Sunday, September 13, 2009

Mobile Operator Landscape 2014-18

During the recent weeks, I’ve had the pleasure of catching up with many industry “insiders” and the discussion has centered on what the mobile industry will bring in form of changes in the coming years. The following 5 topics capture my own take-away -- with some sprinkles on top.

US Mobile Landscape

  • The world has chosen the “convergence” technology of LTE which means that within the next 5 years (2014), Capex focus is on bridging CDMA with WCDMA – in a move towards all-LTE networks by 2018 (a point in time where all devices/MID have LTE capability.
  • The hundreds of millions of subscribers in the US will be swayed by operators offering Ethernet-like experience whether mobile or fixed.
  • Players: Verizon will become Vodafone and Sprint will become T-Mobile and China Mobile will enter into the market either as an MVNO or through partnership with AT&T. One alternative is China Mobile or T-Mobile buy spectrum assets from Clearwire & Comcast to create leverage for roaming partnerships (and access to the home). Regardless, we will see at least 2 new entrants into the US market within the next 2 years (some of the “moves’ just started overseas in the UK…with T-Mobile/Orange (DT/FT).

Smart Phone Evolution

  • The personal experience we will come to expect will demand (from device manufacturers and operators) full mobility, multi-Mb access/experience, inside and outside – with full access to full-motion video and a sensory communication – at a price below $100 per month/sub.
  • Smartphones will become ‘smarter’ and whereas some like to use MID or netbooks to access content, people-on-the-go want to dock their ‘phone’ to keyboard and monitors (and “juice’) at airports, Starbucks/Peets, stadiums and conference centers.
  • Applications? Yes, we want it all and we want it now. Apps and Widgets (“Blur”) which bring our designated social apps together, will prevail over stand-alone applications. Enhanced “Cloud” access for mobile workers will help reduce cost and complexities for small, medium as well as large businesses.

Network Coverage & Capacity

Today’s mobile operators are faced with a network capacity dilemma which will only become more critical as more smart phones and 3G-enabled laptops and devices are sold throughout the world.

The growing usage and penetration of high-speed mobile wireless services for both voice and data have created new challenges and opportunities for mobile operators, enterprises, and consumers. The requirement for always-on, high-speed communications both indoors and out is creating a capacity dilemma in the densely populated areas where enterprises are located (office parks) and high-rise office buildings in metropolitan areas. This capacity dilemma is not easily solved by adding more macro cell sites outside to ‘blast inside’ considering the expense and inefficiency of deployment in this way. So, will the operators build out more Macro sites or go inside with PicoCell and Femto. Do we care as long as coverage and capacity improves? No. ‘How’ targeted capacity is added inside the enterprise and in dense metro areas will be in form of a combination of buy/install to reduce churn and improve enterprise ARPU and through ‘managed network services’ relationships with established players and enterprise channels. We will see some instances where enterprise companies are willing to cover the Capex of install to improve mobile worker productivity (integrated with PBX/Centrex services).

Network capacity will be needed to most macro sites to withstand the capacity demands from hungry data users (aka iPhone, Cliq, Blackberry device users). The business dilemma for the operators will center around Capex vs Opex or Capex/Opex and ROI. Which brings up…

Mobile Managed network Services

Why Capex if you can Opex? The total market for mobile managed services will double from $250B to $500B within 2-3 years. The savings for operators are tremendous and by outsourcing the communications networks, the company can focus on its core competencies (sell products and services it makes).

  • Customer savings range from 10-40% with outsourced managed services
  • Increase efficiencies for CAPEX and OPEX: Integrate new technologies and application without hiring specialists (multiple radios, network technologies, applications, etc). Simplify integration with networks, billing and outsourced application provider
  • Managed services are strategic to both operators and the managed network vendors: Vendor moves-up value chain from supplier to key partner (gains more control/influence). Vendors can sell hardware/software solutions for lesser margin and make it up with global service contracts
  • Consolidation in the industry secures scarce people resources to 3-5 key players (Operators are able to leverage vendors access to people, expertise and networks)

In a previous post, I stated that the market will reach $1 Trillion by 2015 – which means we should all carefully review the emergence of NSN, Ericsson, Alcatel-Lucent and Huawei as major infrastructure players and possibly also as network providers to mobile operators. Point in case, as of today Ericsson manages over 300M subscribers worldwide (for operators). See previous post

Emerging Mobile Operators

The day will come when AT&T, Vodafone, T-Mobile and China Mobile are you all-inclusive communication provider for IP-based video/TV/phone/mobility and e-commerce. No wonder the landline providers are wondering what to do next. BT, Comcast, and others may become part of the network and their brands disappear. Or, they go on the offensive and try to compete on a global scale as a consortium of players.

