Who is the bigger predator ? Online retail or the brick-and-mortar retail ?

Recently the Flipkart mega sale did not go right for a,b or c reasons and led to a lot of backlash and discontent among buyers. Some traders took advantage of this situation and complained to the commerce ministry on "Predatory Practices" ruining their livelihood.. Immediately an ED investigation was started and today we hear news of 1000 cr. fine being potentially (not actually) slapped on Flipkart. Flipkart is being called names in some social media circles and the whole thing looks like an effort to demonize online retail companies like flipkart, snapdeal, amazon, myntra, jabong, etc ...

But does this represent the truth ? Let me put some pain points of classical brick and mortar retail vis a vis online retail from a consumer perspective:

(1) Product Availability - In some categories of products like electronics, the neighboring store (however big or small it is) simply will not have the range of products that online retail can. So if you are looking for a particular tablet (say the latest Notion Ink Cain or the old Sony Transistor), you do not find it easily in the local market. But go online, you may get it at one or more of this mega stores. In one sense, these online stores bridge the retail divide between the well of and the not so well off consumers.

(2) Price - In many cases, their is a very huge markup being charged by brick and mortar retailers to earn profit margins and may for their infrastructure and supply chain costs. I recently bough an HP printer from flipkart for Rs. 4200/- whereas all the small and big stores in town are selling it for Rs. 5800-6000/- (MRP or even above). In general it is usually cheaper to buy online. 

(3) Pre-sales and Post-sales support - A brick and mortar retail will not allow you to evaluate or test a product before buying. They have only some pieces on display and you cannot evaluate them in any way. The showroom sales people will never guide you to buy the right product (they are technically challenged in most cases as well as have a vested interest in selling what they are stocking rather than whats the right choice for the customer). More so once you are buy the boxed piece, you are on your own. If something doe snot work and fails the moment stuff moves out of showroom, they have no responsibility and will promptly direct you to the nearest (or usually not so near) service center. The same happens with online retail (though in some cases there are return facility). So I would call it a tie here.

(4) Time and Effort to shop - Its hard to find a product in local stores sometimes. You have to keep calling or visit them one by one to see whether they have it, which is very time consuming and effort intensive (especially in big cities with their large commute distances, busy lives and traffic snarls). Unless you need something IMMEDIATELY or RIGHT NOW (like medicines), it is hard to justify why we need to take this pain. Compare this with online retail. You can use a price comparison site to see where you are getting the product at best price, go there and complete the order in 10-15 minutes. The product will come to you now.

(5) Environment - Their are so many shops selling same or similar products. That i think is not environment friendly. If we have only few shops, then we use less energy and the space can be used for other commercial or residential purpose.

So as a buyer from a metropolitan area having access to 24x7 internet on Mobile Devices or PCs, access to credit cards, online retail is  way superior option compared to brick and mortar retail.  So who is predator from a buyer perspective. The brick-and mortar store (big or small) and its trading & distribution ecosystem or the online retailers ? Why as a consumer I should settle for a vastly inferior shopping experience & still pay more ?

Their are, however,  some handicaps of online retail too:

(a) Online retail cannot ship everywhere (small towns)

(b) Online retail needs Internet connectivity. And still 80% of the country's population does not have access to it.

(c) Many buyers may have access to Internet but may not have access to credit cards and Internet enabled bank accounts to make online payment. The online retail industry has worked around this by offering COD (but still that's not available at all locations and for every product).

(d) In some cases like garments, you need to wear a product on yourself to see how it looks and feels Fit differs with every brand even if size is same. 

(e) Vegetables, fruits, etc are not mass manufactured. You want to see the product, pick and choose what you want. And you need a brick and mortar store for that. 

If you see (a)-(c), these are limitations that will be overcome with time and smartphone and internet access tele-density increases in India as well as most population have access to online banking and credit. For (d)-(e), I am not so sure and is an open area of innovation for the Internet companies on how they can make the consumer select and pick what he wants. Maybe it will work for some and not for most. Then there is of-course the issue that millions of people work in these traditional brick and mortar retail and distribution (trading) channels and what happens to them and their livelihood. Take example of STD booths and travel agents (the former have already disappeared and the latter are on their way out). This is a risk of/ multi-brand retail (whether FDI is their or not). This is a valid short term concern and a very sensitive one for people employed in the traditional trading and retail business. But isn't it so in manual labour based manufacturing as well as robot automated ones (and yet we have not stopped robotic research and development).

In long term, I feel the needs and desires of the many should be prioritized over the needs of the few (traders and retailers) whether they belong to the brick and mortar industry or online retail. India does not need to blindly kill or discourage the online retail business as it is definitely more innovative and value creating than traditional brick-and-mortar retail in many cases. It is upto the brick and mortar stores to innovate, provide better value and compete in this changing environment, where they are feeling threatened. And the same applies for online retail in areas where brick and mortar retail has an edge. 

