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InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011
ITU Regional Seminar on Costs and Tariffs Regional Group for Asia and Oceania
Trends on Convergence and Migration Leaps
8-9 March 2011, Phuket, Thailand
Oscar González SotoITU Consultant Expert
Spain [email protected]
Session 1
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 2
Agenda
• Convergence • Convergence related questions• Dimensions and profiles• Key factors: Economies of scale
• Market and Business trends per category
• Technology and Business Leapfrogging
2
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 3
Convergence related questions
Does convergence refer only to Fixed and Mobile?
Does convergence matter only to developed countries?
Is convergence more expensive?
What benefits may be addressed by convergence?
How convergence may help developing countries?
Others…………?
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 4
At Network domain One network for all service types: NGN, IMS
At Service domain
Fixed, Nomadic, Mobile, Interactive and Broadcasting, Content, etc.
At radio Access domain DECT, WiMax, 3G, LTE, etc.
At Operational and Business domain OSS, Billing, etc, for all customer classes
At Terminal domain 2G, 3G, PDA, iPhone, etc.
Convergence dimensions
Convergence is taking place at several domains
3
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 5
Convergence profiles
Initial traditional status: Separated networks, services and operations
Network Core
Operations
Terminals
Network Access and Edge
Services
Convergence Domain
Full convergence
Low level convergence
Medium level convergence
Separated
Implementation
Level of convergence
Traditional Modeof Operation
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 6
Convergence profiles
Example of convergence for most operators in emerging economies
Network Core
Operations
Terminals
Network Access and Edge
Services
Convergence Domain
Full convergence
Low level convergence
Medium level convergence
Separated
Implementation
Level of convergence
Traditional Modeof Operation
TransitionConvergence Profile
4
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 7
Convergence profiles
Example for leading operators on convergence (100% on core and 30% to 70 % on access/edge)
Network Core
Operations
Terminals
Network Access and Edge
Services
Convergence Domain
Full convergence
Low level convergence
Medium level convergence
Separated
Implementation
Level of convergence
Traditional Modeof Operation
TransitionConvergence Profile
AmbitiousConvergence Profile
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 8
Convergence profiles
Future profile driven by: Initial status, Market development, Economy of scale and Operator Strategy
Network Core
Operations
Terminals
Network Access and Edge
Services
Convergence Domain
Full convergence
Low level convergence
Medium level convergence
Separated
Implementation
Level of convergence
Traditional Modeof Operation
TransitionConvergence Profile
AmbitiousConvergence Profile
Complete Convergence Profile
5
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 9
The five dimensions of the
economy of scale:
By Size of the systems
By Technology capabilities
By Traffic efficiency with
the occupancy
By customers Density
By Volume of purchasing
Key Factors: Economies of scale
Economies of scale (EoS) are an inherent characteristic to
the telecom technologies that impact on solutions,
efficiency and cost reduction
Benefits per dimension
Cost reduction per unit (i.e.: 10% to 30%)
New technologies with higher productivity (i.e.: x10)
Better utilization for a given GoSwhen larger systems (i.e.: +20%)
Quadratic decrease with coverage radio increase
Discount per volume in log scale (i.e.: up to 40%)
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 10
Economy of scale per system size
Equipment sizem1
Co
st p
er u
nit
Fu
ll ca
pac
ity
cost m2 X M1 M2
u1
u2
u = a + 1 1 / S
u = a + 2 2 / SB2
B1
Equipment size
t1
t 2t = a S + B 1 1 1
t = a S + B 2 2 2
m1 m2 X M1 M2
Cost reduction as function of size and occupancy
6
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 11
Cost reduction per technology evolution. Example for Ethernet ports
1997 1998 1999 2000 2001 2002 2003 2004
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
Source: Dell’Oro Group
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 12
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
10
Res
ou
rce
Eff
icie
ncy
5 15 20 25 30 35 40
P = 0.02
Offered Traffic
Impact on efficiency increase for a given quality with traffic and group size (non-linear effect)
Economy of scale per traffic efficiency
7
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 13
Agenda
• Convergence • Convergence related questions• Dimensions and profiles• Key factors: Economies of scale
• Market and Business trends per category
• Technology and Business Leapfrogging
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 14
Business domains and trends
Example of Value Added chain and operators movements to gain economy of scale and market
• Agreements with content providers and e-commerce
Network nucleus Edge
Metropolitan
