Session 1
ITU Regional Seminar on Costs and Tariffs
Regional Group for Asia and Oceania
Trends on Convergence and
Migration Leaps
8-9 March 2011, Phuket, Thailand
Oscar González Soto
ITU Consultant Expert
Spain
oscar.gonzalez-soto@ties.itu.int
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
Agenda
• Convergence
• Convergence related questions
• Dimensions and profiles
• Key factors: Economies of scale
•
Market and Business trends per category
• Technology and Business Leapfrogging
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
2
1
Convergence related questions
Does convergence refer only to Fixed and Mobile?
Does convergence matter only to developed
countries?
Is convergence more expensive?
What benefits may be addressed by
convergence?
How convergence may help developing countries?
Others…………?
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
3
Convergence dimensions
Convergence is taking place at several domains
At Network domain
One network for all service types: NGN, IMS
At Service domain
Fixed, Nomadic, Mobile, Interactive and
Broadcasting, Content, etc.
At radio Access domain
DECT, WiMax, 3G, LTE, etc.
At Operational and Business domain
OSS, Billing, etc, for all customer classes
At Terminal domain
2G, 3G, PDA, iPhone, etc.
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
4
2
Convergence profiles
Level of convergence
Convergence
Domain
Separated
Implementation
Low level
convergence
Medium level
convergence
Full
convergence
Network Core
Operations
Services
Network Access
and Edge
Terminals
Traditional Mode
of Operation
Initial traditional status: Separated networks, services and
International
operations
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
Telecommunication
Union
5
Convergence profiles
Level of convergence
Convergence
Domain
Separated
Implementation
Low level
convergence
Medium level
convergence
Full
convergence
Network Core
Operations
Services
Network Access
and Edge
Terminals
Traditional Mode
of Operation
Transition
Convergence
Profile
Example of convergence for most operators in emerging
International
economies
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
Telecommunication
Union
6
3
Convergence profiles
Level of convergence
Convergence
Domain
Separated
Implementation
Low level
convergence
Medium level
convergence
Full
convergence
Network Core
Operations
Services
Network Access
and Edge
Terminals
Traditional Mode
of Operation
Transition
Convergence
Profile
Ambitious
Convergence
Profile
Example for leading operators on convergence (100% on core
International
and 30% to 70 % on access/edge)
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
Telecommunication
Union
7
Convergence profiles
Level of convergence
Convergence
Domain
Separated
Implementation
Low level
convergence
Medium level
convergence
Full
convergence
Network Core
Operations
Services
Network Access
and Edge
Terminals
Traditional Mode
of Operation
Transition
Convergence
Profile
Ambitious
Convergence
Profile
Complete
Convergence
Profile
Future profile driven by: Initial status, Market development,
International
Economy of scale and Operator Strategy
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
Telecommunication
Union
8
4
Key Factors: Economies of scale
Economies of scale (EoS) are an inherent characteristic to
the telecom technologies that impact on solutions,
efficiency and cost reduction
The five dimensions of the
economy of scale:
Benefits per dimension
By Size of the systems
Cost reduction per unit (i.e.: 10%
to 30%)
By Technology capabilities
New technologies with higher
productivity (i.e.: x10)
By Traffic efficiency with
Better utilization for a given GoS
when larger systems (i.e.: +20%)
the occupancy
By customers Density
Quadratic decrease with coverage
radio increase
By Volume of purchasing
Discount per volume in log scale
(i.e.: up to 40%)
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
9
Full capacity cost
Cost per unit
Economy of scale per system
size
u1
u1 = a 1+ B / S
1
u2 = a 2+ B2 / S
u2
m2
m1
X
M1
M2
t1 = a1 S + B 1
t2
t2 = a2 S + B 2
t1
m1
Equipment size
m2
X
M1
M2
Equipment size
Cost reduction as function of size and occupancy
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
10
5
Cost reduction per technology
evolution. Example for Ethernet
ports
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
1997
1998
1999
2000
2001
2002
2003
2004
Source: Dell’Oro Group
Phuket, Thailand, March 2011
International
Telecommunication
Union
11
ITU - Trends on Convergence - OGS
Economy of scale per traffic
efficiency
Impact on efficiency increase for a given quality
with traffic and group size (non-linear effect)
Resource Efficiency
0.9
0.8
0.7
0.6
0.5
0.4
P = 0.02
0.3
0.2
0.1
5
10
15
20
25
30
35
40
Offered Traffic
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
12
6
Agenda
• Convergence
• Convergence related questions
• Dimensions and profiles
• Key factors: Economies of scale
• Market and Business trends per
•
category
Technology and Business Leapfrogging
Phuket, Thailand, March 2011
International
Telecommunication
Union
13
ITU - Trends on Convergence - OGS
Business domains and trends
Example of Value Added chain and operators
movements to gain economy of scale and market
Applications
and Services
Application Service
Network
nucleus
Metropolitan
network
Agreements and
merging
Internet Service Providers
(ISPs)
Agreements with
wholesale operators
Local
Access
• Acquisition/merging
of service providers
• Development of new
access loops and
Unbundling
Backbone Service Providers
(BSPs)
Providers
• Agreements with
content providers
and e-commerce
Edge
Access Providers
(CAPs)
• Agreements with content providers
Mobile Service Providers (MSPs)
• New multi-service
development
• Agreements with
content and application
service providers
Phuket, Thailand, March 2011
Established Service Providers (ESPs)
• FMC
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
14
7
Business Planning case
Evaluations to be based on robust techno-economical
tools due to high number of alternatives and complexity
Case study performed for medium size country with
mixes of customer classes and services domains:
Multiservice IP Network with integrated operation
available
Three service categories: Voice, Data/Internet, Video
distribution
Modeling demands, multiservice traffic flows,
dimensioning, network
resources, CAPEX, OPEX and financial results for
different levels of competition
Evaluate differential future Cash-flows, NPV, IRR, etc.
