This document discusses the transition of telecommunications operators toward next-generation networks (NGNs) based on IP Multimedia Subsystems (IMS) architecture. It notes that traditional operators face threats from new competitors and declining revenues, driving industry consolidation. IMS can help operators generate new revenues through converged fixed-mobile services and overcome limitations of current "siloed" networks. However, migrating to IMS requires heavy initial investment and a flexible approach, as cost savings may not be immediate due to network complexity and a long return on investment period.

1. The Rough Road toward Fixed-
Mobile Convergence
The Impact of an NGN–/IMS–Based Strategy on
Telecommunications Operators
Carlos Ruiz Gómez
Telecommunications Manager
Everis
Fixed telephony providers are “Internetizing” their services and differentiating them from those
of other Internet companies in terms of features and content1, and mobile telephony operators are
heading in the same direction2. In turn, Internet access providers are threatening to become
telecommunications operators3, and cable operators are “invading” the competencies of telephony
and wideband access operators and vice versa4. An increasingly growing number of competitors
are driving operators and telecommunications service providers toward a consolidation that
started several years ago (i.e., the acquisition of mobile operator C&W HKT, Ltd., by PCCW in
2000) and continues to date (i.e., the advertisement of the acquisition this year of BellSouth by
AT&T, aimed at controlling mobile operator Cingular Wireless). See Figure 1.
Mobile telephony Fixed telephony Internet access TV
Telecommunications
Access
Cable
original service area short-term extension of offering medium-term extension of offering
Figure 1: Trends in Telecom Player Service Offerings
(Source: IDATE)
The Strategic Potential of Next-Generation Networks
Without mentioning content providers and the role they play in this scenario, these operator
trends are one of the reasons for the consolidation that has also been taking place among

2. telecommunications network system manufacturers, thereby consolidating their own offering and
client portfolio5.
And there are many reasons for these trends in the telecommunications market. Naturally,
operators see their traditional business under threat: revenues from fixed telephony are
continually falling6, as with voice ARPU in mobile telephony7; the churn between mobile
operators has not declined8. The growing demands of users with regard to service quality and
ubiquity of access, in addition to the demand for new multimedia experiences (i.e., new types of
services), make attracting and retaining shop users increasingly difficult and costly, both in terms
of maintenance and network operation (insufficient client attention, poor service quality, and slow
problem resolution are the main causes for loss of business clients between mobile operators,
with a 34 percent drop in marketing and sales). See Figure 2.
4%
5%
5%
27%
7%
12%
22%
15%
Poor coverage Expensive prices / rates Custom er service
Dissatisfied w ith service provided Slow problem resolution Have other com petitive offers
Invoicing problem s Don't deliver as prom ised
Figure 2: Main Reasons Why Spanish SMBs Change Their Mobile Operator
(Source: The Telecommunications Market in Spanish SMBs, Everis)
This change in demand is no doubt influenced and expedited by new technologies. Faster access
speeds (i.e., enhanced data rates for Global System for Mobile Communications [EDGE];
evolution data optimized [EVDO] Revs. A and B and even C, which are already under
development; high-speed downlink packet access [HSDPA]; the forthcoming high-speed uplink
packet access [HSUPA] in Universal Mobile Telecommunications System [UMTS], future
standards such as long-term evolution) enhances the multimedia service offering. But the
traditional “silo” structure of current networks, with each type of service supplied under types of
access, transport media, and degree of control, severely hinders their development, maintenance,
and universalization; next-generation networks (NGNs) are the best option in this framework.
Each type of operator will start from a different technology and market situation, with different

