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

S T R A T E G I C W H I T E P A P E R

User-Centric Broadband: Service Provider StrategiesService Provider with Mobile-Only Networks

As services evolve users are faced with increasing

confusion over devices, subscriptions, and

parameters; they are crying out for simplicity.

User-centric services provide a range of services

in a way that users want, understand and find

easy to use. At the same time mobile service

providers (MSPs) want to launch new user-centric

services, to compensate for the decline in the

traditional voice business. New services will

include, enhanced communications; ubiquitous

personal messaging; universal broadband

network connectivity and video and audio

infotainment.

Executive SummaryAs services evolve users are faced with increasing confusion

over devices, subscriptions, and parameters; they are crying

out for simplicity. User-centric services provide a range of

services in a way that users want, understand and find easy

to use.

At the same time mobile service providers (MSPs) want to

launch new user-centric services, to compensate for the

decline in the traditional voice business. New services will

include:

> Enhanced communications, enabling rich and varied

interaction (voice over IP [VoIP], video calling, and chat),

in a cost-effective manner

> Ubiquitous personal messaging, providing full integration

of a full range of user-defined messaging services

> Universal broadband network connectivity, enabling

reliable and secure connectivity of any device, in any place,

at any time

> Video and audio infotainment, giving users access to

personal, interactive, on-demand services

Today’s MSPs are finding increasing competition from a range

of existing and new players, each trying to secure a hold on

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 innovative

Internet-based application service providers (ASPs) (a variety

of personal messaging and other services), and non-traditional

media 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.

> Provide complete user-centric services by enabling intelligent

service delivery with automatic, most-adapted broadband

wireless/mobile connectivity, to a full range of devices. This

gives users full freedom to access the services they want

in the manner that they desire, while driving new revenue

streams.

To achieve this, MSPs need to choose the right business model,

depending on strategic objectives, competitive issues and the

available resources. This includes being a full service provider,

addressing niche markets, offering wholesale mobile capacity

or innovative mobile broadband Internet services.

Alcatel has a clear vision to assist MSPs with implementation

of user-centric services, helping them deal with the challenges

of implementing new, converged services in an open, standards-

based environment, combining new and legacy systems. Our

vision offers an evolutionary approach, letting MSPs launch

low-risk commercial service bundles to test market respon-

siveness prior to launching more integrated propositions. Our

approach can start with the implementation of convergent

payment for a family of services and conclude with a fully

integrated suite of services delivered to any device, across

any network.

Introduction to User-Centric Broadband Services . . . . . . . . . . . . . . . . . 1

Market Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The mobile services sector is undergoing rapid change . . . . . . . . . . . . . . . . . . . 1

Traditional mobile service growth will slow, in the absence of a strategic shift . . . . 2

Situation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Mobile service providers are playing in many distinct markets . . . . . . . . . . . . . . 3

Developing services with greater personal relevance will drive mobile growth . . . . 6

Current and Future Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Full-Service Mobile Service Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Mobile Virtual Network Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Mobile Network Wholesaler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Mobile Broadband ISP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

How Can User-Centric Broadband Services Help the MSP? . . . . . . . . 10

Enhance Mobile Calling, Leveraging the Wireless Internet . . . . . . . . . . . . . . . . 10

Expand Mobile Messaging into a Ubiquitous Personal Messaging Offer . . . . . . 11

Provide Universal Broadband Internet Connectivity to Any User Device . . . . . . . 11

Drive the Market for Mobile Video and Audio Infotainment . . . . . . . . . . . . . . . 11

MSP and Alcatel Moving Toward User-Centric Broadband . . . . . . . . 12

Alcatel Network Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Table of Contents

ALCATEL 1 >

Introduction to User-Centric Broadband ServicesWith an ever-expanding variety of services, users have lots

of new ways to communicate. However, the pleasure derived

from the richness offered by the growing range of mobile

services is mixed with the pain of complexity. Burdened with

new services, an expanding number of multi-purpose devices

and a growing number of service plans and pricing options,

end users increasingly cry out for simplicity: services that

respond to them in a personal way and offer the flexibility

to do what they want, when they want, wherever they want,

on whatever device they choose, paid for using whatever

payment method they choose.

Alcatel’s research has shown that the desire for new services

to respond to these demands is equally strong in both the

consumer and enterprise worlds. Consumers want new

services delivered in simpler, more flexible and more personal

ways. Enterprise users — staff and customers — also want

less complex, less fragmented communications experiences,

and enterprise chief information officers (CIOs) want to

reduce the cost of that complexity on their bottom line.

Fixed-line service providers, Internet portals, application

service providers (ASPs) and others are offering bundles

of services that simplify interactions across services. Now,

the idea of service convergence is regaining momentum,

promising even more to those who see it offering the

ultimate communications services bundle.

This intersection of user demand and frustration on one hand,

and technological possibility on the other, will create a leap

forward in the way communications services are delivered

and consumed. But will service providers benefit?