In a previous post I made a concluding statement (question/answer) that we should not be surprised if we someday see NSN, Ericsson and ALU branded mobile services.

So who will be my all-inclusive communications provider by 2014? In the US, I can imagine AT&T, Vodafone (after taking full ownership of Verizon FIOS and mobile spectrum) or possibly even T-Mobile (via Comcast fiber and Clearwire’s spectrum).

The landscape for mobile network services is changing. Today’s mobile brand may not be here tomorrow. As a consumer, all I care about is my experience and my monthly bill. As an insider, I care about eco system value creation. We can have our cake and eat it too.


Tuesday, August 4, 2009

Enterprise Femto: "If you can dream it, you can do it."

In light of recent roll-outs of consumer Femto access points in Europe and here in the US, I ponder the future of indoor wireless inside the enterprise. Clearly a different approach than a consumer Femto is needed for operators to establish themselves within the enterprise with a Femto-like solution to improve cellular communication for voice and data within the enterprise campus. With the subscriber density, an AP must be able to handle interference, multiple hops and handoffs between APs and adhere to stringent security requirements from both the enterprise IT teams as well as the operators.

The history of WiFi taught us that 'rogue' access points are 'bad' and that centralized management is good (Cisco & Aruba). Enterprise Femto should learn from the good, bad and ugly of WiFi enterprise deployment. Network and RF management are essential tools. With that said, we should also remember that IT teams are for the most part not very savvy when it comes to RF management - nor should they be. Very few IT teams possess the skills required to deploy multiple radio access points. WiFi is very easy because of the wide spectrum is uses at primarily 2.4 and 5.8GHz. But, even WiFi APs encounter interference when you have multiple people accessing few or many APs within a small perimeter. Add licensed spectrum to the mix and the pool of know-how people shrink by several magnitudes. Some context for the next few thoughts:

In Sweden, monthly data usage of an average mobile broadband subscriber has doubled during 2008 to 4.5 GByte. (article by Cellular News). Needless to say, broadband usage takes place anywhere and everywhere and considering that up to 70% of voice/data usage takes place indoors -- that includes the enterprise as well. The data consumption is not specific to Sweden. People will make use of all available bandwidth wherever they are. Recent studies found that people do not switch off 3G devices or dongles when they are within reach of WiFi. So whether you agree or not, like it or not, the great majority of subscribers do not actively switch from 3G to WiFi when WiFi is present and thus 3G data consumption will take inside the enterprise regardless of spectrum use.

For enterprise Femto to succeed within the enterprise, operators need a simple to install Femto solution which does not rely on the skills of IT management teams to deploy and manage. Simply put, Femto should be a managed network solution offered by the operators where little or no IT team involvement is needed. Why?

Recently published research from mobile systems integrator Cognito found that "while 86 per cent of IT departments have been charged with implementing a mobile strategy, nearly a half say their team lacks the skills needed to integrate business-critical applications with mobile devices." The research also found that 'security' and 'policies' are major factors of concern and that --- no surprise -- lack of " knowledgeable people as well."

Most departments look at enterprise mobility as a dreaded "do-it-yourself" project with the use of WiFi or personal 3G devices and dongles. In this model, enterprise IT departments are responsible for capital expenditure to acquire the enterprise WiFi equipment and for ongoing operational expenses (i.e., supporting, managing, and troubleshooting). The same goes for the cost of DAS and Picocell. If you want coverage you have to wait for it and pay for it. If IT implements Voice over WLAN (VoWLAN) services, the team becomes the enterprise’s “operator inside.” When calls drop, handovers fail, and client software does not work, the IT guy gets the call (day or night). So why bother with the expense if the IT teams are not equipped to handle mobility and RF management? The simple answer is...enterprise IT has no choice (either do it yourself or do not do it at all). Hopefully things will change in 2010 when Femto matures and more options are available for the enterprise.

