Entrepreneur Forum & Carrier Perspectives – Summary of Telecom Council TC3, Part 2

Introduction:

Part 1 of this multi-part Summary of TC3 provided highlights of the Service Provider Innovation Forum held on September 12th. This second piece examines the panel session on Rich Communications Suite (RCS) and (more importantly) selected carrier innovation agendas, strategies and case studies.  The third article will look at telco innovation suggestions from market research firm Informa and what carriers are looking for from partner companies/start-ups to help them accelerate their innovation agendas.

Entrepreneur Forum: Next-Gen Communications – RCS:

The Entrepreneur panel session on Next-Gen Communications was all about Rich Communications Suite (RCS) – a buzzword that this author had never heard of before.   

RCS is a unified communications service for smart phones that will be built on top of IMS (IP Multimedia Services). From the end-user point of view RCS would enable communication such as instant messaging, video sharing and buddy lists. These capabilities would be available on any type of devices using an open communication between devices and networks. The topic seemed to be of interest to many 3G/4G cellular carriers I talked to at theTC3 event.

Here is the abstract from the Telecom Council’s TC3 Program Guide:

“For years, the telecom industry has tossed around various futuristic concepts for converged communications such as Unified Messaging or IMS, but little emerged. Essentially, the networks were not ready, latencies were too high on 3G and older cellular technology, and there was too much circuit-switch legacy that needed to be protected. But now, new infrastructure has turned the tide, and RCS (rich communications suite) is coming fast.

RCS is about enabling the customers to communicate as they want, anytime, from any starting point. It enables sharing media, sharing experiences, and including more people than classic circuit-switch telecom could ever provide. This field is populated by major telecom vendors, big OTT companies like Skype, FB and Google, but also upstarts like Kik and new startups by the likes of Sean Parker (Napster/early Facebook investor) or Rob Glaser (RealNetworks). This discussion will explore the roadmap for RCS solutions, both technically and on the business side, and we will focus on the opportunities for innovation and entrepreneurs.”

Author’s Note:  RCS has nothing to do with 3G or 4G mobile broadband infrastructure (access or backhaul), which is assumed to be in place for RCS to thrive and flourish.  It is effectively a new higher layer protocol that runs on mobile devices.

Carrier Perspectives and Case Studies:

1.  Anne Louise Kardas and Kim Galbraith of Sprint described the (mostly wireless) carrier’s innovation business model: find 10 ideas that will either make or save the company at least $10M for each one. Sprint likes to work with round B or C startups that are significantly funded to achieve their innovation agenda. The Sprint partnership model was said to include IT, network equipment, apps, software and services. They want to address the challenges for distributing solutions out to the marketplace. Specific focus areas are: e-commerce, M2M, mobile health, security, BYOD (Bring Your Own Device) and video.  They have defined an opportunity funnel which encompasses the following procedures: discover, review, analyze, evaluate, development, and commercialization.

2.  Matthew Key of Telefonica Digital (this global business is headquartered in London, rather than Madrid or Barcelona, Spain) was quite specific in detailing his company’s areas of interest:

  • Comms 2.0: video, messaging, Over the Top (OTT) voice & video, voice recognition, contract list management and WiFi offload.
  • M2M:  smart mobility, smart metering, industrial telemetry
  • Mobile Commerce: mobile payments & wallets, POS terminals.
  • Security: network, devices, child protection, Identity as a Service.

Telefonica has a venture office in Mt View that’s pursuing global partnerships with startups. The telco has reorganized the entire company to emphasize innovation.  They have two R&D arms: Commercial & Consumer as well as the CTO office.

An example of “pre-emptive inclusion” by Telefonica was the launch of an OTT voice service over their own network infrastructure to retain customers. This was provided by JahJah– a VoIP company Telefonica acquired with R &D center in Tel Aviv, Israel.

3.  Stephane Allaire of Bouygues Telecom (France) and David Fraser of Devicescape participated in a Carrier Case Study. The purpose of the case studies was to showcase successful examples of startups making deals with carriers. While not at all easy, it gives the startup company immediate scale and a large, well established market to sell into.