3. types of access methods and different penetration in the user markets. Examples include the
following:
• Although fixed-access service providers in general will start from a heterogeneous
environment that will complicate migration to an all–Internet protocol (IP) architecture as
a first step toward NGNs, it must nevertheless be carried out. These providers will focus
primarily on developing their current services and enhancing them to combat growing
competition from cable operators. They must also consider convergent fixed-mobile
services (such as dual-mode services or fixed-mobile continuity, via protocols such as
unlicensed mobile access/general access network [UMA/GAN]) would allow their clients
to take advantage of fixed-access operators’ increasing presence in the wireless
environment, using their own infrastructure or renting it from mobile operators (i.e.,
mobile virtual network operators [MVNOs]).
• Mobile access providers must first adapt their networks to the new wireless wideband
standards and start developing a multimedia service catalog that leverages these faster
speeds. They should consider launching continuity services in conjunction with fixed
operators in regions where they cannot offer clients adequate coverage (e.g., third-world
countries). They should also think about systematically migrating all their networks to
all–IP so as not to eventually lose market share to the more aggressive fixed-access
operators in this aspect.
• Cable operators pose an obvious threat to fixed-access providers (in fact, there is a
growing number of agreements/joint ventures in the United States between mobile and
cable operators, in addition to these wanting to become MVNOs). These types of
providers can leverage and build on their multimedia and television services, in addition
to adopting the standard PacketCable that will allow them to launch services that compete
with the traditional services offered by telephony and fixed wideband access operators.
Therefore, by scaling the speed of adaptation of the types of operators to this new environment
and the launching of multimedia services, the question of whether the adoption of an NGN
architecture based on all–IP is based on a tactical (cost savings, due to the adoption of an IP–
based architecture) or strategic line of action (an attempt to increase the competitiveness of
operators based on a new source of income) quickly comes to mind. But the heavy initial
investment required (in view of which the effect of cost savings will by no means be felt
immediately) combined with the need for differentiation between convergent operators will make
an NGN a strategic option, capable of reducing the churn and driving revenues from new
services.
IP Multimedia Subsystems as Strategy Drivers
IP multimedia subsystems (IMS) form the cornerstone of NGNs, freeing the degree of control
over transport and application, unifying and freeing access type services, and defining a more
dynamic and collaborative multimedia service development framework (see Figure 3).

4. “Silo” architecture IMS architecture
Applicatio
Applicatio
Applicatio
Service Level –
Application and content
Applicatio
Applicatio
Applicatio
servers
Control Level –
Control
Control
Control
Control
Network, security, invoicing and
network interconnection control
Internet
Mobile
PSTN
Internet
Network Level –
Mobile
PSTN
Routers, switches and
gateways
Figure 3: IMS Frees Control and Transport
(Source: Everis)
While convergent services do not necessarily have to be based on IMS, they help speed fixed-
mobile convergence while operators migrate to IMS architecture (i.e., BT’s agreement with
Vodafone in the United Kingdom, or France Telecom’s Unik service). DMS’s pre–IMS
continuity services have become a trial-and-error method for service providers to measure the
demand and acceptance of fixed-mobile convergent services. But this method has its limitations,
such as it does not allow the user to evaluate the advantages of inter-service collaboration. For
this reason, service providers must have clear ideas of their evolution to a full–IMS environment
that will increase their competitive edge.
In fact, a closed network model severely hinders the development of services accessed by users.
Depending on the type of access, the services are deployed through a specialized and specific
set of network elements for that service and through a network access: the “silo” concept. Apart
from a specific network infrastructure, communication interfaces, and support applications,
each service requires its own “silo” and specific network elements and network management.
This silo may include a unique charging functionality, presence, list group management,
routing, and supply, which makes the construction and maintenance of this structure very
expensive.
IMS architecture emerges as a model that will unify the control layer between types of access
networks, standardizing the relationship between the network and services, thereby expediting
the development of the latter. IMS offers a network architecture whereby the software
infrastructure, due to the use of standards, allows network functionalities to be reused and
shared between multiple access networks, thus enabling the creation of services.
As a standard that expedites migration to NGN architecture, IMS should drive revenues from
new convergent services. This blurs the boundaries of current segmentation between cable
operators, wideband Internet access, and fixed and mobile (voice and data) services, thereby

5. intensifying competition between these and defining the new business relationships between the
players that cover different parts of the convergent service provider’s value chain. In this way,
the operator must relate to content providers in a different way and must depend increasingly
on third parties for external development and integration services.
Generation of New Revenues
IMS defines not the applications or services that can be offered to the end user, but rather a
network architecture that operators can use to generate an increasingly rich service offering.
However, IMS must ultimately expedite the development of multimedia and collaborative
services independent of the access network. IMS must expedite the following:
• IP multimedia sessions composed of diverse multimedia flows and content, with an
adequate level of service quality for video, audio, sound, text, application data, etc.
• Dynamic integration of media in the course of a communication (text, voice, video, etc.)
• Identification of users, services, and nodes through universal identifiers, which increases
usability of services for subscribers
• Information on user availability and communication capacity (PC or mobile connection,
multimedia capacities)
• Management and use of user groups in multi-user communications
• Fixed-mobile application convergence, as the system is independent from access
In fact, ABI Research predicts that world revenues from this type of service will reach U.S. $49.6
billion in 2011, in line with the trend that predicts that revenues from multimedia services will
replace voice services in operators’ bottom lines8.
For this purpose, operators must constantly reflect on the types of services that will soon be
demanded by users. This is of great importance, since service sale margins must not only
compensate development and production efforts, but also affect operation or competitiveness. For
example, Gartner proposes a mobile service identification method based on Maslow’s pyramid of
needs (see Figure 4). This method refers to the two essential concepts of mobility and
customization of the services to be developed, concepts that enable IMS services by freeing
access and simplifying development.

