Mobile operators see IMS
and FMC as an opportunity to take additional
market share from traditional fixed line operators.
But mobile operators are kidding themselves
if they think they can control the FMC market
for very long. Once high speed Internet access
becomes available on mobile phones, a plethora
of VoIP services will follow.
Fixed-mobile convergence
Many mobile operators are interested in the
potential for growth through FMC. At this year's
3GSM World Congress, CEOs from NTT DoCoMo,
T-Mobile and Orange spoke on a keynote panel.
A major discussion point was that most telephone
calls originate from inside buildings, where
mobile coverage is poorest. As such, residential
users are often forced to keep their fixed-line
services for use when they are at home. The
same applies in office buildings, with the
added problem that wireless operators haven't
been in a position to offer the Centrex or
PBX features that enterprises require. In theory,
however, that could potentially change with
the advent of IMS and FMC, at least in theory.
In Japan, NTT DoCoMo is trying to address
the coverage problem in major office buildings
with nano-cells and in-building repeaters,
but the more widely applicable approach is
to introduce FMC services for business and
residential users based on IMS. Fixed-mobile
convergence is attractive to operators because
IMS is a logical extension of their existing
networks and the resulting services make the
most of operators like NTT DoCoMo's installed
base. In addition, FMC represents an opportunity
for the mobile operator to sell new services
directly to enterprises. That could be huge.
Today, most mobile services are sold to consumers,
even though the bills are often paid by enterprises.
Establishing a direct relationship with the
enterprise opens new service and new revenue
possibilities for mobile operators.
Fixed-mobile convergence
relies on broadband Internet access for the “fixed” part and wireless
LANs to enable converged handsets. The timing
is right as wireless LANs cover many enterprises
today and home WiFi setups are spreading rapidly.
Broadband Internet access is also available
in thousands of public hotspots, through a
confusing range of service offerings — some
rather expensive, and others completely free.
The first round of convergence depends upon
handsets that support 2G, 3G and WiFi connections
on the same phone. Mobile operators then use
an IMS platform to transparently combine regular
mobile service on their 2G or 3G mobile network
with VoIP services over WiFi and/or fixed broadband
access. And because the mobile portion of FMC
uses the existing mobile number and existing
mobile switching systems, mobile operators
have an advantage.
Competing with VoIP Service Providers
This advantage is critical because of the
dozens of VoIP service providers that have
crowded the market. With FMC, the mobile operators'
advantages are significant for not just their
large customer base that relies on familiar
mobile functionality, but — even more importantly — broad
coverage going far beyond anything we can imagine
for WiFi in the next ten years. Without broadband
Internet access, the VoIP service providers
are a significantly smaller threat to mobile
operators' FMC services. As the Yankee Group
notes, “the aim of fixed-mobile convergence
is to hit the sweet spot of high convenience
and low cost.”
VoIP vendors will be in a better position
to provide their own FMC if WiMAX delivers
on its promise of wireless broadband Internet
access, but widespread WiMAX deployments are
likely to take years. Instead, the VoIP competitive
threat may be enabled by the mobile operators'
own data services.
Impact of 3G Data Services
After many delays, 3G networks are now being
rolled out at a great rate. These networks
offer all the normal mobile telephony services
plus “high speed” data access. 3G operators
may initially limit this data access to their
own branded data services — the “walled garden” approach — or
at least price open Internet access significantly
higher than access to their own traditional
data services. The mobile market, however,
is very competitive, and there are plenty of
consumer and business demands for access to
the open Internet. In fact, flat rate bundles
for data access services are already available
in some markets.
A potential limit on VoIP over 3G data access
might be the limited upstream capability of
the initial 3G services. W-CDMA can deliver
up to 384 kbps downstream but only 64 kbps
upstream. On the other hand, 64 kbps is adequate
for most VoIP services. There has already been
a public demonstration on the Italian TV program " Le
Iene " (" The Hyenas ") — a
mix of investigative journalism, reality TV
and sensationalism — which showed Skype running
on a smartphone using a UMTS data connection
from the 3G operator “3” and succeeded in placing
a SkypeOut call at substantial savings over
a normal voice call on the “3” network.
