Disruptive Tendencies

Wi-Fi: Moving the Dial

(Originally posted at http://www.von.com/blogs/guest/2009/11/wi-fi-moving-the-dial.aspx

One of the most common questions I get when talking with wireless and wireline operators around the world, is how to monetize Wi-Fi services. Indeed, as subscribers are coming to expect Wi-Fi services for free, whether at Starbucks or with their iPhones, it is a complicated question.

In fact, many were skeptical when Cablevision, a BelAir Networks customer, announced its plans to launch “Optimum Wi-Fi” and to give away the service to its residential broadband subscribers as subscriber-retention play.

A key difference, over previous models, is that Cablevision focused its Optimum Wi-Fi deployments in “shopping centers, on main streets and train platforms, in parks, marinas, and at sports fields - the places you go everyday.” They’re delivering the service where their customers eat, shop and congregate – not striving for ubiquitous coverage.

And has this strategy been successful?

When Cablevision reported its numbers earlier this month, Q3 profit tripled, revenues grew 5 percent, ARPU is up 6 percent, net new adds were up 4 percent for broadband, and the stock jumped 3.2 percent on the results.

Craig Moffett, senior analyst at Sanford Bernstein, said free Wi-Fi is one reason why Cablevision customers haven't switched to Verizon. "Perhaps it's time to start giving Cablevision's free Wi-Fi network some of the credit," Moffett said in a research note. "For all of its vaunted capabilities in wireless, free wireless broadband is something that Verizon Wireless simply can't match."

Can you build a business case on free Wi-Fi? I’d say let the numbers speak for themselves.

That’s my .02!

Martin Suter is vice president of business development at BelAir Networks, a provider of broadband mesh solutions for Wi-Fi, WiMAX, 4.9 GHz Public Safety and 5.9 GHz ITS networks. Previously, Martin was the CEO at Cohda Wireless, where he raised the company’s profile and negotiated a licensing deal with a Fortune 100 vendor in its core franchise. Prior to Cohda, he was vice president of business development at MeshNetworks Inc., a classic tech transfer/disruptive technology success story that achieved a major liquidity event for its investors in Q4/2004 with its acquisition by Motorola. Martin also was responsible for building several high profile alliances with and for leading technology companies, including Fujitsu, Microsoft, Netscape, Sun Microsystems, and Teradata. Additionally, Martin has successfully negotiated technology transfer, distribution and/or licensing deals with companies like 3Com, BioChem Pharma, Dow Chemical, Exodus, Fujitsu, IBM, Microsoft, Motorola, Netscape and Sun.

 

Wi-Fi: No Longer the Rodney Dangerfield of Wireless

(Original posted at http://www.von.com/blogs/guest/2009/05/wi-fi-no-longer-the-rodney-dangerfield-of-wireles.aspx )

 

I may be dating myself here, but I’m sure many remember Rodney Dangerfield’s famous line – “I get no respect.” Until recently, that has been the general attitude toward Wi-Fi in certain circles, but the tide appears to have turned. Finally, Wi-Fi is starting to get the respect that it deserves.

Much has been written this past week on the rumored partnership, between Verizon and Boingo, as first reported in the WSJ. Yet to be confirmed, it is expected that this will allow Verizon broadband subscribers to roam across Boingo hot spots, at no additional cost. If this is the case, it suggests that Verizon is a fast-follower (in telco terms), to comparable offerings from AT&T and Cablevision for their subscribers. In no way does this diminish the significance of this potential announcement – it is a bold move by an 800-pound gorilla and one which I’m sure was heavily debated internally.

So why would a service provider embrace Wi-Fi today? The motivation depends on the type of service provider we’re talking about, but the answer really lies in the fact that the number and type of mobile devices and data-rich applications has reached the tipping point, and that it’s been embraced by their subscribers.

Wireline broadband providers have been in the Wi-Fi business for years now, with Wi-Fi-enabled, home gateways as the standard CPE for cable and DSL broadband customers. But now, these same subscribers are walking around with dual-mode handsets, Wi-Fi cameras, gaming devices, netbooks and are demanding broadband connectivity, outside the home. It makes sense for these same service providers to enable a similar experience outside of the home as well. Not ubiquitous coverage, à la failed muni, but targeted coverage where they eat, shop and congregate.

But how do you make money if you’re giving away the service? The answer lies in the question: What’s a subscriber really worth?

All service providers report information like monthly or quarterly churn, average revenue per user (ARPU) and adjusted operating cash flow (AOCF). One way of quantifying the value of a subscriber is to calculate the net present value of the expected revenue stream (ARPU) or net cash flow (AOCF) over the average lifetime of a subscriber. Reducing churn, increasing ARPU and improving margins (AOCF) all have a positive impact on customer valuation.