6. Source: Gartner
Maslow’s hierarchy of needs Revenue by type of need
Customization
Mobility and ubiquity
Figure 4: Identification of Services with Greater Revenue Generation Potential
But the industry no longer speaks of “killer applications.” In fact, voice services will continue to
lead due to their indispensable nature, as compared to others such as those aimed at the leisure
industry, but margins are undergoing a downward trend. Revenues from short message service
(SMS) are also expected to fall between now and 2010; they will drop 8 percent in western
Europe and up to 11.2 percent in eastern Europe9. Now it refers to a set of applications (bundles),
the value of which will increase parallel to their integration in the same session: according to
Lucent Bell Labs, “unique service churn varies between 1.7 and 2.5 percent, while bundle churn
based on multiple collaborative services drops between 1 and 1.5 percent,” boosting mobile
operator voice and data ARPU 40 percent on average during the next five years. Service bundling
is not new—it is used in double-, triple-, and quadruple-play offerings—and supposedly drive
revenues in proportion to the number of applications in the bundle (however, revenues are
estimated to stabilize on reaching four or five services in the same bundle). However, according
to Forrester only 1 percent of Italian consumers, 8 percent of French consumers and 10 percent of
British consumers have contracted triple-play services. In fact, an estimated 44 percent of
European consumers are not interested in bundles, thereby theoretically dismantling the
possibilities of success of this strategy. However, IMS allows applications to interact in a more
natural way, whereby bundles would evolve from a sales-oriented concept to a collaborative
service (blended services). This is expected to not only reduce churn, but also boost the number
of new contracts.
While each type of operator (fixed, mobile, cable, MVNO) adapts to an all–IP and IMS
environment at different speeds, they will all have different requirements—initial and strategic—
with regard to the type of services to be developed. In the long term, this will tend toward the
development of a similar product catalog by the different types of service providers in an
increasingly competitive manner (see Figure 5).

7. VoIP IP VideoTelephony IM
VCC On-Demand Conference
IP Centrex Click-to-dial
Online games VoiceMail Push-to-x
Fixed / cable
Convergent Offering
VoIP PodCasting IP VideoTelephony Online games
VCC PodCasting
Content-Sharing On-Demand Conference Click-to-dial
IP Centrex
IM Online games Content-Sharing
VoiceMail Push-to-x
Convergent
PodCasting IP VideoTelephony VoIP
IM
Content-Sharing On-Demand Conference Click-to-dial
Online games VoiceMail Push-to-x VCC
Mobile
Figure 5: Examples of Operator Approach to Services
(Source: Everis)
Thus, the identification of services and combinations of these in bundles according to type of
client, needs, and behavior, tending toward ultra-segmentation and marketing-to-one, will be
crucial. Complexity increases parallel to the uncertain and unpredictable demand for new services
with increasingly greater costs. The service catalog will depend on the type of operator (its
strategy), invoicing method, location, and type of user (massive/business). Those service provider
offerings that best adapt to client demands will generate greater fidelity and therefore higher
average revenue per user (ARPU) and revenues.
The Need for a More Flexible Environment …
The adoption of IMS should be a strategic rather than tactical line of action aimed at ensuring the
operator’s competitiveness. But this competitiveness would also be determined by the company’s
capacity to adapt to the new environment. Evidently, this affirmation will be more or less
vehement depending on the operator’s situation, e.g., if it is an incumbent, two-tier or new player;
in the last case, for example, the operator would have to be more aggressive in its value
proposition to end users, although the incumbent operator will generally carry greater dead
weight in its organization, such as a wider infrastructure and higher personnel costs. In this
section, we wish to emphasize the importance of the need to adapt to the new environment,
pointing out that cost savings are not immediately felt due to the complex nature of migration in a
fixed-mobile convergent environment favored by IMS.
The studies carried out indicate that cost savings will be achieved. According to Loudhouse for
Apertio, e.g., operator operational expenses (OPEX) will decrease 10 percent on adoption of IMS,
dropping from U.S. $805 million to U.S. $723 million. However, as we already anticipated, this
will require a heavy initial investment, and ABI Research foresees that operators worldwide will

