ITU-D Regional Development Forums 2010 on NGN and Broadband for the Arab Region “NGN and Broadband, Opportunities and Challenges” Trends on Convergence and Migration Leaps Cairo, Egypt, 13 to 15 December 2010 Oscar González Soto ITU Consultant Expert Spain oscar.gonzalez-soto@ties.itu.int Cairo, Egypt December 2010 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication Union 2 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…………? Cairo, Egypt December 2010 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. Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication Union 4 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS Telecommunication Union 5 Convergence profiles: trends 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 developed International economies Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS Telecommunication Union 6 Convergence profiles: trends 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% NGN on core and 30 to 70% on edge and access with IMS base) International Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS Telecommunication Union 7 Convergence profiles: trends 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: E2E IP Future profile driven by: Initial status, Market development, International Economy of scale and Operator Strategy Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS Telecommunication Union 8 Convergence profiles: trends - Most leading operators implemented IMS subsystems since 2007: >20 operational and few hundreds under pilot or planned -- Higher number of IMS started with fixed networks (mainly in EU) driven by the service convergence, followed by mobile networks (mainly in APAC) -Main implemented subsystems are: CSCF servers, HSS, BGCF, Voice Application Servers and Media Resource Functions - audio and video announcements, multimedia conferencing, text-to-speech (TTS) conversion, speech recognition, etc.- - Full functionality of IMS requires end to end IP that will enable innovative services and Reach Communication Suite (RCS) -- LTE with IP terminals will be a key driver of IMS and convergence growth at service level after 2012 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication Union 9 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 the occupancy Better utilization for a given GoS when larger systems (i.e.: +20%) By customers Density Quadratic decrease with coverage radio increase By Volume of purchasing Discount per volume in log scale (i.e.: up to 40%) Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 10 Union 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 Cairo, Egypt December 2010 International Telecommunication 11 Union 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 12 Union Cost reduction per technology evolution. Example for fixed BB residential access in EU [Source: Analysys Mason, 2010] Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 13 Union Agenda • Convergence • Convergence related questions • Dimensions and profiles • Key factors: Economies of scale • Market and Business trends per • category Technology and Business Leapfrogging Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 14 Union Business domains and trends Example of Value Added chain and operators movements to gain economy of scale and market Applications and Services Application Service Providers • Agreements with content providers and e-commerce Network nucleus • Agreements with content providers Cairo, Egypt December 2010 Metropolitan network Agreements and merging • Agreements with wholesale operators Local Access • Acquisition/merging of service providers • Development of new access loops and Unbundling Backbone Service Providers (BSPs) Internet Service Providers (ISPs) • New multi-service development • Agreements with content and application service providers Edge Access Providers (CAPs) Mobile Service Providers (MSPs) Established Service Providers (ESPs) • FMC ITU - Trends on Convergence - OGS International Telecommunication 15 Union 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 16 Union 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 Y1 Y2 Y3 Y4 -1e+08 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 Cairo, Egypt December 2010 International Telecommunication 17 Union ITU - Trends on Convergence - OGS 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 1e+08 Y0 0e+08 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 All Services (reference) -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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 18 Union 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 19 Union Agenda • Convergence • Convergence related questions • Dimensions and profiles • Key factors: Economies of scale • Market and Business trends per category • Technology and Business Leapfrogging Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 20 Union Technological alternatives at core Scenario A Circuit based Scenario B Packet based Managed Dark Fiber Lambda Bandwidth Multiservice ATM/FR/IP ATM VPN, IP VPN IP IP Ethernet ptp Internet Gbit access IP VPN LAN to LAN connection GigE,10/100BT GigE,10/100BT Ficon,Escon, Ficon,Escon, Fibre Ch.. ATM/FR ATM/FR IP IP Routing Routing SDH SDH Optical Optical switching switching DWDM DWDM equipment equipment Ethernet Ethernet GigE Optical Optical fiber fiber Physical Physical Infrastructure Infrastructure Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 21 Union 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS Telecommunication 22 Union 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 Cairo, Egypt December 2010 International Telecommunication 23 Union 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 24 Union 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 Cairo, Egypt December 2010 International Telecommunication 25 Union 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 26 Union 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 27 Union 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 28 Union 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 GSM Steps by developed countries Technology timed evolution NMT Migration strategy is strongly dependent on country opportunity, infrastructure and service maturity Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 29 Union Network Architecture towards NGN Mobile network steps/leapfrogging Current status for deployment of 3G networks and beyond as reported by 4G Americas organization (November 2010) Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 30 Union 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 Cairo, Egypt December 2010 Extension for new services domains + Services of IN, VPN and Mobile ITU - Trends on Convergence - OGS International Telecommunication 31 Union 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 Cairo, Egypt December 2010 Extension for new services domains + Services of IN, VPN and Mobile + Internet and video Distribution (triple play) ITU - Trends on Convergence - OGS International Telecommunication 32 Union Business Migration Leaps Extension for new customer types “staircase” for New Universal Telcos + Customers for end applications + Customers for new services New Universal Telcos ASPs 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 Net Specific migration and timeframe to be optimized for the International country context and regulatory conditions Telecommunication Cairo, Egypt December 2010 Union ITU - Trends on Convergence - OGS 33 Business Migration Leaps Revenue level (ARPU) Evolution of revenues with service domains ASPs 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 Net Convergence strategy is fundamental to grow in a competitive International environment Telecommunication Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS Union 34 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 Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 35 Union 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 • Take benefit of all economies of scale !! Which convergence will happen ? Combination Driven by Market, Economy of scale and Competition !! Cairo, Egypt December 2010 ITU - Trends on Convergence - OGS International Telecommunication 36 Union