By
Huma Abid
Assistant Director (Strategy
& Development Division

FTTX, 3G & 4G services, even up coming 5G marks a new era
of Broadband Band - several new trends are emerging

Telecom shifting to value addition - VAS sweeping revenues of
telecom industry
1.
2.
3.
4.
5.
Definition of VAS
Emergence and Evolution of VAS
The Shape of Telecom Market
Need for Regulation
Platforms For VAS

Defining VAS





WTO
FCC
TRAI
Basic Services eaten up by VAS
Points to Ponder

In its simplest and broadest terms, a “value-added
service” is a telecommunications industry term for
 non-core
services or,
 all services beyond the standard voice call service offering
(“basic service”) or,
 Conceptually, value-added services add value to the standard
service offering or,
 Stand alone in terms of profitability and/or stimulate
incremental demand for core service(s)
 an additional service for which subscribers pay extra
 Do not cannibalize basic service unless clearly favorable

World Trade Organization
Value-added telecom services are telecoms for which suppliers “add
value” to the customer's information by enhancing form or content or
by providing for storage and retrieval.

FCC
“VAS” is an “information service,”- categorized/ defined as:
“The offering of a capability for
generating, acquiring, storing, transforming, processing, retrieving,
utilizing, or making available information via telecommunications,
and includes electronic publishing, but does not include any use of
any such capability for the management, control, or operation of a
telecomm system or the management of a telecom service”


TRAI
Value Added services are the enhanced services, in the nature of noncore services, which add value to the basic tele-services and bearer
services, the core services being standard voice calls, voice/non-voice
messages, fax transmission and data transmission". (press information
Bureau 2010)
VAS today - Basic Service Tomorrow
 VAS
has a certain time dimension associated with it.
 Value-added service today can become a basic service when it
becomes



sufficiently commonplace
widely deployed
no longer provide substantive
differentiation on a relative basis,
i.e., the great majority of users have it.
VAS has Time Dimension Associated With It

anticipated a decade ago
Traditional Voice: The Voice only service
may someday become just one more
value-added service riding on a broadband
platform.
 Traditional TV: The Delivery of audio and video over the
Internet may substitute for, and in some cases replace,
traditional broadcast and multi-channel video (cable,
satellite, IPTV) services.


And it’s a Reality today…
The Basic Voice Telephony and Traditional TV are
evolving to be just a VAS riding on BB Platforms
 Brief
History of Telecommunication
 Evolution of VAS
 Forces Driving Evolution of VAS
 VAS in the Telecommunication Services Landscape

Samuel Morse :- electrical telegraph – 1837

Alexander Graham Bell :- the telephone – 1876


Bell Telephone - 1877 - local telephone exchanges
AT&T -1885 - connected the local Bell companies

Telephone industry opened to competition-1894

Over 6,000 companies grew in ten years

AT&T became a regulated monopoly in 1913.


Initial years based on overhead wires connected to manual exchangesmost countries around the 1900s

Electromechanical switches appear -1930s replacing manual operators,
allowing dialing a number by subscriber/user

First telecom satellite launched - 1966

7 Regional Bell Operating Companies (RBOCs) established 1983

Telecom Act 1996 - Major overhaul of telecom law in 62 years.
 Allows anyone to enter communications business.
 Allows any communications business to compete in any market

2004/2005 a phenomenal change
 deployment of Broadband - FTTX and 3G, 4G Networks supporting
seamless and ubiquitous services in United States, Japan, and South
Korea.

Now in 2015 and beyond, in the words of Bill Gates, “The PC is the Phone
and Phone is the PC”
Evolution of VAS
 The
usage of the available VAS services can be
seen in the graph.
Source: Telecommunication Handbook
 The
Shape Telecom Market Today
 Forces Driving the Telecom through 2015
 Future of Telecom Market
 Suggestions for Better Survival of SPs
 Impact of VAS on Market Structure
 More
change in the last 10 years than the
previous 100
The way in which the world communicates has changed
more in the last decade than in all previous history.
 The
mobile migration
Year
No. of People having access to telephone
4Q of 1800
Invention of Telephony
1999
1 out of 6 people in the world had access to
Telephony
2009
7 out of 10 People in the world had mobile
Source: IBM Report ‘Telco 2015’



Past decade - Internet access and connectivity shifted from dial-up to
broadband i.e Higher data speeds through Digital Subscriber Line (DSL), cable
modem and fiber, BB wireless access technologies
Today, communications fragmented across online services (VoIP, peer-to-peer,
social networking, e-mail, instant messaging, blogs, forums, wikis and more)
and telecom services (fixed and mobile voice, SMS, MMS).
Non-traditional communication services in advanced markets grown overall,
outgoing call minutes from traditional telecoms have remained relatively flat.
France (2005 to 2010)
Call Minutes
Fixed & Mobile
OTTs*
2005
190 bn
303bn
2010
207 bn
942 bn
% Increase
9%
211%
Source: IBM Report ‘Telco 2015’,