In the animal kingdom (as well as business), Extinction is a natural phenomenon in the changing environment, but so is evolution. Those species who resist or do not adapt  die out. But iife goes on. Flipkart will improve next time or the time after that and so on, even if it is incremental. Hope the new Modi sarkar blindly does not play into the hands of one community in this tussle (and start harassing online retailers for eg.). It should  help creating a fair, open and innovation driven business environment.

Why I do not agree with most anti-outsourcing advocates and lobbists

In the west its common for politicians or some industries to raise anti-outsourcing bogey citing loss of jobs, increasing unemployment and ofcourse the cyclic election season. And suddenly India and China are demonised for software and hardware manufacturing outsourcing. what is forgotten is that it is a competitive requirement and social duty to make value affordable for one and all. 

Let us first examine at a macro level what causes companies to outsource. IMO, the following factors are key:

1. Costs - Input costs impact the ability of an Organisation to undertake new development initiatives. The median cost of living in developed countries & therefore the median wages are much higher in developed countries than the developing and poor countries, making them an excellent target for outsourcing. Ideally one would target a country where wage & infrastructure costs are low and the rate of wage inflation & infrastructure cost inflation is also low, to be successful long-term.
2. Availability of talent pool willing to do the outsourced work - The amount of talent available in any location (for the sweat shops) is  also key to run a  big operation. Developed countries with their sophisticated edication levels, focus on innovation and less population present a bleak prospect for for setting and scaling up sweat shops.
3. Lack of skill or experience in particular area
4. Lack of willingness to invest and do a particular work inhouse - A common issue for software coding, manufacturing of goods and providing back-end services. The relatively better educated manpower in the developed countries do not find this an enticing option career wise and financially rewarding
5. Ability to carry out co-ordination and communication in a commonly spoken knowledge - English language proficiency is a big skill advantage for Indian engineers working in software industry.
6. Regulatory pressure on foreign players to localise development, customisation, manufacturing & support for access and preferential allotment of contracts in the local market. A big policy making hurdle in large government contracts and large markets heavily influenced by government policies. Also extra duties on CBU imports compared to locally assembled (CKD imports) or locally manufactured items. If western companies raise the anti-outsourcing bogey, it is easy for big markets like India/China to deny them access to local markets in developing world indirectly or directly. And fortunately (or unfortunately for anti-outsourcing lobbyists) India and China are fast developing and the biggest markets in most business segments for finished products.

These are the first things people raising the anti-outsourcing bogey should think about, rather than a overbrearing sense of false nationalism or proving a wrong solution to genuine problems (unemployment). Politicians are usually the leaders in commiting these crimes for the sake of votes. You have to look at WIN-WIN outcomes.

As a consumer, if I can get an X product at Y cost, I would never look at a similar Y product with same functionalities and user experinces but at 2Y+ cost. I hardly care if Country X (US) makes it or Country Y (China). You have to be cost competitive. At the same time if a corporate cannot scale up its manufacturing and development operations, it cannot hope to be a market leader (successful) as it is late everywhere. Its not a nimble cheetah but a sluggish elephant. Speed is everything in today's times as only the first and second movers stand to profit in a particular business segment.

How do Mobile Operators and Telcos deal with the OTT challenge

Many surveys done on Telcos in the previous 4-5 years have come out with a result that the "OTT Problem" is the biggest challenge for them. Yet despite this heightened paranoia (or awareness of the acuteness of the problem), their record of dealing with this is very poor (or patchy at best). So what should these people do ? Here are my opinions:

First they should recognize that data & IP transport is the future. And it is their unique strength which is not substituitable globally. And hence they should endeavour to consistently built the highest capacity, low latency networks possible. Indian operators would be well served by moving to LTE and LTE-A (the actual 4G) rather than wasting their time with 3G (as the 3G adoption trend has already shown). Their is no substitution to their business unless leading IT service providers like Google, Facebook, Microsoft decide to build their own networks (unlikely as of now). The skill of deploying & running a ubiquitous network & reliable network that these telcos have, is hard to replicate by the IT srevice providers. Telcos have to become more ISP than telco. They have to also implemnet tiered data plans to maximize revenues from the 20% customers who use 80% of the network resources. The pipe is not free.

Secondly, they should push the democratization of smartphones and Tablets further in both urban, sem-urban & rural markets AFAP. As millions come out of poverty every year in this country the target should evolev from 100% voice tele-density to 100% data teledensity. More adoption & use will drive more network usage and will pay for their investments. Lets not be caught in the "whether the egg or the chicken came first" debate. Retail subsidize handsets and recover subsidy as you go, even if it means locking handsets to their networks and selling refurbished ones. Partner with banks to fund device purchases and so on.