Service providers constantly have to grapple with the “spend” per sub relative to the increase in value. Increasing ARPU is one way, but seldom realistic, given downward price pressure by competitive offerings from substitute providers. In many cases, maintaining ARPU by creating additional value-add is a more realistic approach.

Furthermore, upfront customer acquisition is expensive, so retaining that subscriber for as long as possible is critical. Service providers are finding that reducing churn is a key element in their financial success and long term viability. Those companies that are losing or that churn customers are valued very differently than those that are seeing net new subscriber adds.

This is a slightly simplistic explanation, but the market appears to be speaking. It is possible to generate an IRR that justifies the investment required to add Wi-Fi to an existing service offering. Wi-Fi is fast becoming table stakes for the major MSOs, wireless and wireline operators as they compete for a share of our wallet.

RIP Rodney.

That’s my .02!

Martin Suter is vice president of business development at BelAir Networks, the global market share leader in service provider Wi-Fi, enabling 3G data offload for wireless carriers, quad-play for cable operators, and managed WLAN business services. Previously, Martin was the CEO at Cohda Wireless, where he raised the company’s profile and negotiated a licensing deal with a Fortune 100 vendor in its core franchise. Prior to Cohda, he was vice president of business development at MeshNetworks Inc., a classic tech transfer/disruptive technology success story that achieved a major liquidity event for its investors in Q4/2004 with its acquisition by Motorola. Martin also was responsible for building several high profile alliances with and for leading technology companies, including Fujitsu, Microsoft, Netscape, Sun Microsystems, and Teradata. Additionally, Martin has successfully negotiated technology transfer, distribution and/or licensing deals with companies like 3Com, BioChem Pharma, Dow Chemical, Exodus, Fujitsu, IBM, Microsoft, Motorola, Netscape and Sun.

 

500 Percent

(Originally posted at http://www.von.com/blogs/guest/2009/04/500-percent.aspx )

During his CTIA keynote, Ivan Seidenberg, CEO of Verizon Communications, expressed his excitement “about the next generation of wireless – the one that will usher in growth that could see penetration rates of more than 500 percent for the mobile industry.” Other Verizon execs were equally giddy at the various breakout sessions that I attended.

Toasters, fridges – LTE is going to solve world hunger. Imagine the stickiness! How likely is subscriber defection if consumers need to replace their home appliances?

Thirteen years ago, at the inaugural JavaOne Conference in 1996, Scott McNeely launched Sun’s vision for Java, a lightweight programming language that would allow developers to write once and run everywhere, including microwaves, toasters, fridges, etc.

Ten years ago, in 1999, the Internet Home Alliance was formed, but in the early days it was more sizzle than steak, as it required extensive home wiring. Nonetheless, the M2M vision was being articulated:

“With the coming PC-plus era, Kenney and others expect a proliferation of connected devices. But Kenney says that gadgets aren't the solution. "It's not about more gadgets," he said. "I don't want a smart thermometer; I want simplicity. How about a clock radio that sets the thermometer for you when you turn it off at night? When you wake up, it could turn on the coffee or whatever."

Seven years ago, in 2002, Toshiba announced its Internet fridge, as did LG Electronics. Of course, the $360 billion by 2005 market sizing estimate appears to have been a little off, but the point is that other than trying to control the customer, there’s nothing new in Verizon’s “vision.”

As I listened to the presentations, I found myself wondering why the examples being cited required a WAN technology or licensed spectrum? Isn’t a WLAN technology, like Wi-Fi, a better fit for networking devices of all kinds in the home? Does Verizon think that LTE is going to replace Wi-Fi in the home?

One of the key talking points laid out by Verizon’s marketing department was about having a centralized support number. “Who do you call for support when all these devices are connected?” was one of the week’s mantras, and apparently Verizon’s value proposition.

Why would I pay a wireless carrier to add devices on my home network?

“Five hundred percent” is a great sound bite, but is it in our future?

This morning, I began to catalog the number of wireless Internet devices I have in my home: three laptops, one Netbook, one iPhone, three iPod Touches, one XBOX 360, two Sony PSPs, two EyeFi-enabled cameras, one printer, one backup hard drive, one Wi-Fi radio. Even without the wireless fridge, toaster, microwave, meter reader or washing machine, I’m at 16 Wi-Fi devices. How much does it cost me to connect each of these to the network using Wi-Fi? Nada. Have I ever felt a need to have a single number to call for support? Nope.

