

He points out the possibility of the European Commission forcing a structural split between domestic and roaming service provision. Basically, there seems to be frustration that voice (and especially data) prices and consumer choices have not changed quickly enough, despite recent regulation on tariff caps and anti-billshock thresholds. In particular, there is concern that customers don't know in advance how/when/where they will travel, so they cannot make an educated decision about which tariff is "best" at the start of a contract. Most people have a feel for the number of minutes / texts they send per month - but no idea how much data they might use on visits Spain, the US or in Kyrgyzstan over the next 24 months.

Ironically, even when people *do* look at roaming prices as part of making a decision among competitive domestic offers, the operators feel that it's such a minor part of the plan that they are free to make unilateral changes to those roaming prices, while the contract is still in force. This is exactly what happened to me, last year. Certainly, few price plans in Europe are marketed upfront as 'roamer-friendly'.

Although it's too early to judge exactly how any future regulation might manifest, a possible option is that customers choose their "domestic" tariff and plan as normal, but then get to choose again about which network(s) and price-plans to use when actually roaming, or before departure.

That said, there's clearly a whole host of issues, concerns and possible "gotchas" here:

• Is this choice made on a per-trip basis, or at the original time of signing a contract? 
• How does billing work when roaming? Would (say) Vodafone act as a retailer / billing agent for Orange if I pick them when travelling in France? 
• What's the user experience like?  
• Do I need a separate SIM card for my roaming provider? 
• What happens if my phone is SIM-locked - and how would you avoid worsening the grey market in subsisided phones? 
• Would I use the same roaming provider for both voice and data? 
• Whose ultimate responsibility would look after emergency calls; lawful intercept etc? 
• Will this lead to weird distortions - eg people "roaming" permanently in Europe on a Luxembourg mobile contract, because it's cheaper?

I'm expecting the current mobile operators to scream blue murder about this - it's technically complex, and impacts an area of significant profitability, and potentially means that a licencee in one European country can offer services on an almost-equal basis throughout the continent. They will no doubt point out that there are already assorted opt-ins, or discount programmes (Vodafone Passport etc) that enable customers to tweak their roaming cost profiles.

Also, from my perspective, the problem is less about in-Europe roaming - for which we're seeing OK packages such as Vodafone's £2 / day for 25MB, and more for travelling outside Europe. The current typical charges of £3-6 per MB when I travel to the US, along with £1+ per minute for voice, are completely unjustifiable and make a mockery of smartphone ownership.

I now routinely switch data roaming off completely, and just rely on WiFi. I recently spent a whole week in San Francisco recently without using 3G at all, although it does seem silly that I have to resort to using paper printouts of Google Maps, or buying Starbucks coffee to check my email, when I'm quite prepared to pay a sensible amount for cellular data.

The problem is that there is no jurisdiction that can enforce price caps at both ends of (say) Vodafone/AT&T or Orange/SKT bilateral roaming arrangements. The structure of roaming involves both the wholesale (visited) fee, and the retail (outbound) mark-up price. Maybe the ITU, GSMA or even WTO needs to get involved ultimately, although none of them wants to kill the golden goose, even though they realise how unpopular the rates have become.

Another interim approach might be to make it a requirement for operators to disclose the wholesale rates they are paying, in an attempt to shame the visited network into sensible pricing. (imagine getting this SMS when you arrive at the airport: "Data costs £3/MB because the greedy network you're roaming onto charges a wholesale fee of £2.50/MB. Here's the CEO's email address if you'd like to complain").

Perhaps the best option will be an MVNO, or soft-SIM or dynamic-IMSI approach, with Apple or GroupOn or another third party acting as a tariff aggregator for customers. They could use negotiating power to force down wholesale rates for visited networks (eg Europeans roaming onto AT&T in the US, especially), or emulate the style of Truphone's "Local Anywhere" proposition in having multiple accounts on a single SIM card.

Fundamentally, the model for data roaming is completely flawed - unless you're using your home operator's in-house data services such as mobile TV, there is no need to have your data routed back home anyway. If you just want to connect to the Internet in a foreign country, there's no justification for your domestic service provider to have any role, except acting as a source of convenience. I don't phone up Vodafone for permission every time I want to use WiFi in Lithuania, or an Internet cafe in Mozambique. Now, I *am* prepared to pay for convenience - which is why I'll use ATMs and credit cards everywhere, despite some incremental fees. But I'm certainly not paying a potential £500 for a typical week's worth (100-200MB) of non-EU data usage.

