The Mobile Internet (voice) cat is out of the bag ..

By Dr Paddy Byers

paddy_post.JPG

There’s been heaps of discussion of the 3 announcements about X-series services and the associated flatrate data plan. The consensus is that this offering heralds a new era in mobile data services; as Dean Bubley puts it, “the mobile broadband Internet cat is definitely out of the bag”.

Personally, I think there’s another angle. At least as important as the impact this will have on the future provision of data services is the impact it is likely to have on the future provision of voice.

X-series includes an “internet voice” offering based on Skype.

Why would 3 do this?

Most of the commentators found this surprising but I think it isn’t only a natural step, but a necessary step.

As soon as you introduce a flat rate data tariff, then users are going to start using it in all sorts of ways they didn’t before. If it’s priced like terrestrial broadband, they’ll expect to use it like broadband. All of a sudden your attention as a service provider is not focussed any more on maximising data services uptake, but minimising it; at least, making sure that the applications being used don’t bring your network to its knees.

This means, given flat rate, sooner or later, someone will deploy a VoIP application, and this is bad for the operator – not because it cannabilises regular voice services as most people think(uptake will be minimal) – but because of the demands it will make on the data network.

So, how do you fix this? Instead, you give those users a free internet voice service up-front; and by doing that, you get the opportunity to control and, above all, optimise that service.

BT did the very same thing for its terrestrial broadband customers in the UK.

So, 3 needed a solution that provided comparable “internet voice” services, but one that could be optimised to be effective over the cellular infrastructure. Skype was a natural entry-point given that Hutchinson Whampoa (parent of 3) has a significant stake in eBay/Skype.

The technical solution, however, isn’t straight end-to-end Skype-over-IP, but uses the regular cellular voice system to establish a call over the cellular segment to a VoIP gateway, which completes the call over the IP trunk system to the (broadband-connected) Skype user.

This means that the service can take advantage of the highly optimised system that already exists on the handset and offers a superior experience (in terms of audio latency, audio quality and power consumption) than would be possible using end-to-end VoIP implemented in application software – all without using complex solutions like IMS.

Thus, 3 can offer an internet voice service, and avoid the inefficiencies and network overheads of conventional VoIP over broadband, and can legitimately require that X-series subscribers do not attempt to use competing VoIP systems over the service.

So, when other operators are forced to replicate the X-series data service, they will find themselves in exactly the same position with regard to provision of internet voice services. Skype is less likely to be an option for these, as it would put them in the position of relying on their competitor’s technology.

So is there an alternative for other Operators?

The nearest available technical solution is Jajah.

This works in a very similar way, and can be enabled on existing phones via the installation of a native app or a java app; in fact, a competitor could even roll out a service to devices already in the field (which is something that 3, with X-series, have elected not to do, at least for now).

There has been some adverse commentary on Jajah but their mobile client seems to work well.

If I was a competing operator, I’d be looking closely at their solution right now. It will be interesting to see how this pans out in the coming months.

Again, it shows us that the Operator who has an early advantage in this area is likely to win significantly over others who may be forced to adopt a less optimal solution and that if I am right, a lot of homework went behind this announcement

UPDATE: since writing this the Talkonaut solution has

been brought to my attention and it looks to have similar capabilities

The future is bright .. The future is 3 ..

3.JPG

Meg Whitman, who runs eBay, calls 3′s X-Series a “key milestone” in the development of the internet.

Until now, says Niklas Zennstrom, the chief executive and co-founder of Skype, “we thought 3G was not real broadband, but it has now arrived”.

“Moving to flat rate charging is the key to unlocking the value of the mobile internet,” says Miles Flint, the president of Sony Ericsson.

(Source for all three quotes above: BBC)

They are all referring to the announcement by Hutchison 3 announcing a fixed rate pricing and an OpenGardens strategy

Many other respected bloggers like Dean Bubley and David Cushman also concur that it is this is the single most significant digital development in recent times

I agree .. Here are my views on why that’s the case ..

Having written a book called OpenGardens and then Mobile Web 2.0 , 3’ s walled gardens represented the ultimate manifestation of all that is wrong in our industry.

