The last five years have seen unprecedented changes in the mobile industry, in particular in the equipment supply chain.
Pursuit of an all-IP future has seen development in TDM network equipment halted, and loss of the specialist skills required to enhance proprietary infrastructures. With 90% of all telco revenues still generated by person-to-person (P2P) communications — namely voice and SMS delivered over traditional TDM — the idea of an all-IP network looks a significant risk in the current market.
However, a combination of heritage telco and new internet technologies offers a pragmatic escape route for the stranded service provider.
Back in 2004-05, the road ahead was IP-based mobile communications services. Vendors jumped to create solutions that service providers, looking at an increasingly bleak future for voice (the current number-one revenue generator), enthusiastically accepted.
Research dollars were reassigned to IP solutions and support for legacy kit, like those of the first-generation Intelligent Network (IN), has subsequently been “end-of-lifed”. Consolidation has also left many vendors with “two of everything”, an unenviable position in any industry under price pressure. As a result, duplicated equipment lines have been terminated and hundreds of legacy-skilled engineers have been lost to natural wastage, redundancy and retraining.
But then 2008 came around and the global economy nose-dived. Reducing network capex and opex is no longer a priority, but a necessity.
Large core-network projects are being scaled down, migration strategies are heavily scrutinized, and the all-IP future originally envisaged by both the vendors and service providers couldn’t be further away. Today we have a generation of established providers with an incredibly uncertain future, stranded in no-man’s land between the business imperative to create innovative and compelling services for today’s consumers, but struggling to do so on existing heritage (and end-of-lifed) infrastructure — without either the product support or the in-depth technical understanding of the network that has, historically, characterised their relationship with the vendor.
Amid all this change remains one underlying constant: today’s established mobile service providers offer the same set of services, based on the same (or similar) network technologies as their competitors – i.e. the Intelligent Network (IN) architecture and SS7 signalling.
This makes service differentiation a major challenge at best. IP and IP Multimedia Subsystem (IMS) was exactly the kind of platform that promised to let service providers rapidly deliver a host of new services to consumers, based on their particular preferences. These could be turned on or off depending on their success, handing the power to differentiate back to the service provider, who, through the delivery of compelling new services, could secure the continued loyalty of an inherently disloyal consumer base.
However, service providers have proved reticent to adopt a rip-out and replace approach while tremendous value remains within their existing networks. They are still managing to buck the global downturn trend…just. Voice commoditization may be an increasing challenge, yet person-to-person voice and messaging still generate over 90% of revenues. The challenge is how to augment the value of this P2P heritage so that, at least in the short and medium term, the revenue curve continues in the right direction.
Despite the severe capex spending restrictions being imposed at present, there remains an opportunity, and a strong case, for investment in the service layer — otherwise, service providers will be forced to deploy only those limited and undifferentiated services already supported by the vendor. Such a case can be made for minimal investment in the heritage network precisely because of its two decades of success. Opening up the service layer in the core, by using standards-based, commercial-off-the-shelf (COTS) hardware and software to create a service delivery platform (SDP) is a significant step to delivering a new level of service layer agility at the right price.
Indeed, a combination of heritage telco and new internet technologies such as JAIN SLEE and Parlay X, creates a pragmatic escape route for the stranded service provider. The very fact that today’s evolved IN offerings bridge the telco and internet worlds — retaining carrier-grade ‘5 9s’ reliability and the flexibility and ease of development of Java programming — allows much-needed service innovation in the short term.
In this much more pragmatic IN scenario, service providers can achieve significant gain by simply augmenting existing services such as those deployed into the post-paid community, and making these available to a pre-paid audience. VPNs, community calling plans and location-based services are such examples.
There is also a persuasive argument that deploying a new-generation IN will significantly reduce the burden of support required by increasingly expensive proprietary platforms.
While replacement may seem a drastic word in today’s economic climate, adding an application server — with costs in the tens of thousands (rather than the tens of millions) — will deliver the kind of agility to let service providers extend their P2P portfolios into the “smart services” arena, building on the undoubted consumer comfort with voice and messaging services, and adding real value.
The services that will be delivered here will use data the service provider network already owns — users’ service preferences, their usage patterns, and extra attributes such as their location and presence information — to provide smarter, more tailored services. On their own, they won’t always create high revenues, but they will be high volume. And, as has been proved time and again, “high-volume, low-unit price-point” services generate extremely high revenues and margins. Furthermore, by combining a number of these capabilities, through (for example) integrating user context and preferences with messaging and voice calling, new high-value services can be created at minimal cost.
By using the value of additional attributes such as location, personalization, user preferences and user profiling, extra end-customer value is created in the service as it moves from “basic” to “intelligent”. However, telecoms business models are changing, too.
The traditional service provider-subscriber model is being complemented by advertising and sponsorship-funded models involving multiple parties. This is the concept of “turning a dumb pipe into a next-generation intelligent network” based on access and use of subscriber data to create and deliver more innovative and more targeted, revenue-generating P2P services, at a unique new price point.
Today, the closed IN infrastructure predominates, but the open API model whereby third parties are able to innovate is gaining ground.
However, to ensure that service providers continue to realise the core value of their legacy infrastructures and build on the customer data they own, a third strategy is emerging under which they can innovate using the service delivery platform (SDP) and, crucially, within their own core environment.
Jonathan Bell is OpenCloud’s VP for product marketing. He has worked in VC-funded software product companies in the telecom industry for nearly 30 years. www.opencloud.com