CONVERGANCE

sponsored by

charitable beneficiary

t

napsho

yS Industr

: e c n e g onver her

V

bri

toget l l a t i ng

TT

C

Convergence: bring it all together

by Ian Scales, Managing Editor

Convergence has been a feature of the telecoms and IT environment for decades.

It works on many levels and can bring big benefits: cost savings, easier management and new applications and opportunities.

We wanted to find out if that old ‘convergence’ theme still resonates in the industry.

Our research proves that not only is convergence still a meaningful concept, it’s working harder than ever with the industry remaining enthusiastic about its benefits.

V T T

Read on to find out more...

Convergence has been a feature of the telecoms and IT environment for about as long as there’s been such an environment. It’s all to do with going digital. If you take, for instance, telecoms and media and then add IT to both of them, it’s a real game-changer because the differences between the sectors’ underlying technologies start to dissolve. As digital representations of information (voices, pictures and text) replace the concrete, analogue alternatives, it enables the underlying digital technologies to be re-used across the old boundaries and for information churning around in one sector to be manipulated in another.

That brings huge benefits and challenges: it tends to reduce costs, simplify the management of otherwise disparate and complex environments, allow the convergence of the separate businesses involved, generate scale and efficiency, and create new opportunities by marrying new functions such as allowing cameras and GPS to work together on a single device, for instance.

In this survey we’re setting out to compare and contrast different convergent impacts in the industry, all operating at different levels. Network services convergence, function convergence, retail convergence and network technology convergence.

They’re all interlinked and they all really relate back (when you boil it all down) to the increasing digitisation of information. So we took each category and asked similar questions for each. This survey aimed to find out if that old ‘convergence’ theme (as described above) is still resonant in the industry. Is it a saleable, marketable commodity (through to users or buyers), or is it such a commonplace that it is now just taken for granted?

Has it perhaps been so often exploited over the years that it fails to resonate at all?

As usual, we asked our own readers and viewers to participate. We don’t claim to be polling a scientifically valid cross section of industry people - our respondents are selfselecting. But their self-selection probably indicates that they are interested in the topic and that they’ve decided to share their time and thoughts - to express either guarded enthusiasm or restrained dislike of the topics or trends in question.

As it has turned out, the readers and viewers who have responded to our poll have not tired of the convergence pitch at all and remain enthusiastic about convergence at all the levels we’ve defined. Convergence is not only still a meaningful concept, it’s working harder than ever.

How important do you think the concept of ‘convergence’ is in telecoms?

01. As discussed above, the poll respondents are self-selecting so our bias is probably towards those who tend to be actively interested, tend to be collaborative and probably have at least a marginal interest in the specific subject.

So it was only slightly surprising that a convincing 69% of them thought convergence was very important, only 21% thought it just ‘important’ and a mere 10% took the “it’s all a bit overblown” option. We therefore declare that telecoms industry practitioners are overwhelmingly bought-in to the concept of convergence.

01.

0% 7700.0% 0% 6600.0% 0% 5500.0%

4400.0% 0% 3300.0% 0% 2200.0% 0% 1100.0% 0% 0% Very

TTV

important, it is driving Very im m ofpthoert efa ficniet, itsisanddriany ncie mim anpryovoem f en thtseinethffie cbuiesine ving ncss and impro today ies vements in the business today

Important, but only inte rnally. It Im meapns ort noathnint, g tobou utr ow onnly intern

ally. It me ans nothing to our own customers /subscribe rs

Not ve

Not veryryimportant at all. imp at all. Con ortant vergence is always happenin g

What, in your opinion, are the most important convergent trends in telecom today?

02. Convergence is having a real impact in several areas in the telecoms industry - we picked four of what we regarded as the most obvious examples of convergence and asked respondents to rank them in terms of importance.

We had a strong front-runner with Network Services Convergence, thought most important by close to half of our respondents; while Network Technology Convergence (where vendors and service providers simplify the network infrastructure, cutting out different network types, for instance) was conclusively dismissed as least important.

