The Telecommunications Industry

Top Ten Reasons for the 2010 Telecom Rebound

Jay Borden — Wed, 02 Dec 2009 23:05:00 GMT

I don’t know about you, but I can’t believe how much market activity we’re seeing in communications software these days versus the situation of a year ago. It’s enough to drive our engineering and product managers into a synaptic meltdown, given the presales and early project delivery demands. It’s about time. I ran an interesting google trends search this afternoon, which ranks, in simple relative terms, the number of times “telecommunications” has been used as a search term, starting in 2004 and ending today. Search frequency has dropped by about 75% over that period. In other words, the average schmo is about a quarter as likely to satisfy some level of curiosity about telecommunications as he was five years ago. Telecom Search Term Trend Tiger Woods Search Term Trend By comparison, searches for “Tiger Woods” have grown more popular by about 750%. Particularly in the last two weeks. Go figure. So based on our own small sample of interest in things telecom, I’m compiling a list of the top ten reasons why I believe telecom is at an inflection point — a very interesting one at that — and why the google trend curve for 2010-2015 (or whatever replaces it from the google labs) will look much like a mirror image of the 2004-2009 version. I’ll post the first five of these today, and follow up in the next few days with the remainder. Number 10: Mobile data demand drivers will force a business paradigm shift. All-you-can-eat data may be becoming unaffordable (see the interesting article by John Paczkowski in All Things Digital ). It’s going to get worse with video. Someone’s going to have to pay for all the upgrades and new backhaul. The people with expensive unlimited data plans (the kind of people who write news articles and blog a lot) aren’t going to like it. Number 9: The mainstreaming of VoIP and multimedia will force a technical and architectural paradigm shift. The IMS platforms that are rolling out to deliver VoIP and other services work in the lab, but they aren’t ready for prime time operations. The management tools aren’t there yet. Demand for new tools and new methods and procedures is going to fuel innovation and new entrants. Some of the new kids are going to be newsworthy success stories. Number 8: One or more major service provider networks will suffer a catastrophic security breach. It’s going to make big news, spur bloviating politicians to hold Very Important Hearings, and refocus attention on securing the net. The vulnerabilities — either in the internet or in closed service provider networks — are just too glaring to ignore. Some bozo hijacking a Tier I network will make good fodder for 60 Minutes. Number 7: The US industry is ripe for reregulation. The Obama Department of Justice was widely rumored in July of this year to be investigating antitrust violations in US telecommunications. The long silence since then may be an indication that the rumors were greatly exaggerated, but whether in antitrust enforcement or in new net neutrality regulation , the long arm of the law is about to get longer. Lawyers, rejoice. Number 6: The intersection of Google, Apple, and global service providers like AT&T, Verizon, and Vodafone is going to force a restructuring of players and roles. The hunger for content and advertising revenue, the interdependencies among the networks, platforms, and developers, and the extremely capital-intensive nature of the needed new infrastructure will force a historic realignment. The “communications service provider” of 2009 will be unrecognizable in a few short years. to be continued…...(read more)

