Service Providers' Competitive Response
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Service Providers' Competitive Response

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    Service Providers' Competitive Response Service Providers' Competitive Response Document Transcript

    • Service Providers’ Competitive Response The Why and How of Network, Services and Business Transformation By S. Balachandran, T. de Groot, M. Lapierre, P. Lopes, A. Vandenhove Observations from the experienced transformation warrior Introduction The telecommunication market will transform into an IP-based world, where the strategy for growth has to take into account media and Internet convergence, and build end-to-end value into the network. This paper presents the Alcatel-Lucent Acuity™ Transformation Framework which supports service providers in implementing Competitive Transformation strategies to succeed in today’s environment as well as to anticipate tomorrow’s business models. Strategic trends in telco transformation initiatives Telecom service providers (SPs) today are facing difficult challenges such as the decline of voice revenue and subscriber loyalty, the increase in competition from pure Internet-based operators, and the looming threat of becoming a commoditized pipe provider. To counter these threats, SPs are proactively implementing initiatives that improve their ability to compete, generate new services, reduce overheads, and improve margins. At a macro level, these initiatives can be categorized as Network, Services, and Business Transformation, the latter of which includes related process transformations. Driven by the need to modernize and capitalize on the trend of all-IP networks, the Network Transformation initiative strives for cost reduction and network simplification. For example, driven by a rapidly aging PSTN (Public Switched Telephone Network), British Telecom’s decade-long 21st Century Network (21CN) implementation was aimed at replacing the PSTN network, thereby reducing cost. BT initially claimed that 21CN would eliminate 70% of its switches/boxes, and lower operational expenditure (OPEX) by around 10% per year1. Mirroring BT, Telecom Italia initially announced 2 that it expected a 5% reduction in OPEX and 10% reduction in CAPEX (Capital Expenditure) due to its (since shelved) fixed and mobile core convergence. Services Transformation focuses on the rapid introduction of new services to the market in order to capture new revenue streams and/or maintain market share. It also involves leveraging network capabilities and enabling service providers to offer context-aware personalized and blended services over the converged network. A well-designed Service Delivery Environment (SDE), which enables the control of service delivery from and across multiple service platforms (IMS, IPTV, Web Services, etc.) over the same IP infrastructure, while optimizing common enablers and operations, is a key enabler for major services transformation. Examples include France Telecom’s VoIP over broadband, BT’s Unlicensed Mobile Access service, which uses one terminal to access seamless voice service over fixed and mobile networks, and Deutsche Telekom’s World Cup “TV in the pocket” service. 1 British Telecom Group, “BT Network Transformation”, CEO BT Wholesale, 16 June 2003 2 Telecom Italia Group, “Meeting with the Financial Community 2006”, Milan, 8 March 2006 enriching communications > premier issue > 2007 | http://www.alcatel-lucent.com/enrich 1
    • Business Transformation occurs when operators diverge from the traditional business monetization and network operations models. Examples include the move from traditional ‘Minutes of Use’ and ‘Pay per Mbit/s’ models to more sophisticated models that combine subscription, transaction, usage, and advertising revenue. Vodafone’s partnerships with Google (for search) and Yahoo! (for advertising) are examples of such an initiative. Driven by the need to compete cost-effectively with Internet Service Providers – which need little in terms of infrastructure for customer and network management – Business Transformation initiatives aim for a leaner business structure through process simplification (Back Office, OAM), product rationalization, and customer interface optimization. The change in business model opens the door to a real and fundamental transformation on many levels. This can even drive operators to large-scale outsourcing: for instance, Telecom New Zealand’s outsourcing of turnkey network management to Alcatel-Lucent. Bell Canada’s Galileo project, a company-wide, cost-reduction initiative designed to make the legacy system more efficient, is another example that aims to simplify the end user’s interaction with Bell (through self-provisioning, single bills, simpler calling plan, etc.) and improve Bell’s internal operations. Needless to say, all three transformations have an impact on Operation and Business Support Systems (OSS/BSS). IP-based service delivery (Triple Play services in the case of fixed operators, and broadband access for mobile operators) over a converged IP/MPLS core infrastructure appears to be the common trend. In the service plane, the emerging consensus among fixed and mobile operators is a gradual migration towards a carrier-grade SDE which can start with IMS. This transformation enables new content and blended services, while differentiating in terms of access bearer qualities. Transformation drivers A combination of revenue pressure, operational efficiency and cost-effectiveness is the common driver for all transformations. Although there are many similar external market drivers that are more or less applicable to all operators, there are also many local factors such as the degree of competition, consumer behavior, financial obligations, and regulation that influence operators in a particular direction. Carefully discerning the underlying rationale is the first important