Earth to RIM and Netflix: Face Reality

RIM has demonstrated why it’s never a good idea to rest on your laurels in a market you’re not leading in the first place.  The current-model Blackberries sold OK but older models were down in sales and the PlayBook was a disaster.  Now the company is pushing for a next-quarter refresh, the line of everyone who has no clear prospects for getting refreshed at all.

The big problem, according to some pundits, is the refresh of RIM’s old OS platform for the acquired QNX.  One of several (including iOS, Android, and MeeGo) Linux/UNIX variant platforms for appliances, QNX was originally designed for embedded systems, meaning small industrial computers and communications.  It is much friendlier to developers familiar with other “x-OSs” but the GUI RIM intends to plant on it is said to be not compatible with either iOS or Android, which means it wouldn’t be a seamless shift for applications.  The delays in QNX release have stalled efforts to recruit developers but have also given competitors plenty of time to push onward on their own.  The tablet market is also clearly getting mature, meaning getting harder to create a role in, harder to sustain profits.

I think that QNX is less an issue than simple inertia.  Every company who succeeds at anything, via any strategy whether deliberate or serendipitous, fights the tendency to hunker down on their newly won ground and take root.  This, despite the fact that the market itself virtually signals the need for change.  RIM, when Apple launched the iPhone, could have and should have realized that larger form factors were next.  Had they moved at that point, they’d have been number one or two at worst in tablets, and likely in a strong position today.  The market has signaled again; cheap tablets are the only new game possible, and that’s a game that RIM can’t afford to play.

Netflix also has its problems, not that I’d not expected this when they announced their new pricing plan.  The news to me is less that Netflix lost customers (who gains customers by raising prices?) but that the streaming business was so precarious a balance between demand and margins.  Portal plays like Netflix and so many OTT businesses are really parasitic business models; they depend on essentially free transport and free goods, meaning that their profit is based on an unrealistic assumption that others in the food chain aren’t making one.  As you get a streaming movie service going you can draw on old cheap material, but you’re continually pushed to get newer stuff simply because there’s not enough old stuff to keep your subscribers happy.  The new stuff not only costs more naturally, your own success prompts the owners of the content to recognize their higher value, and the next thing you know, you’re caught in a squeeze.  We’ll see if Netflix finds a balance here; there may not be one that works for all.

In the enterprise space, Huawei has announced lofty ambitions as a provider of network equipment to businesses.  The company expects $7 billion from this segment in 2012, though most of that will come from the China market.  It’s widely expected that Huawei will push more into the enterprise market internationally even in 2012, though.  There’s considerable price pressure on enterprise network operations managers because there’s been a general lack of new benefits to drive up spending without compromising overall return.  That mirrors the situation in the service provider market, of course.  Huawei is a formidable risk to any network equipment vendors who don’t learn a lesson from RIM.



Early Survey Results: It’s All Cloud!

I sent out the survey material for our fall strategy sweep, and as usual I asked both service providers and enterprises to respond quickly with the answers to the following questions; “What’s the hottest network issue”, “What’s your biggest concern”, and “What’s your biggest surprise”?  The answers were quite interesting.

The hottest issue for both enterprises and service providers was “the cloud” by a large margin, larger in fact than prior surveys.  In my own view, the broad fascination with the cloud is more than just the typical response to media hype, it’s a reflection of the fact that cloud computing is an explicit marriage of a lot of technology trends, a kind of IT Unified Field Theory.  Enterprises in particular need some strategic mantra to drive their project spending, some way of linking change to benefits, and “the cloud” seems to be even more favored in that role with each passing quarter.

In the “biggest concern” category, fear of another global economic ranked as the clear leader among enterprises, but with the service providers it was in a virtual tie with “declining revenue per bit” or a variation on that theme.  Network operators fear disintermediation and commoditization, a world where traffic growth pushes them to make more investment while revenue either stagnates or falls, the latter coming from the displacement of traditional services (notably TDM voice and even leased lines) by packet-based Internet OTT services.

