With iPhones already earning the reputation as ‘bandwidth hogs’, and networks with heavy smartphone use already under intense pressure, devices like netbooks and USB dongles are adding even more stress to carriers’ infrastructure.

With today’s introduction of the Apple iPad - a device for which users’ quality-of-service expectations are extremely high – operators’ capacity challenges are mounting and may push their networks over the edge.

What we know about the Apple iPad:

Every iPad has Wi-Fi, but Apple also has models with 3G.

There are two wireless data plans. The first provides up to 250 MB per month for $14.99. The second provides unlimited data for $29.99. AT&T is the exclusive service provider and includes free use of AT&T Wi-Fi hotspots. In the U.S., wireless operators typically charge about $60 a month for a laptop data plan.

There is no contract — service is prepaid, so consumers can cancel any time. That’s a big change from the iPhone. All iPad 3G models are unlocked, so consumers can use them with any carrier that supports micro-SIM technology.

The question is: are carriers’ networks equipped to handle another, even more massive, explosion of mobile data consumption?

If Apple’s new iPad lives up to the usage patterns – and more importantly – the bandwidth problems of the iPhone, then the answer is: probably not.

In a recent Wall Street Journal blog post, Niraj Sheth wrote:

…the iPhone is hardly the kind of data guzzler the tablet is widely expected to be. After all, it’s one thing to squint at movies on a 3.5-inch screen and quite another to watch them in a relatively cinematic 10 inches.

With this in mind, carriers can surely expect a ‘secondary’ explosion in video and other multimedia traffic. They need to prepare their networks now in order to avoid consumer backlash. Another quantum leap in data traffic will not only strain the network - and thus the user experience - but will also strain profit margins due to out-of-control infrastructure costs.

We should expect to see the wireless industry put a priority on intelligently managing network traffic and experimenting with new ways to curtail the margin squeeze - whether through tiered pricing plans, stricter enforcement of fair use policies or new value-added services.

-Stacey Infantino

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In May, Bytemobile sat down with Ronan de Renesse of Screen Digest to discuss the state of mobile media. This week, Ronan has been kind enough to answer some questions for our readers.

1) Screen Digest recently published a report on the state of the 3G mobile broadband market. Where do you see 3G mobile broadband fitting into the overall mobile ecosystem today, and where do you see it in three years? How does this affect what carriers are doing, aren’t doing or should be doing?
Mobile broadband today is worth more than mobile TV, mobile video, mobile music, and mobile games combined. The number of mobile broadband connections has multiplied by 10 between 2006 and 2008 and is still rising. Five years after the launch of 3G, mobile operators have finally found a way to monetize their 3G licenses. However, the real potential for mobile broadband is as a primary home connection, and today’s services work well only as a secondary broadband connection. As a result, growth is likely to decline over the next couple of years until mobile broadband can become truly competitive with fixed broadband.

2) You frequently cover mobile video and mobile TV. How would you assess the current state of the mobile video and mobile TV industries? What is the key driver that will increase adoption (network solutions, handset advancements, content)?
Mobile TV/Video is the mobile content category that has suffered the most from the economic downturn. In 2008, we experienced drastic changes in business models with the emergence of mobile content bundles such as SFR Illymitics in France and disruptive technologies such Telegent Systems’ analog mobile TV chipset. The industry realized that mobility by itself does not justify a subscription fee for mobile TV. Quality of experience (i.e., large screens, premium content, good QoS) is key in order to drive the uptake of paid-for mobile TV services. With the increasing availability of free-to-air services, the industry runs the risk of consumers thinking of mobile TV as a feature (like a camera or FM radio) instead of a service. In 2008, 76% of mobile TV users watched it for free.

3) How do you see the growth in adoption of mobile video and mobile TV affecting network infrastructure? Networks already seemed to be bogged down with data traffic. Are they ready for widespread adoption of mobile video and TV?
The rise of mobile broadband, added to the increasing popularity of smartphones (typically sold with flat-rate data plans), has certainly put a lot of pressure on 3G networks lately. Mobile operators are doing a lot to upgrade their networks as quickly as possible in order to accommodate the demand for mobile data. Fixed networks can only handle widespread adoption of online video and TV, and mobile networks are very far from it - especially considering that there are far more mobile connections in the world than fixed ones. However, there are other ways to get content on your handset than through the 3G networks. Over 90% of videos and music tracks on mobile phones are side-loaded from the PC. Taking control of this delivery mechanism and monetizing or reducing it is a big challenge for handset manufacturers and operators.