The whole ridiculous process is about to be replicated in LTE - at least when the question of supporting the right frequency bands in a decent % of phones means that LTE roaming becomes vaguely practical. Just as VoLTE is "yesterday's telephony reinvented for LTE", we can expect to see "yesterday's data roaming reinvented for LTE" as well.

The effect of this is likely to further drive the use of free WiFi in traveller-centric hotspots. We're already seeing an increasing prevalance of hotels, airports and tourist cafes offering free data. I've stayed in remote parts of the world and been able to use Skype and Facebook for my communications needs, for free.  In other words, the current structure for mobile data roaming is driving users to a polarised situation. Many now expect *free* WiFi data when travelling, rather than be willing to pay a smaller, reasonable charge for cellular. In the short term, operators are benefiting from the grudging use of roaming by travellers on expenses - or by occasional roamers who are going to suffer from bill shock because of inadvertant use. That is not a sustainable business - the industry needs to wake up & reinvent how data roaming is organised, because the current system (especially outside the EU or other roaming regions) is broken.

EDIT: as an afterthought, ponder the notion that data roaming is, from your home operator's point of view, "best efforts" especially where it's provided through a telco that is not an affiliate. You would have thought that the lowest level of ownership & control (and therefore QoS) would mean you got charged a *lower* price than at home, not higher, would you not? Or perhaps best-efforts data is really good enough, after all?

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The risks of ignorance-based pricing strategies for telecoms

Almost exactly 5 years ago, I wrote a blog post cutting through the myth of "value-based pricing" in the telecoms industry. It followed on from the observation that people seemed happy to pay for SMS messages, and so therefore it must make sense for telcos to try and extract the maximum amount from all users, for all services at all times, rather than under-price and "leave cash on the table".

In principle, I agree that perfect markets (and perfect marketing) should indeed result in optimal yields and the "right" prices mapped on to realistic assessments of users' utility and perceived value. However, we live in a far from perfect world in telecoms, in which obfuscatory marketing, lock-in and sheer rip-offs prevail - and also, it must be said, sometimes too-low pricing as well.

Updating my definitions, it's worth a quick recap:

Bargain-based pricing - it's so cheap, it's unbelievable. You tell everyone about it. You use it for the sheer sake of it. You buy other stuff just as an excuse to use it more. Example: free WiFi in cafes, or 3G dongles that are cheaper than ADSL lines. Most free Internet services like Google Search and Facebook are also a "bargain" if you're prepared to suffer some advertising.

Value-based pricing - it's the right price. It seems reasonable given the probable underlying costs or its inherently fair market-based pricing mechanism. It does what it says on the tin. You can justify it easily. You mention it to friends or colleagues. Examples: Normal smartphones data plans, iTunes music, Google AdWords, eBay pricing, Inflight WiFi.

Inertia-based pricing - it's a bit steep. You know you could find it a bit cheaper. But it works, it's convenient, and it's not worth the effort to shop around or switch. You don't complain, but you don't recommend it either. Example: SkypeOut calls, your current broadband provider, your current mobile voice tariff, airport food, iPhones

Ignorance-based pricing - it's a ripoff, but you don't realise it. You've got no real benchmarks, so it seems "reasonable". If it was cheaper, you'd probably use it more. You don't know it's available to other people (maybe in another country) at a much lower price. If you found out, you'd be quite annoyed, complain to friends, and probably feel a bit gullible & prone to switch suppliers when the opportunity arose. Example: SMS pricing, PSTN calls.

Resentment-based pricing - you know you're being ripped off hugely, but you "have" to pay as you have no immediate alternative. You grit your teeth, and (hopefully) expense it afterwards. You actively look for a way to avoid the cost, and minimise your usage. You complain to friends & colleagues. You develop "active customer disloyalty" and vow to switch suppliers, out of distaste for their show of customer disrespect, whenever you can. Examples: Hotel WiFi, most mobile data roaming.

You'll notice the assertion that mobile voice pricing is "inertia-based". But according to a new piece of research this morning, UK mobile subscribers appear to have sleepwalked more into the "ignorance-based" tier, spending on average 44% more than necessary on phone tariffs, or £195 a year (about $300), because they choose plans that are unsuitable.

