Operators are not making money from delivering content for
companies such as Amazon, Apple and Google. Tarcisio Ribeiro of
Tellabs believes his company can help
Tarcisio Ribeiro: Everybody’s making money
but the operators.
Content providers will need to work with them
The explosion in demand for mobile data has been good for
Tellabs. As operators develop content services and cloud
computing the future should be even brighter, says Tarcisio
Ribeiro, the company’s vice president for Europe,
the Middle East and Africa.
"We are a niche player," he says: "We have always been in
transport; we have always been in bandwidth management. These
areas are becoming more important as data is more important."
But the company’s real presence in mobile backhaul
dates back only a few years — back to Mobile World
Congress in Barcelona in 2006, when the company started to
promote its belief in MPLS technology as the way to connect
base stations into the core network.
"We had a very small booth in the basement, and nobody knew who
we were," recalls Ribeiro. "People couldn’t even
When they could, they were sceptical. "We were launching MPLS
for data and people were still using SDH and PDH." Tellabs was
suggesting a solution that was different from what the industry
But the company persisted and it won a first contract from
Telecom Italia. "The rest is history," Ribeiro smiles. "Now we
are market leader in mobile backhaul." Other companies are now
adopting MPLS, he says. "Every operator in the world."
"We wanted to anticipate the problems that our customers would
face — and now we want to do it again."
That’s why the company has been expanding. In
December 2009 it took over WiChorus, a Californian start-up
which makes systems for mobile packet core networks —
something that will be increasingly important as operators move
to 4G services, both LTE and WiMax.
"They initially developed a WiMax gateway and then they evolved
to GSM. The problems we want to solve are twofold. Once the
operator has solved the problem with wireless backhaul, which
is a bottleneck for 3G, they have another problem. They can
transport this huge amount of data, but they are not making
money out of it. Everybody else is making money out of it."
Even Global Telecoms Business makes money from its website, he
smiles, "but the operator carrying the data
doesn’t". The same applies to companies such as
Google: "Everybody’s making money but the
The operators have to spend money to transmit the bandwidth
"and that’s where we can help: our solution is
much more scalable than solutions in the market today", he
says. "The bottleneck is moving from the access to the core."
The next step in Tellabs’s plan is to help give
operators awareness of what customers are doing. "They can
tailor customer profiles according to their marketing plans so
they can make money."
He illustrates this with a vivid point. Historically volume was
all: a customer using many minutes a day was seen as good.
"Every minute, more money. It was linear," says Ribeiro, who
used to run Tellabs’s operations in Latin America,
where he grew the business by over 75% in three years.
But in the data world it’s not as simple as that.
Customers pay flat fees for data, clog up the network "and the
operator is not making any more money".
There is a need to differentiate users — not just
heavy and light users. "There are heavy users who are not good.
Some are using a lot of data for mission-critical applications,
and that’s good, because they are generating
revenue. They also talk a lot on the phone, and they roam, so
the operator is getting data revenues from another country."
The heavy college user is not good news, though: he turns on
his computer, consumes a lot of data on BitTorrent and so on,
but pays just a flat rate. "That is not a good user."
So the answer is to throttle the traffic, he says. Allow the
student bandwidth when it is available, "but when I run into a
limitation I want to make sure that the precious resource on my
network, which is bandwidth, goes to the business user who is
roaming from Italy to the UK or from the UK to Russia, because
I make more money that way than from the college kid".
What, for example, if an operator were able to say how many
music tracks were downloaded from a certain site? "You could go
to that site and say how much revenue they generated and tell
them you were going to start charging them a premium." Or you
could tell an e-book site "I am going to take x percent of
every dollar that you make".
And all this could be done without referring to the subscriber,
"because the subscriber is not going to like this", he says.
"This is the ability we want to give to the operators, to give
them some control over their network."
But is anyone actually doing it yet? "Some operators in the US
are engaging with this model." Which ones? "Unfortunately I
cannot tell you yet." And, yes, "some" means more than one, he
confirms. With Tellabs? Ribeiro nods.
