What will be hot in 2007‾

In the one hundred years following the invention of the telephone by Alexander Graham Bell, virtually the only technical advance was Armond Strowger's uniselector switch. Then in the late 1970s, driven largely by deregulation, the telecommunications scene exploded with new developments coming along in swift succession - computerised exchanges, fibre optic cable, mobile phones - the list goes on.

So what are we likely to see happening in 2007‾ TelecomsEurope staff have been staring into their crystal balls and have come up with the following ideas. Space obviously precludes looking at everything so we have chosen what we think are some of the most interesting. No doubt our readers will have their own favourites.

FMC: Big Time Beckons

With a potential customer base of in excess of 817 million - one in three of the planet's telecommunications users - the 26 members of the Fixed-Mobile Convergence Alliance reckon they're sitting on a market about to explode, and many observers believe 2007 will be the year of detonation.

Fixed-mobile convergence (FMC) in its different forms has quite a number of compelling attractions.

From a customer perspective it offers convenience, with one handset for different types of calls and one bill for different services. With improved indoor wireless coverage, FMC delivers a superior communications experience. Typically, the FMC service provider also offers some lower cost mobile calls. Meantime, FMC services are also attractive to those enterprises pursuing lower, or at least controlled, mobile costs and greater employee efficiency. 'Convenience and lower call charges are an attractive combination,' opines ABI Research analyst Ian Cox, 'but call charges need to be simple to understand, and dual-use devices need to be as appealing as single-use devices in terms of battery life, price and choice of models.'

Service providers themselves are attracted to FMC because the convenience of having one device to access different services increases customer 'stickiness' and may give a boost to average revenue per user (ARPU). Additionally, as noted by Pyramid Research, FMC operators can lower their costs by shifting some traffic from a cell phone to a broadband network, while FMC can both provide protection against fixed-mobile substitution for integrated operators and act as effective spoiler of/riposte to offers made by third party voice over IP (VoIP) companies.
There's another incentive for service providers too: in many cases their actual and putative competitors - be they wireline, wireless, ISPs or cable companies - are today busy testing, commercialising or actively selling FMC services.

Notwithstanding such considerations, the mass deployment of FMC services has up till now been inhibited by the existence of a number of technical and commercial shortcomings. Security and the seamlessness of hand-over have been concerns. The logistics of internationally roaming onto different service provider networks have not been comprehensively mapped out. Relative to conventional cell phones, the variety of FMC handsets has been limited. Finally, initial services have been launched on a post-pay basis. 

All this is now changing quite rapidly.

The FMC vendor community continues to bring to market different systems to address the security and QoS issues of convergence. A recent addition here is the Universal Convergence Gateway (UCG) platform from Reef Point Systems. This provides solutions for FMC network architectures defined by the 3GPP, 3GPP2, ETSI and CableLabs telecommunications industry standards bodies, including: the IP Multimedia Subsystem  (IMS); IMS over WiMAX; Unlicensed Mobile Access (UMA); pico cells and femtocells; and wireless LAN Access.

 

Seamless handover solutions for UMA/Generic Access Network (UMA/GAN) have been developed and there has been solid progress in the IMS/SIP-centric Voice Call Continuity (VCC) approach to FMC. In its recent report 'Voice Call Continuity and Multimedia Independent Handover Report 2006-2011: Enabling true FMC services', the visiongain research company argues that VCC is a viable technology that, in combination with multimedia independent handover, will enable fixed and mobile operators to provide true FMC services. visiongain calculates that over 100 VCC-based IMS trials are taking place by vendors and operators worldwide, and says that the first commercial deployments are expected in Q1 2007.

International roaming is understood to be currently engaging the close attention of the various convergence standards bodies and industry groupings, as is the subject of  pre-pay service provision. FMC handset variety is also on the up, with the FMCA forecasting the availability of over 25 different converged handsets by mid-2007.

A recent study from ABI Research - the aptly named 'Fixed-Mobile Convergence' report forecasts that, worldwide, operators will generate US$97 billion in service revenue from FMC applications in 2011. And some serious money is currently being staked on the likelihood that transition to the big time for FMC starts in the next twelve months.

