Powerful performance play provide profits

Powerful performance play 16x9

Making real performance improvements in the network is an ever-more-important issue on operators’ agendas. This is being driven by three strong trends in the market: word-of-mouth marketing, the growing importance of Net Promoter Score and user selection criteria for mobile services. As a result, we are entering an era with clearer correlations between real performance and profit margins, one in which you don’t want to be left behind.

Wharton@Work recently presented a study that showed that 84 percent of consumers trust advice they get from friends and family. This is just one example of how word of mouth in marketing has never been more important – a reality that any network provider must consider. This trend is driving the current focus on Net Promoter Score as the most important KPI for network operators, with network performance also the most important user criteria for staying with or leaving a given network provider.

With this in mind, it is time to consider alternative views on the value of real performance in the network – one in which profits can be derived from how you and I talk about the performance of our operators’ networks.

A new study, “The value of performance”, conducted in collaboration with Columbia University has analyzed the correlation between increased investments in network performance and enhanced profits. One of the key observations in the study is the correlation between increased capacity and market share gains. A one kbps increase in downlink speed resulted in 0.012 higher market share the following quarter. Another way of looking at this opportunity is to see what a 10 percent yearly increase in capex would generate in terms of increased profit margins. In both the US and Brazil, a 10 percent increase in capex has been found to deliver 5 percent higher revenues and a greater than six percent increase in EBIDTA.

With a future around the corner in which video barrels are going to replace data buckets as the user reference for how well networks meet their needs, we have a new scenario in the market. 50 percent of mobile traffic will be video in 2019, and 40 percent of YouTube views are mobile already today. Therefore, investments over the next three years in network performance are central to growing market share and profits. There were doubts about the mobile broadband business case in 2006, and the market adoption of smartphones then took us with storm. There might be doubts about the business case for investing in network performance in 2014, but it will be a risky decision to bet against it.

My predictions for the future of a performance- and profit-correlated future are:
• Network performance will continue to be the number one selection criteria for users, and will only grow in importance.
• Network performance will only grow in importance, driven by video-, VoLTE-, mobile enterprise and M2M-driven applications.
• The most valuable conversations about network performance will take between you, your friends and your family. Performance is and will be an easy topic to discuss as a personal experience.
• Network investments focused on performance will pay off and will be central to operator strategies.

Coverage Challenges Completely Changed

App coverage -1610 Edited

Measuring coverage in mobile networks used to be easy when the bars on the screen told the full story. As the breadth of applications grows quickly, so does the need for new coverage measurements. Going forward operators need to be prepared that end-users will expect coverage for all their applications.

As a starting point for how to measure coverage per application, you can measure the coverage for three performance tiers, e.g. 100kbps, 1Mbps and 10Mbps. These tiers can be used to approximate the coverage for voice, data and video-centric applications. The evolution of mobile-data performance requirements are driven by the new needs from IP-based voice and video applications. According to the most recent Ericsson Mobility Report, the North American coverage for the three tier examples above are: 95%, 78% and 31% respectively.

End-user’s expectations for IP-based voice quality are defined by the mobile voice services we have today. Circuit-switched mobile voice services are known to be universally available and support uninterrupted calls with very high availability. These factors together with the new High-Definition voice capabilities have set the bar for IP-based communication services. The large-scale introduction of VoLTE is driving performance reviews and upgrades for the lower coverage tiers. In addition to voice communication, the application coverage for streaming music services is important to support.

The very high screen resolutions for smartphones and tablets make them prime targets for innovative video consumption services. Video coverage is defined by the higher performance tier and a quickly growing factor for redefining the most demanding coverage bar. Streaming video services can be buffered at both ends but require close to real-time performance when used.

In the past, we have assumed that a lot of the video consumption will be offloaded to Wi-Fi but the ultra-mobile use of smartphones and tablets means that video demand is highly realistic in areas outside hotspots as well.

Here are my predictions for the ‘App Coverage’ evolution:

– IP-based voice and video will set the performance bar for new coverage expectations on mobile data services.
– End-user demand for universal app coverage will require a more refined approach for measuring coverage.
– The current performance measures for mobile data, e.g. response times and download times, will be accompanied by already established quality of experience (QoE) measures for voice and video.

Perhaps the vertical coverage bars we grew up with will soon be complemented with horizontal app-coverage bars on our screens.

Mchn-Maaaaaaschiiiiiine-Mchn – Middle Man Matters

© Peter Linder – All Rights Reserved
© Peter Linder – All Rights Reserved

Why most people miss the role of the world’s largest machine when predicting the future.


When Ericsson sold its 50 percent stake in Sony Ericsson to Sony, a common question to Ericsson employees was: “What do you do now that Sony has bought your company?”


Not all people I meet understand my explanation about what a mobile network is and does. I believe the term “network” is too abstract a concept for most people, even if we keep it simple and say it’s the internet’s backbone and mobile-access network.


In addition, the communications industry sometimes talks about the future in terms of machine-to-machine (M2M) communication and industry verticals. The seven letters that make up machine are used to outline the future of servers and applications at one end, and the future of devices at the other. The magic “2″ refers to the largest machine of them all – the network.

Most people get the idea that there is a machine somewhere working away so that 5 billion people can talk, SMS/TXT and send data to one another. They do not reflect on how this machine is changing so it can transform all the industries around us into smart industries. So how do we get traction with such ideas if the majority of society believes mobile phones communicate with each other like walkie-talkies; in other words with just air between them and no network?


The following examples highlight the role of the network in all society stakeholder groups:


* When breaking mobile-broadband networks into two main parts – the internet backbone and the mobile-access network – most people follow the discussion on what a network is all about a lot better.


* Machine-MACHINE-Machine is a better expression regarding the evolution of the communications industry. This makes it clear to all society stakeholders that there are three fundamental machine developments in play.


* The network plays a vital part in making vertical industries “smart”, and smart industries require smart networks.


* Significant network investments are required to support 50 billion devices across new industries, way beyond the requirements that brought voice and data services to 6 billion mobile phones.


I think the following vital questions need to be asked when discussing the networks in the Networked Society:


* How do we secure the investments in network capacity and coverage to keep up with the demand from the Networked Society?


* How do we create new business model innovations across industry borders so all key stakeholder groups benefit?


* How do we secure regulatory frameworks that promote rather than prevent network innovations?


All of the above are complex issues. The resolution requires a broader understanding in all society groups about what the role of the network is, as it will remain THE enabler for the Networked Society.