The Genie is out of the bottle – and is driving convergence between computing, communications, media and devices

The subject line of this posting paraphrases the heading of a paper on telecommunications/communications recently published by Oppenheimer, US investment bank (HT: David Isenberg). To those who have not been tracking ICT and telecommunications trends for a while, David Isenberg coined the term “stupid network” in calling the transition from the ’smart networks, dumb terminals’ Telecommunications Age, to ‘dumb networks, smart terminals’ of the Internet Age. Basically the message is that applications running over-the-top of underlying networks do not need “smarts” in the network provided by telcos. Just high bandwidth connectivity will do. This is the “dumb pipes” nightmare outcome that telecommunications vendors and network operators fear the most.

Indeed, a battle has been raging between telecommunications and computing industry interests for some years now. The telecommunications sector has a dream: “next generation networks”. Meanwhile, networked computing interest have lived their dream: the open Internet – or has Oppenheimer calls it, network-centric (NC) computing. NC is described as “….networking and sharing computer processing, storage and data, which can be accessed over the Internet using thin devices at the edge of the network” (page 25). Oppenheimer is calling the victory for NC computing. Oppenheimer summarise their analysis by saying “The migration to NC computing will…eventually lead to the break up of vertically integrated service providers along horizontal lines”. They support their case by pointing to the success of the iPhone, which in terms of its applications is separate to the cellular network.

Under a network-centric (NC) computing age, applications and smart devices have the advantage of global economies of scale. Applications and services innovation and deployment can happen much more quickly than services that are coupled to underlying network configurations. So these two forces at work – global economies of scale and rapid innovation development – are the most important dynamic that telecommunications service providers are likely to face over the next few years.

Oppenheimer point to a few examples of applications innovation in VoIP over mobile, such as Fring and Truphone. Fring makes it easy to connect to your favourite VoIP, social network or messaging application and WiFi hotspots. Truphone is a London-based but global provider of mobile VoIP – you can connect to Truphone’s social networking presence on Twitter, Facebook, YouTube and flickr. Later this year Truphone is expected to launch a ‘Local Anywhere’ service where customers will be able to make and receive calls via a local number and at local rates wherever they are. Great for overseas travel! According to Oppenheimer, developments like that could potentially cannibalise telecommunications industry voice revenues (fixed and wireless) and text messaging revenues. Oppenheimer expect that the explosive growth in data traffic would provide some good news to network operators, but that in the longer-term carriers might be better off being transport wholesalers. Oppenheimer assume that carriers could anticipate a healthy share of applications and advertising revenues.

In other respects the NC value-chain is expected to evolve into a horizontally segmented structure with the three main layers being 1) service providers; 2) software companies; and 3) devices. Interestingly, Oppenheimer anticipate that software companies and telecommunications network providers will strive for an open mobile Internet to avoid being dominated by a monopoly operating platform.

Oppenheimer also expect carriers to continue with a strong presence in the enterprise market, providing integrated security, mission-critical execution, dedicated customer service and integration with other data systems.

Largest increase in expressing capability in history

Clay Shirky’s latest presentation is inspirational.

How cellphones, Twitter, Facebook can make history

What is changing is that the people formally known as the audience (in broadcasting terms) or the user (in telecommunications terms) can connect to one-another to talk and ‘do media’. It’s these networks of inter-personal connections that is the driver of change.

The ‘Telecommunications Age’ was one of one-to-one communication. The ‘Broadcasting Age’ was one of ‘one-to-many’ content distribution. The ‘Networks of Inter-Personal Connections Age is ‘many-to-many’.

Those institutions that were in control are no longer. They can convene groups of networked people but cannot control them. Adapting to that change involves a mature realisation of that social phenomenon.

Future of communications

I’ve come across a presentation and a qualitative research study exploring the future of communications in a high speed broadband/networked economy context.

Gerd Leonhard, a media futurist based in Switzerland, gave a presentation on the future of content and telecommunications. Gerd anticipates the emergence of a new ecosystem where content and applications creators, search engines, web portals, social networks and telecommunications collaboration will determine a new balance of power. What is driving that?  The web has removed barriers to content copying and distribution. New forms of IP-based communication  – like email, IM, chat, text messaging, social networks – are substituting for voice, particularly traditional voice over the public-switched telecommunications network. Growth (in terms of use and revenues) is coming from creating added value around content, not from content. The wheels are falling off traditional business models based on centralised networks and centralised distribution of content.

Getting attention (via platforms, applications and location) is increasingly about taking user context into account. For the advertising industry, this means display ads are the past and engagement, involvement & interactivity are the future. It’s about pulling attention to ads rather than pushing ads out broadcast-style. Getting attention means developing trust. The new ecosystem is a convergent system based on collaboration between all of the industry players in the value-chain. The beneficiaries of trust are those than can collaborate.

Accenture (a management consulting and technology services company) released research on the future of the telecommunications industry earlier this month. My source and a link to the research results are here. Views expressed in the study are consistent with taking a more collaborative approach, although there are some interesting twists. Accenture postulates that companies are likely to “find themselves collaborating and partnering one day and competing against each other the next”.

According to the Accenture study, many telecommunications executives still assume they will retain control through “intelligent networks” (i.e middleware like IMS). To quote a telco exec “We will be delivering and controlling a great deal of multimedia…” (i.e. in response to declining revenues from voice services, telcos want to control content). Contrast that with an IT executive view noted in the Accenture paper: “I don’t think the carriers are on top of IP transformation”. And then there is the IT view, that nodes on the network will be communicating with each other quite nicely without the need for middleware. Accenture concluded that “the stifling effect of legacy business models and cultures is another obstacle to be addressed by the carriers” (page 2). I think that is right. In fact it was five years ago now that telecommunications culture was identified as a barrier to change.

Convergence – getting your business model right

Telecom TV has a good panel discussion of convergence and business model implications for telcos from over-the-top applications. The panelists are Alan Meehan, CEO of INQ, and Alan Nunn, Head of Services, Intelligence, Applications BT Innovate.

I guess there were four things that stood out to me, that:

• the walled-garden approach is not sustainable (not that I needed convincing of that)
• there is a clear drive to “make the Internet real” for mobile users
• we can expect continued innovation in communications from applications development
• innovation and growth is happening in the web and a lot of the focus is shifting to mobile connectivity.

From the INQ perspective, “making the Internet real” is in making it easy to use what their target market wants – Facebook, Instant Messaging and Skype. Now, what these applications have in common is that they are used to keep in contact with people. I suspect that Telstra’s “phone mum” advertising campaign actually resulted in a lot of those connections being over Skype or Facebook, not a phone call. In short, connectivity for many people these days does not involve making a traditional phone call.

Alan Nunn spoke about some going innovation, such as converting speech to text, arising from BT’s acquisition of Ribbit, an IP phone company.

There is also some interest insight about mobile network investment decisions such as stringing out HSDPA & deferring optic-LTE roll-outs, and the anticipated roll-out of femtocells. Nonetheless, the end-game is expected to be LTE, taking IP to the edge and cutting through the remnants of mobile operator walled-gardens.

It’s all another sign of the de-coupling of content from underlying infrastructure – a market-led separation in fact, driven by what the consumer is doing.