Distant Echos of the Mainframe Demise

Jay Borden — Thu, 01 Oct 2009 20:15:00 GMT

Lately we have been seeing a huge spike in interest for a variety of applications that manage large numbers of widely distributed intelligent devices in a variety of new broadband networks. One of our partners, Accedian recently put a Nakina application into a US wireless carrier to manage turn-up and test for a large rollout of Ethernet NIDs in a backhaul application; in an another, a top equipment vendor has begun implementing a Nakina Resource Optimization (parameter management) solution for a national IMS rollout supporting consumer VoIP. There are a lot of other cases that can’t yet be disclosed publicly, but they all involve management of networks that are undergoing various stages of disaggregation. In the consumer VoIP example, over 20 individual classes of network element (media gateway controllers, routers, access managers, etc.), deployed in multiple instances, replace a single centralized switch. The new architecture is vastly more flexible, and takes advantage of the inherent efficiencies of packet-based transport, but the flexibility and efficiency come at a cost in terms of increased management complexity. Rev levels, patches, parameter settings, backups, and security in the disaggregated environment can’t be managed without new infrastructure and new methods, and these are often improvised at rollout rather than being baked into the plan. ( photo credit: http://www.computerhistory.org/) It strikes me that what we’re seeing among service providers — and in the management systems that support them — has a lot in common with the evolution of enterprise computer and network architectures — in fact, it’s nothing more than a delayed reflection, played out in an industry that has vastly longer investment cycles and vastly slower technical evolution. The movement out of the 1970s mainframe-centric world and into the ‘peer-to-peer’ minicomputer networking world of the 1980s (the origin of the internet) and then further into the evolution of ubiquitous computing in the 90s and 00s, gave rise to a whole new multibillion dollar industry devoted to management support — network management, PC desktop management, server system administration, and so forth. It created an opportunity for rapid development of hundreds of companies, many of which became billion dollar plus players (CA, IBM’s Tivoli, and BMC for example). We’re still in the early days of a massive transformation from a ‘mainframe’ era of telecommunications into a disaggregated era — based on IMS, LTE, IPTV, femtocells, and ethernet transport (to name only a few examples), with content and service originating from millions of endpoints around the network, not radiating out from its center. It’s time for a new ‘operations software foundry’ to start forging the tools and building the machines that will empower that transformation....(read more)

1984 Redux

Jay Borden — Tue, 07 Jul 2009 18:56:00 GMT

I cut my teeth as a young telecom analyst at the Yankee Group on antitrust and deregulation issues during Judge Green’s forced breakup of the Bell System. So the news this week that Obama’s Department of Justice may be dusting off the Sherman Antitrust Act to go after telecom monopolies merits more than a passing interest on my part. Because I can’t resist being an ‘I told you so,’ I’m going to state right up front that I predicted antitrust action would be forthcoming in the talk I gave last May at Telemanagement World in Nice, and earlier at the November, 2008 TMW in Orlando. The news reports focus on AT&T’s exclusive iPhone deal, and the competitive harm these exclusive deals may cause for smaller carriers. I don’t think that’s the real issue, whether or not it will be the one motivating Department of Justice action (if ever the investigation comes to that). The real issue is that the de-monopolization of US telecommunications that began with the AT&T divestiture, and that reached its apotheosis in the great Internet bubble, must now be regarded by the current administration as a complete failure. More importantly, the telecom industry has become a convenient target for a newly reinvigorated Antitrust Division looking to reverse the prevailing tide of self-regulation. The iPhone issue is a convenient pretext. And one with a pretty influential sponsor in the Senate (see “ John Kerry (D-Verizon) Whines about iPhone Exclusivity “) The Department of Justice is not commenting publicly. The new Assistant Attorney General in charge of the Antitrust Division has, however, left a pretty clear trail of breadcrumbs to indicate her philosophy. In a speech given to the US Chamber of Commerce, AAG Christine Varney traced her lineage in the Division to Thurman Wesley Arnold, who filled the role in the thirties and early forties for Franklin Delano Roosevelt. Thurman was one of the first and most vigorous antitrust enforcers, reversing the prevailing tolerant policies toward trade associations and price collusion. In the wake of the “Great Recession,” Varney wants to end the era of ’self-policing’ industries, and reset the equilibrium in favor of the consumer and the ‘little guy.’ Interestingly, Varney cites the US vs. Microsoft case as a good example for guidance in the application of antitrust law. I’m no lawyer, and certainly no specialist on antitrust issues, but I have to believe that it would be pretty difficult to prove competitive harm in this case. Unless maybe Google were to join the DOJ as an amicus curiae , arguing that Android was being frozen out of the market by hostile exclusionary tactics. Thurman, by the way, was eventually promoted out of harm’s way to a federal judgeship, which he found so stultifying that he left a short while later for private practice, stating “I would rather be speaking to damn fools than listening to damn fools.” Hear, hear....(read more)