The “biggest surprise” was a bit of a surprise to me.  Both enterprises and service providers said that “the technical and business aspects of cloud computing are not what we expected”.  While I knew from prior surveys that there was a considerable shift in enterprise attitude about the cloud as companies advanced the state of their own cloud planning, I wasn’t sure that the enterprises themselves saw this change.  It was also interesting that enterprises listed “failure of the benefit case to prove out in our cloud projects” as a “biggest concern” enough times to give that issue the top spot among the technology responses.

If you reflect on the fact that Cisco’s Chambers says that the company is going to tighten its focus and build a strategy around product areas, you have to wonder whether “the cloud” is among them.  We found in our last survey of enterprises that Cisco had actually lost strategic influence in cloud computing despite the fact that more enterprises said they “knew” Cisco’s cloud strategy than felt that way about competitors’ approach.  I’d speculate that Cisco was pushing the role of UCS a bit too strongly; buyers of network equipment expect Cisco to offer a network-centric cloud view.

There’s also a sense in Chambers’ words that Cisco is prepared to discount significantly to buy market share, or revenue.  The question is which of these two Cisco is going after.  Just buying revenue sets a new lower floor on your prices that you’re unlikely to be able to make up.  Buying market share implies that you have some specific plan to enrich profits with follow-on business and you’re getting a foothold with pricing.  Cisco did say that they expected to mine profits with services and software, both of which are higher margin.  They didn’t say it, but that would put them perhaps more on a collision course with HP.  While Cisco’s Juniper vulnerability comments got most media focus, Cisco also said that HP had a strategy problem, and that’s certainly true.  With so many fundamental changes in the works, and with their future more linked than ever to the data center, HP has to not only do well there, they have to triumph.  The cloud is obviously the only pathway to that goal.


Neutral Internets and Edgy Cisco

The FCC is finally going to publish its net neutrality ruling (some time in the next couple of months), and while the move isn’t going to change a darn thing in ISP behavior (people have been complying anyway), it will open the door for a flood of appeals of the ruling.  It’s also likely that Republicans will try to get it overturned through legislation, though most everyone believes that a bill like that wouldn’t pass the Senate at this point.

I’m on the fence with this bill.  Most of it is reasonable; non-discrimination of traffic based on website or traffic type.  Where I’m not sure is in the fact that the rules appear to bar “pay for priority” services where the paying party is the content provider.  The FCC has said that this would put smaller players in the market at a disadvantage, and I believe that the problem is that smaller players aren’t likely to have free access to content to distribute under such agreements.  What the order really does is make over-the-Internet delivery of something that requires some QoS less attractive, because it would force the user to accept best-efforts delivery or elect to pay themselves.  I also think, based on my own (unsuccessful) attempt in the 1990s to develop pan-ISP standards for QoS-based peering, that there is little chance for customer-pays services developing that cross ISP boundaries.  Content providers would have some leverage there.  So I think the FCC’s rule here could hurt—but where my waffling comes in is that it probably won’t.  There is little chance of content being delivered end-to-end anyway; the CDN is on the rise.

In any event, the Order will soon be tested, not on grounds of reasonability of its measures (the FCC is the “Court of Fact” in communications issues) but on jurisdiction.  At least one Court of Appeals has already said the FCC lacked the jurisdiction to enforce neutrality; does it have the jurisdiction to impose this order, then?  We’ll see.

Cisco held its investor meeting yesterday, and the Street view of the event was considerably more favorable than its view of rival Juniper.  The analysts appear to agree with Cisco’s Chambers when he says that Juniper is “vulnerable”.  My readers know that I wrote about this Cisco view some time back.  Cisco says this is because Juniper is spread too thinly between service provider and enterprise.  Along the way, Chambers indicated that Cisco would be taking an edgier position against HP, and acknowledged that Huawei was a strong competitor.

So what’s really going on here?  Is Cisco going to give us the networking equivalent of the negative ad campaign, and if so, why?  Negative ads are designed not to influence voters but to disgust them, to keep the dangerous unaligned out of the polling places so your party hacks matter more.  Keeping the buyer out of the market is exactly what Cisco is risking here, and why take that risk?  It could be because Cisco is hoping to make something happen, and they want Juniper in particular to be on the defensive.

