The Un-network Uncarrier

Note: The article is the first of a 3-part series which talks Facebook’s Telecom Infrastructure Partnership (TIP) initiative and the underlying motivation behind the same. The next two parts are focused on the options and approaches that Operators and vendors respectively should adopt in order not to suffer the same outcome as what happened in OCP.

When T-Mobile USA announced its latest results on July 19, 2017, CEO John Legere remarked with delight – “we have spent the past 4.5 years breaking industry rules and dashing the hopes and dreams of our competitors…”. The statement rung out true – in 2013 the stock hovered at a paltry USD 17.5 and now was close to USD 70 – with 17 straight quarters of acquiring more than a 1m customers per quarter. If anything – the “Un-carrier” has yet proven unstoppable. While this track record is remarkable, my hypothesis is that in the long term the “uncarrier” impact may seem puny compared to “un-network” impact which could potentially upend the entire Telecom industry – operators and vendors alike. If you are still wondering what I am referring to – then it is TIP, the open Telecom Infrastructure Initiative started by Facebook in 2016 which now counts more than 300 members.

The motivation for TIP came on the heels of the wildly successful Open Compute Project (OCP). OCP, whose members include Apple, Google and Microsoft heralded a new way to “white-box” a data center based upon freely available specifications and a set of contract vendors ready to implement based upon preset needs. It also heralded a new paradigm (now also seen in other industries) – you didn’t need to build and own it… to disrupt it (think Uber and Airbnb). And while many may falsely be led to believe the notion that this is primarily for developing countries in the light of the Facebook goal to connect the “un-connected”, I believe the impact will be for both – operators in developed and developing countries alike. There are a few underlying reasons here.

• A key ingredient in building a world class product is to have a razor sharp focus towards understanding (and potentially forecasting) your customer/ user needs. While operators do some bit of that, Facebook’s approach raises the bar to an altogether different level. And in this analysis – one thing is obvious (something which operators also are painfully aware of); people have a nearly insatiable quest for data. A majority of this data is in the form of video; unsurprisingly video has become a major focus across all Facebook products – be it Facebook Live, Messenger Video calling or Instagram. The major difference between the developing and developed world in this respect is the expectations of what data rates to expect, and the willingness (in many cases the ability) to pay for the same.
• In the 1^st world nations, 5G is not a pipe-dream anymore and has operators worried about the high costs associated in rolling out and maintaining such a network (not to forget the billions spent in license fees). In order to recoup this, there may be an impulse to increase prices – which could swing many ways; people grudgingly pay; consumers revolt resulting in margin pressure – and lastly – people simply use less data. The last option should worry any player in the video game; what if people elect to skip the video to save costs!
• Among the developing world, 5G may still be someway off, but here in the land of single digit ARPU’s, operators have a limited incentive for heavy investment given a marginal (or potentially negative ROI). On top of that there is a lack of available talent and heavy dependence on vendors – those whose primary revenue source comes from selling even more equipment and services; all increasing the end price to the consumer.

Facebook has it’s fingers in both these (advanced and developing market) pies and while its customers may be advertisers, its strength comes from the network effect created by its billion strong user base and it is essential to provide these with the best experience possible.

These users want great experiences, higher engagement and better interaction. Facebook also knows another relevant data point – that building, owning and operating a network is hard work, asset heavy and not as profitable. It has to look no further than Mountain View where Google has been scaling down its Fiber business. Truck rolls are frankly – not sexy.

It is not that operators were not aware of this issue, but traditionally lacked the knowhow needed to tackle this challenge which required deep hardware expertise. This changed with the arrival of “softwarization” of hardware in the form of network function virtualization. Operators were not software guru’s ….. but Facebook was. It recognized that by using this paradigm shift and leveraging its core software competencies it could potentially transform and potentially disrupt this market.

Operators could leverage the benefit of open source design to vastly drive down the costs of implementing their networks; vendors would no longer have the upper hand and disrupt the current paradigm of bundling software, hardware and services. Implementations could potentially result in a better user experience – with Facebook as one of the biggest beneficiaries. Rather than spend billions in connecting the world, it would support others to do so. In doing so, it would have access to infrastructure that it helped architect without owning any infrastructure. In short – it would be – the “un-network – uncarrier”.

