“Apply a new disruptive telecommunications technology to create higher value connectivity, and you will create a new multibillion dollar market.”
First, let’s establish the fact that this is a law and not a theory. Second, what are the new and disruptive technologies that are going to create these markets, and finally, why should you consider Intelligence Support Systems to get a jump on the new market opportunities in the years ahead?
Industry Observations: 1878 to Present
The table below summarizes the Telecommunications Industry Evolution from 1876 (The year of the Bell Patent) through today for the following four markets: voice, video, data and mobile wireless.
1. Voice
Western Union had a chance to buy Alexander Graham Bell’s telephone patent (the new and disruptive technology) but chose to battle it out in court and lost. Bell sold his patent to New York investors, and as a result AT&T was created in 1878. The telephone provided higher value connectivity (person to person) versus the telegraph (person to telegraph operator to telegraph operator then back to person via a paper telegram).
In the 1960s, along comes MCI with a new and disruptive technology known as microwave. In the early days, the company was basically a law firm that just happened to have microwave transmitters on its roof. With this new technology, MCI convinced the regulators that it could provide cheaper connectivity if only it could interconnect with consumers via the Bell System’s local dial-up access network. They did, and MCI rolled out Execunet Service to front-end its microwave network. Here, the consumer dialed a local number, entered a PIN and finally the long distance number of the called party. The connectivity wasn’t higher in quality, but it had a higher value because it was cheaper.
You can argue that MCI WorldCom went bankrupt, so how could it become the new profitable leader in 2003? Time will tell, but the new MCI now has little debt (about $4 billion) and is profitable. If the old MCI hadn’t got mixed up with WorldCom in 1998, would it have overtaken AT&T? Who knows, but you will very likely see an RBOC/MCI merger and a new company emerge that looks like the old AT&T—only bigger.
2. Video
With new high-powered radio equipment, TV broadcasters replaced movie theaters as the premium content delivery venue because content producers could reach more viewers (higher value connectivity). Subsequently, the cable TV companies toppled TV broadcasters with their new and disruptive technology—domestic communications satellites. Cable companies could provide higher connectivity to the new content developers by reaching more viewers.
3. Data
In 1967, IBM introduced its System Network Architecture (SNA), which delivered high power computing to the desktop and remote sites. SNA and telecommunications infrastructure replaced the shipping of magnetic tapes and punch cards. From the 1960s to the 1980s, IBM dominated the computer industry (made the most profits). However, SNA and mainframes couldn’t keep up with the connectivity requirements. This was one to one networking (terminal to mainframe). If you wanted to go outside this mainframe domain, your terminal had to ask the mainframe: may I go to another SNA domain? To leave your home SNA domain you had to establish a line ahead of time. Of course there was another little problem, to add a new user to the network, you had to first shut the whole network down.
Along came the Internet and Microsoft, which created a one to many computer communications link (higher value connectivity). Note that the basic strength of the Internet is the ability of instantly being able to go from one place (Web site) to another for a flat rate fee—again higher value connectivity.
4. Mobile Wireless
Before cellular came along in 1983, the only mobile wireless service available was from “Mom and Pop” type radio common carriers. These companies provided limited service at high prices to a chosen few consumers (doctors, emergency services and so on). Cellular (the disruptive technology) provided national coverage at lower costs. Again, higher value connectivity.
Today, 3G is the disruptive technology. Here, 3G can be described as whatever came after 2G digital voice-only services (e.g., always-on IP packet service at higher digital rates). The problem is there are six national carriers that do not provide inter-system connectivity for 3G value-added data services. That’s what’s holding up new 3G revenues. When these providers interconnected their SMS networks in 2002, traffic and volume exploded. To go beyond SMS interconnection will require massive industry cooperation, and that’s not likely to happen.
The 3G wireless operator that emerges as the winner will be the one that dominates high value connectivity for mobile content developers wanting to reach a mass mobile audience. The 3G wireless operator that will win this race will have done so by understanding Intelligence Support Systems.
What Are Intelligence Support Systems?
Intelligence Support Systems (ISS) are the front office and back office systems that gather intelligence about what is going on in the network. These systems basically perform the 3As functionality (authentication, authorization and accounting). The equipment needed for 3As are IP application servers (next-generation RADIUS), mediation devices and adjunct billing system processors.
So how are ISSs going to support the new and disruptive technologies in the voice, data, and video and wireless networks to enable new multibillion dollar opportunities and create new emerging and dominant players?
To see how, apply Jerry Lucas’ Law of Telecommunications Evolution. “Apply a new disruptive technology to create higher value connectivity, and you will create a new multibillion dollar market.” Apply the law, and see what you get as summarized in the table below.
1) The Next-Generation Voice Market
The new and disruptive technology in the voice market is voice over IP (VoIP). So here’s the disruption. You can call someone on the PSTN by dialing a phone number (NPA-NXX-XXXX). Also, you can call someone that has an IP device with voice capabilities, say a PC with a sound card, by entering someone@domainname.com (an IP address). But you can’t enter an IP address with a conventional phone. However, you could make a PSTN outgoing call to a VoIP terminal directly connected to the Internet if you had access to a directory server.
If you solve the directory problem (telephone to IP or IP to telephone number conversion), the higher connectivity value factor can take hold. When any phone on the PSTN can seamlessly communicate with any IP device on the Internet, you will see the next-generation multibillion dollar market emerge.
So what’s the hold up? Creating a proxy server and directories to translate IP to phone or phone to IP address is straightforward. In addition, IP or Session Initiation Protocol (SIP) phones are available. The problem is that there are no ISSs to support the required 3As to turn this opportunity into a business vs. the hobby you see today (free voice).
