Boy, did we get it wrong on SMS! What chance political central planners.

From this year's Economist technology and Innovation awards*

Computing and Telecommunications: Matti Makkonen for the development of Short Message Service (SMS), or text messaging. Mr Makkonen is a Finnish engineer who is credited with inventing SMS, which allows short messages to be sent between mobile phones. He proposed the idea in the 1980s while working at Finland’s telecoms authority. Billions of text messages are now sent every day.

I spent most of the 90's designing and building GSM networks. Whenever we put business plans together we just paid lip service to SMS; it was seen as something that could be used for SIM updates and nothing else. Nobody believed that any sane person would think about going through the rigmarole of tapping out a message to send to someone else.

Unless you've been on planet Zog for the past 15 years or so you'll be well aware of how wrong we were and the massive growth of SMS but maybe not aware of how much of a golden egg it became for the mobile industry:

The same Informa report shows that SMS remains a very popular technology, however. Worldwide SMS traffic was up year-on-year by around 50 per cent to more than 620 billion messages sent during the quarter. SMS revenues were up 23 per cent over the same period.

and

A report from UK-based research firm Portio Research suggests that SMS will remain the most widely used messaging format for some years to come, with revenues estimated at $50bn by 2010 driven by almost 2.38 trillion messages.

To select just 2 random articles.

When we talked to the Marketing teams to get dimensioning numbers they were either oblivious to SMS or just didn't see it as a major revenue generator, so we would just add in a single SMS centre for the network and move on, it wasn't worth spending time on the detail. This didn't matter as even if they had given forecasts of high usage we would have matched spend to revenues so there wouldn't have been much of an impact on capital expenditure (Capex) until it was needed and had revenues to pay for it.

When SMS did start to take off there was a bit of a scramble but as it is a Store and Foreward technique and instant delivery was never promised it didn't realy matter. A few engineers made extra money during that period and some smaller companies grew like topsy to meet demand, but no real harm done.

It is also worth noting that in 1994 the engineering team I worked in was given a briefing by the Orange marketing team. In this briefing they predicted that UK mobile penetration in the UK would top out at around 30% by the year 2000 and Orange would have a 20% share. As it happens penetration was approaching 100% by the year 2000.

So, why am I telling you all this? Well, apart from general interest there is a lesson in central planning to be learned. When I say "we" did all this planning, I mean some seriously intelligent people. I worked with a number of Management Consultancy companies at the time and they were the ones making the forecasts on mobile demand. Most of the people had MBA's from some of the top management schools, including INSEAD. Many of them also had years of telecoms experience as well. They were also working for some very hard nosed, perceptive and very rich clients.

These people were focused on one thing, making money. If they it wrong then companies would lose billions of £££'s, and they still managed to get something as fundamental as mobile forecasts wrong. Fortunately for the companies involved they undercooked how much money was to be made, but when they get it wrong its very expensive; ask Hutchison about its 3 operation here in the UK:

Canning Fok denies that the launch of a mobile broadband service is the last chance for Hutchison Whampoa's loss-making 3 mobile business. ... Today he is desperate to convince the outside world that the $25bn gamble 3 has placed on Europe's third-generation telephony market will - eventually - pay off.

They are still losing money, but not quite as fast.

If these seriously bright people with lots of experience can't always get it right, what hope is there for us of our current crop of politicians and civil servants, most of whom haven't done anything outside politics, planning and managing a whole economy or even, for that matter, regulating the seriously bright people effectively? And they have any political consideratios affecting their decision making as well.

Me? I would prefere to leave most of it to the seriously bright people and hard nosed business men and I include health deleivery in that statement as well.

*No link as its behind a subscription wall

He doesn't like new media types or Twitter

Work has its benefits; I get plenty of telecom's news letters and this one from The Register amused me this morning:

Here's a conundrum. Top Media People want to come out of the shadows and get "closer to their listeners" - it's what the Web 2.0 people urge them to do. BBC people in particular are obsessed with being seen to be bossy or "out-of-touch" - especially since three out of four license payers have a gripe with the corporation.

But the more of themselves media people reveal, the more the public sees them as clueless, self-referential and narcissistic bunch so many of them are. And the more time the BBC spends on peripheral New Media wankery, the more people wonder why they're paying a license fee. You'd need a heart of silicon not to enjoy their agony. The poor souls.

