Welcome to the Next Generation of the Internet

No one could have imagined the fundamental impact the Internet would have on both society and the economy—changing our lives forever. The Internet has already transformed the way that we work, live, play, and learn. And that is only the beginning…

The extraordinary growth and transformation of the Internet is unprecedented, but what does the future of technology hold, and where is the Internet heading? Business executives, technologists, and policymakers are not only asking these questions—they also are looking for a map of the future that will help them assess changes in the Internet, and possible out-comes and implications of those changes for business, national policy, and regulation.

Recent research by Cisco IBSG has identified 10 major technology trends that we believe are shaping the direction of the Internet today and, most certainly, will change its direction in the future.

1.    A world gone mobile

2.    Cloud: a new way of delivering technology

3.    Everything can be delivered over-the-top

4.    Big data: the new oil

5.    A global village: connecting the unconnected

6.    Powerful devices: the world in the palm of your hand

7.    Bring your own device: the consumerization of IT

8.    The Internet of Things is already here

9.    The New Mobile

10.  Converged networks: a new platform architecture

IBSG has developed a plausible scenario for how these 10 disruptive technology trends might come together to shape the future of the Internet. We call this the “New Digital Explosion.” Why “new”? Changes in devices, networks, applications, delivery models, user behaviors, and mobility will create a step change in demand for and reliance on the Internet. 

The New Digital Explosion is not just about technology; it covers all aspects of consumers, the ICT industry, and global/national economies. One thing is certain: the New Digital Explosion will change the ICT industry, impacting all players across the ICT value chain: There will be greater competition, redefined value chains/business models, and new strategies, resulting in both new challenges and business opportunities. And the role of government will need to evolve to create an environment that encourages business and technology innovation, and investment and competition to the greater benefit of their societies.

Cisco’s IBSG’s recent white paper The Next Generation of the Internet provides details on the 10 major technology trends, maps out the future of the Internet and discusses the implications and opportunities for Internet businesses and governments in this new hyper-connected world.

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The Next Generation of the Internet

No one could have imagined the fundamental impact the Internet would have on both society and the economy—changing our lives forever. There are countless examples of how the Internet has transformed the way that we work, live, play, and learn. Take, for example, the ability to work from virtually anywhere—whether on the beach, in a different country, or even from the comfort of our homes.

There seem to be no limits to Internet usage. The Cisco Visual Networking Index (VNI) projects that global IP traffic will increase nearly fourfold from 2011 to 2016, reaching roughly 110 exabytes per month. That amount of monthly traffic is equivalent to nearly 27 billion DVDs, 26 trillion MP3 songs, or 780 quadrillion text messages. People now own multiple devices (almost all of which are connected to the Internet), creating more than 19 billion connections worldwide. Furthermore, there are currently more than 3.4 billion Internet users globally.

The extraordinary growth and transformation of the Internet is unprecedented, but what does the future of technology hold, and where is the Internet heading? Business executives, technologists, and policymakers are not only asking these questions—they also are looking for a framework that will help them assess changes in the Internet, and the possible out-comes and implications of those changes for business, national policy, and regulation.

Cisco IBSG has identified 10 major technology trends that we believe are shaping the direction of the Internet today and, most certainly, will change its direction in the future. IBSG has developed a plausible scenario for how these 10 disruptive technology trends might come together to shape the future of the Internet. We call this the “New Digital Explosion.” Why “new”? Changes in devices, networks, applications, delivery models, user behaviors, and mobility will create a step change in demand for and reliance on the Internet. 

The New Digital Explosion is not just about technology; it covers all aspects of consumers, the ICT industry, and global/national economies. One thing is certain: the New Digital Explosion will change the ICT industry. IBSG explores how the next generation of the Internet will affect all players across the ICT value chain.  There will be greater competition, redefined value chains and business models, and new strategies, resulting in both new challenges and business opportunities.  Cisco IBSG also explores the role of governments in the New Digital Explosion – creating an environment that encourages business and technology innovation, investment and completion to the greater benefit of their societies. 

Download the white paper

Wi-Fi: From ‘Poor Cousin’ to Preferred Partner

For much of Wi-Fi’s history, technologists and mobile industry executives viewed it as the “poor cousin” to licensed mobile communications. Today, all that is changing with the explosive demand for mobile data, the proliferation of new and powerful devices, and shifts in customer behavior and usage.  Increasingly, Wi-Fi is seen by technologists and consumers alike as a partner to licensed mobile, enabling expanded wireless access. 