-John Williamson

 

Mobile bandwagon keeps on rolling

Enthusiasm for new, particularly novel technologies, has always been the hallmark of the mobile industry. Basically the industry doesn't do pessimism, and is very much in tune with the Candide line that all is best in the best of all possible worlds. Occasionally this causes problems - remember WAP‾ And the early hype about GPRS and 3G‾ On the whole however, the mobile industry has a lot to crow about. Winning a subscriber base comprising half the people on the planet in less than twenty years is a noteworthy achievement. But there remains that fatal addiction to hype which no setback ever seems to dampen. So what will 2007 bring for mobile‾
What is absolutely certain is that the global GSM/WCDMA subscriber base, currently standing at 2.6 billion will reach the 3 billion mark in the first six months of 2007. Given that it took 12 years to reach the first billion, subsequent progress has been amazing. The second billion came in two and a half years, and the third billion looks like being achieved in around twelve months. However, as Gavin Patterson, principal analyst with Informa Telecom & Media warned in the recent Mobile Market Status 2007, the days of double digit growth are coming to an end. Growth figures have been in decline since 2001 although 2006 still saw a rise of 19.4 per cent but this will fall to 10 per cent in 2008 and to around 3 per cent in 2011.

Care should be taken however, as the figures so proudly trumpeted by the industry are headline numbers. As dual-SIM and multi-SIM ownership grows, the headline number becomes unreliable. According to Patterson, 22.41 per cent of all subscriptions worldwide are a result of dual/multi-SIM ownership and this figure will rise steadily through to 2011. One effect of this, says the report, is that in a market with a high level of multiple SIM ownership, the relevance of ARPU is compromised as it refers to average revenue per subscription and not average revenue per user.

 

So ARPU becomes diluted as users split their mobile spend across several subscriptions.

As voice revenues began to decline, operators had high hopes that the gap would be filled by ever-increasing use of non-voice services, driven by the introduction of mobile data in the form of GPRS and 3G. To date this has not happened. Although take-up of 3G, after a shaky start, is starting to accelerate (81 million subscribers on 134 networks in 59 countries) it seems that the majority of 3G customers are using their phones for voice calls rather than data or multimedia services.

As ever, the industry has found another solution to pin its hopes on, in this case HSDPA aka the data service that actually does what 3G said it was going to do. Offering download data speeds in the same ball park as landline DSL, HSDPA should enable operators to deliver a genuine high speed mobile data service to their customers, hopefully triggering off the long awaited data boom. Around 130 operators worldwide are currently deploying HSDPA, and the range of suitable handsets is starting to increase. 2007 should be the year that HSDPA takes off. Towards the end of the year the flip side of HSDPA, HSUPA should be in trials, with commercial launches planned for 2008.

The hot topic of 2006 was undoubtedly IMS - the IP Multimedia Subsystem. In a remarkably short period of time, IMS has become the Holy Grail of mobile communications, seemingly able to solve all the industry's problems by delivering reduced operational costs, increased revenues and market differentiation. Once again the industry seems to be creating unfeasibly high expectations for a technological solution which is, despite the media hype, some years from full realisation. Indeed some parts of the IMS specification are still not fully standardised yet operators are already knocking on vendor's doors asking for complete IMS solutions.

But what if IMS fails to live up to the hype‾ A report by the Yankee Group points to 'gaping holes and inadequacies in the architecture that have surfaced.' The report identifies some of the key challenges facing carriers' adoption of IMS such as: the fact that vendor's solutions are still not standard-compliant; there are immature standards and a lack of vendor solution interoperability; adoption of SIP being a new requirement; and service orchestration functionality being critical but  lacking a proper standards definition.

In conclusion, Arindam Banerjee, Yankee Group senior analyst, warns, 'The promises of IMS architecture for carriers and service providers can be truly mind-boggling. Beneath all the academics and hype, the road to IMS and next-generation architecture is rocky and treacherous.' It will be interesting to see if IMS maintains its position as the centre of attraction in 2007.

The other technology which received a great deal of attention, and generated a great deal of hype, in 2006 was WiMAX, and specifically mobile WiMAX. The decision by Sprint Nextel to spend US$3 billion on deploying a US-wide mobile WiMAX network seemed to give the nascent technology a huge boost but the reality is somewhat different. Despite its powerful backers, notably Intel and Motorola, spending billions of dollars pushing mobile WiMAX, it is doubtful if even they have big enough warchests to make the technology a winner. There may be opportunities in wireless DSL type deployments but as a true mobile solution WiMAX faces formidable challenges most notably the presence, if not immediately in the near future, of alternative mobile broadband technologies such as HSPA and CDMA2000 EV-DO.

