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Impact of transition from voice to data and multi media business in telecom


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  • 1. Impact ofTransition from Voice to Data and Multimedia Business in Telecom:An analysis. P. Abraham Paul. Telecom ConsultantEx: MD & CEO FCOMNET Futuregroups / V.P (TS) SPCNL, SIEMENS ICN / GM &SMT TBG, BPL Mobile. India / TES (I) DOT India.e-mail: Tweet @PA_PaulIntroduction:The past few years saw much hype due to over-projecting the business potential of 3GTelecom, Voice over IP and growth of INTERNET dependent customer products, e-Commerce and other e-businesses. Realization came later that most of these high techpropositions, though conceptually attractive and forward looking, were going to take timeto develop, huge investment and coordinated efforts of various business & technologyproviders and regulators to convert these to marketable and revenue earning products.3G and other New Generation Networks are great advancement in InformationCommunication Technology, but concepts alone cannot be sold to make money and tosustain as user friendly business. It was difficult to make out a viable business case andmany Telecom and Internet service providers broke down as their original business planslater turned unsustainable. However, lately the business approach has been morepragmatic and realistic.The objective of this analysis is to look how to get over the obvious hurdles and maketransition to ICT and Multimedia possibilities suitable for contemporary and futurebusiness needs so that the presently stagnant e-business would really take off. It isenvisaged that the next one or two years will see a quantum leap in the realization ofthese concepts.In the GSM arena, the SMS has become a powerful communication tool, WiFi andWimax bearers have provided more viable end link alternatives dramatically changingthe wireless data world, Data communication and VoIP merged with Internet is becomingmore practical, user friendly, economic and faster, and therefore are gaining universalacceptance. All these are good news to the end users but the picture is not that rosy forthe service providers.1. Consequence of technology advancement:.The advancement in technology and convergence of Voice and Data will adverselyimpact the Telecom & ISP providers and vendors business because the major shift ofVoice based usage to Internet based and other high speed Data and multi-media services
  • 2. will inevitably take away the business from Telecom Service providers to external digital,multimedia and various mobile commerce and mobile management, service providersand along with it a major chunk of the revenue. Please see my blog: It is suicidal forTelcos to allow Banking Industry to hijack Pay by Phone Value added S ervices. reasons are:i) Non-viability of Network Operators/ISPs taking the role of discrete ApplicationProviders.The GPRS / UMTS / WCDMA/ and other modern high speed digital access are bearerswhich provide suitable network and pipes for access and WAP is only an applicationprotocol.The Telecom service provider and ISPs are mainly access providers and cannot become ices, which are going to be a miniscule of the whole businesspotential. Why because, the major data related activities will be in the extremely largebase of clients in the PDN, widely distributed in the limitless IP world and theirrequirements will be highly diverse and dynamic that cannot be met by Telecom serviceproviders.The vast amount of individual and standalone e-business units and service relatedsystems and applications will be spread beyond the boundaries of Network operatorslicensed service areas, and therefore will have to be taken care of by external ServiceProviders and Business units in the PDN.ii) Major portion of revenue moves from Network Operators to external ServiceProviders and e-Business units in PDN.Impact of Voice - Data convergence and transition of major part of usage from Voice toData service will have great impact on the of Telecom business models in terms ofinvestment and revenue realization. The Network Operators have no control on tariffing,rating, charging and billing of "external client" based service and usages. At the mostthey can only charge their subscribers for the access by measures of quantity and not forreal value transaction. The value of the transaction can be determined only at its endService provider/vendor level and therefore, the revenue realization also rests with themand they will become the real beneficiaries of the advancement of technology.It means that, as the scenario changes, a good part of end user revenue will move fromPSTN/PLMN Network Operators to various Content Providers/Service Providers/e-Business units in the PDN, that spread far beyond the licensed area of current individualTelecom network operators.
  • 3. iii) The network operators will eventually lose exclusive ownership of theircustomers. With opening out of Private Long Distance carriers and convergence ofVoice and Data and with predominance of Data service, ownership of end user is no moreremain stuck with any single Network Operator.As the e-Services and e-Business takes of, the Telecom Network Operators and ISPs willfurther lose their monopoly in holding on to exclusive ownership of their customers interms of the revenue generated from them.The end user at their own will and pleasure will have option to choose and use differentNetwork Operators/Service Providers who would provide them efficient, competitive andquality service and eventually will have direct dealing with the e/business Providers forthe services and with it these service related revenue also goes to them.iv. Various IP based products of communication currently in vogue and those to come inthe future communication will highly disrupt plain old telecom business as a whole asmost of these systems, products and services bye-pass telecom systems and networks.2. Role of Telecom equipment vendors:Operators unable to get adequate return on their high-tech investments.Telecom Vendors are already affected due to Network Oin high tech solutions, products and services. The advent of telecom evolution is greatbusiness for vendors if only their customers (the Telecom network operators/serviceproviders) are willing to invest for inducting these technologies in their networks. Due toreasons mentioned earlier, the trend is not positive and hence affects negatively thebusiness of Telecom Network system vendors.b) Telecom Vendors cannot get into Application Business in the PDN.Major telecom vendors cannot get into the business of Application and Business supportsystem sales. The vast amount of Application and Business support systems in thelimitless area of PDN are going to be the most revenue earning part. These are highlydiverse, dynamic and widely distributed across the whole IP world. Such needs of infinitenumber of small and standalone and individually tailored systems cannot be customized,sold and maintained by major telecom vendors. Hence it is not foreseen for any majorvendors to venture in to this business and majority of the service providers/e-businessunits do not need and also cannot afford the major vendor systems.So the business of the vendors is limited to selling of generic and very specificApplication systems for the Network operators which is going to be only a small fractionof the market as the real business value lie in the external IP world. It is more likely thatthe Network operators also will prefer to hand over the Application business to externalService providers.
