Telecommunications
Operators and 3G:
Will They Lead the Band or Play Second Fiddle?
3G is picking up speed, even though
right now there are no signs of an imminent take-off.
Granted, as of May 2003, there were some 46.4 million
subscribers worldwide, but don’t let the figures
fool you – the Japanese market alone accounted
for 80 percent of the total.
Nevertheless, it’s quite
clear that European operators will have to forge ahead
rapidly. The move to 3G technology is the only opportunity
for growth in mobile telecommunications and the only
way to boost an ARPU (Average Revenue Per User) that
has stabilized, at an average of about 32 Euros. Telecommunications
operators also have to do all they can to capitalize
on their substantial investments in UMTS operating licenses.
What are the keys to success for
operators in the 3G sector? How will their relationships
with content providers change? How should their information
systems evolve in order to incorporate the new links
in the billing chain?
François Rabasse, Deputy
Director of the Sopra Group Telecommunications Division,
and Fergus O'Reilly, Director of Product Marketing at
Highdeal, talk about some of the developments in the
telecommunications industry and how to meet the challenges
facing operators today.
 Transaction
Reporter : Why is 3G such a tough market for telecommunications
operators?
François
Rabasse: First of all, because it’s a supply-driven
market. No one knows which services will really work.
We have to take risks, both in technology and marketing,
and innovate to keep ahead of the competition.
Fergus
O’Reilly: The market for Mobile Multimedia
services in Europe seems extremely promising because
of its maturity and the decision to adopt a single standard
for 3G.
Nevertheless, new applications
linked to Multimedia services are having trouble finding
an audience. Ninety percent of the revenues from mobile
data services come from traditional SMS services, and
industry analysts believe that in 2007, messaging will
still account for 75 percent of the total.
François
Rabasse: Another potential pitfall is the “technological
funnel” effect. Time to Market is essential to
the success of a new service, but often the operator’s
IT is a critical part of the launch process. And, in
order to industrialize one application, an operator
has to study a dozen others, develop five, and take
three all the way into the pilot phase. This involves
a huge investment and, if successful, nothing can stop
competitors from imitating the product within a few
months and saving on all the upstream phases.
TR:
It is said that Mobile Multimedia is going to change
the competitive landscape and the relationships between
the different players involved. What do you think?
Fergus
O’Reilly: Mobile Multimedia aggregates
various services that don’t depend on a single
operator: the value chain is more complex, as is the
pricing structure. The basic cost per unit model is
difficult to apply to a message that includes text,
images, videos and/or music. Other business models are
appearing that take into account the volume of data
transmitted, for example, or the value of the message
according to its urgency or exclusivity.
François
Rabasse: Operators have to share the revenues
from each transaction with many partners. This is already
the case for roaming and interconnect and for local
public networks offering Wi-Fi connections. 3G reaches
yet another level of complexity by bringing multiple
content providers into the value chain. Operators have
to integrate a Partner Relationship Management (PRM)
tool into their information system. The tool has to
be regarded as a specialized information system on its
own, and not just as an “accessory” of the
legacy system.
TR:
For you, the boom in Mobile Multimedia will give content
providers an increasingly important role…
François
Rabasse: It’s true, the balance of power
is evening out. Telecommunication operators recognize
that the appeal of these new applications will depend
on the quality and exclusivity of the content transmitted.
Fergus
O’Reilly: A “creative tension”
is leading operators to propose targeted and attractive
partnership agreements to top content providers, such
as the major film studios, television channels, etc.
The challenge is to keep control of the end-user billing.
François
Rabasse: Particularly because there are now other
ways of paying telecommunications bills…
Fergus
O’Reilly: Right. Telecommunications operators
can handle micro-payments, for occasional services such
as weather reports, for instance. But they are no longer
alone: groups like Visa offer content providers electronic
wallet solutions. And when it comes to larger payments,
for downloading a video or music, for example, the transactions
can be carried out online, either directly through the
web site or a third-party. The challenge for operators
is to remain legitimate and efficient in their role
as leaders of the band. Otherwise, they may be relegated
to billing just for bandwidth.
TR:
What infrastructures should they set up for handling
3G customer billing?
François
Rabasse: Operators should have an information
system capable of analyzing transactions and pricing
them in a very timely way. They should be able to gauge
the profitability of a new application almost in real-time,
differentiate between the content and the container,
pay out commissions on the transactions, report regularly
to their partners on traffic flow and distribute revenues
to the different players. For business, the technology
has to perform three vital tasks: real-time management
of data from numerous sources and platforms, correlation
of static and dynamic identifiers, and management of
huge volumes of transactions.
Fergus
O’Reilly: They have to open up their systems
to incorporate the new elements in the billing chain,
without compromising their existing technology. The
Highdeal solution fits these requirements perfectly.
TR:
Your companies have recently established a partnership
involving a project called 3G Lab. What exactly is it
and what are its goals?
François
Rabasse: The Sopra Group 3G Lab is a showcase
for our technological and business know-how. We are
offering to share our expertise and ideas with our mobile
operator customers and large service or content providers.
This enables us to experiment with 3G solutions, evaluate
the best software packages available, get a jump-start
on the pre-integration of complex systems, and work
on prototypes or customized models through Proofs of
Concept.
Fergus
O’Reilly: We’ve been able to set
up a complex revenue chain that heralds the systems
of tomorrow. We’ve defined and integrated various
models of service usage to illustrate different billing
scenarios and complex transfers. By integrating Highdeal
Transactive in the Sopra 3G demonstrator, we’ve
been able to show the essential PRM functions necessary
for billing the type of services that the most advanced
players predict for the future.
NOTE: Join us for a demonstration
of the solution developed by Sopra and Highdeal at the
Sopra Group offices in the Grande Arche de La Défense
on November 21, 2003, at 11 am. Refreshments will be
served after the demonstration
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