Telcos still struggle with paradigm shift: execs

This article was authored by John C. Tanner, and was originally posted on telecomasia.net.

It seems like every telecoms-related conference I’ve been to this year – and I know it’s only March, but bear with me – has had a recurring theme that goes something like this: telcos really have no idea how much their industry is changing.

This year’s Mobile Backhaul Asia conference in Bangkok has been no exception.

Speakers advised delegates first thing Day 1 that while telco executives aren’t completely oblivious to the paradigm shifts going on around them – brought on by smartphones, social media, etc – there’s a huge difference between being aware of change and understanding just what that means.

For example, it’s well understood that OTT players are challenging the telecoms status quo, but many telcos don’t fully appreciate just what a big deal this is, said Mike McConnell, CTO and executive solution consultant for Huawei Technologies.

“I really don’t think people fully understand this, even though they say they do,” McConnell said in his morning keynote. “It comes down to how [OTT players] go to market and how different it is from the telco model.”

For OTT players like Facebook, Google and Skype, the key difference is that –unlike telcos – their service is not the product, but the user base. “They offer the service free and grow their user base any way they can. They build their population, and that’s the product, which they sell to marketers. Telcos don’t do that – they still want to charge for everything they put in front of their customers. It’s very difficult to make that work when you compete against the OTT model.”

Another example from McConnell of underestimating current trends: the well-cited stat that mobile devices are replacing PCs as the Internet connectivity terminal of choice. “It’s critical to understand what that really means,” he said.

For a start, many new OTT services – such as Foursquare – are developed specifically with smartphones and tablets in mind, not PCs (not even laptops), he said.

Also, mobile broadband networks and hot spots will have a significant impact on traditional cash cow of roaming business models, McConnell added. “When I travel, I can get onto a Wi-Fi hotspot and do 98% of what I need to do without using voice at all, and when I do need voice I can use VoIP.”

Gian Paolo Balboni, head of innovation trends at Telecom Italia, also stressed the importance of fully understanding the current trends driving the mobile data business – from smartphone and tablet usage to OTT content.

Take tablets, for example. “Tablets consume up to nine times as much data as smartphones, but over 90% of tablet data consumption is taking place on Wi-Fi, not the mobile network,” Balboni said in his morning keynote. “Wi-Fi is an important factor that we need to understand better.”

Bonus takeaway from Day 1: mobile backhaul will be as heterogeneous as the access network.

Industry players talk much these days of small cells (including Wi-Fi) as an inevitable feature of LTE, and the challenges of operating such a heterogeneous network. But the same will apply to backhaul as well.

While fiber is often talked up as the ideal backhaul link for next-gen mobile, Dirk Wolter, director of mobility architecture for APAC, China and Japan at Cisco Systems, pointed out that operators will likely utilize a mix of backhaul solutions – fiber, microwave (point-to-point and point-to-multipoint), Ethernet, Wi-Fi mesh and (for operators with fixed-line assets as well) xDSL and PON.

Huawei’s McConnell agreed, but added that LTE itself will also serve as a backhaul technology for mobile hotspots.

Ran Avital, VP of strategic and product marketing at Ceragon Networks, pointed out that while there are multiple tech choices for mobile backhaul, it’s important to understand the differences between them in terms of opex, cost, form factors, capacity, NLOS support and service predictability.

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