network
• New multi-service development
• Agreements with content and application
service providers
Local Access
Mobile Service Providers (MSPs)
• Acquisition/merging of service providers
• Development of new access loops and
Unbundling
Agreements and merging
Backbone Service Providers (BSPs)
Agreements with wholesale operators
Access Providers (CAPs)
Internet Service Providers (ISPs)
Application Service
Providers
Applications and Services
• Agreements with content providers
Established Service Providers (ESPs)Established Service Providers (ESPs)
• FMC
8
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 15
Case study performed for medium size country with mixes of customer classes and services domains:
Multiservice IP Network with integrated operation available
Three service categories: Voice, Data/Internet, Video distribution
Modeling demands, multiservice traffic flows, dimensioning, network
resources, CAPEX, OPEX and financial results for different levels of competition
Evaluate differential future Cash-flows, NPV, IRR, etc. for a 10 years period
Business Planning case
Evaluations to be based on robust techno-economical tools due to high number of alternatives and complexity
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 16
SOHO and Small Enterprise
All Segments (reference)
Residential
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Year-1e+08
0e+08
1e+08
2e+08
3e+08
4e+08
5e+08
6e+08
7e+08
8e+08
Eur
o
Effects of the mix of customers on Reference Scenario: Low competition level Network NPV
Business Planning case
SME and SOHO with quicker recovery but less NPV and company value at medium term
“All customer segments” case with much better behavior
9
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 17
Internet
Internet & VoDSL
Internet & Video
All Services (reference)Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Year-2e+08
-1e+08
0e+08
1e+08
2e+08
3e+08
4e+08
5e+08
6e+08
7e+08E
uro
Business Planning case
Effects of the mix of services on Reference Scenario: Low competition level Network NPV
Major impact of service classes on NPV and company survivability
Single service classes without future
High benefit of “all services” case
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 18
Internet
Internet & VoDSL
Internet & Video
All Services (reference)
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Year-2e+08
-1e+08
0e+08
1e+08
2e+08
3e+08
4e+08
5e+08
Eur
o
Business Planning case
Effects of the mix of services on typical scenario: Medium competition level Network NPV
Increase of competition level amplifies the previous effects on feasibility: big differences between service mixes
Data only or single service classes without feasibility at medium termVery robust behavior for the “all services” case
10
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 19
Agenda
• Convergence • Convergence related questions• Dimensions and profiles• Key factors: Economies of scale
• Market and Business trends per category
• Technology and Business Leapfrogging
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 20
Network Architecture towards NGNTrends in WLL technologies for Bandwidth and Mobility
Convergence of different radio systems towards the integration of solutions and services at the IMT advanced
11
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 21
Network Architecture towards NGNTrends in UMTS solutions for higher capacity and performance
Evolution of the 3G and 3,5G versions towards 4G with increasing speeds and decreasing latency time
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 22
Network Architecture towards NGNFixed network steps/leapfrogging
Historical migration steps for fixed network operators with early development and services deployment
PSTN Digital
NGN-SWST
ISDN
ATM/FR/SDH
Grow for Bandwidth
Cost decreaseper bit
Technologytimed evolution
NGN pre-IMS
NGN full IMS
PSTN Analog
Steps by developed countries
12
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 23
Network Architecture towards NGNFixed network steps/leapfrogging
Migration strategy is strongly dependent on country
opportunity, infrastructure and service maturity
PSTN Digital
NGN-SWST
ISDN
ATM/FR/SDH
Grow for Bandwidth
Cost decreaseper bit
Technologytimed evolution
NGN pre-IMS
NGN full IMS
PSTN Analog
Example of Leapfrog for developing countries
Steps by developed countries
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 24
Network Architecture towards NGNFixed Access network steps/leapfrogging
Historical migration steps for internet access operators with early development and services deployment
Modem 128
VDSL
ADSL
ADSL2+
Grow for Bandwidth
Cost decreaseper bit
Technologytimed evolution
FTTB
FTTH
Modem 64
Steps by developed countries
13
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 25
Network Architecture towards NGNFixed Access network steps/leapfrogging
Migration strategy is strongly dependent on country
opportunity, infrastructure and service maturity
Modem 128
VDSL
ADSL
ADSL2+
Grow for Bandwidth
Cost decreaseper bit
Technologytimed evolution
FTTB
FTTH
Modem 64
Example of Leapfrog for developing countries
Steps by developed countries
