S T R AT E G I C W H I T E PA P E RUser-Centric Broadband:Service Provider StrategiesService Provider with Mobile-Only Net...
Executive Summary                                                  > Provide complete user-centric services by enabling in...
Table of ContentsIntroduction to User-Centric Broadband Services . . . . . . . . . . . . . . . . . 1Market Environment . ....
User-Centric Broadband: Service Provider StrategiesIntroduction to User-Centric                                         TH...
User-Centric Broadband: Service Provider StrategiesTraditional mobile service growth will slow,                      In br...
User-Centric Broadband: Service Provider StrategiesSituation Analysis                                                 Alth...
User-Centric Broadband: Service Provider StrategiesPersonal messaging – staying in touch                                  ...
User-Centric Broadband: Service Provider StrategiesIn order to manage their diverse portfolio of personal messag-         ...
User-Centric Broadband: Service Provider StrategiesInfotainment – video and audio                                    The c...
User-Centric Broadband: Service Provider StrategiesCurrent and Future Business Models                                     ...
User-Centric Broadband: Service Provider Strategiesindustries, each with distinct market drivers, brand and            Thi...
User-Centric Broadband: Service Provider StrategiesDepending on the operating model, this provides direct savings       Th...
User-Centric Broadband: Service Provider StrategiesHow Can User-Centric Broadband                                         ...
User-Centric Broadband: Service Provider StrategiesExpand Mobile Messaging into a                                    > Dev...
User-Centric Broadband: Service Provider StrategiesMSP and Alcatel Moving Toward                                          ...
User-Centric Broadband: Service Provider Strategies> Service-aware edge and data-aware transport: Includes the            ...
User-Centric Broadband: Service Provider StrategiesStep 3 - Complete user-centricity. Enable complete user-            Whe...
www.alcatel.com       Alcatel and the Alcatel logo are registered trademarks of Alcatel. All other trademarks       are th...
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User-centric Broadband Service Provider Strategies: Service Providers with Mobile-only networks


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A strategic white paper I wrote to support Alcatel's global market positioning direction in 2005.
Targeting C-level executives at mobile service providers, its examines to the need to develop increasingly 'user-centric' services (e.g. personalized communication, ubiquitous messaging, high-speed mobile Internet and infotainment services) that resolve users' pain-points, address evolving market demands, and compensate for service providers' declining communication service revenues.

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User-centric Broadband Service Provider Strategies: Service Providers with Mobile-only networks

  1. 1. S T R AT E G I C W H I T E PA P E RUser-Centric Broadband:Service Provider StrategiesService Provider with Mobile-Only NetworksAs services evolve users are faced with increasingconfusion over devices, subscriptions, andparameters; they are crying out for simplicity.User-centric services provide a range of servicesin a way that users want, understand and findeasy to use. At the same time mobile serviceproviders (MSPs) want to launch new user-centricservices, to compensate for the decline in thetraditional voice business. New services willinclude, enhanced communications; ubiquitouspersonal messaging; universal broadbandnetwork connectivity and video and audioinfotainment.
  2. 2. Executive Summary > Provide complete user-centric services by enabling intelligentAs services evolve users are faced with increasing confusion service delivery with automatic, most-adapted broadbandover devices, subscriptions, and parameters; they are crying wireless/mobile connectivity, to a full range of devices. Thisout for simplicity. User-centric services provide a range of gives users full freedom to access the services they wantservices in a way that users want, understand and find easy in the manner that they desire, while driving new revenueto use. streams.At the same time mobile service providers (MSPs) want to To achieve this, MSPs need to choose the right business model,launch new user-centric services, to compensate for the depending on strategic objectives, competitive issues and thedecline in the traditional voice business. New services will available resources. This includes being a full service provider,include: addressing niche markets, offering wholesale mobile capacity> Enhanced communications, enabling rich and varied or innovative mobile broadband Internet services. interaction (voice over IP [VoIP], video calling, and chat), in a cost-effective manner Alcatel has a clear vision to assist MSPs with implementation> Ubiquitous personal messaging, providing full integration of user-centric services, helping them deal with the challenges of a full range of user-defined messaging services of implementing new, converged services in an open, standards-> Universal broadband network connectivity, enabling based environment, combining new and legacy systems. Our reliable and secure connectivity of any device, in any place, vision offers an evolutionary approach, letting MSPs launch at any time low-risk commercial service bundles to test market respon-> Video and audio infotainment, giving users access to siveness prior to launching more integrated propositions. Our personal, interactive, on-demand services approach can start with the implementation of convergent payment for a family of services and conclude with a fullyToday’s MSPs are finding increasing competition from a range integrated suite of services delivered to any device, acrossof existing and new players, each trying to secure a hold on any network.these and other businesses. The competition includes tradi-tional fixed-line providers (voice and broadband Internet),nimble low-cost voice providers (VoIP), a plethora of innovativeInternet-based application service providers (ASPs) (a varietyof personal messaging and other services), and non-traditionalmedia companies looking to sell their portfolio of infotain-ment over a number of channels.The key actions that MSPs can take are:> Propose service bundles by enabling service-oriented credit pools, giving users more flexibility to satisfy their service needs. This will help to differentiate from fixed and fixed- Internet only applications, fostering customer retention.> Offer partial service convergence by integrating services on a unified environment, giving users the ability to seamlessly switch across services at will. This should include low-cost IP calling — voice and video — as well messaging, and video and audio infotainment, delivered to selected devices. This will allow effective competition with low-cost Internet calling services and other fixed Internet applications.