Functional Convergence (cameras and music players going into phones) was surprisingly only considered most important by 18.5%, with a strong cohort consigning it to second place (30%). Retail convergence was with a firm second in the ranking with 27% seeing it as most important.

Network se rvices conve rgence of vo technologie ice, data an s. A single, d network multimedia customers.

IP network delivered to Function co nvergence onto a sing le mobile d evice Network te chnology co nvergence single, man o f network la aged syste yers in one m Retail conv ergence of services at the comme rcial level

60% 50% 60%

0% 40% 5500.0%

50%

0% 4455.0% 30%

40%

0% 4400.0% 20% 0% 3355.0%

10% 0% 3300.0% 0%25 25.0% 0%

2200.0% 0%

30%

20%

10%

0%

1155.0% 0% 1100.0% 0% 55.% 00% 0% Most Imp ortan 1

t 2

Least Imp ortan

t

02.

Network Services Convergence

TT

TTV

At what stage of Network Services Convergence are the carriers and users at today?

V

03.

Fully converged (all Data, noPartially voice). converged (still Not some converged voice). - (services purchased and provisione 4% 71.40% 25.00%

80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10%

At what stage of Network Services Convergence are the carriers and users at today?

0% 0%

Fully converged (all Data, no voice).

Fully converged

(all Data, no voice)

Partially converged (still some Partially converged voice).

(still some voice)

Not converged - (services Not converged purchased and provisioned (services purchased and separately). provisioned separatley)

03. Carriers and users are seen as being partially converged (a sensible option, chosen by 71.4%) though a full quarter of you thought they weren’t at all and persisted with separate purchasing and/or service provision.

When do you think (most of) the end users plan to be fully converged regarding Network Services Convergence?

Within 2 years Between 2 to 5 years More than 5 years 13.70% 62% 24%

04 70.00% 70% 60.00% 60% 50.00% 50% 40.00% 40%

30% 30.00% 20% 20.00% 10% 10.00% 0% 0.00%

T

V T

Within years Within 22 years

Between22toto5 5years years Between

More than than55years years More

When do you think (most of) the end users plan to be fully converged regarding Network Services Convergence?

04. The overwhelming majority thought the majority of users would be running converged services in between 2 and 5 years.

05.

TTV

Convergence can be characterised as benefiting users and providers in at least three different ways. For Network Services C 1 2 3 Cost savings 41.2% 24.9% 33.9% Simplification of environment 27.8% 51.7% 20.5% Strategic benefits36.4% 26.7% 36.9%

60% 60.0% 50% 50.0%

05

40% 40.0% 30% 30.0%

Cost savings

20% 20.0%

Simplification of environment Cost savings

Strategic benefits

10%

10.0%

Simplification of

0%

0.0%

1

2 1

3

1

2 2

3

1

2 3

3

1 = environment most important benefits 3 = Strategic least important

What are the benefits of Network Services Convergence?

05. Keep it simple, stupid. What is it about convergence of Network Services that makes people sit up and take notice when the concept is being sold - either to a customer or up to the boardroom? Our responses here are very interesting and indicate two schools of thought. The cost savings option was ranked in a ‘concave’ way on the chart - in other words there were very few respondents placing it in a comfortable second. 41.2% thought cost savings was the most important selling point but a strong 33.9% also thought it the least important. A lower number (a quarter) thought it should be ranked second.

Simplification of the Environment, however, exhibited a strong ‘convex’ graph shape with over half of all the respondents giving it a firm second place. Strategic Benefits, like cost saving, also returned a concave result, with more respondents at both extremes than in the middle indicating a split opinion.

Are there any drawbacks to Network Services Convergence?

06. Our respondents pointed out that users generally expect a price break if they are buying services in a bundle - that creates a revenue challenge for the service provider.

Another respondent pointed out that security concerns might be heightened where ‘virtual services’ are carried; equally, convergence often implies a change or an extension to technical roles within the organisation concerned. These changes can be challenges.

