The research we conduct for the study gives a great snapshot of what is currently happening on broadband networks, but we thought it might be fun to take some of that insight and mix it with what we have been hearing from network operators, to make some predictions for 2012.

So without further ado, here are Sandvine’s five broad(band) projections for 2012:

Data pooling plans will become popular

One of the biggest obstacles preventing subscribers from purchasing their first smartphone, are the additional costs associated with a data plan.  In a household with a couple teenagers, it might not be out of the ordinary to have four active mobile phone lines.  If everyone in those plans had a full data plan as they are traditionally billed, the data charge alone for that household could easily be in excess of $100 a month. 

In order to make data plans more accessible, we expect to see more mobile carriers begin to offer subscribers pools of data in 2012, much like they do with voice minutes.  This will allow families with multiple smartphones, or individuals with both a smartphone and tablet, the ability to use their devices in a more affordable way.

95% of tablet traffic will be on fixed access networks

In our Fall 2011 Global Internet Phenomena Report we revealed that more Real-Time Entertainment traffic in the U.S. now goes to devices other than a PC, with the growth in tablet ownership playing a large factor in that shift. 

While many tablets have built-in mobile network connectivity, we think the majority of tablet owners are using them as laptop replacements within their home.  Amazon’s recently launched Kindle Fires seems to support this thesis, as they chose to launch as a Wi-Fi only device.

While there certainly will be a number subscribers who will choose to subscribe to a mobile data plan for their tablet (especially if they have a pooled data plan option) the amount of traffic those users will generate will be a fraction of what users consuming Real-Time Entertainment on a fixed-access network will use.

The potential bill shock wave will continue

With more and more fixed and mobile providers putting an end to unlimited data plans, and moving towards usage-based billing models, many more users could experience bill shock when getting their monthly invoice.

Almost, everyone has heard a story about someone who used their smartphone’s data while roaming on an international and rung up a bill in the hundred or even thousands of dollars.

As roaming rates are typically higher, subscribers still need to keep a keen eye on their usage, and network operators must ensure they follow best practices for implementing usage-based billing.

Revenue replacement apps will take a bigger bite out of operator revenue

In our Fall 2011 Global Internet Phenomena Report we discovered that in the Asia-Pacific region up to 8% of subscribers were using WhatsApp, a smartphone app that lets people use their data plan instead of SMS messages to each other.

This year also saw reports of SMS growth beginning to level off, which we believe is in part due to the growth in popularity of these data messaging services such as WhatsApp, BlackBerry Messenger, or Apple’s iMessage.

In 2012, as more users get their first smartphones, the usage rates of this category of apps is likely to see massive growth.  For mobile network operators, this means potential significant lost SMS revenue, an impact some have already begun to notice.

Live video will explode

Real-Time Entertainment is regularly one of the largest drivers of traffic on both fixed and mobile networks in many regions across the globe.  In 2012 we will see Communications Service Providers (CSPs) and content providers expand from offering primarily pre-recorded content to offer significantly more live video options to subscribers.

As further proof of the inevitable explosion of live video, one only needs to look at the recent agreement between Bell and Rogers, the two largest CSPs in Canada to jointly purchase controlling interest in MLSE, the corporation that own several pro sports teams including the Toronto Maple Leafs and Toronto Raptors.

When the CEO of Bell was asked about the reason for the purchase with their main competitor, George Cope said “It will deliver the best content to every screen…We believe that increasingly live content is going to be more and more important in the technology world and there is no better live content than professional sports.”

With almost all professional sports leagues, and many news agencies such as CNN and Bloomberg offering live streams of their content in 2011, 2012 is only going to bring more channels to your smartphone, tablet, connected TV, or game console and network operators will need to prepared to provide a high quality of experience as traffic optimization options such as caching are limited for live video.  

Based on these predictions, it looks like 2012 will no doubt be an exciting year for the broadband industry.  We look forward to keeping you posted on the latest trends in the New Year.

Examining data from Sandvine’s Netflix Rising report released in the Spring, the Xbox 360 accounts for almost 25% of Netflix’s total traffic on fixed access networks.  This figure demonstrates that subscribers are more than willing to use their Xbox 360 as an entertainment hub and the list of video providers made available to them on that device is set to grow substantially.

