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Gulf big three Telcos could win big time if only they could cooperate on content

I’ve been spending some time out in the Gulf again on various consulting gigs.

There are currently three pretenders to the crown of biggest regional Telco. Saudi’s STC, Qatar’s Qtel and the Emirates Etislat. STC has a pretty impressive footprint in its own vast country, but the other two make up for a lack of a large local market with capital participations in dozens of other operators, mainly throughout Africa and Asia.

The situation resembles Europe before a combination of regulation and market forces toppled the national incumbents off their pedestals. Most agree any losses the incumbent suffered in those years starting in Thatcher’s 80s but more in the 90s and 00s for the rest of Europe were a small price to pay for the improvements and value consumers saw in triple play services.

But that was before Apple, Google or Netflix loomed so threateningly large on the horizon. Now, with their weakened positions, a common defensive strategy against these behemoths from the USA is to go and cry in front of regulators and governments for some form of protectionism. That might ease the pain, but not cure the problem. The more ambitious ones may seize the opportunity and remember grandpa’s old line that if you can’t beat it, join it. I’m finishing a white paper sponsored by Broadpeak, that explores how and why local operators should embrace OTT providers by selling them their own CDN services, which will always be better than anything from a global provider.

Imposing data caps seems unrealistic in current competitive market conditions, as the operator that initiated them would lose out badly in market share. In France, Free has been fighting Google over YouTube traffic to their subscriber’s detriment for over a year now, the situation is escalating out of control with consumer groups complaining the regulator.

But out here in the gulf the situation is different. Incumbents haven’t yet started their downward spiral and there is an opportunity to do something great.

I believe these three companies have left it too late to succeed alone.

It took Belgacom nearly 10 years to become the content heavyweight it now is in its home market, but nobody had ever heard of Netflix when they first started and Apple was still trying to recruit content into iTunes Music Store.

So where the Belgian incumbent took a decade to get things right, the Gulf Telcos only have one or two years before the global OTT players turn their focus here.

With its subsidiary Intigral, STC has taken a clear lead in terms of content aggregation and probably in video infrastructure too. Opening the capital structure of Intigral to let Etisalat and QTel in may seem counter intuitive at best and probably downright crazy to many. But together the 3 operators could muster enough clout to finally beat some sense into the reactionary content owners.

This triumvirate would need to cooperate on technical CDN issues (but that's a story for another blog), but that still leave a wealth of areas to compete head-on, from user experience to hardware, packaging, pricing, bundling, marketing, business services, etc.

The Middle East is rife with video piracy and Hollywood majors should remember the music labels had all but killed themselves in their wars against file-sharing. They hung on by the skin of their teeth, and some are again a bit hopeful that the likes of Deezer or Spotify might pave the way for the industry’s return to at least part of its former glory. Incumbents like Orange are desperately trying to get into deals with these companies (see Orange - Deezer here).

Hollywood and the TV content rights-holders had been steadfastly maintaining their divide and conquer strategy to content licencing, making any attempt to aggregate content beyond a local play aimed at a specific device impossible.

That attitude has started to crumble, not least because the content owners want to initiate their own OTT strategies without limitation of device or geography.

A stakeholder with enough financial backing could flash a check with enough zeros on it to buy the exclusive rights in the whole region. This could be for a major sporting event or maybe the latest Hollywood blockbuster.

If I go along with this pipe dream, maybe the best of the Rio Olympics in 2016 will only be visible on IP networks in the Gulf, with traditional broadcast left with the crumbs…

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Continuing broadband boom heralds arrival of the home gateway at last

The home gateway has been talked about for long enough, but how many have actually been installed so far? Not a lot, and meanwhile its future appears to have been imperilled by the spectre of cloud services offering a safe and cheap place of unlimited capacity to store all that music and all those home videos, as well as providing the source of on demand pay TV content. But this negative equation between the gateway and the cloud is a false one, for actually the two are going to march forward together. The cloud may well be the place where personal and recorded content is stored, but the gateway will be the point of control, mediating between the external network based services and the increasingly diverse functions executed within the digital home.