The answer is that growth will flow from what users value

and what they are willing to pay for. Service providers will

only succeed by focusing on users’ needs and offering them

a richer, yet simpler and more relevant experience. This paper

addresses the business and technology strategies emerging in

the race to capture the value of delivering a more User-Centric

Broadband experience to users.

Market EnvironmentThe mobile services sector is undergoing rapid change Currently, most markets within the Organization for Economic

Co-operation and Development (OECD) display a significant

level of competition in mobile services, with usually a minimum

of three to four MSPs vying for customer ownership. This

push to win and retain customers has led to service penetration

rates of 75 percent or more (which in some cases exceed

100 percent), often at the expense of falling voice revenue

and lower margins.

Furthermore, in an effort to differentiate and grow, MSPs have

expanded into completely new businesses, including services

such as picture messaging, handset personalization, gaming,

music content and PC data network connectivity. This shift

has been enabled mainly by the convergence of digital media,

driven primarily by the growth of the Internet.

The increasing role of the Internet has also allowed new

players (e.g., ASPs including ICQ, Skype, Vonage) to exploit

the attributes of universal networks (low service access costs,

service universality, open source standards enabling low

development costs and stimulating innovation and short time-

to-market), enabling them to build upon existing customer

needs, while providing practical alternatives to traditional

mobile and fixed-line communications services.

User-Centric Broadband: Service Provider Strategies

THE FOUR primary business strategy questions today’s mobile service providers ask themselves are:

• How can I spur growth in a rapidly maturing market withoutembarking on pricing wars leading to value destruction?

• How can I position myself more competitively in a marketcharacterized more and more by media convergence and thegrowth of Internet services?

• How can I leverage the broadband phenomenon, while avoidinghead-on competition with fixed broadband services?

• How can I streamline my operations so that I can bring new services to market more quickly and cost-effectively.

> 2 ALCATEL

Traditional mobile service growth will slow, in the absence of a strategic shiftOvum forecasts that the total number of mobile users in the

world will increase at an average of 11.8 percent year over

year, from 2003 to 2007, boosting service up-take from 20

percent to 28 percent of the total world population.

They also estimate that the average revenue per user (ARPU)

will fall by an average of 1.5 percent annually over the same

period.

Regional analysis reveals that the most developed mobile

service markets — Western Europe, Asia Pacific, and to a

lesser degree North America — will see low to mid-single-digit

mobile subscriber growth, combined with a small 1 to 2

percent ARPU growth, which in real terms will trail nominal

economic growth.

Figure 1 - World Mobile Service Forecasts

In broad terms this can be attributed to a number of supply

and demand-driven issues:

In a sense, the market evolution described above could be

an optimistic scenario for MSPs because it does not take in to

account the potential impact of low-cost mobile Internet calling

services such as VoIP that may become widely available over

the next few years.

The situation in emerging markets is somewhat different,

owing mostly to revenue growth still primarily being linked

to improved geographic and demographic coverage and a

mismatch between service offers and the inability to pay for

services by low-income users. Even so, it is reasonable to

expect that, once adapted service offers are developed and

made available at reasonable cost, trends similar to those in

developed markets will develop over time.

If mobile growth is to grow in real terms, MSPs need to realign

their strategic focus in light of changing market forces.


Total Connections (x1,000) 2003 2007

World

North America 150,652 198,346 7.1

Latin America 99,728 161,141 12.7

Western Europe 299,834 320,767 1.7

Eastern Europe 71,235 139,725 18.3

China/India 226,925 480,811 20.6

Asia Pacific 205,676 297,948 9.7

Middle East and Africa 83,006 179,982 21.3

1,137,056 1,778,719 11.8

ARPU ($/sub.mth)

World

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

25.21 23.73 -1.5

CAGR (%)

SUPPLY SIDE• More competition, leading to

greater price erosion,namely on calling

• Little differentiation inoperators’ brand promises,and in underlying offers

• Limited success in compen-sating for falling voicerevenue using new dataservices

DEMAND SIDE• Consumer need for basic

mobile services reaching near-saturation levels

• Low consumer price elasticityfor voice calling, in light oflower priced substituteservices

• Limited perceived value of new services

ALCATEL 3 >

Situation AnalysisMobile service providers are playing in many distinct marketsToday’s MSP is a completely different entity compared to

that of a decade ago, when the focus was on offering premium

voice calling everywhere.

Today, MSPs are playing in no fewer than four distinct key

markets, each with a different set of actors, playing by

different rules.

Voice communication – toward a better callingexperienceVoice calling, which today represents upwards of 80 percent

of total customer spending, has been the key battleground

between MSPs and fixed service providers (FSPs) from

the outset.

