Business Challenges and Opportunities In Tomorrow's Mobile Networks
The underlying technolgy and engineering of next-generation fixed networks can be applied to mobile 3G.By Grant Lenahan, Telcordia Technologies
"May you live in interesting times."
This old adage may be particularly apt as the mobile industry moves into a new age. But what will be most interesting about our industry's future?
Will the 3G1 radio standards enable higher data rates and improved spectrum efficiency?
...or the move to a "next generation" IP-based packet network?
...or the advent of a "mobile Internet" characterized by a profusion of voice, data and short mobile commerce transactions?
The answer, of course, is all of the above, and more. In fact, one disruptive impact on our industry is almost too obvious and seemingly benign to mention: Success.
Growth: The Hidden Business Driver
Our success at attracting new subscribers and increasing usage is transforming the mobile industry. While success drives business volumes and revenues higher, it also drives expanded call centers, more cells and sectors, and exponential growth in the core transport and switching network. This growth transforms our economic structure driving management focus from "Average Revenue Per User" toward more efficient use of its capital investments. Success has also changed customers' expectations, and thus their service demands. Mobile communications have evolved from "luxury" to "necessity" first as a business tool and later for personal communications. Consequently, users are selecting their operators as much for service quality, reliability and service richness as they once did for price and coverage. This translates into a new urgency to provide high-quality and innovative services at competitive prices. Meeting the customer's demands will separate winners from losers in the highly competitive mobile future.
The Market Environment: More Growth
and Increased Competition: No Rest for the Weary
Among all the change, there are a few things that are fairly certain:
1.Continued growth in mobile usage, with the gradual substitution of mobile for fixed communications.
2.Increased competition as build-outs and new spectrum allocations increase the viability of many operators.
3.Demand by customers for even more quality, coverage, capacity and service variety at ever lower unit prices.
4.Operations rendered vastly more complex, yet more financially rewarding, by new technology and proliferating services.
5.Basic geographic coverage ceasing to be a major differentiator.
6.Subscriber demand for truly seamless mobility, including seamless roaming and transparent availability of services over a wide geographic range.
Taken together, these six "safe predictions" suggest luring new customers will require innovation and new technology. But what may be unusual is the degree to which the mobile industry is beginning to resemble a highly competitive consumer goods market. This suggests that the industry must move innovation from the radio domain to the service domain, which is enabled by sophisticated core network and operations.
From Voice Minutes to the Mobile Internet
Traditionally, mobile network traffic has been dominated by voice. Although GSM in particular provides for comparatively rich services, the majority of revenues and network traffic have come from subscription-based voice services.
Even prepaid, the engine of subscriber growth across Europe, typically yields substantially less traffic and revenue per subscriber than do postpaid subscribers. However, an array of differentiated services is beginning to emerge and this trend will accelerate in the near future. It is already clear that pricing options beyond simple pre- and postpaid will proliferate, and that message services as in the case of Short Message System (SMS) services can tap into new needs and new markets.
Today's prepaid and SMS services are two early innovations that offer practical insights into the types of innovation that will make for profitable, successful competitors in tomorrow's world. Prepaid is a perfect example of innovation in pricing. The basic service and technology, for example GSM telephone calls, do not change, at least from the subscriber's perspective. But the pricing methodology changes drastically, and consequently draws a wider range of customers. Conversely, SMS services show how a fundamentally new service can drive new types of usage and appeal to new demographics. SMS services not only create incremental revenues from existing voice customers, they also drive usage by the teenage demographic, who are more price sensitive than traditional mobile subscribers, and also show less hesitation with odd typing requirements.
WAP, on the other hand, has demonstrated that innovative technology without rich content fails. With penetration rates saturating, we are witnessing the beginning of a shift that occurs in almost every industry the shift from mass production to mass-customization. As technology and economies of scale enable cost-effective niche product and niche marketing, nearly every product or service imaginable can be offered; each at many price and quality levels, and with payment plans to suit individual needs.
Lifestyle marketing drives segmentation and plays a major role in targeting specific needs. Consequently, service richness will be the true legacy of 3G. While the basic technology will enable "always on" Internet access, higher speeds and more efficient data transport, it is the flexibility enabled by 3G networks that holds out the greatest revenue potential and poses the most significant technological and operational challenges to a mobile operator.
It is a fundamental tenet of economics that different consumers (whether they are individuals or businesses) place different value on goods like cars, jewelry or communications services. Some people will spend lavishly to be early adopters, or to have superior service, while others are more price sensitive. Operators maximize both their revenues and profits when they target a range of offerings to individual niches.
Market research and the history of other goods and services suggest that differentiation will occur on more than just price. In fact, the most basic differentiation will occur based on content. Some people will want travel information; others financial information; others entertainment and messaging. Each of these is basically a data transaction, yet they are differentiated by content.
But differentiation and customization will certainly not be limited to content. We expect further refinements in "quality," performance, pricing, and ancillary value-added services, such as security. Successful operators must deploy infrastructure that allows them to "add value" to the content provided by third parties via flexible, open service platforms that support easy service creation, open APIs, and can provide underlying capabilities such as AAA, billing, prepaid, rating, security and directory functions, to name a few.
The table illustrates our view of service richness today and tomorrow, recognizing that 3G is not an individual event. Rather, it is a gradual migration of technologies (RANs, core networks) and services from today's GSM or IS-41 voice networks, through stages of 2.5G and mixed networks, and ultimately to tomorrow's "all-IP" mobile packet networks.