Five hundred percent isn’t the future. It’s the present. And I don’t have to have a wireless carrier provision every device. I don’t have to pay a service charge for every device. And I don’t have to worry about buying a new fridge every time I change service providers.

That’s my .02!

Martin Suter is vice president of business development at BelAir Networks, a provider of broadband mesh solutions for Wi-Fi, WiMAX, 4.9 GHz Public Safety and 5.9 GHz ITS networks. Previously, Martin was the CEO at Cohda Wireless, where he raised the company’s profile and negotiated a licensing deal with a Fortune 100 vendor in its core franchise. Prior to Cohda, he was vice president of business development at MeshNetworks Inc., a classic tech transfer/disruptive technology success story that achieved a major liquidity event for its investors in Q4/2004 with its acquisition by Motorola. Martin also was responsible for building several high profile alliances with and for leading technology companies, including Fujitsu, Microsoft, Netscape, Sun Microsystems, and Teradata. Additionally, Martin has successfully negotiated technology transfer, distribution and/or licensing deals with companies like 3Com, BioChem Pharma, Dow Chemical, Exodus, Fujitsu, IBM, Microsoft, Motorola, Netscape and Sun.

 

Mobile Internet Genie is Out of the Bottle

(Originally posted at http://www.von.com/blogs/guest/2009/04/mobile-internet-genie-is-out-of-bottle.aspx)

And it’s not going back...

What a week it’s been!

After blogging last month about the market disruption being caused by the combination of Wi-Fi and unlicensed spectrum, the industry reeled as it grappled with the implications of the release of Skype on the iPhone and iPod.

The buzz at CTIA was polarized around two ends of the spectrum — the incumbent wireless carriers, especially Verizon and its LTE plans, and the disruptors, led by Skype.

One of the characteristics of the climb to the “Peak of Inflated Expectations,” as articulated by Gartner, is that the only enterprises making money are conference organizers and magazine publishers. The ascent of LTE and the noise floor created by the buzz at CTIA certainly bears this out!

But LTE is just another technology. It has the potential to expand the adoption of the mobile Internet, but unlike Wi-Fi, spectrum owners that have a history of tightly controlled walled gardens will roll it out. The question is whether companies will continue to propagate a closed, walled garden approach or recognize this as the mobile Internet. There are interesting analogs in the fixed Internet that bear considering. AOL tried, for far too long, to contain its subscribers within the AOL controlled portion of the Web, and look at what’s happened to them. Does anybody remember CompuServe? Could the same thing happen to Verizon or Deutsche Telekom? Only time will tell.

The Internet has proven itself to be fertile ground for disruption. Look at how it has changed the music industry, newspapers, advertising, retailing, travel, residential voice and long distance service, and even the OS and office suite. ... Companies that “got it” on the fixed side have thrived, while those that resisted it have withered and died. Why should we expect the mobile Internet to be any different?

The availability of Skype on iPhones and iPods has, once again, brought the opposing forces into sharp contrast. Now faced with the potential loss of voice minutes, the wireless carriers are reacting in the only way they know how, by locking it out. AT&T is at least to be commended for allowing Skype traffic on its Wi-Fi network, while Deutsche Telekom companies are saying they will even restrict its use across the company’s Wi-Fi hot spots.

The battle is moving to the FCC in the U.S. where lobby groups are saying that blocking applications such as Skype is in violation of net neutrality regulations. While this argument may take years to resolve in this forum, I would bet that the consumer will decide which approach they favor, long before the courts do, and thus which companies they will continue to support as subscribers.

The Internet is kryptonite to a walled garden. Those incumbent carriers that don’t understand this and continue to try and force a controlled, mobile walled garden experience on their subscribers will ultimately lose.

That’s my .02!

Martin Suter is vice president of business development at BelAir Networks, a provider of broadband mesh solutions for Wi-Fi, WiMAX, 4.9 GHz Public Safety and 5.9 GHz ITS networks. Previously, Martin was the CEO at Cohda Wireless, where he raised the company’s profile and negotiated a licensing deal with a Fortune 100 vendor in its core franchise. Prior to Cohda, he was vice president of business development at MeshNetworks Inc., a classic tech transfer/disruptive technology success story that achieved a major liquidity event for its investors in Q4/2004 with its acquisition by Motorola. Martin also was responsible for building several high profile alliances with and for leading technology companies, including Fujitsu, Microsoft, Netscape, Sun Microsystems, and Teradata. Additionally, Martin has successfully negotiated technology transfer, distribution and/or licensing deals with companies like 3Com, BioChem Pharma, Dow Chemical, Exodus, Fujitsu, IBM, Microsoft, Motorola, Netscape and Sun.

