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taBle oF contentSIntroduction ................................................................................................2

Changing Revenue Streams ........................................................................2

Shift in the Competitive Landscape .............................................................3

Value Chain ................................................................................................4

The Future is Now .......................................................................................4

Business Transformation Starts with the Network ........................................4

Policy Everywhere .......................................................................................5

Key Policy Considerations ............................................................................7

Tekelec’s Policy Everywhere Framework ......................................................8

Conclusion .................................................................................................10

PolIcyeverywhere:A STRATEGIC IMPERATIVE FOR DIGITAL LIFESTYLE PROVIDERS

2

IntroductIonA perfect storm – the convergence of universal broadband access, virtually unlimited

content and smart mobile devices – has permanently altered the telecommunications

market. The introduction of the first iPhone was clearly the tipping point. In the ensuing

five years, virtually every aspect of the industry has been radically transformed – revenue

streams, business models, and value chains. To remain relevant in this rapidly changing

environment, operators must address critical challenges to create new business models and

reinvent themselves as digital lifestyle providers.

changIng revenue StreamSVoice has long been the cash cow for global operators, but it has peaked in many

developed markets. Revenues are declining and predicted to drop below the 60 percent

mark globally by 2013.1 Messaging, which has been a revenue engine for the last

decade or more, is expected to increase globally at a compound annual growth rate of

three percent over the next five years.2 Short message service (SMS) remains the king of

messaging; however, it has evolved little over the last several decades. New IP message

services like iMessage and WhatsApp are beginning to attract consumers’ attention,

particularly those with smartphones. As the IP messaging phenomena takes off, SMS

messaging revenues will decline.

Data access is still a growth engine for operators and is helping compensate for the decline

in voice and messaging revenues. In major markets, data demand is doubling each year,

but margin pressure is intense. The expense of building network capacity to handle the

increasing load threatens to offset revenue growth driven by data access. And, at best,

operators will only have three to five years to capitalize on data access before it too reaches

its peak, and overall operator revenue curves begin to decline.3

Given the impending decline in voice and messaging revenues and downward pressure

on access profits, operators need to be developing plans now to stake out new revenue

streams. Analysys Mason predicts that mobile operators in developed countries could run

out of profit in the next two to four years if they don’t change their business models.4

Clearly, traditional telecom services – enabling conversation and messaging and moving

bits from one point to another – will not sustain long-term growth.

Given the impending

decline in voice and

messaging revenues and

downward pressure on

access profits, operators

need to develop plans

now to stake out new

revenue streams.

1 Chetan Sharma, “Operator’s Dilemma (and Opportunity): The 4th Wave,” 2012.2 Informa Telecoms & Media, Press release: SMS will remain more popular than mobile

messaging apps over next five years, May 29, 2012.3 Chetan Sharma, “Operator’s Dilemma (and Opportunity): The 4th Wave,” 2012.4 Tellabs/Analysis Mason, “End of Profit, “February, 2011.

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ShIFt In the comPetItIve landScaPeCompetition in voice, messaging and access has been largely limited to telecom

incumbents because of the tremendous investment required to build and operate the

network infrastructure. The pre-iPhone telecom industry was a rigid, vertical structure

suited to a relatively monopolistic market. Operators controlled the services, applications

and even devices that rode their networks.

However, the “walled gardens” in which operators have operated for decades

are crumbling. The shift to mobile broadband networks has opened the door to a

legion of new competitors – device makers, media, social networks, and application

providers – all from outside the traditional telecom space. Unlike telecom operators,

these nontraditional competitors aren’t burdened by maintaining a massive network

infrastructure to support established service offerings. They can shift their strategy at

will to adjust to market dynamics. From a consumer perspective, the advent of fresh

competition has opened up new, third-party communication channels like Skype, Joyn

and FaceTime, especially for smartphone users. Global smartphone penetration is

expected to reach 39 percent by 2016, which means that over one-third of mobile users

will have access to over-the-top (OTT) services.5

5 mobileSQUARED, “Over-the-Top (OTT) Services: How Operators Can Overcome the

Fragmentation of Communication,” August 2012.