Mobile companies facing investment dilemma

This started out as a quick post, but ended as a bit of a ramble through the jungle of mobile telecoms!

Mobile phone companies are facing a real problem over the next couple of years as the credit crunch bites into their need to innovate and maintain growing customer numbers and Average Profit Per User (APPU)*. The latest land grab, for that is how the industry works, is for data users on their 3G networks. However this is also driving their need for more Capex, to the alarm of their Boards and banks.

It is only 8 years since the industry had to dig deep and find £22bn for 3G spectrum licences which were needed to cope with growing voice demand and to provide data services, which were seen as the holy grail of the mobile industry. But that wasn't the end of it. Once the technology was developed it had to be deployed and backhaul** networks had to be upgraded, all adding to Capex and increased Opex

Once it was deployed it took a while for an eco system to develop sufficiently to produce cheap handsets that took advantage of the new technology. Annoyingly, customers didn't want to pay for slow data services and operators weren't able to develop the "killer application" that would drive customers to pay more for the benefits of the technology. Video phones proved to be a huge turn off, probably because of costs.

While all this was going on home based broadband was taking off, through BT's deployment ADSL***, and the Internet was developing in to what is known as Web 2.0. This meant that the web has become the "killer app" as people want to access to the content they want, not what the Mobile operators were offering in their walled gardens. Unfortunately for the operators the basic 3G technology wasn't up to delivering the experience users were getting used to at home, which proved to be another barrier to take up.

This meant another technology development for the MNO's to improve data capacity on their network. This technology is called High Speed Data Packet Access (HSDPA) and is a relatively inexpensive upgrade to the existing network. Marketeers have made many claims about this technology, data speeds of up to 7.2mbps. The reality is somewhat different, as you would expect, but it does offer a good experience for early users.

All this investment has driven a need for operators to grow their customer base and revenues. Only the most ostrich like technophobe would have missed the land grab as the MNO's make all sort of offers to attract customers, including "free PC's", unlimited data packages and free USB dongles. futhermore the iconic iPhone has gone 3G and has many imitators.

Unfortunately the technology hasn't lived up to the hype, again, and there is huge disappointment as a recent YouGov survey found:

However, experience of Mobile broadband is needs improvement. The data suggests it is great out-of-the-box but usage drives dissatisfaction and ~25% of mobile broadband users seem unlikely to renew their contracts over the next year. The service ranks below fixed ISP’s for every comparable service satisfaction question in the survey.

So less than 10 years after paying for 3G licences mobile operators are far from satisfying the need for data and face another real challenge. If they are to meet this challenge they need to deploy a new technology referred to as Long Term Evolution (LTE) and they also need more spectrum.

The first thing to note is that Ofcom has been prepared to auction more spectrum in the 2.5GHz band but this has been delayed by both T Mobile and O2 who are challenging Ofcom in the courts. There are a few reasons for doing this but the main one is fear of high auction prices****.

The other problem is that LTE is not an evolutionary technology as its name implies. Whether this is a deliberate ploy to make Boards and banks feel a bit easier I will leave you to judge, but the transition to LTE is likely to be as traumatic, and expensive, as the one from 2G to 3G and the penny is just starting to drop. This is from a recent interview with Ericsson's UK CTO:

If there is still life in HSPA, will the economic downturn delay LTE? We've had a downturn in the telecoms industry before, related to the internet bubble. This time, banks are involved, so operators wanting to upgrade may find it hard to get the credit to buy a lot of new equipment.
Conceivably — but I probably shouldn't comment.

What is so telling about this is that Ericsson are one of leading cheer leaders of LTE and desperately need its take up for their own future well being. Furthermore one of their major customers is Vodafone worldwide. So if Ericsson's UK CTO is being coy does it mean Vodafone are under pressure from their bankers not to spend?

But what if they don't, what if Vodafone, or any of the other MNO's, can't support their customer base on the existing 3G HSPA networks and they lose ground? They certainly won't be the darlings of the stock market if their customer stop growing and, even worse start to decline. Once that happens they will be in defensive mode, with only cost cutting to protect profits.

It was going to be a tough call before the credit crunch, it is even harder now. Who would want to be the one making that call?

I will be meeting my financial advisor on Tuesday for a 6 monthly review of the pension funds I am investing in. I think I'll look closely at any with mobile phone companies in them with a view to a move for a couple of years. Of course this is by no means a recommendation to do anything, just my personal opinion of what I might do.