Based on research and engagements with leading operators throughout the globe, the Cisco® Internet Business Solutions Group has identified six important trends that we believe are redefining this new world of Wi-Fi:

1.       Predominance of Wi-Fi for Wireless Access

Almost all mobile devices, including smartphones, now have Wi-Fi as their core access technology.  And people are using these mobile devices to access increasingly data-intensive applications.  Recent research by Cisco IBSG found that roughly half of mobile users are now watching video on these mobile devices. Today, mobile is less about walking or driving and more about the convenience of a “nomadic” lifestyle—moving, sitting/stopping and connecting, then moving on again. Such nomadic locations are ideal for high-speed Wi-Fi, which easily handles those data-hungry applications.

2.       Proven Ways to Use Wi-Fi to Improve the SP Business

The explosive demand for mobile traffic has left mobile operators scrambling for ways to meet this demand, while overcoming spectrum constraints and managing CapEx expenditures. Offloading some mobile-data traffic to Wi-Fi promises savings to carriers of $2 to $5 per GB in deferred CapEx and lower operating expenses. Providers that bundle access to a public Wi-Fi network with their home broadband service are finding significant improvements in customer retention and acquisition. Privately, SPs report churn improvements of 10 to 15 percent through the strategic use of Wi-Fi, delivering a substantial impact to the bottom line.

3.       Growing Use and Importance of Public Wi-Fi

IBSG’s mobile research found that one-third of mobile users access public Wi-Fi at least weekly.  Many expect to find Wi-Fi in key locations such as airports, stadiums, town squares, coffee shops, and retail sites. Overwhelmingly, they expect this public Wi-Fi to be free or, at least bundled as part of their broadband or mobile service.

4.       “Land Grab” of Key Locations to Deliver Public Wi-Fi

As with retail, public Wi-Fi is all about “location, location, location.” A public Wi-Fi provider needs to provide access in key Tier 1 locations such as airports, cafes, and hotels. Increasingly, people also expect Wi-Fi in the other locations where they spend their time. Tier 2 locations, such as hospitals, schools, sporting venues, and public transportation hubs, are increasingly near the top of network deployment lists of Wi-Fi network providers.

5.       Consolidation of Public Wi-Fi Providers to Deliver SP Wi-Fi

As recently as five years ago, most public Wi-Fi was managed independently, by the venue owner or by a start-up Wi-Fi provider such as Wayport or The Cloud. As SPs begin to see the strategic importance of Wi-Fi, they are acquiring these independently managed Wi-Fi providers and becoming the predominant providers in many markets. At the same time, the venue owners realize that they need to provide much better Wi-Fi service, meet more complex technical and business requirements, and conform to increased regulatory demands. Many are looking to service providers to remove much of this complexity and manage the services for them.

6.       Providers Seeking Ways to Make Money From Wi-Fi

SPs recognize that mobile-data offload and broadband-churn improvement provide very compelling business cases for Wi-Fi investments. Beyond that, they are looking for ways that those investments can deliver new sources of revenue. Research by Cisco IBSG revealed a number of new business models that operators can exploit to profit from the rise of Wi-Fi. Premium access, managed services, business solutions, roaming, and wholesaling are some of the key models that providers are currently experimenting with to deliver new revenue from Wi-Fi. Of particular interest and potential is providing value-added services to enhance core Wi-Fi connectivity. Many retail and venue owners, for example, are looking to combine Wi-Fi capabilities with customer location to provide data analytics, enhanced customer experience, and hyper-targeted and relevant advertising.

As we have seen, Wi-Fi’s days as a “poor cousin” are over. Service providers that ignore the compelling cases for Wi-Fi will risk drop-offs in efficiency, profits, and customer satisfaction. Those who treat Wi-Fi as a preferred partner will thrive.

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Observations from Mobile World Congress 2013

I have just returned from a very interesting and jammed-packed week at Mobile World Congress 2013 in Barcelona. More than 70,000 people were estimated to have attended this year’s MWC, and its fabulous new conference facilities proved a great place to celebrate the industry’s accomplishments and catch a glimpse of its potential future. The mobile industry continues to grow while moving from success to success. And though much has changed since I reported my observations of MWC 2012, I would characterize the process as more evolutionary than revolutionary. 

The following are my personal observations and extrapolations from the show, based on my conversations with operators, customer meetings, analysts, and colleagues, as well as from simply walking the show floor. 

