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All posts by John Brooks

Device Journey Management: the next frontier for Device Assurance

In recent years operators have scaled their thinking into hundreds of millions – but not in terms of data volumes, but instead in the numbers of devices now utilizing their networks.  Smart handsets have led the charge of devices, followed (and soon to be surpassed) by IoT devices, and an army of small cells that will serve to densify the upcoming 5G network rollouts around the world.

Why are these devices capturing more and more operator attention?  With over 1.5 billion smart phones shipped from manufacturers in 2017, the amount of investment by telecom operators just in this device category alone amounts to approximately 20% of their overall operational budget.  However, each year tens of millions of dollars of this opex are being written off as losses by operators due to issues with logistics (forward and reverse), fraud, and process misalignments; device journey oversight doesn’t exist as a discipline today.

Subex has invested almost two years researching this domain, including talking with operators of all sizes around the world.  What we have found is an expanding set of exploitable gaps that current systems and practices are incapable of closing.  Points of risk exist across internal processes, channel partners, distribution and supply chain, and various other areas leading to (and sometimes even originating from) the end consumers.  These risk points accumulate losses for operators that range between $500K USD to over $10M USD per month, per operator, depending on size of the operator.

The device growth area today is not only in smart handsets, but also in a wide array of small cells, sensors, and various other categories.  With already significant gaps existing in oversight, this new breed of devices puts an even greater risk on operating budgets.  Under current estimates, deployed IoT devices alone in the next 5 years will exceed 200 billion units, dwarfing the handset counts worldwide.  Can losses be sustained, or even ignored, at these levels?

Subex will be speaking about a comprehensive strategy and methodology for Device Journey Management during a presentation at the CFCA Winter Conference in Las Vegas on February 6th, 2018.  We will also be at the Mobile World Congress in Barcelona later in February where we look forward to speaking with operators encountering the same problems.

Does a Digital Lifestyle offer Operators opportunities, or is the path more ominous?

It stands to reason that the Digital lifestyle of consumers will dramatically impact how operators generate revenues over the next 10-15 years. Transformations are taking place that will move activities, entertainment, commerce, healthcare, transportation, and most other aspects of our lives into Digital modalities. This has invited thousands of micro-providers of applications and networks into the mix, quickly marginalizing the value of the operator to merely an “enabling pipe.” This puts the operator into a competitive situation, ultimately impacting margins. But that’s only on the revenue side of the equation… the story could become far more complex.

For an operator, the days of 25%-40% EBIDTA are waning, if not almost gone (in many regions). Pressures on pricing remain downward, with new product offers being the primary method to sustain acceptable revenues and margins. This has opened the door for some impressive creativity by many operators, especially in developing markets. In many cases no market appears off limits, as seen by the offerings by progressive organizations like MTN in Africa: Who would have anticipated an operator would offer personal transportation services rivaling Uber?

These seemingly odd moves are, in fact, brilliant moves by operators to seek new sources of revenues as their businesses are being redefined by the digital services we are quickly becoming reliant on. The impacts on revenue models due to this change in the business are stunning: Traditional billed services like voice, and even data, are fading in importance. Revenue models are instead focusing more on casual services, pay-per-use services, marketplace services, etc. Put more simply, the “pipe” is no longer where the earning potential lies for the operator.

So now a previously non-agile, large operator business is finding itself competing with, and in many cases partnering with, literally thousands of aggressive, hungry micro-entities that provide products and services accessed by the networks. There is less reliance on monthly guaranteed revenue; the battle for revenue very often resides in millions of micro-transactions.

All of the discussion cannot focus entirely on revenues, however. Margins are also sustained by costs. Agility, therefore, must exist on the cost side of the operator business. In the old world of monthly recurring and predictable revenues, costs could be managed and allocated more confidently. Opex and Capex planning and forecasting practices were based on budgeting with a high degree of certainty. But as revenues models are changing, so must cost models. Where possible, operators will need to employ similar creativity to curbing costs, as they are with earning revenues.

