In Asia Pacific, where advanced
services are already prevalent, some mobile
data services are already following mobile
access in falling prey to commodity pricing.
SMS, for example, which accounts for about
80 percent of mobile data revenue in the region,
is now routinely offered free with basic monthly
subscription by many providers. As the market
matures, even new IP-based services, such as
video streaming, could eventually be commoditized
if they stand alone.
To put it bluntly, what operators are offering
today is simply not going to be enough to satisfy
consumers clamoring for new services, applications
and capabilities that continuously increase
their productivity, availability and entertainment
options.
Recent market research by Lucent Technologies
asked specific customer groups in the US to
identify applications for which were willing
to pay a premium:
- Youths wanted universal
messaging, presence capabilities to know
when a contact is reachable, and the ability
to instantly share video and data files with
multiple contacts.
- Family respondents valued
the ability to share contact information
and schedule information, updated by automatic
alerts for schedule changes, as well as video
and data.
- Prosumers – consumers
whose professional and personal lives overlap – placed
a priority on the ability to instantly establish
a conference call and share data files, supported
by automatic alerts for data changes.
In citing these specific applications, users
are basically asking for the ability to share
information with multiple individuals across
multiple carrier networks at the time of their
choosing and without regard to the type of
network or access method. While it is true
that voice communications remains the most
important mobile function for users today,
what they are actually willing to pay for are
converged multimedia services that are seamless,
simple, secure, personal and portable.
So the key for service providers is to maintain
the cost-effective, high-quality voice services
that subscribers take for granted while offering
new types of blended applications that deliver
the right information at the right time and
at the right place.
Converged New and Existing Services
Deployment of IMS architectures makes this
possible. IMS (IP Multi-media Subsystem) is
an open-standards approach to providing blended
voice, data and video services across fixed,
mobile or converged networks.
IMS gives operators the flexibility to customize
their service architectures to the needs of
their subscribers and the realities of today's
competitive environment. First, it enables
converged new and existing services for subscribers
using wireless or wireline access. Second,
it substantially reduces the time required
for deployment, standardization, integration
and testing to allow these services to be introduced
very rapidly. And third, it provides opportunities
for cost reductions to ensure continuing profitability
even as competition heats up and margins decrease.
As an open-standards architecture, IMS provides
the network framework for converged communications
services that are detached from the devise
and access method. The role of IMS is to:
• Enable person-to-person real-time
IP-based multimedia communications (such as
voice and video) as well as person-to-machine
communications (such as location-based services
and e-commerce);
• Fully integrate real-time with
non-real-time multimedia communications;
• Enable different services and
applications to interact; and
• Support simple user set-up of
multiple services in a single session or multiple
simultaneous synchronized sessions.
But as important as an ability to deliver
new and blended applications is, it is not
enough without the ability to develop and deploy
them rapidly. In the Internet world, application
development is measured in weeks, rather than
the months and years that we in the Telco space
are more used to.
Rapid Service Deployment
Anywhere that multiple players compete for
the same customer, early market entrants have
the advantage. Being first, they capture the
early adopters and technology savvy high-end
customer segments where they can maximize profits.
Being first with the sort of multiple services
enabled by IMS, they also inspire customer
loyalty that goes far beyond simply reducing
churn.
Our data suggests that current single-service
churn rates are typically in the range of 1.7
percent to 2.5 percent whereas churn rates
for multiple-service bundles may drop to 1
percent to 1.5 percent.
IMS-based services are not just bundled applications
but ‘lifestyle' communications services customized
to specific localized market requirements.
They are accessed with a single sign-on and
are always available to the user, whenever
and wherever they are needed. It is clear that
the first provider to deliver this environment
will gain the loyalty of the customer who is
unlikely to seek any other experience anywhere
else.