This basic communication service has generally commanded

a "mobility" price premium of two to five times that of fixed

voice. In an effort to render fixed calling more attractive, FSPs

continue to simplify and reduce fixed-line calling rates, and

have in many cases introduced unlimited local calling between

fixed numbers. (In North America this has been the norm for

some time.) In response, MSPs have also cut tariffs, and have

differentiated by offering buckets of calling minutes and/or

unlimited calling plans.

In parallel, new ASPs have emerged, offering very low-cost

calling services (in some cases free) using the Internet. The

growth of broadband connectivity has further reinforced this

shift by enabling voice sound quality comparable to standard

mobile and fixed-line services.

A fierce, price-driven battleground has been created where

prices are often the final denominator for customers.

Although mobile does give users the benefit of services on the

move, its price premium and varying indoor service quality,

combined with the growing consumer need for PC-Internet

connectivity, have impeded total fixed-line substitution.

This fact is highlighted in a recent European consumer

survey1 around 57 percent of mobile customers were unhappy

with the prices they were paying. Hence, the high perceived

cost for mobile services could be hindering mobile

substitution.

This is important given that 79 percent of consumers would

increase mobile usage at the expense of fixed, and 49 percent

would give up their fixed lines altogether with the right

proposition.

Service quality also showed up as an area for improvement:

74 percent of users would increase mobile usage if coverage

were improved in buildings, the underground/metro, and

trains. Furthermore, it is likely that the same issues will

hinder the growth of new evolutions of personal

communication such as video calling.

Until mobile call prices and quality issues are effectively

addressed and users find a viable substitution for fixed-line

Internet connectivity, most households/individuals will

continue dividing their budget between fixed-line services

and mobile.

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


MOBILE SERVICE PROVIDER MARKETS• Voice communication • Personal messaging• Infotainment • Network connectivity

• 57 percent of European mobile customers think they pay too much

• 74 percent would use their mobiles more if they worked well where they want to use them

> 4 ALCATEL

Personal messaging – staying in touchAfter voice calling, short message service (SMS) or text mes-

saging has proven to be a key secondary source of revenue

for MSPs, representing an average of 10 to 20 percent of total

customer service spending.

The service has been very successful, especially in the youth

market, for a number of reasons, including:

> Availability on all current generation handsets

> Ease of use

> Simple and cost-effective pricing models

> Usage as a non-intrusive communication method, compared

to voice calling

At the same time, Internet-based e-mail usage has grown

exponentially — thanks to its low cost — and as a result

has become an indispensable consumer and business

communication and productivity tool.

Beyond e-mail, the Internet has stimulated the development of

other enhanced messaging services such as instant messaging

and blogs (personal web logs).

Multimedia messaging service (MMS) is the mobile equivalent

to e-mail. However, it has had limited success for various

reasons, including a low up-take of dedicated handsets, and

interoperability problems with e-mail services. Similar issues

may be encountered with other mobile messaging services,

namely with video messaging.

Credit Suisse First Boston (CSFB) forecasts that messaging

revenue will keep growing, while continuing to provide the

bulk of non-voice calling revenue (Figure 2).2

CSFB believes that, although text messaging will remain

popular, its share of total spending per subscriber will decline

owing both to competition and to the gradual up-take of

alternate messaging services such as picture messaging,

instant messaging and corporate e-mail services.

Despite the growing demand for messaging, users are faced

with a choice of alternatives, each providing a different set

of costs and benefits.


6

5

9

8

7

4

3

2

1

01999 2000 2001 2002 2003 2004E 2005E 2006E 2007E 2008E

Non-Messaging Data ARPUNon-SMS MessagingPoint-to-Point SMS

Figure 2 - Mobile Data ARPU Forecasts

2. “2.5G Gathering Pace: Updating our mobile data forecasts”, CSFB, April 8, 2004

ALCATEL 5 >

In order to manage their diverse portfolio of personal messag-

ing services, users are increasingly faced with a number of

challenges, including:

> Managing fragmented services environments, each with

distinct features, separate log-ins, etc.

> Rationalizing inconsistent service pricing, depending on

the device used, message type, etc.

> Dealing with incompatibility between similar messaging

services

If MSPs are to provide consumers with a user-centric

messaging proposition they must combine the personalized,

portable nature of mobile services with the innovation and

low-cost structure of Internet-based services in a consistent

manner across a range of user-defined devices. Furthermore,

to effectively address business users, MSPs must also

reconcile their offers with a range of professional business

messaging suites and services.

Wireless network connectivity – promise of a broadband worldThe growing use of networked applications, combined with

the availability of broadband network access to the home

(i.e., DSL, cable) and in public places (e.g., WiFi hotspots)

has enabled an increasing number of people to work away

from the office.

A recent U.S. survey by The Yankee Group on the technology

and networking needs of small and medium business3 indicates

that there is a real need for networking on the go:

> 68 percent of small businesses and 88 percent of medium

businesses require some form of mobile networking

capability

> 72 percent of medium-sized businesses require a solution

suitable for domestic and international travel

The arrival of high-speed mobile network connectivity, first

with 2.5G and now with 3G technologies, has made mobile

networking on the move a reality. In 2004 alone, IDC estimates

that 1.2 million mobile PC data cards will be sold across

Western Europe4, a figure that is expected to increase five-fold

by 2008.

