Telruptive

The short answer is no unless you operate in a part of the world where there is no regional IaaS. The longer answer is:

Amazon is running their AWS services with a cost-plus pricing model. This means they aim for a 10% profit margin. Every time they have improvements in their economies of scale, they lower the price to get back to the 10%.

Although Amazon has healthy gross-margins, the IaaS is all about investing in hardware and R&D. This means that volume is the name of the game. Although Amazon is making IaaS into a billion dollar business, the number two player (Rackspace) is around $285M for their IaaS business. This shows the winner-takes-it-all.

How are operators going to compete?

Competing at price with Amazon AWS, Rackspace, Gogrid, etc. will not be an option given that they are lowering pricing continuously.

Competing with better technology is also almost impossible because Amazon is THE marketleader for IaaS innovation with services like DynamoDB. IT players are just doing catch-up and any operator that will use an RFQ process will just be buying previous-generation-software and hardware. This means in Cloud terminology: legacy systems.

Operators could give better SLAs then the 99.95% offered by Amazon. However in the world of cloud computing, SLAs do not mean anything. If you want availability, then you are better to implement a multi-cloud strategy in which you use multiple cloud providers and your software can move dynamically between them.

Trust? IBM and other IT players can provide that as well. They have been in the Cloud space for more time then telecom and are quicker at deploying technology.

Networking reliability, QoS and speed? Yes but only for a niche segment of the market. A segment that is unlikely to be big if you look at the local nature of most operators.

Geo-localization reasons? YES. This is probably the only valid reason why in Africa, some parts of Asia and Latin-America, operators should look at IaaS. However in Europe, the US, Australia, Japan, Korea, Singapore, etc. this can not be the driver.

So unless you are targetting some very specific low-latency or high data volume nice markets or are in a part of the world where reliable networking and electricity is hard to get, you are unlikely to make your CEO happy with IaaS. You should think about other parts of Cloud Computing like PaaS, business processes as a service, networking as a service, etc.

Killing the mobile broadband oligopoly

For years operators have paid billions for spectrum. Millions of man-years have been spent on building standards like GSM, GPRS, CDMA, 3G, LTE, etc. Can disruptive innovation kill this in a few years?

Yes, it can. The FCC is finding out that large parts of the USA are still not covered by mobile broadband. After years of lobbying by groups like the New American Foundation, the FCC has finally decided to start with White Spaces. White Spaces are also being rolled out in the UK.  White Spaces allows spectrum to be opened for public usage, which was previously used by analog television or to separate different adjacent channels. White Spaces have been referred to as “WiFi on Steroids”.

Another disruptive technology is software-radio networks in which mobile devices use software-driven radio technology instead of hardware-driven radio technology. This allows a mobile device to be compatible with different standards and to switch and evolve quickly. Putting software-radio in a mobile phone will make it possible to use dynamic white spaces, in-door networks, etc.

A final disruptive technology is Openflow. Openflow, is part of software-driven networks, in which routers, bridges, firewalls, loadbalancers, etc. are implemented on software-level. Networks can be virtualized and used with different QoS and configurations at the same time.

Google and Microsoft are major backers of the White Spaces initiative. They also control two important mobile operating systems. Google is also running pilots with fiber-to-the-home. Google has its own routers and other network technology.

Google could easily be the first White Space operator and use a Fon-like way to roll out their network.

Killing ARPU

SMS is already death, and it will be just a matter of months before operators will see deep dives in revenue. Apple could make the iMessage protocol public and Android could come with a standard iMessage-enabled solution and people would no longer send SMSes but would not even realize it.

Next one on the list are calls. Roaming is already seriously being challenged for years by Skype and others. Operators are planning for VoLTE, or voice over LTE, only by 2013-2014. However most will start rolling out LTE in 2012. This is the ideal situation for Voxtrot, and others, to use the vacuum to get people accustomed to free calls. By the time VoLTE will be available there might just be one market price for it: FREE.

Other value-added services, are already being substituted. MMS is called Twitter & Facebook mobile app now. PBX are now on the Cloud. Call centers are now offered as a service.

Killing ROI

Operators are pushed by the market to invest in LTE roll-outs. However why would you need LTE? There is not a single operator service at this moment that will make people queue up in front of their stores to get an LTE subscription. There are a million and one reasons in the form of mobile apps, mobile video streaming, social networks, HD Video-calls, etc. that can push customers towards the over-the-top-players.

