Home Global-ICTGlobal-ICT 2008 Convergence and data – pushing the limits of the network

Convergence and data – pushing the limits of the network

by david.nunes
Author's PictureIssue:Global-ICT 2008
Article no.:15
Topic:Convergence and data – pushing the limits of the network
Author:Peter Kaliaropoulos
PDF size:201KB

About author

Peter Kaliaropoulos is the CEO of Batelco a regional mobile company operating in Bahrain, Saudi Arabia, Jordan, Kuwait, Yemen and Egypt. He has over 27 years of experience in the information communications technology sector. Mr Kaliaropoulos has held various senior executive roles including MD SingTel Optus Business (Australia); COO/SVP StarHub (Singapore); CEO Clear (New Zealand); Director Sales & Service, BT Asia Pacific (Singapore & Australia); Director, BT Syncordia Asia Pacific; VP Sales & Marketing, Telstra (USA) and MD of Mobile Sales & Distribution, Telstra (Australia). He has also served as a Director on the Board of various IT&T companies in Singapore, USA, Australia, New Zealand and the Middle East. Mr Kaliaropoulos holds a BEng – electrical engineering from the University of New South Wales, Australia, and an MBA from Macquarie University, Sydney, Australia

Article abstract

Convergence is here to stay. Customer demand is still limited for a host of reasons but operators know that without the cost savings, the ease of creating new services, and the other market possibilities convergence provides, they cannot long survive in any competitive market. The cost savings of fixed/mobile/wireless convergence are especially compelling in underserved and remote regions. Despite its advantages, convergence faces a number of challenges, including from regulators who fear it can unbalance the local competitive equilibrium.

