Groundwork for a new direction in telecoms

Shortly before Barack Obama won the election in 2008 I started to work with what became the Obama Transition Team on some of the US telecoms policies. Obama and his small team of technological experts were aware of the developments in Australia—particularly in relation to the need for trans-sector policy on broadband infrastructure.

Together with a team of national (US) and international experts we prepared half a dozen 'BigThink' strategy reports for the Obama Team in the White House.

We also established a good relationship with the FCC (Blair Levin's team) and NTIA (Larry Strickling).

ALL parties publicly agreed to a trans-sector approach and many of our suggestions are clearly reflected in the stimulus package (open networks) of the FCC national purpose strategy. And our suggestions also appear in the upcoming National Broadband Plan—in the trans-sector approach to the public safety sector and the proposed mobile broadband infrastructure for this sector.

Visionary plan now needs legislative action

However, if we're talking about 'national purpose' a transformation of the telecoms industry is crucial, and the FCC has been specifically forbidden by Congress to address this topic.

The National Broadband Plan will most certainly highlight the benefits attached to a 'national purpose' policy but it is up to the Congress to make it happen. The plan will provide a new, visionary direction for telecoms in America but unfortunately in its current state it is a toothless tiger. It will be up to Congress to take action through legislation—without that it will be impossible to implement the plan in any timely fashion.

As matters stand at the moment the plan is the best the FCC can do. They should be applauded for the work they have done so far—they have laid the foundation for a totally new telecoms direction in the USA.

All of these trans-sector/national purpose policy proposals require very significant changes to the way the telecoms industry works and if—as has been stipulated by Congress—this can't and therefore will not be addressed in the Plan.

Affordable access to broadband infrastructure

Another key to telco transformation is the creation of a level of 'affordability' both for the end-users and for the sectors that could use the infrastructure, you won't get this without tough legislation.

To just get very fast broadband to American homes in isolation from this trans-sector approach is fairly useless. While you might get such a service to all homes the reality is that without a utilities-based trans-sector approach towards the underlying broadband infrastructure it will be impossible to make that an affordable service. We only have to look at the charges that currently apply to such (fiber-based) broadband services to realize that probably only about 25% of Americans can afford this.

While not defined as such in the USA, broadband is simply infrastructure. (Access to that infrastructure is now declared a national right in several European countries.) A problem in the US legislation is that the previous Administration gave broadband the unusual classification of 'an information service' and not an access service.

National purpose good for the nation and for lowering the consumer bill

If the trans-sector approach is applied other sectors (healthcare, education, energy, public safety) can be directed by the government to start using this network—thus paying their share towards the cost of the broadband infrastructure—for the delivery of their services, e.g., the monitoring of aged people from their homes to reduce the need for hospitalization.

This has to be a government-driven approach as the social and economic trans-sector benefits fall outside the balance sheets of the telco providers. These benefits need to be carefully monetized and used as input by the government in developing government policies in these areas. The OECD has indicated that the savings made by using the broadband network for healthcare, education and transport alone could pay for the deployment of a national broadband network.

Unfortunately the economic benefits are very hard to calculate. But was it possible to predict the benefits of the electricity network when it was built? The naysayers in those days said that it was outrageous to pay for infrastructure that would simple replace candles.

Structural changes to the industry are needed

In order for those sectors to be able to deliver these services the broadband infrastructure needs to be made available to them on a utilities basis. This can't be done within the vertically-integrated structure of the telecoms industry. An open network policy is required, and that is clearly not on the table in the United States—at least not for 90% of the infrastructure that will be involved in its National Broadband Plan.

So, yes, even without legislative changes the new broadband plan might indeed deliver broadband to most people in the USA—but at what cost to the average American citizen? For the moment at least, the incumbents can't believe their luck at the honey pot the government is placing in front of them. They are in a prime position to deliver these networks and they will not be required to do this at an affordable price. The government will pay the going rack rate which will include a very fat premium to the carriers on top of costs.