So network investment is only going to rise and revenues from the new technologies will be meager at best, if not cannibalizing high-ARPU services.

With Mega Upload and other sharing sites being disabled, illegal file-sharing is not going to go away. P2P is likely to come back with a vengeance. It is easy to shut down large sites. However what if special encrypted P2P apps are used to distribute the location of content and botnets for distribution. There are a lot of computers that are connected to the Internet but are badly secured. Instead of using them for spamming, Mega Upload 2.0 services can use them to store and distribute content. As long as these “hacked” computers use HTTP(S), it will be very hard for operators to distinguish regular do-it-your-self websites from illegal content hubs.

Killing the operator’s established business model

Operators have educated subscribers that everything that comes from them has to be paid for. Disruptive operators like Free.fr are undoing this education by giving a lot of services for free when you pay the monthly subscription fee.

The Freemium business model is likely to find its way into the telecom industry. The model in which 90-98% of the users get the service for free and 2-10% generate the revenue by purchasing premium services. Combined with advertisement, this is the model of big successes like Zynga, Linkedin, etc. Disruptive players that adopt Freemium are likely to start offering services outside of their country borders since the more people participate, the better. With a winner-takes-it-all business model expect roll-outs to be very aggressive.

What can the telecom industry do?

The first thing operators should do it to tell their providers that their top problem is the lack of new revenues that will sustain the industry. Not LTE roll-outs, not fiber-to-the-home, not customer experience management, etc.

Telling telecom providers that new revenue solutions will be a top priority for 2012 will shift R&D budgets into the right direction.

The second thing operators should do is to stop using their existing purchasing techniques to try to generate new revenues. Nobody will be able to invest 5 months into an innovative solution, spend 3 months doing business development, pass 3 months on filling out RFIs, pass another 4 months filling out RFPs, 2 months on contract negotiations and 6-8 months on delivery. The industry can not wait 2 years to launch the first solution. Especially the herding nature of operators is making any introduction of new innovative services difficult because everybody wants a market leading solution but nobody is willing to be the early adopter.

The response should be different. Joint innovation teams that are able to break the “established rules”; that are able to launch “beta-quality” services to early adopters; that are able to innovate with both technology, business model and go-to-market strategy, etc. Operators should be embracing innovation and learn from the IT industry and even better the dotcom industry on how innovation is done quickly, efficiently and successfully…

Telecom operators pay millions in software licenses each year. By doing so they are sustaining an industry of “feature loading”. “Feature loading” refers to complex software solutions that in order to win RFPs add more and more features. Most telecom operators are using RFPs to compare different software solutions. Whoever has more features for the lowest price wins the deal. The end result is that telecom software is unnecessary complex and expensive. Software providers do not want to respond with “not compliant” and prefer to add some extra feature even if the one who wrote the RFP will never ever use them.

The likes of Apple have shown us that software is most beautiful when it does very few things very well. The era of mini applications allows users to use special purpose “apps” for each activity. No training required. No heavy investment. No heavy integrations.

Telecom operators should move away from the long RFPs with hundreds of features being compared. Instead they should try to simplify. Why pay millions for a complex system that does too many things too complex? Many large dotcoms have moved away from this type of solutions and have used Open Source, have built single purpose systems/services or generic platforms with plugins to reduce complexity.

Examples:

• Amazon has pioneered Cloud Computing and has created individual single purpose systems or services that are easily accessible via REST or Web Interfaces. Different individual services (e.g. product recommendation, virtual server, virtual storage) get aggregated into complex solutions at the last moment.
• Google built its Google File System, BigTable, etc. as generic platforms on which hundreds of other services could be easily added.
• Thousands of dotcoms are using Hadoop, Cassandra, etc. to store data.

Each telecom service needs to be provisioned, rated, charged, billed, monitored, operated, supported, migrated, etc. By building solutions in which network, IT, communication and services are mixed into mega-complex architectures it has become impossible to launch new services in less than 12 months.