AI – rescuing the spectrum crunch (part 3)

Part 1 of this post was all about the reasons why DARPA was right when it assigned a Grand Challenge to try and tackle the looming spectrum crises. Part 2 talked about the operating scenarios – on how this could probably pan out in practice. In this concluding chapter I will attempt to determine the impact for both traditional and new players.

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For the regulator, it brings the “uberization” concept right to his doorstep – promoting economic virtues of the efficient utilization of spectrum. Since spectrum could be acquired “on the fly”, the upfront payments made by operators would be replaced by transaction based income with dynamic pricing based upon supply and demand. It would dissuade spectrum hoarding and introduce a heightened level of competition – one which could benefit the end consumer.

For the operator, it would significantly level the playing field since all operators would have access to the same spectrum – one they previously acquired for exclusive use. Those operators which would successfully woo the customer would win; premium operators would be able to engage high value customers by securing access to additional spectrum and hence additional capacity. It would open up a market for newer players not willing to play that game – instead targeting lower tier customers (those who potentially do not need high speed data). The lack of upfront investment in spectrum would allow operators to efficiently allocate capital to better serve customer needs. They could also sell this capability as a service to other service providers (a.k.a. Netflix) who may need a particular QoS  and throughput – and are willing to pay for it.

But the biggest impact I suspect will be for the newer entrants. All these players seek to provide a great user experience to the customer irrespective of his operator. If we take a potential case such as 4K streaming where only one provider has a majority of the spectrum – then trying to stream with another operator would result in a poorer user experience (this of course leads to a lock in scenario) . With dynamic allocation – you could simply define different tiers (and quality levels) for your users and partner with all infrastructure players (e.g. operators) to ensure that spectrum can be made available on demand for your service; thus ensuring a high quality experience (for the money you have paid).

Does it drive the operator down the bit pipe…. perhaps yes and no. While the operator would not be the face to the end customer, it would by its very nature foster a closer collaboration between the operator and the end service provider. The customer could very well be the ultimate winner – with companies pandering to best serve their needs.

With potential global ramifications – I see some very clever ideas coming out of the wood-work, and folks such as Chamath investing in this “world changing” technologies to make a difference. I just hope that the big Telcos and/ or the FCC and other regulators don’t view this as a threat to the status quo – rather an opportunity to derive additional value from an already scarce resource!

AI – rescuing the spectrum crunch (Part 1)

Chamath Palihapitiya, the straight talking boss of Social Capital recently sat down with Vanity Fair for an interview where he illustrated what his firm looked for when investing. “We try to find businesses that are technologically ambitious, that are difficult, that will require tremendous intellectual horsepower, but can basically solve these huge human needs in ways that advance humanity forward”.

Around the same time, and totally unrelated to Chamath and Vanity Fair, DARPA, the much vaunted US agency credited among other things for setting up the precursor to the Internet as we know it threw up a gauntlet at the International Wireless Communications Expo in Las Vegas. What was it: it was a grand challenge – ‘The Spectrum Collaboration Challenge‘. As the webpage summarized it – “is a competition to develop radios with advanced machine-learning capabilities that can collectively develop strategies that optimize use of the wireless spectrum in ways not possible with today’s intrinsically inefficient static allocation approaches”.

What would this be ‘Grand’? Simply because DARPA had accurately pointed out one of the greatest challenges facing mobile telephony – the lack of available “good” spectrum. In doing so, it also indirectly recognized the indispensable role that communications plays in today’s society. And the fact that continuing down the same path as before may simply not be tenable 10 – 20, 30 years from now when demands for spectrum and capacity simply outstrip what we have right now.

Such Grand Challenges are not to be treated lightly – they set the course for ambitious endeavors, tackling hard problems with potentially global ramifications. If you wonder how fast autonomous cars have evolved, it is in no small measures to programs such as these which fund and accelerate development in these areas.

Now you may ask why? Why is this relevant to me and why is this such a big deal? The answer emerges from a few basic principles, some of which are governed by the immutable laws of physics.