This situation cries out for structural changes to the industry, but it doesn't look as though change will take place in the foreseeable future.

The end result is that access to broadband will remain significantly more expensive to Americans than to people in countries that opt for an open network and utility approach towards basic infrastructure.

Regional and Rural America will be second rated

Another result will be that regional and rural users will get a second-rate service (lower speed). There is no way that those premium prices charged by the incumbent telcos can be afforded to build an equivalent broadband network in regional America. This is a very dangerous development as it will undermine the delivery of the trans-sector services to those communities. Healthcare, energy and public safety services require Qos, security, reliability, privacy protection, etc. A second-rate network will certainly compromise some of that and might even render it unacceptable for the usage of such service.

As mentioned above, the incumbents are jumping up and down with joy and—in relation to voluntary cooperation to give some spectrum back—the broadcasters are arrogantly saying 'over my dead body'. But in reality, and based on decades of anti-competitive behavior, who among these players will voluntarily give up their monopolistic rents as requested by what is, in that respect, a rather powerless FCC.

The ball is now in the court of Congress

Congress should take a very hard look at itself and answer some these questions before propping up an outmoded telecommunications structure. This money can only be spent once and at present it appears that without structural changes to the industry the new National Broadband Plan will not provide the right foundation for those national interest investments. It would be impossible to successfully implement these policies without simultaneously addressing the structural issues in the industry.

We have top-class people involved in the development of the National Broadband Plan—the ones mentioned above, as well as the excellent team of extremely hardworking people that Blair Levin has built up.

So that's not the issue. The issue is the failure of the American political system.

For the first time in its history a different approach is being taken towards telecoms in America—we now accept such notions as open networks, network neutrality and trans-sector/national. Let us hope that Congress now takes the baton from the FCC and supplies the legislative follow-up that is required to implement this very important first step.

The plan, as it will be presented on 17 March, has gone as far as the FCC can take it. It is now up to the legislators to be visionary—to make sure that the National Broadband Plan is followed up with legislation that will enable the telecoms industry to deliver the enormous social and economic national benefits highlighted in the plan.

Written by Paul Budde, Managing Director of Paul Budde Communication

The middleware and cloud applications that are now appearing at the edge of the network will of course, be further developed once high-speed broadband becomes available, but already they are having an enormous impact on the telecoms market. The new user experiences that can be obtainable through these applications will enrich fast broadband networks beyond recognition.

What we now have is, on the one hand, the Over-The-Top (OTT) applications that have conquered the world thanks to companies such as Google, Facebook, Amazon, Skype, Microsoft, Apple, Yahoo, YouTube and so on; and, on the other, the attempts by the telcos to develop these apps though their broadband and mobile portals.

By using the OTT route one can avoid many of the problems that the telco industry has been dealing with for decades. I remember as far back as the early 1990s, when both Telstra and Optus launched their impressive new billing reforms; but today, more than twenty years later, their billing and operational support systems (BSS/OSS) are as far from completion as they were in the 1990s. In fact it is likely that they are even further behind now, since many new applications have become available since that time—applications that are making those telco systems look like dinosaurs. In the mobile market we can also refer to decade old failed strategy of introducing IMS.

While fast broadband is the essential infrastructure of the digital economy the real action will take place on the layer above the infrastructure. This is where for many years I have envisaged the future of the telcos—facilitating the development of the digital economy, rather than concentrating on end-user products like telephone calls, mobile portals or broadband applications.

This is the world of value-added infrastructure, middleware and cloud services. However the old infrastructure with its legacy of BSS and OSS systems has failed to make the transition to the new Internet-based ICT infrastructure, let alone being able to facilitate Web 2.0 or Web 3.0 services.

In the meantime it is the new digital media companies that are building not national but international middleware networks. While telcos fail to service customer bases that consist of millions of users the digital media companies are able to serve hundreds of millions of customers.