Building a Free Telco PaaS

How to do it differently? Is it possible to build a zero-license Telco PaaS that acts like a giant service delivery platform in the Cloud? YES

Operators will need to use Open Source, IaaS and SaaS solutions. IaaS can be delivered cheaply by using Open Source components: KVM for virtualization, Open Nebula for virtual machine and storage management, Hadoop/Cassandra for storage, Open vSwitch for network virtualization, etc. On top PaaS platforms can be built with solutions like WSO2 Stratos. Telecom services like Twilio‘s or the private cloud version, RestComm, can be used to allow developers to quickly create VAS. Open Source billing systems have been announced, like Meveo. Online shops can be build with Opencart. Datawarehousing and data analytics with Pentaho or Jasper Reports. There are hundreds of open source monitoring solutions: Icinga, Nagios, Zenoss, etc. Helpdesk can either be SaaS like Zendesk, or Open Source like Request Tracker. CRM like SugarCRM. SIP backoffice systems like FreeSwitch.

Operators should start thinking about the Cloud as a way to simplify internal integrations. All back-office systems should be shielded from the outside via easy to use REST, Thrift/Protocol Buffers, etc. interfaces. Service-based loadbalancing should allow service upgrades and rolling migrations without outages. The architecture should be built with Salesforce.com in mind. Non-programmers, and even better end-users, can build their own VAS by using drag-and-drop interfaces and combining different service blocks together into custom solutions. Plug-ins allow for custom behaviour without cluttering a solution for the rest of the users.

Operators should embrace new disruptive technologies to simplify their business, lower their cost structures and be able to launch new services every hour of the day. Large dotcoms are launching new features every day and use A/B testing to validate if users like them and they add to the bottom line. Marketing and product management get a totally different dimension…

2012 will be the year in which Apple’s mobile app revolution will be translated to every device (PCs, tablets, mobiles, signage, m2m, cars, TVs, etc.) and to the enterprise. Instead of a static company portal and an IT-driven software selection, 2012 will bring apps to the enterprise. Workers will be able to use their PC’s browser as well as a BYOD (bring your own device) to select apps from a company-wide or global enterprise app store. No longer will you have to pay for an annual license to edit a video, image or CAD drawing if you only use it twice a year. Software will be a lot more social. Not only IT will loose power, also marketing and upper management. Crowd-sourcing can allow employees to vote and rate and as such let content and opinions bubble up that might not always fit upper management’s strategy. However when used correctly the opinions are likely to beat any internal reporting system or dashboard in accuracy.

What is still pending?
Except for easy-to-use apps, inter-app and Backoffice integration is very important. Expect new “standards” based on innovative dotcom solutions in this area. Enterprise PaaS, a là Salesforce.com but often in private cloud, will move a lot of Excel and Access apps into SaaS apps. Employees will be the major enterprise app creators and no longer programmers.

Easy over training
This app revolution will focus on mini apps with basic functionality and no longer full enterprise solutions that do everything but in a too complex way.

Telecom’ s involvement?
What I described so far sounds like an IT platform and solution however it will span communication services as well. The link between IT and telecom will become very blurry. For this reason it is important for operators to be active in this market.

What if you had a gigabit Internet connection at home and you could connect a simple device to it and start to offer mobile broadband services without paying for the spectrum?

Four disruptive technologies and the support from a large disruptive player like Apple, Amazon or Google could make it possible in 2013. You could make money from instead of paying money for your fiber to the home connection.

Disruption 1: white spaces
FCC, the US telecom watchdog, is opening the US spectrum to unlicensed communications. The term is called white spaces. It basically means that unused spectrum can be used as long as you consult the FCC database and use an FCC approved device.

Disruption 2: Vanu
Vanu Bose is the son of the famous sound systems Bose. Vanu’s venture is about software-defined radio. It basically disconnects your mobile phone from the underlying radio technology.

Disruption 3: Openflow
I discussed Openflow before. It is one of the major standards for software defined networks.

Disruption 4: Cloud Computing
No further introduction necessary.

Bringing it all together
A white spaces compatible “mini base station” at your home that connects to the FCC database to get some local spectrum. Via the cloud and Openflow your nano operator network is linked to hundreds of other networks. A disruptive player offers Vanu enabled phones, e.g. iPhone 6 or Android Nexus Vanu as well as a monthly broadband subscription, e.g. €10 for 100gb. You download a database of “mini base stations”, their location and spectrum onto your phone. You are ready to go. Each time a phone connects to a “mini base station” a virtual network slice is setup (flowvisor / Openflow) and the owner receives money per Mb (nano payments). At the end of the month your Fiber to the Home subscription is paid for or you are even able to make money if you have enough traffic…

1. One or more major telecom operators will fail. With the crisis continuing some major telecom operator will get into trouble due to the high costs of LTE licenses and the abrupt drop in ARPU.
2. Consolidation in the telecom provider domain. Either ALU or NSN will be losing its independence or Chinese players will merge.
3. Nokia and RIM will lose their independence. Microsoft will absorb Nokia.