So why do you need new ISSs? What happens if someone raids your mailbox and steals your newly issued credit card? Today the credit card can’t be used until you activate it by dialing an 800 number from your home phone. Note that issuing banks receive and record your home number using caller ID during the activation process. If you call from an IP phone via the public Internet and you spoof the directory (my temporary IP address with your phone number), how is the issuing bank going to know this?
The barrier to creating this next-generation voice opportunity is the availability of next-generation 3As. Are you who you say you are (authentication), are you authorized to talk to my IP-enabled garage door opener, or have you captured the accounting information for billing purposes? The 3As are key features in ISS.
2) Data
The new and disruptive technology for data is IPv6. When IPv6 comes along there will be enough permanent IP addresses for every man, women and child on this planet and every component in your house and more. The next step is phenomenal connectivity.
OK, IBM won the data market (made big computer profits) in the 1960s through the 1980s with one to one (terminal to mainframe) connectivity. Microsoft has won big since 1990 with the one to many connectivity via the Internet. IPv6 will permit billions of devices to communicate with
billions of other devices.
The question remains who’s going to capture this new, many to many connectivity market? That part is hard to say, but the company that does will do it with the best ISS delivering next-generation AAA.
3) Video
The new and disruptive technology for video is the personal video recorder (PVR) from companies like TiVo as well as PVR service via cable and DBS companies. Here is the disruption: Today the vast majority of TV revenue comes from advertisements. PVR not only allows you to record and watch what you want over a full spectrum of channels, it also allows you to skip commercials. Not to mention it screws up the value proposition of packaging (not so attractive programs adjacent to winners in order to drive up revenues on the not so popular shows).
How will cable, DBS and TV broadcasters command high ad revenues if they can’t provide accurate usage statistics? In the end they won’t unless they have next-generation ISSs. This user watched this ad because my accounting ISS says so. Or you the consumer watched this program, and here’s your bill based on event records gathered from our next-generation mediation or surveillance device.
4) Mobile
As stated above, 3G is the new and disruptive technology that allows wireless operators to provide multimedia messaging (MMS) services and more. The problem is that a mobile content developer has to work with multiple wireless operators that can’t bill based on usage, haven’t a clue as to what their subscribers want in the way of wireless content and can’t even tell how many hits they get on subscription-based or flat-rate priced content.
The 3G operator that comes along with a next-generation ISS that can provide intelligence about mobile content users’ preferences to content providers, not to mention the 3As, will win their hearts and minds and emerge the winner.
Jump Starting ISS: Think Federal Government
OK, so you are a service provider executive or vendor and see ISS as an opportunity. Where do you start? Obviously, content developers are going to be interested in voice, data, video and wireless service providers that can deliver next-generation ISS to extend their content product reach (higher connectivity). Also consumers with their IP devices will want high-value connectivity with other consumers and their devices. But the immediately available low-hanging fruit will come from federal government activities. Why?
First, as discussed in last month’s editorial, federal mandates (CALEA, USA Patriot Act and Homeland Defense Act) require service providers to support lawfully authorized Internet surveillance (see “Editorial: You Have BSS and OSS, Now Comes ISS,” Billing World and OSS Today, April 2003). That intelligence gathering requires ISSs.
Second, the U.S. government is in great need of ISSs to support a number of initiatives—e-government, social benefit programs and more. The (usefulness) utility of a social security number for the 3As is drawing to an end. The new era requires cyber authentication, and this form of authentication will rapidly spill over to the commercial space for directory and message registry support.
Finally, the U.S. government has the money to spend on ISS. Last year, Congress passed legislation providing $900 million in R&D for cyber security over the next three years. Why? Internet infrastructure protection. Note the Department of Defense gets 125 intrusion attacks per day (or 46,000 a year) from unclassified access networks. Think of it this way. In the 1980s, the DoD funded a little Silicon Valley start-up company to solve an IP routing problem. That company was Cisco Systems.
There are more than a few new “Ciscos” to come out of that $900 million of R&D, and there are likely to be a few new ISS giants as well.
To get a jumpstart in ISS, watch for monthly coverage (see, “Poor Network Security Can Devastate Telecom Providers"). If you want to understand the government’s intelligence mandates, plan to attend TeleStrategies’ Understanding Lawfully Authorized Internet Surveillance and Infrastructure Protection on May 29-30, 2003, in McLean, Va. Finally, if you want to see the birth of a new industry, plan to attend the ISS World Conference and Expo on September 16-18, 2003 in Washington, DC. For speaking and sponsorship opportunities go to www.telestrategies.com/
| Figure 1: Examples of Lucas' Law of Telecommunication Industry Evolution Industry Segment --> Dislodged Incumbent --> Disruptive Technology --> Date Introduced --> The Higher Connectivity Value Proposition --> New and Profitable Industry Leader 1. Voice --> Western Union --> Telephone --> 1878 --> Person-to-person --> AT&T --> AT&T --> Microwave --> 1974 --> Same connectivity but cheaper --> MCI 2. Video --> Movie theaters --> High Power Radio Transmitters --> 1940s --> More content access --> TV broadcasting --> Broadcasting --> Domestic Satellites --> 1974 --> More content access --> Cable and DBS 3.Data --> Magnetic tapes and --> IBM's SNA --> 1967 --> One-to-one remote connection access --> IBM --> punch cards via snail mail --> IBM --> Internet --> 1991 --> One-to-many computer access --> Microsoft 4. Mobile --> Mom & Pop RCCs --> Cellular Telephone --> 1983 --> National coverage --> Six big national wireless players --> 5 of the 6 major --> 3G --> ? --> More mobile content access --> One of six major wireless players --> wireless players |