Access Revenue Growth Curves

Figure 1. Mobile Access Revenue Growth Curves

Subscriber Penetration

Net

Rev

enu

e

0-25% 25-70% 70-90%

Japan

Austria

Finland

Netherlands

Italy

US

Germany

Greece

UK

FranceSpain

Sweden

China India

Indonesia

90%+© Chetan Sharma Consulting, “Operator’s Dilemma (and Opportunity): The 4th Wave," 2012.Russia

Mexico

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value chaInBecause they controlled the network and services, operators have become accustomed to

“owning” the customer relationship. With the arrival of the iPhone and the subsequent

growth in OTT applications and content, that’s all changed. OTT players have successfully

decoupled applications from the underlying infrastructure. Operators are losing their

relevance in the mobile data ecosystem as subscribers spend increasing amounts of

time engaged with OTT application and content providers. In the subscriber mind, value

increasingly lies in the applications and devices rather than the network that delivers

the content. That leaves operators in the difficult position of providing the resources

to drive bandwidth-intensive services but playing a smaller role in the application and

device revenue chain. Even more troubling, subscribers are building direct commercial

relationships with OTT providers and sharing large volumes of valuable, personal data.

the Future IS nowThe telecom market clearly has reached an inflection point. Vertically integrated business

models of the past are obsolete. How operators react to and maneuver in the new

telecom environment will define their success or failure over the next decade. They

can’t afford to be late to the game; mobile device and application providers already are

poised to capture their markets and customers. Those that delay “might find themselves

consumed by the powerful forces of the competitive markets and some relegated to the

dustbin of mobile history.”6

Operators must decide today what path they will take in the future. Will they be

relegated to utility providers, supplying the network infrastructure for third-party

application and service providers? Or, will they serve as enablers, providing a robust

network, application programming interfaces (APIs) and data that powers the most

useful and popular consumer applications and services? Or, will they retool their

business models and open their network for innovation to become digital lifestyle

providers, leveraging social media, entertainment, rewards programs, and mobile

commerce partners?

BuSIneSS tranSFormatIon StartS wIth the networkExisting networks were not built with the DNA to foster innovation and respond

quickly to dynamic markets to meet the demands of the connected world. To reinvent

themselves as digital lifestyle providers, operators will need to refashion their legacy

infrastructure into a highly evolved, completely software-defined network (SDN) –the

thinking network™. The thinking network is analogous to the human body. The memory

is the subscriber database. The language is the Diameter protocol, the central nervous

system is the new product category of Diameter Signaling Routers (DSRs), and the brain

is policy.

6 Chetan Sharma, “Operator’s Dilemma (and Opportunity): The 4th Wave,” 2012.

The telecom market

has clearly reached an

inflection point. How

operators react to and

strategize the new

telecom environment

will define their

success or failure over

the next decade.

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As operators transition

to digital lifestyle

providers, policy’s

complexion will be

transformed. The

majority of use cases

will not involve charging

systems at all, and the

number of enforcement

points will mushroom.

The thinking network self-organizes and self-determines responses to unprecedented

and unpredictable variables. It’s elastic and dynamically enables new services and content

in real time, anticipating subscribers’ preferences and behaviors. It “thinks” as a human

mind by processing new information with what it already knows, morphing and gaining

more intelligence as time, events and content are added.

Figure 2. The Thinking Network

PolIcy everywhereIn this intelligent network model, policy is the engine for innovation and differentiation.

Its role evolves dramatically from its current usage, expanding both in application and

scope. Early policy use cases have focused primarily on monthly quota and fair-use

management, which employ relatively simple logic that’s fairly easy to dimension and

scale. Those applications require little subscriber intelligence and involve interaction with

a limited number of core network elements, primarily gateways and charging systems.

As operators transition to digital lifestyle providers, policy’s complexion will be

transformed. The majority of use cases will not involve charging systems at all, and

the number of policy enforcement points will mushroom. Policy’s reach will become

pervasive, expanding beyond the boundaries of the core network to subscriber devices,

machine-to-machine (M2M) devices, cloud providers, and service delivery and OTT

Social MediaSites

Media OTT Apps

Web Content

On-DeckApps

MobileAdvertising

Carrier PublicCloud

Internet

Subscriber Dataas a Service

Policyas a Service

Identityas a Service

Chargingas a Service

OTT/Closed Proxy

Intelligent Control Layer

SDN Control

UnnassignedResources

VirtualizationManager

Liquid Network Stream Liquid Network Stream

OpCoWi�

RAN

RAN

OpCoWi�

Elastic CarrierTransport Layer

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Smart Devices

Service Delivery andOver-the-Top Platforms

Machine-to-MachineCloud

POLICY

Core Network

GGSN

PGW DPI

Figure 3. Policy Everywhere

With the ability to push policy control beyond the network core to its edge, operators

can develop creative strategies to:

• Optimize and personalize each subscriber’s experience. With context and subscriber awareness originating from the device, operators can create a service experience that’s tailored to each subscriber based on preferences, location, access network, device type, and network conditions. For instance, they can provide a temporary boost in content delivery quality to a customer streaming a soccer match, provide a relevant mobile advertisement, or inform the subscriber when a usage threshold is reached to prevent bill shock. Or, a service provider can zero rate social networking usage so it doesn’t count against the subscriber’s data bucket. Operators can offer service plans that guarantee bandwidth for certain high-value customers like corporate accounts, create fl exible pricing plans that match a subscriber’s preferences and budget, or allow subscribers to share one quota across multiple devices.