  3. 3. Table of ContentsIntroduction to User-Centric Broadband Services . . . . . . . . . . . . . . . . . 1Market Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1The mobile services sector is undergoing rapid change . . . . . . . . . . . . . . . . . . . 1Traditional mobile service growth will slow, in the absence of a strategic shift . . . . 2Situation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Mobile service providers are playing in many distinct markets . . . . . . . . . . . . . . 3Developing services with greater personal relevance will drive mobile growth . . . . 6Current and Future Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . 7Full-Service Mobile Service Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Mobile Virtual Network Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Mobile Network Wholesaler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Mobile Broadband ISP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9How Can User-Centric Broadband Services Help the MSP? . . . . . . . . 10Enhance Mobile Calling, Leveraging the Wireless Internet . . . . . . . . . . . . . . . . 10Expand Mobile Messaging into a Ubiquitous Personal Messaging Offer . . . . . . 11Provide Universal Broadband Internet Connectivity to Any User Device . . . . . . . 11Drive the Market for Mobile Video and Audio Infotainment . . . . . . . . . . . . . . . 11MSP and Alcatel Moving Toward User-Centric Broadband . . . . . . . . 12Alcatel Network Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
  4. 4. User-Centric Broadband: Service Provider StrategiesIntroduction to User-Centric THE FOUR primary business strategy questions today’s mobileBroadband Services service providers ask themselves are:With an ever-expanding variety of services, users have lots • How can I spur growth in a rapidly maturing market withoutof new ways to communicate. However, the pleasure derived embarking on pricing wars leading to value destruction?from the richness offered by the growing range of mobile • How can I position myself more competitively in a marketservices is mixed with the pain of complexity. Burdened with characterized more and more by media convergence and thenew services, an expanding number of multi-purpose devices growth of Internet services?and a growing number of service plans and pricing options, • How can I leverage the broadband phenomenon, while avoidingend users increasingly cry out for simplicity: services that head-on competition with fixed broadband services?respond to them in a personal way and offer the flexibility • How can I streamline my operations so that I can bring newto do what they want, when they want, wherever they want, services to market more quickly and cost-effectively.on whatever device they choose, paid for using whateverpayment method they choose.Alcatel’s research has shown that the desire for new services Market Environmentto respond to these demands is equally strong in both the The mobile services sectorconsumer and enterprise worlds. Consumers want new is undergoing rapid changeservices delivered in simpler, more flexible and more personal Currently, most markets within the Organization for Economicways. Enterprise users — staff and customers — also want Co-operation and Development (OECD) display a significantless complex, less fragmented communications experiences, level of competition in mobile services, with usually a minimumand enterprise chief information officers (CIOs) want to of three to four MSPs vying for customer ownership. Thisreduce the cost of that complexity on their bottom line. push to win and retain customers has led to service penetration rates of 75 percent or more (which in some cases exceedFixed-line service providers, Internet portals, application 100 percent), often at the expense of falling voice revenueservice providers (ASPs) and others are offering bundles and lower margins.of services that simplify interactions across services. Now,the idea of service convergence is regaining momentum, Furthermore, in an effort to differentiate and grow, MSPs havepromising even more to those who see it offering the expanded into completely new businesses, including servicesultimate communications services bundle. such as picture messaging, handset personalization, gaming, music content and PC data network connectivity. This shiftThis intersection of user demand and frustration on one hand, has been enabled mainly by the convergence of digital media,and technological possibility on the other, will create a leap driven primarily by the growth of the Internet.forward in the way communications services are deliveredand consumed. But will service providers benefit? The increasing role of the Internet has also allowed new players (e.g., ASPs including ICQ, Skype, Vonage) to exploitThe answer is that growth will flow from what users value the attributes of universal networks (low service access costs,and what they are willing to pay for. Service providers will service universality, open source standards enabling lowonly succeed by focusing on users’ needs and offering them development costs and stimulating innovation and short time-a richer, yet simpler and more relevant experience. This paper to-market), enabling them to build upon existing customeraddresses the business and technology strategies emerging in needs, while providing practical alternatives to traditionalthe race to capture the value of delivering a more User-Centric mobile and fixed-line communications services.Broadband experience to users. A L C AT E L 1 >
  5. 5. User-Centric Broadband: Service Provider StrategiesTraditional mobile service growth will slow, In broad terms this can be attributed to a number of supplyin the absence of a strategic shift and demand-driven issues:Ovum forecasts that the total number of mobile users in theworld will increase at an average of 11.8 percent year over SUPPLY SIDE DEMAND SIDEyear, from 2003 to 2007, boosting service up-take from 20 • More competition, leading to • Consumer need for basicpercent to 28 percent of the total world population. greater price erosion, mobile services reaching namely on calling near-saturation levelsThey also estimate that the average revenue per user (ARPU) • Little differentiation in • Low consumer price elasticitywill fall by an average of 1.5 percent annually over the same operators’ brand promises, for voice calling, in light ofperiod. and in underlying offers lower priced substitute • Limited success in compen- servicesRegional analysis reveals that the most developed mobile sating for falling voice • Limited perceived valueservice markets — Western Europe, Asia Pacific, and to a revenue using new data of new serviceslesser degree North America — will see low to mid-single-digit servicesmobile subscriber growth, combined