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Sunday, December 18, 2011

2012 Winners and Losers

It's time for the annual merry-go-round of analyst predictions, and so I'll thrown my hat into the ring as usual. Some of these will come as "no surprise" to my regular readers & clients, others represent a bit of a change of stance.

I'm hideously busy before I head off for the holidays, so I'm afraid these are just bullet points. More detail & explanation will crop up here over time, or on my new subscription @DApremium Twitter channel.


Winners:
  • Telco OTT services & business models This won't surprise many regular readers as it's a theme I've talked about for many years. It's a complex and nuanced area though, and we'll see as many failures as successes, if not more. Nevertheless, trial & experimentation are essential "you have to be in it, to win it"
  • Loyalty business models for telcos - I think much of the future revenue growth opportunity for operators comes from clever pricing and marketing, assisted by network technology where needed. "Top up your account by $10+ by Wednesday and get a free 20MB of data and a discounted movie ticket".
  • Charging/billing related policy engines  - the key enabler of loyalty schemes and other similar offers. The policy "intelligence" will primarily reside in the IT side of the operator, with enforcement on the network side. We'll also see on-device policy clients extending beyond today's simple dashboard / quota apps.
  • Enhanced telephony & SMS services or functions - Making existing 20-100 year old services better should be prioritised above creating new ones. So-called HD voice is a start, but it's shameful that the industry abdicated its responsibility and to let Apple create Visual Voicemail and Siri, or Palm and others developed threaded SMS. Unfortunately, the obsession with standards and interoperability seems to stop the telco industry itself from improving the user experience of basic functions.
  • Non-seamless operator wifi (offload, onload & other models). "Frictionless" will be a particular winner, not "seamless" (ie user will remain in control most or all of the time). A regular topic of mine: see various blog posts and this white paper I wrote on Carrier WiFi.
  • iPads & Kindle Fires as complementary devices - OK, I'll admit I was unduly pessimistic about the impact of the iPad when it first launched. However, I still see it largely as an *extra* device for people rather than a substitute. I still don't buy this "post PC era" rhetoric. Netbooks were extra devices too, sold to people wanting a cheap portable second computing device - and iPads fit in the same category, with added coolness and new use-cases. I see the Fire as doing something similar - it looks like something new and fun, but again is incremental not substitutive.
  • Microsoft & Nokia smartphones - I'll take a flyer on this and say that I expect MicroNokia to be a surprise success, although I think the buyout rumours are bunk. That said, it's critical we see continued developer traction - my main reason for not getting a Lumia at the moment is lack of support for some critical apps for me (BTFon for WiFi, Onavo for roaming data-saving, not sure if the Barclays London bike hire scheme has one yet)
  • Mobile broadband data plans based on speed, location, time, device & user - all of these criteria can be determined accurately and easily (unlike application type). Ever more sophisticated pricing plans will be developed around them, supported by realtime information about network congestion, and perhaps ways to offer "happy hours" or similar.
  • On-device network-intelligence for connectivity, policy & control (including both telco-driven innovations & more user-centric apps). Another theme of mine recently: trying to manage the network just from the core won't work - there needs to be intelligence out at the real edge to understand what's going on. Trying to guess about "video optimisation" when you don't even know if the user is watching a foreground player, or downloading in a hidden window makes no sense, for example. To know, you need footprint on the phone. Same deal with managing WiFi access and maybe policy in accordance with user wishes & expectations
  • Consent-based mobile video delivery eg based on Operator CDNs, adaptive bitrate streaming &  close cooperation with video publishers. Where the operator works directly with a content company, they get "consent" to reformat or otherwise manage a video stream. That is going to be much more acceptable than trying to use boxes in the network to "optimise" it without permission or transparency. I wrote about the idea here (and comments) and I spoke about this at a conference recently - watch for an upcoming white paper.
  • Wholesale 3G / 4G networks - yes, LightSquared has problems with GPS. But the general model of wholesale-centric LTE networks is a very strong one. Depending on the market, some will see disruptor new entrants, some will see government intervention, and others may see existing tier-2/3 operators opt for structural separation.
  • Freemium Twitter / LinkedIn business models for analysts, consultants & other professional services companies. Sooner or later, someone clever is going to find a way to make money out of Twitter *coughs modestly*

Losers:

  • RCSe - It was dead. It's now still dead, but shambling around like a zombie. I'm hoping to publish a report shaped like a wooden stake during 2012.
  • NFC payments - classic case of a solution looking for a problem, with the added bonus of squabbling over who controls the wreckage. Massively overhpyed.
  • QR codes - They're everywhere it seems. But have you ever actually seen somebody use one in public? Just give me the URL: I'm not going to "engage" with your marketing until *I* decide to.
  • LTE in Europe - Spectrum, devices, voice, business case. Oh and flattening demand for data as well.
  • SMS revenues - they've been a sitting duck for years. 20 years ago, sending 160 characters of text was quite a feat. Now, not so much. I expect massive price erosion (even within bundles) as a response to the continued viral adoption of iMessage, BBM, WhatsApp & whatever 2012 brings us.
  • Cellular-enabled tablets - Poor fit of subscription "data plan" model with computing devices that tend to get used in unpredictable and ad-hoc fashion, often in places with WiFi anyway. And in the idea that you'd be happy to let an operator policy-manage your computing/Internet experience, and you've got a recipe for disaster. I told you so, 3 years ago.
  • Telco control of user identity - I think the idea of SIM=identity will break down irretrievably in the next 24 months. Operators *do* have a role to play in ID and authentication, but it needs to be much more nuanced and user-centric. Some of the stuff that my associates at Telco 2.0 are doing with the World Economic Forum is interesting, but the industry still has too much of an arrogant belief that it can "own" more customer knowledge than it will get in practice.
  • App-based policy control & charging - Another familiar theme of mine. The network doesn't see apps the way that users do. HTML5 makes the problem even worse - how do you charge for "Facebook" when there's 800m different versions, created on the fly in the server?
  • Eurozone-exposed telecom companies - I'm not an economist, but delving into the topic with Telco 2.0 for a recent paper made me realise some of the problems that next year might bring. Hopefully I won't be writing the 2013 predictions from a cave, looking at the smouldering ruins of civilisation. All things considered though, I'm quite glad to be living and working this side of the Channel, despite the Monty-Python inspired taunting from our friends in Paris.
  • ANDSF, IFOM, I-WLAN & seamless wifi offload - There's some good stuff in ANDSF (eg advising the user which WiFi access point is best), but it's a bit buried in the general belief that operators can control users' WiFi overall, forcing connectivity and enforcing policy. They can't, expect in a few corner-case instances. Attempting over-control will backfire: telcos can either control 30% of user WiFi, or zero. I suspect they'll aim for 100%, and the push-back will mean they'll get zero.
  • Operator API balance-of-payments vs. Internet companies - Telcos are still pushing "capability exposure" via initiatives like OneAPI and Telefonica's commendable BlueVia project. But they're still not doing the right APIs in many cases (eg "does the user have a suitable data plan?", or "does the user have good coverage & network speeds?"). Meanwhile, Google, Facebook and others are starting to charge for bulk access to *their* APIs: telcos are often major users. Result: the net API balance of payments won't be pretty.
  • Full mobile network outsourcing to "under the floor" players - another theme I've talked about for a while: in some cases, vendors' "UTF" managed services offers are larger strategic threats to telco business models than so-called "OTT" providers. Loss of control over the network might mean Opex savings, but it introduces massive opportunity costs from lower flexibility. Conference presentation here - and watch for an upcoming report I've written for Telco 2.0 on the subject.

Questionmarks

  • NFC non-payment applications - interactions, not transactions. More likelihood of success, as it could be driven by a million developers doing cool new things, rather than people wanting a slice of transaction values. But dependent on Apple actually launching NFC as a catalyst, mostly.
  • Mobile VoIP as a telephony replacement - we're getting closer, but we're still not *quite* there yet. Still issues with data network coverage, user interaction, numbering, ringing and so forth. Maybe we'll get the real viral trigger in 2012. Hear the issues in more depth at a Future of Voice workshop (and sign up for the newsletter!)
  • Operator reported "voice" revenues - driven more by price bundling & accounting than VoIP at this stage. Some of the recent discussions I've had suggest that operator execs think they're inevitably losing the voice revenue battle. Add in some dry-but-important accounting changes and they're probably right.
  • Development of simultaneous dual-radio LTE + GSM/UMTS phones - In my view, a sensible alternative to CSFB or VoLTE for LTE voice, but it might be a good idea too late (a bit like VoLGA). See this post & comment stream. One sneaking suspicion - the first such device might be a TD-LTE / GSM phone as I suspect that we're a long way behind implementing both CSFB and VoLTE on TDD networks.
  • Android tablets - can't see the point really, unless you get something much cheaper and more interesting like the Kindle Fire.
  • Blackberry resurgence/demise - 2011 as been an awful year for RIM. A big outage. Storm over encryption. The PlayBook is a cool device lacking an essential capability (email). It hasn't capitalised on its BBM franchise well enough either and is being "outcooled" in its core teenage market, while being sidelined by BYOD policies in its legacy enterprise customers. Can it survive 2012 as an independent? I'm a lot more pessimistic now than a year ago. Clearly some organisational issues to deal with, but at least it's actually still making some profit.
  • Possible network overcapacity as "data explosion" fizzles out - Let's watch the stats over the next 6 months. I've a feeling that the Cisco VNI numbers have created a self-denying prophesy - the industry has developed 20+ solutions to the "data explosion" problem, and it seems that at least 10 have worked - perhaps too well.
  • HTML5 impact on mobile networks if (& that's a big if) web apps take over from downloaded apps. Nobody seems to have thought about signalling, overall traffic load etc. I spoke about this at a recent Telco 2.0 event in Singapore, and I'm writing a research note for them for early 2012.
I hope you've found this interesting & thought-provoking. As always, I'd love to hear your opinions or disagreements on any of this. 
I'd also like to suggest that you challenge your own company - I do numerous workshops and advisory projects for operators, investors and vendors on "Disruption". Some of this focuses on individual issues mentioned here (eg "What's the negative story around RCSe?"), while sometimes I'm asked for an across-the-board wake-up call to provoke thought and discussion. Please get in touch via information AT disruptive-analysis DOT com.

