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Celia Desmond

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  • If  E/  R [1] is much higher than 1 over a 2-3 years time it means the company has no long-term strategy . The increase in earnings is obtained by slashing cost, by being more efficient. There is nothing wrong with that; it is just that you cannot keep decreasing cost over a certain limit (0 is the absolute limit!). If, in spite of slashing cost, you are not managing to increase your revenues it means that your market has reached a maximum penetration. It is even worse. History shows that high earnings deriving from cost compression and higher efficiencies are bound to be squeezed by lower prices, i.e. your efficiency is soon turned into an advantage for the clients, not for you. This is important because it is one of the issues pending on e-business (and e-business companies). If, on the other hand,  E/  R is much lower than 1 it means that the company has the wrong strategy . The increase in revenues does not generate any parallel increase in margin, i.e. you are investing money but are not making any money. This is a crucial aspect for Internet companies. Amazon has consistently increased their revenues but has not been able to generate earnings. ---- [1]  E/  R indicates the ratio between the growth in earnings (  E) and the growth of revenues (  R) over a certain period of time. In the Internet business one may assume a period of 2 years. Longer periods of time are not sustainable because of the fast pace of market and technology evolution.

Celia Desmond Celia Desmond Presentation Transcript

  • Trends in Telecommunications ANDICOM’2004 Cartegena de Indias October 2004
  • Trends in Communications - An Environment Overview Celia Desmond President World Class –Telecommunications Past President IEEE Communications Society President IEEE Canada (2000-2001)
  • Value Chain and Main Categories of Players in Telecom Industry Electronic Component Provider: Intel Qualcomm Broadcom JDSU … Original Equipment Manufacture: Flextronics Celestica … Equipment Vendor: Cisco Alcatel Ericsson Motorola Nortel Lucent Siemens NEC … Service Provider: Verizon SBC NTT DoCoMo Deutsche Telekom Vodafone China Telecom Bell Canada … Material Suppliers Electronic Comp. Provider Original Equip. Manuf . Equip. Vendor Service Provider
  • Celia Desmond IEEE Communications Society Telecommunications Service Industry Key Players in Canada 2001 Revenue $32.8 Billion Wireless Providers Bell Wireless Alliance Paging Companies Telus Mobility e.g., PageNet Canada Rogers Allstream Wireless Other Radio Common Microcell Telecommunications Carriers Wireline Competitive Providers Alternative Providers of Long-Distance Services e.g., Allstream (June 2003) Call-Net (Sprint Canada) Competitive Local Exchange Carriers e.g., Futureway Communications GT Group Telecom Competitive Pay Telephone Providers e.g., Canadian Payphone Corp. Satellite & Other Telecom Providers Satellite e.g., Telesat Canada TMI communications, Stratos Global Corp. Resellers e.g., Primus Telecommunications $6.6 Billion $21.8 Billion $2.7 Billion $1.6 Billion Wireline Incumbent Carriers Major Telephone Companies: Bell Canada Telus Aliant MTS Sask Tel Northwest Tel Independent Telephone Companies e.g., Thunder Bay Telephone Incumbent Overseas Carrier Teleglobe Source: Statistics Canada and company annual reports
  • Global Telecom Market 2000 Global Telecom Market Share Breakdown:
  • Global Telecom Market: Since 2000 “ We built it, and they didn’t come”
  • Out of business Aleron 360Networks Digital Teleport Enron Broadband Ebone/GTS FLAG Telecom Global Crossing GST Impsat KPNQwest Sigma Networks Sphera Storm Telecommunications Teleglobe Telergy Velocita Viatel Williams Communications Adelphia Broadband Office Metromedia Convergent Com Covad ICG Comm FastComm Global Telecom North Point Rhythms McLeodUSA OnSite NetConnections XOCommun Yipes WINfirst Zephion Iridium Omnisky Metricom NextWave PSINet Ardent [email_address] Exodus iBeam NetRail Globalstar StarBand Motient ART WinStar Teligent
  • Telecommunications Equipment Manufacturers
    • Orders for communications equipment reached a peak at about $13.3 billion in June 2000, steadily to about $3.6 billion in September 2001.