1.       LTE Has Evolved—At previous shows everyone was talking about LTE (Long Term Evolution) as the latest 4G wireless technology. This year you had to look pretty hard to see those letters, and they didn’t seem to be on the tip of most people’s tongues. Though many countries in the world still lack 4G coverage and many others are just beginning to deploy LTE, the industry seems to have moved on and is taking LTE as a given.  This leaves us in a technology trough, awaiting the next new, shiny network technology.

2.       SPs Manning the Booths, Turning the Tables—At one time, service providers were the kings of the show, being courted by vendors and other companies looking to sell them their mobile products and services. The tables seemed to have turned somewhat. I was surprised by the number of prominent service providers from around the world who had their own extensive booths or were part of the GSMA’s “Operator Village.”  Now, it seems that SPs are keen to show off and sell their latest applications, cloud services, gaming and other innovative mobile offerings. These services are seen as new revenue-generating opportunities that will counter similar OTT offerings.

3.       Wi-Fi 2.0, From Legitimacy to Money Maker—Last year Wi-Fi moved from the back corner to become a viable part of the mobile architecture, delivering in-building coverage and offload relief from the exponential consumer demand for mobile data. This was the year of Wi-Fi monetization— moving beyond cost savings to find new sources of revenue from deploying Wi-Fi.  Nearly every operator I spoke with asked the same question, “How do I make money from Wi-Fi?” My recent blog during MWC provides some of the answers.

4.       Small Cells in the Great Indoors—The shift of mobile users to more “nomadic” and indoor usage—and the need to cope with growing demand and limited spectrum—has MNOs scrambling to find ways to provide better in-building coverage and capacity.  Small cells, with much smaller footprints and power output, provide much of the solution. All vendors are now actively promoting licensed small cells as part of their network-access portfolio. Often, these are integrated with Wi-Fi access points for a combined licensed and unlicensed solution. Check out some of the insights from me and my fellow Big Thinkers in Small Cells.

5.       Devices Are All About the Software—Now that all smartphones, tablets and newer mobile devices (Phablet anyone?) look remarkably alike, the real battle for differentiation is in the software.  Windows and Blackberry (remarkably absent from MWC) and the recently announced Firefox OS are battling the Apple and Android mobile-operating-system hegemony. But device manufactures are also adding their own unique applications, software controlled features, and cloud services in an effort to differentiate their iPhone-like devices from competitors. Everything from advanced camera technology, to cloud music and gaming, to Samsung’s reputed eye-movement-controlled scrolling are being jammed into new devices.

6.       Mobile Cloud, Making Smarter Apps—Mobile cloud seems to have moved from a stand-alone topic to something that is increasingly just part of an app or a device.  Many of the cool and exciting new apps—including those for social networking, file sharing, and entertainment—have cloud at their core for storing and retrieving of information, processing, and providing the core functionality.

7.       Big Data, On the Move—The combination of Big Data with location, presence, and other mobile-specific information promises not only cool and useful applications but new ways for operators to monetize their terabytes of customer and network information. Companies were demonstrating how very accurate (2-5m) location tracking from Wi-Fi and small cells could be combined with customer information in a retail store; this will provide hyper-targeted promotions to shoppers on their mobile phone, resulting in increased store purchases.

8.       Enterprise Mobility, the Next Phase—Employees can now readily access their email, calendars, and business information from anywhere. And most companies are beginning to embrace bring-your-own-device (BYOD) policies. Many vendors are helping this trend along through better device management, security, and dual-persona solutions.  However, many in the industry realize that this is just the first phase—enterprises are now looking to understand how they can truly transform their businesses and industries. A number of innovative solution companies and consultancies are beginning to show the way.

9.       From M2M to the Internet of Everything—Pervasive, fast, mobile connectivity is finally creating a real market, not just for machine-to-machine but for everything that can be connected wirelessly.  Next-generation telemetry and entertainment systems for cars, as well as remotely controlled sensors and machines were on display. Operators and vendors alike expounded on the dawn of a new world where all animated and inanimate objects are becoming connected.

10.   Mobile Money,  Again, Again, and Again—At yet another MWC, solutions for  providing mobile payments were on display. Mobile payment solutions from banks, credit-card companies, MNOs and other providers were all competing to create a walletless world. But while lunch and coffee from the convention’s food vendors could be purchsed with mobile Paypal, I think that we still have a long way to go. I suspect that I will be reporting on the future promise of mobile payments again next year.