For the customer of converged services it was pointed out that users can find themselves ‘locked in’ and less able to take one or more services out of the arrangement. On the regulatory front, convergence and service bundling was also thought to be a monopoly risk and can increase vulnerability to a single failure if multiple services dependent on a single platform.

Another respondent found standardisation (or rather the lack of it) a problem. And there were worries too about customer acceptance: many customers see convergence as another form of ‘lock-in’ according to some.

V T T

Function Convergence

Is function convergence the settled direction?

07. Our respondents were pretty certain that the trend of shoehorning more and more functions onto and into mobile devices and settop boxes was a trend that was likely to continue. With mobile terminals especially, with their cameras, GPS, Internet access, motion detectors and so on, there seems to be no reason for the trend to slow since new applications (mobile social networking, for instance) rely on users being able to combine two or three of these functions - for instance GPS, camera and high speed uploading).

At the same time, functions such as electronic key and electronic wallet seem able to combine to complete the package At that point the mobile becomes just about the only thing you have to take with you when you leave the house.

Despite this over a third of our respondents can apparently see an end to the remorseless addition of functions and don’t accept it as a settled direction at all - rather a temporary phase that will run its course and then we will return (at least to some degree) to separate specialised devices.

880%

0%

6600% %

4400% %

2200% %

0% YYees s

NNoo

07

To tease out these reservations we asked respondents what drawbacks they discerned with function convergence.

08. Respondents worried that skill sets within organisations bringing ‘function convergence’ weren’t broad enough to make a good job of it. Similarly, there would be a long hybrid period without standards which would make it difficult for consumers. In summary, that function convergence was resulting in ‘jack-of-all-trades, master-of-none’ devices.

There were general concerns that the functionality (such as cameras) would just be squeezed into devices with little understanding of the characteristics required and that they may be tailored to developed markets and not to customers in emerging economies. There would always be room for single function devices as well.

T

T

V

Some observations were clearly driven by personal experience. Squeezing more functions onto a tiny platform made it even more difficult for those of us with fading eyesight and hearing to use them, complained one respondent.

Network Technology Convergence

09.

80% At what stage of Network Technology Convergence are the carriers at today?

80%

70% 70% 60% 60%

Fully converged Partially (single converged Not network) converged (still some - (separate way to go) transmission and switching networks).

2.2% 79.0% 18.8%

50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Fully converged (single network)

Fully converged (single network)

Partially converged (still some Partially converged way to go)

(still some way to go)

Not converged - (separate Not converged transmission and switching (separate transmission networks).

and switching newtorks)

We asked at what stage of Network Technology Convergence are the carriers at today?

09. The vast majority of our readers assigned the middle position.

Progress made, but could do better.

10.

When do you think (most of) the operators plan to be fully converged regarding Network Technology Convergence?

70% 70.0% 60% 60.0%

Within 2 years Between 2 to More 5 years than 5 years 11.8% 58.4% 29.8%

50% 50.0% 40% 40.0% 30% 30.0% 20% 20.0% 10% 10.0% 0% 0.0%

Within 22 Years Within years

Between 22 to Between to 55Years years

More than More than 55Years years

V

10. It was the same when we asked them how much progress operators were making in converging their network technologies. Most respondents thought they would be fully converged in 3 to 5 years and a third thought it would take more than 5 years.

TT

When do you think (most of) the operators plan to be fully converged regarding Network Technology Convergence?

What are the three main selling points for Network Technology Convergence?

Convergence can be characterised as benefiting users and providers in at least three different ways. For Network Services Convergence please rank the importance of the three main selling points which may also be understood as immedia 1 2 3 Cost savings 46.2% 17.9% 35.9% 60.0% 60% Simplification of environment 26.9% 53.8% 19.2% Strategic benefits 33.1% 28.4% 38.5% 50.0% 50%

40.0% 40%

Cost savings

30.0% 30%

Simplification of environment

20.0% 20%

Cost savings Strategic benefits

10% 10.0%

3

1

2 3

3

T

2

2

V

1

T

3

T

1

V

2

T

1

Cost savings were the strong favourite here. The ability to simplify the environment was also accepted as the number two reason by the majority. But there is also some firm disagreement over strategic benefits, with roughly one third of respondents putting as a first choice and only slightly more putting it as their last.

