Fixed-Mobile Convergence: Back with a bang!
After technical, commercial and regulatory problems stalled the first FMC initiatives in the 1990s, more mature technology, in particular wide deployment of IP, have put FMC back on the map and poised for rapid growth. But seamless handover and a wider range of handsets are required for the service to really take off.
by John Williamson
Fixed-mobile convergence (FMC) isn't a new phenomenon. But on an earlier run around the track in the late 1990s, the service was generally dogged by technical, commercial and regulatory problems, and eventually put into cold storage. Now FMC is back, and looks to be back with a bang.
On a recent reckoning, the 24 members of the Fixed-Mobile Convergence Alliance (FMCA) could muster a combined customer base of 500 million worldwide, many of these doubtless candidates for the FMC treatment.
In its 2005 report entitled "Fixed-Mobile Convergence: Creating Value with Successful Business Models," Pyramid Research reckons FMC revenues could reach $80 billion in 2009, or 6% of total communications spend worldwide.
In reality FMC is a mixed bag of tricks from a service perspective. The first FMC product launched by SÃminn (Iceland Telecom), for example, was a hosted PBX Centrex service aimed at SMEs and using a combination of PSTN, ISDN and GSM to provide an identical set of features for mobile and fixed workers. Compare that with BT's current FMC offering, BT Fusion. This basically uses a dual-mode terminal to make regular cellphone calls and then switches over to on-premise wireless LAN calls in the home or office. The WLAN calls are carried off premise by a broadband wireline connection. BT Fusion is initially geared to the residential market - but an enterprise service is due this year - and initially uses Bluetooth for the on-premise residential offering but will transition to Wi-Fi.
Between the SÃminn and BT interpretations, you can find quite an extended range of FMC variants. "FMC is possible at many different levels, from core network infrastructure, business support, operations and access networks to different applications and services," explains Jennifer Fruehauf, ICT research manager at Frost & Sullivan.
Third time lucky‾
According to Ryan Jarvis, chief of convergence products at BT and FMCA Chairman, FMC in the form of services such as BT Fusion is now actually in its third iteration.
The FMC "stage zero" of the 1990s failed for a number of reasons, the key ones being a somewhat rudimentary service proposition, lack of seamless hand-over between different networks and very limited - or no - handset choice. Handsets were in any event bigger than the regular cellphones of the time. "These factors compounded themselves into a very unacceptable proposition," Jarvis says. "Handset attractiveness is a filter for customer uptake."
Jarvis reckons that the second, more recent and more successful flowering of FMC took place when the laptop met the Wi-Fi hotspot. "What's interesting about the hotspot business is that it's the first time that the cellular network operators embraced convergence," he argues. "And they did so because Wi-Fi to the laptop offers a superior service to
Either way, FMC enabling technology has undeniably moved on from the 1990s. In particular, there is now wide deployment of IP, considered key for the completion of FMC. For their part, contemporary cellphones can now accommodate several radios - including GSM, Bluetooth and Wi-Fi - without sacrificing size, weight or aesthetics. In parallel, much progress has been made on the development and standardization of the protocols such as Cordless Telephony Profile (CTP), Unlicensed Mobile Access (UMA) and Session Initiated Protocol (SIP) necessary to deliver convergence services on different wireless bearers. Finally, in an increasing number of markets broadband access - a main component of many FMC schemes - is enjoying widespread availability and take-up.
This is not to suggest, however, that the FMC technology deal is completely done and dusted.
As noted by Andrew Till, director of customer strategy, EMEA, Motorola, terminal battery life is still an issue, especially since the handset is being used to connect to multiple networks and is increasingly being kept in an active state for longer periods of time.
Although solutions have been developed to facilitate seamless handover between different networks, Paul Bassa, product manager at multiservice platform vendor Digitalk, says that this does not include seamless handover of charging from one tariff to another, so from the user's perspective it may be seen as a gimmick. "In the longer term, however, seamless handover between mobile cells and WLAN access points, whether at home or elsewhere, will be a staple requirement of convergent fixed-mobile services," he maintains.
There's also something of a contest between UMA and SIP with regard to which is the best enabler of FMC; the first is sometimes cast as a here-and-now quick-fix, and the latter as a more substantive solution that can more readily segue into the IP Multimedia Subsystem (IMS).
"UMA is a relatively simple extension to the existing GSM network elements. But it has many limitations," contends Grant Lenahan, executive director and strategist at software and services specialist Telcordia Technologies. "First, it compresses voice to GSM coding, and then encapsulates those packets in IP.
Lenahan adds that as an extension to GSM, UMA requires mobile operators to continue investing in the existing GSM infrastructure. This includes specialized network components for UMA, specialized handsets and capacity-driven upgrades to the GSM switches.
"This diverts investment from IMS, delays the benefits for FMC and other services enabled by IMS, and increases the payback period," he reasons. "IMS solutions for FMC avoid many of these problems. However, standards-based IMS solutions are not yet ready for commercial deployment. We expect some carriers (particularly converged carriers with CDMA networks) to deploy pre-standard solutions."