Today there are dozens of VoIP services are
available over the public Internet. Skype is
the most prominent example, because it's grown
to be the world's largest VoIP provider (38
million registered users) in less than two
years. Skype has already cut a deal with Motorola
to embed the Skype client in Motorola's WiFi-enabled
mobile phones, which means Skype could be cutting
into mobile operators' consumer voice revenues — especially
roaming charges — within the next 12 months.
European providers in particular are at greater
risk than their U.S. counterparts. European
per-minute rates are higher, roaming is more
frequent, and flat-rate bundles of minutes
are still a fairly new concept.
Independent VoIP services are a looming threat
for 3G mobile operators. Fixed-mobile convergence
will provide them a viable competitive advantage
for a while. But as 3G data services get better,
WiFi continues to spread and WiMAX emerges,
the VoIP service providers will begin to compete
head-to-head with the mobile operators offering
their own converged services. Will this be
significant in the 12 months? No. The next
three years? Perhaps. The next five years?
For sure!
Mobile operators of the future
What's a mobile operator to do? Obviously
there's an advantage for mobile operators to
roll out FMC services as quickly as possible
to build a strong base and a strong brand while
their competitive advantage survives. Further
out, however, there will be some hard decisions
to make.
To help predict the future, it's worth looking
at the past. Consider America Online (AOL),
which ten years ago was the fastest-growing
ISP. America Online's business consisted of
two distinct segments that were inextricably
bound together: its services (including the
portal, chat rooms, email and other apps and
content), and its dialup access facilities.
First, as the Internet grew, AOL's customers
sought access to content outside the AOL walled
garden. That was easy; AOL opened the walled
garden and interconnected with the rest of
the Internet. Then broadband services began
to appear. America Online executives were faced
with the burning question: Was AOL going to
be a facilities-based Internet access provider,
or was AOL actually a provider of exclusive
content, i.e. a brand? Long story short, AOL
decided it was a brand. It sold its dialup
access network to someone who could operate
it for the company and focused on its services,
now available via any form of Internet access.
3G operators will be faced with problems similar
to those that confronted AOL in the mid 1990s
as the Internet grew and then broadband access
emerged. The services layer (first content
delivery and then converged telephony) will
become independent of the underlying network
(broadband Internet access). Ultimately, a
voice connection between two people on the
open Internet will incur no extra charge beyond
that for Internet access. Users will pay for
mobile broadband Internet access, and then
acquire additional content, products and services
on the open market just as they do today for
web-based services: they get broadband access
in their home but acquire most of their content
and services from other brands over the Internet
(Google, Yahoo, Amazon, eBay, Vonage, etc.)
and not from their broadband access provider.
Becoming an Internet Brand
Eventually, mobile operators will need to
split their integrated mobile telephony business
into a mobile access business and one or more
Internet brands, so they'd be well advised
to start planning for that right now. An FMC
service will take them beyond their own networks.
Can this be built into an independent VoIP
service that works anywhere? And can the walled
garden content services be built into Internet
brands? For example, Vodafone currently offers “Vodafone
live!” content on the Vodafone network. Is
there a way to make some of the exclusive “Vodafone
live!” content available over the general Internet
and make it sufficiently compelling so that
non-Vodafone customers would take interest?
Operators need to consider their brand development
now, so that when the broadband Internet is
truly mobile-accessible, they have built Internet
brands in addition to (and separable from)
their telephony brand.
Today, mobile operators have an opportunity
to profit from an aggressive rollout of FMC
services, with their inherent but short-term
advantages, to build a global branded VoIP
service that can survive when competing VoIP
providers start leveraging mobile broadband
Internet access.
About the Author
Brough Turner is
SVP, CTO and co-founder of NMS Communications,
where he oversees the evolution of NMS's
technology and product architectures and
works on business strategy and new market
development. Brough has broad business experience,
but focuses on engineering, technology, and
products. His current interests include mobile
video, multimodal applications, and wireless
infrastructure.
Brough writes and is quoted widely on telecommunications
topics in both trade and general business publications,
and he is a frequent speaker at telecoms industry
events around the world. He holds a BSEE from
the Massachusetts Institute of Technology.
For further information, contact Brough at:
NMS Communications
100 Crossing Blvd.
Framingham, MA 01702
Tel: 800-533-6120
Fax: 508-620-9313
E-mail: rbt@nmss.com
Blog: http://blogs.nmscommunications.com/communications/
Website: http://www.nmscommunications.com