4) You recently published a report that discussed how, as the walled gardens come down, handset manufacturers are moving in to provide services to operators. Will handset manufacturers continue to drive and influence the wireless industry? Does anything threaten this influence?
The success of mobile broadband and flat-rate data packages has shown several mobile operators that they are better at selling access than content and that opening the walled gardens can work to their advantage. Mobile operators are therefore increasingly opening up to third-party service providers. Handset manufacturers, on the other hand, are suffering from a difficult economic context where mobile users opt for SIM-only contracts instead of handset upgrades. Handset manufacturers are therefore looking at alternative revenue streams and/or new ways to differentiate from their competitors, and content is coming up as a relatively good option. In addition, Apple has proved with its App Store that vertical integration of hardware, software and services works well in mobile.

5) Forrester recently published a report declaring that the term “smart phone” is dying off. Is there a future for mass-market handsets? Why or why not?
There is certainly still a future for mass-market handsets, which will be primarily driven by growth in emerging markets such as China and India. The recession has also helped to keep low-end handsets in the market. However, there has been cannibalization between feature phones and smartphones which are typically populating the mid-range and high-end device segments in Western markets. Smartphones have been taking market share from feature phones for the past 12 months, as smart phones become more accessible in terms of price and feature-rich. I would say that the term “feature phone” is more likely to die than the term “smart phone.”

Stay tuned for commentary from other key industry influencers on the trends and issues important to the mobile internet ecosystem. If you have any questions you’d like us to ask, feel free to leave a comment or send an email to sinfantino@bytemobile.com.

-Stacey Infantino

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I am proud to announce that Bytemobile and Alcatel Shanghai Bell (ASB), our reseller partner in China, have been awarded Phase 1 of the China Mobile Communications Corporation (CMCC) Web Gateway project. Our Web Fidelity Suite content adaptation solution will be deployed at the national Web Gateway center in Nanjing to enable open web browsing from mobile handsets on CMCC’s 3G TD-SCDMA network.

CMCC is the world’s largest wireless network operator, with more than 470 million subscribers. The group’s operating companies cover 31 provinces in China and command a nearly 70% share of the mainland China mobile market. On January 7, 2009, the Chinese government issued 3G network licenses to CMCC as well as China Unicom and China Telecom.

Stepping Up the Competition
Adrian Hall’s blog post of April 10 – State of the Company – framed the significance of the CMCC win to Bytemobile in general terms:

Our global sales pipeline is significantly larger today than it has been in the company’s history – a formidable fact considering our 104 network deployments in 54 countries. The pipeline consists of a number of sizable deals that include multi-year commitments and leverage our entire product portfolio.

…we are competing more and more with traditional telecommunications industry giants such as Comverse, Ericsson and Nokia Siemens Networks. We are winning against them because of our agility, our laser focus on customer needs, and the strength of our technological innovation, execution and support.

Our competition for the CMCC Phase 1 bid included Ericsson, Nokia Siemens Networks, Huawei, and ZTE. Huawei and ZTE are both Chinese infrastructure equipment providers with a strong presence in the China market.

As a trusted advisor to CMCC, we were able to build positive relationships with key decision-makers. Visits to China by Hatim Tyabji and other Bytemobile executives have been instrumental in securing the confidence of CMCC senior management.

Successful Trials
With our partner, ASB, we completed successful commercial trials of the Web Fidelity Suite at Jiangsu Mobile and Hubei Mobile, two of CMCC’s provincial operating companies. We then closed Jiangsu Mobile for the implementation of its 3G Web Gateway solution. This deal led to the formal inclusion of Bytemobile in CMCC’s approved vendor list for the nationwide roll-out.

An additional 5-10 CMCC provincial operators are expected to deploy 3G Web Gateway services in 2009. Phase 2 of the roll-out will target CMCC’s GPRS and EDGE network subscribers. Phase 3, scheduled for 2010 and beyond, will proceed to the remainder of the 31 CMCC operators.

Given our initial success, complacency is not an option. CMCC has selected the Ericsson and Huawei proposals as potential back-up solutions to ours. We must continue to execute and deliver results in order to remain the preferred supplier and realize the full potential of this opportunity.

Teamwork Across the Organization
Our winning bid at CMCC culminated a cross-functional team effort that exemplified the Bytemobile culture in action. Key contributors included:

The Beijing office of the Asia-Pacific team

• Li Xiaohe (Michael Li), Bytemobile China general manager
• Ada Hang
• Louisa Liu
• Kane Qiao
• Frank Su
• Johnson Wang
• Wayne Wang
• Anna Zeng
• Jerry Zhang

The Mountain View and Patras engineering and product management teams

• Chris Koopmans
• Joel Brand
• Kannan Parthasarathy
• Nick Stavrakos
• Konstantinos Tsolakas
• George Tsolis
• Paris Zafiris

Worldwide Customer Support

• Warren Simpson
• Tony Gambacorta
• Bill Hamlin

I would like to extend my sincere personal thanks to all of these individuals for their efforts.