Unlicensed Spectrum + Wi-Fi = Opportunity or Threat

(Originally posted at http://www.von.com/blogs/guest/2009/03/unlicensed-spectrum-wi-fi-opportunity-or-threat.aspx )

Having been on the bleeding edge of wireless for the past nine years, it is gratifying to finally see a major market disruption move from the theory to reality.

I have noticed that the industry is largely clustered around two ends of the spectrum (no pun intended). There are the “cellular” guys, who maintain that licensed spectrum, cell towers, and complex cell planning are all required to deliver robust, wireless service to their subscribers. And there are the “enterprise” guys, who have embraced unlicensed spectrum, low-cost APs, and ad-hoc deployments to deliver wireless service to their clients.

But finally, the line is blurring.

It is now impossible to deny that one can deliver superior customer performance at a fraction of the cost using Wi-Fi. There are very interesting upload, download and latency figures based on millions of worldwide SpeedTests. Their conclusion: “Overall, we found that Worldwide 3G average download speeds to be 956 Kbit/s versus upload speeds of 153 Kbit/s and a 484 ms latency. This compares to average free Wi-Fi network speeds of 2,502 Kbit/s download, 774 Kbit/s upload, and 205 ms latency clearly demonstrating the superiority of Wi-Fi network performance. See our summary chart for additional details...”

Leaders in the cable industry are now moving rapidly into delivering a quad play for their subscribers. Cablevision, a leading MSO, is rolling out a reported 18,000 outdoor access points across its footprint in New York, New Jersey and Connecticut. Why? Verizon, the nation’s largest wireless carrier is moving into Cablevision territory with its own home Internet and content delivery called FiOS. So, unencumbered by the need to purchase expensive spectrum, or the burden that handset subsidies place on carriers, Cablevision has changed the rules of the game. And how are they doing head-to-head? According to a report from market research firm Dell'Oro Group, “Optimum Wi-Fi contributed to “more than 70 percent sequential growth” in Cablevision's net subscriber additions in the fourth quarter of 2008, “a rate higher than any other cable operator in North America.”

And others, like Comcast, have begun rolling out their own trials.

Embracing disruption, just as they did with VoIP only a few short years ago.

In the United States, AT&T is a great example of a traditional wireless carrier that “gets it.” Faced with the challenges brought on by the success of the iPhone and the stresses the mobile Internet were placing on its 3G network, AT&T went out and added wireless data capacity nationally by spending $275 million to acquire Wayport. This gave AT&T an instant data network capacity upgrade at 20,000 locations where people congregate across the country. And are they done? Not if you listen to Greg Williams: “You can think of Wi-Fi as a giant offload point for wireless data traffic. Look at the growth in smartphones and data traffic, and it’s pretty clear that Wi-Fi can be a real plus to AT&T.”

An interesting contrast is Verizon, where the old school cellular perspective has meant clinging to the status quo. Recently, this manifested itself in their signing an exclusive deal with RIM for the Blackberry Storm that shipped without Wi-Fi. The blogosphere lit up over this, as people revolted over not being able to leverage Wi-Fi, even at home or the office.

In the face of competition, leading cable companies see Wi-Fi as an opportunity to deliver a true Quad Play for their subscribers. (In fact, my colleague, Dave Park, will be discussing that topic at a few upcoming events including The Cable Show, NAB and a webcast).

AT&T sees Wi-Fi as an opportunity to add low-cost data capacity at better than 3G data rates.

Verizon sees Wi-Fi as a threat and doesn’t even allow it on a cool, new Blackberry.

Which are the disruptors and which will be the disrupted?

That’s my .02!

Martin Suter

Martin Suter is vice president of business development at BelAir Networks, a provider of broadband mesh solutions for Wi-Fi, WiMAX, 4.9 GHz Public Safety and 5.9 GHz ITS networks. Previously, Martin was the CEO at Cohda Wireless, where he raised the company’s profile and negotiated a licensing deal with a Fortune 100 vendor in its core franchise. Prior to Cohda, he was vice president of business development at MeshNetworks Inc., a classic tech transfer/disruptive technology success story that achieved a major liquidity event for its investors in Q4/2004 with its acquisition by Motorola. Martin also was responsible for building several high profile alliances with and for leading technology companies, including Fujitsu, Microsoft, Netscape, Sun Microsystems, and Teradata. Additionally, Martin has successfully negotiated technology transfer, distribution and/or licensing deals with companies like 3Com, BioChem Pharma, Dow Chemical, Exodus, Fujitsu, IBM, Microsoft, Motorola, Netscape and Sun.