How can operators, therefore, modify cost models in the business to be as aggressive and variable as the revenue models they rely upon? This is where the opportunities for SDN/NFV networks can shave significant costs, while changing operator cost models in ways that were not previously achievable.

Software-Defined Networks (SDN) and Network Function Virtualization (NFV) will allow operators to provide Network-on-Demand and Service-on-Demand models to consumers, while effectively minimizing, if not eliminating the need for human intervention. The costs associated with truck rolls, call centers, and expensive specialized network equipment will be dramatically reduced, resulting in decreased Opex and Capex burdens on the business. The savings need to expand further, however.

In current cost models, operators must deploy and maintain network services around the clock, which consumes significant and ongoing expenses. However, if a network is based on SDN/NFV architectures, the deployed services are no longer in a fixed position in the network, simply because they are now software-defined and/or virtualized. This means an intelligent network can move assets where needed, and when needed. These assets are capitalized as licensed instances; so now an operator can have a pool of 1,000 licenses for a virtual service, and deploy them only as necessary.

This type of dynamic deployment model should allow operators to negotiate dynamic cost models as well; imagine only paying for a license when you have it deployed (and it is generating revenue). While this idea may seem far-fetched, consider that now the network functions we are discussing are no longer controlled by a few network equipment and function providers; micro-entities (application developers) can now produce those functions, often at far less expensive price points.

The business transformations taking place in operators globally are forcing entirely new ways of addressing margin pressures, as the revenue and cost variables operators have historically used are no longer the same. Looking beyond margins in consumer-facing products and services, new network cost models must be explored, especially since those models were based on what is now an outdated means to earn revenues.

Should you still be “keeping your eye on the ball”?

In almost every major sports analogy where a ball is used, the coach is always telling players to “keep their eye on the ball.” In baseball this is obviously critical. Certainly the same holds true in cricket. Other sports rely on this fundamental as well; the ball is the player’s universe. Without keeping your eye on that ball scoring doesn’t happen, and victories escape our favorite teams.
In the world of Revenue Management the same analogy has been applied to those charged with protecting revenues. “Keep your eye on the money.” We’ve all received our marching orders to monitor and protect the revenue process, from where value is generated, billed, and ultimately collected.
What has inevitably happened, however, is an ever-growing expansion of what was originally a relatively simple carrier business model. Consider this maturing timeline for most operators over the years:

  • Risk Management (“ERM”) became an embedded factor in enterprises as they grew larger
  • Revenue Management soon grew on its own within Risk Management, eventually dominating the ERM program with both Fraud and Revenue teams operating (mostly) autonomously
  • Operator business models have since evolved well beyond the classic voice services that ERM was chartered to monitor, further stressing an already crowded ERM oversight domain

Suddenly (actually, over the last 20 years), Risk Management programs are finding that there is no longer a single ball to keep their eye on; in fact, there are many. Revenue is now generated from many streams (e.g., product lines), all using different business models. But what makes this even more difficult is the relationships and interdependencies these product lines have with each other – these also need to be monitored for risks and failures. Now ERM can’t simply deploy independent, autonomous teams to track individual streams – the collaboration and sharing of consistent data and resources is now a critical requirement.
Putting this into context, let’s talk about fictitious Carrier “A” … we’ll call them Rio Hondo Telecom:
Rio Hondo offers 3G and 4G mobile services. They also operate as an ILEC (Independent Local Exchange Carrier), so they have invested in a great deal in underground plant, in the form of both copper and cable, to serve the majority of their 1 million customers. Through that plant they offer fixed line telephony, broadband, and video broadcast services to consumers, and high-speed business service packages to enterprises. Unfortunately, they have no last mile access to 15% of their enterprise customers, and 10% of their standard consumer customer base is too far away to receive broadband and broadcast services. Therefore, Rio Hondo has formed several partnerships with other operators to round out their service offering to those outlying customers. They started carrying services 65 years ago…and their ERM teams formed in the early 1980’s. They have limited Fraud and Revenue controls in place, yet their business models have grown well beyond what they can easily monitor for risks. Where should their ERM teams be focusing their resources? Candidates must include both revenue generation and revenue support functions, among others.