That's enough to have pretty much every UK media outlet pointing out how much we're over-paying. Now to anyone in the cellular industry, this probably doesn't come as any massively-surprising news. Often, plans are specifically set to encourage upgrade to the next-higher tier. If average usage is 280 mins a month, then thresholds will likely be set at 250 and 500 mins, rather than the logical (but cheaper) 300 mins. Whether you view this as opportunist cynicism, or smart marketing, depends on your point of view. And whether you get called out on it.

The open question is whether this type of approach - while clearly generating revenues in the short term - is sustainable, and also whether it creates a damaging perception in customers' minds that operators are ripping them off. At a time when telcos are hoping to become trusted enough to be used for payments, digital lockers, identity management and so forth, they need to be careful to watch their reputation if they hope to gain true loyalty. Google and Facebook don't over-charge their users.

The other risk is that this type of egregious pricing strategy opens the door to "white knights" that can rescue customers-in-distress from the clutches of the evil, firebreathing pricing dragons. It is quite easy to imagine a GroupOn-type approach to buying mobile plans - collective groups of consumers that act with similar power to enterprises start to negotiate bulk deals, disintermediating the operators from identity while they are doing it. (I just realised I wrote a post about "consumer-oriented collective purchasing" 3 years ago, by the way).

Or alternatively, perhaps the UK's price comparison site uSwitch gets recast by Apple as iSwitch, exploiting their patented (and much-hated) notion of a remote-updateable SIM. What better way to perpetuate the $300 gross margins on iPhones than to offer users a way to monitor & optimise their phone plans? "We have calculated that you can save £10 a month by switching to Operator X from Operator Y. Click here to initiate number portability via iTunes and switch to your new provider".

One of the reasons for the mobile industry's historic profitability is that it has been able to derive huge profits from services which aren't really worth what people pay for them. SMS, roaming, too-large telephony plans. This is fine while people don't realise they're over-paying, and while there are no easy workarounds. But as the fixed-line voice providers have learned, once the process of discovering lower prices becomes more transparent, there can be a huge exodus of previously-loyal customers. By contrast, people buying an Apple product - or any other premium brand - knows that the supplier is making money, but they obtain value in other ways such as convenience or status.

There's no "cachet" safety-net in getting a too-large mobile minutes bundle, though.

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Communications innovators - get thee to eComm in June!

I've been involved in Lee Dryburgh's series of eComm events for several years, both as speaker and as a member of its advisory list. For those of you not familiar with eComm, it's an event that is more about a shared understanding of the future (or possible future) of communications, rather than specific takes on a given technology. It spans next-gen voice services, wireless technologies, apps, social networks, messaging, devices, services business models, regulations and much more. Previous speakers have included the Android founders, senior Skype execs, FCC staffers and a plethora of others.

Up to a point, eComm has something of an anti-establishment feel, which surfaces in occasional anti-telco attitudes - although ironically some of the most provocative speakers have been from thought-leading telco business units. Overall, eComm tends to rail against the status quo, or restrictions on communication. It also tends to favour innovation over centralisation - standards are useful but not essential tools.

The next event is coming up at the end of June in San Francisco, but for various personal reasons Lee has had to take some time off from organising it.

This is a call to my blog readers with interesting stories to tell to apply for a speaking slot. This could be something about new services, new communications apps, perhaps new enabling platforms, or new takes on devices, user-experience and regulation. It *shouldn't* be a straightforward vendor pitch for something essentially me-too. (The back-channel can be pretty merciless on corporate powerpoint-mongers).

Either way, I'd exhort you to have a look at eComm, perhaps looking at the speaker roster from previous events such as US 2010, or Europe 2009.

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WiFi highlights an inconvenient truth about QoS...

... it's not always needed.

Increasingly, smartphones get used with WiFi. Some estimates suggest that up to half of data usage now goes over WiFi. Most of that WiFi is connected from homes, offices or public hotspots over backhaul provided by an operator other than that providing the cellular connection to the smartphone. Although in some cases there is an offload agreement in place, there is usually no direct measurement or control of QoS end-to-end.

But some operators have (or are launching) their own data and content services - whether it's a content site, their appstore, remote backup or even RCS. This means that some of the access will come in to the operator domain via the open Internet. This isn't new in itself - technologies such as UMA/GAN have been around for a while, as have assorted softphones, remote access clients and so forth. But what this implicitly means is that for some of the time, at least, operators are happy to have their services accessed by their customers over the public Internet. With all of the potential downsides that suggests.

