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Sunday, December 18, 2005

Lessons from the FT World Telecoms Conference

Earlier in December the Financial Times held their annual World Telecommunications Conference in London. Primarily focusing on the Fixed-Line industry the theme of this year’s event was ‘Beyond Voice’.

This was the stated context for the event: “Fixed-line operators in developed world economies are facing a future of little or no revenue growth as their traditional core voice telephony business is increasingly cannibalized by mobile voice. With no obvious single 'killer application' on the horizon, the challenge for telecommunications companies in 2005 is to develop and deploy new revenue-generating services for their markets.” (

I’ve picked out below some of the sentiments that I think provide useful context for discussing IMS:

Welcome to the concept of ‘Broadband 2.0’: The digital networked home supporting multiple devices and applications (rather than the PC and dumb modem and some peripherals as per today). “Telcos will have to extend their presence into the home to gain visibility of the customer experience”, said a VP from HP.

“The internet would have happened without Microsoft or Google, but never without the investment that the telecom industry has put in”, said the President of Lucent Europe. The key question is: can the telecom industry really protect and monetise that investment.

Keep a close watch on BT’s 21st Century Network (21 CN) – BT’s move to a single IP platform, costing it $18bn, is the most ambitious project of its kind by any telco in the world, said the CEO of BT Wholesale. It has to do this because it is losing nearly $1bn every year in revenue due to price cuts due to competition, so 21CN, built on an IMS architecture, is key to creating cost efficiencies and opening up opportunities for new revenue sources.

Is Content King? - The Corporate Development Officer at Deutsche Telekom echoed the sentiments of his BT colleague. He said that the cost of DSL connection in Germany has dropped by 70% in the past seven months to reach Euro 4.99 flat rate!!

“You either leapfrog into ICT – into a software-based IP services model – or you defend your traditional telecom services until you die out”.

He agreed that while some content will be particularly compelling, it was not critical. “Distribution will be King”. DTAG is investing over $4bn in fibre to the kerb. The costs of the rights to soccer - $150m pale into insignificance.

IMS Insider will be tracking BT’s and DT’s progress closely as we see them both as bellwethers for IMS effectiveness.

Build the Application Developer Community – If telcos don’t have access to a large application developer community IMS will not delivery the promised benefits. Yes, IMS Insider agrees with this, but the current value chain is dysfunctional at present. We believe that Federated Identity provides the key to creating the sort of commercial ‘Network Effects’ that will fulfil the ROI promises of IMS and NGN. (December’s edition of the IMS Insider Report will look at the link between Federated Identity and IMS in-depth – subscribe at
www.ims-insider.com. If you’d like to do some pre-research on this, see www.projectliberty.org)

Why invest in IMS? – The CEO of Cable & Wireless said: “We are offering IP prices for services to customers at legacy telco costs”. Sums up the rationale for IMS quite nicely.

Is there ‘market pull’ for IMS? – A usual objection to IMS (especially from marketing departments at present) is that the customers aren’t asking for the sort of ‘blended’ services that IMS could facilitate. They want things nice and easy. The Group Chief of Mobility and Convergence at BT backed up the view held by IMS Insider that this is not the issue.

“The industry is not doing a good job at relating technology advances to actual customer needs”, he said. “We need to make the end user benefits clear. We need to be better at translating what technology can do. It’s not about marketing pull [responding to what customers ask for], but about technology push [explaining to customers what technology can do for them].” Amen to that.

Why is the industry failing? The BT Chief’s view is that the telco industry heritage is not services, but network reliability. To increase innovation and fend of competition from new entrants who have more marketing acumen telcos need to be less concerned about cannibalisation in the short term when launching new products.

New Telecom Economics – Cap Gemini’s MD of Telecoms, Media and Entertainment talked about how new advertising models can recover lost revenues from VOIP. Although he doesn’t see any imminent collapse in the PSTN system, he said:

“We are at the cusp of a major transition in telecom economics. It’s now possible to enter the market [through wi-fi] with an outlay of $10m’s, which is peanuts compared to traditional levels of capex, and to break even with 10,000’s of subscribers.”

The Editor, IMS Insider

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