  1. Revenue generations functions:
    a. Event creation, mediation, and billing
    b. Recurring charge integrity
    c. Retail sales of equipment and services
  2. Revenue support functions:
    a. Retail and call center provisioning operations, and change requests
    b. Order integrity and fall-out management – critical for bundled service delivery
    c. Capturing of traded/returned equipment, including tracking to warehouse receipt
    d. Chargeback management, merchant charging integrity
  3. Cost and other support functions:
    a. Service call management and charging
    b. CPE and inventory assurance
    c. Commissioning integrity
    d. Partner services delivered as ordered, billed appropriately

This operator example is not uncommon, and certainly something that we have successfully worked with operators to manage for much of the last 16 years. What has been learned over this time that ERM can’t just keep their eyes on the “business model complexity” ball; now ERM must also keep their eyes on every ball that deals with product, service, and support inter-dependencies that now dominate the carrier business landscape.
This is the foundation that drove the birth of the ROC from Subex. First envisioned over a decade ago, the latest generation of ROC3 products fully support the monitoring and instrumentation of every facet of Revenue, Cost, Fraud, and Network Asset protection within the operator’s business…all from a single, integrated architecture. With ROC3, operators can not only keep their eyes on as many balls as their business can throw at them, they can easily manage which ones to catch, and which ones to hit “out of the park!”

The Case for Monetizing the Internet of Things

The Internet of Things. While the discussions around IoT are interesting, in reality what are these “things”? More importantly, why should operators care? On the surface the answer is simple: The IoT world is all about Monitoring, and Machine to Machine explosive use of networks. It’s all about how to plan for the capacity – where to invest, when, and how much is needed to meet the IoT demand? This is the realm where Subex Asset Assurance and Network Analytics platforms help operators plan, procure, and place assets to quickly and effectively meet that challenge.

The Internet of Things, however, goes much deeper than a network optimization discussion. The IoT is ultimately about data. Data about our lives, our spending, our health, the “things” that support us (power, roads, air quality, resource availability, etc.). The value in the IoT is in the collecting and monetizing of that data.

Imagine the scope of that data, by walking through a day in a life where IoT is engaged. Waking up is now more about an alarm clock. It’s now about a smart home knowing what day of the week it is, and therefore what time you’ll be wanting to wake. It’s about the home knowing what temperature the water heater needs to maintain to support the amount of water you typically need to shower; it’s about knowing which rooms in your home you’ll be using today, and controlling the environment in those rooms at the right time. It’s about anticipating your food consumption…and warning you when those supplies are low. An even smarter home will seek marketing promotions from local grocers, to give you best options for pricing to replace those depleting supplies.

In this whitepaper we’ll explore the value of IoT data in more depth, as we continue through a day in an IoT engaged life. This data has the ability to steer spend habits, and thus help retailers secure share of wallet. Analytics and Data Sciences are a crucial component in the successful harvesting of IoT data, and any latency in understanding the data will absolutely make the difference in determining who wins the wallet-share competition.

Big Data and the Zettabyte

The industry buzzwords and focus around Big Data Management are starting to wane in the media, but should it?

Consider this: In 2015, the internet is expected to carry over a Zettabyte of data for the first time ever. Even more interesting…and alarming…is that by 2020, forecasts are calling for upwards of 35 Zettabytes, per year (!), to be carried. If Big Data were a round of golf, and we as an industry thought we were somewhere around the 2nd or 3rd hole, in reality, we haven’t even purchased our clubs yet.