CIOs will continue their focus on reducing OpEx and OpEx and it has become increasingly more challenging for the CIOs to justify and allocate budgets for internal enterprise mobility projects (we all know what a great success 'FMC' with WiFi has been) . This presents a great opportunity for mobile operators and their partners to offer indoor mobility as a service to the enterprise.

For the operators to get foothold within the enterprise, a properly managed Femto solution is the best course of attack (and then 'defend' the turf). The operators need to run the business case for the Capex burden and potential revenue uptake as result of providing reliable cellular access inside the enterprise. If done right, the operators have a re-occuring a future revenue path to upsell more access and application 'cloud' services to captive audience.

To quote the great Walt Disney, "If you can dream it, you can do it." Or in business terms, if the business case is there - do it!


Tuesday, July 21, 2009

Mobile WiMAX - Where Art Thou?

For years, I've had the pleasure of following the emergence of OFDM as a viable technology in the market place. I've been able to see, from the inside, how 802.16 and 802.20 works as the OFDM technology variants took on the massive 3G eco system. Though I love the technology, pragmatism always wins in my world (business case). The best technology does not always win. I will not bore you with examples (they are countless). What we can do, as consumers, businesses and industry insiders, is to appreciate the pressure OFDM has put on 3G to finally deliver on its promise. With HSDPA and now HSPA+, we finally have the experience promised by "4G" as early as in 2002 and every year since. Yes, I for one am tired of hearing "WiMAX will be here next year." I have heard that since 2002 (or maybe it was earlier?). I have moved on.

As outlined in previous blog posts, I believe WiMAX (mobile) had its chance. If the technology could have delivered half of what it promised (by 2007) the debate would have been over by now. Even with close-to-a-decade of funding and the building of a new eco system, money cannot win over logic and pragmatism. Too many operators delayed plans to move to HSDPA/HSUPA (then HSPA+) to see if mobile WiMAX could deliver. Sadly enough, even an estimated $7 Billion (yes, Billions) of funding* and underwriting of primarily Intel and Samsung, the technology (though excellent as fixed wireless) has not won over the eco system of mobile infrastructure and device providers (*estimates includes dedicated Fabs, engineers, investments, marketing, subsidies)

The consumers do not care which technology is powering its experience. If I can have 3-5Mb average experience when fully mobile for $50-75 per month and 1-5Gb consumption, and it works everywhere I go (USA, Europe and Asia) why would I care if it's 3G or Mobile WiMAX?

As Michael Thelander of Signals Research Group has found out over the years, technology does not win by itself. It's all about the consumer experience willingness/uptake and the business case for the operators. I cannot understand the business case for how $7B in R&D and investments can show a positive return with "maybe" $1B in revenue by 2013 (and that's 100% of the total market). Revenue wins over engineering's conviction - as history shows us (no offense to the engineering community)

Michael Thelander, founder & CEO of Signals Research Group puts everything in perspective when it comes to WiMAX's real competition and it's not LTE...

This is from his group's latest Signals Ahead report "Wassup with WiMAX?" from July 21, 2009 (reprinted with permission)

"...if one compares the sustainable WiMAX ecosystem with the sustainable HSPA ecosystem, then the advantage clearly lies with HSPA – both from the perspective of the number of companies that it can support as well as to the overall size of the addressable market. One could argue that the lack of a commercially-viable LTE solution means that there isn’t an LTE ecosystem, hence WiMAX has the advantage, but that would be a bit disingenuous to say the least while it would also suggest that there isn’t an 802.16m ecosystem in place, and that statement wouldn’t be correct either. And as we have argued in the past, the real competition for Mobile WiMAX is HSPA and not LTE. Once an operator deploys HSPA it isn’t going to look back and reconsider a switch it Mobile WiMAX. When the HSPA operator ultimately deploys LTE is an entirely different question, but it will ultimately be a question of when and not if."

He goes on to say: "At the LTE Summit in Berlin the GSA indicated that there were 1,470 HSDPA devices, including more than 260 devices that support HSUPA (these numbers have since been updated to 1,605 and 305, respectively). While we believe these numbers are inflated, since, for example, they appear to count each SKU for a notebook computer with an embedded module (323 notebooks and counting seems a bit high to us) and we seriously doubt there are 197 truly unique USB dongles (230 dongles as of last week) on the market today, it is still an impressive number and an area where the WiMAX community just cannot compete."

