Home Asia-Pacific IV 2001 The Future of Wireless Infrastructure in Asia-Pacific: Convergence and Cost-Effectiveness

The Future of Wireless Infrastructure in Asia-Pacific: Convergence and Cost-Effectiveness

by david.nunes
Chi YooIssue:Asia-Pacific IV 2001
Article no.:10
Topic:The Future of Wireless Infrastructure in Asia-Pacific: Convergence and Cost-Effectiveness
Author:Chi Yoo
Title:Vice-President Mobility Segment Asia-Pacific
Organisation:Lucent Technologies
PDF size:24KB

About author

Not available

Article abstract

Chi Yoo of Lucent Technologies examines the new tight markets facing the next generation. Observing that in the recent past technological demands have overwhelmed commercial rationales, Yoo adopts a realistic view of earlier rosy growth forecasts. Making profits on existing Internet technology has proved hard enough, let alone untried technology relying on telephones with tiny screens and keypads. Any decisions to invest in future wireless must be business decisions not technological.

Full Article

Ladies and gentlemen, please return to your seats immediately. The captain has turned on the ‘Fasten seat belt’ sign. Make sure that your tray tables are safely stowed and your seat backs are in their full, upright position. Now brace yourselves: we’re headed for some turbulent times! Not that the past five years weren’t demonstrably challenging. They were. But they were challenging in a generally recognisable way. The major challenge was keeping up with 2G growth and simultaneously dealing with declining revenue per subscriber, while introducing 2.5G and 3G. Never mind all of that easy-to-come-by growth and the ATM approach to making profits that we had in the last 5 to 7 years, what really matters is how the next five years will challenge us all to rip off our neckties, shed our standard-issue business suits and, most important, lose our Model T-type business thinking. Many view 3G as another evolutionary standard, and to some extent this is true. However 3G, and even 2.5G, has unleashed disruptive monsters that very few people recognise, let alone understand how to control. Many wireless operators are currently in an unfortunate position: not only do they need to understand the new 2.5G and 3G technology and roll it out, but they also need to completely change their existing value chain to meet the new cultural, social, economic and technological development that accompanies them. This is equivalent to changing a Boeing 747 engine while the plane is at 35,000 feet! We all need to understand that next generation is not just about new standards or new technology; it is much deeper than that. It’s about the new digital economy fuelled by the Internet revolution; the enabler of e-business; the technology platform that has levelled competitive playing fields. The web provides technologies that were only available to big telcos and corporate entities with huge budgets, but are now available to virtually any one at a tenth of the price. What is more, the process and the methodologies that telcos developed to rule the analogue economy (1st and 2nd generation) have become barriers to the digital economy (next-generation). In the traditional telco value chain the value is generated inside the telco firm. However, in the new value chain, what were previously tightly integrated inward-looking activities are now disseminated. What was once performed in-house now involves partnerships and out-sourcing. There are three compelling reasons to leave the traditional value chain model behind. First, the explosive growth of the commercial Internet has created a thriving digital economy where the old assumptions about the best way to manage logistics, operations, distribution and customer service no longer apply. Second, the forces that are driving this growth require a new set of core competencies that are focused outside the boundaries of the telco firm. Finally, the competitive landscape now favours those firms with dynamic and flexible networks of relationships and ‘just-in-time’ infrastructure access that can scale to meet surges in demand. 3G and 2.5G have opened the floodgates of e-business on the web. The web today creates its own universe, potentially linking manufacturers and service providers directly with suppliers and customers. Everyone agrees that the web economy is creating unprecedented value for those companies that harness its benefits. For the wireless operators venturing into 2.5G and especially 3G, harnessing the web to their advantage is not just necessary, it is vital to make their business cases profitable. The billion-dollar question is how to build a telco that really does move, grow and produce profits at net speed. Telcos that can’t make the transition by creating sustainable ‘digital value’ will struggle just to survive the decade. To make next generation work and more importantly profitable, Telcos must look at following seven key areas. Re-inventing Core Processes The old traditional telco processes are no longer applicable in today’s economy, where e-business is the business. In fact this is an area that has had very little attention. While many analysts and telcos have been focusing on ARPU to increase revenues, many processes that are still based on the voice value chain are creating bottlenecks and causing havoc on financial business cases. Controlling the Operating Expenditure (Opex) As the network complexity increases so does cost. The challenge is to manage a larger, more complex network with the same number of staff. Needless to say, opex is the culprit that is causing good 3G business cases to fail. Consolidation is a Necessity, not an Option Today’s business case for 3G is typically based on a cumulative capital expenditure (capex) and opex model, starting out with 2G then evolving to 2.5G and finally 3G. At