with a small 1 to 2percent ARPU growth, which in real terms will trail nominaleconomic growth. In a sense, the market evolution described above could be an optimistic scenario for MSPs because it does not take in toFigure 1 - World Mobile Service Forecasts account the potential impact of low-cost mobile Internet calling services such as VoIP that may become widely available over the next few years. Total Connections (x1,000) 2003 2007 CAGR (%) World 1,137,056 1,778,719 11.8 The situation in emerging markets is somewhat different, North America 150,652 198,346 7.1 owing mostly to revenue growth still primarily being linked Latin America 99,728 161,141 12.7 to improved geographic and demographic coverage and a Western Europe 299,834 320,767 1.7 mismatch between service offers and the inability to pay for Eastern Europe 71,235 139,725 18.3 services by low-income users. Even so, it is reasonable to China/India 226,925 480,811 20.6 expect that, once adapted service offers are developed and Asia Pacific 205,676 297,948 9.7 made available at reasonable cost, trends similar to those in Middle East and Africa 83,006 179,982 21.3 developed markets will develop over time. ARPU ($/sub.mth) If mobile growth is to grow in real terms, MSPs need to realign World 25.21 23.73 -1.5 their strategic focus in light of changing market forces. North America 45.61 49.01 1.8 Latin America 15.93 15.35 -0.9 Western Europe 28.72 30.59 1.6 Eastern Europe 15.64 15.96 0.5 China/India 11.88 12.33 0.9 Asia Pacific 34.17 32.38 -1.3 Middle East and Africa 15.10 14.73 -0.6> 2 A L C AT E L
  6. 6. User-Centric Broadband: Service Provider StrategiesSituation Analysis Although mobile does give users the benefit of services on theMobile service providers are playing move, its price premium and varying indoor service quality,in many distinct markets combined with the growing consumer need for PC-InternetToday’s MSP is a completely different entity compared to connectivity, have impeded total fixed-line substitution.that of a decade ago, when the focus was on offering premiumvoice calling everywhere. • 57 percent of European mobile customers think they pay too muchToday, MSPs are playing in no fewer than four distinct key • 74 percent would use their mobiles more if they workedmarkets, each with a different set of actors, playing by well where they want to use themdifferent rules. This fact is highlighted in a recent European consumer MOBILE SERVICE PROVIDER MARKETS survey1 around 57 percent of mobile customers were unhappy • Voice communication • Personal messaging with the prices they were paying. Hence, the high perceived • Infotainment • Network connectivity cost for mobile services could be hindering mobile substitution.Voice communication – toward a better calling This is important given that 79 percent of consumers wouldexperience increase mobile usage at the expense of fixed, and 49 percentVoice calling, which today represents upwards of 80 percent would give up their fixed lines altogether with the rightof total customer spending, has been the key battleground proposition.between MSPs and fixed service providers (FSPs) fromthe outset. Service quality also showed up as an area for improvement: 74 percent of users would increase mobile usage if coverageThis basic communication service has generally commanded were improved in buildings, the underground/metro, anda "mobility" price premium of two to five times that of fixed trains. Furthermore, it is likely that the same issues willvoice. In an effort to render fixed calling more attractive, FSPs hinder the growth of new evolutions of personalcontinue to simplify and reduce fixed-line calling rates, and communication such as video calling.have in many cases introduced unlimited local calling betweenfixed numbers. (In North America this has been the norm for Until mobile call prices and quality issues are effectivelysome time.) In response, MSPs have also cut tariffs, and have addressed and users find a viable substitution for fixed-linedifferentiated by offering buckets of calling minutes and/or Internet connectivity, most households/individuals willunlimited calling plans. continue dividing their budget between fixed-line services and mobile.In parallel, new ASPs have emerged, offering very low-costcalling services (in some cases free) using the Internet. Thegrowth of broadband connectivity has further reinforced thisshift by enabling voice sound quality comparable to standardmobile and fixed-line services.A fierce, price-driven battleground has been created whereprices are often the final denominator for customers. 1. “Is the Operators arms race stifling innovation in the mobile telecom sector?”, CapGemini and Insead, Sept 22, 2004 (27 operators and 1,200 consumers from across Europe) http://www.capgemini.com/tme/news/press_pages/2004/0922oparmsrace.shtml A L C AT E L 3 >
  7. 7. User-Centric Broadband: Service Provider StrategiesPersonal messaging – staying in touch Multimedia messaging service (MMS) is the mobile equivalentAfter voice calling, short message service (SMS) or text mes- to e-mail. However, it has had limited success for varioussaging has proven to be a key secondary source of revenue reasons, including a low up-take of dedicated handsets, andfor MSPs, representing an average of 10 to 20 percent of total interoperability problems with e-mail services. Similar issuescustomer service spending. may be encountered with other mobile messaging services, namely with video messaging.The service has been very successful, especially in the youthmarket, for a number of reasons, including: Credit Suisse First Boston (CSFB) forecasts that messaging> Availability on all current generation handsets revenue will keep growing, while continuing to provide the> Ease of use bulk of non-voice calling revenue (Figure 2).2> Simple and cost-effective pricing models> Usage as a non-intrusive communication method, compared CSFB believes that, although text messaging will remain to voice calling popular, its share of total spending per subscriber will decline owing both to competition and to the gradual up-take ofAt the same time, Internet-based e-mail usage has grown alternate messaging services such as picture messaging,exponentially — thanks to its low cost — and as a result instant messaging and corporate e-mail services.has become an indispensable consumer and businesscommunication and productivity tool. Despite the growing demand for messaging, users are faced with a choice of alternatives, each providing a different setBeyond e-mail, the Internet has stimulated the development of of costs and benefits.other enhanced messaging services such as instant messagingand blogs (personal web logs).Figure 2 - Mobile Data ARPU Forecasts Point-to-Point SMS Non-SMS Messaging Non-Messaging Data ARPU9876543210 1999 2000 2001 2002 2003 2004E 2005E 2006E 2007E 2008E2. “2.5G Gathering Pace: Updating our mobile data forecasts”, CSFB, April 8, 2004> 4 A L C AT E L
