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How to Succeed with
Fixed–Mobile Convergence
Alastair Brydon and Mark Heath
with Rupert Wood
Edited by Sarah Peake
Analysys Research
Fixed Networks and Services
Analysys Research Fixed Networks and Services
The Acceleration of Fixed–Mobile Substitution in
Western Europe: facts and figures
online market intelligence service
Seizing the Opportunities from Enterprise Mobility
Business Data Services: growth opportunities and
The Middle Eastern Mobile Market: trends and
forecasts for Europe 2007–12
forecasts 2007–12
Prospects for Local Loop Unbundling and Bitstream
The Future of the Global Wireless Industry:
in Central and Eastern Europe
scenarios for 2007–12
European Cable: strategies for success
The World’s Top Ten Non-voice Services for Mobile
Fixed–Mobile Convergence in the Enterprise Voice
Operators
Market
Picocells and Femtocells: will indoor base stations
Strategies for Selling More to SMEs: analysis of
transform the telecoms industry?
demand for broadband managed services and service
Mobile Operator Strategies for Fixed Broadband
bundles
Strategies for MVNOs
Opportunities for Non-traditional Players in
Communications Markets
Beyond Triple Play: forecasts for broadband valueadded services
The Competitive Dynamics of DSL in Western
Europe: prospects for local loop unbundling and
Mobile Number Portability: strategies for operators
and regulators
Person-to-Person Mobile Messaging in Western
Europe: forecasts and analysis 2006–11
Mobile Operator Performance: ARPU, churn,
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bitstream
Next-Generation Telecoms IT
Mobile Networks and Services
Analysys Research Next-Generation Telecoms IT
Analysys Research Mobile Networks and Services
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Billing and OSS Trends: the transition to telecoms IT
The Mobile Marketing and Advertising Revolution
The Next-Generation Bill: commercial and technical
The Central and Eastern European Mobile Market:
strategies
trends and forecasts 2007–12
World Telecoms BSS and OSS Markets: trends and
Quadruple-Play Bundling Strategies
analysis
The Western European Mobile Market: trends and
forecasts 2007–12
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ISBN 1 905495 50 1
September 2007
10
How to Succeed with Fixed–Mobile Convergence
2.5 If FMC initiatives are to succeed, there must be strong
benefits for network operators
Operators need to ensure that any FMC initiatives can produce strong, and quantifiable,
business benefits for them. Commercial benefits that could be at the heart of a strong
operator business case are:
•
•
•
•
•
cost reduction, for example by operating a single, highly efficient core network to
support fixed and mobile services
revenue from new services
enhancement of market share through significant service differentiation, compared with
fixed-only or mobile-only operators
churn reduction
economies of scope, for example by exploiting current spend on billing, customer
services and advertising, or by adding FMC as an extra feature to an existing home
gateway product.
Without clearly defined business benefits, FMC may be a highly risky strategy and
operators must not position FMC as the only means of achieving their objectives. They
must consider alternative approaches to achieving their goals that may ultimately prove
more effective, even if they are more radical. For example, it may be more effective for a
fixed-only operator (such as BT in the UK) to acquire its own mobile operations than to
invest heavily in FMC services that prove to be unattractive to customers.
The key challenge for operators constructing an FMC business case is to make realistic
assumptions. While it may be appealing to believe that a new FMC service is going to have
a dramatic impact on the market, operators have to be realistic about the following points.
•
The true costs and difficulties of implementing an FMC solution. The business case
should include not just the costs of technical solutions, but also the costs of marketing,
promotion and distribution, which may be substantial, particularly for fixed-only or
mobile-only operators that are moving beyond their core businesses.
•
The probable demand for FMC solutions. Operators have to compare the probable
end-user benefits with any drawbacks that will diminish the appeal of an FMC solution
in order to derive a realistic assessment of probable end-user demand. They need to take
into account the fact that the majority of end users are happy with their existing services,
and may not see the need to upgrade to an FMC solution.
•
The competitive situation. End users will not adopt an FMC solution simply because it
is delivered in a clever technical way across fixed and mobile networks. They will be
more concerned with the cost of the service and whether it meets their needs. In
particular, operators must not underestimate the appeal of simpler, non-FMC solutions.
2: FMC can take different forms
© Analysys Research Limited 2007
27
How to Succeed with Fixed–Mobile Convergence
Figure 4.1: Decline in mobile voice spend per minute for selected countries, 1Q 2004 to
4Q 2006 [Source: Analysys Research, 2007]
Average spend per minute (USD)
0.50
0.45
0.40
Austria
Finland
France
Germany
Spain
UK
0.35
0.30
0.25
0.20
0.15
0.10
0.05
4Q 2006
3Q 2006
2Q 2006
1Q 2006
4Q 2005
3Q 2005
2Q 2005
1Q 2005
4Q 2004
3Q 2004
2Q 2004
1Q 2004
0.00
The decline in average spend per mobile minute will continue, as operators attempt to
stimulate voice usage in order to maximise ARPU and drive FMS. Following the lead of
the USA, there will be a proliferation of bundles of voice minutes, with generous
allocations of any-time, any-network minutes. Home-zone tariffs will be used increasingly,
and the introduction of femtocell indoor base stations will allow mobile operators to offer
their customers cheap (or free) voice calls from within the home. Mobile pricing will fall to
a sufficiently low level to be perceived as affordable and good value by a large proportion
of mobile users. Consequently, the vast majority of calls will be made using mobile phones,
despite the availability of cheaper fixed network alternatives. Mobile users will have little
interest in seeking out cheaper alternatives, such as UMA-based services.
The extensive deployment of 3G indoor base stations (commonly referred to as femtocells)
could be the biggest barrier to the success of dual-mode handset services. 9 Femtocells may
be deployed widely in the mobile industry within the next five years, as a means of
providing indoor coverage in targeted areas for customers that need or want it. This will
address the one major weakness of cellular-only FMS voice services, namely that indoor
coverage can be poor, particularly from 3G networks. In general, 3G indoor coverage is
significantly worse than that of 2G for many operators. However, widespread deployment
of femtocells could substantially enhance indoor coverage – to more than match that
9
For detailed discussion of the role of indoor base stations, see Heath, M. and Brydon, A. with Wood, R.,
Picocells and Femtocells: will indoor base stations transform the telecoms industry?, Analysys Research
(Cambridge, 2007).
© Analysys Research Limited 2007
4: Cellular-only services will be more popular in many markets
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