first this may look reasonable (using an evolutionary approach) until 3G becomes a reality and the business case fails because the cumulative capex and opex becomes too prohibitive. Hence many Telcos try and focus on increasing the ARPU to justify the business case. What’s more, ARPU is an external parameter with very little control by the Telco. The solution is a combination of both and evolving towards a hybrid network. A hybrid network is a next-generation network that is access- independent, hosting 2G, 2.5G and 3G networks on the same infrastructure. This has excellent cost efficiencies from a capex and opex point of view and allows the 3G-business case to make sense. This also allows all the ‘re-plumbing’ that is necessary for the digital economy (i.e. flexibility, time to market, etc.). Partnership, Alliances and Out-Sourcing Not all telcos will be able to do everything. Partnering with the right firms will be essential. What is important in this equation is collaboration-the fast secured real-time information flow and, of-course, trust. They will need to seriously assess what activities they want to perform and what they want to outsource. In summary, telcos need to ask themselves what core competencies they possess in-house and what will be their core business in the future. Hard decisions need to be made. Killer Applications or Profitable Applications? While many vendors and Telcos alike have been focusing on ‘wow’ applications and ‘wow’ devices, very few are really profitable. Take for example video streaming. While this may be a ‘nice’ application, the profit margin is likely to be very minimal due to the cost of delivering it. Delivering the right information at the right time and at the right place would be more profitable. Since we are in early stages of 2.5G and 3G, Telcos have the opportunity to control the market perception while educating the market and consumers. This is a critical area that requires a delicate balancing act between the ‘wow’ apps and the ‘profitable’ apps, and setting the right expectations in the market place. Many companies, industry consultants and analysts quite rightly place great importance on applications. However that’s not the only criterion. The key is flexibility and more precisely, a ‘rapid deployment’ environment. In the Internet world application development is measured in weeks, while in the telco world application development is measured in months and years. Put simply, applying telco development rules and methodologies to Internet applications just doesn’t work. Speed, Speed and more Speed Time to market will be critical; the concept of thinking of an idea today then developing it tomorrow and deploying it the day after will be the essence of the next-generation telcos. However, to achieve this, a radical change in the way applications are deployed is crucial; it is necessary to throw away existing processes and methodologies and move to more radical rapid Internet models. Culture Is the Key To achieve the above 6 items is no easy task; however, it will make it lot easier if the Telco culture is Internet savvy and receptive to change. Inside the organisation, the ranks of managers are far from giving up on the business models that have generated profits and increased productivity for their entire careers. It is true that many managers are dedicating an ever-growing slice of their IT budgets to Internet initiatives. But these online programs end up consolidating current practices instead of transforming them to create cocoons and comfort zones. This may provide quick short-term returns, but in the long term it will damage the firm’s competitive positioning. The telco world and the Internet world are completely different and oppose each other from technology, business and more importantly cultural perspectives. Internet culture is radically different from the telco culture, one is black the other is white. It’s as simple as that. The next wireless generation network coupled with the new digital economy demands a radically new and revolutionary approach. Peter Drucker, one of the world’s leading management gurus, summed up the situation quite well in a recent interview. “The corporation as we know it, which is now 120 years old, is not likely to survive the next 25 years. Legally and financially, yes, but not structurally and economically.” Conclusion The past two years have taught us some important lessons. Way back in 2000, in the heady days before the dotcom crash, it all looked so easy: to make money from the mobile Internet, you simply created a mobile version of what worked on the fixed-line Internet. The vogue at the time was for business-to-consumer e-commerce, so the obvious target was mobile e-commerce, or m-commerce. In March 2000, just before the dotcom bubble burst, Jeff Bezos of Amazon, the leading online retailer, predicted that by 2010, all of his firm’s customers would use wireless devices to make purchases. Describing m-commerce as ‘the most fantastic thing that a time-starved world has ever seen’, he predicted that it would change the way people shop. Analysts queued up to make rosy forecasts of m-commerce revenues. With such a bonanza apparently around the corner, is it any wonder that mobile operators paid so much for those 3G licences? But as the NASDAQ crashed and the dotcoms started going under, it became apparent that making money was hard enough even on the conventional Internet, where the technology is mature; the prospect of buying things on phones, with their tiny screens and keypads, suddenly seemed far-fetched. At the end of the day, when all is said and done, any decisions to invest in future wireless must be business decisions not technological. The telcos’ shareholders will demand it!

Related Articles

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More