© 2005. All rights reserved. Understanding Best Practices for Convergence in Broadband Anish Madan 1 & Ravi Sharma 2 A presentation for the 10 th ATIE,

© 2005. All rights reserved.

Understanding Best Practices for

Convergence in Broadband

Anish Madan1 & Ravi Sharma2

A presentation for the

10th ATIE, Taiwan

7 April 2005

1 2

2

Outline

Overview of Convergence Case Study of a Next-Generation Service Provider Industry Best Practices Concluding Remarks Questions and Answers

3

Convergence of Networks and Technologies

(Mobile, Fixed, Wi-Fi, IP, PSDN, VPN) Terminals/Devices

(Handphones, PCs) Services

(Voice, Data, Multimedia) Regulated Markets

(Telcos, Broadcasters, Media Cos)

Blurring of boundaries between voice, data and

video delivery and applications

Overview of Convergence – Definition

4

Overview of Convergence – Essentials

Voice VoIP Enhanced VoIP (IP Centrex, IP

Conferencing etc.)

Data WAN: IP VPN Internet Access: xDSL, Ethernet Applications: Broadband and Mobility (including

video applications, gaming etc)

Enterprise Specific IP PBX / IP Contact Center,

Network Security Networking

5

Overview of Convergence – Broadband vs. Narrowband

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Narrowband Penetration % Broadband Penetration % Broadband % of Total Source: Frost & Sullivan

6

Overview of Convergence – Revenue Composition

• Domestic long distance VoIP calls dominate in revenue terms• IP Centrex, IP video conferencing and other IP enhanced services

revenue only nominal in 2003

Local VoIP13%

DLD63%

IP Centrex1%

IP Video Conferencing

1%

ILD22%

Others0%

Local VoIP

DLD

ILD

IP Centrex

IP Video Conferencing

Others

Source : Frost & SullivanData includes Australia. China, Japan, Singapore, South Korea and Taiwan revenues in 2003

7

Overview of Convergence – Market Impact

Significant impact on service providers and customers

Service Providers New business model New opportunity Reduce OPEX Train & retain employees Next Generation Network and Services

Customers Increased Options Possible paradigm shift in service adoption Sophisticated Customer Service Management

8

Infrastructure Provider

Content &Application Provider

End User

Content Aggregator

Content/ServicesH

igh

Investm

ent

Critica

l Mass

of

Dem

and

Conte

nt / A

pplica

tion

Mass

an

d

Dem

and

Mass

Eff

ectiv

e V

alu

e

Pro

positio

n

Revenues Outflow

Overview of Convergence – The New Ecosystem

Services can be in-house, outsourced and hosted

9

Case Study – FastWeb Triple Play

ARPU per year € 780…

Data Voice Video

FastWeb is a leading Broadband SP in Italy (www.fastweb.it)

10

FastWeb – Service Offerings

Fastweb’s Marketing strategy based upon Triple Play service

bundles Voice Internet Video

No single killer application: the real killer application is the

Service Mix

Combination of Flat Rate and Pay Per Use tariff plans to match

specific customer needs

11

FastWeb’s Innovative Services: Fastweb’s TV

FastWeb TV

Video on Demand offer First VoD licensing agreements with First VoD licensing agreements with

US major film studios:US major film studios: 20th Century Fox20th Century Fox Universal StudiosUniversal Studios DreamWorksDreamWorks

Over 3,000 titles (up over 30% from Over 3,000 titles (up over 30% from the end of the second quarter) the end of the second quarter)

Unified interface for content in all formats:Unified interface for content in all formats: Terrestrial broadcast: RAI, Mediaset, ...Terrestrial broadcast: RAI, Mediaset, ... Satellite broadcast : CNN, Bloomberg, ...Satellite broadcast : CNN, Bloomberg, ... Pay-TV/Pay-per-View: Stream & TELE+ Pay-TV/Pay-per-View: Stream & TELE+ Video-on-DemandVideo-on-Demand

Integrated with VideoREC and Electronic Integrated with VideoREC and Electronic Program GuideProgram Guide

12

FastWeb’s Innovative Services:Business and Personal Video Communication

FastWeb’s Video Communication allows business and residential customers to video conference:

Between different locations

With other external parties using FastWeb’s services

With traditional ISDN video conferencing systems and through the Internet with PC-based web-cameras

Non-FastWeb clients (ISDN)