  8. 8. User-Centric Broadband: Service Provider StrategiesIn order to manage their diverse portfolio of personal messag- Figure 3 - Mobile Worker Surveying services, users are increasingly faced with a number ofchallenges, including: Mobile Workers No Mobile Workers> Managing fragmented services environments, each with Telecommuters Business Travelers distinct features, separate log-ins, etc.> Rationalizing inconsistent service pricing, depending on 32 the device used, message type, etc. 48 Very Small 37> Dealing with incompatibility between similar messaging 21 services 18 59 Small 57If MSPs are to provide consumers with a user-centric 30messaging proposition they must combine the personalized, 12portable nature of mobile services with the innovation and 64 Mediumlow-cost structure of Internet-based services in a consistent 72 39manner across a range of user-defined devices. Furthermore,to effectively address business users, MSPs must also 0 10 20 30 40 50 60 70 80reconcile their offers with a range of professional business Percent of Respondentsmessaging suites and services. Source: The Yankee Group 2003 SMB Infrastructure Survey (United States)Wireless network connectivity –promise of a broadband worldThe growing use of networked applications, combined with At the same time, many issues have held back the PC mobilethe availability of broadband network access to the home networking market, including:(i.e., DSL, cable) and in public places (e.g., WiFi hotspots) > High services pricing compared to other broadbandhas enabled an increasing number of people to work away alternativesfrom the office. > Practical data speeds below both 3G’s initial expectation and other broadband substitutes (e.g., DSL or WiFi)A recent U.S. survey by The Yankee Group on the technologyand networking needs of small and medium business3 indicates Teething problems aside, if wireless/mobile networkthat there is a real need for networking on the go: connectivity is to establish itself as the economically viable> 68 percent of small businesses and 88 percent of medium future for networking, its appeal must grow beyond simple businesses require some form of mobile networking basic Internet/intranet connectivity to the mobile workforce capability segment.> 72 percent of medium-sized businesses require a solution suitable for domestic and international travel The ultimate value of wireless networking is in enabling a fully networked economy. For this to occur it must be appliedThe arrival of high-speed mobile network connectivity, first to any relevant vertical market need in innovative ways (e.g.,with 2.5G and now with 3G technologies, has made mobile mobile medical imaging, 24-hour distance monitoring andnetworking on the move a reality. In 2004 alone, IDC estimates diagnostics of industrial systems, etc.) while deepening itsthat 1.2 million mobile PC data cards will be sold across applications across a broader range of consumer servicesWestern Europe4, a figure that is expected to increase five-fold (e.g., wireless i-Pod service, wireless digital picture developing).by 2008.3. “The SMB IT outlook for computing, networking and mobility”, The Yankee Group, June 20044. “Western European mobile access PC data card forecast and analysis” IDC, Sept 2004 A L C AT E L 5 >
  9. 9. User-Centric Broadband: Service Provider StrategiesInfotainment – video and audio The challenge for the infotainment value chain players is toexcitement on demand create a differentiated user experience for mobile infotainmentWith calling revenue flattening out, MSPs have actively compared to other media platforms, thus establishing mobilesearched out new revenue streams to boost their top line and as a viable value-added distribution channel, like the PC.operating margins. In an effort to expand business potential,the mobile industry has already placed significant stakes on However, the success of services such as mobile ring tonesmobile information and entertainment services. does provide hope, showing how MSPs can drive the develop- ment of services that exploit the personal and portable natureAccording to The Yankee Group, the entertainment industry of mobile-networked services. Developing other successfulwas worth over $112 billion in 2004 in the United States alone. video and audio services requires MSPs to leverage theirMoreover, as shown in Figure 4, video services represent over intrinsic capabilities in:three-quarters of this consumer spending. However, despite > Full-service mobility across a range of consumer devicesthe fact that it is possible to deliver media across digital > Real-time transaction delivery capabilities for impulsivenetworks such as the Internet, mobile entertainment still only transactionsrepresents less than 0.5 percent of the total. For this reason, > Always-on interactivity, with the potential to provide real-most media companies are not sure how important wireless time added value over other distribution channelsdistribution fits into their business plans. Developing services with greater personalA significant part of the problem lies in the fact that many relevance will drive mobile growthconsumers do not currently view mobile handsets as effective MSPs are currently playing in a complex and ever-changinginfotainment devices, providing the same level of comfort as environment, characterized by the convergence of digitalspecialized consumer devices for listening to music (e.g., services and media, and the pervasiveness of the Internet.Apple i-Pod), viewing video content (e.g., iRiver mediaplayers), or playing games (e.g., Nintendo Game Boy). To avoid becoming commodity providers of network capacity, MSPs need to refocus their strategy by making their services more relevant for users. This means offering differentiatedFigure 4 - Entertainment Market customer propositions that provide increased convenience and flexibility while leveraging the convergence of a range Online of services, all in a personalized manner. Music $1.5 Million $11.9 Million In short MSPs must provide users with what they want, Cable/Satellite when and how they want it. $53 Million Games $12 Million In order to achieve this, MSPs need to leverage their core capabilities to provide services that are personalized, fully portable, universally accessible, and completely interactive — in other words, user-centric.Video$34 MillionSource: The Yankee Group, 2004> 6 A L C AT E L
