Thursday, October 28, 2010

Mobile Broadband Congestions

People living in Sao Paulo, Brazil, already knows how it is when traffic is congested, just like in the case of mobile networks, everybody gets affected.

Well, in most cases anyway, because some operators are offering a way for some of their customers to get a fast lane in stead of the slow traffic.

Do no evil?

Vodafone Spain and Elisa in Finland have introduced a VIP Broadband tariff plan with prioritised traffic. But is that the best solution? Should normal users be left with a bad service just because the service is popular? It is actually curious that a Finish mobile operator is charging a premium for getting a good mobile connection to the Internet, when the Finish government has lately decided to make broadband a Human Right. Elsewhere, operators and technology suppliers are looking for other ways to solve the problem.

In many places, including Brazil, the lack of spectrum has been blamed for the congestion and slow speed in mobile networks, but in a number of cases the real problem has been the Access Network, i.e. the leased line, fiber, or radio connection which links the cellular radio base-station to the core of the network.

I highlighted this already 10 years ago when operators where connecting their GSM radio bases with one or two E1 connections, which can carry about 2MB/s each, whereas a 3G HSPA radio base would need ten to twelve E1's to feed full capacity. This made the cost increase directly together with the higher data volumes, and as the price per Megabyte has been dropping ever since, operators have been bound for trouble for some time now.

 Even though this still seem to be a problem for some operators in Brazil, most European operators have got over that part, by installing high capacity radios or fiber which will have sufficient capacity to withstand demand for some time to come. These operators are now getting to the next bottleneck in the broadband supply-chain: The Air Interface.

Broadband World Forum in Paris.

This week at the Broadband World Forum in Paris, Deutsche Telecom pointed out that the frequency spectrum currently foreseen for the LTE technology is not enough. Also in Brazil, Falco, the Oi CEO, predicted this week that mobile traffic will grow ten-fold until 2014, and Ericsson is foreseeing growth at 15 times today's levels for 1015. This will for sure put hard constraints on the frequency spectrum made available from the regulator, ANATEL.

To keep mobile operators out of trouble, so called, data off-load solutions have been developed by the technology suppliers. Among them Femto Cells, which works like small cellular base stations with some meters of range that can be placed in residence and office locations, and which are connected to a fixed broadband connection in most cases. Handsets can then reach the mobile network through an Unlicensed Mobile Access (UMA) connection. Off-load via WiFi is also a solution, and is already helping operators in areas where mobile handsets, laptops and iPads are connected to the Internet through wireless routers that people have connected to their fixed broadband connections at home or elsewhere.

Some operators are worried about this, as most WiFi solutions use unlicensed frequencies which are open to many types of equipment, and where there is no network planning to deal with radio interference. Some US cities, like Philadelphia, which have open public WiFi access have seen reports on interference problems decreasing peoples experienced connection quality.

Now, both the UK and the US government are reported to have plans on making 500MHz available for cellular systems to coupe with the traffic needs. Then again, some other markets have looked more to changes in the data plans, and are cancelling the unlimited data plans as was seen after the iPad launch at AT&T in USA, as mentioned in some of my previous blogs on Net Neutrality, Price Plans in the UK, and France Telecom.

This is probably not enough in the long run to keep data volumes out of trouble then it comes to spectrum capacity, as the competitive price erosion together with video anywhere (Video is finally escaping from home) will end up driving the total data volume much higher. In Brazil, which have low penetration of fixed broadband, with a large number of multi-million inhabitant cities, the spectrum looks to get under pressure in the coming years, and here planning is very important, and the possibility to use the 450MHz spectrum could become essencial.

It seem to be a very narrow vision when the Brazilian government believe that the current lack of broadband access should be solved by state subsidized backbones and LAN Houses. With nearly 200 million mobile users in Brazil, mobility is still not on the government's national Broadband agenda. Soon, more serious trouble have to be solved if Brazil wants to have a GDP growth bonus out of having a connected population.

Sunday, October 24, 2010

Thanks for the confidence - Now, Let's go mobile

Eric Schmidt said it last month at the IFA show in Berlin. Apple has made a bold move in this direction. My meetings with global top brands confirm that up to 10% of advertising budgets are allocated for Mobile Advertising for 2011, and this year it is just about 2% when it is good. "Mobile First", by the way, is the mantra that Google keeps repeating nowadays, and Apple is investing heavily in getting Mobile Advertising right.

Therefore I am very happy for the confidence that you showed by electing me to the board of the Mobile Marketing Association (MMA) in Latin America.

There is a lot to do. Media owners, such as mobile operators are eager to get a part of the revenue, but also see Google and Apple moving in fast. They also see that there are no metrics by which they can prove the efficiency of this media, which has been around for some time, but only now is bound for main stream, judging by the allocated budgets for 2011. Not because it could not have happened before. Mobile operators in Europe and Asia have for more than 10 years operated SMS and MMS premium content deliveries, which could have been developed into the Mobile Advertising, as mobile had a well-working charging model way before the Web. Most efforts has been put into the Web, and the brands and agencies seem to have had little time left to look after the mobile business models. Mobile operators also spend way to much time looking for a "Killer Application" that never turned up. This is a petty for mobile operators, as SMS and MMS are much easier for them to monetize on. Nowadays, Smartphones and http traffic with advertising banners are easier to run as "over-the-top" (OTT) business models where operators have more competition with for example Google and Apple. Now that the Web advertising budgets are crossing 20% of total spending, it is time for mobile, or "Mobile First" as mentioned above.

