How to Succeed with Fixed–Mobile Convergence Alastair Brydon and Mark Heath

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,
diversification and globalisation
bitstream
Next-Generation Telecoms IT
Mobile Networks and Services
Analysys Research Next-Generation Telecoms IT
Analysys Research Mobile Networks and Services
online market intelligence service
online market intelligence service
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
Published by Analysys Research Limited • St Giles Court • 24 Castle Street • Cambridge • CB3 0AJ • UK
Tel: +44 (0)1223 460600 • Fax: +44 (0)1223 452800 • Email: [email protected] • http://research.analysys.com
Registered in England No. 3977996
© Analysys Research Limited 2007
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in
any form or by any means – electronic, mechanical, photocopying, recording or otherwise – without the prior
written permission of the publisher.
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
Market intelligence services from
Analysys Research
Analysys Research’s online market intelligence services help you keep track of the latest
developments in major telecoms markets worldwide. All our services are regularly updated
and include a sophisticated range of interactive search, benchmarking and download tools.
•
Analysys Research Fixed Networks and Services provides
analysis of European operators and ISPs, country reports for
30 European markets, country market forecasts, commentary
on industry trends, and a module on the broadband market.
•
Analysys Research Mobile Networks and Services provides
insight into the strategies of key players worldwide, country
reports for leading mobile markets, 3G status reports, country
market forecasts and analysis of industry trends.
•
Analysys Research Next-Generation Telecoms IT includes a
searchable contracts database, trends papers covering the latest
issues in billing and OSS, and profiles of leading and up-andcoming vendors worldwide.
Our Analyst Support package, which allows you direct
consultation with our telecoms experts, is an ideal complement
to your chosen market intelligence service.
For more information on our services or a guided demonstration, please contact our Sales
and Customer Service team on +44 (0)1223 460600, email us at [email protected] or
visit our Web site at http://research.analysys.com.
Market intelligence services from Analysys Research
© Analysys Research Limited 2007
Reports from Analysys Research
Analysys Research’s reports are designed to keep you up to date with industry
developments and how they affect players in the telecoms value chain – from fixed and
mobile network operators, to software and equipment vendors, and content providers and
distributors. Our reports will help you:
•
•
•
•
•
explore the factors that are driving market evolution
understand how industry trends will affect your business
define and evaluate your strategic options using decision frameworks and scenarios
identify where opportunities lie for future growth
find out which players are currently successful and why.
Our publication programme offers
over 25 reports a year, covering all
the key issues affecting the
telecoms industry and the latest hot
topics. Recent reports have
provided expert analysis of such
topics as mobile entertainment, wireless VoIP,
triple play, enterprise mobile data services, mobile
TV and radio, videotelephony, IPTV, outsourcing
by telecoms operators and naked DSL.
Each report is accompanied by an Excel
spreadsheet containing the forecasts or other
key data discussed in the report, presented in
an easy-to-use format.
All reports are offered with Analyst Support,
allowing you direct consultation with the
author.
Shop online at http://research.analysys.com/store or, for information about our report
subscription packages, please contact our Sales and Customer Service team on
+44 (0)1223 460600 or email us at [email protected].
© Analysys Research Limited 2007
Reports from Analysys Research
Custom Research: meeting your
information needs
Analysys Research has developed its portfolio of Custom Research services in response to
customer demand for bespoke market intelligence, when more data is needed than is found
in an off-the-shelf report or database, when there are complex questions about specific
companies or markets that need to be answered, or when analysis needs to be tailored.
Custom Research can deliver real value when an organisation needs to answer specific
questions about how it is positioned in the market, and how to optimise performance at
various stages of the product or service life cycle.
Market opportunities?
Match to customer needs?
Suppliers
New idea
generation
Effective procurement?
Costs?
Pricing?
Competitive landscape?
Competitors
and partners
Regulatory regime?
Company
internal
processes
Channel strategy?
Regulators/
government/
legislatures
Market and
technology
trends?
Product or
service
Strategy
Launch
Marketing
strategy?
Optimum efficiency?
Market analysis?
Optimisation
Customers
Competitive
positioning?
Customer
satisfaction?
Understand how your company is
Optimise performance in the product or
positioned
service life cycle
In answering our clients’ questions, we bring a wealth of understanding of markets, and of
techniques and services including:
•
•
•
•
•
•
•
•
desk research, data collection and interpretation
benchmarking services
quantitative and qualitative surveys
market sizing and forecasting
competitor and partner profiling
white papers, presentations and workshop facilitation
event and trend analysis
procurement assistance.
For more information on Custom Research services from Analysys Research, or to discuss
how we could help you to meet your specific information needs, please contact our Custom
Research team on +44 (0)1223 460600 or email us at [email protected].
Custom Research: meeting your information needs
© Analysys Research Limited 2007
Analysys Consulting
Analysys Consulting is a leading international telecoms and digital media consultancy. We
draw on our unparalleled industry experience to deliver results that enable our clients to
compete and grow in these markets, as well as to exploit new opportunities.
Our experience, influence and unrivalled knowledge base are recognised globally – which
is why we have been involved in some of the world’s largest telecoms projects and in
transactions worth billions of dollars.
For more than 20 years, we have helped shape the telecoms industry through our extensive
work on policy, regulation and finance. We have worked with most of the sector’s leading
players, often at board level, to:
•
•
•
•
•
determine strategy
advise on merger and acquisition activity
optimise tariffing of new and existing services
identify and launch new business ventures
improve profitability and cashflow by streamlining key operational processes.
Analysys Consulting services include:
•
•
•
•
•
•
strategy and marketing
pricing strategy
scenario planning
economic modelling
due diligence
licence awards
•
•
•
•
•
mergers and acquisitions
regulation
interconnect
spectrum pricing
STEM (Strategic Telecoms
Evaluation Model).
For more information please contact:
Europe/Middle East/Africa (head office): +44 (0)1223 460600, [email protected]
The Americas (regional headquarters): +1 202 331 3080, [email protected]
Asia–Pacific region (regional headquarters): +65 6866 3203, [email protected].
© Analysys Research Limited 2007
Analysys Consulting