May 26, 2011 10:15 dmercer

Executives from Alcatel-Lucent (ALU) presented the company's latest technology roadmaps and innovations at its recent Technology Symposium in (and just outside) Paris. Stephen Carter, Chief Marketing, Strategy & Communications Officer, described the six key trends as ALU sees them:

  • Wireless
  • Cost Experience Transformation
  • The Apps and Content Value Chain
  • Cloud
  • Critical Network Infrastructure
  • Internet of Things

 None of these is a particularly new idea but they neatly sum up the key battlegrounds for ALU’s core customer base, the network service provider industry.

The continued evolution of wireless technologies is well documented, as global 4G rollouts will be the focus of attention for the next few years. But ALU has a key interest in the transformation of fixed line broadband as well, having played the leading role in establishing the dominant xDSL technologies over the past couple of decades. In spite of the global predominance of wireless access technologies, it may come as a surprise that fixed access still has a vital role to play, in mature markets at least.

For many years there has been much talk of fiber-to-the-home as the ultimate fixed broadband solution, but the relatively limited commercial deployments of such solutions (such as Verizon’s FioS) have been slow to emerge and, if anything, are showing signs of plateauing rather than becoming de facto alternatives. BT is the latest telco to stumble on its plans for FTTH (or FTTP – Premises – as it prefers to call it): installations during the trial phase are taking seven hours on average, against a target of four, and it is reported that a quarter of installations are taking as long as two days to complete.

There just doesn’t seem to be any obvious solution to the dreaded last mile challenge, which is less about developing ever more advanced communications technologies than about the need to invest in shovels and spades to dig up roads, pathways and gardens. The labour required for such “replacement” wires is pretty much fixed cost, unless anyone is suggesting an unlikely collapse in labour rates; and, as BT is demonstrating, you just never know what physical or organisational obstacles will lie in the way of new wire installations.

ALU thinks it has come up with a viable alternative to FTTH. As part of its High Leverage Network architecture, for which video services are seen as a major driver, it believes that the established copper access infrastructure can be upgraded to support speeds of up to 900Mbps. Key enabling technologies behind this transformation are vectoring (involving the removal of crosstalk), as well as quadruple bonding of copper pairs. Four pairs are not commonly available, but the technology would still provide bandwidth of nearly 400Mbps over two pairs over a distance of 400 metres.

ALU’s major challenge is to convince its service provider customers that any such next gen network investments will generate sufficient return from new service and application revenues. However positive a spin ALU puts on the potential for new data-sapping video services, our reading of service provider strategies is a high degree of caution about any significant net revenue growth impact from such services. As Telefonica noted recently during its investor day, incumbent telcos are projecting very modest revenue outlook (1-4%) for the foreseeable future, in spite of accounting for new service growth globally across wireless and wireline businesses. New network investment will continue but it is driven by competitive dynamics rather than the expectation of discovering a new pot of gold. Whether regulators decisions on next gen network policies, in Europe in particular, can have any impact on the established trendline seems doubtful at best.

David Mercer

Client Reading: Broadband Service Provider Performance Benchmarking: Europe Q4 2010

 


May 3, 2011 21:32 bpiper

At this year's CES, we said that 2011 would the year of the Smart Home Applications. To be sure, tablets took the forefront at the show, but the "smart home" could not be ignored. We estimated the US market value alone to be on the order of $5.6 billion by 2015. While the term "Smart Home Applications" could conceivably a variety of services, in our analysis, we included Remote Energy Management, Broadband-enabled home security, and Telepresence

SHA_Revenues

Up until now, despite what seems like years of trade show mockups, demos, and media hype, Smart Home Applications have failed to garner the attention of Service Providers on any measurable scale. In 2011, market conditions and consumer interest appear to be finally aligning.

Two recent Service Provider announcements suggest momentum:

AT&T and Xanboo

AT&T's acquisition of its longtime home monitoring and smart home application partner, Xanboo late last year garnered some brief media attention, then quickly receded below the radar. AT&T was and continues to be reluctant to disclose their plans with regards to the acquisition. A March 31st letter sent by AT&T's counsel terminating dealer relationships effective July 2011 suggests that the company may be preparing to rebrand and relaunch in the near future.

Verizon's Moves in MDU

Verizon last week announced a partnership with Healthsense to provide remote health monitoring to senior communities another indicator that years of industry talk is finally being converted into action. Penetrating the target-rich MDU (multi-dwelling unit) market is one way to reach CEO Ivan Seidenberg's stated goal of 40% takeup of the FiOS service. Adding Cisco's umi Telepresence to the mix could make virtual doctor consultations a reality though, as always, pricing is an issue.

 

Recent talks with clients confirm this renewed interest in the Smart Home area Service Providers are clearly eager to uncover new revenue streams, and view Smart Home Apps (SHAs) as a new and uncluttered adjacent market.   They are likewise keen to mitigate churn, and our research has consistently shown that bundling provides some "insulation" against churn. Manufacturers see SHAs as a potential "hook" into the home, and are just as interested in how this plays out.