• Create lucrative, two-sided business models with third-party, OTT and cloud providers. Operators hold a number of valuable assets – QoS, security, billing relationships, subscriber profi les, context, usage, and device awareness – that can be used to create profi table commercial relationships. For instance, they can enable targeted, third-party advertising that leverages multi-screen channels and goes beyond traditional demographics to include user behavior analysis. Operators can offer identity as a service, enabling subscribers to use their network identity as a single-sign-on for third-party applications. Or, they can leverage the trusted relationship they’ve established with subscribers to provide secure, consolidated billing for OTT and

provider platforms. Policy will be defi ned centrally within an intelligent control layer

that is independent of the underlying network infrastructure and applied globally

across networks, devices and applications. It will intelligently orchestrate the subscriber

experience, leveraging network, subscriber, device and application awareness and

Diameter signaling routing.

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cloud applications. Another avenue is providing application and subscriber-specific policy and charging treatment for third parties such as guaranteed QoS, service-level agreement (SLA) compliance, quota and session management, and rating.

• Maximize resources and improve QoS. By leveraging policy’s ability to intelligently control network access and application utilization, operators can implement creative solutions to manage network congestion. Advanced Wi-Fi offload use cases based on preferential network access, subscriber tier or type, device, application, quota, or network conditions can be implemented to relieve congestion on licensed spectrum and improve subscribers’ data experience. For example, a device can be moved to the best available network to ensure that the subscriber application usage receives the best available QoS based on current network conditions. The impact of high-bandwidth applications can be minimized by offering subscribers incentives to shift their usage to a different time of day or less congested location. With advanced policy tools, operators can reduce the effect of the excessive signaling generated by “chatty” apps that constantly query the network. Radio access network (RAN) congestion can be mitigated by prioritizing individual packet flows based on subscriber profiles, near real-time and historical analytics. Moreover, by enforcing policy on the mobile device, operators can react quickly to application issues that may impact network performance by blocking “misbehaving” applications at the device – before they impact the core signaling network.

key PolIcy conSIderatIonSOperators need to consider their policy selection carefully as they plan for the digital

future. The architectural choices they make today will dictate their success or failure as

they transition to digital lifestyle providers. They need to factor in several critical criteria

when selecting a policy server. Delivering increasingly innovative and personalized

services and managing network resources at a more granular level requires a robust

policy infrastructure that includes:

• A user friendly graphical user interface (GUI) that enables service provider personnel – even non-specialists – to intuitively engage the system;

• System interoperability with support for standardized and non-standardized interfaces for quick and easy integration with other policy endpoints such as 3G/ LTE access gateways, content optimization systems, business support systems (BSSs), operations support systems (OSSs) systems, and deep packet inspection (DPI) solutions;

• A diverse menu of policy triggers to create advanced rules related to a host of factors such as subscriber tier, device and network type, network capacity, network congestion, application type, consumption, session duration, and time of day/day of week;

• Easy-to-use, integrated policy analytics tools that enable operators to understand traffic patterns and user and service behavior and use that data to rapidly create, deploy, and evolve services and adapt to subscriber behavior;

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• A broad array of use cases to monetize and manage mobile data growth across multiple access networks by leveraging an innovative, real-time subscriber profile repository;

• Proven scalability and reliability to meet the demands of escalating traffic, new service models, and increasing device and application data usage in the world’s largest networks ; and,

• Seamless integration with a Diameter-based, next-generation signaling architecture.

tekelec’S PolIcy everywhere Framework Tekelec extends the reach of policy management to devices, OTT applications and

business intelligence with its Mobile Policy Gateway, Application Manager, and Policy

Analytics products. Each product integrates with Tekelec’s market-leading Policy

Server to create a “policy everywhere” framework, which makes policy the brain not

only of the core network, but of the entire network extending all the way to billions

of devices. Extending policy to the network’s edge enables operators to evolve policy

beyond fair usage and tiered services to innovative services like subsidized or “toll-free”

data, opt-in mobile advertising, loyalty programs, and application-based plans with

partner ecosystems.

Mobile Policy Gateway

Tekelec’s Mobile Policy Gateway (MPG) extends policy directly to the device. The MPG

combines a standards-compliant access network discovery and selection function

(ANDSF) with dynamic network and subscriber aware policy management. It turns smart

devices into policy enforcement points, reducing the need for costly DPI and policy and

charging enforcement functions (PCEFs) in the network core.

