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ARO- BDT – ITU Page - 1 for

Convergence Business Challenges and Threats

Khalil ABURIZIK, ITU Arab Regional Office

Email: [email protected] Web: http://www.itu.int http://www.ituarabic.org

Convergence Telecommunications

Forum Business Challenges and

ThreatsAmman, Jordan

16 July 2002

International Telecommunications Union


Agenda

The new Telecom MarketThe trend is ConvergenceThe platform is IPThe strategy is AllianceThe model is ServicesThe future is MobileFrom dot.coms to dot.gones

The State of the Marketo Increasing competition

• Around two-thirds of telecom subscribers now have a choice of operator

• More than 99 per cent of mobile and Internet subscribers now have a choice of operator

o Dominantly private-ownership• 19 out of top 20 top public telecom operators are

partially or fully private-owned• Of the top 20 mobile operators, 16 are fully-

private, 3 are partially private, 1 is state-ownedo Independent regulators

• There are currently 115 independent regulators (only 13 in 1990)


Selected Trade Principles

o Market access• Access to foreign market on reasonable, non-

burdensome terms• Access to telecommunication transport

networkso Transparency

• Rules of the game clear for all playerso Most-favoured nation

• Preferential market access granted to most favoured nation made available to all signatories

o National Treatment• Foreign service providers treated no less

favourably than domestic ones


Telecom Reform: Creating independent regulators

13 16

26 30 3342

55

74

8593

104115

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Regulatory agencies, world (cumulative)

Source: ITU World Telecommunication Regulatory Database.


The New Telecom World:Private, competitive, mobile & global

o Private• More than half the world has a

privatized incumbent operator; > 80% has some form of private participation

o Competition• Majority allow mobile & Internet

competition• De facto competition in international &

local services

o Mobile• Surpassing fixed

o Globalization• Operators• Multilateral agreements• Services 24%

19%13% 57%

85%

2%

Fully/partly private incumbent

Other private operators

No private operators

Status of telecom

privatization 2001

24%

19%13% 57%

85%

2%

Fully/partly private incumbent

Other private operators

No private operators

Status of telecom

privatization 2001

“Most countries have initiated a reform process. Still, much fine-tuning remains to be done.”

By countr

y

By telecom revenue


Getting the recipe right

o Assessment of telecom market and telecom development is based on three essential ingredients:

•Competition•Private sector participation•Independent regulation


Global Tele-Economy: Revenues

Source: ITU

390

410

460

490

530

610

670

700

740 92

0

1010

1110

110 110 130 130 160180

210 230 260

290310

335

0

200

400

600

800

1000

1200

1400

1600

1990 1991 1992 1993 1994 1995 1996 1997 1998 2000 2001 2002

Services EquipmentUS$ Billion


“Old economy” and “New economy” Networks: What’s the Difference?

““Old economy” networkOld economy” networko Hybrid analogue/digitalo Circuit-switchedo Highly regulatedo Priced per minuteo Distance-sensitive pricingo Generally state-owned and

operatedo Accounting rate system means

cash flows from net traffic generating to net traffic receiving countries

““New economy” networkNew economy” networko All digitalo IP (packet-switched)o Largely unregulatedo Priced per megabyteo Distance-insensitive pricingo Generally privately-owned and

operatedo Peering and transit system

means cash flows from net traffic receiving to net traffic generating countries


Internet Trends

Phenomenal Growth Projections in all Regions.

New Types of Alliances and Partners.

New Business Models and Revenue Streams.

Core Platform for Convergent Services.

Reduced Set-up Costs for Start-ups.


The Trend is ConvergenceConvergence is Breaking Industry and Service Barriers

Broadcasting Companies --> Voice and Network Services

Telecom Operators --> data network and financial services

Computing Companies --> Broadcasting (TV services)

Financial Institutions --> Data network access Services

Voice Services provided over data networks (VoIP)

Data Services over broadcasting networks (DVB)

Broadcasting services over data networks (WebTV, Radio)

Voice and Data Services over electrical power lines

TV Stations Using Web as another Distribution Channel


The Platform is IP

Rapid Evolution in Several PlatformsFixed Networks (dial-up, ISDN, Satellite, leased line)

Digital Mobile Data Services (GSM, WAP, I-mode)

Streaming Media (WebTV, VoIP, Cable Modems)

Household Appliances (TVs, Microwaves, Refrigerators)

Wireless Access (PDA + Mobile, Bluetooth)

Broadband (xDSL, DWDM, UWA, 3G Mobile - IMT2000) Power-line Technology For Internet Access

Fixed Mobile Convergence (WAP)


The Strategy is AllianceNo Single entity holds answer to puzzle, traditional carriers and operators are converging to provide the new services:

Broadcasting Companies + Access Providers = TV-based Internet access and e-tailing

Content Providers + Network Carriers = Distributed Content delivery and Hosting

Mobile Operators + Financial Institutions + Software Firms = Mobile e-Payments

Fixed Operators + Broadcasting Companies = Voice Services via TV Networks

Energy Companies + xSPs = Powerline Internet Access

Operators + Financial Companies = ePayment Solutions

And Small Businesses + Big Businesses =Survival


The Model is Services

1- Application Service Provisioning (ASP) Deploy, Host, Manage, Rent Access to Applications for businesses from a central location with security, availability and performance.