Beginning today, Microsoft will be rolling out a software update that will offer Xbox 360 owners (at least, those who pay $60 a year to be Xbox Live Gold members) access to a wide range of both on-demand and live video content on their TV .

IPTV is not a new feature on the Xbox, as Microsoft had some limited partnerships with select communications service providers and channels such as ESPN. With this software update however,  Microsoft is making an even bigger push by forming partnerships with some  Internet and media heavy-hitters such as Verizon, HBO, BBC, Rogers, and YouTube, just to name a few. 

Access to certain content will differ based on country and Internet provider due to licensing restrictions, but Microsoft is certainly trying to have the Xbox 360 be the one-stop shop for all of your home entertainment needs, and the only device you need connected to your TV.

With over 57 million Xbox 360s sold worldwide to date, how many of them are on your network? The number of owners and the number of soon-to-be-available live streaming options will present unique challenges to network operators.  Live video demands a high Quality of Experience (QoE), and traffic optimization options such as caching are limited for live video.  Operators will need to ensure their networks are engineered for quality because, while the Xbox may be among the first devices to offer a wide range of live streaming video, it is unlikely to be the last.

We will be keeping a close eye on how users adopt this new service, and will aim to bring some insightful data on subscriber usage the near future.

Kicking off the week was the Capacity Management Symposium, during which speakers from Sandvine, Cisco, ARRIS, SeaChange, and Motorola presented their perspectives on how data’s Compound Annual Growth Rate growth rate of 50% is impacting the capacity planning of cable networks.  During my session, I introduced findings from our recently released Global Internet Phenomena Report which contrasted the usage patterns and regulations in North American and Asian augmentation markets with those of emerging markets, such as Africa.  Tools for measurement of Quality of Experience (QoE) are all the more vital in these times of explosive broadband video growth.

Continuing the theme of capacity management, Sandvine was recognized with Broadband Technology Report’s 4 Diamonds at the BTR Award dinner, for its Traffic Management Dashboard.  We were in good company with 22 other vendors, including high scorer CommScope with its new Wideband Edge QAM product.  The Traffic Management Dashboard (screenshot below) is a feature of Sandvine’s Network Analytics product that lets cable operators examine network performance, identify capacity requirements, manage congestion, and view the impacts of implemented policies on the network.  Visitors to the Sandvine booth were able to see a live demonstration of the power of this dashboard, as well as the latest Real-Time Entertainment dashboard that quantifies QoE scores per content provider, per CDN, device or other factors. 

Given that Sandvine solutions are deployed in seven of the top 10 US Cable companies (by subscriber count), we welcomed those US Cable customers at our booth, some of which were the first customers that helped get Sandvine off the ground ten years ago.  The show also had international presence, with cable MSO visitors from Asia, Europe, and Central America looking to learn about network policy techniques for traffic and service optimization.  It’s always a pleasure to listen first hand to the challenges that operators face and to be present them with an array of solutions that can best fit their needs.  It’s not all business at Cable-Tec though; there was plenty of occasion to socialize at the breakfast and lunch sessions and the Expo evening at the Aquarium.

On the thought leadership front, Sandvine’s Global Internet Phenomena program, reporting on Global Internet usage trends since 2002, is widely regarded as the pre-eminent source of information about fixed and mobile consumer Internet trends. For instance, we have revealed that more than half of all Real-Time Entertainment traffic in the United States is being driven by consumer devices like game consoles and smart TVs, and that the Playstation 3 alone accounts for more than a quarter of Netflix traffic (see the Netflix Rising spotlight).

Back in the early days, we were called heretics for announcing that P2P traffic was the dominant form of traffic on the Internet when everyone otherwise believed it to be email and Web surfing.  Sandvine is used to a bit of controversy and we take it all in stride.  Why?  Because we build on our real-world experiences to design products that bring the highest value to our customers, and we’ll continue to out-innovate our competition.