At the same time, many issues have held back the PC mobile

networking market, including:

> High services pricing compared to other broadband

alternatives

> Practical data speeds below both 3G’s initial expectation

and other broadband substitutes (e.g., DSL or WiFi)

Teething problems aside, if wireless/mobile network

connectivity is to establish itself as the economically viable

future for networking, its appeal must grow beyond simple

basic Internet/intranet connectivity to the mobile workforce

segment.

The ultimate value of wireless networking is in enabling a

fully networked economy. For this to occur it must be applied

to any relevant vertical market need in innovative ways (e.g.,

mobile medical imaging, 24-hour distance monitoring and

diagnostics of industrial systems, etc.) while deepening its

applications across a broader range of consumer services

(e.g., wireless i-Pod service, wireless digital picture developing).


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

Very Small

Telecommuters Business Travelers

Small

Medium

0 10 20 30 40

3972

6412

50 60 70Percent of Respondents

80

Mobile Workers

Source: The Yankee Group 2003 SMB Infrastructure Survey (United States)

No Mobile Workers

3057

5918

2137

4832

Figure 3 - Mobile Worker Survey

> 6 ALCATEL

Infotainment – video and audio excitement on demandWith calling revenue flattening out, MSPs have actively

searched out new revenue streams to boost their top line and

operating margins. In an effort to expand business potential,

the mobile industry has already placed significant stakes on

mobile information and entertainment services.

According to The Yankee Group, the entertainment industry

was worth over $112 billion in 2004 in the United States alone.

Moreover, as shown in Figure 4, video services represent over

three-quarters of this consumer spending. However, despite

the fact that it is possible to deliver media across digital

networks such as the Internet, mobile entertainment still only

represents less than 0.5 percent of the total. For this reason,

most media companies are not sure how important wireless

distribution fits into their business plans.

A significant part of the problem lies in the fact that many

consumers do not currently view mobile handsets as effective

infotainment devices, providing the same level of comfort as

specialized consumer devices for listening to music (e.g.,

Apple i-Pod), viewing video content (e.g., iRiver media

players), or playing games (e.g., Nintendo Game Boy).

The challenge for the infotainment value chain players is to

create a differentiated user experience for mobile infotainment

compared to other media platforms, thus establishing mobile

as a viable value-added distribution channel, like the PC.

However, the success of services such as mobile ring tones

does provide hope, showing how MSPs can drive the develop-

ment of services that exploit the personal and portable nature

of mobile-networked services. Developing other successful

video and audio services requires MSPs to leverage their

intrinsic capabilities in:

> Full-service mobility across a range of consumer devices

> Real-time transaction delivery capabilities for impulsive

transactions

> Always-on interactivity, with the potential to provide real-

time added value over other distribution channels

Developing services with greater personalrelevance will drive mobile growthMSPs are currently playing in a complex and ever-changing

environment, characterized by the convergence of digital

services and media, and the pervasiveness of the Internet.

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 differentiated

customer propositions that provide increased convenience

and flexibility while leveraging the convergence of a range

of services, all in a personalized manner.

In short MSPs must provide users with what they want,

when and how they want it.

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.


Cable/Satellite$53 Million

Video$34 Million

Games$12 Million

Music$11.9 Million

Online$1.5 Million

Source: The Yankee Group, 2004

Figure 4 - Entertainment Market

ALCATEL 7 >

Current and Future Business ModelsThe majority of mobile service provider strategies are highly

dependent on mobile voice services. However, increasing

competition, the adoption of new and in some cases substitute

services and the absence of new compensatory revenue

streams will continue driving voice revenue erosion, slowing

growth. Therefore, it is paramount that MSPs focus their

business model in one of the following ways.

The business model adopted will depend on a number of

factors including strategic objectives, competitive positioning,

the targeted markets, and the available resources.

The positioning of each business model is shown in Figure 5,

according to level of market competition, and the differen-

tiation of service propositions.

Full-Service Mobile Service ProviderThis business model, currently adopted by most existing

MSPs, addresses consumer and business customers with a

range of propositions and services, as outlined in the “Market

Environment” section of this paper.

The full-service MSP’s main assets include its established

brand identity, and existing customer relationships. However,

the rapid changes stemming from digital media convergence

and the role of the Internet, coupled with increasing customer

expectations, are showing that this is not enough for

continued success.