Therefore NBNs could be a godsend, since this will, potentially at least, give telcos the opportunity to build a value-added layer on top of the infrastructure that will be capable of delivering Next Generation Network (NGN) service such as Web 3.0+ services.

However, while the digital media companies are progressing in this field on a monthly basis, telcos still measure their progress in years, so at present the gap is still growing, but not in favour of the telcos.

So the sooner the telcos start their transformation the better.

However, after well over a decade of calling for change time is now running out. They have now also lost the mobile portal battle against the apps market (that happened so fast they never knew what hit them). If the telcos miss this last opportunity it is indeed highly likely that they will be relegated to being basic infrastructure operators—and that market is also under threat as construction companies are better-positioned to do this job after most telcos went out of this business one or two decades ago.

On a more positive note, while customers might not like their dinosaur telcos they do, at the same time, trust them. They have built robust systems with enormous reliability and sound security based on proper standards and availability everywhere.

So the telcos could use this advantage to offer that same level of trust in an Internet world where it is becoming increasingly difficult to know who is trustworthy and who is not. I have made this argument for many years, trying to get the telcos to move. Again, the opportunity is still there—but for how long?

Banks are in a similar position, but they have far more valuable data they can use to help customers navigate the digital economy. So they could easily compete in this market as well. Customer knowledge is the key element of the digital economy.

However, more immediate competition is coming from the social media sites, which are quickly becoming the new powerhouses of the digital economy; also, they already have far more information about their customers and can use this to expand their services.

So it is two minutes to twelve for the telcos here as well.

Looking at some of those fantastic applications from Comverse we see a range of enriched voice and messaging services with superior user experience, complete with visualisation, personalisation, location, multi-channel applications and an openness to social networks, UGC-sites and RSS feeds.

I can see the digital media companies offering these communications applications immediately, but the telcos may not move so fast. This would hurt the telcos right at the very core of their communications business and I can now quite easily see these products being offered by companies other than the telcos.

Some of the mobile companies are better-positioned than the fixed operators; however if we look at the mobile portals market versus the applications market we see that the mobile operators also have largely failed to make the transition to the new open web-based world.

Perhaps the telcos should start looking more at OTT services themselves. There are great applications with unified communication applications in relation to social sites, location-based activities, etc. If the telcos were smart they could offer voice free and allow customers to choose from a whole range of value-added voice services and to make incremental changes to the applications they really value.

Over and again I have argued that, rather than concentrating on their retail customers, the telcos should supply their middleware and cloud services to the content and services providers. They should be the key providers to the organisations that are going to drive the digital economy.

Written by Paul Budde, Managing Director of Paul Budde Communication

LTE was envisioned as an all IP system, but the RF allocations follow the voice-centric approach of earlier generations. While LTE standards allow for either Frequency Division Duplexing (FDD) or Time Division Duplexing (TDD), all initial LTE equipment uses FDD. FDD requires two separate blocks of spectrum—one for each direction. FDD makes perfect sense for bi-directional voice traffic. It makes no sense for data. With the exception of peer-to-peer file sharing (which most mobile operators block), data traffic is very asymmetric. Sending data via FDD means one block of spectrum is fully utilized and the other, equal sized block, is dramatically under utilized. Result: the operator pays for almost twice the spectrum they actually use.

Verizon is deploying LTE in the 700 MHz C block which means they are using 746 MHz to 756 MHz (a 10 MHz channel) for their downlink (to the mobile device) and wasting most of 777 MHz to 787 MHz (another 10 MHz channel) for the uplink. If Verizon could deploy TDD (as used by WiMAX and as defined for LTE but not implemented), they could fully utilize both 10 MHz blocks for data transfers, almost doubling their data capacity.