step for service providers to achieve their transforma-tion objective. Despite different local factors, the rate of customer churn is the decisive factor that drives or slows down a service provider’s motivation to transform. The other contributing local factors are: • Loss of legacy revenue: this is particularly true for SPs’ fixed operations. • Regulatory pressure or opportunity: this may induce or slow down a renovation of the access network. NTT in Japan is a classic example of how regulation helped accelerate fiber deployment. Likewise, FCC protection against fiber loop unbundling facilitated Verizon’s move to deploy FiOS, a US fiber- to-the-home network. • Outdated PSTN equipment: this may require rapid replacement by next-generation network (NGN) equipment because of the lack of replacement parts, software obsolescence, etc. An NGN network also occupies less space, and generally incurs lower operational costs than an older circuit-based network. • The need to launch new services: this is a common concern for all service providers. For some it is a key priority, for example AT&T’s launch of IPTV services driven by cable competition. Table 1 illustrates the transformation program announcements and timelines of several Tier 1 service providers. Most transformation programs are multi-year endeavors, extending over anything from five to nine years. enriching communications > premier issue > 2007 | http://www.alcatel-lucent.com/enrich 2
    • Alcatel-Lucent is the service provider’s strategic partner of choice in several large transformation programs, including AT&T, Telstra, TNZ and KPN. In this role, Alcatel-Lucent offers worldwide program experience, business consulting and an end-to-end network integration expertise perspective, and is accountable to deliver the promised goals within the time-to-market constraints. Table 1: Service providers’ transformation program announcements (indicative timeline) Building blocks of transformation The four key areas of investment in transformation are related to: access architecture; core networking; applications; and professional services. Half of the Telco’s cumulative transformation CAPEX is allocated to civil works and customer premises equipment such as set-top boxes (STB), residential gateways (RGW), and next-generation handsets. The following sections describe the major building blocks of a transformation initiative. Access and Core architecture Broadband deployment is the common thread across all fixed network operators. Fiber-to-the-Home (FTTH) and ADSL represent a strong component of network transformation, and in this area, Alcatel-Lucent serves more than 45% of the world’s broadband deployment, according to the Dell’Oro Group Quarterly 2006 DSL reports. In the Telco domain, there have been two generations of broadband access deployment. The first phase of deployment started well before any transformation program, and consisted of ADSL only. This was seen by the operators as an add-on to the PSTN network. More recently, telecom operators have realized that they must transform their PSTN networks fully to broadband, and have considered other access technologies like VDSL, FTTN, or FTTH. Meanwhile, Cable operators have introduced uplink transmission, interactivity and Voice over IP/NGN technologies. Operator preference for access technologies varies widely, between fiber and copper, ADSL2, VDSL and FTTH. While most operators agree that FTTH is the preferred target architecture for new, large- scale greenfield deployments, many are deploying hybrid-fiber-copper upgrades in brownfield deployments. Note that for large greenfield deployments, a 2.5 Gbit/s GPON3 FTTH deployment is more cost-efficient and flexible than either hybrid-fiber-copper or point-to-point Ethernet over fiber. 3 Gigabit Passive Optical Network enriching communications > premier issue > 2007 | http://www.alcatel-lucent.com/enrich 3
    • In fixed and mobile access and core modernization, service-aware aggregation routers and data-aware optical networks have become the preferred aggregation technologies. The service-aware capability of Alcatel-Lucent’s service routers has triggered the sharp increase in Alcatel-Lucent’s share in this market. Mobile operators, who started their network and service transformation later than their fixed colleagues, are dedicating CAPEX to rationalizing backhaul, and are gradually shifting to an all-IP core, which includes the migration of their mobile core to an NGN. Once again, service routers and the NGN are used as the unifying agents of transformation. Applications and associated control architecture Table 2 summarizes a number of SP announcements with respect to control plane architecture and applications. BT and KPN are the only operators to announce a definite date for PSTN switch-off. Most operators deploy an overlay NGN/IMS control plane, while simultaneously freezing or reducing TDM investments and migrating customers to the new control plane infrastructure. Incidentally, KPN is one of the first operators to choose an aggressive “cannibalization” migration strategy, where they repurpose their existing TDM voice lines for VoIP service. Most Tier 1 carriers seem to agree that IMS is the preferred communication service control plane design. Yet for most operators, the adoption of IMS is only gradual. AT&T, FT, KPN and Cingular are at the forefront of full-scale IMS network deployment. Alcatel-Lucent has market leadership in IMS architecture, which fixed and mobile operators view as the starting point for converged multimedia communication services. It preserves value in the network, and provides an efficient framework for service time-to-market, in contrast to the end-to- end Internet service model utilized by Internet competitors. IMS provides network capabilities that enable personalized service delivery with Quality of Service guarantees that can be differentiating assets for telecom operators. Table 2: Operators’ new service plans driving transformation enriching communications > premier issue > 2007 | http://www.alcatel-lucent.com/enrich 4