Juniper is a habitual counter-puncher; they have let Cisco set the stage time after time and boxed against the Cisco initiatives.  The fact that Cisco thinks Juniper is spread too thin almost invites everyone to believe that Juniper might “un-spread” itself, and that could only come by reducing its enterprise commitments—Juniper depends too much on the service provider side.  If that’s what Cisco wants, then it wants it because Juniper’s upcoming QFabric might be harmful to Cisco’s data center and content strategy.  If Juniper responds to Cisco as usual, by simply rebutting the comments Cisco makes, then Cisco will control the market dialog.  If you want Juniper to talk about something, attack them there and they’ll help you drag the issue around the media circuit.  If you don’t want something discussed, then just stay mum; Juniper will not raise the issue either.  So for Juniper here, the right answer is to forget what Cisco is saying and focus on what Cisco doesn’t want Juniper to talk about.



Broadcom/Netlogic, Cisco/Juniper, and a Free Multi-Screen App Note

Broadcom is acquiring semi-rival Netlogic in what’s surely a big buy, but the range of products in the Netlogic portfolio make it hard to be sure just what Broadcom’s target for the deal is.  Netlogic generally makes smart chips, things that are a bit like the network processors of old but more focused on packet processing and inspection than on protocol hosting.  Their products make sense in smart appliances as a way to separate real-time streams from the packet/web chaff, but they could also figure rather prominently in networks as packet handling tools.  In fact, the company has some biggish deals with network equipment vendors in that area.  Netlogic has also been looking deeper into the cloud and data center of late, not only for security but also even for application performance management.

One of the things that the move demonstrates is that packet processing and intelligence is probably a key element in any move to create service value that has a network component.  The network’s ability to recognize services discretely often depends on the examination of data streams, particularly where the network transport web has no integrated service layer that can inject application knowledge/awareness.  That’s one of the reasons we think that whether you’re talking about enterprises or service providers, the service layer is important.

Juniper held its “Innovations Day” meeting yesterday, but the outcome appears to me to have been more evolutionary than revolutionary.  The Street is divided on whether Juniper can create a significant upside in revenues in the near term with the products it’s announced in the past (some of which are targets of the Cisco attack I noted yesterday).  UBS now concedes that it’s unlikely Juniper will make a major headcount reduction and thus seems to be reconciled to a year or so of anemic profit growth because of the longer selling cycle on the hardware that’s already been announced.

I don’t understand either Cisco or Juniper, frankly.  Network gear has a fairly long expected useful life and it’s expensive, so you can’t swish it around at will to track the ebbs and flows of market needs.  For years it’s been clear that software has to be the impedance-matching layer, the adapter that makes glaciers look agile.  That’s how it’s worked in IT for decades, and how it has to work in networking now.  Cisco seemed to have realized this early on, but its software activity was (typically for Cisco) focused on near-term sales goals and it never established any true strategic position for itself within Cisco or its products.  I’d argue it still hasn’t.  Juniper caught on to the notion that software had to somehow be linked strategically to the network and came up with their whole “Junos ecosystem” thing, but they’ve been unable to make anything of it other than an enhanced operations tool.  Get your heads out of the bits, guys, and look at the IT world.  What makes the hardware-to-user connection there?  Learn a lesson.  Watching these guys is like watching two guys fighting on a raft about to go over the falls.  Sometimes you have to view “winning and losing” in a broader light.

Many of those who have followed my views and work over the years know about my open-source ExperiaSphere project, designed to create Java proof-of-concept execution for service-layer technology that tightly couples network assets to service monetization plans.  I’m pleased to say that I’ve completed a very extensive document describing how the ExperiaSphere framework could execute multi-screen video applications.  This document was produced with input and review from seven global network operators, and it’s the most extensive description of multi-screen that you’ll find anywhere.  It’s available at  I’ve included the document PDF (almost 25 thousand words) and all 27 figures in a separate file to make reference easier.  We’re no longer taking comments on the document for future revision, but I’d still be happy to hear from anyone with thoughts on it!




What’s Behind Cisco’s Juniper Zingers?

About a half-dozen years ago, Juniper made news with a series of aggressive cartoon ads that stuck it to arch-rival Cisco in various ways.  Now Cisco is apparently taking that same tack, at least to a degree, with a website that’s a pretty clear swing at Juniper.  The focus of the site is the claim that Juniper is over-promising and under-delivering.  Well, gosh, Cisco, how many times has that been said about you, or pretty much any other player in the space?