For those of you not familiar with a Zettabyte, here is the breakdown:
1000 Terabytes = Petabyte
1000 Petabytes = Exabyte
1000 Exabytes = Zettabyte

Mobile video data alone has increased over 3500% since 2010; statistics abound for data growth – and they all point to explosive growth continuing. With the advent of 4G, raising data speeds and volumes by an order of magnitude, we now see 5G appearing by 2017 in some markets – again raising the volumes and speeds by yet another order of magnitude. Everything in our lives is being connected. Cars, appliances, our bodies (and embedded equipment to run them, e.g., pacemakers), every shop and street corner (video), and even the air, the water currents, and the space surrounding our immediate planet, are all feeding data in increasing volumes and depths into our collective networks. What does this mean?

It means, quite simply, that we haven’t even begun to understand what Big Data is and how it will impact us. It also means that the communications industry, and the backbone it supports, has a long way to go (as the default host for much of this data) to be prepared.

Capex Optimization: A strategy for growth, or defense?

The battle is heating up and speeding up in virtually every market. Customers want the newest, latest, greatest handsets, products, and services.  But how long has this battle been heating up, really?  The answer is simple:  Since the 1980’s.  All that has continued to change are the tools used by the operators in the battle.  Let’s examine the latest tools being used in the Americas and understand how that impacts Capex.  The results may be surprising:

In what is arguably the start of the latest rounds of “artillery”, T-Mobile launched free roaming to over 100 countries in 2013, and started attracting customers by the millions away from the likes of AT&T and Verizon.  After the immediate dust settled and the program was seen to actually be viable, AT&T responded with paying the early termination fees for converting subscribers from T-Mobile.  In the process, flat rate plans with expanded data benefited all of us, as T-Mobile and AT&T both offered non-contract based data allotment increases, for no cost (and in many cases, lower costs) to existing subscribers, to shore up their retention numbers.

Verizon has taken a more conservative approach, saying they have the largest 4G network, which has caused AT&T to counter with having the fastest 4G network.  Not to be left behind, T-Mobile responded with offering to roll over unused data, and to unleash attractive unlimited plans via their recently acquired MetroPCS brand.

All the while, Sprint, the last major national carrier in the mix, has been losing market share while “sprinting” to greatly expand their 4G network.  In the recent weeks they have jumped into the market with a very viable message, aimed directly at AT&T and Verizon, to cut subscriber bills in half…literally.  They even took out an ad in the most expensive slot in the world:  The American Super Bowl.  This ad was designed to “apologize” to AT&T and Verizon.

And now the latest, and perhaps most interesting move, has been the international expansion of some operators into Latin American markets.  The model is simple:  Buy a Latin operator network.  Re-brand it to your internationally known name.  Offer local services that extend all the way into North America.  No roaming or interconnect, and all local calling.  This is a major threat to long-time incumbents in the Latin market, and it’s already happening. Three years ago I was asked what I thought the impact of 4G/LTE would be to the markets.  I made a quite possibly crazy prediction that 4G was going to upset the way we understand roaming and interconnect, simply due to the fact that data, VoIP, and the new products that were going to ride on femtocells and wifi / wimax were going to totally change the playing field.  Could it be that something similar is gathering momentum today?

What is the common thread in all of these battles in the Americas market(s)?  Quite simply, the operator revenues are not growing, or are not growing at the pace to keep up with Capex spend.  Networks are being extended and evolved not to add revenue, but instead to sustain revenue.  Here’s an example:  In the last 24 months I have moved my entire family to 4G.  My bill decreased.  More data was added to my plan.  My bill again decreased.  I then expanded my home DSL to a 30x increase in speed.  My bill stayed flat.  All of this involved more network capacity and expansion in products and services.  But I was not further monetized…I was just retained.

Capex optimization, if pursued for growth, could be considered a great goal and something to strive toward.  However, if Capex optimization is pursued to simply maintain your revenues (and market share), this should no longer be considered a goal, but instead a critical strategy for longer term survival.

