My Thoughts on FCC's Net Neutrality Proposal

It think it is fair for FCC to demand that if an operator has sold an “unlimited” package (whatever the definition of that unlimited is), and as long as the user is within the confines of that “unlimited” consumption, the operator cannot dictate that the user can get content (video) from service A, but not from service B. In that regard, the operator must remain neutral.

However, if service B consumes 3x more bandwidth than any other service currently available to the mobile consumers, then perhaps there is a case to be made for the operator. All “unlimited” plans are priced based on what the operator thinks are reasonable, average consumption numbers. If something completely destroys that model, then the operator should have the luxury of going back and revising their plans from that point on. (and the FCC ruling does permit the operators to tweak prices). As an example, I came across data that iPhone users consume an average of 400MB/month, while a typical smartphone ranges between 40-80MB/month.. It will be legal for the operator to price the iPhone data plan at $60/month and the rest of the smartphones at 30/month if that’s what they decide..

The second point is that the world “unlimited” has been very poorly marketed by the operators. It never is unlimited in reality, but the operators insist on putting the limitations in fine print and not being forthright about it in their marketing. This is perhaps the main reason why the problem arises in the first place.. Comcast has sent me letters mentioning that my monthly bandwidth is capped at X GB, but that it I would normally never hit this cap, even if I downloaded one movie per day over the internet. That’s good advertising. I am ok with a limit which I find fair for the price, and that I don’t think I’ll ever hit under normal daily use. All Comcast does this way is to weed out the top 1% of the users who ‘misuse’ the unlimited. Mobile operators in EU have experimented with concepts such as PBE (priority best effort) and BE (best-effort), where as long as the user is under the monthly quota, the bandwidth is what the network will allow, and after that, it drops to 50KBps for that user..

Another thing that can help alleviate this problem is proper optimization of video delivered to the mobile devices (a problem Aylus has addressed with its infrastructure). One of the reasons the new smartphones (including iPhone) cause for the operator is that they browse the web ‘as if’ they were broadband connected and optimize the rendering locally. This often means a lot more data (e.g. video bandwidth) than was needed to render properly on the device is sent over the air (inefficient use of the air). Operators are experimenting with pushing such optimization into the network – this should help a lot.

So in summary, here are my two key opinions:

1. Differentiating between App “A” and App “B” if both are similar in nature and in their bandwidth consumption, is unfair, and FCC is right in asking the operators to be net-neutral in that regard
2. Operators have plenty of opportunities to comply with this, make their business models work, and still differentiate offerings where they make money in the App space versus sell their pipe (better advertising, bandwidth capping after a limit, video optimization infrastructure, etc.)

I’ll continue to follow the debate (I already see rebuttals from VzW and AT&T back to FCC) – should be interesting to see how we end up..

Monetizing User Generated Content

I had several conversations at CTIA with friends, analysts, mobile operators around the topic of monetizing User Generated Content (UGC), especially as UGC moves from pictures and text which are less data intensive to video (which is far more data intensive).

The ability to share video (live or recorded) from the mobile phone is technically feasible and seems to be available readily (at least on smartphones) now. Question is: what is the business model for a company operating "direct to consumer", or "over the top" (OTT) offering for such services?

Imagine that a smartphone user would like the ability to stream content from my mobile instantly to my facebook followers, my friends and family etc. Further assume that this user has an unlimited data plan (say $30-$40/month) from her favorite mobile operator. Most such OTT service providers recommend that she go get one. (It would actually be suicidal not having an unlimited plan given the high quantity of data usage a single minute of video generates, at 128Kbps). Given the above, I have two questions: How many such users are there that (a) have smartphones, (b) have unlimited data plans, and (c) will pay additional $3-$5 a month for the ability to "share" video content? Besides my concern with the intersection of (a) and (b) being small today (a temporary problem, from all market indicators), my real problem is with (c). It would be hard to find willing users who'll pay additional monthly fee - so I am at a loss for a hook here..

That leaves advertizing as a possible revenue model for such OTT providers - and I am yet to see a good monetization model that works with user generated mobile video. Even the powers that be at Google seem to have trouble with it despite the scale of youtube.

My view has been that if we have to monetize UGC, at least until the mobile operators have all relinquished interest in being anything but a bit-pipe provider, the over the top model is fraught with issues. On the other hand, the case can easily be made if the operator decides to offer this service as a way of selling new lines with unlimited data plan, or acquire subscribers from competing operators. Typical subscriber acquisition cost (SAC) numbers range around $250-$300 for US based operators, and can even be more. If the raw cost/MB of data usage for the operator is in the $2-$3 range monthly (google Hank Kafka's recent presentation on cost of data for various technologies), I'd say the operator has a good case for offering this service bundled 'within' the unlimited data plan if it helps with net subscriber acquisition.

In sum, monetizing UGC is a hard problem, and going against the operator in a Vonage like model is harder still, at least today. It will be interesting to see how this plays out in the years to come..

RCS - really considered harmful?

I found this article really interesting:

http://www.telco2.net/blog/2009/02/rcs_really_considered_harmful.html

I have posted some of my comments along with other readers who are passionate about RCS - the service and the use cases are great, and appeal to most people - I just hope that the collection of telcos/telco suppliers/standardization bodies don't get mired into specifying it to death, but rather try out some use cases in real world trials and keep fine tuning the experiences..

Nothing is better than putting the 'human in the loop' when coming up with new experiences -- especially if the human in question is the one that'll eventually be asked to pay for these services..

2010 - year of video calling?

I often wonder which year will be the year when we significantly augment our plain vanilla voice calls with video. Laptop magazine - Jan 2009 issue has some interesting stats:

1. 28% of Skype calls were video calls in 1Q 2008 (that's 1 year ago!)
2. Yankee group predicts that 11.8% of all Americans will be using Video Calling services within 3 years (and 43% of the online users)
3. At the end of 2007, there were 23m Video-chat users in the US, and this number is expected to rise to 37m in 3 years (by EOY 2010)

So it looks like people do want to see other people when they talk.. Question is, how will the business case for this evolve.. more thoughts on that later..

just a test, don't bother looking..

This is just a quick test. If you have stopped by here, thank you, but you might want to run along now..