Impact of transition from Voice to Data and Multimedia and IP based services in Telecom business: An analysis.
Short link: http://wp.me/p1ZsI2-23
Author: Abraham Paul P.
Telecom Consultant Ex: MD & CEO FCOMNET Futuregroups / Vice President (TS) SPCNL, SIEMENS ICN / GM & SMT TBG, BPL Mobile. India / TES (I) DOT India.
Dated: 15 March 2004 e-mail: email@example.com Tweet @pa_paul
Introduction: Telecom Businesses, a Service Industry handling one of the vital Essential Services, is a different ball game. Hence the Government’s policies on Telecom related issues and its relations with Telecom Service Providers and other stakeholders shall be more People-Centric than Money-Centric.
The past few years saw much hype due to over-projecting the business potential of 3G Telecom, Voice over IP and growth of INTERNET dependent customer products, e-Commerce and other e-businesses. Realisation came later that most of these high tech propositions though conceptually attractive and forward looking, were going to take time to develop, huge investment and coordinated efforts of various business & technology providers and regulators to convert these to marketable and revenue earning products.
3G and other New Generation Networks are great advancement in Information Communication Technology; but concepts alone cannot be sold and make money and sustain it as any user friendly business. It was difficult to make out a viable business case and many Telecom and Internet service providers broke down as their original business plans later turned unsustainable. However, lately the business approach has been more pragmatic and realistic. The objective of this analysis is to look how to get over the obvious hurdles and make the transition from 2G to high speed Data and Multimedia possibilities suitable for contemporary and future business needs so that the presently stagnant e-business would really take off.
It is envisaged that the next one or two years will see a quantum leap in the realization of these concepts. In the GSM arena, the SMS has become a powerful communication tool, WiFi and Wimax bearers have provided more viable end link alternatives dramatically changing the Wireless data world. Data communication and VoIP merged with Internet is becoming more practical, user friendly, economic and faster and therefore, are gaining universal acceptance. All these are good news to the end users but the picture is not that rosy for the service providers.
1. Consequence of advance in Technology.
No one can stop advancement of Technology and changes happen too quick now. However, it is also the fact that advancement in technology and convergence of Voice and Data had adverse impact on the businesses of Telecom & ISP providers and vendors because the major shift of Voice based usage to Internet based and other high speed Data and multi-media services will inevitably take the business away from Telecom Service providers to external digital, multimedia and various mobile e-commerce and mobile money management service providers such as banks and along with it a major chunk of the revenue. Please see my blog: ‘It is suicidal for Telcos to allow Banking Industry to hijack ‘Pay by Phone’ Value added Services’. http://wp.me/p1ZsI2-d
The reasons are:-
i) Non-viability of Network Operators/ISPs taking the role of discrete Application Providers.
The GPRS / EDGE /UMTS / WCDMA / VoLTE and other modern high speed digital communication are bearers which provide suitable network and pipes for access with different application protocols. The INTERNET over World Wide Web which is no one’s baby will rule the world of future telephony as in a no man’s land making the ITU definition of PSTN soon becoming irrelevant.
What will happen to TSPs & ISPs of the day?
The Telecom service provider and ISPs are mainly access providers and cannot become application providers except for very generic and universally specific and ’Device to Device’ multimedia services, which are going to be a minuscule of the whole business potential. This is because, the major data related activities will be in the extremely large base of clients in the PDN, widely distributed in the limitless IP world and their requirements will be highly diverse and dynamic that cannot be met by Telecom service providers. Moreover, the huge number of of individual and standalone e-business units and service related systems and applications will be spread beyond the boundaries of the service areas of individual Network operators, and therefore will have to be taken care of by external Service Providers and Business units in the PDN.
ii) Major portion of data service related revenue moves from Network Operators to external Service Providers and e-Business units in PDN.
Impact of Voice to Data convergence and transition of major part of usage from Voice to Data service will have great impact on the of Telecom business models in terms of investment and revenue realisation. The Network Operators will have no control on tariffing, rating, charging and billing of “external client” based services and usages. At the most they can only charge their subscribers for the ‘data access’ by measure of quantity and not for the real value of the transaction. The value of the transaction can be determined only at its end Service provider/Vendor level and therefore, the revenue realisation also rests with them and they will become the real beneficiaries of the inception of such technology.
It means that, as the scenario changes from Voice to Data, a good part of end user revenue will move from PSTN/PLMN Network Operators to various Content Providers/e-Service Providers/e-Business units in the PDN, that are spread far beyond the licensed area of individual Telecom network operators.
iii) The network operators will eventually lose exclusive ownership of their customers.
With opening out of Private Long Distance carriers and convergence of Voice and Data and with predominance of Data services, ownership of end user will no more remain stuck with any single Network Operator. As the e-Services and e-Business takes of, the Telecom Network Operators and ISPs will further lose their monopoly in holding on to exclusive ownership of their customers in terms of the revenue generated from them.