for a 10 years period
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
15
Business Planning case
Effects of the mix of customers on Reference Scenario: Low
competition level Network NPV
8e+08
7e+08
Euro
6e+08
5e+08
SOHO and
Small
Enterprise
4e+08
All
Segments
(reference)
3e+08
Residential
2e+08
1e+08
Y0
0e+08
-1e+08
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
Year
SME and SOHO with quicker recovery but less NPV and company value at
medium term
“All customer segments” case with much better behavior
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
16
8
Business Planning case
Effects of the mix of services on Reference Scenario: Low
competition level Network NPV
7e+08
6e+08
Internet
5e+08
Euro
4e+08
Internet &
VoDSL
3e+08
Internet &
Video
2e+08
All
Services
(reference)
1e+08
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
0e+08
-1e+08
-2e+08
Year
Major impact of service classes on NPV and company survivability
Single service classes without future
High benefit of “all services” case
Phuket, Thailand, March 2011
International
Telecommunication
Union
17
ITU - Trends on Convergence - OGS
Business Planning case
Effects of the mix of services on typical scenario: Medium
competition level Network NPV
5e+08
4e+08
Internet
Euro
3e+08
Internet &
VoDSL
2e+08
Internet &
Video
1e+08
Y0
0e+08
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
All
Services
(reference)
-1e+08
-2e+08
Year
Increase of competition level amplifies the previous effects on feasibility:
big differences between service mixes
Data only or single service classes without feasibility at medium term
Very robust behavior for the “all services” case
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
18
9
Agenda
• Convergence
• Convergence related questions
• Dimensions and profiles
• Key factors: Economies of scale
•
Market and Business trends per category
• Technology and Business Leapfrogging
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
19
Network Architecture towards NGN
Trends in WLL technologies for Bandwidth and
Mobility
Convergence of different radio systems towards the
integration of solutions and services at the IMT advanced
International
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
Telecommunication
Union
20
10
Network Architecture towards NGN
Trends in UMTS solutions for higher capacity
and performance
Evolution of the 3G and 3,5G versions towards 4G with increasing speeds
and decreasing latency time
Phuket, Thailand, March 2011
International
Telecommunication
Union
21
ITU - Trends on Convergence - OGS
Network Architecture towards NGN
Fixed network steps/leapfrogging
Grow for
Bandwidth
Cost decrease
per bit
NGN full IMS
NGN pre-IMS
NGN-SWST
ATM/FR/SDH
ISDN
PSTN
Digital
Steps by
developed
countries
PSTN
Analog
Technology
timed evolution
Historical migration steps for fixed network operators
with early development and services deployment
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
22
11
Network Architecture towards NGN
Fixed network steps/leapfrogging
Grow for
Bandwidth
Cost decrease
per bit
Example of Leapfrog for
developing countries
NGN full IMS
NGN pre-IMS
NGN-SWST
ATM/FR/SDH
ISDN
PSTN
Digital
Steps by
developed
countries
PSTN
Analog
Technology
timed evolution
Migration strategy is strongly dependent on country
opportunity, infrastructure and service maturity
Phuket, Thailand, March 2011
International
Telecommunication
Union
23
ITU - Trends on Convergence - OGS
Network Architecture towards NGN
Fixed Access network
steps/leapfrogging
Grow for
Bandwidth
Cost decrease
per bit
FTTH
FTTB
VDSL
ADSL2+
ADSL
Modem
128
Steps by
developed
countries
Modem
64
Technology
timed evolution
Historical migration steps for internet access operators
with early development and services deployment
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
24
12
Network Architecture towards NGN
Fixed Access network
steps/leapfrogging
Grow for
Bandwidth
Cost decrease
per bit
Example of Leapfrog for
developing countries
FTTH
FTTB
VDSL
ADSL2+
ADSL
Modem
128
Steps by
developed
countries
Modem
64
Technology
timed evolution
Migration strategy is strongly dependent on country
opportunity, infrastructure and service maturity
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
25
Network Architecture towards NGN
Mobile network steps/leapfrogging
Grow for
Bandwidth
Cost decrease
per bit
LTE
HSPA+
UMTS
GSM/EDGE
GSM/GPRS
GSM
Steps by
developed
countries
Technology
timed evolution
NMT
Historical migration steps for mobile operators with early
development and services deployment
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
26
13
Network Architecture towards NGN
Mobile network steps/leapfrogging
Grow for
Bandwidth
Cost decrease
per bit
Example of Leapfrog
for developing countries
LTE
HSPA+
UMTS
GSM/EDGE
GSM/GPRS
Steps by