Third comes the issue of dealing with OTT service providers. This first two things, they have to IMO irrespective of what strategys is followed for OTT. For OTT, their are many possibilities:

(1) Ignore them - IMO, this strategy involves ignoring OTT service players. The idea could be that whatever is the loss of voice and SMS revenues, it will be compensated with the growth in mobile internet revenues. This approach may work initially in countries like where smartphone tele-density is very poor, but cannot be followed in developed countries (usually population/subscribers are less and smartphone teledensity is very high) as it puts a theoretical cap on the revenue in the near future where there is no appreciable growth in subscribers. A stock market disaster for a publicly listed company if I may add. Also once the OTT network usage increases, the quality of service will suffer on account of delays, jitters, latency & overload (and teh operator would llikely not have thought about of ways in order to do traffic shaping, prioritizing of services and so on to optimize network usage). Not only the data users are increasing what what data they use is also increasing in size & resolution which will complicate these parameters by a multiple. A new Mobile operator can displace an incumbent operator easily if they can offer better networks (and they begin from being unloaded initially ..) 

(2) Block them - This is a body blow to the subscriber who wants choice & freedom. And he will likely retaliate by trying to use WiFI and FBB AFAP. Its bad for the ecosystem as it discourages innovation. Subscribers are going to run away in hordes from this sinking ship. They will always have this complian that their friends are able to do so much on the move, while they are stuck with so little on the move. In many cases, operators might gang up & induldge in crony capitalism partnering the government to influence the regulatory environment in their favor smacking of protectionism. Its the saddest moment in nation's progress when the government of the day sells out to these chrony capitalists. In India also we have cases of protectionism with Interconnect charges and ban on VoIP to Phone calling, which is hindering the progress of skype-to-phone and Viber-Out.

(3) Compete with them - We have IMS to supplement LTE/LTE-A. It can be used as a platform to implement Rich Communication Services apart from spolving the Voice & SMS problem. Plus they can get into new business verticals of Multimedia (Video on demand, IPTV etc) and lately Cloud Computing infrastructure. While this is a natural reaction, one must ask if the innovation is just replicating things done elsewhe with a "Me-Too" approach or is their a serious long-term unique advantage in favour of the operators which cannot be overcome by OTT players. If the answer to the questions is NO, its better to avoid getting into such new business streams. We don't compete because we can but rather based on if we should. The Web has gone social. Communities are key on the web, not communications, and communications are being built around communities. These communities far extend the boundaries imposed by telcos. No states, no nations, just a global community.

(4) Co-opete with them (Co-create value together) - This is a promising option, but requires a lot of reengineering to the traditionally closed boxes made my Telco OEMs and opening up Telco networks to OTT service providers and Overlay networrks. For eg., A CDN (overlay or integrated) can be deployed for Youtube, Netflix etc which are highly bandwidth extensive (Youtube is 24% of Internet Traffic by volume!). This will improve the QoS of these OTT service, reduce load on their servers and optimize network efficiency. This will require some enhancement of existing NEs or deployment of Overlay networks). In return part of the B2B or B2C revenues of the OTT servoce provider have to be shared with pipe operator. Their could also be bandwidth reservation for OTT services to improve the QoS/QoE at a cost to the OTT service provider so that a best-effort delivery network can be converted into a more reliable and predictable delivery when required. You can see early forms of these trends like Play Store, where Google shares a percentage of its App Store revenues with operators but there are others like  Amazon who have built on their retail business to include new streams like music streaming, VoD and lately Cloud computing on a completely "free" pipe. Get money out of people like Amazon is the tough task. DPI, BI and Traffic Shaping are very key technologies to realize this.

(5) Consolidation - Right now Telecom in India is not a very vibrant market and is actually bleeding a lot of players. The subscriber base in country is the second largest in the world (900 million presently). If carrier consolidate, they will have a larger subscriber base. Consolidation will not help conserve operating costs and improve profitability, but also give a huge bargaining chip to bargain with OTT players.

(6) Bundle them  - I have seen Reliance do something like this. Connvert the fremium model of OTT services on FBB access to B2C on MBB. For eg., Youtube at Rs. xx/month till yy MB data limit and Rs. zz/MB beyond this or Unlimited WhatsApp at Rs. XX. The trouble with this model is that if a subscriber can avail this service free on another network (FBB+WiFI), then he will try his level best to avoid using the network where he is charged (and especially if the charges are high) and ultimately put a deflationary pressure on usage of this service of the network which charges for this service. If you price the bundle very low, it might encourage use but add very little to your bottom line or can't justify capacity expansion. You need to effectively monetize the 20% who load the network 80%.

(7) Develop new non-competing OTT business lines - For eg., operator can sell subscriber behavior data (BI) spanning multiple OTT & operator services used in the network to third party which can use that for targeted advertising.

(8) Partner OTT Players  - The telco could collaborate with an OTT service player to implement part of the solution and share revenues. Its as if the operator is a VC in the OTT service player.

