Carl Weinschenk spoke with Sandvine President, Co-Founder and CEO Dave Caputo. The company released the Global Internet Phenomena Report 1H 2012 in late April.
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It's no surprise that the most exciting news on the Internet front is being made on the mobile side. Dave Caputo, Sandvine's president, co-founder and CEO, tells IT Business Edge blogger Carl Weinschenk that a new business model that is structured more on a pay-as-you-go basis is necessary as less expensive, replacement technologies make high-priced, all-you-can-eat tiers obsolete.
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?I also think click-to-cloud smartphone photo backup and synchronizing will emerge as a significant trend. It is continuous cloud/client connections, the continual synchronization of smartphone with cloud and home networks.?
- Dave Caputo
- President, Co-Founder, CEO
Sandvine
Weinschenk: Was the study on wireless or wired networking?
Caputo: The study was on both, but the things we characterized as notable were on the mobile side. We used to ping pong from one to the other. Now that we are established with enough customers, we can aggregate data and say, "What's the most interesting thing happening on the Internet?" We have over 250 customers in over 90 countries around the world. From that we take a sample of 30 service providers and tens of millions of subscribers./p>
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Weinschenk: So what is interesting?
Caputo: There are a whole bunch of things. One certainly is SMS replacement via IM. We looked at one Asian mobile network serving 1 million subs a day. In one day, 7.6 million people sent WhatsApp messages.
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[Another highlight is that] YouTube is big. Not too many people would be surprised that it is the largest source of mobile video traffic in every region. It accounts for as much as 25 percent and never lower than 12 percent of traffic. It is number one in every single geography.
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In North America video and audio streaming ? what we call "real-time entertainment" ? made up more than half of all data traffic, led by YouTube, Pandora and Netflix. We are predicting real-time entertainment will near 67 percent of all mobile data traffic by 2017.
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We dubbed something called ?home roaming? in which people use mobile devices in their homes using a Wi-Fi network. That is 9 percent of total fixed traffic on North American household networks.
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I also think click-to-cloud smartphone photo backup and synchronizing will emerge as a significant trend. It is continuous cloud/client connections, the continual synchronization of smartphone with cloud and home networks. Every time someone takes a photo, it is going to sync into the cloud and then sync to the Apple TV or Mac or whatever else the person wants to show it on. We think that is going to become a major contributor to bandwidth usage.
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Weinschenk: What is the high-level conclusion in what you saw?
Caputo: There are real threats to the businesses of some traditional communications providers by things such as SMS replacement for IM and over the top for traditional cable. Those are becoming more and more real. When you have a random network of 1 million subscribers and 7.6 million WhatsApp messages are generated, that says it is nearly ubiquitous. That should be a wake-up call to the traditional businesses that they face a real threat.
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People have to adopt the key business around Internet data services. Voice used to be a very big part of any telecommunication service. It still is being delivered, but now there are many ways of getting calls over the network. That was the first cord cutting, if you will. Now the same thing is happening to SMS messaging. The big issue is video entertainment. Increasingly providers can get big chunks of video revenue by OTT services.
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I think the challenge to service providers is to understand what is happening on an aggregate and demographic basis. There is a huge disconnect on the planet right now between what we expect from communications service providers and the underlying business model. The disconnect is that we all expect service providers to spend billions of dollars on spectrum and billions more on infrastructure to roll out the next generation of mobile networks. But the question we don?t answer is who is going to pay for it? Unless more and new ways to consume and pay for bandwidth are found, it doesn?t make sense to build the network.
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Weinschenk: So the model has to change.
Caputo: The way we are seeing it play out in different parts of the world is that there must be new ways of paying for and consuming bandwidth. An Amazon Kindle doesn?t have a mobile subscription. You pay when you buy the book. That model has to become more common.
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Service providers around the world are coming out with personalized tiers of service that give the subscribers exactly what they want. That provides cost certainty that month. An example would be a social networking tier that gives you all-you-can-use Facebook for $5 or $10 per month.
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I think that service providers have to make the investment in the network such that they can deliver personalized services, knowing that they can deliver profitably. What they can't do is provide "all you can eat" service tier for $40 a month and still make the multi-billion dollar investment.
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Weinschenk: That sounds like a radical departure. Knowing that $40 is coming in every month seems pretty important to the service providers.
Caputo: We have enabled an "all you can use" messaging tier in Latin America for $5 per month that has unleashed a whole new tier on the low end. If it wasn't offered, the service wouldn?t be used before and those people wouldn?t be customers.
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Weinschenk: But isn?t there a risk that the new people coming in for $5 per month won?t compensate for the loss of the $40 per month subscribers? Say, you get seven new people at the lower tier, but lose one of the $40 folks. That?s a $5 loss.
Caputo: I think that's a theoretical risk [but] generally when you can lower costs and get more people using the technology there is a 10x factor of unleashing people who wouldn?t otherwise use it. So historically the lower cost has driven massive adoption.
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Weinschenk: What else did you see?
Caputo: I think there is another massive transition in IPv6. You will have billions if not trillions of IP addresses. Everything can have an IPv6 address. There is no sense for a street light to have a $40 subscription to say if it is red, green or yellow. There is sense to have a 5 or 10 cent subscription. IPv6 enables that. Once everything is terminated on IP and the big, beautiful, wonderful cloud, you can check your video at home, check energy consumption, check if the garage is closed. Why wouldn?t [those types of services] become pervasive?
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