All I can say is -- well said!

I also urge you to read the consultancy's report “HSPA+: Up Close and personal – Down Under” from July 1 '09. See more @

Have a continued great summer.


Tuesday, June 23, 2009

Who’s My Mobile Network Provider?

Managed Mobile Networks has changed the landscape for all communication, inside and outside.

Just recently, both Ericsson and Nokia Siemens Networks (NSN) announced monster service deals in Asia, Europe and in North America. With “monster deals” I mean any deal over $250M. Most of the larger deals extend over period of 3 to 5 years and thus the contract can be worth Billions.

In a previous post “Managing our Future” (April 20), I highlighted the tremendous growth we have seen for mobile managed services just since 2004 (5 years). The growth will continue to the point where more subscribers are indeed managed by vendors than operators. An article in NY Times last April did indeed put this into perspective highlighting that “a combined 355 million customers” are indeed networked managed by Ericsson and Nokia Siemens Networks even though their subscriptions are with T-Mobile, Vodafone, etc.

Recent reference points (June 2009) re: this trend:

NSN Sees Managed Services as $277B Market

AlcaLu, HP Combine on IT

Ericsson exclusive contract with 3 Italia

From what I’ve been able to gather, managed network services continue to extend into North America. Though all details are not available, it’s expected that Sprint will continue to “sell off” its network to Ericsson and NSN (which begs the question: "for how much longer will Sprint as a brand be around?"). In fact, hundreds of Sprint employees will soon wear Ericsson badges and manage Sprint subscribers as part of an outsourcing deal between Sprint and Ericsson. Why stop there? Soon, NSN, Ericsson and ALU (and now with support from HP Global Services) will manage majority of network assets which change everything for box and software vendors alike. Who do you sell to when the network is managed by someone else? Is the operator in charge or is it the SI or the company who manage the network? Also, the services organizations from these larger OEMs may indeed send out cost competitive bids to its former competitors to get the best price for the network.

Even though the following ‘scenario’ would appear unlikely, it’s indeed feasible (an example).

Ericsson needs to expand and improve network services (capacity and # of subscribers to total 300M) for its Western Europe network where it serves T-Mobile, Vodafone, Telefonica, etc.


Core routers/security by Cisco

BTS (Macrocells) and Metro Picocells by Ericsson

Femto AP and SGSN/GGSN/gateways by ALU and NSN

Installations: IBM Global Services + Ericsson

So, the day will come where an operator no longer can demand that ONLY “operator A’s traffic traverses the network managed by the Mobile Network Service Provider (MNSP). Much like Sprint is providing wholesale access to its CDMA network in North America, NSN and Ericsson (soon Huawei and ALU as well) will start to do the same.

The MNSPs will provide wholesale access to small and large operators who are willing to pay for per-subscriber or per Gb of traffic over its network. That’s right, “its network.”

The total market for mobile managed services will double from $250B to $500B within 2-3 years. In a previous post, I stated that the market will reach $1 Trillion by 2015. That’s not so far-fetched just a couple of months later is it?

I am now more convinced than ever before that the landscape for network services is changing forever. Network providers (will) hold the key and mobile operators become “marketing brands” to the consumers.

Who’s My Mobile Network Provider? Will we see NSN, Ericsson and ALU branded phones and services one day? You betcha!


Wednesday, May 20, 2009

Sensory Mobile Communication & Devices

What Makes a Smart Phone 'Smart'?

I like to read John Paczkowski's "Digital Daily" (All Things Digital) and today's post ("Smartphones Selling Far Better Than Dumb Ones") made me remember a 'vision' paper I did several years ago for a rather large wireless company. The paper was called "The Sensory Internet." In short, the paper stressed the importance of remembering how people communicate and interact in their daily lives -- when designing devices and creating new network infrastructure (5 senses: hear, see, feel, touch, taste)

Keep in mind the synonyms to 'communicate' which is what we do with 'smart phones' and laptops. reference the following words in context of 'communicate': acquaint, advertise, advise, announce, be in touch, betray, break, broadcast, carry, connect, contact, convey, correspond, declare, disclose, discover, disseminate, divulge, enlighten, get across, get through, hint, impart, imply, inform, interact, interface, keep in touch, let on, let out, make known, network*, pass on, phone, proclaim, publicize, publish, raise, reach out, relate, report, reveal, ring up, signify, spread, state, suggest, tell, touch base*, transfer, transmit, unfold, write