How Service Providers Can Monetize Wi-Fi

The insatiable demand for smartphones, tablets, and other connected devices is generating staggering amounts of mobile data and placing a crushing burden on networks. One barometer is the recently released Cisco Visual Networking Index (VNI), which predicts that global mobile data traffic will increase 13-fold from 2012 to 2017, reaching 11.2 exabytes per month. In parallel, the use of Wi-Fi for Internet access is also exploding, as more mobile devices are Wi-Fi enabled, the number of public hotspots expands, and user acceptance grows.

The two trends are intersecting in crucial ways.

Until recently, most technologists and mobile-industry executives viewed Wi-Fi as the “poor cousin” to licensed mobile communications. And they saw little role for it in mobile networks or their business. The upsurge of mobile-data traffic has changed all of that. Most mobile operators now realize that offloading data traffic to Wi-Fi can, and must, play a significant role in helping them to avoid clogged networks and unhappy customers.

Mobile operators understand the business case behind off-loading data traffic to cheaper Wi-Fi—deferring significant capital expenditures for further build-out of the licensed network. However, they ask, is there more to Wi-Fi than just data offload? And, more appropriately, can they actually make money from Wi-Fi—turning a cost of doing business into profitable business models? The simple answer is, yes. In fact, the Cisco® Internet Business Group (IBSG) has identified and built business cases with service providers around 15 additional ways to benefit from Wi-Fi, beyond data off-loading. 

IBSG’s white paper, Profiting from the Rise of Wi-Fi, describes these business models in more detail, but the 15 business models basically fall into four different categories:

1.    Business Effectiveness—using Wi-Fi access networks to decrease operational costs or improve customer retention and service differentiation

2.    End-User Services—solutions for business and consumer end users using Wi-Fi for internet connectivity for their devices (e.g., smartphones, tablets, laptops)

3.    Intercarrier Wholesale—providing Wi-Fi-based services to other service providers, (e.g., cellular network operators, Wi-Fi providers)

4.    Value-Added Services—enhancing basic Wi-Fi access with additional services and alternative funding models

As the pervasiveness and customer adoption of Wi-Fi continue to grow exponentially, these new business models are providing real and meaningful opportunities for service providers. For example, we are seeing home broadband providers improve their customer retention by 10 to 15 percent through bundling free public Wi-Fi access with their broadband service. In addition, we believe that by offering a Wi-Fi enabled “Business Anywhere” service, operators can generate $10‑15 per business user per month. In the retail setting, delivering enhanced, value-added services will bring an incremental $100-150 per store; this is on top of the $50-250 that operators charge per wireless access point to run a managed Wi‑Fi service for retailers. 

But don’t take our word for it. End users tell us that they want these new Wi‑Fi business models and see great value in them. Unique mobile-customer research by IBSG (What Do Consumers Want From Wi-Fi) revealed that mobile users appreciate the lower cost and unlimited data usage of Wi-Fi and greatly value the flexibility and convenience that it offers. In particular, customers were interested in the national/international roaming business models and the Wi-Fi value-added retail offerings. These, consumers believed, would make them more efficient, save them money, and enhance their shopping experiences. Among U.S. broadband subscribers who identified that free public Wi-Fi was part of their subscription, a remarkable 61 percent told us that the inclusion of Wi-Fi was very or extremely important in their choice of broadband provider.  The inclusion is not only a good way to attract subscribers; it is also a good way to keep them.  

Of course, not all business models are attractive to all service provider segments.  Business models will need to be aligned to the different industry segments, while priorities are set and a starting plan created. We feel that our research, insights, and recommended approach will arm SPs with guidelines for setting priorities and determining which strategy is best for making real money from Wi‑Fi.

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The Future of Mobile Networks

The world has definitely gone mobile. According to the International Communications Union, more than 85 percent of the world’s population now enjoys access to a mobile phone. Further research from the Cisco® Internet Business Solutions Group (IBSG) reveals that almost half of all mobile users are consuming video, music, books, and games on their mobile devices on a regular basis.

The Cisco Visual Networking Index (VNI) predicts that these trends will cause global mobile data traffic to increase 13-fold from 2012 to 2017. Global mobile traffic will continue to grow at a rate three times faster than that of fixed IP traffic over this same time period. This outlook is great news for mobile network operators, as revenues from global mobile data services reached US$320 billion in 2011—more than the combined revenues of the music, movie, ISP service, and cable television industries, according to a 2012 assessment by Chetan Sharma Consulting.