Bouygues claims to be the #1 telecom ISP in net new connections for the 2011 calendar year. Their call for innovation encompasses five areas: LTE apps that provide a good customer experience, digital home (integrate data, pictures, music and videos), differentiators & disruptions, and cost savings solutions.

Mr. Fraser said Devicescape was focused on helping mobile operators handle the mobile data explosion via WiFi offload. His company’s dynamic WiFi integration technology includes: intelligent cloud, offload network, cloud based QoS, and analytics as a service.  Devicescape claims they achieve the industry’s highest percentage of offloaded mobile traffic by placing the intelligence, management, and control in the cloud, not just in the client software. The Devicescape Offload Network is called a Curated Virtual Network (CVN), which consists of qualified hotspots deployed worldwide. This CVN was said to manage authentication, Internet access, service quality, availability, location and provide analytics to their carrier/WiFi hot spot customers.

4.  Daniel Zhao, Director of China Mobile’s U.S. research center, described the operator’s Open Mobile Platform for developers. It consists of an app engine (a hosting service similar to Amazon’s), an ‘enabler’ engine (tools such as billing and payment software) and a development environment.

5.  Thomas Neubert of Deutsche Telekom (DT) explained how DT became engaged with Lookout-a mobile security company. Tim Roper, president of Lookout participated in this session.

6.  AT&T’s Foundry (AT&T’s Innovation Labs in Palo Alto) works in 12-week cycles, usually hosting 40 to 50 projects at a time, said Aaron McDaniel, Senior Director of strategy. Brian Woods of OpenPeak, developed their product with AT&T’s assistance.

7.  In a Carrier Case Study, Gabriel Sidhom, Vice President of Technology Development at Orange (formerly known as France Telecom or FT) and Ash Damle, CEO at MEDgle were interviewed by TC3 Chairman Derek Kerton.  Mr. Sidhom participated in last year’s TC3 where he convinced the audience that Orange is serious about innovation and working with start-ups.  This year, he and Mr. Damle were talking “eHealth.”  MEDgle has put together a big data analytics platform that functions as a medical/health care search engine.  It’s focused on redefining human health, with about 130 million data points, cross-connecting about 20,000 symptoms and signs, diagnoses, age, gender, duration, lifestyles, etc.

8.  John Hayduk, President, Product Management and Service Development of Tata Communications (one of India’s largest telcos) is responsible for providing the technology vision and leadership needed to support Tata Communications’ network and growth of managed services. He said his five innovation priorities are: hardware, video, unified communications, the customer experience, and (big) data analytics.

9.  Jean-Marc Frangos, Managing Director of External Innovation at BT, said he’s looking for new services that will drive the use of fiber, breakthroughs in IPTV (or at least in its cost structure) and technology for hybrid clouds. Mr. Francos is especially interested in enterprise tools but wasn’t specific. He said: “I’ve been waiting for a really good collaboration tool for about 10 years now, and I’m still waiting.”

10.  The concluding TC3 Carrier Panel featured panelists from venture capital divisions of prominent carriers. These included: Verizon Ventures, Vodafone Ventures, VP of Innovation at Swisscom, Venture Advisor at DoComo Capital, SingTel Innov8 Ventures LLC, and Rogers Venture Partners.  A corporate VC division was seen as an effective tool for these global carriers to cultivate, nurture and enhance innovation within their organizations. These carrier VCs are all competing for great startups (mostly in Silicon Valley or SF Bay Area, but others in Israel, e.g. wireless and throughout the U.S.).  They are looking for strategic relationships and value added services from start-ups.

Swisscom said they were looking for help in four areas for which they act as “gatekeeper.” These were: Real Time Analytics, Security, Identiy management, and Privacy controls.

Several investments – from turn by turn directions to MOCA chips and NFC were disclosed by Verizon Ventures and followed by similar stories from other carrier VCs.