By implementing Tekelec’s MPG, operators, can:

• Manage network congestion with intelligent Wi-Fi offload based on preferential network access, subscriber tier or type, device type, application usage, quota, or network conditions.

• Improve quality of service and extend device battery life by managing signaling traffic from chatty applications frequently attempting to communicate with the network.

• Secure devices and personal information by blocking malware and fraudulent activity.

• Identify upsell opportunities based on services in use, network conditions and subscriber preferences – and conveniently offer them in the application the subscriber is using.

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aPPlication ManaGer

The Application Manager connects Tekelec’s Policy Server and Subscriber Profile

Repository to service delivery platforms (SDPs), third-party OTT applications and native

OTT applications. It converts web-based protocols (LDAP, SOAP, XML, HTTP, etc.) to

Diameter, allowing applications and SDPs to know current subscriber activities.

This single point of control allows service providers to create two-sided business models

with OTT, cloud and third-party application providers.

With Tekelec’s Application Manager, service providers can:

• Provide application- and subscriber-specific policy and charging treatment, such as guaranteed QoS, SLA compliance, quota and session management, and rating.

• Insert targeted advertisements with native or third-party applications.

• Securely expose network application programming interfaces (APIs), protecting network and subscriber data.

Policy analytics PlatforM

Tekelec’s Policy Analytics platform gives service providers granular business and network

insight about how subscribers use and access services and applications. The intelligence

allows service providers to see how policies impact subscribers’ behavior and network

resource allocation so they can design new plans based on device, content, time,

application or network congestion. Policy Analytics can reveal, for example, that:

• A new handset model generates a 40 percent increase in data traffic through the social networking application.

• Video traffic doubles for subscribers who migrate from 3G to LTE devices.

• Subscribers who exceed data quotas for three consecutive months have a 75 percent acceptance rate when the device offers them a promotional rate to move to the next highest service tier.

• Bandwidth speeds decreased by 25 percent in congested areas for certain subscribers or device types improves the entire cell area quality of service by 40 percent.

These types of detailed findings allow service providers to create targeted tariff plans

based on subscribers’ usage, pricing and quality of service preferences – unlocking

intelligence buried in millions of policy event records. Policy Analytics gives service

providers dashboards, reports and multi-dimensional analysis tailored for network

operations, IT and marketing departments.

In addition, the platform’s policy-simulation tools give service providers new abilities to

test and evaluate the impact of new policies before implementing them in the network.

This type of network “safety net” improves rule creation and lets multiple departments

assess the effects of new policy rules.

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concluSIon The convergence of universal broadband access, virtually unlimited content and

smart mobile devices has created a perfect storm, which has permanently altered the

telecommunications market. As subscribers increasingly focus their spending on over-

the-top applications and devices, traditional telecom revenues are declining. To remain

relevant in this rapidly changing environment, operators must reinvent themselves as

digital lifestyle providers. To do so, they will need to refashion their legacy infrastructure

into a highly evolved, thinking network, in which policy is the engine for innovation and

differentiation. Its role will evolve dramatically from its current usage, expanding both

in application and scope. Policy’s reach will become pervasive, expanding beyond the

boundaries of the core network to subscriber devices, M2M devices, cloud providers, and

service delivery and OTT provider platforms.

aBout tekelecTekelec’s intelligent mobile broadband solutions enable service providers to manage

and monetize mobile data and evolve to LTE and IMS. We are the architects of the new

Diameter network, the foundation for session, policy and subscriber data management.

More than 300 service providers use our market-leading solutions to deliver cloud,

machine-to-machine and personalized services to consumers and enterprises. For more

information, visit www.tekelec.com.

acronymS uSed In thIS documentANDSF Access Network Discovery and Selection Function

API Application Programming Interface

DPI Deep Packet Inspection

DSR Diameter Signaling Router

GGSN GRPS Support Nodes

GUI Graphical User Interface

MPG Mobile Policy Gateway

OTT Over the Top

PCEF Policy and Charging Enforcement Function

QoS Quality of Service

RAN Radio Access Network

SDP Service Delivery Platform

SLA Service Level Agreement

SMS Short Message Service

www.tekelec.com

This document is for informational purposes only, and Tekelec reserves the right to change any aspect of the products, features or functionality described in this document without notice. Please contact Tekelec for additional information and updates. Solutions and examples are provided for illustration only. Actual implementation of these solutions may vary based on individual needs and circumstances.

© 2012 Tekelec. All rights reserved. The EAGLE and Tekelec logos are registered trademarks of Tekelec. All other trademarks are the property of their respective owners.

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