The Evolution of IMS: New Business Models

By Grant F. Lenahan

In the April issue, I argued that VoIP alone was insufficient to justify IMS — or any next-generation service framework for that matter. If it was, we’d all be better off buying integrated softswitches and media gateways and getting on with business. The very name of IMS — IP Multimedia Subsystem  (News - Alert) — says it all. IMS only reaches its potential when it supports true multimedia — voice/VoIP, messaging, music, video, gaming, and the entire spectrum of new services enabled by IP networking.It should be no surprise that the traditional business model of our telecoms industry — built on voice, private lines, and most recently high-speed data, will change. Voice is under intense competition, which will exert downward pressure on voice/VoIP revenues and profits. And most IP/data services, while certainly contributing much needed revenues, are, in fact, of the dumb-pipe variety and, therefore, they, too, will commoditize rather quickly, and begin to suffer the same revenue and margin squeeze.

Some experts feel this is the natural end-point for telecom operators: they must become highly efficient operators of high quality, but dumb, pipes, leaving all services to third parties and creation “at the edge.” In this scenario, the winners become media companies, “new era” operators (think: Google)  (News - Alert) and other “over the top” service providers. Certainly, this is possible, but not particularly desirable for today’s operators.

A second possibility is that operators innovate — creating (mostly on their own) rich portfolios of multimedia services; operating vast walled gardens of content; and offering services and bundles that stay one step ahead of commoditization. This, too, is possible, and we see evidence of creative bundling, FMC, integration between TV and phone and other capabilities intended to improve loyalty and maintain sustainable margins.
There is a third scenario that could prove more successful and lucrative but is far from certain — teaming operators with third-party service and content firms to create a value chain that delivers more services, more innovation, and more third-party content than any single operator could possibly deliver on its own. Many popular concepts and business models foreshadow this — such as the collaborative approach of “Web 2.0” or the cleaner division of value between “Virtual Network Operators” (e.g., MVNOs) and their underlying host networks. Whatever we decide to call it, this business model is time proven, based on a traditional value-chain business model like those that exist almost everywhere in our modern economy. In what other business is everything from the bricks-and-mortar, through the consumer product and extending to the retail channel, controlled by a single firm? Very few, if any.

In this third path, operators do what they do well — they carry traffic, maintain facilities, perform session control, charge and bill, and offer a host of technical components that increase the value of third-party services, such as location information, presence information, policy enforcement, group lists, and centralized address books. The key is that the operator does not “go it alone,” but rather becomes part of a larger value chain and multiparty ecosystem. It is difficult to predict whether on not this third-party ecosystem model will eventually triumph but we can make highly educated guesses about the technical and business characteristics that would encourage its use and encourage partnering between network operators and third-party service and content providers.
First, let’s look at the “value added service enablers” that are most viable and attractive to third parties. Those that are intrinsic to the network, like QoS or network (HLR/HSS) presence, or those that are more valuable when SHARED across many services. Good examples of the latter are shared address books; authentication and authorization, personalized delivery policies; and parental/content protection and limits.

Second, let’s look at how these reusable service components should be provided. At its simplest, they must be easy to access, easy to understand, sufficiently useful, and supportive of a viable business model. That’s easy to say, yet hard to do. Yet the Web is showing the industry a model based on reusable service components, revealed through Web services (SOAP, Parlay-X).
Some refer to this as “Web 2.0”. Others refer to “component assembly models” of service creation. Both refer to a paradigm in which operators think through useful service components, make them easy to use, document them, reveal them, and provide a sufficient authorization and charging framework to govern their use. Such a paradigm empowers the greatest possible number of developers — partners, corporate IT departments, the service providers’ own IT department, and Web-based entrepreneurs. Moreover it could allow unique business relationships with all — from off-the-shelf Web agreements, to tight relationships with a few large and close partners.

The only fly in this ointment is not a fly at all. Web services have long had a reputation for simple operation at the cost of low functionality. This is historically true, but need not be so. That’s the key. Fine-grained development of powerful service components must still take place. They must be well suited to the needs of third parties. And then that complexity must be shielded from them, so that creative types, not necessarily network protocol experts, are freed to become the customers and partners of our communications industry.

At the end of the day this may be a tall order, and is far from certain. But as a vision, it can only help us do a better job of thinking through the business value of our networks and the IMS black boxes it will contain. If we do this, and make rich functionality easy to use, does it matter who ultimately writes the services? Either way, the industry will be more successful and we’ll have avoided the dreaded “dumb pipe” syndrome.


Grant Lenahan is vice president and strategist, IMS Service Delivery Solutions at Telcordia Technologies, Inc. For more information, visit www.telcordia.com. (News - Alerts)

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