In response to a question from this author (echoed by a representative from NSN), Daniel Keoppel of Verizon Ventures said Verizon was interested in three specific areas of improved or new network infrastructure:

a]  Coping with the mobile data deluge: small cell sites, mobile backhaul, optimizing wireless traffic, and reducing requirements for obtaining additional licensed spectrum.

b] Software Defined Networking (SDN) and Open Flow protocol (which partitions and segregates the control and data planes within the network).

c] Cloud based services (Mr. Keoppel didn’t specify what these might be).

Mr. Keoppel raised a dissenting voice among the chorus of love for WiFi offload. Without explanation he said, “WiFi offload is NOT a great solution for the user, except for certain environments.”

“There’s a ton of stuff being done to improve the carrier’s network,” Mr. Keopell concluded.

Editor’s Note:  While this author strongly disagrees with Mr. Keopell’s assertion, that’s the subject for a whole other article and discussion or argument, depending on your point of view.

TC3 chairman Derek Kerton believes there has been quite a lot of innovation and improvements in carrier networks – not by startups, but rather the very large network equipment vendors (Ericsson, Huawei, Alcatel-Lucent, Nokia Siemens Networks (NSN),  ZTE, etc).  He wrote in an email: “Carriers look to Alcatel-Lucent, Nokia Siemens, Ericsson, Huawei and that ilk to improve hardware, systems, and core network infrastructure. This innovation certainly occurs, as these vendors compete ferociously in their highly competitive sector.

The innovations that this sector has sold to carriers includes: small cell infrastructure, Heterogeneous networks, IP to Circuit-switch handover, remote electronic tilting antennas, Self Optimizing Networks, MPLS, Core IP infrastructure, Fixed mobile convergence and UMA, Wi-Fi offload,  3G, HSPA+, LTE, WiMAX, Emergency broadcasting, E911 and location platforms, OPEN API platforms, M2M systems, new billing solutions for family plans and shared data and prepaid, fiber backhaul, point-to-point wireless backhaul at 60 and 80GHz, etc. On the fixed side there have been numerous advances like Coarse Wave Division Multiplexing, FTTH, FTTC, in home distribution like MoCA or Phonline, DAS, and faster and faster broadband services.”

Closing Comment:

“This year TC3 event capitalized on having 20 different carriers available to participants by putting them on the stage to explain what they want from entrepreneurs this year,” said Liz Kerton President of the Telecom Council of Silicon Valley.  “Our carrier members are happy to share their external innovation programs with these hundreds of entrepreneurs, because it makes their jobs of finding new startups easier,” she added.


Stay tuned for part 3 of this year’s TC3 Summary.  In the meantime, please comment in the box below this article or email the author at:  alan@viodi.com

0 thoughts on “Entrepreneur Forum & Carrier Perspectives – Summary of Telecom Council TC3, Part 2

  1. Network infrastructure market lacks VC Support: Just 1% for the past four quarters!

    “Ovum reports that VC funding of telecom infrastructure startups has fallen from $796 million in 2009 to about a third of that over the period of Q3 2011-Q2 2012, while money has poured into mobile, social and over-the-top (of wireless network) startups and overall venture funding has increased as well. Citing data from the recent PWC/NVCA MoneyTree Report, Ovum points out that the networking and equipment share of total VC investments shrank to just 1% for the past four quarters (Q3 2011-Q2 2012), down from about 10% in 2003.

    But Ovum Principal Analyst Matt Walker says carriers and enterprises need to keep bolstering their networks to support all the new software and services, and without an infusion of fresh infrastructure companies, they will become beholden to a dwindling number of powerful players (the Ciscos and Huaweis of the world).”

    http://www.networkworld.com/news/2012/092712-ovum-venture-capital-262857.html

    1. Thanks for posting excerpts of the Network World article on lack of VC funding for network equipment start-ups. I tried to pound that point home in my article: “Telecom Death Spiral Continues..”

      Here’s a related quote from LightwaveOnline:

      “A funding disconnect has thereby emerged between network builders and network users,” Matt Walker, Ovum Principal Analyst and author of the report, assert. “Lots of innovation and venture capital is targeting the network users, such as mobile apps and OTT platforms. However, little of it is directly helping the network builders. With a weak startup pipeline, the industry relies more on incumbent vendors to generate new ideas and products. Their budgets are bigger, but VCs are often better at funding ‘game changing’ ideas ignored by established vendors.

