November 2004

Convergence: A Reality For Today’s Wireline And Wireless Markets

BY FARSHID MOHAMMADI & MICHAEL KHALILIAN

When the Telecommunications Act of 1996 was passed, it was believed that competition in the wireline voice arena would drive the changes mandated by these amendments. However, it took something more than the Telecommunications Act to drive change. It took market demands by consumers to challenge and alter today’s telecommunications landscape — market demands that required services to be more cost effective and available a lot faster. Consumer demands are driving carriers to revisit their existing business models and are requiring carriers to view their existing infrastructure as mature legacy systems that must be evolved.

New business models have been created to support the recent behavior changes we have seen with consumers. However, the most important outcome from these new business models is the understanding that wireless, WiFi, and broadband services can be and are an acceptable alternative for wireline service. This evolution has brought the concept of convergence to the forefront, and is possible now because the concept of convergence today is not being viewed as purely a futuristic evolutionary path but rather as a viable option to address today’s business realities in an effort to meet consumer’s needs.

But why is convergence a viable option? Perhaps the answer can be found in these few simple facts. As the unprecedented growth of the Internet and the high demand for wireless services has pushed existing networks to their limits, carriers must find ways to meet these new customer demands as rapidly and cost effectively as possible. Long gone are the days of consumer loyalty. Today’s savvy consumers are switching carriers when a better deal is presented, and are shopping purely on price, coverage, and service plan options. This increase of consumer choices is forcing carriers to continually drop prices to stay competitive, while their operating costs have remained the same.

To understand the magnitude of the impact that operating costs have on carriers one must bear in mind that carriers support multiple networks. These are the networks that have been built to support Wireless, Wireline, ATM, Broadband, Frame Relay, and IP. As a result a clear demarcation exists between technologies and networks. Each network supports an individual service, and each system must be continually upgraded and maintained at a great expense to the carriers.

So if we look at the issues carriers are facing today and must resolve in order to stay competitive, we find that their only option is to evolve their current infrastructure. The previous business model that supported one network geared toward one technology is obsolete, and there are newer technologies in the marketplace today that can support multiple access types from one common core.

Convergence is a word that directly speaks to transformation, and change makes some carriers very uncomfortable. Yet, it is through converged networks that the new emerging business models can be supported. The bottom line is that the financial success and competitiveness of each and every carrier depends on these new business models, and that every carrier’s financial health will be measured by how they achieve high margins from new services and cost efficiencies derived from migrating multiple networks to a converged core. If these things do not happen, the reality is that carriers will lose their customers to more agile and visionary competitors; competitors who are willing to test and trial new technologies, and who are willing to take risks in order to become tomorrow’s market leaders. Companies trialing new technologies such as IP understand the value of access agnostic networks, which can provide fast, low-cost bundled services to consumers.

How can we be so sure that convergence is the answer? What have we seen in the industry to support the idea that IP technologies are necessary for carriers’ future success? For starters, we have seen that wireline subscribers are replacing their wireline phones with wireless devices, and in many instances, these voice services are being provided through pure VoIP networks. It has also become quite clear that the definition of communications as we knew it is evolving. Communications has become more than a lifeline to consumers. The demarcation line that once existed between wireline and wireless services is currently being challenged. Today’s consumers want to communicate with anyone, at anytime, from anywhere while using any device of their choice.

In summary, convergence today is not being driven by the technologies that are deployed in our networks but rather by the demands of consumers. Consumers are not concerned about how or where they get their services, but are more interested in where they are able to get the best price and performance. They look to issues such as; can their service provider offer them voice, data, and video services at economical prices? Can they receive one bill and can they call one number for support? The solution to these customer issues is simple, and migrating to converged network environments is the answer.

Farshid Mohammadi is general manager for the North American and International Switch, UT Starcom. For more information, please visit www.utstarcom.com.

Michael Khalilian is chairman and president of the IPCC, an industry consortium of carriers and solutions providers advancing packet-based communication technologies. For more information, please visit www.packetcomm.org.

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