  10. 10. User-Centric Broadband: Service Provider StrategiesCurrent and Future Business Models The positioning of each business model is shown in Figure 5,The majority of mobile service provider strategies are highly according to level of market competition, and the differen-dependent on mobile voice services. However, increasing tiation of service propositions.competition, the adoption of new and in some cases substituteservices and the absence of new compensatory revenue Full-Service Mobile Service Providerstreams will continue driving voice revenue erosion, slowing This business model, currently adopted by most existinggrowth. Therefore, it is paramount that MSPs focus their MSPs, addresses consumer and business customers with abusiness model in one of the following ways. range of propositions and services, as outlined in the “Market Environment” section of this paper. MOBILE SERVICE PROVIDER BUSINESS MODELS The full-service MSP’s main assets include its established • Full-service mobile service provider brand identity, and existing customer relationships. However, • Mobile virtual network operator the rapid changes stemming from digital media convergence • Mobile network wholesaler and the role of the Internet, coupled with increasing customer • Mobile broadband ISP expectations, are showing that this is not enough for continued success.The business model adopted will depend on a number of The key challenge faced by the full-service MSP is to continuefactors including strategic objectives, competitive positioning, addressing the evolving and fragmenting needs of a widethe targeted markets, and the available resources. range of customer segments. This requires continued invest- ment into a growing number of businesses across differentFigure 5 - Mobile Service Provider Business Models High Differentiation/Margins MVNO Mobile Highly specialized, Broadband ISP facility-free consumer Increasing bandwidth, companies, targeting enables innovative market niches mobile Internet services: “Personal mobile service portal”Limited HighlyCompetition Competitive Full Service MSP Default model, facing increasing competitive pressure Mobile Network Wholesaler High competition, Relative Operator Size opening up way for commodity (min, Mb) wholesaler Low Differentiation/Margins A L C AT E L 7 >
  11. 11. User-Centric Broadband: Service Provider Strategiesindustries, each with distinct market drivers, brand and This provides the opportunity to offer specialized, exclusivecontent preferences, product lifecycles, partnering require- content, branded mobile devices, cross-product bundles andments, etc. Operationally, the challenge for the MSP will be to promotions, as well as the customer service associated withmanage this additional complexity without alienating end users. the brand.For full-service MSPs to remain successful, they require: These mobile newcomers are keen to limit investment and> Open service delivery platforms easily supporting quick resources in telecom infrastructure and operations, opting development and integration of both in-house and instead to rent network capacity and facilities from existing externally developed services MSPs (ranging from radio access and service provisioning,> A universal broadband network providing a seamless to subscriber management, billing, and customer care). customer experience using adapted network access across devices Challenges include establishing profitable wholesale arrange-> Flexible value charging capabilities adapted to a large range ments, maintaining close customer relationships, developing of service offers and business models effective, differentiated customer propositions in a timely> A powerful customer relationship management system manner, and maintaining their brand image by ensuring ensuring effective profile management over a wide set of the right level of customer satisfaction and loyalty, while segmented offers delivering services using a third-party network.In the end, full-service MSPs may be faced with one of the To be successful, MVNOs require:following choices: > An open, standard, scalable service delivery platform> Specialize and address specific market segments (e.g., supporting fast service development, testing and launching youth market, SMEs) in a more focused manner, while with a scalable investment model welcoming selected “mobile virtual network operators” > Flexible charging systems for quickly developing and (see next section) to address any untargeted segments implementing innovative services pricing models,> Refocus as a network wholesaler of bulk mobile capacity — supporting a range of partner business models calling minutes, MB of data — serving only third-party > An effective customer care system providing unique virtual operators, who will in turn directly address end customer profiling, enabling highly effective marketing, users retention and loyalty programs, all in a scalable manner> Transform into a less vertically integrated aggregator of mobile Internet services, analogous to leading Internet Mobile Network Wholesaler portals (e.g., Yahoo!), to effectively address a wide range of This business model is based on selling bulk network capacity customer segments with a multitude of innovative, billable to third parties (i.e., MVNOs – see previous section) for a services, developed in partnerships with specialized ASPs range of mobile services. In order to succeed in what can amount to a low-margin business for selling minutes and/orMobile Virtual Network Operator MB of data, a network wholesaler must be able to generateThis business model, which has emerged over the last few significant economies of scale. In today’s market, such a roleyears, is characterized by the arrival of non-traditional players may be suited only to the top one or two service providers.offering well-targeted mobile service propositions to theirexisting customers, without having to build the network The main advantage of this model is that the wholesaler caninfrastructure. focus all of its resources on providing network capacity with the required service level agreements toward resellers.MVNO services are a new vehicle for high-profile consumerbrands/fast-moving consumer goods companies looking toextend their brand awareness and exploit new advertisingand distribution channels while generating additional revenue.> 8 A L C AT E L
