App Stores, Mobile Data & the Dumb Pipe Threat

6 Comments Phil Asmundson - Pictures 42007 019 (3)-1

Asmundson has spent 28 years at Deloitte & Touche and will speak at our upcoming conference, Mobilize 09. In the edited interview below, he discusses the impact of ever-increasing traffic on mobile networks and some of the ways carriers can avoid becoming dumb pipes.

Colin Gibbs: We’ve seen a dramatic surge in mobile data usage in North America in the last year or so as smartphones move into the mainstream and on-the-go computing gets legs. How are carriers’ attitudes toward mobile VoIP and other non-cellular technologies evolving due to the increasing traffic?

Phil Asmundson: I think we’re at an early stage of wireless transformation that will ultimately require collaboration across various networks. Carriers have traditionally been reluctant to circumvent their cellular networks, but the shift to data from voice will ultimately force them to offload traffic. I think we’ll get to the point where carriers don’t care whether a call is being carried on their network or on another network, and I think all-you-can-eat plans are going to help drive that.

Gibbs: It still seems like some network operators are having a hard time accepting that, though. How far have they come in changing their thinking regarding non-cellular use?

Asmundson: I think they’re all in the early stages at this point. The carriers have always been the main point of contact, the control point for the customer, and it’s tough to relinquish some of that.

Gibbs: Earlier this year we read headlines detailing how mobile networks in Japan were struggling to deliver content to users. Are we seeing those kinds of network strains in the U.S. yet? If not, when should we expect them?

Asmundson: It really depends on how pricing goes. One of the things about smartphones is that they’re going to increase my usage so much that metering me, billing me on minutes, isn’t going to make any sense.

Carriers are quite reluctant to give up control, and I understand why — if I had invested billions of dollars to build out my network, I would want to see a return on that investment, too. But I will also say that carriers are extraordinarily concerned about the experience of the customer out there. The real impetus that will push this over the edge will be when you start to have failure of access. That may not be just around the corner; that may be here already. But to me this is a good problem. It doesn’t take a Ph.D. in math to conclude that voice ARPU is declining. If this is the case, the future of wireless must be focused on data traffic, not voice. That’s a big conversion to be done, which is why carriers are anxious to build out 4G networks.

Gibbs: I’m reading a lot about things like off-peak content delivery and the use of femtocells to minimize network traffic, but other than Wi-Fi, I have yet to see much real progress. How important will those kinds of solutions be in the next few years? What other kinds of potential solutions have you seen?

Asmundson: Ultimately, what we’re facing is that the interface between various wireless technologies will become very important. I personally believe that as you start to get into ultraband, ultimately we’re going to see a world where my device will communicate with networks in real time. It will look at many different attributes including signal strength, device type, congestion — it will look at that in real time, and it will determine which technology is best suited to deliver that to me.

Gibbs: It seems that’s beginning to happen on very high-end, enterprise-focused mobile computers. But how close are we to seeing that with more consumer-targeted phones?

Asmundson: I think we’re years from seeing it because it requires a whole new revenue model. Media is really interesting — if you get a dollar of media revenue you can watch how it’s sliced and diced up (among multiple partners). That’s how it would have to happen in telecom. This would be something that would be handing off in real time, and that would require new revenue agreements.

Gibbs: When will we see mobile broadband consumer services being deployed in any real way?

Asmundson: We have to get LTE and WiMAX first, so in any meaningful way we’re looking at four to six years. I think the economic downturn sure put a downturn on that, the availability of funds, because let’s face it: It’s expensive.

Gibbs: What tools can carriers leverage as they fight the war against becoming dump pipes?

Asmundson: I think there are a lot of revenue opportunities that go beyond the pipe, and maybe that’s the next generation of telcos. As you start to move more and more things that are personal to you into the cloud, there is the question of who’s going to store it for you. Who’s going to back it up? Who’s going to secure your privacy? I think there is a lot of opportunity for carriers who have huge data centers. They haven’t done an awful lot in that area — I have one case I can’t talk about — but there are some movements from carriers who are trying to get more aggressive.


Sam Gronner

Before offloading the growing data traffic onto new networks, incumbent mobile operators have a number of options that help them avoid being relegated to a role of “dumb pipe” providers. Comverse provides technology for creating a range of service tiers, optimizing bandwidth in real time to the requirements of specific devices and applications, and applying differentiated charging schemes to price market price data services. GigaOM PRO readers attending the upcoming Mobile Internet World @ 4G World (Chicago) would do well to check out the session titled “Mobile Internet – Developing Smart Pipe Strategies”, presented Thursday, Sept. 17 @ 3 p.m.

Dominic Endicott

The industry is missing out on a massive wave of innovation that requires relatively modest capital expenditure. Just like the emergence of the Internet drove a vast amount of innovation as corporations sought to re-define themselves through this new channel, we now have the preconditions for the same to happen via the mobile Internet. Although this is a much more complex environment, the advantage today is that most companies are well positioned with web-services to make a leap. So my point is that the “hardware” (the network, handsets, etc) is already in place, the only challenge is to use it, and this will drive an explosion of innovation. The operators are in a prime position to take advantage for their own processes and to enable their corporate clients.

vinnie mirchandani

It is ironic that you quote a services exec to talk about lack of innovation in telcos. I help CIOs negotiate technology – by far the lowest innovation areas and the biggest in spend are outsourcing/systems integration and telecom. They both reluctantly pass along economies of scale or repetition and basically leach off software, hardware, device and start up innovation vendors. Look at their income statements and less than 1-2% of revenues go towards R&D, and in services if you scratch that often it is more of a marketing lab than once with real innovation or research.

I have a presentation on empty calories in IT budgets. Both services and telecom are mostly carbs, little protein.. no wonder payback from IT is often poor.

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