8 comments:

Anonymous said...

You should add RCS as a loser too. Infact you can add any service that a carrier creates as a loser product. In the future the carriers will be dumb pipes serving bits and only a few telecom vendors will survive. The mobile world will be dominated by the OS manufacturers for a very long time (and thank god for that).

To summarize, you cannot beat first rate engineering talent with 2nd or 3rd rate engineering talent and even worse management and leaders.

Dean Bubley said...

Hi Anonymous

I think that's a bit too sweeping a statement. There *is* some good innovation in the operator space, although it's distributed unevenly.

For example, Telefonica/O2, DoCoMo, Telenor and quite a few emerging-market telcos are doing some really cool things. Even the US operators are buying or building some interesting positions in areas like cloud services.

Anonymous said...

Hi Dean,

I would love to see an example of where google, apple, amazon, msft(skype) are not eating operator lunch. Lets take example RCS(joke) vs FB/Twitter, VoLTE (not existent) vs Skype ( I used skype number on ipod touch with mifi for a month, it works just fine), cloud services (ahem have seen amazon?), video calling ?

Love to specifics of innovation you talk about.

Davide said...

"Android tablets - can't see the point really, unless you get something much cheaper and more interesting like the Kindle Fire."

Why an Android tablet cannot be as cool as an iPad and compete with it? It has a chance to succeed as it is much more open than the iPad.

Dean Bubley said...

Davide

Personally,I don't think *any* tablets are cool. I still have no use for one, except maybe reading PDFs on a plane. So yeah, Androids would work fine for me, but I wouldn't pay more than $200 for one as a gadget. I'd rather buy a pair of shoes.

But some people seem to think the iPad is cool. There's one next to me in the departure lounge at Penang Airport right now, playing a game. Others like the Apple brand, or are locked into the iTunes ecosystem already.

It's not obvious to me why anyone would want an Android at an equal price to an iPad. For normal users, they're open enough - "full" openess is only a geek thing.

It would need to be *different*, both in form & function. It's possible that some super-edgy industrial design might be enough for a few me-too second-placers, but there's needs to be a new "concept" as well for it to be really successful. Amazon's done it for people who are interested in content, so it is possible.

But mainstream Android tabs? I reiterate - what's the point?

Stanimir said...

Even NTT Docomo expects its voice revenues to decline 30-40% in the years to come as OTT players are taking market share. So, OTT players are quite relevant.

The Voice on Telecom said...

Is it time for the SMS to evolve?

Decling SMS volumes triggered by rising smartphone penetration and the popularity of third-party messaging apps like WhatsApp means revenues could follow suit in 2012...

However, as wonderful as all these apps are - have you used any of them during Christmas or New Years to offer best wishes?

(Its a bit like your example of QR codes - does anyone actually use them?)

Although I use WhatsApp I prefer the reliability of SMS at New Years, Christmas, Valentines day.

After all if you're trying to reach someone less tech-savvy, lets say Grandmother living on the other side of the world basic communication is often the best.

Data connections are growing in affordability and will soon become ubiquitous creating more and more competition for the humble SMS.

Despite this trend SMS could continue to rule the roost as long as it is provided at a price people are prepared to pay once it can be used to reach almost everyone, at any time on almost every phone.

Perhaps its time for the SMS to evolve...

http://www.thevoiceontelecom.blogspot.com/2011/12/generation-text.html

Gunjan Indrayan said...

Now that LightSquared looks like a non-starter (for not much fault of their own), do you have anyone in mind who could try the wireless wholesale model using LTE in US? Is there a market for that?
LTE in Europe I think would see a slow deployment and implementation, but LTE is the future, so it has to come eventually.