8. invest a total of U.S. $10.1 billion in IMS infrastructure in the next five years and the return on
investment (ROI) will not be short-term (between two and five years, according to the same
source), although with a 5 percent decrease in capital expenses (CAPEX) (also according to the
same source). Additionally, operators are expected to spend U.S. $4 billion in service
development platforms (service delivery platforms) in the next five years and U.S. $470 million
in operations support systems (OSSs) (according to OSS Observer) at best. According to our own
experience, a business case based exclusively on investment and cost savings could have an even
longer payback period than expected.
Not counting personnel costs, which vary from country to country and can represent a high
percentage of the total adaptation costs of an incumbent operator, the initial cost of infrastructure
and next-generation OSSs and business support systems (BSSs) will account for the greater part
of initial investment costs. In addition to introducing new network elements, IMS will force
operators to take applicability into account in service management, the number of which must be
higher and with less time to market (TTM). For this reason, OSS and BSS systems are
particularly delicate, not only due to their importance to the operator’s capacity to manage its
network and relationship with clients, but also because these systems are not considered in the
scope of IMS. At present, current services are deployed on many platforms, each with its own
dedicated databases, interfaces, functionality, and interaction with OSSs and BSSs such as service
delivery and client attention. These services are either developed in silos or under a vertical
architecture. This method gives rise to significant technical problems on introduction of new
services, increasing both cost and TTM, which is contrary to one of the objectives of IMS and
NGNs. Additionally, the management and control of the deployed services are increasingly
expensive and confusing. Areas impacted by IMS in OSSs and BSSs include the following:
• Order management and fulfillment—The estimated number of service components
increases up to 100 times in customized services, while clients expect real-time order
fulfillment.
• Monitoring of resources—Service delivery must be ensured the first time around.
• Service quality—Service and quality as specified in the service-level agreement (SLA)
must be ensured.
• Mediation and invoicing—Users expect a convergent rate with a wide range of invoicing
options.
• Automation of outbound and inbound marketing tools with real or potential clients.
• Greater relevance of customer-experience management (CEM) systems to detect, track
and solve service availability problems; these systems can even become a differentiating
factor for operators.
The adaptation of systems to the IMS environment is one of the key aspects that must be
considered to ensure its ROI. The convergence of fixed-mobile access networks, the need for
greater operating efficiency, and a growing number of services with less TTM will force service
providers to change the systems map.
… That Includes the Organization and Processes
But infrastructure and system costs are not the only problems an operator must tackle in its
adaptation process. From the determination to migrate to a full–IMS environment to the
adaptation of its IT systems, internal processes, client attention, and even its own internal
organization, there are determinant factors in the operator’s capacity to offer a so-called optimum
user experience, which will become an even greater differentiating factor than it is today (see

9. Figure 6).
Project Portfolio Management
Excellence
Strategic Master
Plan Plan
Telco XXI
Initiatives
Business
Processes
Change Management
Figure 6: Aiming at Optimum User Experience through Operating Excellency
(Source: Everis)
Impact on the Organization
Although IMS is a network architecture—a technological concept—its implications on the
organization as a fixed-mobile convergence enabler are very important, and service providers will
have to reconsider their organizational structure. The boundary between the network and IT
systems is becoming increasingly blurred, in addition to the distinction of functions between
workstations in service providers. The following are examples of what must be considered:
• Redistribution of responsibilities between work teams (merger between networks and
systems, thereby strengthening the product marketing department, greater emphasis on
user support, etc.), giving more and more importance to certain functions (such as that of
service manager)
• Organizational adaptation to the new service/product life cycles (product life-cycle
management)
Additionally, as with all major projects that affect a company and its business model, it is very
important to be able to count on the support of the company’s management team.
Impact on Processes
For each value-chain model, and with business model characteristics based on NGN–IMS
architecture, the service provider must revise its third-party and client management processes.
The service provider must revise its processes with regard to different content providers and
other operators. Examples include the following:
• Management of client operations to ensure that content providers and other operators can
give an adequate response to the operation of services offered to end clients
• Integration of third-party needs (e.g., content providers) in procurement processes