I don't know the actual capacity Verizon will realize on average with their first generation LTE infrastructure. But suppose Peter Rysavy is correct (as implied by Gigaom) that Verizon will initially average 15 Mbps per 10 MHz channel. That's 15/15 Mbps, symmetric, even though average traffic is likely to be 15/2 Mbps. No single user is likely to see 15 Mbps; rather that 15 Mbps is shared among all users in that sector. With TDD (the default for WiMAX and an unimplemented option for LTE), the Verizon spectrum could support two channels of perhaps 13/2 Mbps each in that same sector. Again, no single user will see 13 Mbps, but all the users in the cell will be sharing 30 Mbps of capacity that can be dynamically divided between up and down—mostly like averaging 26/4 Mbps but able to allocate 15/15 or 28/2 as the traffic mix changes.

It's ironic the LTE implementors got this wrong when you consider their decision to use only IP in the rest of the LTE design, thereby dropping support for traditional voice or SMS services. That's right, initial LTE deployments won't support voice telephony or SMS messages, only data services, and yet LTE spectrum assignments were made as if voice comes first.

That's ironic.

Written by Brough Turner, Founder & CTO at Ashtonbrooke; Chief Strategy Officer at Dialogic

Although I didn't attend, this week's Mobile World Congress seemed like a fitting stage for news of this nature. Until only recently, has it been remotely plausible to consider such different companies joining forces. I've written about Skype often, and for the most part, they've been a threat for incumbents of all stripes. To hear about this from Verizon during such a public event makes it very clear that the sands are shifting once more, and yet again, VoIP is the culprit.

Skype has upset another apple cart, but I'm more inclined to put a positive spin on things, and say the opposite. No doubt the golden egg of wireless is poised to go the way of the RBOCs in the wireline world, and that's not good for the major mobile operators. On the other hand, this trend is inevitable, and in time, all mobile voice calls will be IP, running over a data network. Service providers are well aware of the risks of waiting too long, where either an established asset becomes a liability, or they miss the boat the first time around.

Think about the wireline incumbents, who of course, were the last to embrace VoIP. They've hung on too long, and that market is going away either to cablecos or wireless. We all know that today's youth will never have landlines, so there really is no future in this market. Think about how Verizon Wireless turned down the iPhone, and what a winner it's been for AT&T. Verizon Wireless has a pretty healthy business, but they've never had an answer for Apple.

Skype, on the other hand, has its own challenges. Having gone to Silver Lake, they have debt to manage now. Their growth story is still intact, but the business model has inherent limitations, and this has led them to seek closer ties with service providers. The business market could be a great opportunity for them, but they need carrier partners to really make this work. They absolutely need to grow beyond the desktop, and their efforts to date have been moderately successful, but a far cry from being a real growth driver.

I am sure you can see where this is going. Verizon and Skype both have needs, and face some common enemies. They are hardly complementary and have no warmth in their history. However, when long term survival is at stake, you can rationalize anything, and at face value, its news on Tuesday makes good business sense. Verizon gets access to Skype's huge global community, which they expect will be a great driver of data traffic over their 3G network.

Also, with Skype being mostly a voice service, you don't need an iPhone to use it. Any smartphone will do, so in lieu of offering the iPhone, Verizon can now create a distinct value proposition built around the smartphones they want to offer. This may not totally neutralize AT&T's handset advantage, but it gives Verizon a different advantage that comes by not being an Apple partner.

With Skype, Verizon has more levers to control the overall value proposition, and not be held hostage to the demands of Apple, who have radically shifted the traditional balance of power between operators and handset vendors. I would argue that this matters to Verizon, especially when all evidence points to the superiority of their network over AT&T. An example of this control is the fact that Verizon's deal with Skype precludes the use of WiFi. This ensures that Skype calls are routed over their network and not someone else's. It's not clear how long they'll be able to uphold this, but for now, it helps make their data plan more attractive, hopefully to the point where people will think twice about going to AT&T just for the iPhone.