The end user at their own will and pleasure will have option to choose and use different Network Operators/Service Providers who would provide them efficient, quality service at competitive cost and eventually will have direct dealing with the e/business Providers for the services and with it, these service related revenue also goes to them.
iv. Various IP based products of communication currently in vogue and those to come in the future, will highly disrupt plain old telecom business as a whole as most of these systems, products and services bye-pass Telecom systems and networks.
It all points to the fact that to survive it is time for the individual TSPs & ISPs are rolled into one and function as one entity.
2. Role of Telecom equipment vendors.
a) The Telecom Vendor’s businesses also will have adverse impact as Network Operators becoming unable to get adequate return on their high-tech investments.
The advent of telecom evolution is great business for vendors if only their customers (the Telecom network operators/service providers) are willing to invest for inducting these technologies in their networks. Due to reasons mentioned earlier, the trend is not positive and hence impact negatively the business of Telecom Network system vendors.
b) Telecom Vendors cannot get into Application Business in the PDN.
Major telecom vendors cannot get into the business of Application & Business support system sales. The vast amount of ‘Application’ and e-Business support systems in the limitless area of PDN are going to be the most revenue earning part. These are highly diverse, dynamic and widely distributed across the whole IP world. The needs of infinite number of small and standalone and individually tailored systems cannot be customized, sold and maintained by major Telecom vendors. Hence it is not foreseen for any major vendor to venture in to this business, and also majority of the small time service providers/e-business units may not need and also cannot afford major vendor systems. So the business of the vendors will be limited to selling of generic and very specific Application systems for the Network operators which is going to be only a small fraction of the market as the real business value lie in the external IP world.
It is more likely that the Network operators also will prefer to hand over the Application business to external Service providers.
3. Payment Gateways in Public Data network (PDN) for revenue appropriation:
Special methods are needed to handle Micro-payments involved in e-business. See article in http://wp.me/p1ZsI2-d
The end users are real beneficiaries from all these, but such major shift in Telecom business will have negative impact, for the Network Operators. As above said being the situation of business; Network operators cannot dare to indulge in high investment that is needed for the high-tech data networks and access pipes to support e-business needs of the data service users with no means of adequate return on their investment. The TELCOs /ISPs therefore, need to look for strategies and methods to get adequate share of the revenue collected by external e-business units that use their customers, network and resources.
The e-business and e-services related to 2.5G and 3G and Data services over Internet to a large extent involve ‘High Volume’ of ‘Low Value’ payments and these cannot be done by direct payments or handled economically by the banks, regular credit card companies etc. Also these payments can neither be handled by the Network operators/ISPs nor by the Service provider/e-business units as the value of each transaction is known only to the e-Business/Service provider who finally sells or provide the service.
This is the most critical issue and the high tech Telecom and IP related e-Business cannot take off and the Network Operators/ISPs cannot have sustainable business plans until it is addressed and resolved. Micro-payment Gateways in PDN is one such idea to get back part of the revenue generated from e-business based on data services. This need coordinated efforts by all stakeholders and the regulators.
4. Inception of Payment Broker Middle way systems.
To be in line with technology advancements, the network operators have no choice but to induct the new technology systems related to telephony and non-telephony value added systems in their networks and find means and ways to ensure sensibly viable business propositions. As mentioned earlier, the data related services gaining predominance, and the revenue potential moves from Network Operators/ISPs to Service Providers and e-Business units, the Network operators/ISPs have to look for methods to grab their share of revenue generated in the PDN to survive.
Here is the emphasis of the Payment Broker systems, which can manage the accounting of payments, apportioning of it and sharing the revenue generated between the stakeholders. Such payment broker system cannot be managed by individual Network operators/ISPs as the Service Providers and e-business units are common platforms shared by customers of many different Networks/ ISPs. Such system shall reside in exclusive India-Cloud below the world wide web (www) and managed by Cloud computing. Also such an India-cloud need to be fully firewalled to ward off unlicensed service providers poaching products and services from the licensed service providers using their technology systems, network and spectrum.
4.1. Money through Mobile (mTm)
Typical example is “Money through Mobile” (mTm), a common payment Gateway system that supports all sorts of money transaction by Phone users transparent to Banks and Banking systems setup and owned by a consortium of service providers which is an option for Telecom service providers to look into.
Please see my article on Universal Money Management by phone. http://wp.me/p1ZsI2-4g
Mobile Payments involve huge volume of digital data transactions on line and on real time basis between all kind of USERS through Telecom systems.
Charging gateways are just other network elements sitting in PDN. Interestingly such Payment broker systems can be located any where in the PDN and can provide service to large number of Network operators /ISPs and the e-business units and application service providers in PDN.