Both Cisco and Juniper have public events coming up, and I’m not of the view that either is likely to say much of substance at them.  To me, both companies have the same fundamental set of issues.  In fact, one of the two reasons we think that Cisco is embarking on this campaign right now is that Cisco and Juniper are the most direct competitors, the most alike.  In the current market, that means not that they share common strengths as much as that they share common limitations.

When you’re in the bit-pushing business, everything is a bit to you.  That’s not a bad focus when bits are the thing the buyer is going after, and during the decade of the ‘90s when IP supplanted IBM’s SNA and enterprises were limited in their productivity visions more by connectivity than by applications, you needed “power IP”.  Bandwidth was expensive so equipment costs were smaller relative to network costs overall.  Today, both in the carrier and enterprise world, bandwidth cost is declining.  Capital costs now matter, but more significantly we’ve solved the connectivity problem enough to grab all the low-hanging benefits.  More network spending is contingent on more productivity for enterprises, or more profits for carriers.  Revenue drives investment, not “demand”.

Neither Cisco nor Juniper has been able to create a convincing connection between their product strategies and monetization for the operators.  Neither has been able to tout a credible productivity-enhancing vision for the enterprise.  Thus, neither has been able to attack the benefit side of ROI at a time when that’s what the buyer is demanding.  Competitors like Alcatel-Lucent, Ericsson, and NSN who have a direct monetization strategy are gaining steadily in strategic influence in our surveys, and both Cisco and Juniper are losing ground.  In the enterprise space, both Cisco and Juniper are under threat from the big IT giants like HP, IBM, Microsoft, and Oracle.  Even if they don’t sell network gear (or if they OEM your own) these players are tapping off buyer influence, driving projects.  That means those projects are likely spending more on servers and software and storage than on networks.  And Huawei is waiting in the wings, ready to strike at any market that truly is cost-driven.

Remember I said there were two reasons for Cisco’s timing?  What’s the other one.  Well, the story is that Cisco believes from its account contacts that Juniper is truly vulnerable now.  There’s no point trying to deliver a knock-out blow to a competitor who’s fresh and strong, in Cisco’s view, so why waste negative campaign ads when they won’t really change anything?

Is Juniper really vulnerable?  In one sense, as I’ve said, they share the stage in the Benefit Disconnect Waltz with Cisco.  But Cisco is an incumbent, with much stronger account relationships.  They can weather a short-term storm better than Juniper.  Which is in my view the key point to Cisco’s strategy.  If they believe that they are on the edge of solving the benefit-case problem in the market, then it makes sense to try to tackle Juniper right now and leave the path to the goal-line open.  If they aren’t going to fix their own problems quickly, then this is going to backfire.




Google/Zagat Indicts Yahoo/Bartz

Google’s decision to buy restaurant-rating firm Zagat is a validation of a trend I’ve been blogging about; the whole notion of how advertising is monetized online.  It’s also an indication of what Yahoo could have, should have perhaps, and didn’t do.  Maybe even an indication of why it’s too late for them to do anything at all.

Generally, advertising serves three interdependent goals.  One is to build brand recognition, one to build demand, and the final one to influence purchases.  If you think about it, only the last of these three is a sure winner.  Your brand can be a household word and people not buy you; look at Xerox.  You can spend on ads to build demand, but others may get the money.  But if you influence the buyer during the purchase, you’ve struck gold.  That’s why search ads have been the sweet spot of advertising, and why Google has done so well.

What Google is doing with Zagat is recognizing that mobile broadband can take the “influence purchases” paradigm to a whole new level.  Mobile lets you go to the shopping area, even to the store, with the customer.  Nobody these days shops or eats without a phone (most, in my personal view, should learn to keep it in their pockets while eating!) and what Google is aiming for with its latest buy is to get the purchaser to check out restaurant (and obviously, over time, other purchase) reviews at the last minute, that critical Golden Minute when the buyer waffles and then commits.

