The Sunday Brief

Connecting technology, telecommunications, and the internet

The Sunday Brief: Latency is the New Differentiator

by | Mar 24, 2013 | TSB

 Greetings from Dallas and Austin, where there’s a burger bar called Hopdoddy’s that’s a “must eat” location.  I had the opportunity to catch up and talk tech there with Mark Dewey (nicknamed Yedi by his Darden classmates, as he has been AWOL from tech since starting and running AOL Metro).

This has been a news-filled week, with T-Mobile/ MetroPCS receiving their last governmental approval (from the Committee for Foreign Investment in the U.S.), as well as a demand letter from an activist shareholder mandating that CEO Roger Lindquist resign if the deal is not approved.  Rhetoric is increasing from some shareholders, but with only 12% publicly opposed, the merger appears likely to move forward after the April 12 shareholder vote.

The Blackberry Z10 launched at AT&T.  Unlike the Nokia launch, which occurred on Easter Sunday while most stores were closed, this year the Blackberry launched at AT&T pre-Easter.  The Wall Street Journal’s  take was that sales were about as robust as last year’s Windows phone launch.  According to the article, the in-store experience was anything but spectacular:

When a customer asked to see the Z10 at an AT&T store in downtown San Francisco, the store’s representatives had to retrieve it from the back. The device hadn’t been put out on display at the store’s opening because of difficulties setting it up, a store employee said. The device was eventually installed on a display at a back corner of the store, away from a large sign advertising the iPhone 5.

Talk about a soft launch.  As we have discussed ad nauseam, if the store reps are not excited, it will not move – new or not.  Lacking front placement, large displays, store employee incentives, and app promotions, the ability to rise more quickly up the ranks in the US is going to be more difficult (see the  link to the New York Times article above for a description of how Blackberry financed 1,400 Best Buy experts).  The Z10 is Blackberry’s test against Android and Apple – one virtual keyboard smartphone vs. another (the Q10 due late summer includes a physical keyboard).  Blackberry is definitely a contender, but if it cannot get store placement, it’s going to be hard to convince smartphone switchers that it’s the “next thing to own.”

Julius Genachowski announced his resignation from the FCC (no surprise), with rumors circulating that (Venture Capitalist) Tom Wheeler will be the next FCC Chairman.  Tom is a deep and detailed thinker who has been chairing the FCC’s Technology Advisory Council.  His recent blog post on the purpose of the most recent council is here.  Tom knows cable (NCTA Chairman 1979-1984), and he was the head of the CTIA until 2004.  He is currently a partner at Core Capital Partners.  He’s a blogger (see here). He has founded his own company (SmartBrief).  He’s not a lawyer.  Sounds like a great candidate for the job.

One of Mr. Wheeler’s cable colleagues, John Malone, decided to take a 27% stake in Stamford-based Charter Communications this week.  That transaction valued Charter at close to $10 billion.  By Friday, the value of the company increased to about $10.5 billion ($103.28/ share).  Not bad for a stock that emerged from bankruptcy at $33.50 at the beginning of 2010 (208% return in 39 months). This transaction was not an infusion of new capital, but a purchase of several private equity firms’ stakes.  Malone is an old hand at cable, particularly video retransmission, having been CEO of TCI prior to its acquisition by AT&T.  He’s rich like Paul Allen, but that’s where the similarities end.

We could spend the entire week discussing industry goings-on.  However, in keeping with our 3-part series, this week’s Sunday Brief focuses on a topic that is near and dear to anyone who has been working on applications development or Internet services:  Latency.

Latency is defined by the Linux Information Project (also known as LINFO) as:

…the amount of time a message takes to traverse a system.  In a computer network, it is an expression of how much time it takes for a packet of data to get from one designated point to another. It is sometimes measured as the time required for a packet to be returned to its sender.

Yes, latency is becoming the new measure (along with throughput) of a network’s power.  Lower latency enables tomorrow’s video-based applications to succeed.

To demonstrate the effect of latency, imagine that you were going to set up a mobile application focused on delivering live person-to-person video (we could call it something snappy like FaceTime, ooVoo, Skype, Hangout, Tango, Fring, or BBM Video with Screen Share).  Your new service/ app will be available globally on day one, and you are trying to figure out where to put your servers.
Being a start-up, you figure an East Coast US (e.g., Ashburn VA), West Coast US (San Jose), Tokyo, and London would be a good place to start.  However, when the new product launches, many users sign up from Rio de Janeiro.  Specifically, the calling community is from Dallas to Rio.

As the picture shows, the video call path is between Dallas and Ashburn (probably 100 milliseconds (ms) or less connection time, depending on the Internet routing) and Ashburn and Rio (which could be as high as 500 ms).

All of this depends on the routing scheme (and bandwidth quantity) between the service provider for the customer at point A and the service provider at point C.  If the route takes many “hops” between routers, latency will rise (a bad customer experience).  The customer at point A may have LTE speeds (10 Mbps), but if the network has to connect to three or more routers before reaching point B (and another two prior to connecting to point C), the customer experience will be degraded.

Putting an application server closer to the customers at point A and C would help, but only if the packets in between did not need to travel through point C.  What is needed is more bandwidth and router efficiency between points A and C to accommodate increased applications needs.

Many of you have probably stopped reading by now, thinking this is nuanced engineering “topic of the day” stuff.  But consider the following:

  1. Applications drive smartphone/desktop/ laptop usage and bandwidth
  2. An increasing number of applications include (or are solely devoted to) low-latency video
  3. More bandwidth means more revenue to AT&T and Verizon consumers
  4. Bandwidth drives scale and profitability

After LTE networks are deployed in the United States (let’s assume AT&T and Verizon complete their deployments in 2013 or 2014, with Sprint and T-Mobile to follow in 2015), what creates differentiation?  It’s applications performance.  What drives better real-time applications performance?  Low latency Internet connections.

This demand is being driven today by a distinct demographic.  At least 15% of the postpaid user base at AT&T and Verizon makes less than 20 minutes of calls per month, every month.  They may be texting, Tweeting, Facebook posting, or video chatting, but the only minutes they are using are those to and from very close family (likely their parents).  As a result, concerns about large numbers of dropped calls are foreign to them.

Internet performance, however, is very familiar and important to this demographic.  They likely have performed one or more Speed Performance tests, and they likely know which Wi-Fi network is best (because they have already presumed that Wi-Fi performs better than carrier networks).  They may not articulate it in this manner, but to the 15-29 year old generation, voice is dead, but video (particularly gaming and chat) is not.

This is the new face of wireless communication.  It’s not simply about the advertised speeds of LTE anymore.  It’s about the quality of connections to other users through one or more servers.  That’s the new frontier in wireless (and, with virtualization taking off in the business marketplace, with wireline).  Speed and pipe size matter.  How the increasing demand for real-time services collides with the societal need for net neutrality will be a hot topic for years to come.

For more information on the topic, have a look at this week’s Ars Technica article on latency.  If you want to be “in the know” on inter-carrier backbone latency at any time, bookmark this page from Keynote Systems.

Unless there is earth shattering telecom news, we will not publish a Sunday Brief next week due to the Easter holiday.  If you have friends who would like to be added to this email blog, please have them drop a quick note to and we’ll add them to the following week’s issue.  Have a terrific week! 


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