      “Incumbent vendors’ internal R&D budgets are now nearly 90 times larger than VC investments in the sector, up from 30 times two years ago,” Walker continues. “This narrows options for service providers, who rely on both large and small vendors for innovation. The big vendors also need access to the startup pipeline, to fill in gaps in their own portfolios through partnership and M&A.”

      Walker points out that, based on data from the PWC/NVCA MoneyTree Report, the “Networking & Equipment” segment’s share of total VC investments shriveled to 1.0% in the past four quarters (3Q11–2Q12), versus about 10 percent in 2003.

      “Carriers really need help from suppliers, yet what they face is a vendor market in confusion. Most large vendors are now shrinking and reorganizing, even the Chinese suppliers. Several vendors are modifying business plans and selling assets in order to stay solvent. With the recent VC drought in networking, it’s not surprising that big telcos have become more directly involved in funding startups.”

      Meanwhile, Walker says he sees hopeful signs of returning VC interest in the form of recent IPO and M&A deals. He points to the fact that VC-funded start-up Nicira Networks was recently acquired by VMware for $1.26 billion. “The tide seems to be shifting. With heightened investor interest and carrier need for solutions in such areas as small cells, network virtualization, and network optimization, telecom network infrastructure VC seems ripe for a rebound,” concludes Walker. http://www.lightwaveonline.com/articles/2012/09/ovum-vcs-interest-in-networking-startups-may-be-returning.html

      1. Comment on Nicera: It is actually a software company that is using the Open Flow protocol in Software Defined Networking. Most of SDN controller software will run on commodity servers rather than “purpose built switches/platforms.”

        Nonetheless, it’s amazing that Nicera is valued at $1.26B, which is more than the valuation placed on Alcatel-Lucent’s Bell Labs!

  2. Alan, others are reporting what you have been saying for a long-time about the lack of investment going into basic infrastructure.

    I wonder if this reflects a couple things; more efficient and lower cost development thanks to new tools and the use of Digital Signal Processing and the like to do digitally, what would have required a bit of “analog magic”?This reduces the need for both those specialists, as well as enables updates via firmware.

    Further, as we get further and further away from the excitement of the telecom act of 1996 and as industries and media consolidation/partnerships (e.g. Verizon and the large MSOs partnering), I wonder how much that has reduced the opportunities for start-ups as well as pushed for consolidation in the vendor space?

  3. Alan. Thanks for a thorough summary of TC3, the big annual meeting of the Telecom Council of Silicon Valley.

    I think you guys raise valid concerns regarding the investment in R&D. To add fuel to your fire, consider that the R&D investments in the big telcos are also diminishing over time since the heyday of Bell Labs.

    The only consolation is that the vendor market is extremely competitive right now, and carriers don’t seem reluctant to turf out their existing vendor if a newer one has better product or lower prices. For now, lots of innovation is getting done at this layer.

    But as Jagdeep wrote, this concentrates the innovation among a handful of players. Also, as Alan and I chatted about, these players are currently focused on the entry of lower-cost Chinese competitors…and commoditization isn’t a driver of increased R&D.

    So, while all the research and trends seem to indicate less infrastructure R&D, my challenge back to the group is to explain to me this: Why does it seem like telecom infrastructure has NEVER moved forward as quickly as it is today?

    I would suggest this answer:
    As we do actually move towards IP cores, and away from native, proprietary circuit-switching protocols, we actually need less R&D. We do not need to innovate on dozens of disparate proprietary solutions. One IP-based solution can fit into most operators’ network. Any OTT solution can work on any network.

    As we move towards LTE, we have fewer cellular standards onto which to innovate, as well.

    If the Silicon Valley VCs are investing their money in “fluffy” OTT apps and services, instead of hard iron, perhaps it is because we finally have some good standards in the lower 6 layers, some good infrastructure, some fast and low-latency IP networks. It is these networks that have enabled the Twitter, Pinterest, Google Maps, Facebook, and WhatsApps to do what they do, and deliver shareholder value.