While the demand for mobile is unquestionable, the definition of mobile is rapidly changing due to changes in technology, the market, and customer behavior. These factors are redefining what a mobile network is and what it needs to deliver, including near-ubiquitous Wi-Fi-enabled devices, a “nomadic” rather than an on-the-go lifestyle, next-generation hotspots, and small-cell technology.

Given the changes occurring in the mobile marketplace, Cisco IBSG has identified four possible scenarios of how networks could evolve to deliver mobility: 1) mobile only, 2) Wi-Fi only, 3) mobile max, Wi-Fi min, and 4) Wi-Fi max, mobile min. Of these, IBSG believes two scenarios present the best opportunities for delivering mobility: Wi-Fi and small-cell networks—a heterogeneous network (“HetNet”) world where licensed and unlicensed mobile networks co-exist and complement each other, enabling a next-generation mobile operator with Wi-Fi at its core network.

These four network scenarios will co-exist—each with its own unique features and value-add—enabling operators to further monetize their mobile services by providing both coverage in challenging locations and capacity in high-usage venues. In this way, operators can improve network economics, address spectrum challenges, tap new markets, and enhance the customer experience.

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Service Providers Are Sitting on a Gold Mine of Data

The so-called “data deluge” shows no signs of abating anytime soon. Facebook, for example, has more than 2.5 billion pieces of content and ingests more than 500 terabytes of new content daily.  Mobile devices are driving this growth of data.  The global proliferation of devices estimated to reach 10 billion by 2017—or 1.4 times the number of people on the planet. As a result mobile-data traffic is exploding. The recently released Cisco Visual Networking Index (VNI) predicts that global mobile-data traffic will increase 13-fold from 2012 to 2017, reaching 11.2 exabytes per month. 

But along with the challenges inherent to this tsunami of data, opportunities abound for monetizing and optimizing information. All of those new mobile consumers—in developed and emerging markets alike—will demand enhanced connected-life experiences that will be newer, better, and more personalized. Data is the new oil that will fuel this opportunity.  Networks and the Internet have a critical role to play in the future of Big Data. First, they are the collectors and disseminators of data, gathering it from the millions of Internet-enabled devices, applications, and sensors and storing it in the right place for analysis and further action. Second, they are creators of critical information on location, presence, device type, application, and more.

Service providers sit on a vast and unique trove of information—all they need to do to profit from this from this new and lucrative advantage is to capture and apply it. Many of these issues will be under discussion at the Mobile World Congress, which I will be attending in Barcelona this month. Here are five relevant trends, challenges, and solutions that I expect will be top of mind for service providers attending the show:

·         Capturing Data in Motion. All of that real-time and near-time information coursing through the network has vast, intrinsic value in creating SP-delivered experiences. When filtered and processed through Big Data analytics, it can become vital intelligence for business-to-business, business-to-consumers, and consumer-to-consumer interactions. For example, data on buying and browsing history, connection and device type, location and access speed can drive personalized, targeted advertising, a core area of opportunity that is estimated to become an $8 billion industry by 2016.

·         SP Wi-Fi. The rising tide of mobile data may threaten to swamp networks, but many providers are seeing Wi-Fi and licensed small-cells as increasingly viable offload solutions. Since the majority of all mobile-data traffic is generated from fixed locations, much of that traffic can be handled by localized, cost-effective, and carrier-grade Wi-Fi and small cell architectures. This will also drive an opportunity for business innovation, allowing operators to monetize indoor, location-based services, especially in high-density environments such as shopping malls, stadiums, airports and hotels. 

·         Network Virtualization. Cloud-based, virtualized network architectures will form the core of the mobile network. Indeed, advanced mobile cloud techniques can fundamentally improve operators’ cost models while offering an unprecedented opportunity to target markets based on providing wireless connectivity to the Internet of Everything.

·         Programmability. At times, some may have feared that service providers were in danger of being relegated to the role of “dumb pipes.” To avoid that fate, networks must be programmed to do more. The goal for service providers should be to oversee “elastic” networks that can dynamically adjust to changing needs, demands, and challenges. To achieve this, service providers will need to enhance all aspects of their networks with programmable intelligence Cisco’s mobile next-generation Internet architecture is one way to do this.

·         Intelligent Software/Intelligent Access. Intelligent software, such as Cisco Quantum, can harvest valuable information from the network, and combine with analytics and policy control to enable personalized experiences and services in real time.

Clearly, there is a major opportunity for service providers, who are already sitting on a gold mine of raw data. But they will need to take the right steps to capture, refine, and monetize that deluge of information.