"This needs to be transparent to the customer. Operators are
charging the application provider." That’s because
if operators start charging their end-customers $1 for every $5
of download, the customers will move to a different operator.
"The operator that imposes a charge on the customer will be
very short-lived. It will hurt their brands and their
So it’s clear we’re talking about
operators charging companies such as Amazon?
"That’s correct." Or iTunes? "Exactly." Or
YouTube? "Yes, because these providers, such as YouTube,
iTunes, Amazon, don’t want to be blocked from
doing business via any operator, because the operator is very
Of course, there are some publicly know relationships
— the Amazon Kindle, most prominently, uses Sprint in
the US and AT&T for its international version. But now the
iPad is arriving "and the interesting thing about the iPad is
that it is not locked", points out Ribeiro.
But what will that do to the market? "It depends on how the
operators react," he says. "First, the subscriber wins. This is
great. I am a strong believer in free markets. The operator has
a big challenge — how to avoid becoming a commodity
and how to capture this value."
So while a few years ago the concern was about backhaul, now
the concern is changing, he adds. "They have another challenge
to solve, and we’re trying to help them solve that
The operators are potentially in a powerful position, as they
are the gateway to the customers, "but they have to figure out
how to use this". None of them? "I have been having discussions
with some operators," he says — more recently with
marketing people. "They are looking for ideas and they are
interested in talking to Tellabs. They have this on their
But wouldn’t content providers react by finding
alternative routes to their customers? "Would they?" asks
Ribeiro, who moved from Latin America to take over the European
operation, which represents 28% of the revenue that Tellabs
earns outside its North American base, with sales of $105
million in the first quarter of this year.
Kindles and iPads
"The more people you can reach, the higher the chance of making
money. The number of wireless subscribers is continuing to
grow. It looks as if is it not stopping — because
people now have two phones, an iPad, a Kindle. It is not
limited to the number of people in the world any more. It grows
faster than printed media, than broadcast media, than fixed
line media. I don’t think you want to avoid mobile
Content providers have to work with the mobile operators, he
says. "If the mobile operator is successful, they will be
successful. People like the mobility."
Does that mean content providers are embracing the idea? "No,
they will resist, of course," says Ribeiro. "It’s
one of those things that, resist as much as you can, at some
point you will need to let go. You don’t want to
lose revenues or profits to anyone."
Content owners understand that operators need to provide a good
subscriber experience. Subscribers will move on, so content
providers need to work closely with operators. "Yes, I believe
So, who so far understands this? Who has got it? "I like
Apple," says Ribeiro. "They understand what is important for
the user. They have moved away from the traditional way this
whole market was working — and they have focused on
the user behaviour, how the user interacts, the whole
This takes him back to the issue of backhaul. "Once we have
enough backhaul capacity to offer good experience to the users,
Apple wins, the operator wins and most important the subscriber
In addition, "Google is doing an amazing job", he says, "in the
whole ecosystem", by attracting subscribers and then selling
advertisements. Applications such as the translator are
"breaking one of the huge barriers in communication".
There are new apps coming along, such as Google Goggles
— an image-based search: point the camera at a
building or a person and you’ll get information.
"I think they are doing an amazing job."
But neither of those are operators. Any operators he
particularly admires? That puts him in a difficult position,
because they are customers. "Those I mention will be pleased
and those I don’t mention will not be pleased. But
the user is very emotional when he picks an operator.
It’s like beer tasting, he says. If you hide the
labels, people will often choose an unexpected brand.
"Mobile communications is the same thing. Mobile operation is
all about the brand. Those I admire the most doing these big
campaigns — advertising and sponsorship that appeal to
Some are good at that, while others rely on prices. "But
pricing schemes are so complex that it’s hard to
compare." Branding is key.
Operators have some important decisions to take over the next
year or so: Ribeiro hopes to steer them in
Tellabs’s way. GTB