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International Telecommunications Union
Convergence
Telecommunications
Forum
Business Challenges and Threats
Amman, Jordan
16 July 2002
Convergence
Business Challenges and Threats
Khalil ABURIZIK,
ITU Arab Regional Office
Email: [email protected] Web: http://www.itu.int
http://www.ituarabic.org
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Agenda
The new Telecom Market
The trend is Convergence
The platform is IP
The strategy is Alliance
The model is Services
The future is Mobile
From dot.coms to dot.gones
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The State of the Market
o
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 fullyprivate, 3 are partially private, 1 is state-owned
o
Independent regulators
• There are currently 115 independent regulators
(only 13 in 1990)
Selected Trade Principles
o
Market access
• Access to foreign market on reasonable, nonburdensome terms
• Access to telecommunication transport
networks
o
Transparency
• Rules of the game clear for all players
o
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
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Telecom Reform: Creating independent regulators
115
104
Regulatory agencies,
world (cumulative)
93
85
74
55
42
26
13
30
33
16
1990 1991 1992 1993 1994 1995
1996 1997 1998 1999 2000 2001
Source: ITU World Telecommunication Regulatory Database.
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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
Fully/partly private incumbent
Other private operators
No private operators
Competition
• Majority allow mobile & Internet
competition
• De facto competition in international &
local services
o
Mobile
• Surpassing fixed
o
2%
13%
19%
Globalization
• Operators
• Multilateral agreements
• Services
By
telecom
revenue
By
country
Status of 57%
telecom
privatization
2001
85%
24%
“Most countries have initiated a reform process. Still, much fine-tuning remains to be done.”
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Getting the recipe right
o
Assessment of telecom market and
telecom development is based on
three essential ingredients:
•Competition
•Private sector participation
•Independent regulation
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Global Tele-Economy: Revenues
US$ Billion
Services
Equipment
1600
1400
1200
290
1000
1110
1010
920
740
700
260
230
210
670
530
490
410
200
110 110
390
400
160
130
130
460
600
180
610
800
310
335
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 2000 2001 2002
Source: ITU
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“Old economy” and “New economy”
Networks: What’s the Difference?
“Old economy” network
o Hybrid analogue/digital
o Circuit-switched
o Highly regulated
o Priced per minute
o Distance-sensitive pricing
o Generally state-owned and
operated
o Accounting rate system means
cash flows from net traffic
generating to net traffic
receiving countries
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o
o
o
o
o
o
o
“New economy” network
All digital
IP (packet-switched)
Largely unregulated
Priced per megabyte
Distance-insensitive pricing
Generally privately-owned and
operated
Peering and transit system
means cash flows from net
traffic receiving to net traffic
generating countries
for
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.
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The Trend is Convergence
Convergence 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
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The Platform is IP
Rapid Evolution in Several Platforms
Fixed 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)
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The Strategy is Alliance
No 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
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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
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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
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Why Change
the 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.
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E-Business Drivers
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.
o
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We found the missing link:
It’s mobile communications
2,500
Telephone subscribers & internet users millions
97 countries have
more mobile than fixed
phones
2,000
1,500
1,000
500
Fixed
Internet
Mobile
0
1982
85
88
91
94
97
2000
2002:Mobile
03 surpasses
fixed
“Mobile has raised access to communications to new levels…
policy-makers must look to mobile as a way of achieving social policy goals.”
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One gap closes, another opens up
Total telephone subscribers
Per 100 inhabitants
International Internet
bandwidth, Per capita, 2001
100
bps per inhabitant
Advanced
Advanced
1'634
x112
10
x171
Emerging
Emerging
112
1
LDC
LDC
0.1
1991 1993 1995 1997 1999 2001
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0.16
x10’327
Jordan, Arab Countries and the World
15.5%
17.1%
Selected ICT Indicators
18%
17%
14.4%
16%
15%
12.6%
14%
13%
12%
11%
World
Arabic Region
Jordan
8.2%
10%
7.2%
7.5%
9%
8%
Internet Hosts
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5%
3.3%
4.1%
6%
4%
1.7%
3%
2%
1%
0.0%
0.0%
2.3%
4.1%
5.3%
7%
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0%
Internet Users
PC
M obile
for
Telephone
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.
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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.
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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
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Mobile Commerce Services
Security Services
•Access Control
•User Authentication
•Digital Signatures
•Non-repudiation
•Data integrity
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The dot.com euphoria
What Happened to the New E-economy?
o
o
o
o
o
o
o
o
Building market share and dominance was vital.
Long term future was justification for high share prices.
Cash and profits were secondary.
Technology used as a business rather than enabler.
Unlimited cash injections from Venture Capitaists VCs
and Initial Public Offers IPOs.
Business models too complex for VCs and investors.
Having an Internet Strategy was the guaranteed
component for success.
More than USD 3 trillion lost when the bubble burst.
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The dot.com euphoria
That was
bricks and mortar to
bricks and clicks to
clicks and clicks to
bricks and clicks
Can these pitfalls be avoided?
Does this affect e-commerce growth?
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Reinventing Telecoms
Thank
you,
See you at:
www.itu.int
www.ituarabic.org
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