The number of possibilities may be more. I strongly believe that the innovation in Telecom market is not on the technology front (OEMs are in a position to evolve converged Web 2.0 and Telco 2.0 platforms) but one the business front, because the disruption is on business, not technology. My personal opinion is that he new emerging business model of telcos will be very dynamic, adapting & changing as the OTT players rise or sink. The old order of one business model is probably dead already. Working together in some way with the OTT player is the way forward.

At the same time, I feel that OTT Service providers have to be responsible enough to implement critical regulatory policies like lawful intervention which is critical and justifiable requirement in countries like India. National security cannot be jeopardized in order to be progressive and the if the OTT players are not complying with this, they are only putting roadblocks in their own path to success in the market.

An OTT voice & SMS look at my Fixed & Mobile broadband tariff plans

I use Airtel India Services for both fixed and mobile broadband. Here are my tariff plan details:

Type	Data Limit (FUP)	Max. Speed	Speed after FUP (Unlimited Data)	Price
Fixed Broadband (ADSL)	30 GB	2 Mbps	512 Kbps	Rs. 1149/-
Mobile Broadband (4G LTE)	3 GB	40 Mbps	128 Kbps	Rs. 650/-

These are the cheapest unlimited plans I could get from Airtel (and because of the FUP limits, nothing is really unlimited). 

The MBB connection serves my Wifi+3G enabled tablet (iPad Air) while the FBB connection serves my computers, Tablets and smartphones (also my wife's) at my residence. I was curious to know how these connections would fair if I start using them for voice calls. Now Skype and Viber are presently the two most popular VoIP applications and are available on PC and Mobile Platforms. 

According to Skype support, Skype-Skype voice call needs a bandwidth of 50 KBps or  3 MB/minute, giving me unlimited minutes on both my fixed & broadband plans. And is independent of whom & physical distance between the calling & called parties as long as both of them use Skype. Conservatively, if we consider only till FUP limits (and we should as 50 KBps = 400 Kbps is more than the post FUP speed in MBB but less than psot FUP speed in FBB), its 10,000 minutes (166.67 hours) approximately on FBB and 1000 minutes (16.67 hours) on MBB, befor On top of this there is presence data exchanged which does not have hard real time constraints and would depend on the number of contacts.

Similarly, Viber reports that for Viber-Viber VoIP calls, 0.5 MB/minute (or just 8.33 KBps = 67 Kbps) is used (call quality is typically inferior to Skype but still tolerable in most cases). This would give me almost 6 times the hours I can get with skype before my FUP is reached. And post FUP usage limit, I would be more confident of using Viber as bandwidth demand is less than post FUP speed in both FBB and MBB plans.

Independent analysis from Voip bandwidth calculator gives us a figure of 0.75 MB/minute (= 100 Kbps) for any generic VoIP client conversation based on G.729 codec.

If we compare this with Carrier voice plans, the best we can get is 1083 min free + 0.6p/sec (not pulse) for local & pan India (STD) traffic by paying a Rs. 400 rental. It means that if I transfer 10,000 minutes from Skype (best call quality VOIP Client) to carrier voice (assuming its all within India), then I need to pay Rs. 3710/- per month to the carrier. Ofcourse I can be assured of reliability, QoS & QoE. Its just that the cost would be 3-6 times cheaper if I use VoIP Fixed or Mobile broadband networks.

I am not taking OTT Messaging for any comparison as its bandwidth usage is practically negligible and the features (rich messaging compared to text messaging) are way better than SMS. This debate is already settled and OTT Messaging has won over SMS. Period. Only point (2) below is holding it from completely decimating SMS as has occurred in developed markets.

So why has OTT voice not replaced Carrier voice completely in India as of today ? There could be one or a combination of reasons:

(1) Insufficient spread & spotty 3G & 4G mobile broadband coverage. Limited to only Metropolitan and Tier-I cities

(2) Relatively small smartphone penetration. Only 67 million smartphones against a total mobile subscriber base of 900 million. If we don't have a modern smartphone OS, then we don't have access to VoIP and other OTT applications.
(3) An incumbent business system depending on directories and contact lists which only carry carrier voice numbers (A problem solved by Whatsapp & Viber).
(4) Lack of awareness among subscribers about feasibility of VoIP replacing carrier voice and still low penetration levels of smartphones (now only 7.5-8% of mobile subscribers)
(5) Crony capitalism @ work from Service providers which influences the government's regulatory policy in their favour (avoid loss of bread-and-butter voice revenues) by restricting MBB /FBB growth
(6) very inconsistent latency in Wireless networks upsetting the buffering algorithms of VoIP clients and causing severe QoS/QoE issues with OTT VoIP services
(7) Something else which I am not aware of ...

