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Telecommunications: seismic shifts
ahead
By Charles Goldfinger,
April 2006
Over the last few weeks, the
pace of restructuring of telecommunications operators
has accelerated. And it affects not only the declining
fixed line business but also the (still) flourishing
mobile business. In early March, 2006, AT&T announced
that it will merge with BellSouth, a Baby Bell in an
euro 60 billion transaction. Few days later, Vodafone
sold its Japanese business to Softbank, Japanese Internet
conglomerate for close to euros 13 billion.
The consolidation of traditional
telcos has long been expected, under the combined impact
of deregulation and commoditization of fixed line business.
What is new in current manoeuvres is that they are driven
by strategic challenges in mobile business.
These challenges include:
- Technological integration
among different mobile standards (GSM, TDMA, CDMA)
and the speed of convergence to CDMA (and related
technologies such as High Bandwidth (HSDPA))
- Pricing structure rationalisation
in order to increase usage and to prevent
- Declining ARPU (average revenue
per user), which then results in lower AMPU (Average
Margin Per User)
Underlying these challenges lurks
a spectre of the wireless high-speed Internet. This
is the promise and the menace of CDMA and other 3G technologies,
which finally are getting ready for prime-time and full-fledged
deployment. Much is made of the threat that VOIP (voice
over the IP) poses to fixed line telcos business. But
the threat is actually as real and economically much
more serious to the mobile voice business. And mobile
voice is at present both the cash-cow and the growth
driver of a great majority of telecommunication operators
across the world. It was the acquisition of Cingular
Wireless that triggered the AT&T – BellSouth
merger.
It does not require much crystal-balling
skills to foresee that the VOIP over wireless high-speed
internet will cause drastic adjustments in pricing of
voice services, similar to the one that broadband Internet
imposed on ISPs, forcing them to shift from time-based
to fixed-use pricing. To the extent that mobile revenues
are much higher and more important to telcos operators
than those generated by ISP traffic, the adjustment
will be more dramatic and painful.
Telecommunication landscape is
likely to experience seismic shifts, similar to the
one that shook up the computer industry between 1985
and 1995. By the end of this period, none of the major
players has survived in its previous incarnation and
the sectoral hierarchy was changed beyond recognition
with new players (Microsoft, Intel and Dell) becoming
market leaders. We can anticipate similar or even bigger
upheavals in the telecom domain. New players are beginning
to show their hands. In this respect, the Skype acquisition
by eBay and Softbank’s entry into mobile are the
first harbingers of a massive invasion. It is difficult
to see Google or Yahoo not entering the fray. Existing
players, in particular the historical telcos, have between
eighteen months and three years to define and put in
place their strategic response. This entails further
restructuring of their business lines. More fundamentally,
it requires a serious look at the core business model.
Telcos need to move away from traffic-based and direct-billing
revenues and implement new pricing structures, based
on service, content and third-party pricing (such as
advertising). |
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Highdeal Point of View
Owning
the customer relationship
Operators
must enhance and add value to their direct billing relationship
with their customers. This means managing multiple payment
types (prepaid, postpaid and hybrid), handling both
small and large transactions, and allowing groups of
customers, such as families or small businesses to control
their spending with allowances per service or per subscriber.
Offering
rapid application development platforms to third party
content and service providers
IMS
is the perfect architecture to eliminate headaches for
application developers. It takes care of subscriber
management, session control, access network and device
signaling independence. It allows hot new 3rd party
services to be brought to market more rapidly on the
operator's network than they would as standalone Internet
applications. The IMS infrastructure needs to be linked
to a flexible, service-independent charging and revenue
sharing system. This will allow new services to not
only be rolled out with quick time to market but will
also allow the rapid implementation of creative business
models to equally shorten time to profit.
Learn
more about the Highdeal solution for next generation
service pricing, rating... |
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