CapEx and OpEx Savings
Today's business case for 3G typically involves
evolving from 2G to 2.5G and finally 3G. At
first glance this appears reasonable, until
3G becomes a reality and the business case
fails because the cumulative capital and operating
expense becomes too prohibitive. Hence many
service providers focus on increasing average
revenue per user (ARPU) to justify the business
case.
In another study in the US , Lucent Bell Labs
researchers evaluated a specific set of applications
to determine how IMS-based blended lifestyle
services will impact overall ARPU. The applications
included: interactive push to talk and Active
Phonebook as well as unified wired and wireless
services such as voice mail box, inbound and
outbound call logs, and instant messaging. We
found that the ARPU for a generic operator is
likely to increase 40 percent annually over the
next five years due to blended lifestyle services
based on these applications.
The solution then is to combine an emphasis
on raising ARPU with an evolutionary approach
to 3G deployment that gradually develops an
access-independent hybrid network hosting 2G,
2.5G and 3G networks on the same infrastructure.
Enabled by the IMS architecture, this has excellent
cost efficiencies from a capEx and opEx point
of view and justifies the 3G-business case.
IMS provides a cost-effective, modular network
framework that can support any type of multimedia
service across any type of access device .
CapEx can be reduced as carriers reuse components
and eliminate r edundant systems . Furthermore,
operators benefit from reduced risk with a
standardized service architecture, for which
more suppliers develop compliant products and
solutions.
Similarly, OpEx can be significantly decreased:
through the reduction of churn – leading to
lower marketing and sales costs; through the
lower cost of billing, customer inquires and
collection for multiple services to a single
customer; and because a pplications can be
more easily and cheaply developed and introduced
in the network. OpEx is also further reduced
since communications sessions on IMS are transported
in the most efficient method for the particular
session.
For example, more subscribers today are making
wireless calls from a fixed location. According
to the Yankee Group, the percentage of mobile
calls made from home rose from 6 percent in
1999 to 24 percent in 2003, while at-work mobile
calls rose from 4 percent to 8 percent in the
same period. This trend is an opportunity for
cost saving under the IMS architecture. IMS
optimizes routing by delivering voice or data
services via a variety of network options,
including access available in the location,
such as WiFi access points, thereby lowering
the cost of transport and offloading macro-wireless
system capacity for other calls.
In its study Bell Labs analyzed the value
of IMS for a traditional set of voice and data
services. Over the five-year period, total
operating expenses decrease about 10 percent,
from US$805 million using a point solution
to US$723 million with IMS.
Updating the Value Chain
The promise of 3G for network operators, as
delivered by IMS, is for the rapid introduction
of converged, customized services and the continual
reduction of costs. To capture these opportunities,
operators need not only to understand the new
2.5 and 3G technology and roll it out, but
also to recognize the impact that this will
have on their existing value chain.
There are three compelling reasons to leave
the traditional value chain model behind. First,
the explosive growth of the commercial Internet
has created a thriving digital economy where
the old assumptions about the best way to manage
logistics, operations, distribution, and customer
service no longer apply. Second, the forces
that are driving this growth require a new
set of core competencies that are focused outside
the boundaries of the Telco firm. Finally,
the competitive landscape now favors those
firms with dynamic and flexible networks of
relationships and "just-in-time" infrastructure
access that can scale to meet surges in demand.
In the traditional Telco value chain, value
is generated within the company. Now, however,
what were tightly integrated, inward-looking
activities are becoming disseminated. In a
radical transformation of business culture,
partnerships and out-sourcing are the new imperative
as organizations accept they cannot excel in
all areas. Outsourcing allows Telcos to focus
on their core competencies and strategic direction.
Today, this applies not only to outsourced
maintenance and network management, but also
to new relationships to develop and brand blended
services – where a wireless carrier may partner
with a broadband access provider, for instance.
Service providers that transition to next-generation
IMS networks, and successfully update their
processes and partnerships for the new Net-centric
economy, will be able to capture the opportunities
for new revenues, market share and increased
profitability that lie ahead. Those that do
not will struggle just to survive the decade.