• Limited “good” Spectrum – the basis on which all mobile communications exists is a finite quantity. While the “spectrum” itself is infinite – the “good spectrum” (i.e. between 600 MHz – 3.5 GHz) or that which all mobile telephones use is limited, and well – presently occupied. You can transmit above that (5 GHz and above and yes, folks are considering and doing just that for 5G), but then you need a lot of base stations close to each other (which increases cost and complexity), and if you transmit a lot below that (i.e. 300 MHz and below) – the antenna’s typically are quite big and unwieldy (remember the CB radio antennas?)

Courtesy: wi360.blogspot.com

 

• Increasing demand – if there is one thing all folks whether regulators, operators or internet players agree upon it is this; that we humans seem to have an insatiable demand for data. Give us better and cheaper devices, cool services such as Netflix at a competitive price point and we will swallow it all up! If you think human’s were bad there is also a projected growth of up to 50 Bn connected devices in the next 10 years – all of them communicating with each other, humans and control points. These devices may not require a lot of bandwidth, but they sure can chew up a lot of capacity.

CISCO VNI

• and as a consequence – increasing price to license due to scarcity. While the 700 MHz spectrum auction in 2008 enriched the US Government coffers by USD 19.0 Bn (YES – BILLION), the AWS-3 spectrum (in the less desirable 1.7/2.1 GHz band) auction netted them a mind-boggling USD 45.0 Bn.

One key element which keeps driving up the cost of spectrum is that the business model of all operators is based around a setup which has remained pretty much the same since the dawn of the mobile era. It followed a fairly, well linear approach

• Secure a spectrum license for a particular period of time (sometimes linked to a particular technology) along with a license to provide specific services
• Build a network to work in this spectrum band
• Offer voice, data and other services (either self built) or via 3rd parties to customers

While this system worked in the earlier days of voice telephony it has now started fraying around the edges.

•  Regulators are interested that consumers have access to services at a reasonable price and that a competitive market environment ensures the same. However with a looming spectrum scarcity, prices for spectrum are surging – prices which are indirectly or directly passed on to the customer
• If regulators hand spectrum out evenly, while it may level the playing field for the operator it does nothing to address a customer need – that the capacity offered by any one operator may not be sufficient… leaving everyone wanting for more, rather than a few being satisfied
• Finally, the spectrum in many places around the world remains inefficiently used. There are many regions where rich firms hoard spectrum as a defensive strategy to depress competition. In other environments there are cases when an operator who has spectrum has a lot of unused capacity, while another operator operates beyond peak – with poor customer experience. No wonder, previous generations of networks were designed to sustain near peak loads – increasing the CAPEX/ OPEX required to build up and run these networks.

In the next part of this article we will dive deeper into these issues, trying to understand how an AI enabled dynamic spectrum environment may work and in the last note point out what it could mean to the operator community and internet players at large…..

In defense of Uber

A few months ago, I had penned some thoughts about the ride sharing battles taking place in Continental Europe, be it the mytaxi or the Lyft’s or the Uber’s of this world. Now, having finally moved back to the Bay I have been a liberal experimenter in all forms of the shared economy to get a better hang on how things move state-side. After having taken over 40 odd Uber/ Lyft rides and having a cheerful discussion with every driver from Moscow to San Francisco and Mexico I would like to revisit and re-examine those deductions.

In San Francisco, the traditional cab business has taken a nose-dive with the regular taxi cab companies losing close to 65% of their regular business and warnings that the viability of their enterprise was at stake. This figure was not surprising; if you’d just take a walk and look around; you would find just as many Ubers and mustachioed Lyfts as regular cabs. Armed with a tech savvy population primed to use the latest apps, and discount after discount offered by the deep pocketed Uber if I was surprised of something it would be questioning why the drop wasn’t even more dramatic!