Let’s hope my negative predictions are wrong and a lot more positive things happen.

The service delivery platform market is going to see disruptive players in 2012. One of these offerings is Restcomm that offers an open source Telco PaaS solution that will get to version 1.0 in March 2012. I interviewed the director of Cloud Engineering of Telestax, Thomas Quintana, who is responsible for driving Restcomm within the Mobicents community.

What is RestComm?

RestComm is what I like to call a “Web Driven Communications Platform”. In order to understand what I mean it’s useful to have a basic understanding of how RestComm works. When RestComm receives a phone call for example, it calls out to some resource on the web to instruct it on how to handle a call. In turn the resource itself can turn over control of the call to other resources on the web. Hence my description of RestComm.

Who is the target user? 

In developed markets that is an interesting question because the target user has always been web developers but we have noticed that the RestComm instruction set maps nicely as a DSL (Domain Specific Language) on top of development platforms such as Java, Ruby, Python, etc. This in turn has made mobile applications developers and desktop applications developers target user communities as well.

In emerging markets the target users are operators who want to deploy a PaaS (Platform as a Service) and provide services to its customers and SME’s

What is the RestComm Vision?

The RestComm vision is to offer a 100% open source and service provider agnostic web driven communication platform to the open source community. Woah, that’s a mouth full

What is on the direct roadmap for RestComm?

There are a quite a few goals on the RestComm road map but I will list the ones I think are currently most important:

• 100% Twilio API compatibility (Available as of ALPHA 2 which will debut in a few of weeks)
• 100% Tropo API compatibility
• Monitoring support
• Web based management interface for easy management
• Support for other communications networks such as Skype and Google Talk

Will RestComm also support non-REST APIs, e.g. Javascript?

Yes, as a matter of fact most if not all of the Twilio wrappers will work with RestComm with very little effort (possible as of ALPHA 2). Usually all it takes is just pointing the API at your RestComm server.

When will release 1.0 be available?

The RestComm FINAL release is scheduled to be available in March. 

What will be in release 1.0 that is currently not there yet?

We are doing a lot of work on RestComm based on community feedback from early adopters so it’s hard to tell everything that will make it in to the FINAL release but the following are things that will definitely be present.

• A super set of the Twilio API to support functionality currently not covered by the Twilio API but requested by our development community (e.g. faxing, call leg and conference room recording, etc.).
• JDBC and MongoDB support (plus it’s very easy to add additional back-ends)
• Support for any SIP origination/termination provider
• Support for more international SMS aggregators
• High Availability support
• and many more things stay tuned

Below are two features that we would like to have available by the FINAL release but are still investigating.

• RestComm application Fail-Over support
• Very large self organizing conference rooms (1000+ participants)

How will RestComm scale? 

This question is a bit difficult to answer because RestComm’s ability to scale is limited only by the infrastructure that it runs on. In order to answer this question I would like us to assume that most of the RestComm deployments will be on private/public clouds with sufficient resources. Now that we have some context RestComm scales horizontally on two layers the RestComm interpreter itself and the media gateways. Each RestComm interpreter can drive tens to hundreds of media gateways providing scaling for media and by placing SIP load-balancers in front of the RestComm applications servers the interpreter itself can be scaled horizontally. We are currently investigation media gateway fail-over where if a RestComm interpreter becomes unavailable the other interpreters in the cluster will take over its media servers and continue executing the RestComm applications.

In order to provide a demonstration on how to accomplish large scale scaling the Mobicents team will publish a paper on how to deploy RestComm on the Amazon EC2 cloud with hundreds of instances once we reach our BETA release in February.

Will there be a GUI management interface?

Yes, we are planning on releasing a web based management interface but we are currently focusing on providing a stable release. 

Will there be a monitoring interface?

JMX and SNMP support are currently available for the Mobicents Sip Servlet Container which RestComm sits on and that is how we monitor RestComm for now. In the future RestComm will provide its own monitoring interfaces.

Will Telestax offer support/SLAs for RestComm?