  12. 12. User-Centric Broadband: Service Provider StrategiesDepending on the operating model, this provides direct savings The usual service provider activities of service development,on service delivery and content management platforms, while operation and maintenance, as well as many customersignificantly reducing spending on new service development marketing aspects — service launch, promotion, customerand related operating and maintenance expenses. Similarly, acquisition and retention — will be shared between the MoBwholesalers will also save on costly end-user marketing activ- ISP and its third-party service partners.ities, including new service launching, promotion, subscriberacquisition, retention programs, and customer care. Challenges will include providing a consistent customer experience for services integrated into its “portal,” over whichTo be successful, wholesalers require: it has little or no control. Similarly, the MoB ISP will also be> A unified carrier-class core network — a next generation faced with ensuring a consistent user experience across a full network (NGN) — handling a range of services from range of user devices. several MSP retailers, while providing maximum operational efficiencies In order to establish a successful business, MoB ISPs require:> Service-aware edge and data-aware transport networks > An open service delivery environment supporting quick providing a broad range of service level agreements to development and integration of Internet services developed retailers both in-house and by third parties> A universal broadband network providing high-speed > Universal broadband access providing high-speed, service delivery across a full range of standards and wireless/mobile service delivery across a full range of devices, in a future-safe manner devices, in a future-safe manner > Flexible charging systems to accommodate any numberMobile Broadband ISP of innovative services pricing models, while supportingThis business model focuses around offering a wide range of a range of different business models with partnersinnovative wireless/mobile Internet-based services to users, > An effective customer care system providing uniqueto any type of networked device. customer profiling, enabling effective marketing, retention and loyalty programsWhile the mobile broadband ISP (MoB ISP) will develop > A service-aware edge and data-aware transport networkselected services itself (e.g., voice calling), most services will providing a broad range of service level agreementbe developed and branded by cutting-edge third parties, and capabilities to selected end-user servicesthen commercialized by the service provider. As such, the > A unified carrier-class core network handling a full rangemain role of the MoB ISP is to act as a personalized "mobile of user services, while providing maximum operationalInternet service portal" (much like Yahoo!, the PC-based efficienciesstandard), aggregating and distributing a range of services,providing added value through service interactivity, user Although the mobile industry is probably headed in thisprofiling, service level agreements, single-point customer direction over the long term, the key risk for a MoB ISP iscare and billing capabilities. that it may lose focus, failing to provide additional added value over “fixed Internet” services, becoming relegatedThis model provides the flexibility to quickly develop and instead to the role of mobile IP wholesaler (possibly withoffer any number of innovative services (leveraging the low- insufficient scale to compete effectively).cost, innovative nature of the Internet), while providing theopportunity to extend or develop an innovative brand identityand remain customer-facing. A L C AT E L 9 >
  13. 13. User-Centric Broadband: Service Provider StrategiesHow Can User-Centric Broadband Enhance Mobile Calling,Services Help the MSP? Leveraging the Wireless InternetA User-Centric Broadband concept brings greater levels of Personal calling is, and will remain, the core business forconvenience and convergence to services, expanding the MSPs for some time. At the same time, to offset falling ARPUpossibilities and benefit for end users. This presents the MSP (owing mainly to competition from low-cost calling substitutes),with major revenue opportunities and new business challenges. MSPs must develop more personalized service offers, combin-The key to success is to develop a User-Centric Broadband ing the best of all worlds, including video and Internetstrategy that balances the creation of new revenue streams capabilities:and the protection of core business against increasing > Provide the user with a choice of real-time personalcompetition and reduced margins. communications media — voice, text, video — with the option to switch between these as needed > Enable calling from the user’s device of choiceKEY MOBILE SERVICE ATTRIBUTES (e.g., handset, PC, PDA, TV):• Personalized services • Universally accessible • using the most adapted network access (mobile, wireless,• Fully portable • Completely interactive fixed) according to availability and service level agreementWhile today’s mobile services will be central to User-Centric • ensuring interworking between devices with adaptedBroadband strategies for MSPs, in order to deliver more payment mechanismsrelevant customer propositions and provide greater perceived • with a consistent pricing policy, leveraging the low-costvalue, MSPs must leverage the key mobile service attributes Internet when possiblewhere possible. > Support a full range of supplementary services across devices (e.g., caller ID, voice-mail)Building on these key service aspects, MSPs are able to > Offer simple access to and management of account detailsdefend, and in some cases anticipate, emerging competitive in a consistent manner across devices and for all callingthreats, as seen in Figure 6. servicesFigure 6 - Competitive Threats and MSP Responses Competitive Low-cost Internet Abundant/substitute Unlicensed wireless Web-only portable Threat hotspot calling message services networking infotainment services Personalized Ubiquitous personal Universal broadband Interactive on-demand communication messaging – offer Internet connectivity – video and audio proposition – voice providing full service extending networked infotainment services, Response and video – across any integration for user-defined service mobility to any providing 24/7 transaction networked device. Offering services, providing seamless device and application. capability and increased a full range of support service escalation across user relevance. services, and levering devices. low-cost IP when possible. Strategic Customer Increase customer Grow wireless Develop mobile Objective retention loyalty networking business infotainment business> 10 A L C AT E L