Plus, this means that in those situations, the operator is itself acting a so-called "OTT" provider, riding for free on somebody else's pipes. Are they first in the queue to offer to pay their ADSL/cable saviours for QoS guarantees? No, I thought not.

So the obvious question has to be - if it's OK to connect via an unmanaged network some of the time, then why not all of the time? Are they warning their customers that reliability might be lower if they connect via WiFi? What rights do their customers have if performance is below par?

Now obviously in most cases here the fixed connection used for WiFi is faster than the mobile network would have been - so "quality" in some regards is arguably actually better. But it's still not actively monitored and managed, and both the Internet portion of the access and the WiFi radio itself are subject to all sorts of contention, congestion, packet loss and other threats.

I know that various attempts are being made to bring WiFi into the operator's control - or at least visibility and policy oversight - with selective offload and ANDSF and I-WLAN and various proprietary equivalents. But even these will not cover all situations, even when viewed throught the rosiest tinted glass.

But surely, if a QoS-managed and policy-controllable network is that critical, surely there ought to be explicit notifications to users that they are accessing the service via an unmanaged connection? Maybe, in extremis such access should even be blocked?

Flipping this around the other way.... if it's OK for your access customers to access your services over the Internet on an OTT basis, at least some of the time, why not also let other people access those services as well?

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UK ISPs Code of Practice on Traffic Management - OK as a start, but major flaws

A group of the UK's largest fixed and mobile ISPs have published a "Code of Practice" about managing traffic on their broadband networks. The full document is here with the announcement press release here. The group includes BT, Vodafone, 3, O2, Virgin, BSkyB and TalkTalk, but currently excludes others, notably EverythingEverywhere, the Orange/T-Mobile joint venture.

(Regular readers may remember that I put up a suggested draft Code of Conduct for traffic management last year - there seems to be a fair amount that has been picked up in the UK document. My input also fed into the manifesto published my partners at Telco 2.0, here)

There's some good stuff, and some less-good stuff about the new Code of Practice. Of course, if you a Net Neutrality purist, your good/bad scale will shift a bit.

On the positive side, the general principle of transparency is extremely important. The committment to being "Understandable, Appropriate, Accessible, Current, Comparable, Verifiable" is entirely the right thing to do. I think there is a lot of good stuff in the Code here, going as far as the need for independent verification (although that would probably happen anyway - I'm sure Google and others have their own techniques for watching how traffic shaping is used by telcos).

The fact that it has been signed by both fixed and mobile operators is also a good thing, although there isn't much in the document about the specific issues inherent in wireless networks.

But the main problem is that it attempts to define traffic management policies by "type of traffic" in terms of descriptions that are only meaningful to boxes in the network, not to users themselves. Ironically, this fails the Code's own insistence on being understandable and appropriate. There are also no clear definitions on what constitutes the various categories such as "gaming" or "browsing".

The problem here is that DPI boxes don't really understand applications and services in the way that users perceive them. "Facebook" is an example of an application, including links or video which are displayed on the web page or inside a mobile app. "WebEx" is another application, which might include video streaming, messaging, file transfer and so on. Add in using HTML5 browsers and it all gets messier still.

Having a traffic policy that essentially says "some features of some applications might not work" isn't very useful. It's a bit like saying that you've got different policies for the colour red, vs. green. Or that a telephone call is #1 priority, unless a voice-recognition DPI box listens and senses that you're singing, in which case it gets reclassified as music and gets down-rated.

And even in terms of traffic types, the CoP conspicuously misses out how to deal with encrypted and VPN traffic, which is increasingly important with the use of HTTPS by websites such as YouTube and Facebook. Given that SSL actually is a protocol and "traffic type" this is pretty important. At the moment, the footnote "***If no entry is shown against a particular traffic type, no traffic management is typically applied to it." to me implies that encrypted traffic passes through unmolested under this code of practice. (I'd be interested in a lawyer's view of this though).

Another problem is that there is an assumption that traffic management is applied only at specified times (evening, weekends etc), and therefore not just when or where there is *actual* congestion. I suspect Ofcom will take a dim view of this - my sense is that regulators want traffic management to be proportionate and "de minimis" and there seems no justification for heavy-handed throttling or shaping when there is no significant congestion on the access network or first-stage backhaul.