FastWeb clients

Party 1

Party 2

FastWeb residential customers

Internet

PC + Webcam

TV + TV Cam

13

FastWeb’s innovative services: VideoREC

Virtual VCR service: allows clients to record favorite free-to-air TV programs (RAI, Mediaset, ...) with no need for a VCR or tape

Easy and convenient programming: just click on the desired show, directly on your TV or on any PC with an Internet connection

14

Fast Internet at up to 10 Mb/s from any point of the house

No need for wires or cables

Fastest wireless offer on the market

Access kit on sale at only 250 EUR

Access base

FastWeb’s network

FastWeb’s innovative services: Wireless-Fidelity (“Wi-Fi”)

15

FastWeb’s innovative services: IP VPNs and B2E Installed IP VPNs grew 85 (from 255 to 340) in 3Q 2002, confirming

FastWeb’s unique accelerated pace in this market segment

10 Mb/s (scalable) bi-directional connection among different branches and from employees’ premises to the corporate LAN, on FastWeb network

Service quality and security guaranteed through MPLS technology and IPSec protocol

Big Internet

FastWeb’s server farm

Branch 2

Branch 1

Business-to-Employee (B2E) services

IP VPNs

Other networks

Branch 3

16

Industry Best Practices – Drivers of Convergence

85%

45%

53%

8%

18%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Cost GlobalConnectivity

Efficiency Convergence BundledService/VAS

MarketingPush

23%

35% 38%

100%95%

33%

53%

73% 75%

60%

0%

20%

40%

60%

80%

100%

120%

ERP CRM SCM Email Data Transfer VoIP Video E-Commerce Real Time Collaboration

Both residential and enterprise users find IP

an attractive value proposition

Source: Frost & Sullivan

17

Supply demand match

Point to point

connectivity

Distance & bandwidth

sensitivity

Individual

services/rigid

Services abundance

Any to Any connectivity

Distance insensitive

Service suites/total solutions/flexible

Traditional Structure Emerging Structure

Technology Push

Market Pull

Regulatory Arbitration

Industry Best Practices – Industry Structure

18

Regulatory Framework – A Tale of Four Countries

• No national broadband (triple play) policy

• Light touch

• USO metric: homes passed rather than uptake

• Build-up of national facilities encouraged

• Technology neutral

• Broadband vision (E Korea 2005, Cyber Korea 21)

• Policies for competition in voice, data & mobile

• Hands off internet services regulation

• Competition of facilities-based SPs

• Promotion of broadband network building (loans, KII, Internet usage, public/education sectors)

• Sharing infrastructure and facilities

• Stimulating supply of content, applications & services

• Encouraging SMEs to e-biz

• Creating a secondary market for radio spectrum

• Unified regulatory regime (Multimedia & Telecommunications Regulatory Commission)

• Promotion of multimedia super-corridor and flagship projects

• Possible competition between incumbent, competitive 3G carriers and CATV operator

19

Regulatory Best Practices – Issues

Licensing of all existing and new services as they emerge,

under the ambit of convergence Licensing fee – Auction, beauty contest or free for all? Service area – Universal Service or roll-out Obligations Setting an appropriate Universal Service incentive Creating a level playing field for incumbent or competitive,

standalone or full service operators Interconnectivity and tariff agreements Numbering and addressing issues, directory and look-up

services Regulation of shared facilities, example infrastructure and OSS

20

Industry Strategies for Growth

• Stabilize voice revenues• Velocity and shelf-life of Next-Gen services• Open platforms and business models• One-touch for the customer

• Increase data revenues• Grow an Internet based economy

• New Generation networks • Applications • Critical mass of subscriber services

• Allow SPs the opportunity to “lock-in” customers• Recognize that access and services are evolving separately

21

Concluding Remarks – Moving Up the Value Chain

Technology

Consumer Markets

RegulatoryPolicy

• Strengthen regulatory framework;• Consumer advocacy• Enable Growth of innovation drivers• Availability of workforce with specific

skill sets at competitive costs

• Facilitate environment for high adoption of new technologies;

• Availability of latest services with service quality;

• Competitive Cost for these services;• Skilled IT workforce

• Knowledgeable and sophisticated user communities

• Drivers for sustainable growth• Support for open competition

22

Concluding Remarks – The Convergence effect

Benefits predominantly for end user

Service providers

Core competency based

Advantage Competition: Leap-frogging with Cost and Scale

Content/Application Developers/Providers also benefit

Create green-field applications and opportunities

Customers will not pay; unless …

They can’t do without it (the utility of convergence)

© 2005. All rights reserved.

Thank You