Overview
Telecommunications convergence is here now
The world of telecommunications has changed beyond all recognition over the last decade. The mobile device has revolutionised our lives and redefined the way we communicate. How we pay for these communications services has changed too – pre-paid payment mechanisms are commonplace and the payment method of choice.
The fixed internet has truly arrived. It is used daily, frequently and pervasively for email communication, as a research tool, and as a communications medium. Music and video retailing is also changing as digital content and distribution means that the 'long tail' of markets is now commercially viable. Mobile data transmission rates have increased dramatically and mobile devices are no longer so obviously the poor relation (to fixed internet devices) in terms of speed and utility. In recent years the smartphone and touch tablet have successfully addressed the major challenges and impediments formerly associated with screen “real estate”, usability and device computing power in mobile devices.
New competitors
But look behind the scenes. Telecommunication companies – wire-line and wireless – are providing a standardised, homogenised, utilitarian service. They are providing access and connectivity which is under disruptive competitive pressure from new over-the-top (OTT) providers supplying voice over IP (VoIP) services that ride on the back of ubiquitous broadband and internet access. The OTT providers are attacking traditional telecom providers on two fronts simultaneously: price-point and functionality. OTT VoIP services are delivering a richer communication experience which includes enhanced address book capabilities, instant messaging, presence and video calling at a fraction of the price telecom companies charge for basic calling. Consequently, telephony prices are falling, margins are shrinking.
To add to these woes, in order to compete and remain attractive providers, telecom companies must invest in numerous core network infrastructure upgrades to deliver more and more bandwidth (through technologies such as HSDPA, LTE etc) across the spectrum they acquired – often at considerable expense. This all requires considerable investment, but is yielding little if any increase in revenue.
In short, the game has changed. Telecom companies must react to this fast-changing competitive environment. And they must do so quickly, with serious intent and commitment.
Within the telecom industry, a common short-hand expression for this is to ask whether the plan is to be a “dumb pipe or a smart pipe?” – a question that most operators will answer “smart pipe” without hesitation. Welcome to the next generation service layer.