revenue strategies: IMS
For more than a century, the telecom market has been seen as a utility selling a service. However, with the changing demands of 21st-century users, operators are under increasing pressure from their customers to provide an attractive experience instead of pushing new products to market.
As the telecom market becomes more open and competitive, its end users demand (as with any open market) a balance of affordability, predictable pricing, simplicity, quality, freedom of choice, personalization and expression. The telecom market, realising these demands, is quickly adapting to the rest of the economic environment, mirroring the Fast Moving Consumer Goods (FMCG) market that has evolved from a service economy to an “experience” economy. As such, it has moved from differentiation through offering packaged products and services to differentiation based on a total user experience, not subject to quick commoditisation due to its “subliminal” nature (i.e., McDonalds, Starbucks and even Vodafone live!).
Innovation Collision
While creating and branding an overall experience, the technological innovations are moving on even more rapidly than ever before. The convergence of telecom and IT already has given birth to myriad new technologies. The so-called “third wave” of technology comprises the advent of always-on packet networks together with such multimedia technologies as camera phones, video players, Java, Multimedia Messaging Services (MMS), Wireless Application Protocol (WAP) and IP Multimedia Subsystems (IMS).
Most of these technologies have been brought to market as if they were services and, subsequently, they failed to achieve mainstream consumer adoption. Even though the technology itself offers a new world of opportunity for consumer communications, it tends to move ahead of user requirements and, at times, imagination.
The trend toward a FMCG market for communications and the speed of new technology development potentially are on collision course as the telecom industry continues the strategy of pushing technology to a market that is not ready to receive it. Although now one of the fastest-growing service enablers, this also happened with the initial introduction of WAP. However, if packaged correctly, third-wave technologies definitely can meet the requirements of the user experience economy. To enable critical mass, communications services need to be accessible and comprehensible. Therefore, mirroring human interaction seems to be a critical success factor.
Making messaging intuitive
To have end users adopt IMS-enabled services of tomorrow, a true customer-centric approach that meets the end user’s core interest, communicating is required. This requires a different approach in which end-user interaction is directly related to communicating only. The end user should become the starting point for the communications process, while technology is hidden to the background.
To access a communication service, users do not select a technology (SMS, e-mail, etc.) but instead, they select a contact from their presence-enabled address book. Contact and presence information will help senders to determine what means of communication best fit their needs. Location, availability and the device used by both sender and recipient determine the nature of the communications, including how it is (technically) delivered and presented at each end.
Users are able to receive a single, consistent look and feel across messaging services, whether SMS, MMS, voice mail, video mail, Instant Messaging, e-mail and messaging based on Session Initiation Protocol (SIP). Furthermore, operators, content providers and device manufacturers are able to create a common look, feel, branding and — where appropriate — functionality of devices (ranging from PC to mobile device to set-top box). This definitely contributes to the creation of a truly intuitive communications experience.
Operators in control
Operators are facing increasingly severe competition, not only from new market entrants but also from players in other domains. Mobile operators compete with mobile virtual network operators (MVNOs) and wireless local area network (WLAN) providers that offer broadband access through hot spots. Fixed operators are under pressure from Internet service providers (ISPs) and the likes of Skype, which provides free calls based on Voice over Internet Protocol (VoIP), and virtual network operators (VNOs) that bring down per- minute pricing for voice services. Some fixed operators are losing as much as 1% market share per month.
Migration to an all-IP network, where IMS is an important first step, will help operators drive down costs and will allow them to jostle for position in the marketplace along with the other players — both incumbent and new. For example, mobile operators will be able to compete on price with fixed operators and in content provision with many new entrants. By offering converged services, they will also be increasingly able to provide a full portfolio of services to engage and retain customers.
MSN, Yahoo! and AOL currently are launching branded clients, downloadable for free by any mobile user. As soon as a larger audience starts using these services on a broader scale, mobile operators’ messaging revenues will be under further pressure. This is one of the biggest threats for operators, as it might downgrade their business to a mere “bit pipe” where other providers actually serve the customers or enterprises serve their own employees.
