Interview - Signaling change
As operators grapple with competing business models, and the dislocation of existing business
models, who is there to help them align their networks with these competing demands in a cost efficient way? Keith Dyer speaks to Wolrad Claudy, Senior Vice President for Global Sales, Tekelec
Mobile Europe:
Wolrad, many people will know Tekelec as a signaling specialist, but it's probably not an area of the industry that gets much attention compared to some others. What is the role of signaling within operator networks, and Tekelec's presence in that?
Wolrad Claudy:
Signaling is really the brains of a network, from session control on the network plane, to the management of value added services such as messaging and roaming. It is also critical to areas such as security, number portability and performance monitoring and assurance. And we know it inside out, from SS7 all the way to SIGTRAN and SIP. As a company, we've certainly been around a while, having been established for 30 years and listed on Nasdaq for more than 20. At year end 2007, we had roughly a one billion dollar market capitalization, annual revenues of approximately $450 million, and now employ one thousand people, of which about 300 work outside the USA, incidentally. Although we started life as a company providing Test & Measurement equipment, our focus now is on dominating the network control plane of telecoms networks. The majority of our clients are Tier One operators. Two thirds of our business comes from Tier One wireless operators, and in fact eight out of the top ten wireless operators worldwide use our solutions to support all kinds of different applications and services. We also count six of the top ten wireline operators as our customers. This justifies the decision the company made to diversify and enter new markets, expanding our signaling presence to get into complementary niche markets, such as messaging and roaming.
ME:
With such a high grade customer base, it would be interesting to hear what their priorities are at the moment.
WC:
Well, in a way that's very fragmented by market. In high-growth emerging markets - such as India and China - adding and supporting huge numbers of new subscribers is the challenge of the day. In developed markets, such as much of Europe, we are seeing the consolidation of legacy networks as operators seek to reduce the number of suppliers on their books. The key drivers there include the need to reduce operating costs. But also, mobile data traffic is picking up as 3G finally starts to generate growth, and the developed world is also getting prepared for 4G, which will further expand bandwidth and throughput, even though most operators are just in their 3G Release 4 rollouts. Yet this growth has brought with it a headache for operators. In the past, traffic growth equaled revenue growth, but now that relationship is completely uncorrelated, as tariffs move from linear to flat rate models. So these operators know they need to keep the network scaleable and efficient. They can do this by transitioning from TDM to IP, reducing operating cost by reducing the number of nodes in the network. Our role in that is to offer a transitional strategy for network operators to migrate from their existing legacy networks to all IP networks, moving from TDM networks based on SS7 to SIGTRAN, SS7 over IP, and the like. We are the market leader in providing SIGTRAN, for instance. The aim our customers have is to condense the number of nodes in a network, to consolidate signaling networks from dozens of nodes to one or two pairs, with SIGTRAN and gateway capabilities in between. Yet while customers might be discussing the impact of migration to 4G in two years, they will continue to work in 2G and 3G, requiring services and network interoperability between them all. These new upcoming challenges, for services interoperability in hybrid network environments, will keep us busy for the next decade, because there's a long way to get to all IP.
ME:
And the operators are also faced with challenges to their business model from external sources.
WC:
Absolutely, there are a lot of convergence trends, between fixed and mobile, voice and data, that are just increasing the complexity - as operators think about providing new converged products and services on top of separate fixed and mobile, voice and data domains.
This is where we appear - to provide services interoperability between these different domains as well as a bridge towards converged services and applications.
At the same time one can see competition between different domains. The fixed operators are moving forward, with technologies such as fibre to the home. Mobile as a vertical has to provide higher bandwidth to compete, and we've seen it embrace that challenge with the NGMN alliance starting to achieve agreement on what 4G will all be about.
ME:
One of the paths forward in this converged world, where services were interoperable across networks, was IMS. Yet you have not mentioned IMS yet, and it seems to have dropped right off the list of industry buzzwords.
