June II 2008

26 June 2008

Fredric Morris, Editor-In-Chief, Connect-World
Fredric Morris
Editor-In-Chief
Connect-World

Bandwidth, Bandersnatches and breaking the ‘Net’

‘…and shun the frumious Bandersnatch’… Jabberwocky, by Lewis Carroll,

If I had only one word to characterize the NXTComm show last week in Las Vegas it would be ‘bandwidth’. Every year there is a different word, which by the following year is muted by the noise surrounding the next big word or disparaged – as in the case of IMS – when the promised miracles did not materialize as quickly as promised. This year bandwidth – more, faster, safer, cheaper and all in a smaller box – was the buzzword of choice.

There is good reason for bandwidth frisson – the brief shudder of excitement; bandwidth usage is growing dramatically with no end in sight. The NXTComm Daily News for day one – in an exceptionally well-done article about R&D, far above the normal standard for a show news sheet – included a disturbing graph from Cisco, called Growing Monthly IP Traffic. By 2011, in only three years, the graph shows overall bandwidth usage almost tripling – mostly driven by consumer usage. Today, consumer and business IP traffic are about equal, but in three years consumer demand for video (IPTV and cable TV) alone, excluding consumer Internet use for all other purposes, will exceed overall usage by businesses.

The more I looked at the graph, the more I began to wonder if it could be correct. If consumers will drive most of the bandwidth growth, who will pay to build out the network to meet the demand? Overall, the numbers I have seen show growing bandwidth usage, but little growth in overall revenue -certainly not enough extra revenue to multiply network capacity by three or more in the next three years. Now, consumer budgets are relatively inflexible – to spend more on communications services they have to spend less on something else. So, given rising prices for gasoline, food and probably almost everything else, where will the money come from? The carriers are facing a monster, a frumious bandwidth eating Bandersnatch of sorts, but have no ‘Vorpal blade’ to slay it.

If I were a serious industry analyst, I would have spent days researching this question – digging into the numbers and the trends, but since this eLetter is simply a stream of consciousness effort, my spontaneous musings on-line, I might easily be missing some important factors that change the whole earnings / broadband equation dramatically. Nevertheless, I did ask a number of people at NXTComm if they thought traffic growth would meet the graphed projections and where the cash needed to build the network would come from.

The results of my informal survey were confusing. No one seems to doubt the consumer can pay more, but no one seems to have noticed that salaries aren’t rising much. Almost everyone questioned believed the growth numbers, but many of the same people believed in a capacity crunch, some of these even thought the growth projections were too low. No one could give me a convincing answer (when they had any answer at all) as to where new cash or additional capacity would come from. The most plausible explanation – pieced together based upon the opinions of a number of highly placed sector executives – was that the bigger companies are already growing their networks using low-cost long-term financing they put in place some time ago. Newcomers, however, will have difficulty obtaining financing at a reasonable cost and might well lose ground.

I went to Cisco, the graph’s source, for some answers and spoke with Jeff Spagnola, their Vice President for Worldwide Service Provider Marketing. He gave me some interesting insights and a very recent Cisco white paper, Approaching the Zettabyte Era. The paper makes the astounding prediction that IP traffic, “will exceed half a zettabyte in four years”. A zettabyte is one sextillion bytes (8 bits).

Remember when megabytes and gigabytes sounded big? Well gigabytes are just the beginning; there is still a long way to go. You need to pass first by ‘tera’, ‘peta’ and ‘exa’ – trillion, quadrillion and quintillion – to get to ‘zetta’.

The paper is fascinating; all 23 well-researched pages are filled with facts and astounding/ominous predictions of stupendous growth. The first two pages alone state:

  • Annual global IP traffic will exceed half a zettabyte in four years;
  • Global IP traffic will nearly double every two years through 2012;
  • The Internet in 2012 will be 75 times larger than it was in 2002 (28 exabytes/month equal to seven billion DVDs);
  • Total IP traffic grew 55 per cent in 2007 and should grow 63 per cent in 2008;
  • Internet video is now approximately one-quarter of all consumer Internet traffic;
  • Together, all forms of video (TV, VoD, Internet and P2P) will account for almost 90 per cent of consumer traffic by 2012; and
  • In 2002, Internet video will be nearly 400 times the U.S. Internet backbone in 2000 and it would take over half a million years to watch the videos crossing the network each month (I can hardly wait)