  • 4. 3. Payment Gateways in PDN for revenue appropriation:Special methods are needed to handle Micro-payments involved in e-business. Seearticle in /The end users are real beneficiaries from all these, but such major shift in Telecombusiness will have negative impact, for the Network Operators. Such as above said beingthe situation of business, Network operators cannot dare to indulge in high investmentthat is needed for the high- -business needs with no means of adequate return on their investment.Therefore, Network Operators /ISPs therefore, need to find strategies and methods to getadequate share of the revenue collected by e-business units that use their customers, their network and resources.The e-business and e-services related to 2.5G and 3G and Data services over Internetinvolve High Volume of Low Value payments and these cannot be done by directpayments or handled economically by the banks, regular credit card companies etc. Alsothese payments can neither be handled by the Network operators/ISPs nor by the Serviceprovider/e-business units as the value of each transaction is known only to the e-Business/Service provider who finally sells or provide the service.This is the most critical issue and the high tech Telecom and IP related e-Business cannottake of and the Network Operators/ISPs cannot hold on with sustainable business plansuntil it is addressed and resolved.Micro-payment Gateways in PDN is one such idea to get back part of the revenuegenerated from e-business based on data services. This need coordinated efforts by allstakeholders and the regulators.4. Concept of Payment Brokers middle way systems.To be in line with technology advancements, the network operators have no choice but toinduct the new technology systems related to telephony and non-telephony value addedsystems in their networks and find means and ways to ensure sensibly viable businesspropositions.As mentioned earlier, the data related services gaining predominance, and the revenuepotential moves from Network Operators/ISPs to Service Providers and e-Business units,the Network operators/ISPs have to look for methods to grab their share of revenuegenerated in the PDN to survive. Here is the emphasis of the Payment Broker systems,which can manage the accounting of payments, apportioning of it and sharing the revenuegenerated between the stakeholders.
  • 5. The payment broker system cannot be managed by individual Network operators/ISPs asthe Service Providers and e-business units are common platforms shared by customers ofmany different Networks/ ISPs.Money through Mobile (MTM) a system that supports all sorts of money transaction byphone users transparent to Banks and banking systems setup and owned by a consortiumof service providers is an option for telecom service providers to look into.Please see article on Universal Money Management by phone The whole story in nut shell is:a) The Network operators can only play the role of access providers and not majorapplication providers. It is folly to attempt provision of multifarious application servicesb) Majority of the revenue generated is going to be in the PDN in the infinite IPworld. The Network operators cannot have control on the revenue generated and do notget the rightful share of this revenue as a decent return on their higher investment inproviding access to data related services. So the network operators will be reluctant toinvest on high tech systems for opening out fast access to external IP world.c) There will be no exclusive ownership of Customers considering the revenue pointrevenue generated from them directly goes to the coffers of large number of externalagencies that provide e-business and e-service.d)are unwilling to do major investment in high tech unless they are assured of adequaterevenue. The telecom vendors cannot venture to get into the large-scale application and e-commerce support system business in the vast IP world.e) It shall be possible to address this by introducing concept of Payment Gateways inPDN for apportioning the revenue. Micro-payment gateways can take care of the highvolume low value transactions that happen in the PDN. These need special methodologyand coordinated efforts of all concerned.d) Other solution is to have third party systems owned by consortium of TelecomNetwork Operators /Service providers for non - telephony related value added serviceslike un-banked universal money management using phones, Charging of road toll andvehicle parking charges etc.Conclusion: Most of the advance technology systems are now the monopoly of NetworkOperators/ ISPs and System vendors. It is necessary to take these out into the userpremises by melding the technology with user intensive systems and applications. For theTelecom service providers, the voice call revenue is dwindling due to transition to data
  • 6. oriented business and competition as well as saturation of usage and they need to forgeinto more and more broadband products business to survive.To realize all these effectively, it is necessary for the Network operators/ISPs andregulatory bodies to standardize the e-business related charging, billing and paymentprocedures. Common Payment broker systems are needed to take care of adequaterevenue share to network Providers / ISPs as to compensate the high investment neededto induct high tech and provide enough pipes for their customers to access the Serviceproviders and e-business units.Charging gateways are just other network elements sitting in PDN. Interestingly thePayment broker systems can be located any where in the PDN and can provide service tolarge number of Network operators /ISPs and the e-business units and application serviceproviders in PDN. The Payment Broker systems shall be a common platform ServiceProvider system in the PDN and not to be tried by Network Operators.This could be the ideal philosophy to adopt in every country, in order to avoid stagnationin the e-business growth and full exploitation of benefits and advantages of moderntechnology. With right perception and direction, these disconnects in concepts can berectified and the e-Business will see ample growth in the coming years. It shall bepossible to achieve quick overall Telecom growth, with benefits for all, the NetworkOperators/ISPs, Business owners, the Service providers, the Telecom Vendors and theConsumers as end users.e-mail: Tweet @PA_Paul---------------------------------------------------------------------------------