Home Asia-Pacific I 2007 The carrier in an IP world

The carrier in an IP world

by david.nunes
Ingvar LarssonIssue:Asia-Pacific I 2007
Article no.:5
Topic:The carrier in an IP world
Author:Ingvar Larsson
Organisation:TeliaSonera International Carrier
PDF size:356KB

About author

Mr Ingvar Larsson is President of TeliaSonera International Carrier, responsible for all international carrier activities within the TeliaSonera Group. Before joining TeliaSonera, Ingvar Larsson was Vice President and General Manager for Ericsson Core Unit Service Network and Applications having previously held a variety of executive positions within Ericsson. Before joining Ericsson Ingvar Larsson was a Vice President at Sun Microsystems AB. Mr Larsson has 20 years of experience in the IT industry as consultant, project manager and as senior manager for R&D, professional services and systems integration. Ingvar Larsson holds a Master of Science degree in Electrical Engineering/Control Automation and Computer Engineering from Lund’s Institute of Technology.

Article abstract

The Internet and the Internet Protocol, IP, caused an ongoing revolution in the telecommunications sector. The traditional rules and business models of the sector no longer apply. IP makes it possible to transmit all types of traffic – data, voice, video, etc – on a single network and to offer many new services. This is redefining the traditional roles of carriers, mobile and fixed operators alike as each of them tries to occupy a space in the new market environment.

Full Article

Digitalization of telecom and media services will forever change both industries. It will change all existing business models as well as create new customer groups and demands for international carrier services. In the future, the market will demand that all services be reachable from anywhere at anytime. For media, mobile and gaming, the carrier network will be the flavour of the future. During the ’90s, the telecoms industry was fundamentally changed by two major revolutions, namely mobile telephony and the Internet. These two very different value propositions impacted forever on our way of working and living. Mobile telephony offered levels of mobility and reach never before seen and global collaboration and connectivity – within the means of most people – became available via the Internet. From a business perspective, these two innovations were as different as they were revolutionary. Mobile, with its roots in the voice world with healthy margins and a controlled service offering, naturally evolved into a cash cow. On the other hand, the Internet, created by entrepreneurs, was driven by the ideal of global collaboration and connectivity, rather than a more structured business model. Since the Internet took off in the 1990s, what impact it would have – not only on telecom, but also on society as a whole – has often been discussed. Normally, the Internet is also thought of as being the same as IP, its network protocol, which causes some confusion. To fully understand the impact of IP or the Internet it is important to separate them. The Internet as a business model is synonymous with vertical integration between network and applications. It is a global collaboration, supporting end-user driven development, reaching millions of potential users and customers. IP is the protocol supporting it. The GSM Association, amongst others, is trying to protect the legacy telecom business model; it embraces IP, but not the Internet business model. Therefore, it is important to separate IP and the Internet. Depending on which business model wins, the impact on carrier function will vary throughout the IP world. If service providers are able to create vertical integration, and limit end-user-driven development/demands, the carriers’ role will be less important. If the majority of usage is local, and only a small portion of the traffic is international, carriers will act as they do today for mobile and voice. In this scenario, controlling the end user is the true, and only, value. The carriers will be competing to earn with low margins and commoditized products, most of the products will be cost centres, not revenue centres, for the large incumbent operating companies. The services may all still be IP-based, but they will constitute an ‘anti-Internet’ – as some call this scenario. This scenario will support a profitable business model for a provider as long as the market is controlled by the provider and not the end user. On the other hand, if the Internet model is used it will dramatically change the carrier’s role. With an all IP environment, applications are separated from access. It transforms local providers into access providers, but any application provider can sell their services globally using that infrastructure. It will breakdown national barriers for media services and open the way for a global media distribution environment. Any service provider running a VoIP application can provide voice. Increased competition will drive prices downward, forcing national providers to focus on their national service and outsourcing their international needs to carriers. All the services required by end users will be supported on a global basis and carriers will be the hub for all applications and networks. Carriers that offer simplicity and cost-effective solutions will be the big winners. IP is not a revolution it should, rather, be viewed as an evolution of telecommunications. IP can be implemented to support existing business models, to reduce costs, and/or improve the ability to offer new services. The Internet is the revolution. It is a revolution that reduces the role of current solution providers, that cuts prices and turns telecommunications into an end user’s market. Today the market is clearly leaning towards the Internet model. On the fixed network side everything seems to be migrating towards an Internet-type model. Flat prices or fees for voice are here to stay and, in some cases, voice is just another value added to the bundle of services sold. Illegal downloading of media, together with developments such as Tivo and the Slingbox, will also force the content providers to adjust to the new market reality. We already see solutions on the market for the legal downloading of movies, and it has just started. On the mobile side, it looks quite different. Mobile networks, today, are closed networks and it is not a free market. Governments control the licenses and the entry costs are very high. Still, mobile operators realize that, although they have to provide access to the Internet, by doing so they give up control of the applications and content. Faced with the threat of losing revenue, they are now trying to find a way out by providing IP-based solutions in a controlled environment. The question is, whether the market accepts it. Regardless, the mobile initiative will require solutions similar to those for carriers and fixed service operators – just with added complexity. In addition to lower capacity products, carriers today are mainly selling voice termination and IP transit. For legacy reasons, they are separated both in the network and in their business models. It is easiest to integrate the network, but keep the business model. Carriers can offer value to their customers and simplify service creation by offering both voice and Internet using the same local access. When and if voice goes to a fully IP-based solution everything will be in place. This will also help non-voice operators offer voice and, conversely, non-IP providers to offer IP. It is easy to add mobile roaming, multi-media services or other IP-based solutions on an existing, in-place infrastructure. Ethernet can enable many services on a single port. This will lead to a bigger role for carriers in the local providers’ market, but will also bring more complexity. The ability to add new functions will force carriers to be innovative and to integrate new services continually. Coming from a highly standardize environment with few products, this will be a tough challenge for carriers. Carriers that can deal with the complexity of the new market environment will be winners – because resolving the complexities of the new technologies and services creates simplicity for customers.

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