Where Yahoo comes into this is at two levels.  First, they have had mobile aspirations all along but they’ve failed to recognize the most fundamental truth about mobile advertising, the truth I opened with here.  Mobile is different because it supports point-of-purchase manipulation of the buyer.  You don’t do mobile searches for the same reason you do searches at home.  You’re out there, ready to buy.  Earth to Bartz (yes, a retrospective question at this point); why not focus Yahoo search on MOBILE and forget about all those “relevance” and other issues.  What’s relevant to a mobile user is what’s surrounding that user.  You make your choice from what’s available.  Yahoo COULD have taken a leading role there.  And since Zagat has been on the block with no really interested parties looking at it for ages, Yahoo could have had them too.

A major investor group is calling for a new board, citing all of the value that Yahoo should have on paper.  The Internet industry doesn’t exist on paper, not really, not in the way that other industries do.  Yahoo is a recognized brand, but in Yahoo’s market brand is less important than you’d think.  The Internet is an information engine, and getting the right information to people at the right time is the formula for success.  Replace Bartz, replace the board, and you still have a thousand Yahooheads in key positions in the company who can’t think outside their own narrow gully of past experiences.  Startups are trained by their VCs to cling to a notion until they either win everything or lose everything.  Yahoo was trained as a startup, and unless they get that thousand inertial thinkers out of their gullies, they’re toast.




Social, Content, and Ad: Threat or Opportunity?

Facebook, whose revenues are said to be ramping up sharply (toward, no doubt, what its backers hope will be a truly cosmic IPO), is apparently planning to confront the problem of limited ad opportunity I talked about yesterday with a simple solution; eat all of it.  The company is rumored to be planning to make itself into a complete media portal, serving all kinds of content in a truly social context and even providing for social communications.  In fact, I’ve heard that they’re quietly planning to scrap their partnership with Skype (announced when Google+ burst on the scene) and develop their own framework for social and collaborative communication.

The problem with this model is that it presumes that social behavior underpins all commercial activity.  Remember, it’s commercial activity that ads target; advertisers don’t give a darn about your social life except insofar as it is exploitable to manipulate your buying.  Everyone’s research seems to agree that socially-driven buying is concentrated in the youth segment.

The point here is that Facebook is heading after a market space that is even more restricted than the overall ad-sponsorship market.  Google has it right in that search ads are still the most likely things to impact retail activity.  I just bought something online, and it was a purchase that online search impacted because it changed not only my preferred vendor but switched me to online fulfillment over retail instant gratification.  Did I ask my Facebook (or Google+) friends about it?  Didn’t even occur to me.  And I probably spend more than your average 25-year-old.

For video, we’re seeing a bit more focus on the kind of features more likely to be associated with monetized video than passive streaming.  Vendors are jumping onto this, not with what we’d like to see (a true, architected, service layer) but at least with silo video offerings.  I noted that Alcatel-Lucent had announced a multi-screen application, and NSN did the same this week.  The NSN offering is surprisingly glitzy for a company that’s not exactly a household word in effective marketing sensationalism; it demonstrates screen-switching and social video for example.  And both NSN and Alcatel-Lucent may in fact be moving toward a unified service-layer approach.  Whether for sales focus reasons or because they’re hoping to sell professional services, or just that they’re not there yet, the current material doesn’t talk about service-layer integration and orchestration.

It’s fair to ask what this is all going to mean, and I think one thing that’s certain is that the network of the future is going to revolve around the CDN.  Content is the majority of traffic growth.  Content is the majority of monetization opportunity.  Content that has any monetization is served by a CDN to manage QoE.  Content that has none is served by a CDN to control bandwidth utilization.  Getting the picture here?  But the CDN of the future isn’t the old Akamai model peering-point connection.  It’s deeply distributed, it’s highly policy-managed with respect to where caches go and what goes into them, and it’s highly componentized so that it can be composed into flexible media offerings that are specific to the operators’ local needs and rules.  You can see this model emerging from both Alcatel-Lucent and NSN, and also being expressed at least by Cisco and Juniper.  You can even see it from CDN startups like Verivue.  The fact is that every operator is going to need both bandwidth optimization and content monetization.  That these missions are very different means that CDNs and the logic that’s built around them has to be very flexible.  We’re working to find out just how flexible all these options really are, and we hope to provide some of that this month in Netwatcher, and more in future issues.