There are many more fascinating (stupefying) predictions, facts, trend analyses and explanations in the paper; much more than I can deal with in this letter, so I expect to return to this in the future. Nevertheless, despite the wealth of information, the report does not get into the economic implications and does little to answer the question of how such incredible consumer-driven growth rates can be sustained by inflation-flattened consumers. With little revenue growth, a lot of competition, pressure to build the bottom line, a flat-lining economy and little hope that disposable income will grow it seems only a matter of time before network growth slows.

I might be wrong; it has happened before, and I am especially leery when doubting Cisco’s predictions. I have a pen on my desk – a year-old memento celebrating the thousandth CSR-1 92-terabit super router and a reminder of my failure to understand the need for such capacity. Two years ago I would have guessed that it would take at least five years to reach that mark. They have already sold two thousand and can’t keep up with the demand.

I discussed the white paper with Kelly Ahuja, the Vice President and General Manager of Cisco’s Carrier Routing Business Unit, the unit responsible for the CSR-1. He believes, despite my contention that today’s consumer might not have the cash to pay for much more and that some of the paper’s predictions might even be conservative. Well, given my track record and his, the odds are in his favour; still…

Where is all the capacity to come from? Speaking with executives from a wide variety of companies at NXTComm, I was amazed at the lack of concern regarding Internet capacity and Internet addresses. When asked about the challenges and problems they will have to face during the next few years, not one mentioned the growing probability of a severe Internet capacity crunch or that Internet addresses will soon run out and there is no Y2K-type effort to switch to IPv6 (Internet Protocol Version 6). IPv6 replaces the current version, IPv4 and resolves a number of version 4’s problems especially the growing shortage of IPv4 addresses. I had spoken about this with a number of people, but none had much to say about the prospect of an Internet meltdown.

Oddly enough, despite the apparent lack of concern, on the last day the NXTComm Daily News reported the results of a survey taken during the show by Tellabs and IDC that 51 per cent felt the Internet would ‘break’ (whatever that means) in less than two years. Show goers suggested everything from network neutrality, to usage limits, traffic priorities, deep-packet inspection to determine content types and priorities, and bandwidth metering to charge heavy users as ways to control usage and pay for the additional capacity.

Grant Seiffert, President of the Telecommunications Industry Association, the TIA, was the only one at the show to speak of the IPv6 issue. The TIA aims to become the sector’s ‘thought leader’ for a number of vital issues such as IPv6, green telecommunications (they have an extensive ‘green’ database to help industries monitor compliance), expanded cell phone handset serial numbering, telematics for autos, and ICTs for healthcare. Although most companies claim to support the IPv6 initiative and/or have compliant products, the responses were so tepid they were hard to believe. Judging by the almost total lack of IPv6 enthusiasm at the show, I can only wish the TIA good luck and success (soon, very soon) with their efforts.

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Our next Connect-World India Issue will be published early next month. This edition of Connect-World will be widely distributed to our reader base and, as well, at shows where we are one of the main media sponsors such as: India Telecom, New Delhi (11-13 December) and Convergence India, New Delhi (19-21 March 2009).

The theme for this issue will be: Seamless networks and seamless business in a seamless world.

Technologically, if not politically, the world is becoming increasingly interconnected, interdependent and interoperable. Few if any big companies are ‘national’ in the old sense; they no longer exist, work buy supplies and services and sell within the boundaries of a single nation. Supply chains and processes of all sorts reach into other nations and at times circle the globe crossing and interacting with one another, first in one nation than another, in subtle and complex ways.

Nowhere is this more obvious than in India, where broadband connectivity has, seemingly overnight, reinvented the country’s economy and re-written its future. More than just outsourcing, taking over existing processes in behalf of companies in other parts of the world, India is increasingly sourcing its own processes, its own technologies and products.