However, fighting these global brands and blocking end users from accessing their services is not an option. It is not in line with the end-user demand for “freedom of choice and expression”. The operator’s best option is to go for an open-market model that enables seamless interconnection between the (mobile) operator’s domain and other domains (like other mobile operators, MSN, Yahoo! or Google). As an example, introducing instant-messaging clients embedded in handsets and making sure that interoperability is provided with MSN, Yahoo! and AOL will generate more revenue and customer loyalty for the operator. However, ignoring this market trend will result in subscribers downloading third-party clients that bypass their infrastructure. IMS will make it easier for operators to enter partnerships with players in other domains and to jointly create new, innovative and compelling end-user services.
In 2005, MSN and Yahoo! opened up their domains to one another. In 2006, global operators, joined in the GSMA, will introduce an IM service across their operator domains. As with SMS, the next logical step will most probably be that different IM domains will all open up, creating true freedom for the end user.
IMS: The Holy Grail?
The main benefit of IMS is in the provision of converged person-to-person or group multimedia services on the converged packet domain. Multiple services can be delivered within a single session; for instance, voice can be combined with document sharing and streaming video. IMS also enables multiple simultaneous synchronized sessions, such as instant gaming, push-to-video or IM. IMS provides more freedom for people to choose what, where and how to communicate.
IMS is a standardized architecture that enables person-to-person communication services in an all-IP environment with the quality, reach and chargeability with which people are familiar. It supports many user experience-centric service enhancements, including multiparty and multimedia collaboration for sharing and communicating content between a group of friends or colleagues.
Fixed operators and ISPs will be the first to implement IMS or pre-standard IMS-like solutions. This group faces the biggest pressure and has fewer means to counter the competition because it traditionally has fewer value-added services on offer and very often no service creation environments at its disposal. IMS will allow the group to introduce VoIP, which will support significant cost reduction.
For mobile operators, the situation is less immediate but the opportunities are equally expansive. Mobile operators have a lot of value-added services within their portfolios, and they have more sophisticated solutions for controlling user access and to charge for content and services at different levels. Potentially, IMS offers these operators extensive cost reductions and faster time-to-market for new services. However, as long as they cannot replace their current circuit switched voice service by VoIP, the business case is less clear.
Beyond Theory…
IMS enables a bridge to be established between Internet-based services (chat, e-mail, IM, multimedia file exchange) and traditional operator services (SMS, MMS, voice). It enables operators to provide an experience above and beyond today’s location-to-location communications, whether fixed or mobile. It answers the needs and can exceed the expectations of many in today’s FMCG environment. Being aware of what those needs are and how they are changing will enable operators to remain innovative and at the forefront of the market without overstepping the mark and launching new technologies onto an unwitting audience.
So, instead of continuing to search for the elusive killer applications IMS could enable, the highest potential for return is based on the evolution of services that already exist in the comfort zone of today’s majority of end users: i.e., voice and messaging. Therefore, operators can gain a greater return from enhancements and combinations of applications with which users already are familiar.
Even though IMS offers the right starting points for operators to deal with the inevitable consequences of convergence, creating the required return on investments remains a major challenge, especially because all users today have not yet adopted IMS-based technology.
Operators should, therefore, have a strategy in place to migrate their customer bases toward IMS technology in these ways:
1 Implement an IMS framework next to the existing service portfolio, still (largely) based on circuit switched technology.
2 Enable seamless inter-working between old (circuit switched) and new (IP-based) worlds, as this is a pre-requisite for end users to adopt any new technology.
3 Assure that IMS subscribers will start contribute to cost savings from the start by routing their traffic most efficiently through the network (i.e., avoiding expensive SS7 technology whenever possible).
4 Start migrating customer base toward IMS enabled services by introducing new services (push-to-talk over cellular, IM and video sharing) and traditional services (voice and messaging) based on IMS/SIP with a unified and branded user experience.
5 Save yet more opex by downgrading circuit-switched technology as soon as SS7-based traffic decreases.