Whatever be the case we can surely hope that the situation will turn around in the next 4-5 years and we will see OTT voice go mainstream in India. In atleast metros and Tier-I cities, there is early infrastructure. The focus should be to further democratize the smartphone and increase the smartphone users. If that happens demands will skyrocket (It is already estimated that India will have 200 million smartphone based subscribers by 2015) automatically. Low cost Chinese Manufacturers (including Huawei, ZTE, Xiaomi, Oppo, etc) as well as Indian OEMs like Lava, Micromax, etc can play a key role in this. But if operators really want to expedite the usage of their mobile broadband offerings, they need to possibly sell subsidized smartphones to subscribers and recover the subsidy in a 1-2 year timeframe (even if it means locking handset to the operator). Quite akin to the way US carrier operate. Our urban areas deserve to be on par with the developed west & SK/Japan/Singapore/HK in terms of mobile infrastructure. Are the NaMo's and RaGa's listening ?

The onslaught of OTT and the way forward for Mobile Operators

Recent data published by TRAI indicates that India has a total mobile subscriber base close to 900 million (Oct 2013 data) out of which 60% are urban subscribers and the rest 40% rural. While the rural teledensity is only around 40% the urban teledensity is close to 140%. And we are adding between 2 to 3 million subscribers per month in either area.

On a related note smartphone penetration is around 67 million (2013 end) and is expected to reach 120 million by 2015, the annual growth has been around 52% despite a depreciating rupee making such devices expensive. However this represents only 7.5% of the mobile subscribers. Comparively China has a smartphone penetration of 350 million which is 21% of the mobile subscribers in that country and is showing a YoY growth of 31% [All data ref. Mary Meeker, partner at Kleiner Perkins Caufield & Byers (KPCB)]. India is thus one of the fastest growing markets for smartphones ans may continue to be so in the next 4-5 years (Canalsys, IDC).

Figures published by TRAI indicate rural market (expect less smartphone/tablet sales here) as having growth potential, while that published by KPCB show the urban matket as focus area for smartphones. It worthwhile noting that most traffic in rural market is voice (where both ARPU and margins are extremely low) whereas "data" will show explosive growth in urban segments. Data ofcourse is more resource intensive on the network and therefore this is where Operators have to focus on as urban market has short term potential of increased ARPU as well as profitability.

Based on the above market scene, their are two fundamental trends sweeping the Industry:

(1) Demand for Mobile & Fixed Broadband Connectivity driven by the explosive growth of smartphones and Tablets

(2) The rise and rise of OTT services which are having a profound impact on the services based revenue model of mobile operators

Traditionally, the killer service that telcos offered was a simple 2-party voice call, a business that catered to probably more than 95% of subscribers spanning consumer and enterprise domains. It was the backbone of operator revenue streams. Another service that was vastly successful and profitable was the use of SMS. Compared to voice, it consumed less network resources, was used more and became highly profitable. In essence the business model of telcos was to sell such bundled services. At the same time ISPs emerged in fixed wireline networks domain, which sold fixed bandwidth agnostic of applications. The more speed, data limit (including the hated FUP limits on unlimited plans) and reliability (I must add this because their is no point in taking an FBB connection which is down half a month) was what mattered to consumer. Their was no loyalty to service provider, only to the service. the fatter the pipe, the lower the latency, the more glitch free it was, the more it sold.

First, the increased competition (due to MNP, more players, improving infrastructure etc) impacted both of these business models in a similar fashion. It drove down call, sms and data plan tariffs. That means lower ARPUs. ARPU/CAPEX-investment ratio went down as operators had to invest more money to upgrade equipment/network while at the same time try to entice customers (who were a small fraction of overall subscribers) by throwing the cost bait. 

Second, consumer behavior wrt to what he uses his data plan for is changed drastically. What was originally casual browsing and web mail (in 2G or GSM/EDGE era) has now expanded to cover a host of services like Video streaming (YouTube, Netflix, Hulu), Social Networking (Facebook, twitter, Google+), Content Creation and Uploads (video/text/image blogging), VoIP (skype, viber, text+, etc) and Instant Messaging (WhatsApp, Facebook messenger, hangouts, Tango, Line, Kik+, etc). Many of these services are FREE and this is the biggest motivation for subscribers to jump on to them. These services initially started to serve fixed broadband customers, but the increasing ubiquity of mobile broadband and smartphones/tablets created a use-case on mobile devices. The increasing resolution/quality of such IT services is putting tremendous stress on the capacity planning of mobile networks. YoY the traffic is increasing many folds. WhatsApp is the global leader in a couple of years time in Messaging. If whatsapp were to offer Voice Services, it could overnight eat a huge chunk out of the carrier voice business. Skype is already the world leader in International calling worldwide (by minutes carried).

So to summarize we can say that for the operators revenues from bundled services (including mobile internet data access) are declining YoY while the bandwidth (and latency) requirements are increasing forcing them to upgrade network capacity frequently to keep up with the demand. So how does one find the business case and required CAPEX finances moving ahead ?