Cool Stuff that drives Wireless Data

Jay Borden — Fri, 29 May 2009 14:04:00 GMT

I took a several-year-long nap in between the time I was doing Granite Systems and the time that I woke up and started working with Nakina. Somewhere in that interval cell sites stopped being fed by one or two T1/E1 lines, and started being fed by big fat optical pipes at OC-3 rates and up. This is good news for companies like Fibertower , since making adequate backhaul capacity available is going to be an ever greater challenge for wireless operators. I just saw a review of one of the gadgets that’s going to keep driving data throughput up (and hence keep feeding the ravenous demand for faster backhaul). Over at engadget mobile there’s a review of a new “MiFi” device from Novatel that’s being distributed by Verizon Wireless . For a hundred bucks you get a credit card-sized WiFi router that gives access to five devices at EV-DO speeds. Engadget clocked it at about 1.8 Mbit/s down and 0.4 Mbit/s up — more than enough for the usual email catchup and web wandering. The access charges are low enough that for anyone who spends as much time on the road as I do, and gets as ticked off as I do about the absurd charges some hotels levy for net access, this looks like a no brainer. Time to cancel my Boingo subscription…...(read more)

The Collapse of the Entrepreneurial Model

Jay Borden — Wed, 20 May 2009 03:16:00 GMT

The success of Tier 1 service providers is in jeopardy due to the deepening innovation crisis in management and operations technology.

Every Tier 1 service provider today relies on the same dual technical and market strategy:

Attain lowest cost of service by migrating to a multiservice packet-based network; and,
Ensure highest customer loyalty by bundling valuable services delivered through high speed access networks.

Yet every Tier 1 service provider’s success is in jeopardy due to the deepening innovation crisis in management and operations technology. Next generation networks – whether ‘next generation’ means IMS, LTE or metro Ethernet – can only be deployed in scale if they are supported by a new generation of supporting operations support technology. That technology is, with few exceptions, not being developed today due to the collapse of the entrepreneurial model for innovation in network technology.

The Innovation Crisis
New network technologies make their way into the marketplace through a web of innovative young companies, their investors and the larger established players that sometimes resell their products (and, one might add, often acquire and eventually squeeze the life out of them). Just like a planetary ecosystem, there is an interlaced and interlocking set of relationships here that ensure the evolution, growth and prosperity of the technology species. Without the good health of this ecosystem, there would be no Cisco, no Ethernet, no Apple or iPhone, no Google and of course no modern network management or operations support software.

Today this ecosystem is deeply sick. The mechanism that has for decades acted as a ‘wetlands’ for early stage network technology companies has gone toxic. The crisis predates the current recession; it began in the technology implosion of 2000-2001. Venture investment in virtually every sector had, of course, reached levels that could only be justified by willful speculative blindness to the realities of economics, valuation and normal market function.

The ensuing and predictable collapse drove venture investment as a whole back to levels that were historically rational. By 2004, the market had continued a normal growth pattern, as if the bubble and burst had never occurred. But investment in network technology never recovered, and has continued its decade-long decline into the present. In fact, 2008 network technology investment has reached a low that only barely exceeds the level spent in 1996. The little investment that has continued serves almost exclusively to support later stage investments in companies that were started many years earlier. Enterprise creation in the network technology sector is, for all practical purposes, a dead zone.

Data Source: Moneytree Report, PWC & NVCA

Next Generation Networks: New Management Requirements
To understand why this must be a concern for every Tier 1 network service provider, consider just one set of requirements for operations in a next generation network context.

A single service, such as consumer voice, once relied on a monolithic network. One class of network device (stored program control switch) in a small number of vendor and model variations (Lucent #5ESS and Nortel DMS-100, say) were the primary programmable engines that delivered service and required operator intervention, much of it delivered (locally or remotely) through a dedicated console. A single device delivered service to a population of some 10,000-20,000 subscribers, on average.