Interestingly, Skype's deal is not exclusive to Verizon, as they do have an iPhone app with AT&T, so they actually get the best of both worlds. However, with Verizon, they get an instant bolt-on to a huge subscriber base and integration with every top smartphone not made by Apple. We don't know the revenue sharing details, but I have no doubt the financial upside is attractive for Skype. It's also not clear how using Skype for IM will impact Verizon's SMS revenues - which could be substantial—but I'm sure they'll figure this one out.

Thinking more strategically, Apple may be the coolest tech brand ever, but Skype has cachet too, and Verizon knows this is a great way to gain overnight credibility with the youth market, as well as business users (and their addictive BlackBerrys), both of which are heavy Skype users.

I'm keeping this analysis high level, mainly because the details would make this a very long piece, and they've been dissected extensively by bloggers who followed this minute-by-minute. There are many items I haven't touched on here, but from my view, I'd say both companies come out as winners.

Skype brings more to Verizon than to AT&T and the iPhone, and the longer mobile operators ignore VoIP, the more they stand to lose. Sure, those long distance and roaming charges will be hard to give up, but they won't disappear entirely any time soon. More importantly, anyone using mobile broadband knows there are cheaper ways to make phone calls, and customer goodwill will turn into goodbye if carriers stand still.

With IP, the economics of voice change big time, and there's no turning back. What happened to wireline will be repeated with wireless, and this news with Skype and Verizon is a major inflection point in the evolution of mobile. The iPhone was a big one for sure, but I think this will be bigger as it will cause every mobile carrier to rethink their core business plans. It will be very interesting to see who makes the next move, and how they will respond, and you can be sure I'll have something to say about it soon after.

Written by Jon Arnold, Principal, J Arnold & Associates

Like many, I have bought the view that voice communications has become a software application that rides on top of any wireline or wireless link. As such, the downward trend line for telephony approaches zero, right? Yes, if subscribers abandon their voice minutes of use plans that start at about $45 for 450 minutes a month. But no if subscribers keep the voice plan and add the $30 or higher data plan.

There was a time when wireless carriers mandated the bundling of a voice plan for the privilege of adding a data plan. Absent such compulsory bundling, Verizon must have confidence that consumers will opt to keep the user friendly voice option. This assumption makes sense particularly if wireless carriers expect to replace unmetered, "all you can eat" data plans with several tiers of monthly throughput baskets.

Cable television operators did not have such confidence that their subscribers would add service tiers rather than cherry pick. By law cable operators must provide subscribers with some "buy through" opportunities.

With a future data dominant, but tiered service environment, users may consider it prudent to keep their voice minutes on a voice plan to conserve their available megabytes for nonvoice services. Under this scenario, efficient pricing plans trump visions of convergence and zero cost voice.

Written by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law

Telecom providers and community projects alike concentrated on their stimulus applications from passage of the American Reinvestment and Recovery Act (ARRA) in February of 2009 until the application deadline in midAugust of last year. Money was (and is) hard to get, so looking for a share of the promised $7.2 billion of ARRA money seemed like a good idea even though the odds were long. According to NTIA, there were $19 billion in requests for the $1.2 billion they intended to make available in the first round. RUS says that they had $28 billion in requests for $2.5 billion in grants and loans. Even with some applications being to both NTIA and RUS, the odds were at least ten to one against any individual applicant!

The grants were supposed to be announced in October; everyone waited. The first announcements were made in December. A few more have dribbled out since. So far the agencies have announced awards for only about 15% of the money they said they would make available in round one. Doing the math, the odds go to a staggering seventy to one against getting funded (so far) in round one. Probably not many applicants would have spent the money they did on applications or waited so long to move ahead if they'd known how long it would take for so little to be given out.

But it gets worse.

Without having finished notifying people whether or not they have round one grants, NTIA and RUS recently announced that March 15, 2010 is the deadline for round two (the final round) of broadband applications. Applicants, of course, must prepare applications immediately; more first round information is supposed to dribble out; but, as of now, there's not nearly enough information about round one.