So ultimately, how do operators monetize networks?  Perhaps the question needs to be focused on monetizing customers – by turning attention toward strategies that get more share of wallet.  Operators should invest Capex into supporting behavioural shifts in their customers.   Mobile wallet, xBanking, xCommerce, etc, need to be provided as revenue-generating services by the operators, for those customers.  It’s no longer about getting money for network services…it’s now about getting money from supporting a behaviour facilitated by those network services.

Using the ROC to re-shape industry big-data usefulness

Recently I have watched several vendors in our markets talk about Big Data, and the technologies they are supporting to manage that data. What I’m trying to understand in all these announcements, however, is “what does that mean for me, the user?” … or put more directly, “so what?”
There are great numbers out there. With all the buzz about Exadata and Hadoop being made in the market, operators have reason to take notice of what’s being achieved: 1 billion loaded records per hour; 10x-13x storage savings; 70% decreases in DB license costs… Subex is also seeing similar fantastic numbers, and in many cases we are now benchmarking 40x faster performance that these other vendors’ results. Subex has supported Exadata for some time, is seeing significantly stronger results using Vertica, and will be supporting Hadoop in the coming months (including the Hadoop + Vertica hybrid, which is proving to be the best performing architecture anywhere in the industry). But still the question remains: So what?
Vendors in our market have continued to allude to the ability to process data faster and save costs. But what else can this increased data power do for you? That should be the question being asked and answered. For this, Subex has strategically employed these new data processing advantages right in the heart of the ROC suite – which now enables our operator customers to not only see those “default” benefits of faster processing (decreased hardware, decreased costs, etc.), but to also extend their business intelligence into other critical business areas (in many cases, real time), including:
– Customer Experience and propensities to Churn
– Enterprise Margin analytics
– Aggressive network and service Time to Exhaustion analytics
– Service impact “what if” propensities and analysis
– Distributed fraud support in wholesale parent/child enterprise relationships
– Deep packet inspection and response for IP fraud detection and cost management
– Immediate wholesale cost/benefit analysis with carrier trading
– Analytics insights into root causes underlying specific issues in costs and revenues
– Preventative security insights to plug loss exposure before it happens
– Predictive product analytics to understand the internal impact of a product offer
– Etc.
These are but some of the areas operators should be looking for answers from within that new data processing capability…not just faster dashboard updates for current processing. Big Data remains useless if you can’t process new insights and intelligence from within its unstructured foundation. By positioning all relevant new performance technology advances into the heart of the ROC suite, every Subex application will benefit from the improved performance, while be positioned to share that data across other ROC solutions in the suite. This strategic approach will ultimately enable operators to model and extract far more critical intelligence for all the questions above, and more!

The Capex Snorkel Effect

I just read through an interesting, somewhat validating article from Alex Leslie of Billing Views, talking about operator revenues and margins.  In a nutshell, revenue and ARPU are down across virtually every major operator in Europe, according to their own annual reports, and almost all were down by double digits!

I can’t help but believe that this is true in other regions as well, and the problem continues to be growing year on year.  Are we surprised?  When I moved my family to a new mobile operator, leaving another after 9 years, we leapt into the 4G world with all new handsets, 10x the speed, 10x the data, unlimited everything else, and our price went down.  Only 6 months later they lowered my plan price yet again, as part of a national retention promotion.  So why should dropping revenues and shrinking margins surprise anyone?

The fact is they don’t surprise anyone, but they do worry CFOs and Boards, as shrinking (and in some cases, negative) margins are the final result of the trend.

The trend has to stop at some point…through mergers, spectrum purchases, policy controls, or even government intervention…it has to stop.  But how far will it go beforehand, and how does an operator stay strong in the face of an industry trend that seems (for the moment) unstoppable?

The answer may be more straight-forward then you think:  Focus on Capex maximization.  Period.  However this doesn’t mean slash budgets – although that is the current tactic in play across the industry.  What it does mean, however, is sweat the maximum efficiency out of your purchases that you can.  Why can programs like Subex Asset Assurance find tens, and now hundreds of millions of dollars in asset recapture opportunities across an operator’s business?  While there are many answers to that question, the fact remains that we are finding massive sums of Capex that operators can recycle right back to the top line.