Let's take a historical perspective to Sensory Communication Devices (hear, see, feel, touch, taste) from a mass-market perspective (@ home and business)

We were first introduced to ‘sensory’ communication with the landline phone in the 50s (mass market). Note that I'm disregarding military communication, newspapers and going to the movies as I give this perspective. Having a phone (talk) at home, talking to grandma several miles away was "just like magic."  Then, in the sixties, we saw the entrance of the black & white TV (see). Our seeing and hearing experience were further enhanced with the introduction of color TV in the 70s. Just a decade later or so, the "personal computer" (desktop PC) made inroads from business to consumer and desktop game devices were introduced (remember Commodore 64?).

We experienced a communication revolution in the nineties where phones, PCs, pagers and cell phones made it easier to communicate and reach each other. Add billboards and advertising (print and TV) and we found ourselves surrounded with visual images and electronic media.  The nineties showed us that text alerts could change the way we communicate and this had a profound impact on productivity and response. Mobility of voice and digital communication improved our senses with regard to hearing while moving as did DSL and Cable to our homes (proliferation of online gaming).

From 2000 to 2005, mobile voice and mobile data showed us that we can be anywhere while communicating with the rest of the world. A rice farmer in Vietnam now has the same access to communication and information and a investment banker in London – sort of speak. By 2007, mobile broadband mirrored the LAN of the late nineties.

The impact of sensory communication has a profound impact on the network traffic of tomorrow. By 2010, 1 to 1, and 1 to many video communication and individual webcasting, will be the norm (big network impact). By 2012, we will see the beginning of ‘feel sensory communication where a Wii-like experience within devices where touch and feel enhances the experience (I do not count my vibrating phone as a sensory experience, it's more of an alert mechanism). By 2015, I predict we will be able to enable ‘touch’ communication using mobile devices (a sense of touch, not human like). There are labs working on this right now.

By 2020, today's 7 year olds will be able to communicate with touch, feel and taste – making use of all five senses (sensory) to communicate with the world

It goes without saying that the demands on carrier's infrastructure (coverage, capacity and connectivity) will be detrimental unless we plan for the impact. Tomorrow will see today’s megabyte subscriber become a Terrabyte subscriber and the network traffic will be measured in hundreds of Zettabytes.

So, what makes a phone smart? Just adding applications to voice and thus the phone is smarter?  No, adding 'senses' help enhance the mobile device experience. What we need is a new term as we develop networks and devices capable of sensory communication. Naming the Sensory device will be left to the marketing experts.



Tuesday, April 28, 2009

NGN is the ‘ingua franca’ of the mobile world

Earlier this month operators, vendors and industry insiders gathered to discuss Next Generation Networks. Unlike WiMAX, Femto or WiFi oriented events, NGN is not a “love fest” where everyone focuses on what could be – but rather meet to discuss and hammer out what needs to happen or take place for NGN to become a reality. This sober approach is reflected in most of the presentations from over 25 tracks where the majority of the focus was on 3G-LTE (Long Term Evolution) or “4G” if you really want to differentiate between today and tomorrow and the indoor user experience.

First off, let me be clear when I say that there is no ‘line of demarcation” between “today” and “tomorrow.” There’s no switch or lever to pull to go from 3G to 4G. A better way to think of mobile technologies is…the English language: 

We have the Queen’s English, and then there’s us Americans and how we butcher the language and slang to our liking and then there’s English as the spoken word among businesses around the world (with differences in annunciation, pronunciations and emphasis) and the language has evolved from what it was hundreds of years ago with influence from Germany, France, the Scandinavian countries and Asia-Pacific to become the lingua franca of the modern era.

3G to NGN is an evolution which will go on for next decade

Yes, you may have heard of Verizon, Telia Sonera and AT&T talking about LTE in 2010-11 but that’s not the endpoint for a Next Generation Network. Today’s 3G networks are evolving due to subscribers’ needs for new and faster applications, better devices and the opportunity for operators to deploy profitable services. Several operators have seen network traffic triple and in some cases data traffic has increased over 500% in just one year.

