Best Practices for Carrier Voice Transformation (2008)

IP TRANSFORMATION CENTERPartnering for change

Best Practices for Carrier Voice TransformationMarc JadoulLisbon, 5 March 2008.

All Rights Reserved © Alcatel-Lucent 20082 | IP Voice Meeting | March 2008

Evolution of Voice Service Architectures

IMS Architecture

ALLSubs. Data

Session ControlCSCF

MGCF

Signaling

Media GWController

IP MediaGateway

AS

SIPXML

SIP

SIP

H.248

Switch Fabric

Features

IN

WirelineSubs. Data

Call Control

Signaling

Bearer Control

WirelessSubs. Data

Traditional Switch

IN, AIN, Camel

NGN “Softswitch”

ASWireless

Subs. Data

EmbeddedFeatures

WirelineSubs. Data

Call Control

Signaling

Media GWController

MediaGatewayIP

IN, JTAPI, Parlay& proprietary

H.248SIP, H.323, MGCP

voice +MM


Service Provider Voice Strategies — The Future is IMS

Source: Heavy Reading, “Class 5 Migration and Adoption: A Multi-Client Study”, November 2007

Voice Services Delivery Strategy

0%

20%

40%

60%

80%

100%

1- 2 Years 2-5 Years > 5 Years

IMS PSTN SimulationIMS PSTN EmulationNGN Basic Features NGN Full Features


Why Do Service Providers Need to Transform ?

Source: the Yankee Group, Alcatel-Lucent

Low return (RoA, RoI) due to ‘legacy’ & ‘proprietary’ infrastructure.Limited innovation capacity due to network silos & heavy processen/IT.

Traditionele telecom service providers

New market players(Google, Yahoo, eBay, ...)

Market Cap/Revenue

EV/PPE OPEX/Revenue CAPEX/Revenue

< 3

> 8

< 5

> 53 < 47%

> 62%

< 10%

> 18%

RoA = Return on Assets; RoI = Return on InvestmentsEV = Enterprise Value; PPE = Property, Plant, Equipment

Source: service provider reports, Morgan Stanley

‘Legacy’dominates

revenue mix

~ 55 %

~ 45 %Growth

Legacy

Revenue Mix

Low margins onnew services

~ 75 %

~ 25 %Growth

Legacy

EBITDA Mix

+2000 2002 2004 2006 2008

35 %42 %

Impact onEBITDA margins

=(~ 2- 4 %) YoY

Fast erosion oflegacy revenues

*Legacy revenues


Transformation is No ‘Business as Usual’

• Tactical infrastructure upgrades• Unchecked/uncontrollable TCO• Poor user experience• Technology & operations “stovepipes”

• Increased churn• ARPU erosion• Pressure on margins

Time

Costs

OpEx

CapEx

QoE

Upgrade approach

• Strategic network transformation• Cost control & investment protection• Managed end-to-end QoS/QoE• Global IP transformation project

• Customer-centric services• ARPU growth• Margin protection

Costs

Time

OpEx

CapEx

QoE

Transformation approach


Different Drivers for Transformation

When End-Users opt for the new service

• Benefits:• Staged deployment

Lower initial CapEx• Minimal feature transparency

Lower Emulation Costs • Greater customer tolerance for

transition issues

• Trade-offs:• Multiple touch in the access network

Higher Transition Costs• Rapid adoption could cause extreme

workload on provisioning organizations & systems Higher OpEx

• Longer term overlay network costs

Subscriber-Driven Migration

Based on the Provider’s migration schedule

• Benefits:• Ability to control & plan customer transitions

Lower Transition Costs• Higher speed decommissioning legacy

Lower OpEx• Avoids creation of additional

technology stovepipes• Trade-offs:

• Requires feature transparency Higher Emulation CapEx

• Expenses without new service revenue Higher initial CapEx

• Plans and investments needed to minimize & manage client impact

Carrier-Driven Migration


1.000 €

1.500 €

2.000 €

2.500 €

3.000 €

3.500 €

2005 2006 2007 2008 2009 2010 2011 2012

10%

2005 2006 2007 2008 2009 2010 2011 2012

15%

20%

25%

30%

35%

40%

45%

Target scenario

Baseline scenario

Target scenario

Baseline scenario

Revenues (M€) EBITDA margin (%)

Case Study* — an European Incumbent

Environmental impact from:

Price erosion• Competition Take rate

Customer churn• Regulation• Internal/external costs evolution

Transformation impact from:

• Service Delivery (NGN/IMS/SDP)• New services/bundles (VoIP, IPTV,

Multimedia)• Network transformation (All-IP)• Process re-engineering and NG OSS/BSS

(*) business case simulation based on anonymized service provider reports, analyst data and extrapolations of the former


Impact of Transformation on the Business Results

Impact on revenues Impact on EBITDA

71%

29%

64%13%

6%

17%

Transformation impact from:

Service Delivery (IMS/SDP/SDE)

New services/bundles (VoIP, IPTV, Multimedia)

Network transformation (All-IP)

Process re-engineering and NG OSS/BSS


IP Technology is a Means, NOT the Target ...