    • In addition, Alcatel-Lucent has defined an architecture blueprint: a carrier-grade SDE to support SPs in introducing new service platforms, migrating existing services, and consolidating their OSS/BSS in a coherent context. The SDE is a framework that allows SPs to provision, personalize, deliver, bill, and manage services across different networks and service delivery platforms (SDPs), such as IMS, IPTV, and Web Services, with the quality and transparency expected by end users. The SDE provides SPs with a fast, flexible way to provision and profit from many applications available to subscribers across a wide variety of service platforms. Most wireline operators are taking an incremental path to IMS, establishing relatively small NGN overlays focused on single revenue-generating applications such as residential VoIP, corporate IP Centrex, or video conferencing. AT&T, for instance, announced that it would link its AT&T/ BellSouth/Cingular networks with a common IMS framework and is expected to introduce a few service enhancements. But the biggest impact of IMS won’t be felt until AT&T begins extending its Lightspeed IPTV service from screen to handset (basically allowing customers to take their IPTV subscription on the road), and implementing hand-off between the GSM WAN and the home wireless local area network (effectively erasing the distinction between the home and wireless phone). A customer could then have a single number, and the network intelligence could determine not only where that number rings, but under what circumstances. Mobile operators, on the other hand, are taking the lead in establishing IMS-based networks, and introducing next-generation applications such as presence-enhanced calling features, mobile video, and location-based services. Personal content applications are likely to receive increased attention, initially through partnerships with Internet-based service providers as illustrated by the recent Verizon Wireless/YouTube initiative. Vodafone plans to begin supporting real-time IMS applications such as VoIP, gaming, and presence-based calling features. Professional services The innovator’s dilemma argues that “commoditization of one part of the value chain will lead to de-commoditization of another part of the value chain.” While IMS simplifies individual network elements, it also leads to integration complexity, as elements that were previously integrated into a single switch are now distinct. Due to the networking skills and knowledge of the multiplicity of equipment and communication technologies required, only a global company with multi-vendor integration competency like Alcatel-Lucent can master this kind of global network and services integration. Tier 1 telecom operators have an increased need for consulting and integration services to succeed in transforming their networks. Alcatel-Lucent is recognized as a reference point and trusted partner with superior transformation expertise and services skills. A broad skill set and turnkey professional service capabilities are needed during transformation projects: • For Network Transformation: network and business case modeling; network and operations consulting; network planning, design and optimization; multi-vendor network integration, support and operation; OSS/BSS integration; lab testing; migration planning and implementation; project management; etc. • For Services Transformation: service and economic modeling; application development and integration; OSS/BSS integration; application hosting; subscriber data optimization, intelligence and analytics; service delivery environment implementation (Figure 1); etc. • For Business Transformation: business & IT consulting; business modeling; business transformation outsourcing; business process outsourcing; OSS/BSS migration; etc. enriching communications > premier issue > 2007 | http://www.alcatel-lucent.com/enrich 5
    • Figure 1: Services Transformation: introducing services without silos Alcatel-Lucent’s carrier-grade SDE value proposition Drawing on its worldwide, multi-technology telecom experience, and extensive partnerships with leading Independent Software Vendors (ISVs) and IT vendors, Alcatel-Lucent has developed a key expertise in deploying SDEs for customers with different starting points and different integration and business requirements. Experience gained in SDE realization projects is re-injected to enrich the Alcatel-Lucent SDE architecture blueprint. Examples of blended services enabled by the SDE are combining IMS with IPTV services, such as buddy-list sharing on TV, and taxi fleet management, blending voice with video from taxi-based cameras and location-based services. Part of the Acuity Transformation Framework, Alcatel-Lucent’s carrier-grade SDE encompasses IT platforms and frameworks, and enables operators to reach deep into the network and thus to control services end-to-end. It offers: • A balanced approach for blending latency-sensitive and latency-insensitive services; • Intimate integration of applications with the intelligence and distributed control services of the network; • Specialized capabilities for handling near/real-time services; • Support for operational process automation beyond the traditional fulfillment, assurance and billing processes to cover service creation, application lifecycle and partner management. The Alcatel-Lucent SDE proposal (Figure 2) comprises numerous carrier-grade components, and allows SPs to differentiate their offering, increase revenue opportunities, and decrease costs, by enabling the effective and efficient delivery of user-personalized and blended services. enriching communications > premier issue > 2007 | http://www.alcatel-lucent.com/enrich 6