There is also no reference to what happens to any company which fails to meet its obligations under the Code (which is "voluntary"), or how enforcement might happen in the future.

Lastly, there is no reference to bearer-type issues important in mobile. In particular, whether the same policies apply to femtocell or WiFi offload.

Overall, on first read I'd give it a 5 out of 10. A useful start, but with some serious limitations.

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Revenue from content/app transport? Operators need to be part of solution, not part of the problem

I'm still seeing a lot of discussions that go along the traditional and rather tired lines of saying that Facebook / YouTube / Hulu / BBC etc should "pay for their use of our pipes". I've just been debating on Twitter with Flash Networks, an optimisation company, about the fact that YouTube is now watched by a huge proportion of broadband-enabled people in India (mostly fixed, not mobile)

Flash asked the question "should YouTube be financially accountable", to which the answer I think is pretty clearly "no" - the users are financially accountable for buying Internet access services. If they all seem to prefer the same website for video, so what? Maybe at some point it becomes a question for competition authorities, but I really can't see what difference it makes if people watch videos from one site or 10 different ones.

If I have a mobile phone plan with 600 minutes, and use 500 of them calling my best friend and 100 calling everyone else, you wouldn't send my friend a bill for "generating traffic".

But that doesn't preclude the operator doing a deal with YouTube for something extra. Maybe they offer QoS guarantees (empty promises won't cut it, there needs to be proof and an SLA) for prioritisation or low-latency. Maybe they have a way to over-provision extra bandwidth - for example the customer subscribes for a 6Mbit/s line speed, but YouTube pays extra to boost it to 10Mbit/s if the copper can handle it. Maybe the operator gives YouTube a way to target its advertising better, through exposing some customer data. Maybe the operator improves performance and reduces costs by using caching or CDN technology.

But all that is on top of the basic Internet access - and of course, YouTube will be doing its own clever things to squeeze better performance out of basic access as well. It will be playing with clever codecs and buffering and error-correction and so on, so the telco has to make sure its value-add "happy pipe" services give YouTube a better ROI than spending it on a more R&D tweaking the software.

What won't fly (in most competitive markets) is attempting to erect tollgate for the baseline service. The telco gets a chance to participate in the upside beyond that, if it can prove that it's adding value. It can't just exploit YouTube's R&D, user loyalty and server farms "for free".

The same is true in mobile - the operator needs to be part of the solution, not part of the problem. Which means that before it has the moral authority to say it's providing value from "extras", it needs to get the basics right, such as adequate coverage and reasonable capacity. It also has to demonstrate neutrality on the basic Internet access service - it can't be seen to transcode or otherwise "mess about" with traffic.

But assuming that there is good - and provable - coverage (including indoors, for something like YouTube), then once again the operator has a chance to participate in improving the performance of vanilla Internet access. It can offer device management, user data, possible higher speeds and prioritisation and so forth. But there are many more complexities to getting this right, as mobile is less predictable and "monitorable" than fixed-line. Ideally, quality needs to be seen and measured from the user's perspective, not inferred imperfectly from the network. And there needs to be some pretty complex algorithmic stuff going on in the radio network too - how do you deal with a situation where you have both "Gold users" and "Gold applications" competing for resources in a cell? And just how much impact should one Gold user/app right at the cell-edge have on 50 Silver users in the middle?

All of this needs to be based on upside from what is possible with a best-effort standard mobile Internet connection, where the user and app provider are in control and can alter their behaviour according to personal preferences. The operator and network need to show a demonstrable solution which offers more than can be reasonably expected, and not just try to extract fees by creating an artifical problem.

So in pharmaceutical terms, the performance of the baseline, unmodified transmission is like a placebo in a double-blind test of a new drug. Any new network "treatment" such as higher QoS or optimisation has to show measurable and repeatable benefits against the placebo. It is also possible (and necessary) to double-check that the placebo is uncontaminated.

This is the challenge for mobile operators in particular, looking to derive extra fees from users and/or content and application providers from "smarter" networks. They need to get the basics right (coverage), and provide an acceptable basic service (unmolested Internet). And then they have to offer something more (proven quality or targetting) at a cost and effectiveness better than that which could be done either by the app software, or simply providing more capacity.

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