The key challenge faced by the full-service MSP is to continue

addressing the evolving and fragmenting needs of a wide

range of customer segments. This requires continued invest-

ment into a growing number of businesses across different


Relative Operator Size

LimitedCompetition

HighlyCompetitive

Mobile Network WholesalerHigh competition, opening up way for commodity (min, Mb) wholesaler

Mobile Broadband ISPIncreasing bandwidth, enables innovative mobile Internet services: “Personal mobile service portal”

MVNOHighly specialized, facility-free consumer companies, targeting market niches

Full Service MSPDefault model, facing increasing competitive pressure

High Differentiation/Margins

Low Differentiation/Margins

MVNOHighly specialized, facility-free consumer companies, targeting market niches

Figure 5 - Mobile Service Provider Business Models

MOBILE SERVICE PROVIDER BUSINESS MODELS• Full-service mobile service provider

• Mobile virtual network operator

• Mobile network wholesaler

• Mobile broadband ISP

> 8 ALCATEL

industries, each with distinct market drivers, brand and

content preferences, product lifecycles, partnering require-

ments, etc. Operationally, the challenge for the MSP will be to

manage this additional complexity without alienating end users.

For full-service MSPs to remain successful, they require:

> Open service delivery platforms easily supporting quick

development and integration of both in-house and

externally developed services

> A universal broadband network providing a seamless

customer experience using adapted network access across

devices

> Flexible value charging capabilities adapted to a large range

of service offers and business models

> A powerful customer relationship management system

ensuring effective profile management over a wide set of

segmented offers

In the end, full-service MSPs may be faced with one of the

following choices:

> Specialize and address specific market segments (e.g.,

youth market, SMEs) in a more focused manner, while

welcoming selected “mobile virtual network operators”

(see next section) to address any untargeted segments

> Refocus as a network wholesaler of bulk mobile capacity —

calling minutes, MB of data — serving only third-party

virtual operators, who will in turn directly address end

users

> Transform into a less vertically integrated aggregator of

mobile Internet services, analogous to leading Internet

portals (e.g., Yahoo!), to effectively address a wide range of

customer segments with a multitude of innovative, billable

services, developed in partnerships with specialized ASPs

Mobile Virtual Network OperatorThis business model, which has emerged over the last few

years, is characterized by the arrival of non-traditional players

offering well-targeted mobile service propositions to their

existing customers, without having to build the network

infrastructure.

MVNO services are a new vehicle for high-profile consumer

brands/fast-moving consumer goods companies looking to

extend their brand awareness and exploit new advertising

and distribution channels while generating additional revenue.

This provides the opportunity to offer specialized, exclusive

content, branded mobile devices, cross-product bundles and

promotions, as well as the customer service associated with

the brand.

These mobile newcomers are keen to limit investment and

resources in telecom infrastructure and operations, opting

instead to rent network capacity and facilities from existing

MSPs (ranging from radio access and service provisioning,

to subscriber management, billing, and customer care).

Challenges include establishing profitable wholesale arrange-

ments, maintaining close customer relationships, developing

effective, differentiated customer propositions in a timely

manner, and maintaining their brand image by ensuring

the right level of customer satisfaction and loyalty, while

delivering services using a third-party network.

To be successful, MVNOs require:

> An open, standard, scalable service delivery platform

supporting fast service development, testing and launching

with a scalable investment model

> Flexible charging systems for quickly developing and

implementing innovative services pricing models,

supporting a range of partner business models

> An effective customer care system providing unique

customer profiling, enabling highly effective marketing,

retention and loyalty programs, all in a scalable manner

Mobile Network WholesalerThis business model is based on selling bulk network capacity

to third parties (i.e., MVNOs – see previous section) for a

range of mobile services. In order to succeed in what can

amount to a low-margin business for selling minutes and/or

MB of data, a network wholesaler must be able to generate

significant economies of scale. In today’s market, such a role

may be suited only to the top one or two service providers.

The main advantage of this model is that the wholesaler can

focus all of its resources on providing network capacity with

the required service level agreements toward resellers.


ALCATEL 9 >

Depending on the operating model, this provides direct savings

on service delivery and content management platforms, while

significantly reducing spending on new service development

and related operating and maintenance expenses. Similarly,

wholesalers will also save on costly end-user marketing activ-

ities, including new service launching, promotion, subscriber

acquisition, retention programs, and customer care.

To be successful, wholesalers require:

> A unified carrier-class core network — a next generation

network (NGN) — handling a range of services from

several MSP retailers, while providing maximum

operational efficiencies

> Service-aware edge and data-aware transport networks

providing a broad range of service level agreements to

retailers

> A universal broadband network providing high-speed

service delivery across a full range of standards and

devices, in a future-safe manner

Mobile Broadband ISPThis business model focuses around offering a wide range of

innovative wireless/mobile Internet-based services to users,

to any type of networked device.

While the mobile broadband ISP (MoB ISP) will develop

selected services itself (e.g., voice calling), most services will

be developed and branded by cutting-edge third parties, and

then commercialized by the service provider. As such, the

main role of the MoB ISP is to act as a personalized "mobile

Internet service portal" (much like Yahoo!, the PC-based

standard), aggregating and distributing a range of services,

providing added value through service interactivity, user

profiling, service level agreements, single-point customer

care and billing capabilities.

