Impact of Transition from Voice to Data and Multimedia Business in Telecom:

An analysis. http://wp.me/p1ZsI2-23

Author: P. Abraham Paul. Telecom Consultant

Ex: MD & CEO FCOMNET Futuregroups / V.P (TS) SPCNL, SIEMENS ICN / GM & SMT TBG, BPL Mobile. India / TES (I) DOT India.

e-mail: papaul@hotmail.com Tweet @PA_Paul

Introduction:

The past few years saw much hype due to over-projecting the business potential of 3G Telecom, Voice over IP and growth of INTERNET dependent customer products, e-Commerce and other e-businesses. Realization came later that most of these high tech propositions, though conceptually attractive and forward looking, were going to take time to develop, huge investment and coordinated efforts of various business & technology providers and regulators to convert these to marketable and revenue earning products.

3G and other New Generation Networks are great advancement in Information Communication Technology, but concepts alone cannot be sold to make money and to sustain as user friendly business. It was difficult to make out a viable business case and sustain as user friendly business. It was difficult to make out a viable business case and many Telecom and Internet service providers broke down as their original business plans later turned unsustainable. However, lately the business approach has been more pragmatic and realistic.

The objective of this analysis is to look how to get over the obvious hurdles and make transition to ICT and Multimedia possibilities suitable for contemporary and future business needs so that the presently stagnant e-business would really take off. It is envisaged that the next one or two years will see a quantum leap in the realization of these concepts.

In the GSM arena, the SMS has become a powerful communication tool, WiFi and Wimax bearers have provided more viable end link alternatives dramatically changing the wireless data world, Data communication and VoIP merged with Internet is becoming more practical, user friendly, economic and faster, and therefore are gaining universal acceptance. All these are good news to the end users but the picture is not that rosy for acceptance. All these are good news to the end users but the picture is not that rosy for the service providers.

1. Consequence of technology advancement:.

The advancement in technology and convergence of Voice and Data will adversely impact the Telecom & ISP providers and vendors business because the major shift of Voice based usage to Internet based and other high speed Data and multi-media services

will inevitably take away the business from Telecom Service providers to external digital, multimedia and various mobile commerce and mobile management, service providers and along with it a major chunk of the revenue. Please see my blog: 'It is suicidal for Telcos to allow Banking Industry to hijack 'Pay by Phone' Value added S ervices'. http://wp.me/p1ZsI2-d

The reasons are:

i) Non-viability of Network Operators/ISPs taking the role of discrete Application Providers. Providers.

The GPRS / UMTS / WCDMA/ and other modern high speed digital access are bearers which provide suitable network and pipes for access and WAP is only an application protocol.

The Telecom service provider and ISPs are mainly access providers and cannot become

ices, which are going to be a miniscule of the whole business potential. Why because, the major data related activities will be in the extremely large base of clients in the PDN, widely distributed in the limitless IP world and their requirements will be highly diverse and dynamic that cannot be met by Telecom service providers.

The vast amount of individual and standalone e-business units and service related The vast amount of individual and standalone e-business units and service related systems and applications will be spread beyond the boundaries of Network operators licensed service areas, and therefore will have to be taken care of by external Service Providers and Business units in the PDN.

ii) Major portion of revenue moves from Network Operators to external Service Providers and e-Business units in PDN.

Impact of Voice - Data convergence and transition of major part of usage from Voice to Data service will have great impact on the of Telecom business models in terms of investment and revenue realization. The Network Operators have no control on tariffing, rating, charging and billing of "external client" based service and usages. At the most they can only charge their subscribers for the 'access' by measures of quantity and not for real value transaction. The value of the transaction can be determined only at its end Service provider/vendor level and therefore, the revenue realization also rests with them and they will become the real beneficiaries of the advancement of technology. and 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 from PSTN/PLMN Network Operators to various Content Providers/Service Providers/e-Business units in the PDN, that spread far beyond the licensed area of current individual Telecom network operators.

iii) The network operators will eventually lose exclusive ownership of their customers. With opening out of Private Long Distance carriers and convergence of Voice and Data and with predominance of Data service, ownership of end user is no more remain stuck with any single Network Operator.

As the e-Services and e-Business takes of, the Telecom Network Operators and ISPs will further lose their monopoly in holding on to exclusive ownership of their customers in terms of the revenue generated from them.