Apart from "fatter-pipe" demand which is inevitable, and is pushing mobile operators to an ISP kind of business, it is fundamentally threatening to convert the pre-existing Mobile operator business model of selling bundled voice and VAS, into an unbundled business model of bandwidth (pipe) and services. The bandwidth can come from one service provider while the services from another. An operator like china mobile which is the world's leading mobile operator by subscriber size (500 million) can be simply dwarfed by the user community of Facebook, WhatsApp and Google in a couple of years time, if not already. And china mobile dwarfs every other Indian mobile operator by many folds. This IMO is the disruptive business trend.

While 3GPP and Mobile industry has answers to the pipe (LTE, LTE-Advanced) on the technology front, there are no clear answers to the Over-the-Top (OTT) services problem. Mobile broadband has clearly improved latency and bandwidth. While IMS has the ability to let telcos build Multimedia and Rich Communication Services themselves for their networks, its adoption has lagged behind far too long (as any new development in ITU-T/3GPP/ETSI driven industry is ...). Today even if the network resources are opened up, it is unlikely as to why a community of developers would be keen to develop applications on top of individual operator's network assets and even if they do, can beat the fast moving OTT players from the Internet who already have massive subscribers (users) for their ever improving & innovative services. The service is global, access is local.

In my opinion the unbundling is the right trend as it allows agressive innovation independently in both the data and services plane. The previous network architecture was constrained in this respect. Sooner or later telcos have to accept this reality (and lobby to loosen the regulatory presire with governments) to create a more net-neutral Mobile Internet. they have to sell bandwidth to users and somehow work in collaboration with OTT players to improve delivery and QoE of their services and charge them accordingly (revenue-sharing). They can also increase the network usage efficiency by these applications to save OPEX (something the OTT player may not care aggressively about as he is used t a free pipe model). They have to develop the B2B focus and shrink the B2C focus. If a viable business case cannot be made out of the co-operation between mobile network operator & OTT service provider, the mobile operators have to resign themselves to being the pipe provider.

Users are smart. If they want to use skype or Whatsapp they will. It is free. If they can't do effectively (or at all) or cost-effectively on mobile networks, they will try to use their WiFi connections to jump on the nearest indoor (residential, office or commercial space) fixed broadband connection and use the services AFAP and only in the most urgent cases use the Mobile Broadband network or Mobile Operator's services. I have seen many so many users in India who don't use 3G (even though their phone/tablet supports it) or switch the 3G phone to 2G by default, switch of their mobile data always & try to use WiFi AFAP and only in very rare cases try to switch on mobile data or 3G/HSPA. This behavior is a technology, mobility & ubiquity anti-pattern. It is a loss-loss situation for both the operator & subscriber. It is not the direction in which the industry or the subscriber should be headed. This is one reason I am not bullish at all on IMS beacuse I feel its a technology too late for the times. If LTE and IMS would have been deployed 10-15 years back, maybe things could have been different. IMS holds promise for future but OTT services are a viable reality today.

Voice in LTE Networks. Which way the industry will move ?

With the continuously increasing penetration of smartphones, tablets and other mobile devices (including M2M sensors), the data traffic on mobile networks has been continuously increasing and will continue to do so in the near foreseeable future. In the consumer space laptops are increasingly getting replaced by tablets for on-the-go content consumption as well as mild content creation (Even I am writing this blog post from my IPAD and not my desktop/laptop). I bet more tablets are flying off the retail shelves these days compared to laptops even in India. And i see more of this type of consumerization of IT in the enterprise space with many corporates encouraging the usage of tablets and smartphones (even BYOD in some cases) on their networks for employees to be always available 24x7. There exist use cases of dongles and a typical greenfield area where there is no fixed broadband available. There has also been a democratization of both the smartphone and tablet, with costs continuously going down as economies of scale are achieved. The connected devices (to mobile networks) are thus increasing in number. This is the space dimension problem.

The second point is what you do with the mobile device. It was plain voice earlier, followed by emails and basic browsing, but now it will increasingly cover social networking, video conferencing, video streaming & downloads, mobile application updates, VPN traffic, etc. So with the increasing capability of the mobile device, the data demand per user is also increasing rapidly. The content itself increasing in depth (for eg., video encoding standard quality to HD quality (720p, 1080p) and 4K in future, or increasing resolution of images usable on the net as the screens used to view them also increase in resolution). This is the time dimension problem.

So the traffic demand is increasing by a multiplication factor of time & space. To keep up this operators are gradually increasing investments in mobile broadband. Things have moved from GSM/EDGE (narrow band) to 3G/HSPA and now LTE. On the technology and standardization front, we are talking of LTE-Advanced with speeds of 100 Mbps - 1 Gbps (or almost equal to the LAN bandwidth !!!). However whether we will be able to keep the consumer pipe bandwidth up with ever increasing demands is anybody's guess. 