This point has not been lost on the more astute vendors of both hardware and software for home gateways, as can be seen from a clutch of recent product announcements. One that stands out for me came from Arris with the introduction of its Touchstone family of wireless voice and data gateways. Arris deals in CPE and infrastructure for the cable TV industry, although now prefers to set out its stall as a broadband services company. Touchstone therefore is for cable operators only, but for the first time Arris is making as much play about the features on the home network side as on the HFC (Hybrid Fibre Coax) front. Arris describes it as a game changer, presumably both for itself and its cable TV customers. Such rhetoric can often be dismissed as marketing puff, but on this occasion it is about right. Whether the Touchstone family itself proves to be the game changer remains to be seen, but the shift in emphasis that it represents on the CPE front most certainly is. It is no coincidence that some of Arris’ largest customers such as Comcast of the US, the world’s number one cable TV operator with over 20 million subscribers, have been clamouring for this product and plan to start deploying it before the year is out.

 

On the HFC side, Arris is touting its channel bonding, which increases available bandwidth by aggregating up to 24 channels together. It was notable the strong emphasis Arris is placing on upstream bandwidth to meet increasing demand, generated partly by cloud services, for uploading content rather than just consuming it within the home. On the home networking side, Arris was trumpeting its inclusion of Celeno’s CLR260 3x3:3 chipset, which is pretty much state of the science for home Wi-Fi technology with various enhancements to the standard MIMO technology, including transmit beam forming, which involves coordination of multiple transmission antennae such that radio waves from each interfere constructively at the receiving end to boost the overall signal and hence increase both range and bit rate. Other important add ons aimed more at dealing with interference both from physical objects and radio signals are Tunneled Direct Link Setup, designed to focus available bandwidth on the actual point to point links in operation at the time, and real time channel hopping, aiming to find the best part of the spectrum at a given moment for transmission.

 

The underlying message behind developments such as the Arris gateway is the continuing proliferation of broadband services, as confirmed by the latest data from the Broadband Forum indicating that global broadband subscriptions have soared to over 624 million by the end of Q2 2012 compare with about 565 million a year earlier. The Forum itself argues that this presents a huge opportunity for broadband operators to exploit the connected home, as they control the means of service delivery. This must all be music to the ears of the few software companies that have specialized in the home gateway, notably French based SoftAtHome, which was ahead of its time with its SOP (Software Operating Platform), but it now looks as if the rest of the industry is catching up. SoftAtHome has a modular platform that is hardware independent, and supports not just existing broadband delivered services such as TV, but also what the company believes will be big emerging applications in the digital home, such as home security, environmental control, and eventually remote healthcare. This is a good place to be if, as Arris claims, the game has indeed changed to one favoring the fat home gateway as an equal partner with the cloud.

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Service Providers and the Smart Home

In the last decade, Pay-TV operators have added telecoms services to their portfolio just as Telcos have added content services to theirs, creating competitive multi-play markets throughout the world. This White Paper explains how the Smart Home can become a new differentiating service for operators to stay competitive. It explains what the Smart Home actually is for the end user and divides the potential markets it can serve into four clear segments. After determining what the drivers will be for this new emerging market it explains in detail what role services providers can play in it.

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The importance of the home gateway in the age of OTT, it will be a key enabler of Big Data.

I wrote this blog entry in planning my visit of the BBWF 2012 show floor.

OTT is creating a deep shift in the TV value chain. Most cord cutters or thinners actually leave their traditional pay TV service to go somewhere else, or trade down to a cheaper subscription. Someone out there is profiting. Even if a 100$ monthly spend becomes 10$, that’s still 10$ of fresh ARPU for the new guy.

But Hulu, Netflix, Roku, Amazon, Google, Apple, Microsoft beware: pay TV operators and even dusty old Telcos have realized that they too can be the new kid on the block when it comes to OTT TV.

But why would I be interested in an old pay TV operator, let alone a Telco, when all the sexy OTT upstarts are vying for my business?

One answer is data, or rather what has recently become known as Big Data. It’s adding fuel to traditional CRM and data mining, but also brings radically new service possibilities.

Like data mining Big Data is basically about aggregating data from user’s interactions with a given service and then number-crunching it in huge data centres to provide marketing teams with customer intelligence. One main goal has always been to improve and better target products to different markets and customer segments.