Success in 2.5G & 3G lies not just in deploying new technology, but in deploying a network and service creation infrastructure that is both cost effective and capable of delivering the range of services described above. Interestingly, the greater the range of services offered, and the greater the range of quality and price options, the more efficient and cost-effective will be your use of network resources. While this may sound counter-intuitive, the communications industry in general, and the mobile industry in particular, have a long history of employing "off-peak" pricing to encourage use of an otherwise under-used network, discourage peak-hour congestion, and, consequently, increase revenues. In the 2.5G & 3G packet environments, a richer set of options will be available, and consequently one can build a richer and better differentiated set of end-user services.
Raw technology does not automatically lead to new services. For operators to actually create and administer these services, they will need a core set of tools to enable services, and to manage their network and services profitably. Fortunately, a large set of services can be created from a relatively smaller set of basic technology features, and these can be managed by a correspondingly smaller number of management tools.
The illustration provides one view of the core tools required to operate a packet-based, multi-service, 2.5G or 3G network.
One well-founded fear is that 2.5G packet networks, and, even more so especially 3G networks, are new, unproven and not yet understood sufficiently. Certainly we must be cautious of unproven technology, particularly in the radio propagation domain where there is no substitute for deployment and empirical evidence. Yet other aspects of 3G - while still relatively new - are not totally untried. The basic packet technology of 3G (and, for that matter, GPRS/EDGE), employing ATM and Frame Relay for capacity provisioning and IP for transport and routing, is being deployed today in "next-generation" fixed networks. Of particular interest are those deployments where predictable or guaranteed performance is required, and where "contention" for capacity is high. These are emerging today, in the form of ATM and IP networks deployed to support xDSL (and Voice over DSL), Cable Modems, VoIP and business-to-business extranets such as the Automotive Network eXchange (ANX).
While they excel at data and multi-media, few IP networks today have the reliability, QoS, or voice features to meet regulatory and business demands. Given that voice is among the most demanding and profitable services on an IP network, Telcordia has been working since 1998 to bring PSTN-levels of quality, services and reliability to Voice Over IP (VoIP) for clients. Unlike some of the demos, enterprise and Internet VoIP services that dominate the news today, our clients are deploying regulated-quality telephone service on a variety of networks and access types, including DSL, ATM and Cable Modems. Mobile VoIP, alas, must wait for the availability of higher-rate air interfaces, such as EDGE and 3G, before it will be technically or economically practical.
Today's fixed NGN networks and tomorrow's 3G mobile networks face many common challenges, mostly resulting from (1) the packetization of the network, (2) variable QoS, and (3) the growing breadth of services. Both 2G and the PSTN were circuit-switched networks, which, even with all their limitations as data networks, made for very predictable traffic and QoS management. Packet networks, despite their efficiency for transaction-oriented data, complicate QoS management. This is particularly true for delay-sensitive traffic, such as voice or financial transactions. Fortunately, many of these engineering and Operations Support Systems (OSS) challenges are already being solved for fixed NGNs, and the same methods and technologies can be applied to 3G mobile networks.
Beyond Networks and
We believe that the underlying technology and engineering of next-generation fixed networks can be applied to mobile 3G. But does the same hold for operations processes and paradigms?
Mobile network operators have always had a more flexible and less network-dependent process of provisioning. Activating a new mobile customer does not require provisioning a dedicated circuit or transmission facility, as is the fixed paradigm. Instead, a customer need only be logically provisioned, in a database, at a web site, or in an HLR. This is the mobile concept of logical "service activation" on a pre-existing network. The NGN world is causing some fixed operators to move slowly to this new model, but the mobile industry is already there. However, unlike today's networks, tomorrow's fixed and mobile networks alike will involve a wider range of service types, quality levels, pricing plans, and content mixes. Therefore, the relatively simple "service activation" in 2G - creating HLR and billing records - must give way to a richer set of services profile options, just as the PSTN's world of "facility provisioning" will give way to logical services activation of the multitude of services available on each high-speed "pipe." As service richness drives revenues, it also holds the danger of driving up costs.
Complex service options and complex mobile terminals could yield a dangerous combination when mixed with the non-technical mass market of mobile users. Witness the headache of today's ISPs that must talk novice users through the arcane configuration maze of Microsoft's "dial up networking" or Mac OS's Open Transport. Customer support and customer operations are already the dominant cost elements in mobile and ISP operators today even though today's networks deal with relatively simple service sets. Clearly, a new paradigm is required to maintain high customer satisfaction with reasonable support costs, as both the number of services and the complexity of mobile terminals spirals upward.
Looking into the root cause of those support costs, we find two culprits. The first is the complexity of customer equipment either mobiles or PCs. The second root is inquiries and service changes that require the assistance of customer service representatives (CSRs). In either case, operators incur significant customer-support costs, and the customer is fundamentally inconvenienced. Service management costs need not spiral upward forever. They can be reduced by software systems that manage customer self-service to a rich service profile, or "super HLR". If designed correctly, this is a tremendous "win-win", resulting in lower costs and higher customer satisfaction. The second culprit, CPE complexity, ultimately leads to intelligent configuration management of CPE by a network based "OSS". Telcordia has already demonstrated that intelligent agents can isolate troubles without human intervention, and can extend the concept of managed version control to tomorrow's software-enabled mobile devices.
The 3G world will usher in many changes, from sheer growth to new radio and core network (packet) technologies. Yet the most profound impacts both technically and operationally may come from the plethora of services and service packages that 3G technology enables. This service proliferation and richness, more than IP technology itself, is truly the essence of the "mobile Internet". Fortunately, not all of these technologies are entirely new, nor must their associated management challenges be solved entirely from scratch. Many of the same technologies, opportunities and challenges are part of the fixed world's evolution to "next generation networks," of which the first are actually being deployed commercially as I write. The technology and experience that comes from these early deployments can be applied as well to tomorrow's 3G networks.
Grant Lenahan is the executive director of wireless mobility for Telcordia Technologies.
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