The speed and seamless interconnection and interoperability of the world’s networks, both wired and wireless, using a wide variety of transmission media and technologies, is now so common it is rarely noticed by the user, but much of India’s growth depends upon just this. This effortless connectivity makes possible the seamless interoperability of business processes and supply chains spread throughout the world. Today’s technology is inventing a seamless, global, work environment that might, one day, lead to a seamless world.

This issue of Connect-World India will explore the influence of information and communication technology upon the transformation of India, and how India is itself transforming the technology and processes and helping create a seamless world.

India 2008 Media Pack; Click here

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June I 2008

12 June 2008

Fredric Morris, Editor-In-Chief, Connect-World
Fredric Morris
Editor-In-Chief
Connect-World

Nobel Prize; sell-out merge, submerge, change or bust; place your bets

Of all the many new ICT technology and trends making their mark on how we live and work, my vote for that with the greatest impact throughout the world is wireless broadband. Not only does it keep us constantly connected to the Internet, the office, television, games and a long list of other ‘necessities’ of modern life in the developed world, it is also the emerging economies’ best hope for real affordable connectivity.

The Nobel committee does not give prizes to technologies, especially not to technologies that owe so much to the contributions of so many people over many decades. Still, there are a number of technologies that deserve such a prize for profoundly influencing the economy and bettering people’s lives. Technology – from reading and writing (yes, this is a technology), mechanical inventions starting with the wheel and the lever, transportation including horse-drawn vehicles, railroads, cars, and airplanes, energy sources such as petroleum, electricity and atomic, industrial advances such as mass-production and, surely, the computer – has shaped the world we live in and added immeasurably to the lives we lead.

One of the technologies I would definitely award a Nobel to is wireless telecommunications. Mobile or fixed, it is hard to think of anything – except perhaps rising oil prices – that has done so much recently to change the economy in many parts of the world.

I was in Munich last month, at the WiMAX World EMEA 2008 event, thinking, hearing and breathing wireless for several days and there is nothing like an overdose of business models, technology and regulatory affairs to turn my thoughts away from nuts and bolts to human questions – hence my musings on the Nobel Prize.

The event brought together some 1500 attendees and 120 sponsors. The conference – and the exceptional pre-conference event – was as good a round up of the advantages, disadvantages, deployment strategies, business models and business cases as I have ever seen.

I have been following WiMAX – along with every other technology in the ICT sector – but I have not been living and breathing WiMAX technology, ecosystem, markets, regulations, networks, planning, security, applications, business models, equipment and such. There is a long list of these ‘little details’ that I have not been able to keep up with, but the WiMAX World event was a great reminder of how complex the rollout of a new technology can be. The conference gave an unusually comprehensive update of the sector.

It is easy to forget just how complicated the rollout of a radio network really is – even if you have been through a rollout and survived; time blurs details. WiMAX was, supposedly, the easy low cost way for start-ups to leap ahead. Maybe easier and lower-cost, but easy – no way!

Then too, there are so many news reports about mobile WiMAX in the USA and EU – and so few about many other parts of the world – that I was surprised by the strong interest in fixed 3.5 GHz WiMAX in Eastern Europe.

Of course, I shouldn’t have been surprised considering the characteristics of the telecommunications market in the lesser developed parts of the EMEA region. Nevertheless, despite thinking, reading and writing about developing regions for years, I unthinkingly fell into picturing the rest of the world’s needs as being the same as those in highly developed regions. Well, this woke me up.

The differences are in the details, but there are so many details that just running through my notes and listing these ‘differences’ was a surprisingly long process. Suitable technology, regulatory frameworks, spectrum decisions, backhaul considerations, market plans, business models, network architecture, the need for mobility, QoS, and equipment availability – among many other characteristics – all look different depending upon where in the world you are standing.

In regions of the world where 3G dominates mobile broadband, the big concern is how to protect the 3G investment and evolve to compete with the WiMAX threat. All the talk in the USA centres upon the threats of wireless broadband – not only WiMAX versus LTE, but of any sort of wireless against everything including cable and DSL. This is much different from the developing world, where wireless is the flavour of choice – it is, generally speaking, much cheaper to rollout than wireline.

