Home EMEAEMEA 2007 Mobile’s new challenges

Mobile’s new challenges

by david.nunes
Christian MichaudIssue:EMEA 2007
Article no.:13
Topic:Mobile’s new challenges
Author:Christian Michaud
Title:Senior Vice President, Marketing and Business Development
Organisation:VSNL
PDF size:284KB

About author

Christian Michaud is the Senior Vice-President of Marketing and Business Development for VSNL, which is part of the Tata Group. Mr Michaud is responsible for developing the corporate marketing strategy as well as products and product management for the companyís three lines of business: voice, data/IP and signalling. Previously, Mr Michaud worked at Teleglobe, which was acquired by VSNL. Prior to his appointment as Senior Vice-President, Marketing and Business Development, he held a number of senior positions in sales, marketing and regulatory affairs. Mr Michaud holds graduate and undergraduate degrees in economics from the UniversitÈ de MontrÈal.

Article abstract

Roaming, for both voice and messaging, is one of the services mobile network operators, MNOs, must get right, but connecting to other mobiles throughout the world is highly complex. MNOs are turning to international wholesale voice carriers for this increasingly important – but technically demanding – mobile-to-mobile, M2M, traffic. Although direct connections and agreements with the 700 or so mobile operators worldwide might be possible, virtual direct -connections, through a single connection to a third-party carrier are less complicated and more cost effective.