    We could use additional hard iron investment, but we should also take a moment to realize how great things are. How fast they are moving forward, and how infrastructure is moving at a pace with Moore’s Law…no, better:

    We could do 20 Kbps on GPRS mobile in 2000, 12 Mbps on LTE today. Moore’s Law (2X every 2 years) would have us at 1.3Mbps today, we’re about 10x better. Something is working.

    @derekkerton

    1. Derek, Thanks for your enlightening comments. Yes, I agree that the wireless industry has made phenomenal progress, particularly in access networks (as opposed to backhaul).

      But as I said at TC3, there hasn’t been much progress in new services or higher speed wireline access for enterprise customers in many years. I think the main reason is that carriers redirected their R&D to consumer wireless technologies, e.g. HSPA+ and LTE. As a result, the enterprise customer has been neglected.

      Business customers can get DSL (single or bonded), T1 (single or bonded, e.g. n x T1), T3 for Internet access or point to point private line. For mesh network connectivity, they can get IP VPN (over the Internet or a managed carrier network) and, in some areas, carrier Ethernet (AKA Business Ethernet or Metro Ethernet which is also offered as a point to point, private line service). But the speeds have not improved significantly in the last decade. That’s because facility based carriers didn’t follow through with their promised fiber plant build-outs to commercial buildings (which was expected in 2000-2001 but still hasn’t happened in a big way).

      In the core telco optical network, OTN with IP/Ethernet framing has pretty much replaced SONET/SDH with TDM frames as payloads. Some carriers are talking about using 40G/100G Ethernet for their backbone networks. But we didn’t hear ANYTHING about the above or any type of broadband wire-line communications at TC3.

      Nor did we hear discussions of software defined networking/ open flow protocol, data center & cloud computing delivery networks, mobile backhaul technologies and strategies, or LTE Advanced. Instead, TC3 focus was on various overlays and apps for 3G/LTE networks as well as new features for devices, e.g. Rich Communications Suite (RCS). Guess that’s where the money is to be made these days! Yet, it’s very hard for an old timer like me to accept the new reality!

      All best, alan

      1. Derek’s comments provide a good summary of why we seem to see this dichotomy of lower investment in fundamental building blocks, while the overall network speed keeps increasing. Clearly, wireline incumbents, particularly in urban areas, try to milk the most they can out of their existing last mile infrastructure and try to get as much out of the existing copper infrastructure as possible. That has opened the door for competitors, whether they are cable companies, CLECs or other telcos.

        Those who have the fiber win, as evidenced by an independent telco I met who CLECs outside their rural base into a mid-size southern city. Because they had fiber running by a software start-up, they were able to bring fiber to the building within two weeks. This same start-up used a large MSO as back-up, but it took 6 months to get a cable modem. The incumbent LEC wasn’t even in the picture, as their network couldn’t support the needs of the software start-up.

        The question is whether, 16 years after the Telecom Act of ’96, competition is robust in all markets – residential and business – across all geographies.

        1. Ken, The Telecom Deregulation Act has been a huge failure. Even Reed Hundt (FCC Commisoner at the time) admits that! Almost all the CLECs have disappeared. As a Santa Clara, CA resident, I only have choice of either AT&T or Comcast for broadband Internet. In 1997 there was Covad, Northpoint & several other CLECs providing high speed Internet service over DSL. All of the DSL equipment start-ups that were selling to those CLECs went bankrupt, e.g. Copper Mountain, Coppercom, Jetstream, many others!

          Facing no CLEC competition, AT&T hasn’t upgraded its high speed Internet over DSL service in many years. I had to go to a U-Verse bundle to get higher speed DSL from AT&T. I’d been stuck with AT&T’s “DSL Pro” at 2.5Mb/sec (downstream) for last 5 years prior to getting U-Verse which provides 12Mb/sec (downstream).

          7 years ago, 100M b/sec Internet was widely available in Japan & S Korea as well as other countries via FTTH.

  4. It is somewhat ironic that in Silicon Valley there is less competition than in other areas. I was in a rural area a month ago or so and some customers will be able to get service from as many as 6 providers (thanks in part to not very well directed stimulus money).

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