What is Ericsson actually up to?

03 Dec 2014

As featured on the Disruptive Views blog

Digital service providers (DSPs), aka OTT players, have known for some time that in order to keep their customers happy what they are selling needs to be delivered in the best possible condition and working optimally, especially video content.

They also know that although they can ‘rent’, build, or operate high-capacity fiber links between their own data centers and cloud infrastructure they can’t do the same for the so-called ‘last mile’ to their customers that is controlled by communications and internet service providers, i.e. network operators.

Customers having problems with the quality of content they are downloading or viewing will want to blame somebody and the DSPs don’t want it to be them. Short of running massive advertising campaigns pointing the blame for poor network quality at the network operators they have to hope their customers are savvy enough to know who is to blame. Neither scenario looks good for them so they are having to resort to new tactics to keep their market positions.

There has been some reticence in the past to approach the CSPs and ISPs directly for fear of being charged for advantageous peering agreements or prioritized traffic arrangements for their customers. And rightfully so, the network operators would prefer reserve such preferential treatment for their own customers so they can either offer them better service or be able to them charge them more for premium plans. How this will work post net neutrality is anyone’s guess.

According to a recent report in Rethink Wireless, Facebook, like Google, “is starting to take an interest in underlying network technologies and how it might harness them to enhance its services. Recently it has shown a keen interest in certain LTE capabilities, particularly LTE Direct and Multicast. And in some cases it is working closely with the mobile operators which have so often seen it as a rival, and delving deep into their networks to improve performance on both sides.”

In order to take advantage of enhanced network capabilities they need to work closely with mobile operators in particular and some interesting new partnership models are emerging. In February this year Ericsson and Facebook announced the creation of a joint innovation lab supporting the Internet.org initiative to provide an environment and expertise for optimizing applications, networks, devices and services for the next five billion Internet users.

Those early efforts are now coming to fruition with the announcement of a partnership with Indonesia’s XL Axiata that aims to not only improve customer experience for both the Facebook social app and the network operator, but it shows Facebook willingness to work with mobile operators to get the best out of the mobile web for its users.

It makes sense for Facebook to target Indonesia that has the fourth largest Facebook user base in the world, even though 75% of its mobile subscribers are on GSM/EDGE networks. It was Axiata that first realized the potential of working with Facebook many years ago that made it the obvious choice to work with for enhanced service delivery at app level.

This all bodes well for future strategic partnerships to get the masses using mobile access to the Internet and may even lead to stronger economic ties if the network operators manage payments on behalf of their DSP partners, especially for pre-paid customers. However, one major stumbling block exists, and it’s the same one raised by TripAdvisor in a previous posting.

The major DSPs such as Facebook, Google, LinkedIn, Twitter, etc. that operate in very broad international, almost borderless markets find the task of having to deal with fractured and largely disjointed mobile markets that require multiple agreements and engineering arrangements very hard to address. They simply don’t have the infrastructure or desire to deal with anything less than large multi-market conglomerates or dominant national carriers.

Unless, of course, someone steps up to be a trusted broker with strong relationships already in place and the technical know-how to seamlessly connect them to almost any network. I could be wrong, but it seems Ericsson may be eyeing this role and extending its dominance of the telco managed services market to the broader OTT or digital services market. Touché Ericsson!

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