Now, we are seeing more and more similar Internet traffic trends reports each year.  We view it as a validation of our leadership efforts when our competitors follow us.  Case in point, 18 months after Sandvine launched Network Analytics, part of our suite of network business intelligence solutions, one of our competitors released an analytics product. Interestingly, by design or ignorance, the press release announcing the competitive product was filled with implicit terminology references to Sandvine’s own product: 

“(Product X) is the first solution to enable network operators to conduct sophisticated analyses on their network traffic for capacity planning, marketing analysis and service planning.”  I didn’t have to think long before recalling Sandvine’s own “Capacity Planning Calculator” (part of our Traffic Management Dashboard), “Service Planning Calculator” (part of our Usage Management Dashboard) and “Marketing Summary” (part of our Usage Management Dashboard) screens. In fact, our Network Analytics have already been purchased by more than ten customers world-wide.  

The resemblance of the competitive solution to Sandvine’s feature set is eerily coincidental:

The competitor’s press release stumbles again when it says: “Competitive solutions are targeted toward creation of generic dashboard charts or canned reports.” If true, that would give their product a competitive advantage.  I’m thankful that, once again, they’re mistaken.  There are several separate “Dynamic Analysis” dashboards within Sandvine’s Network Analytics product, and I’m satisfied in knowing that our customers are using the screens to dive into their data, on-demand, in completely non-generic and non-canned ways.  This was reinforced recently by a judge who awarded our Traffic Management Dashboard a prestigious 4 Diamonds in the Broadband Technology Report’s Diamond Technology Reviews: “Sandvine has provided a very powerful path for the operator to really see what is happening in the network, anticipate capacity issues & bottlenecks more accurately which allows more accurate timing of capital investment.”

As a communications service provider in an increasingly competitive market, ask yourself this question, “Would I rather have an innovative product now, or a copycat in 18 months’ time?” Or, in other words, “Would I rather entrust the success of my business to a leader, or to a follower?”

Service providers who deploy Sandvine’s Network Policy Control platforms benefit from access to cutting edge traffic optimization, service creation, operations management, and business intelligence solutions months, even years, before competitors who elect to take a different approach.  Resulting in immediate savings and revenue increases.  And those solutions, such as the industry’s “Best Implementation of Tiered Data Pricing”, are best-in-class.

BlackBerry users have long praised BlackBerry Messenger (BBM) for its ability to send messages using a data plan to other BlackBerry users, but in recent years as the smartphone marketplace has become more fragmented, messaging apps that allow users to send messages between platforms have really started to gain popularity.  LiveProfile, Kik, PingChat are just a few of the apps available that offer this functionality, but WhatsApp popularity is undeniable – the service is now reporting that their users are sending over 1 billion messages each day.

While subscribers love these apps, network operators are, understandably, less enthusiastic. Apps that enable instant messaging or voice communication via data plans compete directly with the SMS and voice services upon which operators depend for a substantial portion of revenue.

Dutch operator, KPN, started to feel the impact of these revenue replacement apps when they issued a profit warning earlier this year, directly citing revenue-replacement apps BBM and WhatsApp as causes for a 10% decrease in text messaging revenue.

BBM’s popularity in many countries is due in part to mobile operators offering data plans that zero-rate many popular social networking services, including BBM.  These plans make instant messaging services available to users at a low, fixed price and allow mobile providers to gain additional revenue from customers who might not otherwise purchase a data plan at all. 

To combat the lost revenue from these messaging apps, operators will need to continue to explore innovate ways to package their services. By including this new breed of messaging services in low cost data bundles as they do with BBM they may be able to maintain a sustainable business and do so in a manner that embraces subscriber preferences.

Sandvine’s Real-Time Entertainment Dashboard is revolutionary because it provides business intelligence particularly relevant to streaming content (Netflix, YouTube and Spotify), including measurements regarding the quality of the video experience, the viewing duration, and the associated revenue generated by the adoption of over-the-top services. Our Usage Management 4.0 product helps both fixed and mobile service providers create, manage and implement new product offerings.

Both products are receiving plenty of attention because much of the conference is focusing on trends in IP video and innovations in service plans and billing models.  In addition, our Global Internet Phenomena Report: Spring 2011, revealed that Real-Time Entertainment applications consume 49.2% of peak aggregate traffic.

I participated in a panel discussion called “Managing IP Video” with Thierry Souche of France Telecom – Orange, Matthias Linder of Magyar Telekom, and our moderator Rob Gallagher of Informa.  The discussion focused on the particular challenges that integrated and converged operators face when dealing with IP video, what technologies and techniques are coming online to assist providers, how operators can manage IP video without endangering Net-Neutrality and how operators can work more closely with content providers for mutual benefit.

