Interview: Henrik Palsson, Ericsson on an Internet headed for 50 billion devices

Richard Chirgwin meets Henrik Paulsson, founder of Ericsson's ConsumerLab, and talks to him about how the Net can scale to 50 billion nodes, partly thanks to wiring China and India.

Last week, Ericsson's Henrik Palsson, who founded the company's ConsumerLab in 1995 and now specialises in researching emerging markets such as India and Africa, visited Sydney. His wide-ranging discussion with journalists and analysts covered media consumption, access, the utility of mobile phones in the third world, and Ericsson's visions for the future of the Internet - which include a network supporting not one or five billion connections, but 50 billion. What follows is an edited transcript of Palsson's discussion.

SearchNetworking: In Australia, as in India and in Africa, there is a huge gap between the best of access and the worst. How does that impact the behaviours of different users?

Palsson: The world has four billion mobile subscribers - but the worse the physical infrastructure is, the more benefits the user has from a mobile phone.

For example, in Africa someone might order concrete to build a house. The shop is six hours away, so you have to walk for six hours to find out that your concrete didn't arrive, and then you have to walk six hours back. For that person, the mobile phone is much, much more efficient. The relative advantage of the mobile phone is enormous.

Also we know that we are not just individuals, we are social beings - we don't enjoy isolation. Extended family is the reference, but as development comes, people seeking better income leave their villages. Without telecommunications, they are disconnected from each other. So even before the mobile phone improves incomes, it gives an enormous, fantastic platform for happiness and confidence.

On top of that, the mobile phone is often used by farmers, fisherman and so on, to increase their revenues. By having a phone, they can trade in a better way ... and to some extent, balance the middle-man, who has been very powerful before.

SearchNetworking: Palsson articulated a remarkable vision: that connectedness will reach far beyond the connectedness of people, reaching not a few billion subscribers, but fifty billion devices.

Palsson: Our vision is 50 billion devices, that we envision will be connected in the future, because our belief is that any device that will benefit from a connection will be connected. The vast majority will be mobile, because that is the most cost-efficient way to do it - and most devices sacrifice something if they are connected by cable.

SearchNetworking: Doesn't that suggest that the premium paid for mobile connections at the moment is artificial? That it is some kind of price discrimination to improve ARPU?

Palsson: The whole model is dominated by voice and mobile broadband. When we talk about 50 billion connections, we talk about a much wider type of connections - the device might connect a few bits, once a month. So the dynamics of the commercial offers needs to be reflected in that vision - a lot of different subscriptions, and some of those subscriptions will not reach the consumer. They will be business-to-business subscriptions.

So the diversity of the commercial offer will change with that vision, and it's also a fundamental change to the industry, with the focus on mobile telephony subscriptions, pre-paid or post-paid, and since a few years back, the focus on mobile broadband.

SearchNetworking: That is a big change for carriers, who look to traffic charges to repay their subsidy on handsets or SIMs, and whose back-end costs might not suit low-volume services.

Palsson: Already today we can see that voice is becoming noise in the network, from a capacity perspective. Demanding applications are typically those that involve imaging, moving images, and they generate a lot of traffic in the network. So yes, the business model will evolve, and players in the market will find ways to cost-efficiently manage new types of subscriptions, no doubt about it.

So how far are we from that vision of 50 billion devices? Well, one market today has more Internet connections than it has households with computers: Japan. Ninety-seven percent of households in Japan have Internet connections, but only ninety percent have computers ... it's the first signal that the Internet is something that is interesting beyond the computer. So 2009 is the first signal that the Internet has gone beyond the computer.
SearchNetworking: At this point, Palsson returned to the challenge of living with multiple devices.

Palsson: One of our challenges is that there is no convenient way to manage media across these platforms. These consumers have a vast amount of media. On average, these consumers that we interviewed had 2,500 songs, 2,000 pictures, 100 games and 250 videos, that they try to cross-access over these devices. And as you know, many of the commercial players in the field have their proprietary pipe. So it's easy to download and buy things on the Internet and get it to one of these devices, but if I want to consume on another device, it starts to get complicated.