Upon closer examination of the claim that Uber was destroying the livelihood of the taxi driver, I believe that this is a fallacy since in many locations a taxi driver (if his/ her car met Uber/ Lyft requirements) could become an Uber/ Lyft driver as well. Issues such as “Uber’s dont’ know the neighborhood, or they have not passed the  KNOWLEDGE in London ” fall short since navigation technology has progressed to the point to render memorizing entire maps and routes irrelevant. Couple this to addition of user based services such as Waze and I daresay technology trumps the brain.

The two segments that ARE being affected (and consequently the loudest complainers) are the taxi-dispatch companies and the local governments. The first is simply being automated by a service which is more efficient and transparent and well, the second loses on a expensive medallion (or the permit to drive) revenue. If there is a danger to the taxi/ Uber driver in the future, is that an indiscriminate issue of too many Uber “permits” would create too high a supply and not enough economical demand to feed so many drivers. It may not impact the person who would like to make a few bucks on the side, but would turn out to be a risky proposition for those who are leasing new cars just to drive Uber. It sounds tempting to make a quick buck – but driving cabs for long hours is not for the faint hearted…

I am less concerned of issues such as market dominance and monopolization – both from a free market and regulation perspective. In the former, any attempt towards the same would see the rise of alternatives emerging to offering cheaper alternatives (since the technology itself is not unique), and in the latter – governments have time and time again shown the willingness to step in; in this case the Uber would once again become like the regulated “yellow taxis” of old.

But for now, they are here to stay – and all moves to provide efficient, safe and effective transportation to the masses must be applauded and encouraged. GO Uber!

Net Neutrality – let the “Blame Games” begin

The picture stared right back at me – it was hard to miss, with a bright red background and letter’s clearly spelled out  – “Netflix is slow, because the Verizon Network is congested“. It is hard to pass a few days without yet another salvo thrown in the latest war against net neutrality. No sooner does one side claim victory, the other party files a counter-claim. This is not only a US phenomenon, but has also spread to Europe; regulators now have their backs firmly against the wall as they figure out what to do.

What is a pet peeve of mine is that although there are good, solid arguments on both sides – among the majority of comments there seems to be a clear lack of understanding of the whole situation as it stands. I am all for an open and fair market, an ardent supporter of innovation – but all this needs to be considered in the context of the infrastructure and costs needed to support this innovation.

A few facts are certainly in order

• People are consuming a whole lot more data these days.  To give you an idea of what this is – here are some average numbers for different data services
  • Downloading an average length music track – 4 MB
  • 40 hours of general web surfing – 0.3 GB
  • 200 emails – 0.8 GB, depending upon attachments
  • Online radio for 80 hours per month – 5.2 GB
  • Downloading one entire film – 2.1 GB
  • Watching HD films via Netflix – 2.8 GB per hour
• Now consider the fact that more and more content is going the video route – and this video is increasingly ubiquitous, and more and more available in HD… this means
  • Total data consumption is fast rising AND
  • Older legacy networks are no longer capable or equipped to meet this challenge

Rather than to dive into the elements of peering etc for which there are numerous other well written articles I would like to ponder on three aspects.

1. These networks are very expensive to build out – truck-rolls to get fiber to your house are expensive… and
2. Once built out – someone has to pay
3. and finally – firms are under increasing pressure from shareholders and the like to increase revenues and profits…

This simply means that if the burden was all on the consumer – he would end up with a lighter (I dare say a much lighter) wallet. It would be similar to a utility – the more you consume, the more you pay. It would be goodbye to the era of unlimited data and bandwidth (even for fixed lines).

Now, I totally get the argument when there is only one provider (a literal monopoly) – then the customer is left with no choice. This is definitely a case which needs some level of regulation to protect the customer from “monopoly extortion”. Even when regulators promote “bit-stream access” – i.e. allowing other parties to use the infrastructure – there is a cost associated with the same. Hence this is more of a pseudo-competition on elements such a branding, customer service etc rather than on the infrastructure itself. The competitor may discount, but at the expense of margins. There always exists a lower price threshold which is agreed with the regulator. Other losers in such a game are those consumers who live in far flung areas – economics of providing such connections eliminate them from any planning (unless forced by the government). In such a case – it becomes a cross-subsidy, with the urban, denser populace subsidizing the rural community. However, these can be served by dedicated high speed wireless connections and in my opinion do not present such a pressing concern.

