The new business models - Ericsson portfolio of network solutions

THE ENGINE ACCESS EQUATION In an increasingly challenging marketplace, network operators need to focus on the strategic exploitation of assets and resources. Nowhere is this more true than at the access level -- the ultimate point of customer contact. Access solutions need to support broadband networks, provide for potential new services and revenue streams and match the requirements of a wide range of customer needs. The focus must be on flexible future-proof solutions and on near term cost effectiveness.

In this supplement, sponsored by Ericsson, and written by Stephen McClelland Editorial Director of Telecommunications[R] International, seven major operators -- KPN, KingCom, Tele Danmark, Skanova, AAPT, Altitude and Banda 26 elaborate on their next generation access requirements and plans for implementation.

The colder it is, the faster you have to move...

Steering operator strategy through the current marketplace is no easy task. Technology choices abound, investment sentiment (after a major boom) is now difficult, and new revenues remain uncertain and unpredictable. After a period of essentially hype, most operators are now facing a trade-off between time and money in their new network strategies: do they invest to achieve early or rapid rollout of networks when returns are still uncertain? The overall dilemma is that to meet new demand, operators may have to invest heavily across technology platforms. In the current climate, this might prove unacceptable. Indeed, the value chain for many implementations is already being squeezed by unprecedented price pressure. In technologies such as mass market DSL, for example, price erosion has become unsustainable in major markets such as the USA. At this level - less than half of two years ago neither operator nor vendor sees profitable business emerge.

The result has been a substantial need for a rethink of business models and strategies. Near-term (a 12 to 18 month timeframe) operator strategy is likely to focus predominantly on cost reduction approaches. After this period, I believe the industry will emerge into a genuine evaluation and deployment of new services and new revenue generation opportunities, especially in the broadband domain. Network technology must offer both and a motivation to invest for future services whilst securing present operational considerations.

Any serious vendor therefore has to move from a pure technology supply to a solutions perspective and support these new business models. This statement is a common claim by the vendor community at large. However, the underlying strategic question remains: how do we as vendors discover value for the operator with a particular solution? Determining this value creation will be, for us, a major competitive advantage in the marketplace.

This value detection comes from segmenting the marketplace: examining the technology strengths, current operator perspectives, cost structures and likely individual markets for each solution. Pragmatically, more than 97% of all access loops are copper-based. Copper, by definition, is a mass-market segment. But overtime, there will be an evident trend to fibre technologies and we are supporting both media. Specific wireless applications such as LMDS solutions at 26GHz also offer opportunities for operators to serve business customers. Indeed, a major driver for access enhancements will come from business customers in the small and medium size grouping. Several case studies in this present supplement focus on how various operators are tailoring their strategies ingeniously to the business requirements that now exist. As vendors too, we segment ourselves by the same market strategies that our operator customers must themselves face: the mass-market and home access segment, the business access segment, and the m etro access segment.

Market Segmentation

The Home Access segment is a mass-market network business. End user bandwidth demand now challenges operator capability. One route leverages from existing copper infrastructure using DSL access, the other deploys new types of networks. The Ericsson Home Access portfolio comprises both DSL Access and fibre Ethernet Access solutions. Ethernet Access solutions have become increasingly interesting for players in greenfield markets. The Ericsson approach is to combine the advantages of the Ethernet technology, traditionally related to the datacom industry, with our extensive knowledge of the telecom world. This combination proves optimal: carrier-class services over Ethernet platforms, which meets the growing demand for higher capacity, and supports new and coming IP based applications in the long term.

The Business Access segment requires different characteristics, and, in particular, complete end-to-end solutions, either through dedicated networks, new fibre Ethernet networks or through exploitation of the existing copper loop technology. For most operators this segment is very high growth and provides a critical customer base moving forward, with up to 60% of fixed line revenues for service providers. Many of the resulting SME solutions require inherently multi-service networks carrying voice, data or video, or will mean that SMEs can be supplied with a high quality data network where voice can be provided as an add-on. A common requirement, for example, is the replacement of leased line provision, which can, with our solution, significantly reduce OPEX/CAPEX for the operator in supporting many SME communication requirements. Prominent technologies now emerging include symmetric DSL variants such as SHDSL as well as high capacity fibre Ethernet solutions. Dedicated networks represent a broader scope beca use many separate elements are involved, from backbone management systems and lines, to CPE at the customer sides. Our Integrated Access Device (IAD) portfolio completes the multi-service solution that enables operators and their customers to cost-effectively combine functionality of PSTN and broadband access in one system.

The Metro Access segment supports the requirements for high-density population areas. User demand in these areas promotes very high traffic needs. Operators meet this market strategically. New operators are able to justify 'cherry picking' the market because the user density justifies overall network infrastructure investment, typically in Gigabit Ethernet technology. Incumbent operators on the other hand need to increase the capacity of their existing networks. Equally, they should begin to deploy multi-service networks, and they consequently require a migration path towards an all-IP metro network implementation. The Ericsson Metro Access approach addresses these strategies by helping operators build an all-IP-based network connecting all end-user categories (residential, SOHO, SME and large enterprise) to the core and service networks. Equally, it provides connectivity for residential and SME markets to the same core and service networks too, and is particularly appropriate in the vigorous demands of the urban high density markets. The Metro Access solution ensures that operators with any degree of legacy network, or business model, in the incumbent or CLEC space can continue serving their customers with the appropriate Quality of Service (QoS) over new technology.

End-user broadband need does not necessarily imply quick returns for the operator. Many operators currently face problems in broadband deployment, for example, ADSL implementation. Instant ADSL, part of the Ericsson Instant Multi-Access solutions, is the Ericsson solution enabling aggressive but profitable DSL deployment. Instant ADSL is an end-to-end solution with automated service activation, which for the operator means new customers can be connected directly on request.

We can mix and match various elements in this portfolio, such as automated and remote service activation, telecom and service management, network rollout and even sometimes, financing strategies. Together, these functions effectively allow operators and users the advantages of on-demand connectivity. It's a new approach, different to the relationships of the past that essentially depended on supplying technology products to customers as boxes. Now, in this new business model, we seek to engage the customer decision makers in more strategic dialogue with widespread implications across the business.

These access solutions, although independent in themselves, are effectively unified through the existing Ericsson ENGINE portfolio of network solutions. Equally, on a network-wide basis, we can provide turnkey network rollout that enables operators to enjoy a minimum time to revenue generation, but using carefully tailored solutions. Our network competence supports end to end service quality. Cost-effective telecom management across all these different technologies, networks, and services, too is a key factor throughout the telecom management, ATM and DSL domains. Remote and automated management streamlines operations and eliminates manual tasks. Finally, billing implementation ties users to the services they receive and bills appropriately.

By carefully matching the solutions to pragmatic investment conditions and actual operator needs, we believe we have discovered the valuable business models that will balance the 'access equation'.

COPYRIGHT 2001 Horizon House Publications, Inc.
COPYRIGHT 2002 Gale Group