 

With large established user bases already existing it will be hard for a new player to displace these technologies. There is also a lack of available spectrum in key potential markets such as Europe. Operators who might, on the surface anyway, have been keen on mobile WiMAX seem to be having second thoughts. Deutsche Telekom recently announced that it would not be participating in the German WiMAX spectrum auction and was pulling back from future involvement. It seems likely that mobile WiMAX will continue to be hyped during 2007 but real solid business opportunities might be limited.

And finally in this swift gallop around the technologies currently obsessing the industry is mobile TV. A plethora of trials, and even a few commercial deployments, kept excitement over mobile TV at a high level throughout 2006 but there are serious problems to be addressed. There is no agreement on which technology is best, with at least four in the frame. Spectrum for mobile TV services has not even been identified in most markets and, most significantly, no-one seems quite sure how to make money from mobile TV. In almost all the trials, customers report that they enjoy the service, would watch it for a few hours a week, but would not pay very much - if anything -to have the service. So expect mobile TV to continue to make headlines but not much else.

In conclusion, 2007 looks like more of the same in the mobile arena, lots of talk, lots of hype, lots of surface activity, but glacially slow progress towards making the hype into reality.

- Ian Channing

 

Mid-band Ethernet to hit commercial stride

You're a small-to-medium enterprise (SME). Your telecommunications bandwidth requirements have outgrown your DSL or E-1 connection, but you can't cost-justify the expense of a 34 Mbits/s E-3 leased line or the 10 Mbits/s that is the typical entry level Ethernet service. Plus, you're one of the 91% of European businesses (or around 88% if you're in the USA) that are not presently connected to a fibre network. What to do‾  Two and a half years ago your options were somewhat limited, and might have included some form of off-the-wall broadband wireless technology. Now, though, following the ratification in mid-2004 by the IEEE of a new amendment to the 802.3ah Ethernet in the First Mile (EFM) standard, the plain old existing copper telephone network could come to your rescue.

The new Ethernet-over-copper standard - widely dubbed mid-band Ethernet - appears in two flavours. The asymmetric/symmetric 10Pass-TS flavour is based on VDSL while the 2Base-TL symmetric service is based on the same physical layer as Enhanced SHDSL. 10Pass-TS can offer asymmetric rates of around 100 Mbits/s, and 50 Mbits/s symmetric. In principle 2Base-TL provides nominal symmetric data rates of 2.3 Mbits/s over 2,700 to 3,600 metres and 5.7 Mbits/s over shorter distances, with the standard defining a multi-pair bonding scheme that enables 8 pairs to deliver 45 Mbits/s over short distance, and up to 20 Mbits/s over a typical carrier serving area. As Hatteras Networks' vice president of marketing Gary Bolton points out, the two pairs that deliver 2 Mbits/s for an E1 connection in principle can now deliver 11.4 Mbits/s.

'Metro Ethernet is the transport method of choice for both Layer 2 and converged IP networks,' adds Martin Chandler, vice president, product management, Business Markets at Hatteras customer and large scale mid-band Ethernet commercial pioneer BellSouth.

 

'BellSouth mid-band Ethernet speeds of 2 Mbits/s, 4 Mbits/s and 8 Mbits/s directly address the bandwidth sweet spot for converged voice and data communications between corporate headquarters and branch locations and meet the expanding needs of small businesses.'

With 2006 drawing to a close mid-band Ethernet is now beginning to hit its commercial stride. Mehmet Balos, president of Americas and chief marketing officer of Actelis Neworks, reckons that the new IEEE 802.3ah technology is presently being tested by incumbents '"&brkbar; in every country in the world.' And it's not just incumbents that are getting interested. As well as BellSouth, service providers that are commercialising or trialling the new technology, or that are apparently contemplating purchasing the technology from the like of Actelis and rival Hatteras, are understood to include AT&T, BT, COLT, Easynet, Finnish data group Finnet, PowerTel in Australia, T-Com in Hungary, Norway's Telenor, and CenturyTel, TDS Telecom and XO Communications in the USA. One estimate from the Vertical Systems Group analysis house is that, over the next five years, the addressable mid-band Ethernet market in Europe is 1.5 million lines and in the USA is 1 million lines. This could represent, respectively, service revenues of over US$7 billion and over US$8 billion.

