3G and the Battle for FMC Revenue How can cellular operators sustain their growing total share of outgoing minutes and protect their revenue from the threat of the voice over WLAN (VoWLAN)-based fixed-mobile convergence (FMC) solutions being offered by fixed-line operators? Cellular Operators' Revenues Are Under Attack Fixed-line operators are using disruptive tariffs, enabled by GSM/VoWLAN hybrid FMC solutions, to capture cellular business and damage cellular revenues. BT and Korea Telecom solutions are already available and a slew of other service offerings will follow in their wake. If adoption of VoWLAN-based FMC solutions goes unchallenged, it is possible that cellular operators will miss their opportunity to claim the FMC market for themselves. Combating the Fixed-Line Threat So how can cellular operators combat this threat, protect their 2G revenue streams and grow their 3G business? Although VoWLAN-based FMC delivers one-phone convenience and cheap home or office calls to customers, it doesn't give cellular operators a competitive advantage over the fixed-line operators who are doing the same thing. But there is a competitive advantage at cellular operators' disposal: their licensed cellular spectrum. While fixed-line operators have no alternative to VoWLAN-based solutions, cellular operators can use cellular spectrum to deliver ‘pure cellular' FMC. Cellular spectrum is licensed and reserved, and therefore controllable, so a pure cellular FMC solution would avoid the potential interference problems suffered by VoWLAN callers. And this is just one of many advantages gained by taking a pure cellular approach to enabling FMC… Competitive Advantage: Pure Cellular FMC Pure cellular FMC will be enabled by 3G access points – a new generation of picocell – to seamlessly extend macro-network coverage into homes or offices, while providing extra network capacity. 3G access points will allow operators to introduce and control competitive tariffs based on home or office location, with the potential to offer strategically priced services to displace fixed-line carriers. They will use existing 3G handsets, cellular standards, and domestic ADSL for cellular backhaul, so: · They will provide the lowest-cost means of connecting to local infrastructure · They will be easy to install · They will not require special roaming agreements · There will be no cost for incremental minutes once a call has been routed. 3G Access Points and 3G Adoption Another advantage of this approach is that 3G FMC complements cellular operators' existing 3G strategies. Deployment of 3G access points is a simple step towards the goal of further enabling the domestic 3G market. Cellular operators will be able to use the cost and convenience user benefits to profit further from their investment in 3G and sustain the growth of their share of total outgoing minutes. There are a number of ways in which cellular operators can use 3G access points to accelerate 3G uptake. They may be able to capture all users in a home or office zone by offering multiple handsets as part of 3G access point bundles. Also, multimedia services could be offered at low prices in the home to encourage increased use of games, music and video downloads on the macro-network. Avoiding VoWLAN Problems Operators taking the pure cellular approach will be able to offer FMC services that are of a better quality than those offered by VoWLAN-based solutions like Unlicensed Mobile Access (UMA). There are many problems with the service delivered by UMA, which has failed to meet some operators' requirements in tests: · Interference from other devices in the area · Poor voice quality on congested networks · Poor connectivity, depending on location of nodes and antennas · Packet loss and inconsistent flow of voice information · Battery drain of WiFi radios in dual-mode handsets The cost of GSM/VoWLAN solutions is another deterrent. Operator subsidy of 802.11e-enabled access points is needed to enable adequate QoS and reduce latency for Voice over WiFi calls, and dual-mode VoWLAN handsets must be subsidised to cover the cost of the extra radio needed when a call switches from cellular to WiFi functionality. These costs, and the design challenge of combining two radios and sufficient battery power in one handset, are likely to have a limiting effect on the range of commercially available VoWLAN handset models, which is a critical factor in consumers' choice of carrier. The global home cellular market is forecasted to reach 55 million subscribers by 2010. If addressed solely by UMA, annual sales of WiFi-enabled handsets will represent only 6.8% of the total number of handsets sold in that year – too small a market opportunity to make the development of a broad low-cost handset range a priority for manufacturers. FMC Success for Cellular Operators An estimated 200 billion minutes are available for fixed mobile substitution in Western Europe alone (Strategy Analytics). As industry players prepare for a new voice and data battle, 3G access points present the greatest opportunity for cellular operators to claim FMC revenue from subscribers in the home and workplace. By deploying 3G access points, cellular operators can offer their subscribers all the benefits of FMC, while promoting 3G uptake, sustaining their traditional revenue streams and staving off the threat from their fixed-line competitors.
By Mark Pittick of ip.access