Therefore the formula remains, quite possibly, this simple:  Maximizing Capex allows operators to build and transform their networks more completely, quickly, and efficiently, which puts them in a market strength position.  Think of it as having a longer snorkel than your competitors as financial crisis waters are rising…

Preserving Capex and Improving Network Efficiency – Can both go hand-in-hand?

As one of the largest capital line items in every telecom operator’s budget, Network Capex continues to drive large numbers every year since network augments and migrations to newer technologies are unavoidable budget items. Today operators are spending huge sums of money on new network infrastructure for advanced telecom services like LTE / 4G, IPX, etc. without adequate visibility on revenue growth. A recent survey points out 20% of the assets fail to return cost of capital and 5-15% of these network assets are ‘stranded’.

Hence, effective capital expenditure and network asset lifecycle management are rapidly becoming a big boardroom issue for telecoms operators. This is only possible when all functions work together to maximize the returns from their investments. Both the CFO’s and the CTO’s teams in a telecoms operator should have a holistic and collaborative view on the network asset investment.

The urgent need is to have a strategic approach to asset assurance program which manages and reduces network capex substantially. ROC Asset Assurance is different from ERP services because of its workflow and analytics elements. It can initiate workflow to ensure that all the applicable assets are procured and deployed when needed. ROC Asset Assurance helps the CFO & CTO function within the operator company to tackle the following pain-points:

  • Planning of capital spend vs budget
  • Tracking deployed assets and ROI on those assets
  • What to buy, when to buy, where to buy, and for what reason?
  • Information related to assets
  • Ensuring usage of all available assets at the utmost efficiency
  • Network resource capacity and the need to respond

To learn how an effective asset assurance program will provide complete confidence to operators that their network will grow to meet market demands while also guaranteeing optimal value for every dollar of capital budget spent, download our newsletter: Asset Assurance –  Preserving Capex While Improving Network Efficiency featuring research from leading Analyst firm Gartner.

Asset Assurance – Translating Visibility into Capital Savings

As one of the largest capital line items in every operator’s budget, Network Capital Expense continues to drive large numbers every year.  Re-purposing fixed line and backhaul assets, moving to complete IP backbones, migrations to newer technologies (e.g., LTE), and demanding more throughput from the same asset footprint have all contributed to consistent pressure on capital, regardless of previous years’ growths and efforts.

 

Each year, network capital planning and budgeting have repeatedly been baselined on factors that include:

  1. Growth planning and projections
  2. Network maintenance and replacements
  3. Decommissioning and retirement
  4. Previous year expenditures

Each of these factors contributes valuable intelligence that help planning activities determine and set budget levels, but critical gaps are also created in the process that strand capital indefinitely.  Gaining visibility into the available capital assets, and acting on that knowledge are the primary keys to actually preserving capital, creating peak utilization efficiency, and generating the highest level of free cash flow in the business.  But what aren’t operators doing today?

The ability to understand what capital is stranded in your network is based on visibility.  ERP systems consistently lack views into deployed assets; similarly, inventory platforms have a good (yet almost always incomplete) view into what is deployed.  What isn’t known are factors around capacity and utilization rates, lost or vacant assets, or status of all “tagged” assets.  This, coupled with a clearly orchestrated and managed retirement and resale process, positions the operator to not only “connect” data from ERP and Network sources, but to also act on that data in a way that is poised to saved the average operator tens of millions of dollars in capital expense and increase free cash, all in the first year of such a program.

Without the ability to act, no realization of optimization and savings should be expected from any program – this is the difference between mere reporting visibility, and a program to drive the data through a lifecycle that culminates in tremendous operators gains.  This is a unique set of capabilities for any operator, and it forms a program Subex calls ROC Asset Assurance.

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