Issue: Finding the Right Position in the ASP Value Chain

1. Network Access Services (Network Connectivity)

2. Content Distribution Services

3. Community and Hosting Services

4. Business Productivity and Communications Solutions

5. Application Integration and Work-Group Solutions

Network --> Services --> Applications --> Content --> Portal


NSP - Strategies

2- Network Service/Access Provisioning (NSP) Reliable, low-cost, high speed access for Businesses and Consumers

Issue: Finding the model for reliable and affordable Internet Access to All.

1. Determine Appropriate Pricing Policy for Services

2. Take Advantage of New access Technologies

3. Forge Strategic Alliances with New Bread of Carriers

4. Migrate from Traffic to Content Delivery Services


Why Changethe rapid rate of change of technologies and its falling costs,

the convergence of technologies, services and industries and the process of globalisation,

the phenomenal growth of the IP networks (e.g. Internet) and the proliferation of pervasive computing,

the emergence digital wireless mobile data services and technologies (Bluetooth, WAP, GPRS and IMT2000), digital TV, voice recognition, Internet appliances and Broadband IP (xDSL, DWDM ) access,

the increase in mergers, alliances and powerful new players,

the breakdown of geographical, time and industry sector barriers,

are perpetuating the phenomenon of e-convergence and introducing new opportunities and challenges to developing countries.


E-Business Drivers

o Better Shopping Options, Price Comparison, Cost-effective and Rapid Market Expansion.

o Drive to Streamline Business Processes and Customer Demands

o Search for New Revenue Streams by moving up the value-chain as Profits Margins for Voice Traffic Declines.

o Operators Capitalising on Customer-base and Investments.


We found the missing link: It’s mobile communications

0

500

1,000

1,500

2,000

2,500

1982 85 88 91 94 97 2000 03

“Mobile has raised access to communications to new levels…policy-makers must look to mobile as a way of achieving social policy goals.”

Telephone subscribers & internet users millions

Fixed

Mobile

97 countries have more mobile than

fixed phones

2002:Mobile

surpasses fixed

Internet


One gap closes, another opens up

0.16

1'634

112

LDC

Emerging

Advanced

bps per inhabitant

0.1

1

10

100

1991 1993 1995 1997 1999 2001

Advanced

Emerging

LDC

Total telephone subscribers

Per 100 inhabitants

International Internet bandwidth, Per capita,

2001

x171

x112

x10’327


Jordan, Arab Countries and the World

Selected ICT Indicators

17.1

%

15.5

%

7.5

%8.2

%

2.3

%

7.2

%

5.3

%

1.7

%

4.1

%

0.0

%

12.6

%

14.4

%

3.3

%4.1

%

0.0

%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

16%

17%

18%

TelephoneMobilePCInternet UsersInternet Hosts

World

Arabic Region

Jordan


M-Commerce Drivers (1)

High growth rate expected due to lower deployment cost and speed of deployment.

Mergers and alliances between mobile operators, equipment manufacturers and service providers creating opportunities for new services.

Convergence to IP as platform is facilitating access to existing IP-based services through WAP and I-mode.

Problems of low speed on 2G platforms and limited WAP services will be resolved as migration from circuit-switched to packet-switched networks continues.

Migration from time-based tariffs to volume-based tariffs will create opportunities for IP-based services and content.

Security (SIM and PIN codes) on Mobile terminals (as PSEs) encourage secure e-payment solutions.


M-Commerce Drivers (2)

Falling prices for high speed processors and reduction in their sizes will transform mobile devices to powerful handheld computers.

Global Standards (ITU-T/ITU-R Recommendations) will enable global interoperability, create critical mass and reduce deployment cost.

Pre-paid services will provide low-entry cost for subscribers but might have negative impact on operator revenues as customer loyalty reduces.

These drivers will affect the business models for operators as voice revenues decline.

… But they also present new markets for innovative operators and service providers what can capitalise on the opportunities brought about by these changes.


M-Commerce Applications

Banking - Accounts, Statements, Bill payments and Fund Transfers

Payments - Credit cards, Micro payments and Pre-paid

Trading - Stock quotes, Notifications of events.

E-Government - E-voting and E-admin, E-payment

Retailing – Subscription and Direct sales

Entertainment - Interactive TV and Live Music


Mobile Commerce Services

Security Services•Access Control

•User Authentication

•Digital Signatures

•Non-repudiation

•Data integrity


The dot.com euphoria

What Happened to the New E-economy?

o Building market share and dominance was vital.o Long term future was justification for high share prices.o Cash and profits were secondary.o Technology used as a business rather than enabler.o Unlimited cash injections from Venture Capitaists VCs

and Initial Public Offers IPOs.o Business models too complex for VCs and investors.o Having an Internet Strategy was the guaranteed

component for success.o More than USD 3 trillion lost when the bubble burst.


The dot.com euphoria

That was bricks and mortar tobricks and clicks to clicks and clicks to bricks and clicks

Can these pitfalls be avoided?Does this affect e-commerce growth?


Reinventing Telecoms

Thank Thank you,you,

See you at:See you at:www.itu.int

www.ituarabic.org

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