• Many applicants have not yet received word of whether or not they've been chosen. This means, if not selected, they haven't received the promised information on why they were rejected which would certainly be helpful in preparing a new application. If they've been selected, in whole or in part, a new application is, of course unneeded (some may be on some sort of waiting list but there's no information on that).
• Since we don't know for sure what awards remain in round one, we don't know which territories still need coverage.

Particularly frightening is that incumbent carriers were allowed to provide non-public information to dispute the claims of applicants that their projects would extend coverage to unserved Americans but there is no mechanism for making either the allegations public or for applicants or states to dispute the data which may have been used to disqualify applications. This is hardly transparency. See http://www.ntia.doc.gov/broadbandgrants/applications/responses/722pnr.pdf for an example of a filing by Comcast apparently challenging a request by Vermont Telephone Company (VTEL). Nothing against Comcast; but, if they are going to dispute coverage data, they should have to make their own data public and subject to rebuttal.

So what should be done?

An organization called National Association of Telecommunications Officers and Advisors (mainly non-profits and community organizations) has called on NTIA and RUS to move the deadline out to May 1 so that first round information will be fully available to second round applicants. That's a good start but it's not enough; there's no reason to think RUS and NTIA will do a better job of awarding the second round money plus the unawarded remainder of first round money than they did in administering the first round—especially now that they must also finish the award process and start monitoring for those projects which were funded.

• There is a statutory deadline of September 30, 2010 for awarding all the money. The agencies can't waive this so Congress may have to extend it.
• The agencies should, as many of us urged them to do in the beginning, give the states a significant role in the process both to assure grants comply with state plans and just to speed up the grants with local knowledge. Fine with me if Congress just delegates all of this to us at the state level.
• No one should be allowed to use non-public data to impugn applications and rebuttals must be allowed.

Counter-cyclical Government programs which are a day late and a dollar short are worse than no program at all. It's already clear that the broadband stimulus money isn't going to be spent during the latest recession. The unfulfilled promise of the money has slowed down broadband progress and cost jobs. Just leaving the money in the private sector from whence it came (or from whence it will come when the bills are due) would have been much better than dangling an undelivered carrot of stimulus.

Written by Tom Evslin

My analysis of Google's announcement to become involved in building FttH networks is actually the same as the one as I made when that company announced its plans to build wireless city networks, and when it announced its intention to invest in submarine cable networks.

The company has a vested interest in making sure that the digital economy is developed and, like most others, it is frustrated by the extremely slow pace at which the telcos are upgrading their networks. They will do anything to nudge the process along, or to kick-start developments. I remain of the view that Google has no intention whatsoever of becoming a telco; that would not make any sense. So all those endless blog discussions (mainly in the USA) about what underlying business model Google will base its FttH model on, and what the costs per house will be to lay fibre, are utterly useless.

The company will want to establish a business model for high-speed telecoms infrastructure. FttH will produce this model along the lines of the trans-sector synergy that this will create, as we have been discussing in various BuddeComm reports. Many telcos insist that there is no business model for this, but Google is now placing its resources behind such investments, to show how economically viable business cases can be developed. Their projects can become demonstration sites that are able to be replicated elsewhere.

The initiative also supports those countries and those companies that have been advocating the need for FttH infrastructure in conjunction with trans-sector services (healthcare, education, public safety, etc). This will most certainly support this concept within the political, business or investment circles where these plans are being discussed.

Google has indicated it wants to cooperate with municipalities in the rollout of these networks. Perhaps they should extend this and consider at least sharing their results and using these demo sites for national and regional government purposes as well, which might be more appropriate in other parts of the world.

In Australia, Google is very supportive of this government's planned NBN rollout and has already indicated that it will actively support this development, they don't see a need to develop their own FttH networks in such a situation.

Written by Paul Budde, Managing Director of Paul Budde Communication

Off the record, two of the best engineers in the world have confirmed to me that's perfectly plausible. It corresponds to my research, an FCC conclusion, and what John Stankey of AT&T is telling investors.