OTTs include VoIP, peer-to-peer and instant messaging
Challenge for the industry- devise a way to better monetize this massive
growth of OTTs

Toward the end of the last decade, growth of mobile
broadband was enormous
Aggressive
Pricing
Pay as you
go option
Customer
Adoption
of BB
Attractive
Bundled
Packages
All u can
eat
Bundle

With flat tariffs, costs no longer match revenues for
delivering an ever-increasing amount of data over a
network designed to support narrowband voice and
lightweight download, Web browsing and e-mail.
Revenue and traffic volumes are disconnected as
telecom becomes more data/connectivity-centric.
 Historically, traffic and revenue tracked along the
same path.
 Past ten years- divergence disassociation of revenue
& Traffic a major concern

Reduction in capital costs- telecom providers are
turning to network outsourcing, infrastructure
sharing,
 Even amongTier-1 providers such as Vodafone.

Outsou0rced

Vodafone UK (2009)
O&M of 2G& 3G
Outsourced
Ericsson for

France Telecom
Management

Number of outsourcing deals rise from six (6) in 2004
to 90 in 2008.
NSN Network

Although increases in mobile Internet usage and
changing face of communication offer a glimmer of
hope – along with a host of operational challenges –
the telecom industry faces some serious questions:


Where will future growth come from?
How will the industry evolve?
These uncertainties reveals four contrasting scenarios depicting
What the industry could look like five years
from now..
 Reduced
consumer spending leads to revenue
stagnation/decline.
 Service providers in developed markets not
significantly changed voice communications/
closed-connectivity service portfolio.
 Not expanded horizontally or into new verticals
 Investors’ loss of confidence in the sector
produces a cash($) crisis- results in
industry/survivor consolidation
Cash Crisis
Industry Consolidation
Different Profile Business: Under a prolonged
economic downturn and inconsistent financial
recovery, investors force the providers to
disaggregate assets into separate businesses with
different return profiles. Retail brands emerge to
collect and package services from disaggregated
units.
 Connectivity sold to App providers: Service
providers look for growth through horizontal
expansion and premium connectivity services sold to
application and content providers

Inconsistent Economic
Recovery
Disaggregate Business for
different Return Profiles
Providers consolidate: Providers cooperate and
create alliances to compete with OTT players and
device/network manufacturers that are extending
their communication footprints.
 Focus shift to selective verticals: Mega-carriers
expand their markets through selective verticals
(e.g., smart electricity grids & e-health) for which
they provide packaged end-to-end connectivity
solutions.
 Premium Network Service Portfolio by Telco: Telco
develop a portfolio of premium network services and
better- integrated digital content capabilities to
deliver new experiences.

Providers Consolidate to Compete OTT Players
Mega Carriers expand their market to provided end to end solution
Telcos develop Portfolios of Premium Network Services
 Barriers
between OTT and network providers blur
as regulation, technology and competition drive
open access.
 Infrastructure
providers integrate horizontally to
form a limited number of network co-operatives
that provide pervasive, affordable and
unrestricted open connectivity to any person,
device or object, including a rapidly expanding
class of innovative, asset-light service providers.
Barriers b/w OTTs and
Network Operators Blur
Infrastructure providers
provide affordable connectivity to any

Current growth model - based on an ever-expanding
customer base, the industry is likely to experience
flat or declining revenues

Return path to stronger growth - industry needs to
act collectively

to create the conditions necessary for the more dynamic
and profitable scenarios

They can begin to accomplish this through greater
global industry cooperation on common capabilities

Platforms to improve competitiveness with global
OTT providers.
 The
role of service providers can be enhanced
in adjacent vertical markets, enabling new
business models in health, smart grids,
transport, retail, banking and more.
 Further
growth can be achieved through
persistent, open connectivity for any person,
object and a multitude of connected devices
by stimulating third-party innovation and
leveraging customer and network insights to
deliver new experiences that help to
accelerate the evolving digital economy.
•
•
Horizontal Market layers have blurred
Neighboring market layers have converged
Network
Technology
Changes have
allowed VAS
Providers to move
upstream
Search for
enhanced
margins have
driven carriers
further down
the value chain
VAS
Entry of competitors
from neighboring
markets e.g,
broadcasting,
content, software


Why Regulations
China Case Study On Reforming The VAS Policy for
re-normalization of the Market
 Lapse in the Regulatory System
 Reasons for the failure of the earlier policy
framework
 VAS Challenges to China compared to US
 Cleanup of Industry
 Two
Roles of Regulation in traditions VAS
Market
1.
2.
Maintain boundary between the fully
liberalized VAS market and the
partially/less liberalized basic services
market
Regulate contractual relationship between
stakeholders



China went through a process of reforming the VAS Policy
for re-normalization of the Market
This was based on the complaints of hundreds of customers
about
 misleading practices,
 unfair pricing,
 inappropriate content and
 illegal behavior,
Many companies received administrative punishment from
the Ministry of Information Industries (“MII”), acting as
telecommunications supervisor, and had their contracts
terminated by the basic telecommunications carriers.