Yet a very surprising challenge was thrown by the mobile broadband technologies. Traditionally 2G/3G voice was circuit switched. LTE is pure IP-based or packet switched network and was designed to simplify and flatten the overall network. It was assumed that by the time LTE is adopted, IMS would be mature and equally adopted the mobile operators. On ground, however, the increasing demand of mobile broadband has certainly pushed adoption of data plane LTE, but not the control and service plane IP-based IMS. Of the 222+ LTE deployments worldwide, only 2 have adopted IMS. Mobile operators have always seen (atleast in India), basic voice services has most fundamental demand. They have extensive investments in 2G and 3G voice services. They know that their consumers have similar investments in their mobile devices which are not yet past their usable lifetime and that LTE phones/tablets are not as common as 3G devices. Data has always being used as an additional source of revenue catering to a smaller fraction of subscription base (atleast here in India) and an additional nice-to-have service by a vast majority of subscribers. What makes matters further confusing for operators is that to offer new Multimedia services (data, video, etc) IMS is not the only option. And the users are also increasingly getting aware of this. Operators, however, implicity recognize the dangers of not offering services and just selling bandwidth (from one decreasing ARPU business of voice, they will head into another of data). But the decision making has been slow and therefore this chasm is created.

Anyways, lets look at technical options for resolving this (and there are six of them atleast):

(1)  Simultaneous Voice and/over LTE (SVLTE) - In this type of technology the mobile station has to support both legacy 2G/3G and LTE simultaneously. For voice, the mobile station uses 2G/3G G circuiit switched network, while for data an LTE is used. The drawback ofcourse is the adverse impact on battery life of handset as it keeps two cellular radios on at the same time and beacuse of this most handset vendors do not support this technique. There is also no standardization for this feature, which is usually a prerequisite for carrier networks. The technology however is reasonably simple to implement and the handset state machine is also very straight forward. It also ensures that Voice traffic and Data traffic can work independently of each other and simultaneously. ZTE and Huawei are known to have handset solutions that can support this method for simultaneous CDMA and LTE networks.

(2) Circuit Switched Fallback (CDFB) - Standardized by 3GPP R8 (TS 23.272 ), it entails the method of switching the radio from LTE to 2G/3G to make or receive circuit switched  calls on mobile handsets. This requires an upgrade to the MSC on the network side ( and no migration to IMS) but no extra support is required on the handset side. This makes it a very effective choice for deployment. However the downside is that beacuse of switchover, the call setup time is greatly increased and the handover scenarios are complex. Also data services are blocked when the voice service is being used which may not be acceptable in many deployments

(3) Voice Over LTE via GAN (VoLGA) - This method was once an industry forum (VoLGA forum) sponsored standard which utilizes 3GPP generic standard to allow Generic IP networks like WLAN or LTE to access 3G services. It is a short term solution like CSFB. It involves a special gateway element (VANC) which is connected to the PGW of LTE access network. VoLGA did not get sufficient support & traction from operators which did not forsee it as a solution moving forward and it was dropped in favour of CSFB in short term on account of investment required in new network elements as opposed to software upgrades of existing equipment in case of CSFB. It was thought to be in a retrogade direction considering LTE aims to simpliy network architecture by reducing NEs.

(4) MSC Server/SIP Adapter - This is a proprietary solution from NSN and is specific to NSN only. Not much is known in public domain about this (apart from Heavy Reading quoting this in its VoLTE market analysis report).

(5) VoLTE - This is long term and carrier multimedia and rich communication services (RCS) solution from mobile operators. It uses IMS for control plane architecture. Existing LTE enanled devices can have a new app (or even replace the dialer) to support IMS UE functionality whille the RAN has to be upgraded to IMS core. It is also possible that many operators can share an IMS core. While VoLTE looks logical the problem stems from the fact that IMS is not the only solution (or the madatory solution) for subscribers to avail rich communication & multimedia services. If a subscriber has invested/indulged in internet based services, he would ideally want the same service delivered on mobile networks to his mobile devices, not migrate to a new one unless their is a very compelling reason to do so. This puts a pig question mark on the success of the service bundles that IMS promises to bring to the operator table.

(6) OTT Services - If you look at WhatsApp, the amount of subscribers they have, the rich messaging that the user indulge in, and what it has done to the SMS market, then you would realize the danger that OTT Voice presents to operator's voice services. Imagine if whatsApp offers voice services tomorrow. Now consider that most communications happen when the subscriber is indoors in his residence, office, coffee shop, retail etc and if the fixed broadband infrastructure is extended to offer WiFi coverage in last 100 metres, then a lot of voice traffic can get offloaded to OTT Voice providers, dealing a body blow to service based voice revenues of the mobile operators. Another scenario is a large corporate offering proprietary VoIP/UC Client to all its employees who can keep in touch with each other while being mobile within and outside the office premises as oindividuals may not be always reachable on their office extensions. The biggest attraction of these services to the consumer is that they are virtually FREE. And for this reason they will keep coming back even if they face unreliability, outages, QoS problems, etc. Compare that with operator service, where everything comes for a price. The word "FREE" vs other Propaganda may cut with some operators, but will not with the average user. As long as users can get something for free vs paying for it, they are going to look very very hard at the first option before selecting the 2nd option. In effect, OTT applications have unbundled the Mobile operator network into connectivity bundle and services bundle, a fundamentally disruptive business trend.