The whole video thing is going to be impacted by the fall season of technology product launches, among which are supposed to be Apple’s new iPhone and Amazon’s tablet.  We are seeing iPhones and Android smartphones gaining traction even as gaming platforms, and obviously we’re seeing tablets increasingly as personal media portals.  There will be people who will use smartphones more (youth), people who use tablets more (everyone else), and all of these people will be both stressing networks and generating opportunity.  I don’t think that the OTT video market will really threaten channelized TV because I doubt that the delivery of that much material can be made affordable to the consumer and still return anything reasonable on investment for the operator.  I do think that the revenue kicker it can add to commercials embedded in standard content could be very significant, and so I think you’re going to see more from vendors to address streaming and monetization of video.



Bye Bye Bartz

Well, Carol Bartz is done at Yahoo, and that’s a truth that has mixed implications for the market.  Yes, it’s true that Yahoo has continued on its downward slide since Bartz took control.  But there’s a bigger question here, which is whether there is/was anything that could be done to stop that.  That question has implications for the broader web marketplace.

Yahoo was once a darling of the web (but then so was AOL).  It was one of the literati of the Silicon Valley culture, a firm that prided itself as being one of the new model of American business.  Like most such companies, it sprung out of venture funding and grew in a glamour period when having an “I” anywhere in your mission made you a hit.  The company is widely seen as having lost to Google, which from the perspective of search was surely true, but Yahoo had an enormous number of loyal fans who made it one of (and often THE) top portals on the web.  What happened?

Part of the problem was the VC genesis.  Companies who start their lives as venture-funded startups are evolving in a fool’s paradise.  There’s no accountability in a classic business sense; the goal is to create buzz that will result in somebody buying you.  Worst-case, you puff yourself up somehow and do an IPO.  I’ve said a million times that the whole VC process is a glorified pyramid swindle, and I stand by that.  You don’t learn to be a real business by learning to be what the VC community calls a “burger”; born to be “flipped” or sold.

Another factor was the whole Silicon-Valley-culture thing.  There’s a general lack of understanding of business reality in the Valley.  Part of it is from the VC genesis of most companies, but another part is from a kind of cultural superiority.  We are the new age, you are the old.  Prepare to die off and have us take over!  Tell that to IBM, the most successfully venerable of all tech companies.

Starting about five years ago, I saw this mindset contaminate Yahoo’s appreciation of what might have been the greatest opportunity of all time.  In that period, the big telcos and even cable companies were getting very interested in things like advertising and OTT-like services.  They had no real way of getting into that space quickly, and they were eager to partner with somebody.  Google was quick to say “No!” to that; they were at the time embroiled in a Vint-Cerf-sponsored war with the telecom establishment.  Yahoo could have said “Yes” and become the poster child for synergy between the network operators and the OTTs.  Instead, they dismissed the notion with at least as much dripping disdain as Google did.  And with that they threw away the keys to the kingdom.

Yes, ads are important; for one thing, they fund content.  But they can’t fund everything.  We’re seeing players like Groupon, one of the latest wrinkles in what’s still essentially an ad space, first employ creative accounting to justify its IPO, then get into controversy over statements made during what was supposed to be a quiet period, and finally pull its IPO plans, ostensibly because of the economic conditions.  Too many consumers at any level of the food chain tend to kill off the prey, and eventually each other.  Yahoo could have been the apex predator.  Now it’s probably prey too.



Portends of the Fall Planning Cycle

We’re heading into the fall now, and with the change in season will come a new period of technology-strategy planning for both enterprises and the service providers.  I’ve tracked the former group with a formal fall survey since 1982 and the latter since 1991, and the results of the surveys are always interesting.  This year instead of publishing a special report in November to cover the results, I’m integrating them into our December Annual Technology Forecast issue of our technology journal, Netwatcher.

For the enterprises, the challenge with project spending has been identifying projects that provided a net benefit.  Over the last ten years the focus of enterprise projects has shifted from providing some enhancement to the top line to one of defending the bottom line.  That means shifting from a productivity-driven thesis for projects to a cost-management thesis.  The problem is that cost management vanishes to a point; you can’t continually build IT spending on a static set of benefits and at the same time demand “improvements” in ROI unless you take spending levels toward zero.  There is still a credible “cost” on the table, associated with the management of application performance, but it’s not been addressed in an organized way by the vendor community in general and by networking vendors in particular.  Neither group has been able to come up with productivity-based benefits to drive spending UP, either.  This fall we may see whether that will change.