  14. 14. User-Centric Broadband: Service Provider StrategiesExpand Mobile Messaging into a > Developing a universal networking proposition targetingUbiquitous Personal Messaging Offer vertical markets, that:Messaging is already a profitable business for MSPs. However, • provides simple, standardized interface rules for quickto become even more valuable for users and thus provide and easy broadband networking, at predefined serviceincreased revenue, MSPs must bring together a range of user- levelsdefined messaging services into a ubiquitous offer, providing • ensures superior reliability and securitythe best individual user experiences. This implies: • provides consistent service management and billing> Providing a full choice of integrated messaging service arrangements (e.g., text, picture, instant messaging [IM], voice, video), according to a user’s desire for communication, information Drive the Market for Mobile Video sharing, emotional expression, etc.: and Audio Infotainment • seamlessly escalating between services, on demand Video and audio infotainment services offer huge growth (e.g., escalating an SMS exchange into an IM session, potential for mobile service providers. However, in order to then sending pictures or videos, and returning to an increase their share of this growing market, service providers SMS exchange) need to offer services with more relevance for consumers.> Assuring ease of use, whatever the device> Ensuring simple, transparent pricing, applied consistently This means leveraging their intrinsic capabilities in selling across the devices used: on-demand services, with always-on service interactivity, • supporting customer-defined billing arrangements, in line across a range of user devices. This implies: with budget requirements (e.g., subaccounts, real- > Expanding existing infotainment business to accommodate time/prepaid payment) a wider range of video and audio services, across a variety> Offering the possibility to develop segment-oriented of networked media platforms – mobile, PC, TV, selected customer messaging propositions: specialized consumer devices • consumers — transparent access and interoperability • driving cross-platform service usage through bundled with commercial e-mail and IM services, access to offers with ubiquitous service access and global pricing personal blogs propositions • business users — integration into office messaging > Innovating new services leveraging real-time, personal environment, including access to corporate contact lists, service interactivity: intranet resources, etc. • driven by users’ preferences and profiles to give them what they want, when and how they want itProvide Universal Broadband • offering added value to substitute services deliveredInternet Connectivity to Any User Device over parallel channelsThe ultimate value of wireless networking is in enabling a > Offering a personalized video and audio environment,fully networked economy. To do this MSPs need to broaden regardless of devices:their wireless data offers to address the emerging needs of • single set of service preferences, media bookmarksconsumer and corporate customers for communicating, service, etc.interacting and transacting with others, across the networked • consistent real-time transaction capabilitieseconomy. This implies:> Providing a consumer value proposition for networking a range of user devices or applications (e.g., MP3 player, industrial monitoring and diagnostic systems), using the most adapted network access available (2.5 f 3.5G, WiFi, WiMAX, etc.) A L C AT E L 11 >
  15. 15. User-Centric Broadband: Service Provider StrategiesMSP and Alcatel Moving Toward Service providers will require an environment flexible enoughUser-Centric Broadband to provide a wide range of services in a way most appropriateThere are several steps that an MSP can take in order to for each customer as service strategy evolves across thedevelop a more User-Centric Broadband business. A high-level different phases of the user-centric roadmap.service evolution roadmap for a full MSP is shown in Figure 7,indicating the key steps to be taken toward fully converged Figure 8 provides a strategic vision of Alcatel’s User-Centricuser-centric services. Broadband service delivery network. This vision considers the entire network, including legacy systems. As the serviceThe first step to a User-Centric Broadband business is to start provider moves along the service roadmap (Figure 7), it willwith service bundles, giving users more flexibility in satisfying implement the necessary components as needed.their service needs, according to their budgets. The next levelof service convergence concerns the partial integration of Alcatel Network Visiondisparate services, including (among others) low-cost Internet Alcatel’s User-Centric Broadband delivery model has four keycalling over mobile handsets. Users should also have the characteristics:freedom to seamlessly switch between services whenever they > Service delivery environment: Includes pre-integratedwish. Finally, moving toward completely user-centric services applications, such as messaging, VoIP, presence and payment,implies giving users full freedom of choice both in the services and is open and standards-based for integration of third-they want, and how they want to access them. This will lead party applications. It contains the personal profileto a world where the user defines the service he or she receives. information and makes it available for new services, enabling consistent service delivery and a common look and feel.Figure 7 – Service Roadmap for a Mobile Service Provider Complete User Centricity • Ubiquitous service access – mobile web services: Partial Service Convergence from any device, with • Low cost hotspot calling a consistent proposition (voice and video) with dual and user preferences Service Bundles mode devices • Automatic most-adapted • Service-oriented credit pools: • Service access across different broadband connection – calling: voice and video devices – mobile, wireless, (fixed) – messaging: text, picture, – personalized environment, • Mobile broadband ISP service IM, video... common service log-in, – networking and device/ Strategic Value – networking: mobile, management, bookmarks, application wireless (fixed) payment • User-driven service innovation – infotainment: white label • User-driven service escalation: – open ecosystem, fostering video, audio,... – voice-to-video calling; the development of new, – corporate voice/data VPN SMS-to-IM-to-video messaging on-demand, interactive, • Real-time account management etc. personalized services Attract VoIP users, Differentiate from fixed line Differentiate from fixed increased differentiation triple play services and single and Internet-only services over Internet services service providers (VoIP, ISP) Key Enablers: Convergent payment, increasing wireless bandwidth, more networked devices, content value charging, new access technologies (WiFi, 2.75 -> 3G, WiMax,...), single/open service environment (own and third-party applications), unified next generation network Time> 12 A L C AT E L
