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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Heart of the Matter is pleased to welcome its first guest blogger from outside of Bytemobile.  Asokan Thiyagarajan is a technology evangelist at Motorola and presents/publishes on cutting-edge trends and technologies in the mobile industry. Some of his publications can be found at http://developer.motorola.com/cuttingedge/

Although mobile data networks have been around for quite a while, the majority of usage is still for traditional needs: messaging systems such as MMS and email, file downloading and internet browsing. Buzzword concepts like Web 2.0 are beginning to make inroads into the consumer market, but the next-generation killer data application is yet to be found. I believe the time is ripe for a true game-changer to emerge, thanks to the convergence of five remarkable factors:

1. A Unique Demand Opportunity
As mobile phones continue to penetrate the world consumer population at an explosive rate, a parallel movement is taking place in mobile networks, which are rapidly evolving from voice-only to a data-based infrastructure. According to a recent report from Informa Telecoms & Media, Revenues from mobile data services are set to exceed US$200 billion in 2008 for the first time.  These twin factors – an increase in the number of mobile data users and rising consumer spending on data services – mean an unprecedented revenue opportunity exists for developers who create innovative, useful data-enabled applications over the next few years.

2. Improving Data Networks
The movement of data networks through 3G and on to 4G will bring increased bandwidth and connectivity, providing better throughput and always-on connectivity to consumers. Although manufacturers and operators have continuing worries about performance, security, roaming (quality of service), and standardization, they are resolving these issues by refining performance management techniques – optimizing user requests, caching, protocols, and so on.

3. Network Diversification and Ubiquity
Alternative mobile broadband networks are being deployed at an astounding rate. For example, WLAN has matured over the years and is now being made available from coffee shops to airports. WiMAX deployments may soon go even further, reshaping future devices, applications and user experiences to fit their increased capacities. This proliferation of wireless broadband networks has already begun to make multi-mode phones essential, as major industry players such as Motorola have become active champions of the new technologies and are rapidly rolling out infrastructure solutions.

4. Globalization, and an Even Playing Field
Regional differences are beginning to evaporate. The developed countries saw data networks emerge in three stages – first dial-ups, then wired broadband and now wireless broadband services. In the rest of the world, however, the data infrastructure has leap-frogged directly into the wireless broadband sphere. So it’s not only the traditional markets that are ready for rich mobile data applications; the whole world is following suit, faster than might have seemed possible.

5. Declining Data Pricing
As data networks are widely adopted by consumers around the world, data pricing will fall proportionately. Most carriers in the United States have recently introduced a flat pricing model for unlimited usage, following a trend that has already taken hold in other markets. Not surprisingly, it’s the enterprise that’s driving much of this momentum. Overall, operators have seen an increase in the average revenue per user (ARPU) for enterprise-class users, even as the ARPU of normal users has remained relatively steady.

With the adoption of data networks around the world approaching critical mass, your next cool idea may be just in time to meet a massive revenue generation opportunity. Developers can best position themselves to take advantage by staying current on new hardware and platform developments; device manufacturers like Motorola have developer programs ready to help you create cool new applications and get them to market quickly.

- Asokan Thiyagarajan, Motorola

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While the iPhone has an incredible number of fan(boy)s talking about it on the
Net, there is no dearth of articles criticizing it, either. The 2G version came under fire for not having GPS or a video camera — and for being 2G, of course. The 3G version now comes under fire for battery life, the kill switch, the app store, etc. If you were the product manager in charge of the iPhone, what would you do? What would you roll out and when? How would you balance the features, the price and the release timing to satisfy the clamoring crowds?

Whoever is making these decisions — my hunch: a guy wearing a black turtleneck and blue jeans and nothing so lowly as a product manager — has done a fantastic job. The first generation was aimed at the Apple fanatics. These are the evangelists, the first to buy every new Apple product at high prices and tell their friends about it. You have probably seen pictures of them lining up outside Apple stores. They serve as Apple’s test market, helping the company to recover development costs and reduce risk. That’s how Apple got away with pricing the phone around $500 initially. I’ll bet Apple knows exactly how many of these guys there are, where in the world they are located, what they want, and how much they are willing to spend. (more…)

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