    • Industry operating at about 55% of capacity, down from 87% in May 2000.
    • In 2001, sales revenues for telecom equipment, declined by nearly 28% from the prior year.
    • Revenues fell further in 2002.
    • Economy.com forecasted revenue to decline 19% in 2002
    • Profits were down in 2001, and remained weak in 2002.
    • Headcount in top 10 companies is 1/2 that 10 years ago
  • ICT Market (1999-2002) Value in Millions of Dollars Fonte: Assinform / NetConsulting North America (Canada & USA) Asia – Pacific (Japan, Singapore, Hong Kong, Taiwan, Korea and Asia Pacific countries) Europe 1.872 13% 11.7% 12.3% 11.2% 20.8% 2.115 -0.6% -0.4% 1.8% 4.6% 2.234 Rest of World 4.9% 2.218 0.7% -0.3% 5.8% 9% 10.9%
  • TLC market Fonte: Assinform / NetConsulting North America Europe Asia Rest of the world  % 2002/2001
  • So where are we now?
    • Telecom Service Industry is a Trillion Dollar Industry – 1,300 billion at end of 2002
    • Telecom services make up 75% of the industry, with Telecom Equipment broken into 13% infrastructure equipment, 7% mobile handsets, 5% enterprise equipment
    • Overall this industry represents 3% of GDP
    • Americas 43%, EMEA 34% and Asia Pacific 24%
      • Telecom industry is still a large and very viable industry
  • If we add the IT market
    • 2002 Market Size in Revenue is $2,200B
    • Telecom makes up 57%
    • 46% in the Americas, 22% Asia Pacific, 34% EAME
    • IT services are 57%, hardware 33%, software 10%
  • 2004 Update
    • US Dept of Commerce – only 21,000 jobs added in Feb 2004, despite economic growth since summer 2003
    • Unemployment in computing at 5.2% in 2003, as compared to 2% in years in last decade – as opposed to 6% rate in all jobs, compared to an earlier 4%
    • Causes: outsourcing, automation and business strategy
    • Companies using the investments they made in the 90’s rather than researching, developing and deploying new technologies
    • Total focus on cost cutting
    • 80% of CEO’s surveyed recently say they will shift focus to new growth projects
    • Source: International Herald Tribune, March 10, 2004
  • PC, PDA, Cell Phone sales (2000-2002) Source: Assinform / NetConsulting Millions of Units
  • Cellular Growth in the US Yes, there is still some good news:
    • ~141M subscribers as of Dec 2002
    • 10% Y/Y growth in subscriptions
    • 36% Y/Y growth in minutes
    • 20.8% Y/Y growth in capital investment
    • Forecast data revenues ~$1B in 2003
    Source: CTIA Wireless Industry Survey, Mar 2003
  • Cellular Local Number Portability
    • FCC Mandate in 2003 for LNP between US Cellcos
    • US Cellular service commoditized-
    • Few differentiators:
    • Price
    • Bundled cell phone
    • Technology transparent to users
    • Retention factors today :
    • Contract termination penalty
    • Need to change phone # when changing carriers
    Impact on Cellular carriers: Increased Churn Rate 25-30% 50-55%
  • Wireless Possibilities
    • 3G
    • WiFi
    • Ultrawideband
    • Bluetooth
    • WiMax
    • ZigBee
  • Wi-Fi is Driving Rapid Change
    • Wi Fi is today’s “hottest” new technology
    • Allows users to create Wireless Local Area Networks (WLANS) with high speed internet service
    • Analysts predict 700 million users and a nearly U.S. $3 billion worldwide market by 2007
    • 54 million laptops, PDAs, televisions and other devices with Wi Fi will be sold in 2004
      • 4 times as many as in 2002
  • IEEE 802.11 “WiFi” LAN Properties
    • Properties
    • Power: 100 mW max
    • Configuration: Hierarchical or Ad-Hoc
    • Spectrum: 2.4 and 5.8 GHz Unlicensed bands
    • Channel BW: 20 MHz (Overlapping)
    • Two modulation technologies are available:
        • CDMA: 802.11b @ 2.4 GHz
        • OFDM: 802.11a @ 5.8 GHz, 802.11g @ 2.4 GHz
    • CSMA/CA LAN Protocol
      • (Carrier Sensing Multiple Access/Collision Avoidance)
    • Security via station authentication
    • Data rates up to 11 MB (b), 55 Mb (a and g)
    • Actual data rates are usually much lower
    • Maximum range ~100M with clear LOS in LAN configuration
      • Some specialized point-point applications up to 20 km.