Full Article

The market Globally, there are three billion mobile subscribers and some of the more mature markets have over 100 per cent penetration. Prepaid mobiles now account for more than 60 per cent of the worldwide mobile subscriber base and continue to grow by around 60 per cent per annum. Growth in fixed networks is almost nonexistent. Whilst recent research forecasts a 5.7 per cent annual revenue growth in global consumer telecom fixed and mobile network services within the next five years, the Middle Eastern market growth is set at more than double. Such trends create opportunity for converged services. A whole new world Convergence and integration are words used almost daily by executives of every telecommunications company around the world. The fundamental belief that is fuelling convergence is that an operator with converged platforms will have a demonstrable competitive advantage in the market. This is good news for providers especially, who will benefit from adapting to this market wave early due to its competitive boost. Currently, data convergence is the key component of many companies’ strategies and business plans. There are, however, diverging views about whether fixed-mobile-data integration is driven by the need to develop bundled services for the market (customer led) or by the necessity to drive network and operating costs down and deliver cost synergies. Some doubts remain, predominantly from mobile operators, regarding the need for convergent services because customer demand is limited. There are, though, compelling reasons why integration and convergence are of high relevance in the industry. Among these reasons are the ease of creating and delivering new services to meet demands, cost synergies and strategic hedging that will let single platform operators become competitors in the emerging convergent delivery services and content market. The ongoing merging of fixed and mobile services is affecting the commercial models of fixed and mobile operators. Convergence continues to open up a new world of opportunity for telcos. It facilitates the delivery of more service, improves quality and enables lower cost structures through shared infrastructure. This cascades down to benefit customers in the form of lower prices, better devices and access to many more applications on the go. Convergence will soon bridge the business intelligence and search gaps, and let information professionals provide customers with better contextually pertinent information that can help users make better daily decisions, transactions, negotiations, and run their businesses more efficiently and effectively. The drivers of the move towards convergence include customer retention, revenue enhancement and ongoing network upgrades. It will result in operators focusing better on services that combine the benefits of both fixed and mobile, and applications that can operate over both fixed and mobile devices. At the same time, operators that offer only fixed or mobile services may partner with each other in order to offer integrated services and mitigate competitive threats from fully integrated companies. These trends may enlarge operators’ range of services and result in changing industry dynamics, both for current operators and new entrants. FMC (fixed/mobile convergence) trends have a number of important implications for the communications sector. A growing number of services will have both fixed and mobile attributes, so it will become more difficult to differentiate between fixed and mobile services. This merging of fixed and mobile functionality will drive new commercial models. However, regulatory restrictions on incumbent dominant operators, in the recently liberalised markets in the Middle East, for example, may limit commercial innovation and realisation of consumer benefits from FMC. Specifically, innovative bundling of services by operators with converged networks, may be delayed due to regulatory restraints based upon fears that dominant operators will reinforce customer loyalty with these new packages and thereby reduce the customer churn that new entrants depend upon. Arabia As a market that sees data as an increasingly important part of its business needs, the Middle East region welcomes new mobile data technologies. While the main emphasis continues to be SMS, the growth of richer content is very evident, thanks to better network technologies such as 3.5G and ever more sophisticated mobile devices. Triple play offerings – voice, video and data – delivered by fixed line operators are growing in importance. However, we expect convergence will take some time before it is widely accepted in the Middle East due mainly to the limited availability of the necessary infrastructure, the speed of technological development and the addressable market. Currently, while the overall Internet penetration rate is relatively low (2.2 per cent) compared to world average (5.2 per cent), the usage by youth is growing very fast. Steps towards enhancement Today, many businesses rely on a variety of communication technologies and applications to enhance their operations, telecom operators are investing in new generation networks which run high-speed access to the end user premises through fibre optic and high speed wireless technologies. The fixed and wireless new generation networks in our regions are now in the final phase of implementation and once completed will be capable of providing a wide array of large bandwidth services, facilitating the upload of rich user-generated content. The modern networks coupled with the growing availability of content, services and applications will help in the growth of Internet penetration and the move to convergence. New pricing models from providers will assist in accelerating convergence in the Middle East. Concerns Convergence has significant implications for regulators who need to not only protect against the control of markets by incumbent operators by encouraging competition, but also ensure consumer protection and privacy, protection of minors and human dignity and of course protection against defamation. Recent global research shows that 60 per cent of consumers from 15 countries felt the branding of converged product offerings was very important, since a company they can trust will help make their lives less complicated. Traditional back up and recovery, and basic information protection that blends security, networking and storage technologies, are all pieces that must fit into the puzzle. Business convergence Telcos are becoming increasingly preoccupied with developing content strategies. In this regard, I believe the best way forward for telcos is to enter into partnerships with content creators; developing successful content requires skills telcos rarely have. Data and convergence will encourage – indeed, require – greater investment and mergers and acquisitions within the market. There is consensus amongst many industry operators and analysts that customers prefer a retail supermarket approach: one stop shop, full service offerings, and simplicity in billing with less ‘finger pointing’ between service and content providers whenever a problem arises. Certainly, when full convergence arrives it will be great news for some customer segments, especially mid and high value consumers: convergence delivers more choice in devices and applications, one bill convenience, one contract and, equally important, better value through more competitive pricing packages. When the demand for convergent services is met, the end users will greatly benefit from seamless services and access to the Worldwide Web no matter where they are, stationary or on the go, irrespective of type of access and device! Just the beginning Data and voice convergence is not an end in itself; it is about joining together an organisation’s communication resources to deliver reduced complexity of business processes and increased business opportunity. With the convergence of telecom bringing the world’s regions closer, distance is no longer an obstacle. After nearly a decade of discussions and promises about convergence, virtual meetings and cost savings, online collaboration is finally becoming a reality. Most experts agree that to be successful convergence should be a controlled process. Rushing into such an ambitious changeover would be a risky investment. Convergence should deliver us from risk and not put us at risk. By embracing convergence, companies should realise substantial savings from the consolidation of their network infrastructures. Companies that fail to move up to a converged infrastructure might be left behind. Among the industries and business sectors that will immediately profit from adapting to data and voice convergence are the healthcare sector, property and financial markets. Converging the future In the coming years we will see great development of broadband and communications services in underserved and remote regions. The widespread convergence of data and voice telecom technologies, will greatly improve consumer self-service and facilitate the integration and management of medical patient information. Financial and property markets will benefit from quick access to a wide variety of data; this will help them make faster, better informed, decisions regarding matters such as regulatory compliance, risk management, customer retention and profitability among others. Whilst the marketers’ dream will be realised one day, in an increasingly competitive world, operators cannot ignore the immediate operational and capital expense savings (opex and capex) synergies from convergence, which improve the bottom line and reward shareholders. No matter what the operator’s reasons, marketing or cost, the need for convergence is no longer questioned by the sector. Convergence is already happening; it is delivering benefits and allowing operators to take advantage of market trends and quickly create new services. Ignore it at your peril…

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