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China Telecom Fujian: Empowering smart fixed broadband
operations
Key words: China Unicom, Fujian, fixed broadband
Abstract:
China Telecom Fujian (Fujian Telecom) provided the optimal Internet application
experience for end users and enhanced the ISPs' loyalty to China Telecom by creating a
new service model of "opening the network capacity and sharing the content to achieve
win-win cooperation." This is a successful practice of China Telecom's smart operation
strategy.
With the wide spread of broadband services, it is becoming strategically important for
China to develop broadband on a large scale. In 2011, Ministry of Industry and Information
Technology put forward the "Broadband China" strategy. China's State Council released
the implementation plan of "Broadband China" strategy on August 17, 2013, which
indicates that the broadband development has become a national strategy and that
broadband has been considered for the first time as strategic public infrastructure.
In response to "Broadband China" strategy, Fujian Telecom is replacing copper wires
with optical fibers. By the end of 2015, the urban areas of Fujian province (in southeast
coast of mainland China) will be entirely covered with optical fibers that provide more than
100Mbps bandwidth and the rural areas will be entirely covered with 20Mbps broadband.
On the one hand, the increased access speed provides better network experience and
promotes the enthusiasm of the broadband users. On the other hand, the increased
network speed in turn stimulates the development of better applications and services,
bringing new opportunities to the IT industry.
Since 2000, the Internet industry has been developing rapidly. Until now, the leading
companies in China's Internet industry have a tendency to become oligopolies. The rise of
Tencent, Taobao, and Sina brings groundbreaking changes to Internet services. In the
process, we see the cruel rule of the Internet industry: user first and survival of the fittest.
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Internet players continuously improve their services experience to win more customers
and players who cannot adapt lose their customers.
Though the survivors gain short term popularity, they still dare not relax their efforts.
These changes are well proven in the transformation from blog to microblog, the merger of
Tudou and Youku video websites, and the rise and fall of Kaixin (a social network site).
Innovation is the gene of Internet and good customer experience is the essence for the
survival of ISPs. This rule is also applicable to telecommunication operators. In the end,
can operators cooperate with ISPs to meet the challenges?
Two rifts on the broadband value chain
With the rapid development of the Internet, the one who can obtain more users is
considered the king of the IT industry. We can see from the fierce competition among
massive Internet App suppliers that users have higher requirements on user experience.
Traditional membership system can hardly maintain customer loyalty. The only way to win
and keep customers is to provide better services with excellent user experience. However,
"user experience" is not uniformly defined in different Internet application fields. For
instance, in terms of video services, better user experience means stunningly smooth and
clear HD video; in terms of downloading services, it means higher download speeds; while
in terms of online games, it means more stable connection.
However, considering the present value chain of the broadband, ISPs lack the
understanding of the actual user information and their innovation on the user experience
still focuses on the server-side.
For example, currently the major over the top (OTT) video websites in China provides
standard definition (SD), high definition (HD) and ultra high definition (UHD) videos
according to the assumption of broadband capacities at the user side.
In most cases, users have to manually choose the bit rate, so they hardly enjoy
optimal service experience. Therefore, with so many OTT websites competing with each
other, customer loyalty to an OTT website is fleeting and even a slight disturbance of
fluency can influence users to change to another OTT website. The download services are
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limited by the actual broadband capability of the user. If the access bandwidth is low, the
download speed is certainly limited to a low number. The user may stop downloading or
choose another downloading tool. Therefore, it is clear that most ISPs cannot effectively
optimize their service experience according to the users' actual demands.
From the perspective of broadband users, their enthusiasm for high bandwidth
services will diminish due to poor user service experience or we can say that broadband
users have a strong inertia. This kind of inertia can be vividly illustrated by the ubiquitous
"lock-in effect" in the Internet industry. "Lock-in effect" in the Internet industry is mainly
embodied in that any broadband product has its strong systematic features. If the market
has no uniform standard, it will be extremely costly for consumers to change the product
they are using. Consumers will not turn to new products unless the new ones are much
better than the old ones.
The practical experience of Fujian Telecom shows that "lock-in effect" is applicable to
broadband speeding-up. During the period of free speeding-up broadband experience
activity carried out by Fujian Telecom, users could increase their access speed by using
the intelligent speeding-up function of the E-surfing Broadband (a broadband service of
China Telecom). The results of the experience activity showed that most users kept their
original package after the free experiencing period and few users were willing to pay for
increased bandwidth. If we interpret the "systematic features" in the "lock-in effect" as the
broadband access of the user and "uniform standard" as the direct experience brought by
different bandwidths, then the "lock-in effect" tells us two facts: first, broadband users will
not blindly pay for broadband speeding-up; second, telecom operators can hardly find any
users who really need the increased bandwidth and are willing to pay for it.
From these two facts, we get two results: first, ISPs cannot obtain the actual network
capacities at the operator level, so when they launch new Internet service, they cannot
optimize their service experience according to the actual customer demands; second,
since broadband users cannot obtain better service experience, they refuse to choose
service of higher bandwidth. This phenomenon is embodied in the value chain like this:
from the perspective of ISPs, the situation of users' demand is as dismal as pitch darkness;
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but from users' point of view, most Internet services provide low-level user experience
service. These two rifts on the value chain directly lead to a vicious cycle.