TeleStax enables Telecommunication Service Providers and Enterprises to create scalable communication applications based on Open Source and Open Standards. Therefore, TeleStax will provide supported versions of the “RestComm Platform for Production” aka RCPP (like JBCP) to its end customers. The support subscription will be for developement as well as production support with flexible SLA’s to suit the requirement’s and demand’s of end customers. For further details contact TeleStax -http://telestax.com/contactus/ 

In the nineties it was paradise for those people who wanted to innovate. Unfortunately a lot of innovators forgot about revenues, cashflow, margins and profits. As happens too often in history, we went to the other extreme: clueless management by numbers. The type of management that thinks a strategy equals a growth target for next quarter. Innovation equals the next product release. M&A and financial engineering can make up for a louse product portfolio. Milking the cashcow can last forever.

The current crisis has many causes but one is definitely clueless management by numbers. For years IP telephony solutions have been around but no major operator has abandoned circuits. We ran out of IPv4 addresses recently and the world is full of sub-optimal NAT. The iPhone, Youtube, Netflix, etc. are killing networks but nobody tried seriously to come up with new revenue generators for operators.

It is five to twelve. Operators and telecom providers will need to join hands and come up with innovative products and solutions again. Management can no longer hide behind numbers because even with the best financial engineering the existing cashcows are at most two years away from dying. It is time to look for leaders that understand business and new technologies. The alternative is very clear. Telecom operators consolidate and seriously reduce headcount. Telecom providers get squeezed and either die or seriously reduce headcount.

Except for focusing on the core business, every operator and telecom provider should have an independent business unit that focuses on new revenue generating solutions. Otherwise can the last one to leave please switch off the light…

In recent weeks I had the pleasure to talk to the team behind Mobicents. I have been pleasantly surprised by Restcomm. Restcomm is Twilio for the Private Cloud. Telco 2.0 SaaS for private cloud. Tropo APIs are also on the roadmap. Mobicents is starting a revolution by moving away from telecom standards and moving to the new Cloud telecom standards. Telecom engineers are no longer needed to make enticing value-added services. Any web developer can make telecom apps in minutes and integrate them with Web 2.0 and social networks.

Is Restcomm a threat for Twilio? Quite the contrary. Many larger companies did not want to move to Amazon because of fears of vendor lock-in. Eucalyptus brought a way for public cloud apps to move to a private cloud. Restcomm will allow companies to move their telco apps to the private cloud when they become a large hit. Developers could even start from a private cloud deployment and move apps to Twilio when spikes in demand happen, a.k.a. cloud bursting. In general Twilio is very likely going to get more customers instead of less by having a valid open source alternative.

Mobicents is also undergoing large changes. There has been a shift in direction at Red Hat and the Mobicents team started their own company called Telestax. The company is independent from Red Hat, however it will partner with Red Hat for telecom opportunities involving RHEL and JBoss products.

Let’s assume a new telecom competitor is entering the European market: RyanCom. Similarities to RyanAir are purely fictual

1) The Network

Instead of building expensive antenna networks RyanCom would make deals with Cable operators to put Femtocell equipment in cable modems and as such cheaply get coverage in major cities. Everybody that would switch to a Femtocell modem in their home or office would get 6 months of mobile usage for free.

Ryancom would have an agreement with the smallest operator in every country to sublease capacity if a Femtocell is not available.

2) Target User

iPad, Tablet owners, Websurfers, Roamers, etc. Ryancom would allow one data plan for the whole of Europe. Since the bulk of the traffic would go via Femtocell, better access costs could be provided. €5-10-15/month to have €5-10-15 Gigabyte/month.

3) Backoffice systems

All backoffice operating and business systems would be running in a cloud and open source is heavily used. Since there are only a limit number of data plans, there is no need for a billing system. SaaS like Zuora are enough. Google Apps and Salesforce would also be heavily used.

4) Social aspects

Social aspects would be very important. There would be competitions going on for which subscriber can convince more friends to join RyanCom.   There is no helpdesk in the traditional manner. There is community support just like GiffGaff.

The End Result

RyanCom would be able to gain young data-intensive and roaming subscribers. They will see RyanCom initially as a second provider for their tablets. Little by little RyanCom could become their first provider when Skype and other applications become common use to make mobile calls.

RyanCom might be a fictional company but operators should be warned that fiction and reality might be just a matter of time…