WC:
Well there is still undeniably a move towards IP, for instance in the transport network. That's happening. But the introduction of IMS has probably been behind the initial expectations. It's not happening as expected because all the deployments so far have been vertically integrated in a one-vendor solution, whereas our play will be in mass multi-vendor rollouts. We have to get there, and it needs a push because at the same time the telco operator business model is being confronted by Web 2.0/ 3.0, and smart devices, and web-based suppliers opening up platforms to allow any developer to create new applications. That encourages a lot of dynamism compared to a world where all applications are based in the network. I think part of the issue has been with standardization, which can be a very slow and not very agile process. If we are not achieving the idea of IMS - to have just one application block where a common platform is available for operators to develop apps on - if that is not happening then IMS only equals IN 2.0, and might fail. So the problem is, what are the applications going to be to justify that investment at the end of the day. No-one will deploy a platform without approving the network ROI. Yet without IMS there will be no such applications, so it's a chicken and egg situation. As an industry, we have been very stable for many years. Device manufacturers, infrastructure vendors and operators all had a firm idea of who pays whom. Now, this static model is turning into chaos with a lot of competing business models. And the next two years will decide what business model will be more dominant.
ME:
Do you think your role will be about helping operators deal with these challenges, and if so, how?
WC:
We are living now at time of uncertainty, and operators have been in a holding pattern to think about what to do next. For many, the driver is still cost reduction, and they are not necessarily about to open up their profile and services model in a Telco 2.0 model. I would say we are well-positioned to help network operators defend their current business models and keep existing business models alive, as they transition their technology. There might be a lot of suppliers only supporting next gen greenfield solutions for the new business models. But our solutions are focusing on helping operators to transition from TDM to IP and to do this more cost efficiently by leveraging existing infrastructure and ensuring interoperability. So our solutions are geared to supporting the existing T1 business models of today and preparing for what's next.
ME:
Do you think that necessarily means we will see greater SIP rollouts, even if not accompanied by full IMS transformation projects?
WC:
SIP, yes it's fantastic. In terms of the challenges we have outlined, SIP is far more flexible. But SS7 is a very well standardised protocol that guarantees interoperability between vendors and networks. So right now because of two acquisitions we have made in the last three years with SIP entrepreneurs we are ahead of the game, and are being considered the industry reference point for all other suppliers. R4 rollouts are still based on the SS7 protocol over IP transport. This is going to be replaced by SIP, and right now there are several different SIP variants to be deployed. I'm not really sure which version will succeed, but the industry is gearing up towards the SIP protocol and it makes no difference to Tekelec which variant is deployed. We are at the forefront of deploying SIP technology, ensuring interoperability for the next two decades between legacy and next generation networks.
ME:
You said that your signaling expertise has enabled you to diversify into other areas of service; can you give a couple of examples?
WC:
One example is within messaging, where we can provide firewall filtering and screening, and first delivery attempt routing services, without having to store and forward messages through the legacy SMSC. We are also very involved in extending that into mobile IM, which might be a very interesting area going forward. Our messaging solution is a full-blown solution, including the SMS router, firewall, store and application gateway. In fact, we just announced Mobilink, a mobile operator in Pakistan, as a customer for our SMS firewall product - to combat SMS spam. Then, because we can add these routing and security filtering capabilities in front of the SMSC, we can support the trend to SMS carrying advertisements, using our solution to inject ads on any text message. Many mobile operators consider mobile advertising to be the next big revenue opportunity.
We also have used our unique location in the network to aid QoS and performance monitoring. We have unique ways of monitoring everything that's going on in the network, to improve service efficiency but also to provide better subscriber profiling, enabling a user to have the services capability he needs. That's a big and increasing area. In the past, much of this centred around performance and fault management, and network surveillance. Today we are much more focused on looking at services, at groups of subscribers, to profile them and provide the adequate resources and QoS. This provides a user view to all areas of the operator that can utilise that information, from the customer helpdesk to marketing and strategic departments. Roaming management is also an evergreen subject, where optimal routing of traffic, as well as concepts such as ensuring a user is forced onto a specific network, or knowing exactly when a user has left and entered your network, is crucial.
ME:
Much of what you have touched on, of course, brings you into competition with many dedicated players in markets such as roaming, messaging and service assurance and management. Why do you think Tekelec is best-placed to address all these challenges for an operator?
WC:
The unique position we have is that we can bundle these products and services to create an integrated, flexible solution to meet the specific needs of each of our customers. This gives operators the opportunity to do all these things very efficiently with one platform, versus building point solutions across multiple suppliers. And that's going to be crucial as operators address all the challenges, and opportunities, we have mentioned.
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