    • 3G UK traffic data from February 2009 showed a tremendous traffic uptake:
      • 316 million internet pages viewed
      • 189 million instant messages
      • 94 million Facebook page views
      • 42 million Skype calling minutes 

Today's mobile networks may have the speed of a LAN in 2000 with applications developed for 2010 (Several operators are launching HSPA+ in 2009 for 21 Mbps peak downlink speeds and above). Within the next couple of years, the gap will be much closer and by 2015 the network experience is tied to the device and subscriber plans you have – and not limited by the network infrastructure. Home, work or at play – your device is the network.

The (missing) indoor subscriber experience

Today 70% of 3G capacity is impacted by signal strength inside. According to T-Mobile's own research, 43% of customers would switch operators for better home coverage. That’s a tremendous opportunity to steal market share – if you have a solution in mind.

Many operators have plans in place to test and trial Femto and other systems. Indoor as a barrier for a good mobile experience will be removed within a few years. Lower cost systems deployed closer to where the data consumption takes place, self optimizing networks and interference mitigation techniques will be put in place to help operators go after large enterprise accounts (Campus) and dense metropolitan areas.   

Capacity consumption is way up and operators need ways to reduce the cost of deploying networks, including site acquisition. To make this a reality, operators need to also solve the backhaul issues and they need more spectrum. Smaller, “built from the inside out” networks are the potential solution. What we may see are “islands” of LTE where people gather and spend time (and capacity) to augment the HSDPA/HSPA+ networks for mobility and travel. 

Therefore, do not expect to see LTE deployed across the entire spectrum in a country (700MHz, 800MHz, 2.6GHz) but in hotspots where capacity and coverage requirements are the highest.

By now you are asking yourself (unless you’re an operator) “but why not WiFi 802.11n and UMA (unlicensed/universal mobile access) solutions, they certainly have capacity – right?  Yes and NO. The big NO is from large operators who see WiFi as a “data only, fixed” system. Not a solution for mobility and seamless handoff between macro and inside radio systems to handle mobile communication. Telefonica O2 and BT reference “complexity” and “number of service calls” as reasons for not proceeding with UMA. In brief, mobility kills the business case – it just does not work (same reasons why WiFi + MESH did not take off for city-wide and metro networks in 2002 and beyond). WiFi is great for stationary data-only access (with QoS for VoIP).

As a side note, WiMAX was barely a mention by the large operators and vendors presenting at NGN. “(WiMAX) Time has come and has passed,” someone told me. On the bright side, Analysys-Mason believes 90% of all WiMAX deployments (primarily fixed) will be in developing countries (and continents such as Africa and South America). So where-to next?  

Next generation networks are evolving from within today’s 3G networks. 

  • We will have HSDPA/HSPA for many-many years and devices need to support 3G and LTE by 2012 (Over 93.5% of commercial WCDMA operators have commercially launched HSPA)
  • Some early deployments of LTE will take place in late 2010 (over 20 operators committed to LTE). An all-LTE network? Not any time before 2018.
  •  LTE devices: less than a handful of devices by late 2010 and into 2011. Do not expect lots of device options (availability) until late 2012 with FDD and TDD support closer to 2014)
  • Over 93.5% of commercial WCDMA operators have commercially launched HSPA with over 1400 devices option to choose from.

NGN is the lingua franca of the modern era and just like we grew up to speak English and our neighbor from France had his kids learn English in school, the next generation of people will travel and communicate over a seamless and transparent network within the next decade where the device is the network and we all speak the same language.




Tuesday, April 14, 2009

Managing our Future

In 2006, several leading industry firms predicted that the market for managed services for mobile networks would become a $50 billion market.  

Their predictions were spot on. This 'quiet' trend is changing the infrastructure landscape for vendors and operators alike. For vendors, the leading managed providers for mobile networks (Alcatel Lucent, Ericsson and Nokia-Siemens with Huawei slowly gaining traction) are increasingly becoming an important part of the selling cycle. Before, they were the vendors. Since 2006, they have emerged as a trusted "partner" (while keeping the hat on as 'vendor') for mobile operators whose vision is to become global communications providers of wireless and wire-line services. Most of the "big guns" (Vodafone, T-Mobile, AT&T) have been acquiring brands and networks for a period of five years and most (almost all) of these networks are indeed managed by NSN, Ericsson and Alcatel-Lucent.