If you got this far I admire your stamina, well done!

*Traditionally the telecoms sector looks at ARPU (Average Revenue Per User) but this doesn't tell the whole story as costs rise margins get squeezed. One of the biggest costs are subscriber acquisition driven by high churn

** Backhaul is the generic trm for connecting mobile sites, roof tops, towers etc, back in to the network. It is either very capex intensive or high opex. Either way, it is a real burden on mobile operators

*** BT had to be dragged kicking and sreaming in to rolling out ADSL and allowing local loop unbundling, you beleive it to listen to them now!

**** T Mobile are also claiming that the original 2G spectrum should be refarmed and set aside for 3G. This is a technical issue but if anyone wants more details let me know

Website problem fixed

The problem I had with TGW's new website running in Internet Explorer 7 has been fixed by upgrading to IE8 Beta.

Despite this I think I'll stick to Firefox as my default browser.

EU and emergency numbers

I'm a bit late on this one from EU Referendum -it seems the EU is getting itself worked up about having a common emergency number and wants member Governments to make more effort to condition us to use 112.

Today is 11 February which, expressed in numerical form is 11/2 – something which the EU commission could not let pass – 112 being the single European emergency number.

It has therefore launched a new initiative, calling for "EU citizens" to be "better informed" about the number.

As usual this is a complete waste of time and money and another case of the EU focusing on something for cosmetic reasons in the name of "integration". To understand why we need to look at some history and techie stuff, but I will simplfy it.

You need to know that the telephone exchange provides the power for your phone to work by putting a voltage across your line. In the normal condition the circuit is not made (open) and therefore no current flows. The first telephone systems used currrent pulses on the line to tell the exchange what number was being dialled and they did this by the telephone dialler making and breaking the circuit to the exchange and so drawing current pulses at a set timing interval.

You may remember that early telephones had rotary dials and for the exchanges to work the dialer had to release at a constant pace so the exchange could detect the pulses correctly. This type of operation is susceptible to "noise" from lightening, car engines, early vacuum cleaners and even lights being switched on. This noise can, and did, cause mis-dials or even phantom dialling of emergency numbers.

Selecting the emergency number therefore became a trade off between how long it took to dial the number and the risk of spurious and/or mis-dials. For speed we would want 111 to be the emergency number but this is prone to being dialled by spurious noise. On the other hand 999 is slow to dial but not prone to phantom dialling.

So when telephine systems were fists eing built, rightly or wrongly UK telecoms engineers chose 999 for the emergency number, in the USA 911 and in parts of Europe 112. This is only a problem because in an emergency people will revert to what they were conditioned to dial and not what they had been recently told to dial when entering a country.

Whilst pulse dialling still works, fixed telephone systems moved to a system of Dual Tone Multiple Frequency (DTMF) dialling some years ago which meant push button telephones and all numbers being dialed at the same pace. Dialling is now faster and not prone to noise, so the trade off for emergency numbers has, by and large, become redundant (remember though that pulse dialling still works so we cave to be careful). Most of us have been conditioned from an early age to dial a certain number in emergencies and as all numbers are now dialled at the same rate it was pointless changing the emergency number.

So why not use all these numbers in a country? Well, yes, but old analogue exchanges were expensive to set up numbers and because of a lack of standardisation in the early days other country's numbers may have been allocated to other functions. However modern exchanges are now really easy to provision and we have standardisation work through the International Telecommunications Union (ITU).

Over the years the ITU has standardised numbering eg UK is always 0044 (+44 on your mobile). It is therefore quite easy for the ITU and national regulators to move towards common standards and insisting that all countries accept other country's emergency numbers, which they have done on their mobile networks and most with their fixed networks.

So, the EU should forget its fantasy of getting everyone to remember and use its favourite number and save money. If they are really worried what they should focus on is working on the ITU and regulatory bodies to make sure all countries recognise the main emergency numbers eg 999, 911, 112 etc because it really is quite easy to set these up.

And a final point, the EU has set itself up as the super regulator when it comes to telecoms and is almost in a position to do this by diktat, which is what they really like.

Braodband on Segways

This looks fun. I was talking to someone who had a go today and they said it was impressive.

Techie stuff - solid state hard drives

Courtesy of The Register comes this demo of a new solid state hard drive. Its only about 90 seconds and worth watching for the throw away comment about about their demo of regular hard drives.