Campbell calculates it costs less than $3/month for a gigabyte of added capacity, falling. If the average "unlimited" (really 5 gig) customer uses about 1 ½ gig (a likely average), that means a carrier collecting $20-50/month needs to spend about $5 of that for the bandwidth.

It should fit in a capex budget similar to todays and will drop with Moore's Law.

An important point is that the carriers can essentially control the bandwidth demand by plans and pricing. If they stay with today's 5 gigabyte cap or even double it, the numbers work. Behind the higher estimates for 2012-2015 is an implicit assumption that carriers will raise double their caps every two years and be at 20-40 gigabytes for the almost all customers. That's unlikely.

Those caps will limit the use of wireless for folks who want to watch all their TV over the net. It is therefore only a partial substitute for landlines, so I believe most families will maintain both. With a landline in most homes, 30-50% of wireless traffic can be diverted to femtos and WiFi. Vodafone and AT&T are well along making that happen, especially as femto prices drop to $50 and eventually $20. They pay for themselves just with the spectrum savings. Vodafone is already giving them out for free as part of the bundle and 2Wire has promised gateways with femtos inside.

While some of his conclusions are U.S. centric, most of his data applies across the world. Glen is Merrill's world lead on telecom and he has some conclusions about both the emerging and developed world. He has long been acknowledged as one of the dozen best in the world. This report is the most interesting I've seen in a while. It should be available through the standard investor databases but unfortunately is not public.

There are predictable technology shifts like double or triple capacity in 3G/4G, huge IP voice efficiencies that will free up spectrum used for voice today, mass deployment of WiFi phones and/or femtocells.

My guess is we probably can go a decade without a serious problem based on some almost certain FCC moves. Improved spectrum use is the most important part of the broadband plan, as I wrote more than a year ago.

Written by Dave Burstein, Editor, DSL Prime

The company also points out that part of the goal of the experiment will be to operate the network openly and give users choice of multiple service providers.

(At least) two solutions are on the table, Femtocells and Wi-Fi offload. Both approaches solve the backhaul issue by using customer or 3rd party links (DSL, DOCSIS, T1/E1, WISP or otherwise).

Femtocells are tiny mobile cellsites using the mobile operators' licensed spectrum, supporting all handsets and all services. Thus femtocells are a great way to extend coverage. If you want mobile voice service in a place where macrocell coverage is poor, a femtocell could be ideal. However, that's the only place where femtocell's have the advantage.

As a solution for mobile data capacity, Wi-Fi wins, for many reasons.

First, most mobile data is destined for the open Internet, not for someplace on the mobile operator's network. Multiple actual measurements of live traffic in different countries show 96%-99% of all bytes passed over the mobile data channel are destined for the Internet.

The mobile operator's NGN mobile core network is a complex network designed to support differential services, fine-grained billing and so forth. This makes it significantly more expensive than a best efforts network like the Internet and yet, no operator has found a way to charge for this extra capability—people just want to get to the Internet.

Femtocells are part of this complexity, and cost.

Second, the primary sources of mobile data demand are laptops, notebooks and smart phones. Laptops and notebooks have Wi-Fi connectivity. Half of smart phones have Wi-Fi already and the percentage is rising rapidly. So the major demand comes from devices that can connect to either femtocells or Wi-Fi hotspots. Thus the only potential disadvantage of Wi-Fi hotspots is gone or rapidly vanishing.

Third, Wi-Fi access points cost less than femtocells. Besides being somewhat simpler, they are being produced in very high volumes, far higher than the mobile operators are likely to achieve with femtocells. Femtocells might have made sense when they were first conceived, but today Wi-Fi has changed the landscape which leads us to…

Fourth, Wi-Fi access points are showing up everywhere. People are installing them in their homes but we also see Wi-Fi coverage in enterprises, in retail establishments and in public places.