This model provides the flexibility to quickly develop and

offer any number of innovative services (leveraging the low-

cost, innovative nature of the Internet), while providing the

opportunity to extend or develop an innovative brand identity

and remain customer-facing.

The usual service provider activities of service development,

operation and maintenance, as well as many customer

marketing aspects — service launch, promotion, customer

acquisition and retention — will be shared between the MoB

ISP and its third-party service partners.

Challenges will include providing a consistent customer

experience for services integrated into its “portal,” over which

it has little or no control. Similarly, the MoB ISP will also be

faced with ensuring a consistent user experience across a full

range of user devices.

In order to establish a successful business, MoB ISPs require:

> An open service delivery environment supporting quick

development and integration of Internet services developed

both in-house and by third parties

> Universal broadband access providing high-speed,

wireless/mobile service delivery across a full range of

devices, in a future-safe manner

> Flexible charging systems to accommodate any number

of innovative services pricing models, while supporting

a range of different business models with partners

> An effective customer care system providing unique

customer profiling, enabling effective marketing, retention

and loyalty programs

> A service-aware edge and data-aware transport network

providing a broad range of service level agreement

capabilities to selected end-user services

> A unified carrier-class core network handling a full range

of user services, while providing maximum operational

efficiencies

Although the mobile industry is probably headed in this

direction over the long term, the key risk for a MoB ISP is

that it may lose focus, failing to provide additional added

value over “fixed Internet” services, becoming relegated

instead to the role of mobile IP wholesaler (possibly with

insufficient scale to compete effectively).


How Can User-Centric Broadband Services Help the MSP?A User-Centric Broadband concept brings greater levels of

convenience and convergence to services, expanding the

possibilities and benefit for end users. This presents the MSP

with major revenue opportunities and new business challenges.

The key to success is to develop a User-Centric Broadband

strategy that balances the creation of new revenue streams

and the protection of core business against increasing

competition and reduced margins.

While today’s mobile services will be central to User-Centric

Broadband strategies for MSPs, in order to deliver more

relevant customer propositions and provide greater perceived

value, MSPs must leverage the key mobile service attributes

where possible.

Building on these key service aspects, MSPs are able to

defend, and in some cases anticipate, emerging competitive

threats, as seen in Figure 6.

Enhance Mobile Calling, Leveraging the Wireless InternetPersonal calling is, and will remain, the core business for

MSPs for some time. At the same time, to offset falling ARPU

(owing mainly to competition from low-cost calling substitutes),

MSPs must develop more personalized service offers, combin-

ing the best of all worlds, including video and Internet

capabilities:

> Provide the user with a choice of real-time personal

communications media — voice, text, video — with

the option to switch between these as needed

> Enable calling from the user’s device of choice

(e.g., handset, PC, PDA, TV):

• using the most adapted network access (mobile, wireless,

fixed) according to availability and service level

agreement

• ensuring interworking between devices with adapted

payment mechanisms

• with a consistent pricing policy, leveraging the low-cost

Internet when possible

> Support a full range of supplementary services across

devices (e.g., caller ID, voice-mail)

> Offer simple access to and management of account details

in a consistent manner across devices and for all calling

services

> 10 ALCATEL


Competitive Threat

Response

Personalized communication proposition – voice and video – across any networked device. Offering a full range of support services, and levering low-cost IP when possible.

Strategic Objective

Low-cost Internet hotspot calling

Customer retention

Ubiquitous personalmessaging – offer providing full service integration for user-defined services, providing seamless service escalation across devices.

Abundant/substitutemessage services

Increase customerloyalty

Universal broadbandInternet connectivity –extending networkedservice mobility to anydevice and application.

Unlicensed wirelessnetworking

Grow wirelessnetworking business

Interactive on-demandvideo and audioinfotainment services,providing 24/7 transactioncapability and increaseduser relevance.

Web-only portableinfotainment services

Develop mobileinfotainment business

Figure 6 - Competitive Threats and MSP Responses

KEY MOBILE SERVICE ATTRIBUTES• Personalized services • Universally accessible• Fully portable • Completely interactive

ALCATEL 11 >

Expand Mobile Messaging into a Ubiquitous Personal Messaging OfferMessaging is already a profitable business for MSPs. However,

to become even more valuable for users and thus provide

increased revenue, MSPs must bring together a range of user-

defined messaging services into a ubiquitous offer, providing

the best individual user experiences. This implies:

> Providing a full choice of integrated messaging service

(e.g., text, picture, instant messaging [IM], voice, video),

according to a user’s desire for communication, information

sharing, emotional expression, etc.:

• seamlessly escalating between services, on demand

(e.g., escalating an SMS exchange into an IM session,

then sending pictures or videos, and returning to an

SMS exchange)

> Assuring ease of use, whatever the device

> Ensuring simple, transparent pricing, applied consistently

across the devices used:

• supporting customer-defined billing arrangements, in line

with budget requirements (e.g., subaccounts, real-

time/prepaid payment)

> Offering the possibility to develop segment-oriented

customer messaging propositions:

• consumers — transparent access and interoperability

with commercial e-mail and IM services, access to

personal blogs

• business users — integration into office messaging

environment, including access to corporate contact lists,

intranet resources, etc.