Not counting the Nokia-Siemens merger, the top 5 players made over $20 B in acquisitions related managed network services during 2003-2008 (includes Alcatel-Lucent).  Ericsson posted service revenues of $3.3B in 2005. Last year, 2008 professional services revenue accounted for 25% of all revenue for the company - roughly $6B (doubling in sales). Overall, do not be surprised to find that 'services' account for 30-40% of revenue for many of these companies (and 20-30% margin or more) within the next 2 years. In 2008, Ericsson managed networks that served more than 185 million subscribers worldwide.

It's just a matter of time before China Mobile (world's largest by # of subscribers) decides to make a brand entry into Europe or North America by acquiring networks and assets (brand). Most likely, these networks will be managed by the top three or the emergence of Huawei as a service partner - creating a "4 horse race."

So why this trends of outsourced managed networks for mobile operators? 

We have seen the same trend since 1997 when it comes to managed enterprise networks (first finance and insurance, then the rest of the verticals). Very simply, the savings are tremendous and by outsourcing the communications networks, the company can focus on its core competencies (sell products and services it makes).

  • Customer savings range from 10-40% with outsourced managed services
  • Increase efficiencies for CAPEX and OPEX: Integrate new technologies and application without hiring specialists (multiple radios, network technologies, applications, etc). Simplify integration with networks, billing and outsourced application provider
  • Managed services is strategic to both operators and the managed network vendors: Vendor moves-up value chain from supplier to key partner (gains more control/influence). Vendors can sell hardware/software solutions for lesser margin and make it up with global service contracts
  • Consolidation in the industry secures scarce people resources to 3-5 key players (Operators are able to leverage vendors access to people, expertise and networks)

By outsourcing, operators will focus efforts on marketing the brand and differentiate with customer service in order to hold off price wars and customer churn.

This trend has created a new landscape. You could make the same argument NY Times did in their article last Monday when they raised this question:

"Which two European companies run the biggest wireless networks in the world, with a combined 355 million customers? If you are thinking of the top mobile operators — Vodafone, Telefónica, T-Mobile or Orange — you would be wrong. The right answer: Ericsson and Nokia Siemens Networks." See article  

As NYT's Kevin J. O’Brien puts it 

"...most subscribers are unaware that day-to-day management of their calls and text messages is being supervised not by local engineers but by managers in remote centers like New Delhi, Bucharest or São Paolo. In Britain alone, Ericsson manages significant parts, if not all, of the networks of 3, T-Mobile and O2. In March, Ericsson added Vodafone, its fourth mobile operator client in Britain. On the same day, Nokia Siemens said it had been hired by Orange, the mobile unit of France Télécom, to manage its British network."

This is a very powerful trend which impacts all the players in the infrastructure network. The day could come where operators and enterprise alike says to IT vendors... "Talk to my partner." The operator and the enterprise IT group just stipulate what they need in form of products and SLA (as in shopping) and for an agreed contracts, services are rendered without the customer touching the IT decision. Take this a step further. The operator can become the brand-facing Communications Provider for small, medium and large enterprise customers. The enterprise stipulate LAN-Wan and Wireless service needs and the operators then dictates to the "Managed Communications Partner" what they need to fulfill service contacts with hundreds or thousands of enterprise customers.

Managed Mobile Networks has changed the landscape for all communication, inside and outside. 

The day will come when AT&T, Vodafone, T-Mobile and China Mobile are you all-inclusive communication provider for IP-based video/TV/phone/mobility and e-commerce. No wonder the landline providers are wondering what to do next. BT, Comcast, and others may become part of the network and their brands disappear. Or, they go on the offensive and try to compete on a global scale as a consortium of players.

The managed network space (not just for mobile networks) is worth hundreds of $ billions every year. IBM is already a big player in this market as are many System and Solutions Integrators. The gravy lies with mobile networks. It remains to be seen if Cisco decided to get into this space as well, creating a global services organization for wired and wireless network services. Even Dell got into the SMB space for smaller network services. Managed Network Services is a strong trend for all communication services, for enterprise, consumers and mobile network operators alike. By outsourcing, the brand can focus on its core products and services and allow the infrastructure to be handles by the experts.

My prediction is that managed services (wired & mobile) will exceed $1 trillion in revenue by 2015 where the top 4 players account for 80% of the revenue.

I'm glad to see the New York Times article by Levin J O'Brien. He's on to the big news. I hope the CEOs read and internalize the article and conceptualize the impact on their organization during the next 3 years.