Mobile is not only the hottest spot in service provider infrastructure, it’s probably the only hot spot. Mobile profits and revenues still show some glimmers of hope even though ARPU is expected to plateau late this year and start its slow decline next year. My model says that operators are looking to make some smart changes in metro/mobile in the next couple of years, while the bloom is still at least in part on the rose. But “smart changes” doesn’t mean spending like a sailor, and you can see some indicators of what it does mean already.
JDSU’s acquisition of Ariesto, a mobile infrastructure data collection and analytics play, is a kind of two-dimensional look at the future. Obviously you don’t collect mobile data to plaster your walls with reports. The goal of most of Ariesto’s users is to optimize delivery infrastructure to maximize customer satisfaction and lower costs (or at least control them). For JDSU, who provides optical gear out of another division, to admit that you need to optimize mobile infrastructure says they recognize that future cost consolidation is a reality. In addition, there’s the “upsell” argument for JDSU; they know that you can’t differentiate yourself at the bit-pushing level except by pushing cheaper bits, so they’re looking up to higher layers.
On the handset side there are also signs. There was a time when a hot handset commanded almost any premium, and now Motorola’s handset unit (now part of Google) is cutting staff and operators are looking hard at Mozilla Firefox OS for featurephones to reduce their need to subsidize. The demand that operators let users unlock phones when their contracts expire is also going to put pressure on operators to reduce or even eliminate subsidies, even if regulators don’t insist they do that.
All of this is happening as we start seeing ads for Google’s voice search (which of course they’ve had for some time), and ironically it’s this sort of service that holds the hope (at least that which remains) for the future in terms of mobile investing. What voice search shows is that mobile users are different. Most people would consider voice search for laptops or desktops to be a curiosity of so little value they’d not bother fiddling with it. In the mobile space it’s a whole different picture. Like mobile apps, voice search or voice commands in general offer a handset user a more convenient way to interact with a phone given that the phone isn’t likely their only distraction at a given moment. Mobile fits technology to lives. What operators and handset players need to be doing is taking that simple truth as a jumping-off point.
There have always been three operator monetization priorities, the big opportunity areas that if realized could make a profound difference in revenues and profits. Content was number one, mobile/behavioral symbiosis the second, and cloud computing the third. It has always been recognized mobile/behavioral was the biggest opportunity of all. In fact, mobile/behavioral symbiosis could generate half of the total revenue attributable to cloud-based infrastructure, so it’s also symbiotic with the cloud.
The challenge with mobile/behavioral symbiosis has been that operators had no real clue how to go about it. As a result, we’re seeing cost pressure on mobile infrastructure when we can see a path that could almost double total mobile capex if it were to be pursued. This should generate some powerful incentives to make mobile/behavioral services work, but the first problem is that most don’t know what they are, and the second that they don’t know where to start.
Mobile/behavioral services are services that fuse information from multiple sources to generate insights and advice for mobile users. If you take the question “Where can I find a good pizza?” as an example, the optimal answer would blend location-based services (where am “I”) with demographic analysis of businesses (where is “pizza”) and subjective assessments of quality (“good”) drawn from a combination of what the user might have liked in the past, pizza-wise, and how others might have reviewed the nearby pizzerias. Look at this in even a cursory way and you see the structure of the app needed; a cloud process to dig out all that information on request and return it to the handset as a couple recommendations. The operators have all the pieces needed to make this work, but there is no architecture to build this kind of application.
There is a platform to run it, which is the cloud. The question is how the cloud as a platform would fuse with mobile backhaul and metro deployment to create a connection network to link all the users with all their application pieces, then how the software could be organized to make this work. It’s long been my view that SDN could be applied to solve the first of these problems and NFV the second. What I see as the industry’s challenge, and failing, is that we are not applying the obvious technologies to the critical problems at this point. Maybe we never will.
If you fulfill mobile/behavioral opportunity with SDN/NFV fusion you get a major-league revenue increment to justify a significant amount of infrastructure investment. Then we shift from reading consolidation stories to reading advancement stories. I’d like that, and I’m sure most in the industry feel the same way. If that’s true, then we have to start holding SDN/NFV players’ feet to the fire not on how they do some stupid, trivial little short-term thing but on how they compose those services of the future.