Provide Universal Broadband Internet Connectivity to Any User DeviceThe ultimate value of wireless networking is in enabling a

fully networked economy. To do this MSPs need to broaden

their wireless data offers to address the emerging needs of

consumer and corporate customers for communicating,

interacting and transacting with others, across the networked

economy. 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.)

> Developing a universal networking proposition targeting

vertical markets, that:

• provides simple, standardized interface rules for quick

and easy broadband networking, at predefined service

levels

• ensures superior reliability and security

• provides consistent service management and billing

arrangements

Drive the Market for Mobile Video and Audio InfotainmentVideo and audio infotainment services offer huge growth

potential for mobile service providers. However, in order to

increase their share of this growing market, service providers

need to offer services with more relevance for consumers.

This means leveraging their intrinsic capabilities in selling

on-demand services, with always-on service interactivity,

across a range of user devices. This implies:

> Expanding existing infotainment business to accommodate

a wider range of video and audio services, across a variety

of networked media platforms – mobile, PC, TV, selected

specialized consumer devices

• driving cross-platform service usage through bundled

offers with ubiquitous service access and global pricing

propositions

> Innovating new services leveraging real-time, personal

service interactivity:

• driven by users’ preferences and profiles to give them

what they want, when and how they want it

• offering added value to substitute services delivered

over parallel channels

> Offering a personalized video and audio environment,

regardless of devices:

• single set of service preferences, media bookmarks

service, etc.

• consistent real-time transaction capabilities


> 12 ALCATEL

MSP and Alcatel Moving Toward User-Centric BroadbandThere are several steps that an MSP can take in order to

develop a more User-Centric Broadband business. A high-level

service evolution roadmap for a full MSP is shown in Figure 7,

indicating the key steps to be taken toward fully converged

user-centric services.

The first step to a User-Centric Broadband business is to start

with service bundles, giving users more flexibility in satisfying

their service needs, according to their budgets. The next level

of service convergence concerns the partial integration of

disparate services, including (among others) low-cost Internet

calling over mobile handsets. Users should also have the

freedom to seamlessly switch between services whenever they

wish. Finally, moving toward completely user-centric services

implies giving users full freedom of choice both in the services

they want, and how they want to access them. This will lead

to a world where the user defines the service he or she receives.

Service providers will require an environment flexible enough

to provide a wide range of services in a way most appropriate

for each customer as service strategy evolves across the

different phases of the user-centric roadmap.

Figure 8 provides a strategic vision of Alcatel’s User-Centric

Broadband service delivery network. This vision considers

the entire network, including legacy systems. As the service

provider moves along the service roadmap (Figure 7), it will

implement the necessary components as needed.

Alcatel Network VisionAlcatel’s User-Centric Broadband delivery model has four key

characteristics:

> Service delivery environment: Includes pre-integrated

applications, such as messaging, VoIP, presence and payment,

and is open and standards-based for integration of third-

party applications. It contains the personal profile

information and makes it available for new services,

enabling consistent service delivery and a common look

and feel.


Service Bundles• Service-oriented credit pools: – calling: voice and video – messaging: text, picture, IM, video... – networking: mobile, wireless (fixed) – infotainment: white label video, audio,... – corporate voice/data VPN• Real-time account management

Stra

teg

ic V

alu

e

Time

Differentiate from fixed and Internet-only services

Key Enablers: Convergent payment, increasing wireless bandwidth, more networked devices, content valuecharging, new access technologies (WiFi, 2.75 -> 3G, WiMax,...), single/open service environment (own and third-party applications), unified next generation network

Partial Service Convergence• Low cost hotspot calling (voice and video) with dual mode devices• Service access across different devices – personalized environment, common service log-in, management, bookmarks, payment• User-driven service escalation: – voice-to-video calling; SMS-to-IM-to-video messaging etc.

Attract VoIP users, increased differentiation

over Internet services

Complete User Centricity• Ubiquitous service access – mobile web services: from any device, with a consistent proposition and user preferences• Automatic most-adapted broadband connection – mobile, wireless, (fixed)• Mobile broadband ISP service – networking and device/ application• User-driven service innovation – open ecosystem, fostering the development of new, on-demand, interactive, personalized services

Differentiate from fixed linetriple play services and singleservice providers (VoIP, ISP)

Figure 7 – Service Roadmap for a Mobile Service Provider

ALCATEL 13 >

> Service-aware edge and data-aware transport: Includes the

integration of networks to form IMS/TISPAN next generation

networks. This integration can be done by interconnecting

legacy and other licensed operators networks. This also

includes the service-aware routing functionality that enables

service providers to deliver QoS when it matters, and not

when it doesn’t, providing essential service tiers to add

value to end-user services and to enhance revenues from

wholesale services.