On the broadband value chain, telecom operators act as the value delivers between
ISPs and the end users. This means how the telecom operators participate in the
cooperation between the upstream and downstream parties of the value chain is the key to
turning the broadband value chain into a virtuous cycle.
How to fill the rifts
Facing the two rifts on the value chain, Wang Xiaochu, President of China Telecom,
proposed a new working concept featuring de-telecom, marketization and differentiation.
Operators should be the leaders of smart pipes, platform providers, and participants in
providing network contents and applications.
"De-telecom" is proposed because the operation model of the telecom industry formed
in recent decades is extremely self-centered. The main service provided by the telecom
industry is broadband access. The broadband access services are monotonic. The
revenue of the telecom industry depends on the scale of users under this extensive
operation model. However, with the rapid development of Internet and endlessly emerging
new products nowadays, both telecom operators and radio & television companies who
are interested in the broadband market should give up the traditional telecom operation
model or they will end up becoming simple pipe providers. Under such circumstances,
de-telecom offers a strategic development approach for China Telecom: It must reject the
extensive operation model and change to adapt to new situations. Marketization and
differentiation are tactical requirements compared with strategic thinking of de-telecom.
Marketization requires activating the market dynamics and differentiation requires
product innovation to avoid price war. China Telecom positions itself as the leader of
intelligent channels to continue maintaining its current position in the industry, a platform
provider to create a good atmosphere from the upstream to downstream of the industry,
and a participant in providing contents and applications to create differentiated service and
to avoid becoming a pipe provider.
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Smart operation is another reflection of China Telecom's strategy. Smart operation
means creative and intelligent use of smart pipes to create new service models. Openness
and sharing of network resources is the key to smart operation. Fujian Telecom takes the
lead in implementing the strategy of "de-telecom, differentiation and marketization" and
creates an operation model of "backward speeding-up service model" This model
fundamentally gets rid of the self-centered thinking of telecom operators'. Through joint
innovation with ISPs, this model, featuring broadband value reification and speeding-up
experience visualization, fundamentally fills the rifts of the value chain.
The nature of the "backward speeding-up service model" by Fujian Telecom is to
effectively deliver the broadband speeding-up experience to the users and improve their
loyalty through accurate price positioning. To successfully implement the "backwards
speeding-up service model", we should first clarify the relationship among broadband
users, telecom operators and ISPs and create new service models. With the participation
of operators in the contents operation, telecom companies can use their understanding
and control of network resources to optimize Internet service experience.
Judging from the relationship among broadband users, telecom operators and
Internet services providers, ISPs are creators of the Internet value, users are beneficiaries
of the value and operators are value delivers. If we illustrate this relationship in a chart, the
broadband user is placed on the right side since they directly experience the services. ISPs
are on the left because they are the source of value creation who continuously delivers
Internet innovation into the value chain. Telecom operators are placed in between the two
since they provide broadband access for users and provide network pipes for ISPs. In this
relationship, the ubiquitous speeding-up model is like this: operators provide
comprehensive higher bandwidth to all users. This service model is called "forward
speeding-up service model". Telecom operators provide differentiated and reliable network
capacities to the ISPs to form a profit sharing model with them. This kind of service model
can be realized by providing differentiated network capacities to show the value of the
speeded-up broadband so that the value of broadband services can also be increased.
This kind of service model ISPs is called "backward speeding-up service model".
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"Backward speeding-up service model" requires operators to cooperate closely with
Internet services providers, open network capacities according to the actual demands, and
couple the Internet service demands and the actual network capacities to optimize service
experience, and deliver the optimized services to users. The improvement of user
experience increases the number of paying subscribers, enhances user loyalty to ISPs,
and helps Internet service providers obtain more loyal users.
However, traditional telecom operators focus on pipe building and bandwidth leasing.
They do not participate in contents operation and therefore lack understanding of the
demands of ISPs. Some services open to the ISPs are limited to proxy management of
data centers and leasing of ports and lines, but the key network capacities that are closely
related to telecom network and Internet services are not open to ISPs, such as end users'
broadband access capacities, link bandwidth, and network QoS, latency and jitter. In other
words, due to lack of understanding of pipe capacities, ISPs only provide uniform service
experience based on the basic network capacity. This means that when a users’ network
capability exceeds that of the basic network, the extra potential is wasted and unused.
Conversely, should a users’ network capability be less than the basic network capability,
they experience degradation in service quality. Under such circumstances, Internet service
experience cannot be optimized due to users' actual bandwidth and users are helpless
when the service experience is degraded.
A major difference between operators and ISPs lies in the service flexibility of creating
and scheduling of services. Operators provide broadband access to users and this service
is monotonous, so users often do not need networks with great flexibility. However, ISPs
face a great deal of demands from users, so their service update is much more frequent
than that of operators. If operators want to participate in providing Internet contents, they
have to satisfy the ISPs' demands of one-stop development, testing and operation of
services.