Services

• ROI on broadband access • New customers, higher ARPU• Enhanced ‘user experience’

Operations

• Time-to-market• Cost reduction• IT, processes & organization

Network

• Common transport layer• Ready for multimedia• Getting rid of “stovepipes”


Lessons Learnt — Network Transformation

“Less is more” and “simpler is better” …• Regain economies of scale and allow cost synergies• One single multi-service network, without (network & service) silos

… but don’t under-estimate end-to-end complexity

• “Standards compliance” is not always a synonym for “interoperability”• Understand the legacy before designing the next generation• Work with a prime Network Integrator to manage technology, solution

architecture, project and multi-vendor interdependencies

QoS is more than “bits per second”

• It’s the overall quality of the end-user experience (QoE) that matters• Invest time & money for upfront QoS/QoE design, testing and validation• Always develop and evaluate the service against well-defined KPI/KQIs

Inter-working is a business decision, not a technical one

• Inter-working with PSTN and peering with VoIP are hard requirements• Don’t (mis-)use SIP for what it was never intended for• Security, QoS and inter-carrier roaming and settlement need to be

covered by end-to-end IP peering scenarios


Lessons Learnt — Services Transformation

The feature parity/transparency challenge• A service portfolio based on “differentiation” instead of “continuation” will

minimize R&D costs and and maximize revenue potential• Synchronize with marketing & sales early in the project to challenge

features and to quantify costs, risks and benefits of approaches• Work closely with vendors to communicate your priorities and expectations

“Plain Vanilla” voice is not enough• A well designed SDP will allow to smoothly ramp-up move from voice

to converged, blended and personalized services• Three activities not to neglect: MARKETING, MARKETING, and MARKETING

IMS is a good framework for design and delivery• Appoint Solution Architects to maintain integrity of the architecture• Adopt a consistent set of R&D practices and an efficient delivery organization • Get organized for a dramatically shorter SLC: weeks instead of 12-18 months

VoIP should not be deployed in isolation• Launch new services bundles combined with a portfolio rationalization• Align your network and service capability roadmaps• Create a prioritized transition & launch plan to balance revenues with costs


Lessons Learnt — Operations Transformation

IP Transformation changes everything• Network Interface Points: e.g. collocation from CO to street cabinets• Services: e.g. regulated vs. non-regulated• Products & vendors: network, IT, CPE … content• Customer Interfaces: “Zero-Touch” provisioning and Customer Self-Service• In-house skills: spanning the present and the new technology and operations

Migration will not happen overnight• Physical Migration, Network Database Migration, Network Routing Migration,

OSS/BSS Migration, …• Migration strategy & planning, tools development and customer communication

Network transformation should go hand-in-hand with IT• Transform operations from managing networks to managing services and customers• New business and usage models require flexible rating, charging and billing• Challenges the processes, not just the technology !

Each transformation project is unique• Transformation may start anywhere in the service provider’s organization• Geography, local market, regulation, legacy infrastructure, resource availability,

budgets, etc.may affect transformation strategy, scope, roadmap and implementation


Transform predictably. Transform comprehensively. Transform profitably.

Conclusion

• IP transformation represents a unique —once in a lifetime— business opportunity for telecom service providers to evolve their network, services and operations beyond a “bit pipe” with “vanilla voice”

• IMS is a key standards framework and reference architecture for developing and delivering differentiated VoIP and multimedia services

• VoIP and IMS introduction need to be part of a “holistic” network and services evolution vision — in sync with the end-user portfolio, business processes, IT systems, skills and organization transformation roadmaps

• A “best practices” approach, supported by an experienced partner is the most effective way to engage into a “predictable” VoIP and IMS deployment

• Carriers worldwide are leveraging Alcatel-Lucent’s global reach, experienced technical staff, and IP subject matter expertise to accelerate their network evolution and to incorporate lessons learned from the early adopters


[email protected]

www.alcatel-lucent.comwww.alcatel-lucent.comwww.alcatel-lucent-iptc.com

Thank You! — Obrigado!

Best Practices for Carrier Voice Transformation (2008)

Technology

ip voice meeting

new service benefits

service provider reports

transition issues tradeoffs

churn arpu erosion pressure

heavy reading

assets roi

growthlegacyebitda mix