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
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
"We had a very small booth in the basement, and nobody knew who
we were," recalls Ribeiro. "People couldn't even find us."
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 operators."
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 reputation."
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 valuable."
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 now."
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 priorities."
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 operators."
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
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 ecosystem."
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
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 their
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.