The market is moving on with high speed, and the meetings with Jeffrey Cole from the Center for the Digital Future in California, and operators, agencies and brands, which I arranged last week, show that the interest is really growing. One topic form the talks is that there are basically only three ways to get content: Advertising, Paying, and stealing. Stealing is still the option for many, but as buying is getting much more convenient than stealing and perceived to have more fair conditions than before, more people are accepting to buy, even if it will never bring the music industry back to the revenue it enjoyed before. Research show that people are reluctant to pay if there is another way to get to the content. And there is. Free-to-air TV which stands for around 90% of the viewing in Brazil is financed by advertising, and this is also a great option for mobile. You could even give end-users the choice that if they do not accept advertising, then they could pay. Some will argue that user-generated content is another business model, but well-known sites for where this type of content like YouTube or Facebook, are already investing heavily in financing their sites with Advertising. Another curious fact is that the wast majority of the visits to YouTube is to get free or time-shifted access to the professionally generated content from TV.

All of this is accelerating our entrance in business models for Mobile Advertising but we need to remember that this is not Web advertising on a mobile phone. The same way that TV was not radio with images, and the mobile Internet is not the same at the Web, like many argued in early days, and it took some 10 years to get that right from the first GPRS phones. Now we entering the LTE era, and we already have over 5 billion mobile screens out there that people are looking at every day. But Mobile Advertising is different, and has to do with relevance. Research show that the mobile screens are seen as a more personal sphere than both TV and the computer screen. This means less but more targeted advertising, and the value of the viewer or click (expressed by the CPM price) is likely to grow significantly as we learn to understand the underlying behaviour, and agree on commonly accepted metrics among all players in this business.

This is just one area where the MMA has to a lot to do, and I am very happy for the trust that so many has showed by electing me to the board. Once again, thanks.

Thursday, October 7, 2010

Marketing for Mobile and the MMA

The global economy took a severe hit in last year, however the online advertising market proved resistant to the recession. Unlike spending on all other major media, online advertising spending increased 2% to $55 billion, and measured-media advertising spending did better during the recession in Latin America than in any other region of the world.

This year brought a return to double-digit growth, with online ad spending tracking towards more than $60 billion worldwide in 2010. By 2014, the sending in online marketing could reach around $100 billion, growing around 12% a year. These rates will be unmatched by other media.

The recession has made online advertisers with limited budgets to make every dollar count. Even though Mobile Advertising is still only a few pro cent of the total advertising spending, resent global research point to the fact that marketeers worldwide are unsatisfied with the metrics that they get from Mobile Marketing, where figures show that the category is the lowest ranked together with Off-site Social Media. Both Google and Apple are very clear on a strategy for the future called "Mobile First", as also pointed out by Google CEO Eric Schmidt at the IFA show last month.

This is no different in Latin America, and the repositioning of the Mobile Marketing Association (MMA), is an excellent platform for creating a common language and establishing an aligned and coordinated metrics in the regions with global standards, but with much higher quality than today.

My main aim as candidate to the board of director at MMA is to:
  • Promote open and standardized interfaces to mobile marketing channels as efficient connections between agencies and publishers.
  • Seek common agreement among all the players in the mobile marketing space to establish the metric by with we can define milestones and set goals for the development of our common business. The penetration of mobile phones in Latin America is tracking steadily towards 100% penetration, and the interest in the mobile handset as a media is increasing significantly. Therefore, we must make sure that the marketing space becomes open to all players in the value chain, and not overtaken by a few dominant Internet players.
  • Use my well established network to open a constructive dialog with regulators about how we can improve the regulatory and legal framework for Mobile Advertising, while still protecting the end user.

Looking into the future, there are a lot of very interesting challenges to embrace. Social network advertising is getting renewed attention in 2010. Ad spending on social destinations in the US will cross the $2 billion mark in 2011. Mobile Facebook users are twice as active as their fixed broadband colleagues.

Twitter has finally launched its ad business earlier this year. And the potential for 2011 and beyond could be dramatic if it proves that its model of measuring advertising effectiveness works.

Finally, online social games and applications are becoming a more important part of the mix.
Teenagers are spending less time talking and more time playing on their phones.

All of this will spell a very interesting next season for the MMA.

You can also read more on the Top 5 five Mobile Marketing Trends to watch on Mashable.

Tuesday, October 5, 2010

Growth in the VAS business

It is very interesting to note the growth in the VAS revenue as part of the total for the North American market, where VAS has gone up from about 6% of total revenue in 2005 to 32% in 2010. The developed Asian countries have been high in this measure ever since the i-mode days in Japan. The North American mobile operators have apparently had much more success on finding their place in the data centric mobile universe compared to the mobile infrastructure suppliers from both USA and Canada, which has nearly all disappeared in the same period. Take a look for your self.