So one of the things that needs to happen to address their needs and the realities of these consumers - these consumers are to a large extent the forerunners, they are the tech-savvy, the more capable, the more exploratory.

SearchNetworking: Does this suggest that the nexus in which control of media is enforced by control over the device will break down at some point?

Palsson: Let's attack the challenge from a different perspective. Society, thanks to the mobile telphone and the Internet, is getting much less hierarchical. The power shift ... is phenomenal - a small number of consumers can take an initiative on the Internet and it can grow to a movement. The power is shifting towards the consumer, and what we can see is that consumers see less and less of the traditional borders.

They might be borders defined by companies, borders defined by organisations, borders defined by governments. Those borders are under severe scrutiny worldwide, and if consumers don't see a border, it doesn't exist, regardless that companies, organisations and governments claim they are there. Sooner or later, some media company will see that there's an enormous opportunity.

But on the other hand, the more protected pipe can be extremely convenient - the couch potato may still enjoy someone who makes it super-simple, and all of us are in some life situations or weekly moods enjoy the super-simple.

SearchNetworking: Simplicity is a big challenge, and it only gets solved rarely. The Nokia 3210 was as simple as a doorbell, but mobile phones dealing with complex content haven't recovered that simplicity.

Palsson: What we have to accept and respect is that even technology-savvy consumers, now and then (typically during the weekends) want some moments that they really can take a step back and relax, where things are not complicated but super-simple.

For anyone who involves [themselves] in IP TV, you have to think through, all the way, end-to-end, to make sure that the experience becomes super, super, super-simple ... and as you might know, this is not the direction the living room is taking right now.

SearchNetworking: With 50 billion devices, we're also asking consumers to accept a lot of things into their homes that communicate, without their intervention. Some people would fear that this opens up the opportunity for those devices to be controlled. Will the urge to control the devices undermine Ericsson's vision, or will consumers push back against that control?

Palsson: It's two powers which will continue to balance each other. It also varies enormously from individual to individual.

It's interesting to see that academia has had big difficulties to define what is integrity, and what is privacy? One of the main reasons for this is that privacy and integrity are defined by the individual, and we are very, very different.

Also, as human beings, we quite well realise that if we give up some of our privacy, I get benefits in return - it might be friendship, or it might be convenience. So there's always a trade going on here, and how that trade looks varies from individual to individual.

And we have to differentiate between reality and perception.

Consumers base their behaviours on their perceptions, but in most cases, they choose trusted partners, and they expect those trusted partners to sort out problems that happen. You do not always love the bank, but you trust it.

SearchNetworking: Palsson also believes that the IT industry tends to address problems like personal security and privacy with excessivly complex solutions.

Palsson: As individuals, we do leave online tracks. Unfortunately, most initiatives that try to address this work at the extremes. Organisations like governments look at the very worst that can happen ... but if shopping becomes to inconvenient, the solution will not work, and it will not be accepted.

SearchNetworking: Returning to the question of remoteness, what solutions do you see changing things in the emerging markets you study?

Palsson: One thing is that television remains very important. If you are in a remote village in India, with 2,000 people, reached by 120 Km of dirt road, there will still be a hut where people gather to watch TV.

But we're also seeing interesting things happen in base stations - you have solar or wind base stations deployed in remote areas, and the carriers are starting to deploy charging stations [for users' mobile phones] in those base stations.

There's also dual porpose power being deployed in those base stations. They always have excess power during the day, so we are starting to use that excess for applications like refrigerating medicines and so on.

SearchNetworking: What will influence the success of remote communications in those markets?

Palsson: India has 600,000 villages. There's coverage to 400,000 of them, and the carriers think they have a business case for another 100,000. But how do you fund the last hundred thousand?

In general, we see that the legal framework the government sets up is very important. If governments see communications as a tax source, they hold back the market. And they forget that government activities themselves become more efficient with good communications.

But it's too easy to tax telecommunications companies, especially in countries where there is income that is not monetarised (such as barter societies). Governments look for something that's easy to tax, and they can see telecommunications as a luxury rather than a neccessity.

But we see telecommunications as being as necessary to peoples' happiness as water is to life.

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