Facing these challenges, Fujian Telecom actively explores "operator-initiated network
speeding-up model" and cooperates with Thunder, the biggest download manager in
China. Fujian Telecom provides high bandwidth services to VIP Thunder and users of
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Thunder can enjoy a download bandwidth of up to 30Mbps. When the download is
complete or users shut down the Thunder, the high bandwidth is canceled. In this way, the
experience of high-speed downloading is successfully delivered to the users. Thunder and
Fujian Telecom will share the profits from the VIP membership fees.
Under this operator-initiated network speeding-up model, China Telecom does not get
direct profits from broadband users, but it gets shared profits by cooperating with Thunder.
Finally an all-winning situation is achieved.
Technical network support
To achieve the "operator-initiated network speeding-up model", Fujian Telecom joins
hands with China Telecom Ltd Beijing Research Institute and Huawei, which is presently
the network facility provider, to achieve the openness of network capacities. This process
includes two crucial actions: the first is to import the service demands of ISPs to the
network and the second is to transfer the service demands to network demands and adjust
the network capacities according to the service demands. In the speeding-up service of
Fujian Telecom and Thunder, these two actions are achieved respectively by the E-surfing
Byte platform and intelligent speeding-up system.
As the receiver of the Internet application demands, the E-surfing Byte platform has to
obtain the specific speeding-up service demands from Thunder's service system. As the
"converter" that converts service to network demands, the intelligent speeding-up system
should map Thunder's user policy to the network. To realize this, the intelligent
speeding-up system should first get user data from the Telecom network and develop
policies for user authentication and authorization, and network capability appraisal. Users'
network capacities determine the network policies and include the highest bandwidth of the
subscriber line, type of plan, and basic bandwidth.. In addition, another key network
component – Broadband Remote Access Server (BRAS) – receives the network policy
delivered by the intelligent speeding-up system and implements it. The specific process of
Thunder's speeding-up service is as follows.
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Assuming that user's original bandwidth is 4Mbps, after becoming the VIP paying user
of Thunder, the user can apply for "Surfing High-speed Download" service application.
Then the E-surfing Byte platform receives the request from the user, interacts with
intelligent speeding-up system to obtain the user's broadband ID and rights, and finally
obtains the actual capacities of the user. When the user meets the speeding-up conditions,
the speeding-up strategy is made immediacy and delivered to the intelligent speeding-up
system. The intelligent speeding-up system sends the user policy to BRAS for
implementation and finally the speeding-up process is completed. At present, the entire
process takes only two minutes.
When the download is complete or Thunder is shut down, the client side sends
instruction to the E-surfing Byte platform and the platform sends the user policy of disabling
speeding-up to the intelligent speeding-up system. The system delivers the instruction to
BRAS and the bandwidth returns to the original 4Mbps. Thus the entire process is
completed. The speeded-up 30Mbps broadband capacities cannot be used by other
applications.
Application scenarios
Thanks to Fujian Telecom and Thunder's speeding-up service, we see that the
opening of network capacities can visually provide the broadband speeding-up experience
accurately obtain profits from users. Although the operator has a large user group, the
internet market segments are also large with customers scattered all over the world.
Therefore, "operator-initiated network speeding up model" should be applied to more ISPs
with the cooperation model differing according to different types of services.
To apply this model to all types of ISPs, the E-surfing Byte platform and the intelligent
speeding-up system should be made compatible with all services from ISPs. Network
policy systems will not be limited to intelligent speeding-up system in the future. Besides
bandwidth control, QoS adjustment, traffic channeling and other network policies require
more powerful network servers for policy formulation.
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We should also realize that the services of ISPs are available on the Internet.
Operators must have intensive operation capability to support open Internet services. If
operation capacities of operators are scattered and localized, ISPs will be reluctant to use
the operators' network capacities. Therefore, Fujian Telecom is working with China
Telecom Ltd Beijing Research Institute to conduct a pilot program that integrates the
network capacities of China Telecom in various provinces hoping to find an intensive
operation method, provide integrated service of "access to the entire network" to ISPs, and
accelerate the opening up of operators' network capacities.
Summary
Through the "operator-initiated network speeding-up" model, Fujian Telecom has got
its first pot of gold. Since the launch of Thunder’s speeding-up service in August 2012, it
has won about 40 thousand users with the E-surfing high-speed download service. The
service contributed a revenue of over CNY10 million and enhanced customer loyalty. With
the increase of members, Thunder's Internet Data Center (IDC) in Fujian increased its
egress capacity by dozens of Gigabits, further boosting the revenue of Fujian Telecom.
Telecom operators inevitably participate in the Internet service operation by opening
up network capacities. Fujian Telecom sets an example for other operators by
implementing the operation model of operator-initiated speeding up. In the case of Fujian
Telecom, we can see that by identifying Internet service demands and network capacities
and opening up the network capacities to ISPs, we can maximize broadband value as well
as our profits. The "operator-initiated network speeding-up" model can effectively improve
user experience and improve customer loyalty, which perfectly fills the two rifts on the value
chain and promotes healthy development of broadband services.
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