Sprint and Ericsson

This item , which reports that Sprint is basically outsourcing its network operations to Ericsson, is interesting. Given their challenges in the wireless industry, Sprint is innovating in business models. First we see the 4G deal with Clearwire. Now we see this deal. So, Sprint has kept some of its strategy (though it has limited control over this in the 4G space due to the Clearwire deal). It has kept its capital investment and spectrum. And, it keeps control over the brand and the customer interface. I also assume that they keep some degree of control over network engineering, though that begins to but up against operations in some cases.

Also interesting to me is that they laud Ericssons expertise, which it undoubtedly has in GSM networks. How does that translate to Sprint's CDMA/WiMAX combo?

This will be interesting to watch. It could portend a shift in the industry.

Transatlantic telecom capacity

You might find this item from GigaOm interesting. If this projection is correct, we will almost certainly be paying more for transatlantic capacity.

iPhone and network capacity

This article, which describes how the iPhone is putting strains on AT&T's wireless network is interesting. It further illustrates the close relationship between carriers, content and network devices that I blogged about here. As the article shows, reducing handset prices increases network capacity (and revenues) and also increases the use of social networking applications. It seems likely that there is some revenue sharing going on to facilitate this ...

Wireless carriers and applications

This article from GigaOm is interesting. Basically, the article explains that carriers are benefiting from consumer interest in social networking, which has migrated to wireless platforms. Interestingly, this was not an application carriers had in mind when they made investments in 3G infrastructure. How will carriers justify their upcoming investments in 4G?

The nature of telecommunications is that large investments must be made before revenues can be realized. The telecom network has to be largely built out before it becomes valuable to consumers. As a result, investments have traditionally been conservative and tied to applications. The telephone network was tied to voice communications and associated services, etc. A significant exception was the Internet, which was built with no particular application in mind, but then it was also built with government funding. It wasn't privatized until a commercially interesting application set emerged (email and the web).

The phenomenon that this article describes indicates that unexpected applications (social networking) are a significant new revenue source for carriers. Will this change their investment model? The other thing that is addressed, though not explicitly, is that these applications require collective action from independent entities whose interests are partly common and partly at odds. Applications need broadband and want it to be cheap. Social networking works better with smart phones, which are more costly than "regular" ones. So manufacturers need joint marketing agreements with carriers, yet they want the ability for users to control applications and configuration.

If high-revenue end user applications can no longer be predicted or managed by telecom carriers, how will their investments be justified? It seems that carriers need a strategy and a set of tools for managing investment risk. Physical commodities have futures markets for this purpose.

One of the reasons why I am interested in markets for capacity (most recently spectrum) is that derivatives (such as futures) are possible, which allow for industry restructuring. In the absence of explicit risk management, carriers will integrate applications with carriage, which leads to "network neutrality" concerns.

Asia-Pacific Gateway fiber cable

Following my interest in collecting information on undersea fiber cables, here is the latest installment, the Asia-Pacific Gateway. According to the article,

Targeted to be ready for service in 2011, the 8,000 kilometer network with a minimum design capacity of four terabits per-second ... the proposed fiber optic network will offer alternative communication routes and nodes. In the event of accidents or subsea earthquakes, it will minimize the impact of a breakdown in services provided by existing regional fiber optic network ...

The APG network will connect Japan, Korea, mainland China, Taiwan, Philippines, Hong Kong, Vietnam, Thailand, Malaysia and Singapore. The signatories to the agreement for the development of the gateway are China Telecom, China Unicom, Chunghwa Telecom, NTT Communication (Japan), Vietnam Post and Telecommunications (VNPT), Korea Telecom (KT), Philippines Long Distance Telephone (PLDT) and Telekom Malaysia. The telcos will jointly finance and own the APG network.