As everyone is in agreement, the availability and access to high-speed data at a reasonable cost does have a direct and clear impact on the overall economy of a country. If we do not want to continue increasing prices for consumers in order to keep investing in upgrades to infrastructure, who then should shoulder this burden? Even though it would undoubtedly be unfair to burden small and emerging companies by throttling services etc, given on how skewed data traffic is with a few providers (e.g. Netflix etc) consuming the bulk or the traffic – would it be fair they bear a portion of this load? After all, these firms are making healthy profits while bearing none of the cost for the infrastructure.

These aren’t easy questions to answer – but need to be considered in the broader context. One extreme may lie in having national infrastructure networks – but this is easier said than done. A better compromise may be to get both sides to the negotiating table and involve the consumer as well, each recognizing that it is better to bury the hatchet and work out a reasonable plan rather than endless lawsuits.

Once this is accomplished – the Blame Games would end; and hopefully the “Innovation” celebrations would commence!

The new battleground – Uber/ MyTaxi against the world!

Last year, I penned in an article around Airbnb and the upheaval this industry is facing. A that time I had likened it as a “David vs Goliath” fight  – the individual renter on one side versus the big bad “industry” on the other. If one looks at the news feed these days coming out of Uber, MyTaxi and others – I have to wonder, did I by any chance get the “David vs Goliath” reversed?

I use both these services, and my recent experience in Moscow re-emphasizes just this need. If you are a tourist, try hailing a cab and negotiating a decent price; in most cases you end up with a smelly cab paying double if not triple the price. Try Uber, and you are chauffeured around in a luxurious S-Class Mercedes Benz, many equipped with free Wi-Fi for a lower price and a clear emailed receipt at the end. No wonder, for tourists in a strange country where local cabbies are accustomed to well – “taking people for a ride”, such services are a godsend!

But how about the better, efficient taxi services in places such as Berlin? They are forced to compete on prices using apps such as MyTaxi, or by limousine services such as Uber. Or take London, NYC etc – where the cab drivers have to take an exam, pay medallion fees (which in places such as NYC can cost a fortune) – how are they expected to compete with the “private Uber’s” of this world? Even lawsuits in this realm seem to be a bit ridiculous, such as what is happening in London. Transport for London allowed Uber on the justification that “Uber’s kit does not require a physical connection between the device and the vehicle”. Well, take this argument to an illogical end then you may have payment POS solutions using NFC or some other sensing technology arguing that they may not need to pay merchant fees since they didn’t have any “physical contact”…. Such arguments are simply frivolous, and loose sight of the bigger picture. Yes, Uber, MyTaxi etc are using a mobile device – but this device is a clear replacement to the taxi meter – if it wasn’t sitting somewhere in the car, there would be no way to compute a fare!

Authorities all around the world do need to move quickly towards a compromise – with all parties (the authorities, taxi companies and the new upstarts) coming to a agreement which has world wide applicability. What could this look like?

• For authorities – it may herald the end of these costly license fees and strict regulation. This may be especially necessary in regions/cities which have an acute paucity of public transport. This does mean that they either lower/ eliminate fees for the taxi firms, or charge anyone who uses his/her car for such services a similar payment (or based upon hours of use). This may lead to lower tax revenue, but would improve overall transport. There is definitely a risk that accidents may increase due to unskilled drivers – but this risk is mitigated by evaluating and approving drivers before being allowed to join such as service.
• For registered taxi services – it would mean to focus on improving customer experience, even banding together to provide a similar service. No one likes to have a different app per city, but if taxi companies really want – they can work together to create a viable alternative. This is akin to partnerships by Telco operators and other regional players, as a defense against a global OTT player who have a global footprint
• For upstarts – funnily enough, wouldn’t recommend anything apart from to get ready for increased competition. Any rulings similar to the above recommendations would move towards leveling the playing field;

Consumers would undoubtedly benefit with an increased availability and better customer experience. In the end, isn’t that the end result of what innovation does – provide viable alternatives, forces legacy providers to improve and innovate and enhances our quality of life.