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 26
Network Architecture towards NGNMobile network steps/leapfrogging
Historical migration steps for mobile operators with early development and services deployment
GSM
UMTS
GSM/EDGE
Grow for Bandwidth
Cost decreaseper bit
Technologytimed evolution
HSPA+
LTE
NMT
GSM/GPRSSteps by
developed countries
14
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 27
Network Architecture towards NGNMobile network steps/leapfrogging
Migration strategy is strongly dependent on country
opportunity, infrastructure and service maturity
GSM
UMTS
GSM/EDGE
Grow for Bandwidth
Cost decreaseper bit
Technologytimed evolution
HSPA+
LTE
NMT
GSM/GPRSSteps by
developed countries
Example of Leapfrog for developing countries
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 28
Business Migration Leaps
“staircase” for leading growing alternatives
Conventional voice and data services
+ Services of IN, VPN and Mobile
Extension for new services domains
Ext
ensi
on f
or n
ew
cust
omer
type
s
Classic TelcosCustomers for
connectivity
Upgraded Telcos
15
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 29
Business Migration Leaps
“staircase” for leading growing alternatives
Conventional voice and data services
+ Services of IN, VPN and Mobile
+ Internet and videoDistribution (triple play)
Extension for new services domains
Ext
ensi
on f
or n
ew
cust
omer
type
s
Classic Telcos
+ Customers fornew services
Customers for connectivity
Extended Telcos
Upgraded Telcos
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 30
Business Migration Leaps
“staircase” for New Universal Telcos
+ e-applications,Hosting, CC and
Virtual Nets
Conventional voice and data services
+ Services of IN, VPN and Mobile
+ Internet and videodistribution (triple play)
Extension for new services domains
Ext
ensi
on f
or n
ew
cust
omer
type
s
Classic Telcos
ISPs
ASPs + CCNew Universal Telcos+ Customers for
end applications
+ Customers fornew services
Customers for connectivity
Extended Telcos
Upgraded Telcos
Specific migration and timeframe to be optimized for the country context and regulatory conditions
16
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 31
Business Migration Leaps
Evolution of revenues with service domains
+ e-applicationsHosting, CC and
Virtual nets
Convergence strategy is fundamental to grow in a competitive environment
Conventional voice and data services
+ Services of IN, VPN and Mobile
+ Internet and videodistribution (triple play)
Time and Extension for new services domains
Rev
enue
leve
l(A
RP
U)
voice revenues IN and data
Video and multiservice
ASP+CC
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011
32
Impact on regulation by NGNMultiplicity of Interoperability scenarios
NGN(Carrier X)
NGN(Carrier Y) PLMN
PSTN/ISDNPublic IP NETWORK
User Equipment
SIMULATION
EMULATION
NNI
UNI
NNI
UNI
UNI
UNI
User Equipment
User Equipment
Variety of scenarios for Variety of scenarios for interconnection interconnection
�� TDMTDM-- TDMTDM�� TDM TDM –– NGN NGN �� NGN NGN –– NGN NGN
17
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011
Impact on regulation by NGN Requirements on NGN regulation
Manage customer rights to better services at lower costs Customers orientation
Have a vision of market evolution on overall services and business developmentAlways promote Innovation, never break itMaintain fundamental principles for regulation objectives and decrease degree of detail for servicesIncorporate new charging units and market dynamicsSimplify application process at “macroscopic” levelConverge regulation for the converged Telecom usageMeasure accountability by country customers satisfaction
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 34
Impact on regulation by NGNCharging evolution on Units and Market dimensions
Two dimensional view for charging systems: Units & Market Intelligence
Chargingunits
Classic TelcosPSTN
MultiserviceNGN-IMS-RCS
High competition
+ Resource utilization
+ BW capacity
Time and distance
Triple playNGN-SSW
Upgraded TelcosPSTN + Data
+ BW capacity + event
OnlineChargingSystems
MultiserviceNGN-IMS
+ BW utilization
Market evolution
Predefinedregulated
Mix regulated and open
Package Open + flat
Usage Monetization
+ SLA
18
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 35
Conclusions
• Recent higher capacity technologies take benefit of economies of scale and are cheaper per communication unit
• Skipping intermediate development steps will reduce transition and operational costs
• Selection of Leaps per country is a function of initial maturity stage and demand growing rate
• Developing countries may benefit from a business staircase strategy based on the experiences at developed ones
InternationalTelecommunicationUnionITU - Trends on Convergence - OGSPhuket, Thailand, March 2011 36
Recommendations
• Take benefit of experiences, benchmarking and proper modeling of key techno-economical factors
• Focus on consolidated migration steps and technologies with multiple services domains
• Adapt charging to power of technology andmarket intelligence
!! Which convergence will happen ? Combination Driven by Market, Economy of scale
and Competition !!