Marketed as a precursor to, and sometimes substitute for, fibre network roll-out, mid-band Ethernet is not just targeting bandwidth-strapped SMEs. Applications for the technology also include the delivery of cellular, DSLAM, and fixed and meshed wireless network backhaul.

According to Infonetics Research's 2006 Ethernet Services market size and forecast, mid-band Ethernet services, in which category the research company includes the 1 Mbits/s to 10 Mbits/s, and above 10 Mbits/s to 50 Mbits/s speed bands, were already worth almost US$1.9 billion in 2005, and are forecast to account for 36% of total worldwide Ethernet services revenue by 2009.

-John Willamson

 

Inside out: the rise and rise of managed services

Not that long ago the notion of a network owner farming out responsibility  for the planning, management and operation of its infrastructure to a third party would have been anathema. Now it's increasingly seen as the really smart thing to do and, according to Pyramid Research, is set to form the basis of a global business worth US$55.3 billion by 2010.

Actually, outsourcing or managed services, is already a very substantial activity for companies such as Nokia. In the space of three days in late 2006 the Finnish mobile giant announced deals involving managed services - with India's Bharti Airtel Ltd and Vodafone Australia - worth a cool US$630 million. At that point Nokia had a reference list of close to 60 managed services contracts. 

Fellow Scandinavian vendor Ericsson is another big managed services player. In November when it won contracts for the expansion of existing outsourcing arrangements with PT Telekomunikasi Selular Indonesia (Telkomsel) and Yoigo in Spain, the Swedish company had officially announced more than 100 managed services contracts with operators worldwide since 2002. In all its then current managed services contracts, Ericsson was overseeing networks that together served more than 80 million subscribers worldwide.

And although much of the managed services action takes place in the mobile arena - the consequence, perhaps, of the cell phone service industry being newer and less hide-bound than its wireline counterpart - fixed operators are also joining in.

 

Alcatel, for example, has an established outsourcing deal with Telecom New Zealand while, more recently, Siemens has been contracted to manage part of the wireline network of Brasil Telecom and the nationwide network nodes of the Turkish telecommunications operator Borusan Telekom.  

So what's the attraction‾ Cost-saving, the telcos's ability to concentrate on its core business, and the handing over of responsibility for technical upgrades are the managed service providers' three chief selling points. Vodafone Australia touched on these on the occasion of the announcement of the deal with Nokia. 'Outsourcing the management of the networks to Nokia makes good business sense for Vodafone Australia. It delivers cost efficiencies and, at the same time, allows us to control the quality and technical direction of our networks so that we can deliver the best and most advanced technology available to Australian customers,' stated Vodafone Australia ceo Russell Hewitt.

Hewitt's take on cost savings echoes the line taken by Pyramid Research in its recent report 'The New Frontier for Vendors: An Analysis of Network Services and Outsourcing'. In this analysis Pyramid suggests that while operator savings vary depending on the scope of the outsourcing relationship, outsourcing can reduce the cash costs of a typical mobile operator by 20% to 25%, or more. 'Operator savings stem from reduced CapEx through network sharing and effective asset management, as well as from OSS and network management outsourcing,' asserted report author Elizabeth Bramson-Boudreau.

On the score of technical complexity, the visiongain research firm sees the advent of the IP Multimedia Subsystem in particular as a catalyst for expanding the managed services opportunity. In its report 'Managed services and hosting 2006-2011: Rationalising network and content outsourcing' visiongain calculates that over 40% of all operators will adopt some form of managed services strategy by 2011, and that the complexity of IMS will stimulate much of this growth from the new year onwards.

As you might anticipate, not everything in the network outsourcing proposition is as easy as falling off a log. Although in the more ambitious deals operator personnel get transferred to the incoming vendor, it's natural for a telco's existing operational staff to see support of outsourcing and managed services as a career-limiting move. Some established (conservative‾) operators may also be a little coy about owning up to buying in expertise to run their core networks - some perhaps persuaded that this jeopardises their tier one status. It may also be the case that network operations are easier to outsource to an equipment vendor if the vendor concerned is also the infrastructure supplier, and the network and services being rolled out are new.

But even with these caveats, managed services will become more and more a strategy of choice as operators try and transform themselves into lean, mean and more nimble machines.

-John Williamson

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