For more than a year now, I have had two phones: A Vodafone Blackberry and a ‘3’ Nokia phone. The ‘3’ phone was mainly for voice(they have some of the best voice plans).

I also wanted to experience first hand, what it felt like living in a walled garden through the 3 connection.

I would often remark that within my lifetime, the ‘3’ service would not change(sarcastically adding that I had to worry about ‘3’s lifetime more than my own!)

All that changed last week with the announcement that ‘3’ is adopting a diagrammatically opposite strategy to that they have pursued so far : i.e. they are adopting OpenGardens and fixed rate pricing

Although the exact pricing is not announced, the strategic direction is more important.

It will lead to other operators announcing similar pricing and thus a virtuous cycle for the industry.

Coming so close to Christmas(and consequently handset upgrade cycles), other Operators may well have been caught on the wrong foot.

For years, the Mobile Data Industry wanted Web valuations without embracing the ethos of the Web.

And everything was done to show how ‘Mobile Data’ is different

We tried Location

We tried talking of ‘performance’.

We tried ‘User experience’.

We tried ‘content’ and also ‘relevance’

Most of all, we tried ‘walled gardens’ and we avoided fixed rate billing

Walled Gardens and the lack of Fixed price billing were the two biggest factors throttling the uptake of the Mobile Data Industry

Because ..

If the other factors above are critical .. then how do we explain SMS?

Think about it ..

SMS breaks every rule in the book.

Interface – what interface?

Performance – Is NOT guaranteed .. (you send an SMS – no guarantee that it will reach recipient and when)

And so on ..

Thus, all other factors are necessary but not sufficient to create a vibrant industry(as the experience of SMS so aptly demonstrates)

But SMS has three things going for it ..

a) It was P2P and it was based on ‘User generated content’

b) It had a revenue model through Premium SMS and also in itself (at least in Europe)

c) It had critical mass and interoperability(again mainly in Europe and Asia)

Ironically, the entire industry benefited from the uptake of SMS.

We don’t worry about ‘Operator pipes’ when it comes to SMS (because it is mostly P2P communication i.e. there is no unpipe as I said in a previous post )

That’s why I am so bullish about the ‘3’ announcement

Both OpenGardens and Fixed price billing lead to a healthier value chain(for all players including Operators)

Any operator who takes up this strategy deserves higher market valuations because they are aligning themselves to the ethos of the Web.

I expect that this will also translate into greater customer uptake, move data usage, greater ad revenues etc. All of which will create a virtuous cycle for 3 and also the industry as a whole.

Two other points are worth noting

a) Fixed rate billing will lead to a whole set of new applications such as Mobile podcasting(which are currently not commercially feasible now). This will boost innovation at the grassroots level in contrast with the ‘song and dance’ applications we see proliferating today. I have nothing against Ringtones, Wallpapers and other forms of ‘Broadcast content’ as Howard Rheingold calls it, but these applications primarily benefit the big media players, Operators and some large aggregators. They belittle the true potential of the Mobile Data industry and they provide no incentive for the grassroots developers. All that changes when fixed rate pricing and OpenGardens become the norm.

b) While not immediately apparent, there are two revenue models for ‘3’ – first is the data charges but also there is advertising as the BBC says : The proposed flat rate may pay some of 3′s networks costs, but the real business model is advertising.

That’s where Mobile Web 2.0 comes in .. i.e. ad supported business models on Mobile devices will mirror the uptake of Web 2.0 applications.

The importance of the resurgent advertising model in laying the foundations of Web 2.0(and by extension Mobile Web 2.0 ) is shown by Jason Calacanis in a fascinating blog The real story of Web 2.0: Advertising 2.0 where he says

The real story of Web 2.0 has little to do with the bells and whistles and everything to do with the stunning growth of online advertising.

And also

How far will this trend line go? Think 20 more years of similar growth.

Will it(rate of growth) get steeper? Absolutely.

To conclude ..

As a blogger with a mission of fostering grassroots innovation, healthier value chains and greater uptake of the Mobile data industry: I say ..

The future is bright .. the future is 3.