We’ve had many service providers come by our booth to see a live demonstration of the Real-Time Entertainment Dashboard, including several service providers from Argentina and Brazil who are doing their due diligence, now that Netflix has launched recently in South America and is now traversing networks all over the region.

They aren’t the only ones interested in the ever-growing Network Analytics dashboard line-up.  It was our pleasure to host a champagne reception at our booth to celebrate the product’s success and to toast the customers who have embraced it so strongly.  In fact, we recently announced that ten customers have implemented Sandvine’s Network Analytics product for sophisticated network insight and business intelligence. 

Lee Brooks demonstrates Sandvine’s Real Time Entertainment dashboard to booth visitors at Broadband World Forum:

The court case is still ongoing, but in an interesting move last month, TWC announced that they will offer subscribers a free Slingbox to their highest Internet tier known as Wideband.  For those that don’t know, Slingbox is a device that allows you to stream your cable or satellite set-top box remotely to any computer, tablet, or smartphone connected to the Internet.

The potential genius of this promotion is that not only is TWC winning favour with their subscribers by giving them a $300 gift, they are also reminding the content owners that their subscribers have other options available to them and can consume their content on the go, whether it is sanctioned by the content programmers or not.

To date, TWC has not made public the exact number of 50 Mbps Wideband subscribers it has, but that number is clearly growing rapidly.  In Q2 2011, TWC added 25,000 Wideband subscribers, which more than doubled the additions from the previous quarter.  Should this promotion prove popular, TWC could soon see a large number of Slingboxes joining their network.

Since the Wideband service has no monthly quota, subscribers will not have to worry how much they use the service on the upstream or downstream at home.  It is however, a different story for those Wideband subscribers who are looking forward to using the Slingbox over their preferred mobile networks. 

In our research for the last Global Internet Phenomena report, Sandvine found that on mobile networks, Slingbox users averaged speeds of 800kbps, significantly higher than Netflix, which was the second-fastest Real-Time Entertainment application with an average speed of 125kbps. With unlimited download mobile plans quickly becoming a thing of the past, TWC subscribers should keep a keen eye on their data usage in order to avoid being surprised by data overages that the Slingbox could bring.

Whatever happens in the legal situation between TWC and the content programmers, the one thing that is clear is the fact that subscribers don’t want TV restricted to the living room anymore.  As more cable and satellite companies begin to offer live streaming TV over IP options to their customers, average residential bandwidth consumption is only going to increase.  In the coming months and years it is going to be very interesting to see how networks cope with this additional traffic, how Communications Service Providers count that traffic against potential data caps, and how subscribers will balance their media consumption between live and on demand services such as Netflix and Hulu.

These recent actions aren’t the first attempts by carriers to manage the usage of tethering applications.  This past May, US-based carriers demanded that Google restrict access to applications that allow tethering in the Android Marketplace. This restriction brought Google devices in line with Apple and Microsoft, who both don’t allow third-party tethering applications in their official app stores.

Even though BlackBerry, Microsoft, Google, and Apple all include native support for both wired and wireless tethering in their mobile operating systems, third-party tethering applications (often installed through non-official channels) are popular with users because they have allowed subscribers to bypass the restrictions included in most TOS agreements.

The news of this enforced subscriber migration to tethering plans has grabbed some headlines this past month, but the transition shouldn’t have been news to those who were using the TOS-evading apps. Both Verizon and AT&T were very proactive in communicating with subscribers about the fact they would be transitioned to a higher-priced plan.  Letters, page redirects, and text messages were all used to send messages to those identified using these tethering apps as early as March of this year.  From the Communications Service Provider (CSP) perspective, tethering creates massive amounts of data that must be carried on networks, and premium plans have been designed such that the revenue will offset the cost of carrying this traffic to ensure a sustainable business.

Given that tethering app developers charge between $10 and $50 for a software license, and that CSPs stand to gain potential additional revenues from tethering subscriptions, both developers and network operators have significant financial interest in tethering services.  We have very likely only seen the beginning of a cat-and-mouse game between app developers and CSPs, as developers will try to find new ways to have their apps go undetected on CSP’s networks.