  16. 16. User-Centric Broadband: Service Provider Strategies> Service-aware edge and data-aware transport: Includes the This low-level service convergence will enable the service integration of networks to form IMS/TISPAN next generation provider to differentiate from their fixed and Internet-only networks. This integration can be done by interconnecting competitor, while giving the end user more freedom in using legacy and other licensed operators networks. This also their services in a way that suits them. Alcatel’s open service includes the service-aware routing functionality that enables delivery system, combined with our evolutionary OSS/BSS service providers to deliver QoS when it matters, and not approach, enables the service provider to quickly and easily when it doesn’t, providing essential service tiers to add test the market with new bundles based on our convergent value to end-user services and to enhance revenues from service pricing and value charging capabilities while swiftly wholesale services. reacting to changing behavior and customer needs.> Multi-access support, covering PSTN, DSL, WiFi, 2G, 2.5G, 3G, etc., including access to third-party networks Step 2 - Partial service convergence. Extend service> Evolutionary approach allowing service providers to build delivery and control to an external partner’s networks (i.e., on the existing infrastructure such as operations and Internet), while offering other unique customer propositions business support systems (OSS/BSS), core and access based on functionally integrated services (in-house and third- networks, etc. party), across different devices. The service provider will also want to begin unifying its legacy networks to provide a unique, transparent customer service experience, and beginFigure 8 - Alcatel’s User-Centric Broadband Services Delivery benefiting from economies of scale. Users will benefit from:Architecture > Lower-cost delivery of selected services (e.g., voice and video communications over IP), using mobile (dual mode) handsets Any Application, Any Content Business Universal Service- Open Every Terminal, Everywhere Environment Broadband Aware Service > User-driven service escalation between similar services Access Edge Delivery and Environ- (e.g., voice-to-video calling) Each User Wireline Data- ment > Access to user services across a range of user-defined Aware Wireless Transport devices (e.g., handsets, PCs) Consumer Satellite Environment Mobile Functional service convergence allows the service provider to effectively compete with low-cost Internet calling services, while increasing differentiation over other Internet-based Operations and Business Support Systems services, all while increasing overall customer loyalty. The Integration and Operations continued implementation of Alcatel’s open service delivery system facilitates integrated services thanks to its unique userAlcatel recommends that service providers take the following profile capabilities. Our service-aware infrastructure providessteps in becoming a provider of user-centric services. control of bandwidth and QoS, allowing the service provider to amalgamate services based on user needs (e.g., VoIP callingStep 1 - Service bundles. Enable a variety of service- within hotspots) across different devices. Finally, by deployingoriented bundles by integrating selected OSS/BSS functions, a range of adapted high-speed mobile/wireless broadbandservice delivery mechanisms, and content value charging, in access (EDGE, UMTS, HSDPA, WiFi, etc.) in strategic locations,order to offer: the service providers capture revenue effectively where> Convergent charging across selected services, enabling services are most valued. service-oriented credit pools (calling minutes, message credits, MB of data, etc.)> Development of unique content value charging schemes applied consistently to selected service families> A unique contact center with global service management and provisioning A L C AT E L 13 >
  17. 17. User-Centric Broadband: Service Provider StrategiesStep 3 - Complete user-centricity. Enable complete user- Whether an MSP continues to follow a full-service model,centric services, accessible from any device, by continuing whether it decides to focus on wholesaling mobile/wirelessto extend the reach of integrated services. Provide intelligent capacity to enable other specialized players to address users,service delivery with automatic, most-adapted broadband or whether it chooses to partner with innovative Internet-wireless/mobile connectivity to a full range of devices. Complete based service providers to propose the best-of-breed services,migration to a unified network, paving the way for a flexible, offering more user-centric services will solidify existingopen network environment, which continues to foster service business, build new revenue streams, defend againstinnovation and create shareholder value for the service competitive threats and build customer loyalty.provider. This will give end users:> Any device service access and network connectivity Alcatel has extensive experience in this area and has many (video, audio, data to user-defined devices) solutions and services that can help service providers define,> An enhanced, end-to-end service delivery experience implement and launch their user-centric service strategies, optimized according to needs and budget making them more competitive, while also giving them control> Mobile broadband ISP services, including reliability over their investment and risk every step of the way. and security service level agreementsThis complete user-centric model allows the service providerto differentiate for fixed-line services and single-serviceproviders (VoIP providers, ISPs) while positioning mobileservices as the future of networking. By fully integratingAlcatel’s open delivery platform with its range of broadbandaccess solutions and an adapted NGN, the service providerwill be able to benefit from a powerful user-centric servicedelivery environment with which it can provide potentiallyany services to any networked device, with the lowest costof ownership.ConclusionMSPs are facing a range of opportunities and competitivethreats. Alcatel believes that user-centric service convergenceoffers a great opportunity for MSPs to establish long-termdifferentiation, while offering users simpler, more relevantservice propositions, extending beyond basic voice calling to:> Personalized communications, including cost-effective voice and video> Ubiquitous messaging, integrating text, picture, IM, video and other new services> Universal broadband connectivity, unlocking the potential of networking> Interactive, on-demand infotainment including video, audio, games and other services> 14 A L C AT E L
  18. 18. www.alcatel.com Alcatel and the Alcatel logo are registered trademarks of Alcatel. All other trademarks are the property of their respective owners. Alcatel assumes no responsibility for the accuracy of the information presented, which is subject to change without notice. © 01 2005 Alcatel. All rights reserved. 3CL 00469 0767 TQZZA Ed.01 18894