 

Data mining started as far back as the 1970s and by the 1990s it was an industry in its own right. But it has mainly been one dimensional, querying against a single relational database, or just maybe two or three interlocking databases. The most typical example is of a Supermarket chain analyzing data on the contents of shopping baskets to "mine" combinations of products that are purchased together (there's been a lot of mileage out of the good old beer and diapers case from the 1970s, where a marketeer - who wasn't yet called that - after analyzing shopping basket contents, realized that more beer could be sold if it was positioned in an aisle "on the way" to the diapers at least during weekends).

What’s new though is the explosion in different types of data, i.e. from all the screens in the house, and there’s also a huge increase in the amount of external data that can be collected from a range of sources including social media and messages. At the same time scalable cloud-computing architectures have come along to enable the data crunching to be powerful enough to get closer to real time answers, even when petabytes of data are involved.

So now instead of just realizing why subscribers behaved in a specific way in the past, Big Data will enable operators to optimize a service so it best suits what they will do in the future. For example providing near real-time content or service recommendations based on what the family is doing at the moment …

This is where Big Data will not only serve the interest of incumbent operators by giving them ammunition to fight off some of the OTT upstarts, but also bring new services to the end user. A few decades ago advertising was fun. But today TV advertising has become that period of time you either use technology to make disappear (i.e. with a PVR) or disappear yourself during the break. The truly personalized advertising that Big Data can enable could make it relevant and therefore interesting and oh so much more valuable.

 

You may be wondering what has this got to do with BBWF. Big Data has voracious appetite. This is where a broadband service provider can come in. 3G is often too slow, and is still capped in most markets, while 4G is still only in its infancy, so most content consumed in the home over IP will come through a broadband provider.

This means that a Home gateway is about the only place almost all user interactions go through. The gateway is also the hub of the home network where in-home usages like a child streaming a film dozens upon dozens of times can be captured to help personalize a service (who doesn’t have a few worn out Pixar DVDs that always amaze by still being playable despite all the scratches).

Where almost all operators have fared badly with their ambitious content plans, often closing down channels they created, OTT is giving them a second chance, thanks to the central role of the home gateway. Companies that are exclusively in the Cloud will never get such a complete picture of home usage.  Operators with coherent gateway strategies on the other hand will be best placed to harness Big Data by combining the cloud and the home network most effectively.

 

So at this year’s BBWF I’ll be looking out for companies that will enable my vision of the future. I’ll post something after the event, but I know I’ll look out at least for:

  • ADB that has extensive tools for monitoring home network usage,
  • Axiros that have championed and extend TR-069 to get it to carry more information than in the original spec,
  • Broadpeak who has made me curious with their new nano-CDN technology,
  • Cisco who’s new acquisition NDS have been championing Big Data for a while,
  • SoftAtHome with a compelling hybrid CloudAtHome approach,
  • Witbe and any other QoE companies that are monitoring retail devices.

See you there?

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IBC 2012 Takeaways

I didn’t actually see much Web-TV as I had expected to (see previous blog), but several IBC 2012 write-ups I have read so far, including those from people I respect like Giles Cottle or John Moulding have said say that there was no new “big thing” this year. I disagree or otherwise, there never is anything radically new – it depends on your point of view. Below is what I picked up as genuine game changers:

  • The Telia Soneria STB shrunk into a Samsung TV app is a true paradigm shifter.
  • VO’s second screen “Deep” app is also a breakthrough innovation; with the “doh-why-didn’t-I-think-of-that” magazine approach to content browsing.
  • Sony's 4K consumer TV hit me in the stomach just as hard as when I first saw an HD display about ten years ago.
  • Huge progress in the way data can be extracted from devices with extensions to the TR-069 protocol shown at the ADB, the SoftAtHome or the Mariner Partner’s stands to name just a few (bit expect more detailed reports after BBWF next month).
  • All this data will need to be crunched, paving the way to a major 2013 theme, which will be Big Data.
  • NDS showed their Solar project that is all about bringing this Big Data approach to TV. Project Fresco (ex project Surfaces) was also being demoed behind closed doors, and even if it's hard to see this impacting the market for many years, it is a mind blowing demo using a massive 6k display.