Full Article

Todayís mobile network operators, MNOs, are getting squeezed by two growing market challenges, both of which require them to focus on what is important to their success and upon leveraging new partnerships and models. The first challenge is from intense and growing competition. The growth and margins in the mobile industry, along with the promise of owning a key pathway to customers (the mobile phone), is drawing massive interest. There are now more than 700 MNOs globally. The advent of mobile virtual network operators, MVNOs, also means you donít even need to own a network to be a mobile operator. Existing players must focus on winning and defending their targeted segments. New entrants must employ the same focus to even gain a foothold. The second critical challenge, service innovation, is closely related to the first. The latest front on the battlefield for mobile subscribers is new services. Just as MNO markets are becoming fiercely competitive, their customers are demanding new, more advanced services. In fact, the upstart competition is using new services against incumbents to steal customers. Global voice roaming One simple, but very important, example of the growing demand for new services is global voice roaming. Global roaming highlights how these two forces come together to challenge the MNO on both fronts. In the early-mover markets of Western Europe, Asia and North America, MNOs began by establishing a strong customer base in their home markets. Once established, users began to rely on their mobile phones and those that travelled, especially corporate travellers, began expecting that their phones work abroad as well as they did at home. This has led to huge growth in international roaming traffic – which is very good news for MNOs since they make an extremely good profit on such calls. Of course, MNOs turned to international wholesale voice carriers to carry this increasingly important mobile-to-mobile, M2M, traffic. The fast growth of the traffic, as well as its increased quality demands, quickly presented new challenges to these international carriers. It turns out that roaming traffic can be very complicated – demanding seamless signalling between the mobile networks to provide the roamer with the same experience and features found at home – seeing the phone number of the person calling, voicemail interworking, and the like. Once connected, the call quality must be very high for both parties despite the challenges that mobile access on this sort of network interconnection can bring. Initially, the wholesale carrier market was not in tune with the increased quality demands and, in fact, some of the operators had incentives to undermine quality (SIM bypass arbitrage). The very nature of the wholesale voice market ensures multiple hand-offs of any call between two mobile networks and, hence, multiple opportunities for degraded quality and connection failure. The cost of bad roaming quality can add up quickly. It starts with the lost origination revenues for calls not answered and calls not returned because of lack of caller line identification (CLI). Calls to voicemail while roaming rarely work unless local systems work seamlessly with the home voicemail system. Such calls, when made, are typically quite long. Then, the higher costs to process customer service complaints must be accounted for. Many of these costs simply go unrecognized. Based on typical roaming profiles globally, and assuming a very conservative 1 per cent roaming base, MNOs can lose as much as US$ 100 thousand per month per one million subscribers. Informa estimates that 15 per cent of a typical MNOís subscribers are international roamers. A 15 per cent roaming base would mean US$1.5m or more of lost revenues monthly per million subscribers. This, of course, does not capture the costs of poor customer satisfaction and churn. Though each operatorís scenario varies, lost revenues and total fees are invariably quite costly for the MNOs. Of course, MNOs could choose to set up and manage these point-to-point direct connections (directs) themselves, but the network infrastructure costs, the resources required to support them and the commercial aspects of each bilateral relationship quickly become untenable. Some MNO families have chosen to establish directs themselves between major family members. However, such an approach has been limited and there is little evidence MNOs wish to further deploy this model beyond those few directs. So letís sum up the typical mobile operatorís dilemma: ï a fast-growing need for high-quality international M2M calls; ï a wholesale carrier market catching up to meet the new need; ï high entry barriers to do it themselves; and, ï roaming is not their core business. MNOs must focus on working with the few wholesale carriers that can solve this for them. The Virtual Direct Model A few wholesale carriers are stepping up to the challenge with M2M transit services. A virtual direct model enables MNOs to interconnect with multiple MNO partners via a single physical access to a third-party providerís network. Cutting out unnecessary middlemen eliminates potential sources of quality problems and, frankly, is the only way these virtual directs can be engineered to meet the incremental quality needs of international M2M traffic – especially roaming traffic. The challenges M2M virtual directs raise the bar by meeting the following incremental requirements for international M2M roaming traffic: ï guaranteed end-to-end carriage of critical signalling information: calling line identification, CLI, original called number, OCN, and re-directing number, RDN; ï guaranteed completion to all Mobile Station Roaming Numbers, MSRNs; ï solve number portability, NP, redirect in applicable countries; ï highest voice quality (avoid compression when possible); ï enhanced routing to filter out the M2M traffic for virtual direct treatment vs. rest-of-world traffic; ï ability to terminate non-M2M traffic on high-quality hubbing services; ï seamless interworking with hosted managed roaming solutions – steering travelling roamers to preferred MNOs with whom the MNO has virtual directs; ï guaranteed peak-hour capacity; and, ï thorough roaming scenario testing and verification upon turn-up. Number portability, NP, in particular, is fast becoming a critical need for international M2M traffic. NP allows customers to keep their telephone numbers when they change physical locations, service providers or types of service. The introduction of NP by regulators in many markets has created cost and complexity issues for MNOs. Increasingly, and appropriately, MNOs are leaning on their international M2M providers to solve this challenging issue for them. Benefits Once the service is in place, MNOs experience material increases in Average Revenue per User, ARPU, and much higher levels of customer satisfaction with their most important subscribers – corporate roamers. These benefits stem from: ï more calls reaching the called party: – guaranteed, uncompressed peak-hour capacity; – multiple intermediary sources for network congestion and technical problems are eliminated; ï increased percentage of answered calls: – due to the visibility of the calling line identification, CLI, and reduced post dial delay, PDD. ï longer conversations: – highest level voice quality; and, ï increased voice mail retrievals and deposits for international roamers: – virtual ëhome environmentí enabled by guaranteed carriage of calling line identification, original called number and re-directing number 100 per cent of the time. From a pricing and billing perspective, such M2M services can provide additional benefits. The transit nature of these services means transit fees are separated from the fees to terminate in the destination mobile network. Often, the termination fees are tied to regulated rates – ensuring the customer that they are paying the regulated rates where applicable. This cost transparency results in better cost management and eliminates the cumulative effects of intermediary cost arbitrage. The separate charges also provide MNOs with the flexibility to arrange their own termination agreements with select parties – even enabling ëbill and keepí agreements in certain cases. With the most flexible services, an MNO will have the option to select either bill and keep or, should it prove too costly to manage the arrangement as a bilateral relationship, an inclusive settlement model in which the M2M provider settles both the transit and termination with the partner MNO. MNOs are choosing the virtual directs model rather than traditional hubbing services for the significant cost and quality benefits it offers. In comparison to setting up multiple directs, the incremental value from higher roaming revenues, greater customer satisfaction and lower total cost of ownership significantly offsets the typically higher per minute costs. Only carriers with a global network footprint, a substantial number of relationships with MNOs worldwide and the right complementary services and capabilities can successfully fulfil the emerging need to provide virtual directs services. Carriers who have significant voice M2M footprints will garner more attention from potential new members. Next-generation peering Where do MNOs go next? While the virtual directs model described resolves a number of near-term voice interconnect issues, once an MNO makes the jump to 3G and VoIP, it only makes sense to migrate voice to a peering model – where there is no longer any per minute settlement – and integrate it with their other IP-based application peering. Today, MNOs use a GRX, global roaming exchange, for peering and delivery of non- voice applications such as SMS. GRXs enable GSM operators to exchange 2.5G packet-switched roaming services. In addition, GRX networks provide interworking of multimedia messaging services, MMS. With the advent of IMS, IP Multimedia Subsystem, architectures, there is a need to evolve GRX networks to allow 3G services based on the SIP, Session Initiation Protocol, to be peered. These evolved GRX networks are termed IP Exchange, IPX, networks. In an IPX scenario, the third-party interconnect provider becomes an IPX peering enabler. IPX providers provide value to the peering partners by offering a convenient to reach peering infrastructure, interoperability, number portability, ENUM, telephone number mapping, lookup, and the like. IPX requirements are being defined by the GSM Association, which is giving priority to voice applications in its early IPX trials. As MNOs grapple with their market challenges, they must develop relationships with carrier partners that can meet their near-term (virtual direct) and long-term needs for international exchange applications – starting with voice. A critical component in the longer term is the carrierís ability to offer a future-proof, robust, global IP network to support this next generation of IP-based peering needs. Each MNO is at a different stage in the adoption cycle for application peering. In the short run, carrier partners will need to handle virtual directs well. In the long-run, though, they must evolve to meet the growing needs of their MNO partners as they migrate to IPX.

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