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Urgence and Convergence

Heavy Lifting Analyst Notes
Heavy Lifting Analyst Notes
Heavy Lifting Analyst Notes

Equipment vendors are all fired up about fixed-mobile convergence, and a survey by Heavy Reading has found that many service providers are buying in to the idea (see Fixed/Mobile Convergence Ramps Up). Almost nine out of ten of the 110 respondents to our service provider survey said that FMC would eliminate the border between fixed and mobile services over the next decade. And nearly half the respondents said that FMC was now a “top strategic priority” for their company.

What are these companies thinking? The basic proposition runs something like this.

First, revenue from wireline telephony is in decline and is migrating to wireless. Wireline network operators therefore need a new convergent proposition to slow the migration and at the same time create stickier and broader bundles.

Second, customers (especially enterprise customers) seem to like the convenience of converged service offerings that might enable them to do away with a tangle of handsets and software, not to speak of the wires that go with them – and save money at the same time.

Third, cellular mobile services, especially 3G service providers, can’t do everything themselves, so even cellular providers stand to benefit from FMC.

Enter, stage left, a bevy of technological white knights: UMA, IMS, WiMax, WiFi, and a dozen other standards that will allow service providers to offer multimodal handsets able to connect to any suitable network, not just cellular, and to deploy IP-based platforms that allow them to eliminate the distinction between wired and wireless applications in the core of the network.

Everyone, it seems -– vendors, service providers, and customers – is happily converging on the same idea.

Yet there is plenty that could prevent this appealing vision from being realized. FMC is a highly complex idea, and the devil is all in the detail.

Here are some of the major barriers:

  • Organizational rivalries: Respondents to our survey identified this as the biggest barrier, and it’s especially problematic for incumbent telcos that own both a wired and wireline subsidiary. Finding a way to break down this barrier will be a number one priority, since – as the survey also found – incumbents probably stand to gain most from FMC.
  • Regulation: This is another problem that primarily affects incumbents, which must persuade rulemakers that convergent offerings will not extend their dominance of the local access market into the wireless space.
  • Customer demand: Many service providers believe that customers will love the convenience and lower prices implied by convergence, but the evidence for this is mixed. In particular, convergent offerings will need to be very compelling in the consumer space, where conventional cellular phones have built powerful brand loyalties and appeals based on price may fall on deaf ears.
  • Existing fixes: Our report looked at what service providers have done already in the converged service area, and found plenty of pre-standardized solutions that are already winning customers. Some, like iPass, are building strong businesses in the enterprise space without waiting for the full-on convergence vision to be realized.
  • Wireless substitution: Substitution of fixed by wireless services is already a major issue in telephony markets, and emerging 3G standards, notably 1x-EVDO and HSDPA, threaten to extend substitution into data services. Advocates of FMC must demonstrate that convergence delivers real benefits over straightforward substitution.
  • Technology, especially interoperability: In our survey, we found that service providers were sanguine about technological barriers. Yet in interviews with both vendors and service providers, we found there was plenty of uncertainty, especially about interoperability (with a particular concern here about the central role of SIP in FMC) as well as about support among handset vendors for multimodal devices.

None of this is to say that fixed-mobile convergence isn’t going to happen. Six out of ten respondents to our survey agreed with the proposition that, within a decade, the first link in almost every network connection will be wireless – though not necessarily cellular wireless. And there are indeed good reasons to believe that nearly all networked applications will routinely and automatically run on both fixed and mobile platforms in the medium to long term, because it’s in the clear interests of both businesses and consumers.

However, the barriers we identified here suggest that service providers will need to take a step-by-step approach to FMC. Full-blown visionary strategies with vaguely defined marketing will fail, just as similar approaches have failed before. In particular, it’s not enough for providers simply to build the capability for IMS-based multimedia applications across the fixed-mobile boundary and hope that this will automatically create a market. Instead, they must mix sharply-focused ad hoc approaches like those already winning customers in the enterprise space with a flexible, modular approach to technology deployment. That way, they can be winners in both the near term and the longer term.

One way or another, FMC is coming. But it’s no panacea. As with many big ideas before it, deployment must be based on hard-headed business cases, not a “build it and they will come” mentality. — Graham Finnie, Senior Analyst, Heavy Reading

For more on this topic, check out the Heavy Reading report: Fixed-Mobile Convergence Reality Check.

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