In our telecommunications world, where yesterday seems as old as the black and white TV era, and where tomorrow seems as unpredictable as a winning lottery number, it is sometimes good to take the helicopter (drones can’t carry me yet, see this post!) and have a global look at the situation.
This was the purpose of the DigiWorldSummit 2012, organized last month by our friends from IDATE, a famous company of industry analysts located in sunny Montpellier in the South of France – and a city I know very well because I studied there for years!
While last year’s summit was entitled “Will The Device Be King?”, acknowledging the disruption brought by smartphones, tablets and connected TVs, to name a few, this year’s event was about “Game Changers: Mobile, Cloud, Big Data”. A very interesting subject and one that lead to the participation of several hundred people from many countries, and keynotes from leading company executives, including Alcatel-Lucent’s CEO, Ben Verwaayen. The event was broadcast on the Internet, and there was a livetweet during the conference to ease interaction between speakers and the audience.
The question was how these game changers would impact the different industry players in the value chain. While the value chain is shaken, it is clear that these game changers represent opportunities for all stakeholders and threats as well if not managed properly. With such a large topic, one could imagine that not all value chain players have the same analysis. Some of them are local players locally regulated, others are worldwide players not regulated and as a consequence, friction happens.
The situation is quite simple: the consumer (also known as you and me) wants access to their favorite convent wherever they are, at any time and on any device. Some big brains call this ATAWADAC (Any Time, Any Where, Any Device, Any Content). This is not new.
What is new is that we have moved from the voice era to the video era thanks to very high broadband fixed and wireless networks (for example, 80% of Vodafone Germany’s traffic is now video and Netflix represents 33% of all Internet traffic in the US!). Pascal Cagni, the former head of Apple in the EMEA region reminded the audience that the iPhone’s success was due to cellular networks.
We are getting a variety of devices that can display the same content, whether they are TV sets, computer desktops, laptops and netbooks, tablets and smartphones. And we will soon have cars, spectacles and many others! And we’re using more and more of these devices on the move (there are more people in the world today using mobile phones than toothbrushes!). Since we want this content on all these devices, it becomes impossible to make manual content replication, so better put the content it in the Cloud.
So, if content is in the cloud, why should it be downloaded on all devices requiring from them storage capacity and computing power? Why don’t we stream it? And if all activities are now made with content from the cloud, it becomes very interesting to analyze all this information, transactions, activities and others and store them in the cloud as very BIG DATA.
Transforming this data into meaningful information, thanks to powerful data mining and correlation algorithms, allows for new services – leading to new business models. During the conference, small examples were given on big data: you could monitor flu progression and predict when an outbreak reaches the epidemic threshold by region by simply monitoring the number of searches for “flu” in Google! Microsoft designed Kinect based on big data gathered from studies of human movement. There are many others and even more to come.
As more content will appear on more screens, leading to more data generation in the cloud, the information we will extract from this data will generate further content demand. For example, 4G LTE is a real enabler of cloud gaming thanks to its low latency and throughput, according to Alexandre Wauquiez, head of Network Marketing for the French operator SFR. And if people do more cloud gaming, more LTE capacity and services will be needed. “La boucle est bouclée” [the loop is closed] as we say in French!
Analyzing the impact on the value chain, I take no risk in saying that:
- People will not use many devices if they don’t have nice content to consume
- Content will not go to any device if these devices are not smart and provide a good user experience
- No content will go to any device if the network cannot carry the corresponding data and prioritize the different data flows
So we have three essential components in the value chain: devices, networks and content in the cloud. The different industry players in these three domains have different fortunes in the different regions of the worlds.
Speaking about Alcatel-Lucent as network equipment makers, we are very excited by this prospect because we have tremendously improved the throughputs of networks and network capacity while reducing their power consumption. Today, a network is a very ‘fat’ intelligent IP pipe that can carry any content, fixed or mobile data, at a constant lowering cost and power consumption per megabyte. We, at Alcatel-Lucent, call it the High Leverage Network or HLN and it becomes a true platform.
In the mobile world, to complement additional wireless spectrum and the introduction of more spectral technologies like LTE, small cells provide a spectacular means to improve capacity. This was something stressed by Gabrielle Gauthey, Executive Vice-President of Public Affairs at Alcatel-Lucent. Laurent Fournier, head of Qualcomm’s EMEA activities added that the combination of spectrum, technologies and small cells is enabling a multiplication of network capacity by a factor of 1000.
The issue is that in some geographies, service providers are suffering. They cannot translate the spectacular growth in traffic consumption into revenues, and they have to invest in networks to cope with that growth (researchers at Alcatel-Lucent’s Bell Labs researchers predict mobile traffic will multiply by 25 between 2011 and 2016; Dominique Baroux, AT&T EMEA VP of Regulatory Affairs, explained that traffic via AT&T networks has multiplied by 250 in the last five years) but can’t get return on this investment. The reasons why a return-on-investment doesn’t happen in some regions like Europe are numerous: we are in an industry where operators need scale and visibility but the market is too fragmented with too much regulation (20 regulators and 100 operators in Europe compared to one regulator and four national operators in the United States). This is why Europe is suffering while other geographies are investing.
Stéphane Richard, CEO of FT/Orange explained that due to competition and regulation, FT/Orange anticipates a 10% revenue decrease this year and another 10% next year. In addition, consolidation has at times been difficult because regulators were blocking it, for example, in Austria where Orange can’t sell its operations to Hutchinson.
While consumers might be happy with a price decrease, Stéphane Richard shared the results of a study by Arthur D Little where France appears now as the cheapest mobile market in Europe, after being one of the most competitive in the fixed-line industry! This makes investment a bit constrained.
In my next blog post, we’ll see what are some of the solutions to this market constraint, how to monetize data and the importance of networks in the whole value chain
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