    The WiFi Alliance is an organization of vendors and users, that provides interoperability standards and testing to equipment compliant with IEEE 802.11 standards
  • Wi Fi Standards
    • Wi Fi = IEEE 802.11 WLAN standards--Compete with each other for market share
    • IEEE 802.11a -- data rates to 54 Mb/s in the 5 GHz band
    • IEEE 802.11b – 11 Mb/s in 2.4 GHz band
      • Today’s leading Wi Fi technology
    • IEEE 802.11g – 54 Mb/s in 2.4 GHz band
      • Backwards compatible with .11b at higher speeds– Opens possibilities for wireless multimedia video transmission and broadcast MPEG. Catching on quickly.
    • IEEE 802.11n – work just starting – plans to increase data rates to over 100 Mb/s
    • WiFi HotSpot service is a major growth area
    • Leading providers, T-Mobile, Boingo, Wayport Access, Megabeam (UK)
    • Service by subscription or open (e.g. hereUare)
    • Important partnerships developing
      • T-Mobile / Starbucks (subscription)
      • Cometa / McDonalds (open)
      • Holiday Inn / Megabeam (open)
    • Valid 3G alternative for portable services
      • Ubiquity of 802.11 interface- being built into new laptops
      • Unbeatably low equipment costs
      • Low capitalization, no incremental spectrum
    802.11 and a Double Latte, please…..
  • Wi Fi Faces Fierce Competition from Other Technologies
    • Limited range: only about 50 meters from base station; hundreds of base stations needed to match coverage of single cell phone station
    • Addressing security concerns
      • Next generation security solution in development: IEEE 802.11i
      • Will include new encryption, keys exchange and authentication methods
    • Development of Ultrawideband could impact Wi Fi
  • Ultrawideband to Offer Full Mobility
    • UWB is super high speed, low power personal area networking technology suited for wireless multimedia applications
    • High data rate of 1 gigabit per second allows movement of massive files over short distances
    • Short range of 30- 60 feet -- an advantage if operating multiple independent links at one location
    • UWB transmits low power streams of extremely short pulses over a huge section of radio frequency spectrum
      • Uses either orthogonal frequency division modulation or direct sequencing
  • Ultrawideband
    • Many potential revolutionary consumer and specialized business uses:
      • For example, at home: wireless users could move data from PC to stereo, from DVD to TV
      • On road: might transfer data from laptop in truck to handheld computer; send email
      • In business: doctors could look at patients charts and view digital xrays
    • Expected to grow from 0 now to 6 million UWB nodes embedded in devices by 2007
    • No standard yet: IEEE 802.15.3a in development--high speed, physical layer
      • Market is not waiting: Motorola already selling chips based on early version
  • Bluetooth “Wireless Cables”
    • Bluetooth is a low power, short range data transfer technology
    • Moderate date rates
    • Applications primarily as cable replacements
    • Support of mesh network configurations
    • Frequency-hopping spread spectrum technology in the 2.4 GHz ISM band
    The Bluetooth SIG is an industry association dedicated to the development and application of equipment based on the IEEE 802.15.1 spec.
