The Drive to Find Money- Making Mobile Internet Services Will Take Center Stage At Mobile World Congress

It is no accident that Alcatel-Lucent will showcase its LTE connected car, which brings cloud computing to moving automobiles, at the industry’s annual Mobile World Congress in Barcelona Feb. 15 to 18. This year marks the start of the LTE decade. But gear makers have to help drive the creation of money-making mobile Internet services or there will be little return for carriers on multi-billion dollar network investments.

Up to 19 LTE mobile broadband technology commercial launches are planned by the end of this year, with 36 expected by 2012, according to the Global Mobile Suppliers Association. What’s prompting operators to consider spending money on long term evolution (LTE) gear, despite the global recession, is a veritable tsunami of data traffic, says Berge Ayvazian, a veteran telecoms analyst who recently joined Heavy Reading, the research arm of Light Reading.

Devices like the iPhone and netbooks are causing demand for mobile data services to skyrocket. For example, the United Kingdom-based O2 reported that its mobile data traffic in Europe doubled every three months in 2009; Telecom Italia announced that its mobile traffic grew 216 % from mid-2008 to mid-2009; and AT&T has reported that its mobile traffic increased 5000 % in the past 3 years.

 Cisco’s latest Visual Networking Index Global Mobile Data Forecast for 2009-2014, predicts that globally, mobile data traffic will grow at a compound annual growth rate of 108 % between 2009 and 2014. Video will be responsible for the majority of the traffic growth. Overall mobile data traffic is expected to grow to 3.6 exabytes per month by 2014, according to the Cisco forecast and over 2.3 of those will be due to mobile video traffic. (An exabyte represent one billion gigabytes)

 The runaway growth in mobile data traffic leaves operators with a conundrum: how to justify the required investment in network optimization while lacking an adequate mechanism to monetize mobile data services, says Heavy Reading’s Ayvazian. Operators have to create revenue streams beyond monthly data subscriptions.  “They need to figure out ways of using the vision they have of their subscribers and to get between subscribers and anyone else who wants to do business with them,” he says.

 In the hopes of selling more gear, equipment makers like Alcatel-Lucent are focusing on helping operators to do just that. “Assets in the network can be leveraged far more aggressively than they are today,”  Kenneth Frank, executive vice president of Alcatel- Lucent and President, Solutions and Marketing, said in an interview with Informilo. “That is why we are sponsoring partnerships between the operators and the developer community.”

Alcatel-Lucent recently unveiled products to help service providers open their networks to applications developers and content providers to speed the creation of innovative, next generation services. The company’s so- called “application exposure suite” allows carriers to make assets in their networks such as billing or location- available via a so-called “secure exposure layer” to application and content providers in a way that can enrich Web-based services and create new mash-up capabilities.   The hope is that after doing the math, carriers will embrace this type of mash-up to increase their return on investment in new networking gear.

Alcatel-Lucent has also launched an Open API service, which brings developers and carriers together to support the rapid creation and secure testing of new services and a support service to aid carriers with the transformation to more open business models.

To better plug into the developer community , the Paris-based gear maker  is planning to be present this year at South by Southwest, a hip emerging technology conference that takes place each March in Austin, Texas,  Frank said.

The Paris-based equipment maker is also enlisting the help of a range of companies, including network and consumer electronics firms, in a multi-industry organization called ng Connect that aims to develop and  deploy the next generation of broadband services based on LTE and other ultra high bandwidth technologies. Founded in 2009 by Alcatel-Lucent, the group also includes HP, Samsung, QNX and others.

The LTE connected car , which will be on display on Alcatel-Lucent’s stand at the Mobile World Congress in Barcelona, the annual meeting point for the global mobile industry, was developed through ng Connect. Services being demonstrated in the car include  geo-specific traffic, weather and accident information as well as restaurant and friend locator services, streaming music, downloading on demand of films, TV shows and multi-player games as well as  on-the-go access to YouTube, social networks and other Internet sites. Click here to see a video about the LTE connected car.

Alcatel-Lucent plans to bring such services not just to car consoles but to mobile handsets. “One of the critical advantages of LTE is latency improvement, allowing more cloud applications to work across handsets,” says Alcatel-Lucent’s Frank. Alcatel-Lucent executives believe that the uptake of such services as well as  improvements to the company’s portfolio, such as a software- defined radio solution and transport solutions that merge IP and optics, will help improve the company’s bottom line. They also point, as proof of traction, to last year’s high-profile win of of LTE business from Verizon and to the February 10 announcement that AT&T has selected Alcatel-Lucent as one of two equipment suppliers for its planned deployment of LTE mobile broadband technology.

 But the company’ stock price fell 12% Feb. 11  after it lowered its profit-margin targets for 2010 and industry analysts say they are not yet convinced of better times ahead.”Management talks about developing solutions rather than point products, but this is true for all major vendors in the sector,” said a Feb. 12 Nomura Securies research note. “The fact remains that Alcatel Lucent has lost share for most years in the past decade.”

In order to turn things around, Alcatel-Lucent is going to have to launch more innovative solutions and prove that carriers are willing to embrace them, says Nomura Securities.The same could be said for Nokia Siemens Networks and Ericsson. They have stronger market positions than Alcatel-Lucent but are among equipment providers to have reported losses or declining profits in recent quarters. Analysts say the onus will be on all of the suppliers at this year’s Mobile World Congress to help carriers develop new business models that will drive the whole industry forward.

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