10. • Definition and management of SLAs throughout the third-party chain (diverse providers)
to ensure correct delivery to the end client
• Alignment of invoicing processes to ensure that the service provider’s concepts and
processes for content provider invoicing are adequate and in accordance with service
capacities
It is also important for the operator to modify its client attraction/treatment processes, expediting
them, adapting and/or modifying them, creating new ones, and standardizing the processes
between the service provider’s departments to maintain user quality. Examples are as follows:
• Adaptation of invoicing processes to the new possibilities created by IMS
• Generalization of self-procurement and self-activation of services by clients
• Streamlining of attention processes for increasingly skilled users who increasingly
demand SLAs, homogenizing them between departments and creating processes to
improve user experience, detecting, tracking, and solving service availability problems
while managing end-to-end quality
All of these process modifications can be summarized in three concepts: the homogenization of
processes between the operator’s departments to lower costs; the automation of said processes to
improve end-client attention; and the generation of added value for the client.
IMS will not succeed in achieving these objectives unless operators tackle the impact of IMS, not
only from a technical point of view but also in terms of streamlined processes and business
generation. IMS, as an essential part of a next-generation fixed-mobile convergent network, not
only favors an agile operating environment, but also needs this greater agility, which impacts
everything from network infrastructure maintenance to the organization, process by process,
resulting in improved service to end clients: the concepts of lean and agile operations as a way of
guaranteeing the competitiveness of telecommunications operators.
Conclusion
Taking the figures and timelines anticipated above as a more or less accurate reference, and in
spite of the many challenges, fixed-mobile convergence must be adopted by operators, since it is
the IMS standard and a key part of its implementation.
But beyond the technological challenge, the identification of services (which includes
customization as a client acceptance strategy) is probably one of the areas of greatest difficulty
and greatest strategic impact.
In this way, this new environment does not exclusively affect network infrastructure and
operation, but also impacts corporate strategy; marketing, product, and service launches (defining
new product/service catalogs, which are increasingly segmented by client type and are no longer
offered individually but in bundles that favor cross-selling of services); and business operations
(see Figure 7).

11. •Customer
•Processes •Systems
• Are the processes sufficiently • Can current OSS and BSS systems support
automated to adapt to the new IMS requirements?
business model?
• Is attention in line with customer •Operator • Are the SDP platforms IMS-ready (operators
will invest US$4B in these platforms over the
1
expectations? next 5 years )?
•Organization •Network
• Does the operator already have an IP
infrastructure in place? Is there a plan to
• Do fixed and mobile areas operate independently in migrate to All-IP?
the case of convergent operators?
• Does the operator have multiple network
• Have timely alliances been established with relevant equipment suppliers?
market players?
Figure 7: The Operator Approach towards Customers
(Source: Everis)
Each type of operator will have different requirements and will adapt to the new rules at different
speeds, being the remainder of the period 2006–08 key to said adaptation (see Figure 8).
Figure 8: Examples of Operator Approaches to Services
Eventually, service providers will tend toward offering a similar service catalog, making fast
adaptation to the new environment crucial to operator competitiveness. In this way, launching

12. new services, adapting them to client needs, and quickly supplying an optimum user experience
become the most powerful strategies to drive operator growth, though clients must be able to
perceive the value of those services. Access control does not guarantee client retention:
customization, brand, and service value are the differentiating factors of the new model.
Carlos Ruiz Gómez
Gerente Telecomunicaciones – Innovación
Pº del Club Deportivo s/n, Bloque 10, La Finca
28223, Pozuelo de Alarcón - Madrid
Notes:
1
Attempt by operators to control IP traffic (according to IDC, the number of minutes of VoIP will
increase 717 percent from 2006–09), placing special emphasis on service quality, for example.
2
Siemens foresees a decrease in monthly mobile voice ARPU of 18 percent from 2006–09.
3
Positioning of Skype as a new type of voice service provider.
4
Multiple-system operators (MSOs) launch voice services and ADSL wideband fixed access
providers launch TV services.
5
Merger between Lucent and Alcatel and agreement between Nokia and Siemens.
6
Gartner foresees that revenues from traditional PSTN telephony in the 10 largest European
operators will drop approximately 30 percent from 2006–09.
7
See note 2.
8
According to the same source and in the same period and region as in note 2, the representativity
of monthly voice ARPU in the total will decrease approximately 28 percent in favor of data and
multimedia services.
9
EnterData as from GSMA, Ovum, and Tekelek.