Since developing regions desperately need communications, the world’s major wireless companies have been targeting the fast-growing emerging markets. The growth of the emerging economy market has been one of the real success stories in recent years. Mobile growth in these communications hungry regions, powered by prepaid cards and ultra-low-cost handsets has been phenomenal. Fixed wireless technologies, especially WiMAX, offer developing regions a way to expand their telecom infrastructures and services, including broadband Internet access, without breaking the bank.

The major operators from developed economies have long realised they would need new markets when their home markets approached saturation. The need to acquire new customers wherever they can be found, the changes in market dynamics as competition forces prices for services and equipment to commodity levels and the convergence of networks, technologies and services have changed the essential nature of the sector.

Market forces everywhere are pushing prices and margins downward, so economies of scale and scope – be they for equipment, services, applications or content are essential. These forces – together with the offering of services crossing over between the mobile, wireless, wireline, cable and broadcasting sectors – are driving the consolidation of the world’s telecommunications market. Smaller players have always had to work harder to survive and they will have to work even harder in the future. Many will not be able to keep up the pace; they have to sell-out, merge, submerge, change or bust. The pressure on small players is growing daily.

Some companies are targeting the emerging markets to compensate for changing home markets, other operators, such as Verizon and AT&T in the USA, are pushing fibre delivered services into the cable companies’ markets. Cable operators’ business models, from the biggest on down, are up in the air – looking for ways to get into the wireless market, both fixed and mobile and broadband, to meet the growing competition from phone companies. Cable companies Comcast, Time Warner Cable and Bright House Networks, if you remember my recent eLetter, joined Sprint, Clearwire and Google in a US$3.2 billion consortium to build a WiMAX powerhouse. For much the same reasons, Cablevision is building out a WiFi network wherever its cable network reaches to offer broadband to subscribers on the move. The clear lines that traditionally separated mobile operators, fixed operators, cable companies and even ISPs are disappearing at a quickening pace.

To add a bit more spice to the brew, the White Space Coalition, which includes Google, Dell, HP, Intel, Microsoft, and Philips, among others, have been applying to use ‘white spaces’ frequencies. White spaces are unused frequencies, mainly between channels, in the frequencies assigned to TV broadcasting; the coalition wants to use these unused television airwaves to offer high-speed Internet streams. Now, when Microsoft and Google work together you know there is some really serious interest in upsetting established models.

Broadcasters, predictably, are fighting this attempt to break into their territory, but if the Coalition can prove they can use the white space frequencies without creating harmful interference the broadcasters are likely to lose. I’ll bet the Coalition will win this battle. I will also bet that we are heading for one hell of a knockdown brawl in the wireless market. I won’t bet on who will win.

____________________________________________________

Our next Connect-World India Issue will be published early next month. This edition of Connect-World will be widely distributed to our reader base and, as well, at shows where we are one of the main media sponsors such as: India Telecom, New Delhi (11-13 December) and Convergence India, New Delhi (19-21 March 2009).

The theme for this issue will be: Seamless networks and seamless business in a seamless world.

Technologically, if not politically, the world is becoming increasingly interconnected, interdependent and interoperable. Few if any big companies are ‘national’ in the old sense; they no longer exist, work buy supplies and services and sell within the boundaries of a single nation. Supply chains and processes of all sorts reach into other nations and at times circle the globe crossing and interacting with one another, first in one nation than another, in subtle and complex ways.

Nowhere is this more obvious than in India, where broadband connectivity has, seemingly overnight, reinvented the country’s economy and re-written its future. More than just outsourcing, taking over existing processes in behalf of companies in other parts of the world, India is increasingly sourcing its own processes, its own technologies and products.

The speed and seamless interconnection and interoperability of the world’s networks, both wired and wireless, using a wide variety of transmission media and technologies, is now so common it is rarely noticed by the user, but much of India’s growth depends upon just this. This effortless connectivity makes possible the seamless interoperability of business processes and supply chains spread throughout the world. Today’s technology is inventing a seamless, global, work environment that might, one day, lead to a seamless world.

This issue of Connect-World India will explore the influence of information and communication technology upon the transformation of India, and how India is itself transforming the technology and processes and helping create a seamless world.

India 2008 Media Pack; Click here