Re- Normalization of Market: Corrective actions
have, for a time, re-normalized the market; however,
the VAS regulatory framework, and especially its
shortcomings, has attracted widespread attention.
This hassled to the need for the development of a
new policy better suited to changing circumstances
and the evolving marketplace.

Lapse in the Regulatory System:
The MII is limited both by
the absence of an effective supervisory mechanism and
 the absence of an unambiguous and explicit regulatory
authority.


This caused difficulties in the operation of the
regulatory mechanism as well as with the healthy
functioning of competition and collaboration in the
VAS market.

Minimal Regulations: At that time, the VAS market in
China was in confusion, with minimal regulation,
which has resulted in a variety of consumer abuses,
and in the effective regulation of VAS entities being
shifted largely to the carriers, which are also in many
cases their competitors.

Minimal Intervention of Authority: By large, China’s
governmental authorities have not directly
intervened in value-added telecommunications in the
daily conduct of operations, so the basic telecom
operators have been acting in the de facto role of
manager of value-added service providers, and
directly control their survival.
 Standardizing
Behavior of Basic Operators:
In order to realize fair competition between
value-added enterprises and basic telecom
operators, and to prevent basic telecom
operators from squeezing out the value-added
enterprises, it will require standardizing the
market behavior of the basic operators

Annual Inspection: From 2005 onwards, the focus of VAS
regulation has shifted to the service providers’ qualifications and
operations supervision, regarding which the MII mainly adopted
annual inspections to eliminate unqualified service providers and
made them take corrective measures.

Technical Standards: Meanwhile, the MII’s administration of
service quality gradually shifted to technical standards.

Harmonization of SMS: An important initiative was in July 2006,
when it released the "Notice of MII on adjustment and
harmonization of short message services access code" to adjust
and unify SMS and other services’ access code.

Clean up: From the last half of2006 into 2007, the MII also
launched clean-up activities in the market, with a focus on
enforcing the administrative laws, and regulating market order.
 Delivery
Platforms for VAS
 Latest Developments and trends in VAS Platforms
 MVAS
are mainly based on three different
delivery platforms:



SMS,
interactive voice response (IVR)
Wireless Application Protocol (WAP) Portals*
 Each
VAS has its own characteristics and
relates to other services in a unique way.
*WAP is specialized version of web browsing for mobile handsets.
Delivery Entertainment
Platforms
SMS
1.
2.
3.
4.
5.
6.
IVRs
1.
2.
WAP
Portals
1.
2.
3.
4.
Alerts & News
Commerce
Social VAS
SMS
Ringtones/C
RBT
Customized
Wall papers
Animations
Quiz
Jokes
1.
1.
Mobile
Banking
Ticketing
Travel n
Holiday
Bookings
1.
Religious
Chats
Music On
Demand
1.
2.
Cricket/Matc
h alert
News
Astrology
Personality
Tests
Banking Info
Travel
alerts/details
Astrology
Personality
Test
Mobile
Banking
Ticketing
1.
Video Clips
Mobile
Games
Mobile
Themes
Mobile
Radio
1.
Movies
related Info
Stock
Portfolio
Messages
News Alert
1.
Mobile
Banking
Ticketing
Travel &
Holiday
Booking
1.
2.
2.
3.
4.
5.
6.
2.
3.
2.
3.
1.
2.
2.
3.
2.
2.
3.
4.
5.
Enterprise VAS
Location 1.
search
Advertise
ment
2.
3.
4.
5.
Pull on Short Codes
for Content, Voting,
information
Push for Advertising
LBS System
Enterprise IM
Group Messaging
Astrology 1.
Services
Voice
2.
SMS
3.
IVR Based Contact
centers
Self Help Counters
Voice Portals
Mail
Mobile
Greetings
Dating,
Chatting,
Blogging
Infotainm
ent
Messeng
er
LB Info
Internet Mobile
Email
Mobile Calendar
Access to Internet &
Core Business
Applications
Mobile VPN
Push Email on Many
Devices (e.g.
Blackberry/ Wireless
email
1.
2.
3.
4.
5.
6.
 The
VAS cloud Platforms with
Integrated Service and Multi- Vendors managed
services :
 saves
millions of dollars for vendors
 migrate almost 85 % of the services from physical
servers to virtualization environment
 Reduce Hardware numbers and energy consumption
to save Total Cost of Ownership (TCO)
 It's a well pre-integrated service, has openness. It
has Unified O&M and professional tools to improve
maintenance efficiency.
 constant service innovation like industries to evolve
to digital service cloud
Orange Spain Facing High VAS TCO Challenge
196 services from
different vendors
1184 servers from
different vendors
High hardware maintenance cost
Many servers will be EOL
43