There are also no fixed architectures or standards governing OTT Voice, messaging & other services. The focus is to create what subscribers would love and just increase this user base scaling your system all along the journey. Then this big community is fair game for targeting advertising but none of these revenue streams go to the mobile operator. Telco OEMs and Operators are traditionally very slow in innovation. They believe in a lengthy standardization process first and then roll out. The Internet guys move at light speed. The product that is successful becomes the standard. They cook up something even if its half baked and put it out to users for use. If users like it, the product is enhanced, otherwise it is killed. And we move on to the next big thing possibility.

To conclude, there are multiple ways to solve the Operator voice problem in LTE. Each having its own advantages and disadvantages. Its quite likely a lot of operators will adopt makeshift CS fallback or such temporary solution till they have more business clarity on how they will play in the non-voice services market. They may also play the ISP bandwidth seller game to test the market [Take Airtel In India for example. Their TD-LTE based LTE service (under the 4G marketing moniker) is typically working as a replacement of fixed broadband (dongle) or a solution limited to IPhone 5C/5S (which will drive the usage of facetime chat between apple device users]. Long term the choice is between VoLTE and OTT Voice. And its not a straightforward one. For standards voice the advantages frequently quoted are QoS, reliability, compatibility, etc. But many of these can be implemented in OTT solutions using clever solutions based on a user's device type, location, capability as well as always improving technologies like buffering etc. Not to mention the biggest advantage that most OTT service have is being "perceived" virtually free, even if user is paying for bandwidth (Mobile plans are always tiered not unlimited ...) atleast till now. I repeat, that as long as services are free, people are going to keep coming back.

Today many of us use Youtube, Skype, Viber on 3G networks and don't complain about quality. The Whatsapp/Hangout messaging was anyways superior to the SMS offering from telcos from day one. Its difficult to conceive the scenario that fragmented Telco services (one per operator) can compete with and beat the wow factor with such Internet based services. The game is no longer in the hand of telcos but in the hand of subscribers. And even though it looks like a zero sum game, one does not need to play it like that. Possibly we should look at WIN-WIN ways in which Telco operators could monetize these OTT services (and optimize their network usage efficiency) and these OTT service providers could benefit from partnering with operators by improving user experience even if they have to part with a share of their revenues. This is the situation that operators need to get into, not the subsitution of OTT services with their own. And if in the process, I am pronouncing the death of VoLTE or IMS or Telco services, so be it ...

Owner's Pride, Neighbour's envy

Indians take tremendous pride if a person of Indian origin is nominated as president/CXO of a leading MNC or other organisations of international repute. In many cases these are IIT or IIM alumnus. Sometimes from lesser known colleges like Satya Nadella of Microsoft. Microsoft is really a big deal as they can hire almost anyone they want to. Probably. At least it brings cheer too a country deeply hurt by corruption, inefficiency, inflation and women safety issues.

At times these alumnus are used to showcase and inflate the capability of an institution which produced this decorated alumnus. One must ask two questions:

1. Is the individual institution responsible for this person's competency ?

2. Is our industry responsible for nurturing & enriching them to this level ?

The answer to both these questions is a "NO". There is no doubt that Indians as a race are talented than many others whether they are from India or abroad. But one must realise that:

1. IITs and other engineering colleges are just supplying raw talent to American universities that are polishing them through their MS, PhD and MBA programmes. A raw uncut diamond is thus made a kohinoor, which becomes priceless.

2. American MNCs provide them the opportunity and platform to excel professionally just as they do to their own citizens and immigrants from other countries. Not only Indians but many Chinese, East European and Jewish immigrants have been successful beyond measure in the land of equal opportunities.

A brilliant scientist from Navy, Dr. Arogyaswami Paulraj went on to teach & research at Stanford university, invented MIMO which is used by every short range to long range wireless transmission technology around. No wonder he has been awarded both the Marconi and Alexander Graham Bell prizes celebrating both theoretical and practical excellence. A rare combo.

IMO these are more Americans than Indians as far as their fame goes. Race, Nationality, Citizenship, Loyalties not withstanding. While Indian pride is justified to some extent (they mined the diamond in the first place from a billion plus possibilities), it is the Americans who should be really proud of the Nadellas and Paulrajs (for they are the craftsmen who polished the gem).

And for some odd reason we do not take the same level of pride in Narayan Murthy, Nandan Nilekani, Kieran Majumdar Shaw and others. These are the real successful Indians, because they slogged and made it big in this land ...