  • WiMax Ideal for Rural Areas
    • WiMax will use either licensed or unlicensed parts of the radio spectrum
    • As fast as traditional broadband but potentially less expensive; relatively easy to create
    • Well suited to rural areas as those found in Russia- no need for wired “last mile”
      • British Telecom testing an 802.12a product now in small, remote Northern Ireland village; if successful, may roll out across UK
    • In addition to Internet access, WiMax can also carry voice over Internet Protocol--another technology I’ll address shortly
  • WiMax Faces Some Obstacles
    • Many proprietary systems- affects device interoperability
      • systems from Cisco, Motorola, Tsunami
    • Other systems based on IEEE 802.16 standard or corresponding one from the European Telecommunications Standards Institute
      • Intel, Nokia, Alvarion Ltd among about 40 companies in WiMax Forum working to eliminate barriers to adoption of standard, such as interoperability and cost of deployment
    • No mobile version yet
  • IEEE 802.16 “WiMAX” WAN Properties
    • Properties
    • Power: Varies with band. Profiles from 100 Mw up to 2W
    • Configuration: P-P and P-MP Cellular
    • Spectrum: Initially 3.5 GHz licensed and 5.8 GHz unlicensed bands
    • Radio interface: OFDM, using 256 tones
    • Access Protocols:
      • Downstream: TDM (Broadcast)
      • Upstream: TDMA with access contention
    • Security via station authentication and encryption
    • Data rates variable with channel bandwidth 3.5 MHz in 3.5 GHz band, 20 MHz in 5.8 GHz band
        • Actual realizable data rates are ~ 2b/Hz
    • Maximum range ~2Km for indoor Non-LOS cellular service at 3.5 GHz
    • Indoor NLOS 2 nd Gen interoperable products in 2006
    The WiMAX Forum is an organization of vendors and users, that will provide interoperability standards and testing to WAN equipment compliant with IEEE 802.16a/d/e standards. It is described as “WiFi on steroids” .
  • ZigBee: Ultra-low power Telemetry
    • 8 02.15.4 is a simple data protocol for low-capacity wireless networks intended for telemetry and control
    • Optimized for very low power, extremely long battery life
    • Applications as Active RFID tag
    • Support of mesh network configurations
    • Direct Sequence Spread Spectrum technology
    • Three unlicensed bands, 27 channels specified
        • 868.3 MHz 1 Channel 20 Kb/sec
        • 902-28 MHz 10 Channels 40 Kb/sec
        • 2.4 GHz 16 Channels 250 Kb/sec
    The ZigBee Alliance is an industry association dedicated to interoperability of equipment conforming to the IEEE 802.15.4 spec.
  • Comparison of Wireless Data Technologies Cost, Simplicity Cost, Power, Flexibility Cost, Speed, Flexibility Throughput, Coverage Coverage, Quality Key Attributes 1 - 10+ 1 - 100+ 1 - 100 1K-30K 1,000+ Typical Range (m) 720 20 - 250 11,000+ 1K-40K 100-2000 Bandwidth (KB/s) 1 - 7 100 - 1,000+ N/A N/A 1-7 Battery Life (days) Cable Replacement Control & Telemetry Data/Voice LAN Wide Area Data Wide Area Voice & Data Typical Application Bluetooth™ (802.15.1) ZigBee™ (802.15.4) Wi-Fi™ (802.11b) WiMAX™ (802.16d/e) 3G Cellular Technology
  • 2004 Update
    • Total Service Revenues Rise Nearly 13 percent -- U.S. carriers earned service revenues of $41.4 billion in the first six months of 2003, up from $36.7 billion in the first six months of 2002.
    • Data Service Revenues Up 70 percent -- Total reported data service revenues reached $700 million in the first six months of 2003, up 70 percent from $411 million in the first six months of 2002.
    • Minutes of Use Up 30 percent -- Total billable minutes of use (MOUs) for the first half of 2003 were over 380 billion -- up more than 30 percent from 292 billion for the first half of 2002.
    • Monthly SMS Traffic Up Over 31 percent -- Reported SMS traffic for the month of June 2003 was over 1.2 billion -- up more than 31 percent from 930 million in June 2002.
    • Ref: CTIA
  • 2004 Update (Continued)
    • Digital Subscribership Reaches 92 percent -- The number of digital subscribers topped 128.3 million, an increase of nearly 17 percent since June 2002.
    • Wireless Investment Up Over 13 percent -- Wireless carriers reported over $134 billion in total cumulative capital investment in the first six months of 2003 -- up from $118.4 billion in the first six months of 2002.
    • Total Wireless Subscribership Up 10 percent -- Overall wireless subscribership increased to 148.1 million by June 2003, from 134.6 million as of June 2002.