The end user at their own will and pleasure will have option to choose and use different The end user at their own will and pleasure will have option to choose and use different Network Operators/Service Providers who would provide them efficient, competitive and quality service and eventually will have direct dealing with the e/business Providers for the 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 in the future communication will highly disrupt plain old telecom business as a whole as most 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 OTelecom Vendors are already affected due to Network Oin high tech solutions, products and services. The advent of telecom evolution is great business for vendors if only their customers (the Telecom network operators/service providers) are willing to invest for inducting these technologies in their networks. Due to reasons mentioned earlier, the trend is not positive and hence affects negatively the business 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 support system sales. The vast amount of Application and Business support systems in the limitless area of PDN are going to be the most revenue earning part. These are highly diverse, dynamic and widely distributed across the whole IP world. Such needs of infinite number 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 major vendors to venture in to this business and majority of the service providers/e-business vendors to venture in to this business and majority of the service providers/e-business units 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 specific Application systems for the Network operators which is going to be only a small fraction of the market as the real business value lie in the external IP world. It is more likely that the Network operators also will prefer to hand over the Application business to external Service providers.

3. Payment Gateways in PDN for revenue appropriation:

Special methods are needed to handle Micro-payments involved in e-business. See article in http://wp.me/p1ZsI2-d /

The end users are real beneficiaries from all these, but such major shift in Telecom business will have negative impact, for the Network Operators. Such as above said being the situation of business, Network operators cannot dare to indulge in high investment that is needed for the high- -business needs with no means of adequate return on their investment. business needs with no means of adequate return on their investment.

Therefore, Network Operators /ISPs therefore, need to find strategies and methods to get adequate 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 Internet involve 'High Volume' of 'Low Value' payments and these cannot be done by direct payments or handled economically by the banks, regular credit card companies etc. Also these payments can neither be handled by the Network operators/ISPs nor by the Service provider/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 cannot take of and the Network Operators/ISPs cannot hold on with sustainable business plans take of and the Network Operators/ISPs cannot hold on with sustainable business plans until it is addressed and resolved.

Micro-payment Gateways in PDN is one such idea to get back part of the revenue generated from e-business based on data services. This need coordinated efforts by all stakeholders 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 to induct the new technology systems related to telephony and non-telephony value added systems in their networks and find means and ways to ensure sensibly viable business propositions.

As mentioned earlier, the data related services gaining predominance, and the revenue potential moves from Network Operators/ISPs to Service Providers and e-Business units, potential 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 revenue generated 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 revenue generated between the stakeholders.

The payment broker system cannot be managed by individual Network operators/ISPs as the Service Providers and e-business units are common platforms shared by customers of many different Networks/ ISPs.

Money through Mobile (MTM) a system that supports all sorts of money transaction by phone users transparent to Banks and banking systems setup and owned by a consortium of service providers is an option for telecom service providers to look into.

Please see article on Universal Money Management by phone http://wp.me/p1ZsI2-4g

5. The whole story in nut shell is:

a) The Network operators can only play the role of access providers and not major application providers. It is folly to attempt provision of multifarious application services

b) Majority of the revenue generated is going to be in the PDN in the infinite IP world. The Network operators cannot have control on the revenue generated and do not get the rightful share of this revenue as a decent return on their higher investment in providing access to data related services. So the network operators will be reluctant to invest 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 point

revenue generated from them directly goes to the coffers of large number of external agencies that provide e-business and e-service.

d) are unwilling to do major investment in high tech unless they are assured of adequate revenue. 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 in PDN for apportioning the revenue. Micro-payment gateways can take care of the high volume low value transactions that happen in the PDN. These need special methodology and coordinated efforts of all concerned.

d) Other solution is to have third party systems owned by consortium of Telecom Network Operators /Service providers for non - telephony related value added services Network Operators /Service providers for non - telephony related value added services like un-banked universal money management using phones, Charging of road toll and vehicle parking charges etc.

Conclusion: Most of the advance technology systems are now the monopoly of Network Operators/ ISPs and System vendors. It is necessary to take these out into the user premises by melding the technology with user intensive systems and applications. For the Telecom service providers, the voice call revenue is dwindling due to transition to data

oriented business and competition as well as saturation of usage and they need to forge into more and more broadband products business to survive.

To realize all these effectively, it is necessary for the Network operators/ISPs and regulatory bodies to standardize the e-business related charging, billing and payment procedures. Common Payment broker systems are needed to take care of adequate revenue share to network Providers / ISPs as to compensate the high investment needed to induct high tech and provide enough pipes for their customers to access the Service providers and e-business units.

Charging gateways are just other network elements sitting in PDN. Interestingly the Payment broker systems can be located any where in the PDN and can provide service to large number of Network operators /ISPs and the e-business units and application service providers in PDN. The Payment Broker systems shall be a common platform Service Provider 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 stagnation in the e-business growth and full exploitation of benefits and advantages of modern technology. With right perception and direction, these disconnects in concepts can be rectified and the e-Business will see ample growth in the coming years. It shall be possible to achieve quick overall Telecom growth, with benefits for all, the Network Operators/ISPs, Business owners, the Service providers, the Telecom Vendors and the Consumers as end users.

e-mail: papaul@hotmail.com Tweet @PA_Paul

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