In one current Tier 1 IMS network, consumer VoIP is delivered through a combination of 26 discrete network devices, each of which may be replicated physically many times in order to provide service within a given market area. Each device requires a specific operating software version and patch level; each may have from several hundred to several thousand software-driven parameters that may or may not need to be set with reference to a predefined operations and procedures model (which is itself in constant evolution). Each device has its own logon procedure, password and security requirements. The ratio of devices to subscribers and services delivered is two to three orders of magnitude higher than in the POTS generation.

The problem of how to commission new devices in the network; how to distribute, backup and restore new versions of software; how to audit software configuration, compare to a reference model and flag discrepancies that may be service-affecting; and how to manage the security requirements for access across the thousands of devices that deliver service in a given market area: there is no solution to this operational problem in the element management software delivered by the device vendors; there is no solution to this operational problem in the established network management or provisioning solutions that evolved over the last decade in response to the rapid growth of DSL or digital wireless.

This is not an IMS problem. The same pattern applies in the evolution from 3G to 4G LTE wireless. Replace relatively dumb 3G base stations with intelligent IPv6 routing solutions, and you have the same multiple-order-of-magnitude increase in management load. It’s not just an IMS and LTE problem. Replace relatively simple TDM optical transport systems with more complex Ethernet solutions, try to manage them to the same level of predictable metrics, and you have yet a different permutation on new operational management requirements. The process of network disaggregation has fundamentally changed the requirements for management solutions.

Nakina Systems, because it is a rare exception to the overall business cycle (a post-crash OSS innovator with a Tier 1 footprint), has developed the capability to address this “domain control” management problem, but this is the exception that proves the rule. There are dozens of unfulfilled operations requirements that stand between the promise of a converged, efficient, multiservice network and very little occurring in the way of enterprise creation or even product innovation to address them.

Great Companies That Will Never Get Started
There is no shortage of big problems to solve in network operations and telecom applications more generally. A great little company could be built around the needs for next generation transport network planning and design, incorporating wireless backhaul regrooming, TDM to Ethernet transition and LTE network design. Another one could rewrite the rules in the inventory market by solving the ‘data currency’ problem and replacing a static network inventory with a virtual one – combining stored and in-network data transparently. Still another one could do for applications content and settlements in an open market what the Apple App Store does in a closed garden. But until the entrepreneurial model returns to some kind of balance, these needs aren’t going to form the seeds of new enterprises.

Requiem in Pace: Network Venture Investment

Jay Borden — Thu, 07 May 2009 15:00:00 GMT

I went through the updated Moneytree figures to rebuild some charts for the presentation I’m doing (tomorrow — it’s never too late!) at TMW in Nice. Yurgh. Venture investment in network hardware and software is on an asymptotic curve approaching zero. Maybe ‘getting ready for the post-voice environment’ really means ‘getting ready to get gobbled up by Google.’ The Tier I traditional telephony providers are going to have a very hard time sourcing the kind of technology they need to get ahead of the innovation curve over the next five years....(read more)

Fortress Germany Walls Out VoIP?

Jay Borden — Fri, 03 Apr 2009 15:17:00 GMT

Many, many years ago I was an analyst covering telecom services at the Yankee Group in Boston. In those days of yore, I remember writing an article about Deutsche Telekom’s laughable attempt to develop “bit meters.” They wanted to attach...(read more)

Huawei Lands in the US

Jay Borden — Mon, 30 Mar 2009 18:43:00 GMT

Last week Martin Creaner of TM Forum fame was blogging about the importance of Chinese capital in setting the standards for future wireless networks. The growing muscle of Chinese service providers, who are probably spending about a quarter of all capital...(read more)

Mama don’t take my iPhone away…

Jay Borden — Mon, 23 Mar 2009 20:33:00 GMT

That last post is looking a little prophetic after this morning’s ROI column in the WSJ. People may not be paying their mortgages any more, but they won’t give up their iPhones or their Starbucks lattes…...(read more)

Software to be Spared?

Jay Borden — Fri, 13 Mar 2009 01:17:00 GMT

In an article in this week’s Economist , the author posits the existence of a technology food chain, telling the story of Autonomy . Autonomy is Britain’s largest software firm, and nearly capsized in the technology crash of 2000-2001 but...(read more)