For network operators, the big problem is obvious; monetization.  Right now I’m seeing operators pretty pessimistic about wireline investment except in emerging economies.  The Internet is the only wireline driver for traffic growth and it’s a driver whose growth is currently non-monetizable under neutrality rules and the unlimited-usage paradigm.  Operators have identified three priority areas for monetization (content, mobile/behavioral, and cloud) but only the latter is getting much near-term capital support because the former two rely almost totally on the emergence of a service-layer paradigm—an NGN Advanced Intelligent Network architecture.  That’s not been happening, at least not in an open sense, and so I’m seeing an accelerating shift of capex to mobile networking, where dollars buy cell sites and backhaul and switches and not routers.  That shift works against the network vendors overall, but in particular against those who don’t have much of an RF/cellular stance.  Which is why Cisco did their agreement with NEC, of course.

Operators haven’t abandoned monetization of content or mobile services; Telefonica just restructured to create a division that’s explicitly charged with that task, for example, and our survey in May showed that most operators had board-level projects underway to identify a variety of monetization goals.  The current problem is that about half these projects have near-term milestones the operators say they can’t meet for lack of conformant implementation tools.  I’m always amazed at these complaints because they show that even when vendors are confronted by buyers with well-articulated requirements they’re finding it impossible to simply address them.  Instead they want to talk about taking a “first step” that, absent any credible longer-term vision for the project, might be the only step they can support.  That’s what’s stalling progress.

One vendor who has recently taken some of this to heart is Alcatel-Lucent, who has quietly beefed up its Application Enablement story with some real insight into how services are created.  For example, they say that the service layer develops “Platform APIs” that can then be exposed to developers, and an example of such an API is multi-screen video!  I just finished an open-source app note on this same service opportunity, and I’d love to be able to compare it to the details of the Alcatel-Lucent approach, but so far the inner workings of these Platform APIs and the way they get developed (including by whom) isn’t on the website.  I’ve also noticed some recent positioning by NSN in this space, and even by Ericsson (who has been gaining some traction in the multi-screen video space over the summer).  An interesting contrast to Cisco, who despite having what might be the clearest technical picture of a service layer seems to be stalled by reorganizations in the exploitation of their assets.


Cable Cellular and the Tablet

One of the more interesting wrinkles in the ongoing tablet wars is a decision by more cable companies to back away from any commitments (on their own or as MVNOs) for wireless capabilities.  There was a time when everyone thought that the quad play was going to be a major requirement, so how did this happen?  Apple, in a word.

First of all, the iPhone created an appliance magnetism that broke many customers away from having cellular services from their home carriers.  It disproved the notion that you could create loyalty with non-functional bundles alone, and that in itself was a major factor in limiting interest in quad-play economics.

Second, it’s proved more complicated to create FUNCTIONAL bundles, active symbiosis between wireless and wireline, than was previously considered.  Yes it’s possible to create apps to let you do something on or with your TV, but for the key youth market those tools are less interesting because they’re not home anyway.  And service-layer technology, an architecture or framework that would let operators (including MSOs) build sophisticated componentized services from features, have been hard to come by.

Third, tablets are proving that if consumers have a larger form factor and a place to sit, they will consume “TV Everywhere”.  On one hand this might appear to promote a cable company’s entry into cellular, but it doesn’t for two reasons; usage costs and hospitality hot spots.  You don’t have to stream many videos to your tablet to run into extra-cost territory, and in any event why pay for mobility when you need to sit down to watch?

Since tablet vendors offer WiFi tablets at a much lower cost than cellular-equipped models, more and more consumers are jumping on that approach, and TV Everywhere doesn’t have to include that many places that don’t offer WiFi.  I think we’re going to see WiFi exploding at the same pace that tablets have exploded, and I think we’re going to see less focus on “wireless” and more on WiFi.  One more reason why the DoJ should have let AT&T and T-Mobile merge!