Kevin Shatzkamer is the Chief Architect for Cisco Mobility and speaks to the mobile research Cisco has developed in helping Mobile Service Providers reach their ROI goals and objectives in projecting an increasingly demand driven market.
World Cup and Mobility
Q. How will current World Cup viewership demand impact the mobile community from a network capacity standpoint?
VIEWING SOURCE – WORLD CUP GAMES
|Mobile||ESPN Mobile Sites||6%|
"Traditional TV remains the dominate source of viewing for the games"
A. There has been speculation for years that increased demand for mobile video would tax and possibly crash current networks and infrastructures of mobile operators. A predictor may be The World Cup games being held in South Africa. “We know that AT&T, VERIZON, SPRINT, MobiTV and QUALCOMM FloTV have teamed up to work with ESPN to offer mobile video coverage of the games.” From real-time research conducted by ESPN on current World Cup video demand has produced the following statistics:
MOBILE VIDEO TRENDING
|Event Source||Total Views||Total Days|
|Vancouver Olympics Mobile||2.0 Million||17|
|World Cup Mobile||1.8 Million||7|
“What is interesting in these statistics is that not only are people watching on mobile video, but they are spending an inordinately long period of time watching video on their mobile device, which is significant. Speaking to network capability in handling this viewership, think of over one-hundred thousand cell towers in the U.S. alone, not to mention globally, to handle this demand and you can see the network is not currently being impacted significantly.”
Mobile Traffic in the Future
Q. Where does mobile traffic go from here and what are the demands going to be for video in both near and long term?
A. Cisco predicts that sixty-six percent of mobile traffic in the future will be video and whether the FCC’s reclamation of needed spectrum is enough is not yet known. Kevin goes on to explain that whenever you have a delivery method that leverages a finite resource, such as spectrum; there will always be increased contention depending on what people are doing over that network at any particular time.
It’s important to remember that video over wireless can be taxing on the entire network, not just the radio interface. One example is the backhaul network, which is always provisioned with some level of oversubscription. There are technologies that can be used today like video optimization and multicasting technologies which can help a service provider better distribute and deliver mobile video. Other solutions include moving from streaming video to more adaptive protocols like fragmented MP4.
Video and the Network
Q. Why should we look at mobile video as just another application within the network and not a bandwidth hog that could potentially crash the network during peak usage?
A. As an analogy to building strong video infrastructure, Kevin points out that Cable Operators have invested tremendous amounts of capital in their video delivery platforms. It is important to understand that cable has the revenue models which support this kind of investment. Wireless on the other hand has not developed the kind of revenue streams for video since the demand has not been sufficient to support that investment, albeit on a smaller scale.
However, research indicates that as mobile video continues to grow, these kinds of investments will be needed to upgrade current networks to both capitalize on revenue streams and handle the burgeoning demand for video over increasingly diverse devices. Long-term, video might not be looked at strictly as an over-the-top service for mobile, but instead an opportunity for mobile service providers to insert themselves into the value chain; if this successfully occurs, the infrastructure investments which need to take place will happen.
Cisco’s experience with operators continues to indicate a focus on optimizing the entire network, including the backhaul, which needs to be a primary consideration in subscription models. Cisco is helping operators control the impact of video by implementing intelligent network capabilities in the core, mobile services and gateways, and backhaul networks. These solutions add immediate value by conserving the RF itself, but also provide the foundation for new monetization capabilities.
He adds that adding more spectrum is helpful to the problem, but should not be the only focus of mobile operators. Kevin points to a consistent theme across all models whether it’s Docsis3 or LTE in that the Internet Protocol (IP) is becoming less about a transport mechanism and more about a service delivery platform. He compares Docsis3.0 carrying cable signals to a modem which becomes your access point, where mobile will use the cell tower as the same type user access point. In essence, from the access point back through the network, IP will be the primary technology for service delivery.
Net Neutrality and Regulation
Q. What is the potential impact of Net Neutrality possible legislation which could affect service provider ability to manage their networks?
A. The crux of Cisco’s policy release takes a practical view regarding any initiatives that would control service provider network management strength. In essence, “Cisco supports competition within the marketplace and believes that any regulation based on any perceived or potential future abuses are not in the best interest of logical network management practices.”
At best the outlook for where technology will be in the future is uncertain, but as progression in technology evolves as a result of private market forces, any attempt to regulate those forces would dampen private investment as a natural evolution. It is inherent that networks be managed in a way to promote bandwidth optimization which fills the needs of both casual and heavy users. Fair usage will be critical to enabling any network of the future and requires an intelligent IP infrastructure. This also sets the stage to use tiered pricing to offer expanded services critical to a B2B and B2C economical model.
Tiered Pricing Models
Q. Why is tiered pricing important for Service Providers in the Future?
A. Quoting Bernstein Research to predict the evolution of mobile data and how fast it is growing in a shift from a voice dominated model to a data dominate model, Kevin conveys that 50% -70% of future revenue will begin to come from a data model with a de-coupling of mobile revenue and traffic with revenues now accounting for $.43 per Megabyte. Bernstein predicts that by 2014 those current revenues will drop to $.02 per Megabyte and points to current revenue models as becoming deflationary.
While networks are moving from circuit to packet models as they continue to upgrade their infrastructure, the amount of capital invested as compared to resulting ROI is expected to decrease 30% by 2014. Increasingly mobile service providers will be looking for ways to monetize their networks. While the tiering trend has been with the cable industry for quite some time, it has not yet evolved within mobile markets.
Kevin predicts this will change as the industry evolves to the tiered approach beginning with flat-rate for basic users and progressing to higher level packages as individual demand increases. Using the 80-20 rule, Kevin compares how only 20% of all users can demand an exorbitant amount of bandwidth and tiering is an inevitable market force in the future. In reality, this will not affect the majority of users where pricing will be very competitive, but will take the heavy users to an appropriate bundling strategy that can handle specific demands at a relative price model.
Creating New Revenue Models becomes Critical
It can be surmised that current pricing models within the mobile industry is driving traffic to higher levels especially with the amount of rich applications being afforded customers due to the iPhone and Android appearance on the scene with open source development driving those applications.
However, mobile operators are only covering their costs with current revenue models and will need the new service offerings and pricing models to create additional revenues and ROI in the near future. Kevin, shares that tiered pricing is only one model of the total business spectrum service providers should be looking at to grow ROI. Cisco is committed to helping providers find other businesses and models to extrapolate the potential of future networks.
That being from a standpoint of B2B services in environmental, energy savings and monitoring services with which both businesses and consumers could reap much higher benefits from these kinds of services. Mobile data penetrations are nearing 50% and voice penetrations are already at 95% which brings further credence to understanding the need for service providers to differentiate mobile service offerings, including mobile data, to retain existing customers, grow their subscriber base, and increase their revenues.
You must be a registered user to add a comment. If you've already registered, sign in. Otherwise, register and sign in.