  • The Growth of Internet
    • Internet 2000
    • Over 300 million users online Worldwide
    • Internet Users (3Q’2000):
    • North America - 147.48 M
    • Europe - 91.82 M
    • Asia/Pacific Region - 75.5 M
    • Latin America - 13.19 M
    • Africa - 2.77 M
    • Middle East - 1.9 M
    • Growth estimated over 500,000
    • new users per month
    • Business is the fastest
    • growth area
    (Source: Microsoft)
  • IP Telephony Market Opportunity
    • From $314 million (U.S.) in 2000 to $4.02 billion (U.S.) in 2007
    • IP Telephony as % of all int’l calls in 2004
    • IDC forecasts that “Web Talk” revenues will reach US$16.5 bn by 2004 with 135 billion mins of traffic
      • Tarifica forecast 40%
      • Analysys forecast 25%
    • In developing countries, the majority of IP Telephony calls are incoming
    • (Source: IDC)
    “ Web Talk” revenues, US$bn 2000 2004 But it didn’t take off yet!
  • Electronic Commerce - Growth of E-commerce Growth of E-commerce (in billions) (Source:IDC)
  • The Next Generation Network: Internet2
    • low bandwidth
    • best effort
      • transport protocols
      • low security
      • no allocation
    • Static applications
      • e-mail
      • file transfer
      • browsing
    • high bandwidth
    • quality of service
      • middleware
      • user authentication
      • cost-allocation
    • Real time applications
      • interactive client server
      • teleconferencing
      • telepresence
      • virtual environments
      • collaboratories
    Mission Statement Facilitate and coordinate the development, deployment, operation and technology transfer of advanced, network-based applications and network services to further U.S. leadership in research and higher education and accelerate the availability of new services and applications on the Internet Internet Vs. Internet 2
  • Impact of Applications
    • DSL expecting solid growth
    • Fast ethernet to gigabit crossover in 2004
    • E-business applications more bandwidth intensive
    • Implies tremendous growth for internet
    • Network doubling each year implies 1000 times the traffic in 10 years
  • Value Proposition
    • In total, service providers of revenue generation network services can provide systems that have 5 basic pieces:
    • A variety of access systems ranging from wireless to circuit to packet systems
    • A set of transport switching and routing systems that has an optical core
    • A set of network services that build on top of the transport to make them useful
    • A layer of network management to perform element and multi-element network management
    • A layer of service provisioning systems performing customer care, billing, trouble tracking/dispatching, etc.
    • In providing any portion of these services, the basic value proposition should include reliability, manageability, and multiservice
  • One Proposition - Broadband Services
    • Mobile services, local loop unbundling and VOIP causing decline in fixed market
    • In Hong Kong, voice services and broadband services are saturated
    • PCCW now offering TV, aiming for broadband data
    • With over 30 channels of TV, they attracted 100,000 customers within 2 months
    • Reference: Infocom 2004 - Dr. Liang Wu, PCCW
  • Another Approach
    • SK Telecom has 55% of the Korean mobile market (47M people, 70% penetration)
    • They offer fixed and wireless internet and even handsets
    • Offered 2G in 1999, 2.5G in 2001, 3G November 2002
    • Subscriber base growing rapidly with 3G offerings
      • Services
        • Ring tones 23%
        • Games 8%
        • Chatting 4%
        • Shopping 2%
    • SK Telecom has a joint venture with China Unicom
    • Not all Korean experience will transfer directly to Chinese market - need to study it
            • Source: Infocom 2004, John Liu, CEO SK Telecom in China
  • PSTN Signaling Gateway POTS ISDN Cable Modem xDSL Residential Gateway
    • Billing Servers
    • Name Servers
    • Messaging Servers
    • Data VPN
    Session Managers Service and Business Management Network Databases Network Services Fixed Wireless A Network Vision Business MUX OC3 xDSL Remote Voice ATM LANs Business Wireless Firewall Mobile Wireless Access Residential Access Business Access Gateway ATM Switches & IP Routers Multi-Media Resource Server Feature Servers Packet Gateway Packet Gateway Packet Gateway Wireless, Comm Sftw Wireless Access Gateway ( Mobility Server POTS ISDN NIU POTS ISDN POTS ISDN NIU Internet PSTN Application Processor
  • New Trends in Telecommunications
    • Convergence of telecommunications, computation and entertainment, leading to innovative new services
    • Bandwidth expansion
    • The great rates war
    • Migration of intelligence
    • Globalization
    • Create need for both technical skills and personal management skills
    • Emerging role of consumer electronics
      • Sony announced new line of television and appliances with WiFi
      • Intel supports WiFi in domestic environment
      • Centrino and various chip for enabling WiFi on appliances
      • Trend toward non-hierarchical networks, wireless routers, hot spot
      • Software radio
  • What about the business perspective?