    • Figure 2: Alcatel-Lucent Acuity™ Transformation Framework includes Alcatel-Lucent’s SDE, a carrier-grade SOA-compliant framework to deliver personalized and blended services The value proposition of the Alcatel-Lucent SDE stems from its capabilities to: • Support carrier-grade, end-to-end service delivery by: – Enabling end-to-end management from application platform to terminal, and from OSS/BSS to the end user; – Generating reusable assets and optimizing resources; • Minimize data duplication and optimize exploitation of user profile data; • Accelerate and automate service introduction, provisioning, assurance and billing processes; • Optimize real-time resource management and service blending, by: – Enabling fine-grained QoS for tiered services, along with real-time and non-real-time rating and charging mediation services; – Providing end-to-end policy management for security, SLA/Resource management, and personalized service blending/orchestration. Alcatel-Lucent SDE pillars The Alcatel-Lucent SDE builds on four pillars, whose components are linked together in a flexible Service-Oriented Architecture (SOA), fully integrating the IMS and other SDPs. The system is flexible to include specific SP components of choice within the integration project. The Service Factory pillar components allow SPs to improve the quality of experience (QoE), simplify service creation across multiple application platforms, enhance the service offering with personalized and blended services, and embrace (rather than battle) ASPs through cooperative business models and open frameworks. enriching communications > premier issue > 2007 | http://www.alcatel-lucent.com/enrich 7
    • The Service Enhancements pillar components allow SPs to exploit multi-vendor and multi-operator user profile information and network capabilities such as location, presence, security, QoS and preferences, to enhance QoE. It also lets users personalize their services anytime, anywhere, on any device, and offers controlled access to partners. The Federated Control pillar comprises components that allow SPs to federate service/session resources through policy enforcement across a common IP infrastructure. It exploits assets through dynamic resource management and central policy decisions. It eases differentiation by enabling personalized delivery according to user context and preferences. The Service Operations pillar components allow SPs to be innovative in service creation, blending, bundling and life-cycle management. It also automates service fulfillment, assurance and billing through business-focused service models. It attracts application and content partners by automating service, content and revenue sharing. The Alcatel-Lucent carrier-grade SDE uses these four pillars to help SPs increase their strategic and competitive advantage, while using common component sharing across SDPs to improve CAPEX and OPEX. Conclusion Service providers are responding to competitive pressures by transforming their networks, services and businesses. These transformation initiatives involve multi-year projects impacting multiple areas of the SP’s business, and aim to: • Increase revenue opportunities by quickly satisfying end-user demand for blended, personalized and easy-to-use services; • Create a competitive advantage by providing superior QoE to end users; • Improve margins by implementing effective network, cost and operational models. The challenges of evolving to a rationalized, all-IP network, a new service delivery environment, and a lean operational model can be met, and in a progressive and controlled way. SPs have an opportunity to minimize risk and manage the transformation lifecycle by leveraging partners such as Alcatel-Lucent, with its rich SP environment expertise and telecom and software integration knowledge. SPs implementing a carrier-grade SDE can differentiate themselves through service personalization and blending, and will have the tools to manage partner application and content providers effectively. The Alcatel-Lucent SDE architecture maximizes service, data and networking knowledge to deliver services efficiently, flexibly and with the expected QoE, from application platforms such as IMS, IPTV and mobile interactive services, across a policy-driven network to end-user terminals. Alcatel-Lucent is a unique and trusted partner to service providers, governments, and enterprises worldwide, which are benefiting from its carrier-grade portfolio of services, products and solutions, and SDE architecture blueprint and experience. As a partner, Alcatel-Lucent advises, orchestrates and operates SP transformation initiatives worldwide, irrespective of the size of the associated network and range of services. enriching communications > premier issue > 2007 | http://www.alcatel-lucent.com/enrich 8
    • Shri Balachandran works in Alcatel-Lucent Corporate Strategy, Plano, TX, USA. Email: shri.balachandran@alcatel-lucent.com Tanja de Groot is OSS Strategy Director, Alcatel-Lucent CTO/Network and Technology Strategy Group, Paris, France. Email: tanja.de_groot@alcatel-lucent.com Martine Lapierre is Competitive Transformation Top Marketing Program leader, Alcatel-Lucent CMO, Strategic Marketing, Paris, France. Email: martine.lapierre@alcatel-lucent.fr Patricia Lopes is Services Transformation Top Marketing Program leader, Alcatel-Lucent CMO, Strategic Marketing, Whippany, NJ, USA. Email: lopes@alcatel-lucent.com Anne Vandenhove works in Alcatel-Lucent Corporate Strategy, Vélizy, France. Email: anne.vandenhove@alcatel-lucent.fr Alcatel, Lucent, Alcatel-Lucent and the Alcatel-Lucent logo are trademarks of Alcatel-Lucent. All other trademarks are the property of their respective owners. The information presented is subject to change without notice. Alcatel-Lucent assumes no responsibility for inaccuracies contained herein. © 2007 Alcatel-Lucent. All rights reserved. enriching communications > premier issue > 2007 | http://www.alcatel-lucent.com/enrich 9