The third stakeholder is, of course, the subscriber.  While the vast majority of subscribers respect the terms of their service agreements, others are trying to circumvent these rules, to the detriment of everyone else.  For mobile network operators who want to enforce their terms of service, Sandvine’s network policy control solution provides tethering detection, enabling CSPs to confidently and reliably conclude when a subscriber is tethering, and ensure accurate billing.

The killer application in this partnership is the ease of use.  With this implementation, neither the originating nor the receiving party need to have created a Skype account in order to make a video call, since a button will be installed on every user’s Facebook profile. With Facebook claiming that the average user has over 130 friends, and that half of users access Facebook each day, it is easy to see how this new feature could explode in popularity.

It is not clear whether it was a coincidence that the feature’s launch came just a few weeks after social networking competitor Google+ opened its doors, offering a group video chat option.  While many people have been quick to praise Google+’s differentiating features as a “Facebook killer”, their user base of 20 million, while growing rapidly, is still only a fraction of Facebook’s total users.

So where will this partnership lead to next? At the press conference, both companies hinted at an expanded feature set coming down the road.  There was talk of group video chat, and of potentially offering other services for which Skype currently charges a premium.  The greatest potential, however, will be if, and how, this partnership makes the transition to smartphones and tablets.

While Skype is a popular mobile application, Facebook is among the top five most downloaded applications on every major mobile platform.  Should the two further integrate and partner on mobile applications, then video calling (especially cross-platform) could see tremendous growth on mobile devices.

This partnership, and others like it, will raise some interesting questions for carriers from a charging standpoint.  With unlimited, zero-rated, social networking being a popular data option on many wireless plans, should the newly generated traffic be included as Facebook, or classified as Skype within the real-time communications category, or classified as something different altogether?   Customers who subscribe to social media packages for price certainty might expect that anything launched from Facebook is subject to the same zero-rating treatment.

Operationally, the reality is that a handful of video calls might very well dramatically shift the data usage profile of a typical Facebook user.  Unlimited bolt-on packs are designed to help align average revenue with average usage, and step-function changes to data usage can potentially play havoc with such service plans.  Network operators will have to carefully analyze broad subscriber usage trends to ensure data plans continue to be profitable, while still providing value for subscribers.

Last week, Netflix confirmed those rumours by announcing that in the fall they will begin offering their service to an additional 43 countries throughout Latin America and the Caribbean. The announcement was short on specifics (no pricing details, no country list, no timeline), but Netflix did say that they will be using a content strategy similar to what they employed in their first international expansion to Canada by offering region-specific content in Spanish, Portuguese, and English.

As Sandvine reported this past April in our Global Internet Phenomena Spotlight: Netflix Rising, only four months after Netflix’s launch in Canada, Netflix had already gained 800,000 subscribers for their streaming service, which by early March accounted for 13.5% of Canada’s peak period downstream traffic.

Netflix now has over 23 million subscribers in North America, with the company adding an additional 3.3 million in their last fiscal quarter alone.  This rapid growth and widespread use in North America has created global brand awareness – when combined with an ever expanding list of Netflix-capable devices, this recognition and widespread availability could result in an even faster rate of adoption for the service in new markets.

Netflix has effectively given service providers in Latin America and the Caribbean a heads-up.  Network operators in these regions need only look north to the United States and Canada to see what is coming to their networks, and the window of opportunity to prepare in advance is closing.

Both fixed and mobile service providers are likely asking themselves three questions in response to the Netflix announcement:

1. Are our networks ready to support the anticipated demand for Netflix (and over-the-top video in general), while insuring our customers receive the quality of experience they expect?
2. Are our service plans structured to meet the needs of our subscribers while also maximizing our return on infrastructure and operations investments?
3. Do we have tools in place to measure the adoption and impact of Netflix on our networks?

Experience and data tell us that subscribers throughout Latin America and the Caribbean will adopt online video: this will be true regardless of language, country, and access technology.  With detailed information from network policy control systems, about how and when users are using Netflix, or other OTT video services, network operators can make the best decisions not only for capacity planning, but also in creating service plans that meet the video consumption habits of their subscribers.