Individuals spend most of their online time in just two locations: home and the office. Enterprises will not install Femtocells as the IT department can't control them. Consumers, retail and public locations have already done or are doing Wi-Fi. They won't install femtocells unless there is some form of subsidy from the operator—another cost with no net benefit.

Summary:

Femtocells will flop. They do provide a way to extend voice coverage into homes that macro cells don't reach, but they are not efficient for data offload. Since Wi-Fi is efficient for data offload, and it costs less to buy and less to operate, Wi-Fi will trump Femtocells.

What should an operator do?

Mobile operators need to focus on providing bundles of connectivity, not on whether its 3G/4G or Wi-Fi. They should be encouraging Wi-Fi offload by bundling "free" public Wi-Fi access with their mobile data plans.

In the long term, it's likely most mobile data bytes will go over Wi-Fi. The 3G/4G network is still necessary to provide a backup path when no Wi-Fi is available. Mobile operators who recognizes this can still come out on top, if they focus on facilitating connectivity for their customers regardless of the technology involved.

Written by Brough Turner, Founder & CTO at Ashtonbrooke; Chief Strategy Officer at Dialogic

Today we have two widely deployed global identifiers for reaching people. One is delegated address out of DNS and the other is phone numbers. So I consider an address like email: carol@johnson.com or xmpp:john@gmail.com to roughly be out of the DNS namespace and phone number to be out of the E.164 name space.

Phone numbers have lots of parts that are not cool, but they also have some cool parts: they are widely understood including social conventions of giving out someone else's phone number to a third part, they are easy to enter on devices with highly contained user interfaces, humans can almost remember them, they are easy for a human to give to another human. The biggest problem with phone numbers is, well, the only thing you can do with them is make a phone call. Say I wanted to have a Skype video call with you, or view your twitter feed, or send you an email and all I knew was the phone number. In many cases it would be nice to use a phone number to reach some internet service for user. Fundamental, this vipr technology solves the problem of securely mapping a phone number to URL.

Clearly there have been other attempts at mapping phone numbers to internet resources. Public ENUM is one example. However, most of the previous ones have failed because the economic incentives to make the technology deploy did not line up right. The vipr technology makes sure that every player that has to do something to make the technology deploy has an economic incentive to go do whatever they need to do. It heavily relies on peer to peer technologies.

How does it work? Imagine two enterprises, A and B that both have devices that can do voice and video over IP using SIP or something like that. First of all everyone using this systems forms one large Distributed Hash Table (DHT) using peer to peer techniques. Think of this like a database in the cloud.

Enterprise B publishes it's phone numbers to the DHT along with a pointer to B services on the internet. When A dials a phone number, it looks up the phone number in the DHT and notices that there is a pointer from this phone number to B. However, A has no reasons to believe this information so it more or less ignores it for now. Anyone could have published a link claiming that phone number was theirs and pointing to themselves. Now A call B over the normal PSTN and it's a normal phone call. After the phone call ends, both A and B know a common shared secret.

They know who called who and the start and stop time of the call. At this point, A can lookup the person in the DHT that claims to have the phone number (B in this case), then initiates some crypto magic (related to zero knowledge proofs) and B proves to A it knows the start and stop time of the call that happened over the PSTN. At this point A has validated that B really is the "owner" of the phone number and at any future point that A wants to communicate with that phone number, the services that B published into the DHT can be directly contacted. So the next time A calls that number, instead of going over the PSNT, the call goes over the Internet and A and B suddenly get video as well voice. The details are a bit more complicated (over a hundred pages of IETF specification) but that is the gist of it.

The enterprises need to run the vipr technology but will both get more features by doing this as well as a potential reduction in PSTN toll charges. Today lots of people have video phones running over SIP yet when they call another person that also has one, the call is forced over the lowest common denominator of the PSTN. This takes a very useful set of globally deployed address (namely E.164 phone numbers) and makes them useful for all the services on the internet not just making a phone call.

Written by Paul Budde, Managing Director of Paul Budde Communication