> Multi-access support, covering PSTN, DSL, WiFi, 2G, 2.5G,

3G, etc., including access to third-party networks

> Evolutionary approach allowing service providers to build

on the existing infrastructure such as operations and

business support systems (OSS/BSS), core and access

networks, etc.

Alcatel recommends that service providers take the following

steps in becoming a provider of user-centric services.

Step 1 - Service bundles. Enable a variety of service-

oriented bundles by integrating selected OSS/BSS functions,

service delivery mechanisms, and content value charging, in

order to offer:

> Convergent charging across selected services, enabling

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

This low-level service convergence will enable the service

provider to differentiate from their fixed and Internet-only

competitor, while giving the end user more freedom in using

their services in a way that suits them. Alcatel’s open service

delivery system, combined with our evolutionary OSS/BSS

approach, enables the service provider to quickly and easily

test the market with new bundles based on our convergent

service pricing and value charging capabilities while swiftly

reacting to changing behavior and customer needs.

Step 2 - Partial service convergence. Extend service

delivery and control to an external partner’s networks (i.e.,

Internet), while offering other unique customer propositions

based on functionally integrated services (in-house and third-

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 begin

benefiting from economies of scale. Users will benefit from:

> Lower-cost delivery of selected services (e.g., voice and

video communications over IP), using mobile (dual mode)

handsets

> User-driven service escalation between similar services

(e.g., voice-to-video calling)

> Access to user services across a range of user-defined

devices (e.g., handsets, PCs)

Functional service convergence allows the service provider

to effectively compete with low-cost Internet calling services,

while increasing differentiation over other Internet-based

services, all while increasing overall customer loyalty. The

continued implementation of Alcatel’s open service delivery

system facilitates integrated services thanks to its unique user

profile capabilities. Our service-aware infrastructure provides

control of bandwidth and QoS, allowing the service provider

to amalgamate services based on user needs (e.g., VoIP calling

within hotspots) across different devices. Finally, by deploying

a range of adapted high-speed mobile/wireless broadband

access (EDGE, UMTS, HSDPA, WiFi, etc.) in strategic locations,

the service providers capture revenue effectively where

services are most valued.


Integration and Operations

BusinessEnvironment

UniversalBroadband

Access

Wireline

Service- AwareEdgeand

Data-Aware

Transport

Operations and Business Support Systems

OpenServiceDeliveryEnviron-

ment

Mobile

WirelessSatelliteConsumer

Environment

Any

App

licat

ion,

Any

Con

tent

Each

Use

r

Ever

y Te

rmin

al, E

very

whe

re

Figure 8 - Alcatel’s User-Centric Broadband Services Delivery

Architecture

> 14 ALCATEL

Step 3 - Complete user-centricity. Enable complete user-

centric services, accessible from any device, by continuing

to extend the reach of integrated services. Provide intelligent

service delivery with automatic, most-adapted broadband

wireless/mobile connectivity to a full range of devices. Complete

migration to a unified network, paving the way for a flexible,

open network environment, which continues to foster service

innovation and create shareholder value for the service

provider. This will give end users:

> Any device service access and network connectivity

(video, audio, data to user-defined devices)

> An enhanced, end-to-end service delivery experience

optimized according to needs and budget

> Mobile broadband ISP services, including reliability

and security service level agreements

This complete user-centric model allows the service provider

to differentiate for fixed-line services and single-service

providers (VoIP providers, ISPs) while positioning mobile

services as the future of networking. By fully integrating

Alcatel’s open delivery platform with its range of broadband

access solutions and an adapted NGN, the service provider

will be able to benefit from a powerful user-centric service

delivery environment with which it can provide potentially

any services to any networked device, with the lowest cost

of ownership.

ConclusionMSPs are facing a range of opportunities and competitive

threats. Alcatel believes that user-centric service convergence

offers a great opportunity for MSPs to establish long-term

differentiation, while offering users simpler, more relevant

service 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

Whether an MSP continues to follow a full-service model,

whether it decides to focus on wholesaling mobile/wireless

capacity to enable other specialized players to address users,

or whether it chooses to partner with innovative Internet-

based service providers to propose the best-of-breed services,

offering more user-centric services will solidify existing

business, build new revenue streams, defend against

competitive threats and build customer loyalty.

Alcatel has extensive experience in this area and has many

solutions and services that can help service providers define,

implement and launch their user-centric service strategies,

making them more competitive, while also giving them control

over their investment and risk every step of the way.


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

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

Business

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