OXFORD, United Kingdom-The phrase on everyone’s lips within the cellular industry at Telecom ’99 will be value-added services, a world apart from the talk at the 1995 exhibition. This simple dictate is being touted as the only way for operators to achieve the future nirvana of ever-growing revenues.
Industry analysts are making stark warnings that operators that ignore this call to radically re-engineer their existing business models will be consigned to nothing more than “bit-pipes” with little hope of survival.
The message from infrastructure manufacturers is also clear: Cellular operators must evolve into companies that can offer and support a wide variety of mobile services which will appeal to existing and new subscribers. However, these new services are going to be based around mobile data, a technology that has promised, but failed, to bring newfound revenues for longer than most can remember.
Hans Snook, chief executive officer of U.K.-based cellular operator Orange, claimed he can recall for each of the last 15 years being told that mobile data was going to mean the biggest explosion ever of products, services and revenues, but it never occurred. He estimated that, with the exception of the Nordic operators, the amount of data currently on GSM networks today is still only about 1 percent to 2 percent.
This pragmatic view is based on the past difficulties for cell phone users to establish even simple mobile data connections. Only the most determined and expert users were prepared to tolerate the mine field of incompatible software and jumble of cables to link the cell phone to a laptop at a data rate of 9.6 kilobits per second (kbps).
However, as Snook and others are prepared to admit, this effective barrier against mobile data uptake is about to be breached by the likes of High Speed Circuit Switched Data (HSCSD), General Packet Radio Service (GPRS) and third-generation UMTS.
Nokia, a long-time proponent of mobile data, claimed that, until these Internet Protocol-based technologies became a reality, the computer industry was not ready to invest the time and money developing and promoting mobile data applications that would appeal to the mass market. But, combine these infrastructure technologies with Wireless Application Protocol (WAP), Bluetooth and Symbian’s EPOC operating system, and the picture for mobile data is transformed from the simple “black and white” of some years ago, to a dazzling technicolor of possibilities.
The nimble operator
The realization that the cellular industry is perhaps at its most significant crossroads since its inception has already caused some operators to support mobile data. Most infrastructure developers report their more nimble and market-aware operators are close to deploying, or have launched, new services based upon HSCSD or GPRS.
According to Motorola, this sudden rush by operators to be first to market with data services is based on the premise that it will dramatically reduce churn. It will be hard for rival operators to recruit a subscriber who has already signed up to use a range of data services offered by an existing operator.
However, this call for operators to dump their existing voice-based business models and jump into the unknown world of services has provoked a change of thought from the equipment developers. Most major manufacturers claimed they are prepared to examine the support offered to operators making this migration.
Woody Ritchey, corporate vice president and general manager of Motorola’s Systems Integration Division of the Network Solutions Sector, said his company is looking at creative forms of network upgrade financing, or part owning and managing the operator’s cellular network. “None of this (is) out of the realm of possibility. Some operators are looking at fairly unique financing schemes, and/or utilization of networks without owning them outright,” said Ritchey.
This concept, labeled Virtual Network Operator (VNO)-in which the operator uses, but does not necessarily own the network-is gathering credence.
Ake Persson, president of Ericsson CDMA Systems, said it is no longer strategically important for the operator to run the network. “We are experts on operating and tuning networks after all, and would suggest we are better positioned to do this work. I believe you will see the equipment developers providing this sort of service to a much greater extent in the future,” predicted Persson.
Persson said some of Ericsson’s customers have made it clear they will outsource the network operation, while they focus on recruiting and retaining customers and providing services. However, Persson is conscious that, given the competitive position in each country, some operators may be content with the status quo and reluctant to change.
Global branding
This shift away from owning the infrastructure opens the door for the more marketing-aware operators to move outside of their network-imposed boundaries. Vodafone-AirTouch and Orange are but two examples of operators looking to establish their service brand on a global scale.
Orange’s Snook said the company’s biggest objective in going global is to do it without spending a ton of money building new networks every year. “We want to be among the first to go into different countries with the Orange brand and operate as though we are an operator, without owning the network, but still controlling and providing the services.”
However, he also admitted the company’s biggest challenge is to have Orange’s service hosted on someone else’s network in a country, without being seen as a competitor.
While this global shift might seem far-fetched, there is evidence within the Internet arena that offers firm support. The runaway business success of Yahoo could be transferred to the cellular world with the operators acting as portal suppliers of choice to their subscribers. If this played out, operators would become aggregators of content and services, with the responsibility of marketing the overall package and managing the billing. This would create networks that are run almost as utilities, with any number of operators using them to offer customers a mix of content and services.
This scenario calls for the wholesale adoption of IP as the base architecture, with voice calls becoming no more than data packets.
Those who have tested voice over IP (VoIP) admitted to its potential but claimed it will be two to three years before the technology can provide the quality of service now dictated by customers.
But if the market potential exists, technology has the habit of quickly catching up. IP has the attention of the whole telecommunications and computing industry and will dominate the technical landscape of the future.
