Increasing Competition Boosts Fixed-Mobile Convergence in the Telecommunications Market in Europe
The trend of providing telecommunication applications and services independent of the access network through fixed-mobile convergence (FMC) is gaining significant momentum and initiating changes across the value chain from the end users to the core network infrastructure. Intensifying competition both within the fixed and mobile markets and between them is also prompting the adoption of FMC and fixed-to-mobile substitution strategies aimed at fostering customer loyalty and combating the high costs of customer acquisition and retention.
“FMC is a gradual trend, but it is a fundamental shift with wide-reaching implications on all carrier types”, says Jennifer Fruehauf, ICT Research Manager at Frost and Sullivan (http://wireless.frost.com). “FMC is possible at many different levels, from core network infrastructure, business support, operations and access networks to different applications and services. Hence, operators must adopt clear, long-term strategies that prepare these different elements for the changes to come.”
To successfully exploit the growth opportunities in the fixed-mobile convergence market, carriers and service providers will benefit by devising effective strategies at various levels such as the application, service, device and network levels. Carriers enabling end-users to access a range of core services irrespective of the device or access network and service providers that offer value-added services are entering into agreements, partnerships or acquisitions to capture greater market share. The penetration of the wireless local area Network (WLAN) technology into the telecommunications market through its integration into broadband and cellular data and the development of voice over WLAN products and solutions will further spur FMC. Fundamental changes in the core network levels of various carriers following the implementation of the IP Multimedia Subsystem (IMS) will lead to savings in operations and capital expenditure and will further underline the appeal of FMC.
Application-level strategies will assume importance with the deployment of IMS, which will facilitate the implementation of a single application platform that can be offered as services for fixed and mobile access. This will encourage the telecommunications industry to shift form a vertical structure based on access technologies to a horizontal one that emphasises applications and services.
To avail of the opportunities that FMC offers, carriers will do well to offer complete service bundles, which will enable cross-selling, by which additional services can be sold to existing customers to avoid the high costs of customer acquisition. However, carriers providing value-added services such as unified messaging or communication must ensure that legacy infrastructure and billing systems are capable of charging for such services.
Moreover, carriers can significantly reduce capital expenditure (CAPEX) and operational expenditure (OPEX) by integrating core networks and sharing back-end functions such as customer service, network operations and maintenance, customer relationship management (CRM) and other administrative functions. In addition, the IMS architecture, which breaks down barriers between fixed and mobile networks, will also encourage carriers to develop new applications and services with lower investment requirements.
The emerging trend of several users replacing their fixed lines, offers opportunities for carriers to develop an integrated device and eliminate the need for multiple address books, passwords and message portals. However, despite these benefits, the market for integrated devices is still at a nascent stage due to limitations such as short battery life and the high costs associated with integrated devices.
Fixed carriers in the market, such as cable operators, Internet/DSL service providers, fixed network operators and wireless hotspot network operators/(VoIP) service providers can also avail of the increasing opportunities to offer converged solutions due to the well-developed support systems they possess. Moreover, their understanding of enterprise requirements is likely to induce enterprise mobile data solutions, which promises tremendous potential. Integrated carriers (with their own cellular and fixed networks) are also likely to benefit from the integration of core networks and offering converged solutions will be viable for such carriers due to their strong market positions.
Mobile carriers such as Vodafone, O2 and Bouygues are making efforts to increase fixed-mobile substitution and there are others who are also aiming at inducing clients to scrap their fixed lines altogether. Additionally, most mobile operators are offering converged services by integrating WLAN into their cellular networks. While partnerships with fixed carriers to develop converged solutions will be advantageous, mobile operators must ensure that the new services do not compete with their existing ones.
“Uncertainty in the market is driven by the development of various technologies, especially voice-over-IP, wireless LAN, the emergence of WiMAX (and similar) technologies, dual mode handsets and higher speed cellular capabilities”, cautions Ms. Fruehauf. However, despite the presence of some challenges (essentially supply-related), operators which succeed in creating attractive value propositions and providing adequate customer support, can expect to gain from FMC.