In my forthcoming write-up also expect an update on Verimatrix’ never ending successes, a sexy start-up called Klia with a CRM product delivering part of the Big Data promise before anyone else, HEVC news or lack thereof, Kit digitals strong attempt to reassure and updates on Zappware, Harmonic, Capablue, Visual Unity, Broadpeak, never.no, Corpus Media labs.

If one of these subjects is of more relevance to you than others, let me know, I’ll be sure to cover it more thoroughly … detailed write-up coming soon.

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Back to the future with Web TV

This is the final-preparations-for-IBC time of year. So In speaking with friends and colleagues, David Gillies, who runs isis digital, told me about some of the streaming companies he was planning to see. David feels there is some matchmaking to do between them and the T2 and T3 operators. Only the big T1s can put together OTT strategies by calling all the shots. He’s right of course and that’s one area where independent consultants like us can bring value. But his plans for IBC 2012 sparked a moment of realisation in my mind that we were talking about something very familiar. Oh yes, wasn’t this kind of streaming supposed to happen like 15 years ago? Web TV was one of the drivers of the Internet bubble.

 

After NAB 2001, the next tradeshow I went to when I was still getting to grips with digital TV and what was becoming IPTV was « Narrowcast 2002 ». The Internet bubble had just finished bursting and the telecoms one was still exploding. Some of the first generation Web-TVs were still alive, although not really kicking anymore.

A bright young employee from TF1 that I spoke to on the show floor confidently predicted that this Internet nonsense would never take over TV - TV would take over the Web. His proof was that one of France’s highest traffic websites was his own one from TF1, France’s number one TV station (the conference was in Paris).

 

Since then all the Web TVs have died and faded into distant memory, but it doesn’t look like TF1 benefited much. In fact TF1’s TV market share has lost about 50% in the last 10 years and despite remaining an attractive Web property, they haven’t compensated the broadcast losses with Web traffic however which way you measure it.

 

First generation Web TV had two flaws in their business plans, either of which could sink any initiative, however much money they raised and raised again. Firstly of course, the network just wasn’t ready during the Internet & Telecoms bubbles at the end of the last century. Not only do you need broadband, but you need it in multiple megabits per second not in the hundreds of kilobits per second of early broadband.

But more importantly, the overriding concept « Content is King » still wasn’t really understood throughout the telecoms industry or with many start-ups. Traditional players like my friend at TF1 had a stranglehold on any content that might draw a big and regular audience. Ten years on, User Generated Content or UGC, one of the early Web TV’s promises to replace prime time content, is still only just taking a sliver out of the hours-consumed-per-day pie charts.

In 2012, the next big thing is called the cloud. For anyone remembering Larry Ellison’s vision of a Net computer dating even further back than my Narrowcast conference, this should start sounding a bit déjà vu, non?

A powerful, fast, responsive and service enabled network with simple devices to consume directly from it. Hey, not only is that going back to the mainframe computing model, but it’s also mimicking the broadcast paradigm to a certain extent, just without the broadcast technology. In his 2009 book called The Big Switch (Rewiring the world, from Edison to Google) Nicolas Carr used the commoditization of electricity a century ago as a parallel to what IT infrastructure is currently transforming into with Cloud computing. In the heyday of the Industrial revolution, any industrial project had an electricity generating part to it. It would have been unthinkable otherwise. In the same way broadcasters have today installed a huge amount of kit in peoples homes and find it often unthinkable to do otherwise. But if that kit, otherwise know as Customer Premise Equipment or CPE, were to be commoditized into the Cloud so any humble device could receive the service, wouldn’t that be just what Web TV was all about?

 

The two Web TV killers of ten years ago are gone: sufficient broadband penetration will now support a monetized business as any Netflix subscriber user can show. Content owners saw what happened to a music industry that tried to ignore then resist the Web and are now more responsive. They will actually talk to network operators, and even the Hollywood majors will experiment new things (OK only small, low-risk things but it’s a marked improvement on their head-in-the-sand policy of 10 years ago).

 

So now is the time for Web TV to rise from the ashes like a Phoenix. But rather than a mythical return, my friend David Gillies & I are convinced this time it will turn into a real and sustainable challenge to the existing broadcast TV market. The market moves so much faster than it used to and I’m sure we’ll know if we’re right by the time we prepare for IBC2013. But ponder on your way to IBC this year if you have figured out how to use the Web TV 2.0 to your advantage.