developed
countries
GSM
Technology
timed evolution
NMT
Migration strategy is strongly dependent on country
opportunity, infrastructure and service maturity
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
27
Business Migration Leaps
Extension for new
customer types
“staircase” for leading growing alternatives
Upgraded Telcos
Customers for
connectivity
Classic Telcos
Conventional voice
and data services
Phuket, Thailand, March 2011
Extension for new
services domains
+ Services of IN,
VPN and Mobile
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
28
14
Business Migration Leaps
+ Customers for
new services
Extension for new
customer types
“staircase” for leading growing alternatives
Extended Telcos
Upgraded Telcos
Customers for
connectivity
Classic Telcos
Conventional voice
and data services
Phuket, Thailand, March 2011
Extension for new
services domains
+ Internet and video
Distribution (triple play)
+ Services of IN,
VPN and Mobile
International
Telecommunication
Union
29
ITU - Trends on Convergence - OGS
Business Migration Leaps
+ Customers for
end applications
+ Customers for
new services
Extension for new
customer types
“staircase” for New Universal Telcos
New Universal Telcos
ASPs + CC
ISPs
Extended Telcos
Upgraded Telcos
Customers for
connectivity
Classic Telcos
Conventional voice
and data services
Extension for new
services domains
+ e-applications,
+ Services of IN,
+ Internet and video Hosting, CC and
VPN and Mobile distribution (triple play) Virtual Nets
Specific migration and timeframe to be optimized for the
International
country context and regulatory conditions
Telecommunication
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
Union
30
15
Business Migration Leaps
Revenue level
(ARPU)
Evolution of revenues with service domains
ASP+CC
Video and multiservice
voice revenues
IN and data
Time and Extension for new
services domains
Conventional voice
and data services
+ Services of IN,
+ Internet and video
VPN and Mobile distribution (triple play)
+ e-applications
Hosting, CC and
Virtual nets
Convergence strategy is fundamental to grow in a competitive
International
environment
Telecommunication
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
Union
31
Impact on regulation by NGN
Multiplicity of Interoperability
scenarios
User
Equipment
NGN
(Carrier Y)
PLMN
User
Equipment
NNI
UNI
UNI
NGN
(Carrier X)
UNI
UNI
NNI
PSTN/ISDN
SIMULATION
EMULATION
Phuket, Thailand, March 2011
Public IP
NETWORK
User
Equipment
Variety of scenarios for
interconnection
TDM
TDM-- TDM
TDM – NGN
NGN – NGN
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
32
16
Impact on regulation by NGN
Requirements on NGN regulation
Manage customer rights to better services at lower
costs
Customers orientation
Have a vision of market evolution on overall services and
business development
Always promote Innovation, never break it
Maintain fundamental principles for regulation objectives
and decrease degree of detail for services
Incorporate new charging units and market dynamics
Simplify application process at “macroscopic” level
Converge regulation for the converged Telecom usage
Measure accountability by country customers satisfaction
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
Impact on regulation by NGN
Charging evolution on Units and
Market dimensions
+ Resource
utilization
Charging
units
Usage
Monetization
+ SLA
+ BW
utilization
Package
Open + flat
+ BW
capacity
+ event
Mix regulated
and open
+ BW
capacity
Time and
distance
Online
Charging
Systems
Market
evolution
Predefined
regulated
Classic Telcos
PSTN
Upgraded Telcos
PSTN + Data
Triple play
NGN-SSW
Multiservice
NGN-IMS
Multiservice
NGN-IMS-RCS
High competition
Two dimensional view for charging systems: Units & Market Intelligence
International
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
Telecommunication
Union
34
17
Conclusions
• Recent higher capacity technologies take benefit of
economies of scale and are cheaper per
communication unit
• Skipping intermediate development steps will
reduce transition and operational costs
• Selection of Leaps per country is a function of
initial maturity stage and demand growing rate
• Developing countries may benefit from a business
staircase strategy based on the experiences at
developed ones
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
35
Recommendations
• Take benefit of experiences, benchmarking and
proper modeling of key techno-economical factors
• Focus on consolidated migration steps and
technologies with multiple services domains
• Adapt charging to power of technology and
market intelligence
!! Which convergence will happen ?
Combination Driven by Market, Economy of scale
and Competition !!
Phuket, Thailand, March 2011
ITU - Trends on Convergence - OGS
International
Telecommunication
Union
36
18