The Payment Broker systems shall be a common platform Service Provider system in the PDN and not to be tried by Network Operators. This could be the ideal philosophy to adopt in every country, in order to avoid stagnation in the e-business growth and full exploitation and passing on the benefits and advantages of modern technology to the people. Therefore, as mentioned earlier the Government’s policies on Telecom related issues and its relations with Telecom Service Providers and other stakeholders shall be more People-Centric than Money-Centric.
5. Exclusive Digital Payment Banks.
Virtual Money is best handled by Virtual banks. Banking the unbanked is the way to enable Financial inclusion to realise Inclusive Growth. However, getting it done through the current banking system in India is problematic. Most Banks in Public and Private sector have its limitations to take care of the needs of currently huge unbanked population especially those in the lower social and economic strata. Naturally, handling huge volume of low profile and low value accounts would eventually lead most Banks to collapse due to severe HR constraints and gross customer dissatisfaction for no fault of theirs. The way out is to to have exclusive special purpose digital online Virtual Banks integrated with payment Gateways and payment broker systems to take care of all forms of Virtual money management, directly or with direct or through Phones with minimum human interface with the help of modern Technology systems .
6. National security is also a serious issue.
Proliferation of Virtual Money need regulation.
Giving unrestricted access to all sorts of systems and information will have its own consequences. Once taken off, many forms Virtual Money businesses both in banked and un-banked modes will crop up. Few special purpose digital Payment Banking systems need to be place to regulate and manage Virtual Money flow.
7. The whole story in nut shell.
a) The Network operators can only play the role of access providers and not major application providers. It is folly to attempt provision of multifarious application services other than ‘device to device’ or ‘peer to peer services’ by network operators.
b) Majority of the revenue generated is going to be in the PDN in the infinite IP world. The Network operators cannot have control on the revenue generated and do not get the rightful share of this revenue as a decent return on their higher investment in providing access to data related services. So the network operators will be reluctant to invest on high tech systems for opening out fast access to external IP world.
c) There will be no exclusive ownership of Customers considering the revenue point of view. The customers use the Network operator’s network but the major portion of the revenue generated from them directly goes to the coffers of large number of external agencies that provide e-business and e-service.
d) There will be negative impact of Telecom vendor’s business as Network Operators are unwilling to do major investment in high tech unless they are assured of adequate revenue. The telecom vendors cannot venture to get into the large-scale application and e-commerce support system business in the vast IP world.
e) It shall be possible to address this by introducing concept of Payment Gateways in PDN for apportioning the revenue. Micro-payment gateways can take care of the high volume low value transactions that happen in the PDN. These need special methodology and coordinated efforts of all concerned.
f) Other solution is to have third party systems owned by consortium of Telecom Network Operators /Service providers for non – telephony related value added services like un-banked universal money management using phones, Charging of road toll and vehicle parking charges etc.
g) There shall be sufficient safe guards to prevent various unlicensed service providers and OYY systems and networks disrupting the licensed service providers business.
Conclusion: Most of the advance technology systems are now the monopoly of Network Operators/ ISPs and System vendors. It is necessary to take these out into the user premises by melding the technology with user intensive systems and applications. For the Telecom service providers, the voice call revenue is dwindling due to transition to data oriented business and competition as well as saturation of usage and they need to forge into more and more broadband products business to survive.
To realise all these effectively, it is necessary for the Network operators/ISPs and regulatory bodies to standardise the e-business related charging, billing and payment procedures. Payment Gateways connected to common Payment broker system are needed to take care of adequate revenue share to network Providers / ISPs as to compensate the high investment needed to induct high tech and provide enough pipes for their customers to access the Service providers and e-business units.
Moreover Mobile phones have become life science devices that will provide diverse products and services, in addition to merely a phone but camera, watch, music / video, products based on various location based services, NFC based services, e-wallet and all sorts of money management using phones including DBT by governments, health care support and emergency support system etc. With right perception and direction, these disconnects in concepts can be rectified and the e-Business will see ample growth in the coming years. It shall be possible to achieve quick overall Telecom growth, with benefits for all, the Network Operators/ISPs, Business owners, the Service providers, the Telecom Vendors and the Consumers as end users.
Also please see my blogs:
- The never ending Telecom muddle in India. http://wp.me/p1ZsI2-gG
- Telecom Industrialists need caution on broad band network ideas that do not fit in the future. http://wp.me/p1ZsI2-4s
- Who need Spectrum; How much, Where and When? http://wp.me/p1ZsI2-82
- Segregation of Service Provision from Network operation / Universal Numbering Plan. http://wp.me/p1ZsI2-t
- Make Telecom Systems, Network, Phones, Product and Services affordable for the common man. http://wp.me/p1ZsI2-9i
- Net Neutrality without hurting Telcos and End users. http://wp.me/p1ZsI2-ES
- Digital India. How and When. http://wp.me/p1ZsI2-J5
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