And, while not strictly speaking a technical issue, many observers reckon the range and variety of FMC handsets will have to be significantly expanded before the service really takes flight. "It's fundamental. Nothing happens in this industry until you have a full range of handsets - high-end, mid-range and low-end," suggests Bengt NordstrÃ¶m, chief strategy officer the Technology & Strategy Group, EMEA, at wireless technology and business consultancy inCode. "That's proven by WAP, GPRS and
Market forces come together
Forces now shaping present day telecommunications markets are also radically different from those when FMC had its first outing, and a number are combining to promote the deployment of convergent systems by different types of operators.
Fixed-line and cable operators, attracted by the higher revenue growth potential and EBITDA margins of wireless compared to wireline, are now moving into, and sometimes back into, the mobile space. Some are driven by the ongoing shift away from the use of the wireline network to low-cost cellular service. Indeed, there's some debate as to whether increased availability of cheap cellular actually removes the need for FMC.
BT's Jarvis, obviously, thinks not, styling fixed mobile substitution (FMS) as DIY or "self-help" convergence. "I don't think FMS is competing with the BT Fusion offering, because BT Fusion is layered on top of broadband. Abandoning the fixed-line and having just a mobile handset isn't going to get you a broadband experience for your home PC," he ventures. "And I think even the more price sensitive self-help convergence customer can be addressed by the right FMC offering."
Mobile operators are approaching FMC from the opposite direction with, according to NordstrÃ¶m, many figuring that they need high-speed Internet and even TV to round out their service propositions. "Any service provider that only has one access method is today feeling in a vulnerable position," he maintains.
Fixed, mobile and integrated operators alike are also anxious to increase ARPU and increase the stickiness of their customer base by offering an extended and bundled service repertoire.
Again, all established categories of service providers are getting apprehensive about the challenge to their "birthright" businesses from a group of new kids on the block. "Threats are circling - MVNOs with strong consumer brands and the wild children of VoIP with free on-net calls. There is even evidence of SMS displacing fixed-line voice calls," asserts Lenahan. "For operators, FMC offers the ability to combat these trends whilst retaining customer loyalty. For many fixed-line operators, the attraction of FMC is also in significant reductions in capex and opex offered by new architectures."
Given that with FMC there's a very real sense of one type of service provider encroaching on another's turf, it's interesting to speculate which type will be the first mover and which might prove most successful in the longer term.
Digitalk's Bassa believes that fixed operators are currently most keen on FMC thanks to both FMS and broadband telephony solutions eroding their revenue base. "
NordstrÃ¶m wonders whether all fixed operators have the commercial and management skills necessary to operate a converged network that will include a mobile component. "I wonder whether the execution model would work in reality," he says. "There's not one definition of FMC - just that circumstance makes me wonder how executable it is as a strategy."
A report by Analysys entitled "Fixed-mobile convergence: opportunities and strategies for the mass market" sees success going to integrated operators. "Ownership of both fixed and mobile access networks will allow integrated operators to extract more value from the applications they deliver," reasons report author Stephen Sale. "The challenge for these players is to move from an organization structure divided on the lines of network infrastructure to one that is oriented toward the customer."
Meantime, Sharon Barkai, CEO of IMS database vendor Xeround Systems, questions whether current definitions such as "fixed" and "mobile" will have much meaning a little further down the line. "It's even not clear whether these distinctions will be relevant in a couple of years given the serious merging of functions and carriers such as Orange/France Telecom, Telecom Italia/TIM, O2/Telefonica, AT&T-Mobile/SBC, for example," he speculates.
What's in it for Joe public‾
Technology innovations and supply industry market drivers that favor FMC are fine and dandy, but is there actual end-user demand for FMC‾ This, for NordstrÃ¶m and others, is the really big question.
One possible answer was provided last year when a survey commissioned by Motorola and carried out by the BrainJuicer market research company indicated a strong consumer demand - at least in
So what's the pay-off for subscribers to FMC services‾ While acknowledging that the BT Fusion proposition will be further enhanced over time, Jarvis says BT is initially promoting its service on the basis of the three "Cs" - convenience, low cost and improved on-premise wireless coverage. For the future he calculates that the convenience and cost advantages of FMC products will become available in the street in urban areas as Wi-Fi hotspots appear in more public locations.
"Wi-Fi in the streets will become a reality in urban areas. Convergence won't be just an in-building story," he estimates. "And you are going to see some new access technologies such as WiMAX pushing the range of convergence further. It won't just be a short range play."
And if this is a correct reading of the runes, FMC promises to be even more of a mixed bag of tricks than it is at present.
Down to business
Consumer FMC gets a lot of airplay, but there's consensus that the enterprise opportunity is a very substantial one. As BT's chief of convergence products Ryan Jarvis remarks, it's quite a different sell, focusing on return on investment rather than things like the three "Cs".
In some regards it may be an easier sell. "The user is not the selector of the service or the handset. That has some dynamics around handset choice in that you could have a more limited portfolio of handsets - you just need the right few," points out Jarvis.
From a technology perspective, enterprise FMC may be more problematic to do than consumer. "The enterprise segment is more complicated, of course, as PBX-type functionality has to be provided over cellular, WLAN and existing legacy fixed-line phones," says Mikko Salminen, director fixed-to-mobile convergence, Nokia Networks.
Another barrier to be overcome, according to a Yankee Group report, is that corporates are presently ignorant about what FMC is and what it can do for them. "Today, enterprises are not demanding converged solutions and are largely uninformed of FMC technology,' ventures Nicholas McQuire, Yankee Group senior analyst of wireless/mobile enterprise solutions.