Sharing the Excitement
In closing, I would like to share my feedback to the China team:

Michael,

Congratulations to you and the entire Bytemobile China team and to ASB. This was indeed a very challenging and hard fought win and the effort put forth by all of you was tremendous. I am confident that this win marks the launch of many great successes for Bytemobile in China. Now we must work even harder to ensure that we capitalize on this opportunity and move quickly to keep our competitive advantage. You know that the support of the entire company is behind you, your team, and our partner.

I would like to offer my personal thanks to Chris [Koopmans] and his team as well. Their support has been exemplary.

John

The China Mobile Web Gateway win is an exciting milestone for Bytemobile and for the Asia-Pacific Region.

-John Cole

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My barber has a tiny shop right on Main Street where he has been cutting hair for ages. The shop is filled from floor to ceiling with politically incorrect stickers and signs. To be fair, my barber is completely unbiased.  The sign that reads “Dr. Kevorkian for White House Physician” has been there through the Clinton and Bush administrations.  One sign is particularly enlightening:

We offer three types of haircuts:
1.    You can have it Fast and Cheap, but it won’t be Good
2.    You can have it Good and Cheap, but it won’t be Fast
3.    You can have it Fast and Good, but it won’t be Cheap

In technical jargon, this is called Differentiated or Tiered Services.  Each customer receives a different level of service based on his unique needs and willingness to pay.  Cheap is measured in dollar amounts.  Fast is measured in minutes.  But what is Good and how is it measured?  In the case of my barber, it means that you leave his chair with both of your ears still attached to your head.

Executives at wireless companies are almost as smart as my barber.  In a recent survey by The Economist, 60% of these executives agreed that charging users variable prices for bandwidth consumption at different times of day will be an important revenue source for network operators.  They all realize that fixed-price, unlimited data plans are unsustainable, as wireless spectrum is scarce and demand is growing fast.  The forces of supply and demand must be balanced using tiered services.

Fixed-line DSL operators have been offering tiered services for a long time. They use technology known as Traffic Shaping or Throttling.  The idea is to limit the data rate on your DSL line based on your willingness to pay.  Some users are fine with a 128 Kbps downlink speed while others insist on a 1 Mbps downlink speed.  The faster speed clearly costs more.  Can wireless network operators do the same?

Well…it’s not that simple. When you sign up for a 128 Kbps DSL service, you expect 128 Kbps when you download a large file.  DSL operators can pretty much guarantee that speed because they have a lot of excess capacity on the link to your house.  Actually, they have so much excess capacity that they are trying to offer High Definition TV over the same link.  This is known as IPTV.

Wireless operators, on the other hand, do not have any excess capacity.  They would have a hard time fulfilling such Service Level Agreements.  If you ever bothered to actually test the speed of your wireless data service using a 3G card or an iPhone, you’d find that the numbers range from a few tens of Kbps to a couple of Mbps on a 3G network.  This is a huge range that depends on what people around you are doing, the cell coverage in your area and other less-defined parameters such as the exact rotation of the moon (only half-kidding).

Throttling can certainly limit the upper boundary, but it won’t provide any guarantee of a minimal level of service.  When the smart lawyers for the wireless operators draft your subscriber service agreement, they should remember my barber’s sign and consider the trade-offs between Cheap, Fast, and Good.  They should define the dollar amount you would have to pay and the maximum speed you could expect.  But how could they explain what a good service is if no minimal bandwidth is guaranteed?  With health concerns lingering over RF technology, they couldn’t even guarantee that your ears would stay attached to your head.

We mentioned High Definition TV.  Now, that’s quality.  The cable companies have figured it out.  They have tiered services based on quality.  Better picture quality in the form of high-definition signals warrants a higher price.  You might be surprised, but your average wireless operator can do the same using Bytemobile products.  The service provider can control both static image quality when you download a web page and video quality when you watch YouTube.  This is a truly differentiated service: if you are willing to pay extra to experience a high-quality image or video, then feel free to do so.  But if your company picks up the bill, your CFO might opt for degraded image and video quality under the assumption that what you really need to do your work on the go is primarily text-based email.

Given that images account for about 15% of total wireless traffic (or about 50% of web traffic) and videos account for almost 50% of total traffic, imposing quality reduction represents not only a real opportunity for differentiated services, but also significant savings in the cost of wireless service delivery.  With Bytemobile’s WebGate™ Service, carriers can introduce differentiated services based on time of day, maximum throughput, image and video quality, the device you are using, and the websites you are visiting.

Choices for the consumer!  Revenue opportunities and cost savings for the operator!  A win-win proposition!

- Joel Brand

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