    • Since 1993, major mainframe/server manufacturers changed - only 1 of 18 major manufacturers left today (Kevin Kalkhoven OFC 2003)
    • PC’s replaced mainframe - market shift - financed by individuals rather than corporations
    • Grew as % of GDP from 2% in 1991 to 10% in 2001
    • US business and consumer expenditures flat at 2% - so telecom needs to find a similar new market in order to grow more than the GDP
  • Top Companies
    • 1997 Revenues $M
    • Alcatel 30,880
    • Lucent 30, 147
    • Motorola 29,794
    • Ericsson 21,242
    • Nortel 15,475
    • 2002 Revenues $M
    • Motorola 30,004
    • Nokia 27,763
    • Ericsson 22,369
    • Alcatel 22,567
    • Cisco 18,915
    Factset and Band of American Securities estimates
  • 2002 Year End Actuals
    • Americas
      • Motorola
      • Cisco
      • Lucent
      • Nortel
    • Europe
      • Nokia
      • Seimens
      • Alcatel
      • Ericsson
    • Asia
      • Fujitsu
      • NEC
    • 26.7
    • 19.2
    • 10.8
    • 10.6
    • 28.5
    • 18.5
    • 16.5
    • 15.0
    • 13.6
    • 11.3
  • Network Evolution
    • To survive, networks must be
      • Evolvable
      • Scalable
      • Flexible
      • Have open standards
      • Be easy to maintain and operate
      • Be open to rapid service development
      • Be priced competitively
      • Support multiple services
  • Where is Networking going?
    • Future Internet will be the basis for high speed global networking
    • Security is very important for e-Business to take off
    • Rapid growth and diversification of the ISP Market
    • Upgrading the Local Access Infrastructure
    • Growing Role for Wireless Services WAN, MAN, LAN, CAN, HAN - 3G in NA???, 3G now in Asia
    • Voice and data convergence generating new integrated services
  • Market Dynamics
    • Revenue of voice and data are split as 80% and 20% in 2000
    • Local voice in single digit growth
    • Traditional data in single digit and Internet services in double digit growth
    • ILD and DLD voice flat to decline
    • Mobile in rapid growth
    • Optical bandwidth glut is triggering price declining in Data/Internet services
  • Competition -the technology perspective
    • Transport
      • T1, PRI, T3, Optical (SONET, SDH, DWDM), Microwave, and Satellite
    • Access
      • ISDN, DSL, Cable Modem, Broadband Fixed Access, Wireless access, and Satellite
    • Switching
      • Frame Relay, ATM, IP Routing, MPLS, and Gigabit Ethernet
    • Mobile
      • GSM, TDMA, CDMA, GPRS, 1xRTT, WCDMA, and CDMA2000
  • Conclusion
    • More content format
    • More network-based services
    • More technology changes
    • Changes in end user’s device
    • Internal Influences
    • Service definition
    • Service design
    • Network design
    • Customer service levels
    • Special technology and vendors
    • Ext. Influences
    • Regulatory
    • Technology
    • Standards
    • Marketplace
    • Technology Influences
    • Speed – BW
    • Security
    • Access terminal
    • Standards
    • Service Influences
    • Intelligence move to edge
    • Peer-to-peer application
    • Free service model failed
    • New killer application
    Future : Network-Centric Age Content-Centric Age Internet Telecom
    • New Influences
    • Regulatory
    • Market
    • Competition
    + Gradual fading away of circuit switching ...