T

0% 0.0%

Simplification of environment -

1 = most important 3 = least important Strategic benefits

11. Convergence can be characterised as benefiting users and providers in at least three different ways.

For Network Technology Convergence please rank the importance of the three main selling points which may also be understood as immediate, medium and long term.

Are there any drawbacks/disadvantages to Network Technology Convergence?

12. Our respondents thought it early days, so the technology was often not proven and there was till time for problems to emerge, however security was cited by many as a drawback, as was integration with back office systems designed for unconverged technologies, and the often proprietary nature of the technology used.

Others mentioned the high cost of infrastructure and competition from applications providers who don’t own any.

The ability of some organisations to develop the right skill-sets was also a concern and the fact that convergence was driven by ‘techies’ not business people. An allied problem was seen as a loss of focus.

Retail Convergence 13.

60% 60%Is Retail Convergence the settled direction?

50% 50%

Yes

No 45%

54.90%

40% 40% 30% 30%

T

TV

20% 20% 10% 10% 0% 0%

Is Retail Convergence the settled direction?

13. Our respondents were divided over Retail Convergence, with a clear majority expressing the view that it was not a settled direction.

Yes Yes

No No

TT

V

TT

V

TT

V

TT

V

TT

V

TT At what stage of Retail TT Convergence are the carriers and users at today?

V

TT

V

TT

V

14.

At what stage of Retail Convergence are the carriers and users at today?

100%

T

TV

90% 80%

As far as it will Stillgo more progress to be made 12% 87.90%

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

70% 60% 50%

TT

V

40% 30%

TT

V

V

14.VAt the same time, however, V respondents were T V TToverwhelmingly of the opinion TT (87%) that retail T

convergence still had some more progress to be made.

20% 10%

T

TV

0%

As V far as it will go

TT

TT

V Still more progress T V to be made T

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TT

V

TTV

In what ways does retail convergence benefit providers and users?

15. Some of those who sung its praises thought it represented a much-needed telco shift from technology focus to customer focus. It provided a one-stop-shop (always welcomed, in theory, by buyers), should deliver cost savings, reduce complexity through elements like a single bill.

It should also give users enough power (it was thought) to create their own services and bundles.

Another respondent thought some providers had been burnt by bundling because of the high ‘ticket’ price once everything had been added up.

Are there any drawbacks/ disadvantages to Retail Convergence?

TTV

16. We asked respondents what they thought the drawback and disadvantages to Retail Convergence were. From the provider’s point of view respondents mentioned the lack of technological maturity at key points - where services were being converged around IP, for instance, shortcomings in the OSS (operational support system) and SDP (service delivery platform) areas were mentioned, as was the general problem of ensuring different vendors kit could interoperate: a more pressing problem when convergence of any kind is taking place.

The stove pipe problem inside carriers takes a long time to break down too one respondent mentioned egotism and non-cooperation between business units.

An actual increase in complexity was mooted as a particular drawback. For the customer, the problem of lock-in is a live concern. A customer putting all the comms eggs in one basket could mean

xx

that any link outage affects all services (and ironically the customer has no way to complain). Others felt the customers were being misled. In some territories service bundles are allegedly used to disguise otherwise illegal cross-subsidy designed to drive competitors from the market.

Another respondent pointed out the inherent conflict between retail convergence and personalisation and specialisation which are appearing on the Internet, often enabling customers to choose best-of-breed providers. Retail convergence, on the other hand, seems to indicate less choice and differentiation.

At the same time it tends to create a barrier to churn because the prospect of moving all services at once is just too daunting. In other words retail convergence is sticky, which is exactly why service providers value it.

V T T All brands and products are the trademarks of their respective holder/s. Š 2008 Decisive Media Limited.

All rights reserved.