|Latin America 2007
|Convergence, service and standards
|co-founder and Chairman
Keith Willetts is the co-founder and Chairman of the Board of Directors of the TeleManagement Forum; he has over 30 yearsí senior level experience in the communications industry. As founder and principal of Mandarin Associates Ltd he consults with a wide range of companies on business development issues. Prior to founding Mandarin Associates, he previously held a variety of executive positions at BT and TCSI. A regular presenter and writer, he co-authored the highly influential book, ëThe Lean Communications Providerí. He was honoured twice in the Communications Week ëTop 25í awards for industry visionaries, and has received the British Computer Society award and the BT Gold Medal. He is widely recognised as one of the worldís leading authorities on communications management.
The advent of the Internet Protocol and the convergence of networks and devices have drastically changed the communications sector. The networks, no longer separated by service, carry any sort of traffic. Mobile devices make calls, play music, take and send photos, display TV and offer a host of other functions. This has created the need for standardised solutions to interconnect not only the systems and software that operators and service providers use, but also the many players in the sector.
Twenty or even ten years ago the global communications sector was still fairly predictable. There was always rapid change of course, but at least it could be subdivided with solid business boundaries. There were telephone businesses – fixed and mobile – the networks of which delivered voice calls and provided data circuits for other applications and specialized service providers. There were TV broadcasters whose networks beamed from satellites or terrestrial masts, and others which offered multi-channel TV over cable. In the last decade or so weíve had the Internet as well. Today all these boundaries are crumbling fast. We always knew that convergence would come and would change the ground rules, but perhaps itís only now that weíve realised just how dramatic the change would be. At an everyday level, convergence is a collection of obvious developments. We can all see cameras and MP3 players, geographical positioning systems, web browsing, email and even TV services appearing on mobile phones. This is making the mobile phone a convergence device – an electronic Swiss army knife with applications that would formerly have demanded separate gadgets, all sharing the same little digital system. The same digital dynamic has been working its magic in service provision and in the broader definition of market sectors. For instance, cable companies and large retailers are also selling telephone services and, in return, telephone companies are beginning to offer multi-channel TV using IP networks and related technologies. As a result, the global communications sector now has to rethink itself and its constituent parts. Instead of well-defined roles formed along a business chain, weíre seeing the evolution of a more fluid business structure where a business relationship web replaces the old linear relationships. Any two players on the web may compete directly, but still buy and sell services to each other, or another, at the same time. All this requires re-thinking of business strategies, of relationship building and of the technical underpinnings of the web itself. Most importantly, the focus on standards – long advocated for system integration within organizations – has to focus now on industry-wide standards as well. This is crucial to allow the degree of business inter-working (and the ability to change relationships at short notice) that the new business web will demand. Relationships for providing content, specialized applications, sales and distribution arrangements and so on, will not only have to be fluid but will have to work in real-time as customers, auto-provisioned on one network, gain access to facilities residing on another. Why is this happening? In a digital world all information types can – in theory – travel over the same networks and be stored as data on the same devices. So, while in the past the need of each sort of information or communications service (telephony, TV, computer networks etc) for its own specialised technologies reinforced sector boundaries, in todayís digital world these technological boundaries no longer exist. That makes it possible for a player in one sector to chase extra revenue or build extra scale by crossing a boundary or two to get into someone elseís market. This, though, is just part of the story. Convergence is simply one aspect of a complete revolution currently slashing its way through the communications and networks sector. Applications are both converging and diverging because new and exciting ways of using digital communications and computer technology are arriving to make this a much more complicated picture. Social network sites such as Orkut are changing the way we communicate and phenomena such as YouTube and mobile TV are changing the way we all consume entertainment. Similarly, pervasive networking is changing the way enterprises actually function. Convergence isnít just about technologies. Itís also about business models. Three trillion-dollar industries – telecoms, media and Internet – are rapidly converging. Not only are they digging into each otherís markets, but some players are creating brilliant new business models that cherry-pick presence and revenue from all three sectors. Google, for instance, is present in all three: first, as a search engine it occupies an obvious Internet position, but itís also making a big splash in the media sector by selling advertising to fund its model and it has entered the content business through its acquisition of YouTube. It also owns Orkut, the leading social networking site for South Americans, over half of whose members are Brazilian. Even the telecom sector doesnít escape its attentions. Google owns its own network fibre in the US although itís unclear yet how they will use this capability. At the time of writing, Google was exploring the option of bidding for radio spectrum in the US, claiming that it would use the spectrum to open up the market and bring in a diverse range of players. Google is also rumoured to be working on a Google-phone – a mobile service that would fund itself through advertising. Whatever the eventual outcome of these specific moves, they are clearly a symptom of a wider change. Players, especially powerful, well-funded ones, are no longer staying in their old boxes. Recently, convergence-driven business disruption has been most pronounced in the mobile market. For instance, much has been made of Appleís recent iPhone launch. Attention has focused on the productís touch screen, its ability to run the Macintosh Systemís X operating system and applications. The real significance of the iPhone has less to do with its technology than with Appleís clout in the market. Based upon its Macintosh, iPOD and iTunes music businesses, Apple could deal on equal terms with a major US wireless carrier, AT&T, to support such specialized iPhone features as visual voicemail on its network. This is a major change in a market – firmly driven in the past by the network operators – where the handset vendors played a secondary equipment supplier role. In fact, the real power of handset and device manufacturers has been apparent for some time. As the functionality of mobile devices increases – and consumers of phones become increasingly discerning about their handset and service choices – device manufacturers who get the technology and image right for specific target markets will wield great power. Given their well-known brands and market recognition, device manufacturers may well become service operators in their own right. Certainly many mobile service users are highly influenced in their choices by the handset, with the service itself playing at most a secondary role. As a result, the subsidized phones offered by mobile operators, with the cost clawed back by the service contract, drive much of the mobile business worldwide. In a competitive mobile market, having a wide range of handsets is so important that Brazilís leading mobile operator, Vivo, until recently operating an exclusively CDMA network, decided to overlay a GSM network. They did this, in large part, to get access to the broader and cheaper range of handsets available to GSM users. Without a GSM handset offering, Vivo was steadily losing market share to its GSM competitors. Does this disruption, driven by Internet players and device vendors, mean that we have a complete take-over of one sector by another? Can we expect the Internet, and the companies that have developed with it, to simply add telephony, mobile telephony and video to their other online applications such as social networking, and kill off the current incumbents in the process? This is unlikely. Far more likely is the emergence of a highly interconnected mix of companies that combine their strengths to deliver complex services. To do so, it also seems logical that some wire line telecom companies, which currently rely on vertically integrated business models – where the network owner also creates and sells the service available on it – will split themselves up into separate entities. One entity will run the network and sell capacity on a fair and equal basis to all comers. Another entity will compete as a service provider, buying wholesale network capacity – just as the other service providers in the market. This is already happening in some parts of the world – such as the UK, and now possibly Italy – and the trend should continue for some time yet. To make the new web model for business work, the industry needs strong standards to define the interactions between the business systems and operational systems they use. This is the role of such industry organisations as the TM Forum. Having built a solid set of industry standards for the integration of the operational systems, business systems and software that operators and service providers use – primarily for the fixed and mobile telecom business – the TM Forum is now working to enable a broader set of interconnects. Cable operators, telecom operators, media players and service providers all need a common way of sharing information and services. The TM Forum intends to play a central role standardising the vital interconnect between all the players in what is now a single communications sector.